10 August 2007

House prices fall 2.6% in first half of year

House prices have dropped by 2.6 per cent since the start of the year, according to the latest permanent tsb/ESRI index published this morning.

In continuing signs of a slow-down in the property market the index shows that the average price paid for a house in June was €1,561 less that the price in May, representing a 0.5 per cent decline in June.

This follows a reduction in national house prices of 0.8 per cent in May and April and 0.6 per cent in March.

The future will continue to be influenced by interest rate changes and local sentiment however on the whole, the market remains solid and is underpinned by the twin fundamentals of a strong economy and strong demographic growth
Niall O'Grady, permanent tsb

The average price paid for a house nationally in June 2007 was €302,605, compared with €310,632 in December 2006. In the 12 months between June 2006 and June 2007, house prices rose by only 0.9 per cent.

Dublin house prices fell by 1.3 per cent in June when there was a reduction in prices of 0.9 per cent for houses bought outside the capital. Over the first half of this year, prices declined by 2 per cent and 3.2 per cent respectively.

However, in the 12 months to the end of June, house prices in Dublin grew by 4.1 per cent while outside Dublin they fell by 0.4 per cent over the same period.

The average price paid for a house in Dublin and outside Dublin in June was €418,905 and €257,945 respectively. The equivalent prices in December 2006 were €427,343 and €266,339.

In the commuter counties of Louth, Meath, Kildare and Wicklow, house prices fell by 0.7 per cent in June, compared to growth of 0.3 per cent in May 2007.

During the first half of this year prices fell by 3.9 per cent in these areas, while year-on-year growth to June was 0.9 per cent. This was lower than the 3 per cent growth recorded in the 12 months to May. The average price of a house in the commuter counties in June was €330,712, down from €344,186 in December 2006.

House prices in June for first-time and second-time buyers declined by 0.9 per cent and 0.5 per cent respectively. The average price paid by a first-time buyer and a second-time buyer in June was €270,093 and €340,143 respectively. The equivalent prices in December 2006 were €279,003 and €349,213. House prices for new houses were down by 0.7 per cent in June while the price for existing houses decreased by 0.3 per cent.

Permanent tsb Head of Marketing Niall O'Grady said: "After a decade of exceptional growth, house prices have declined in the first six months of this year by 2.6 per cent.

"While specific cases can be found of higher declines and of some increases, this represents the actual national picture. The future will continue to be influenced by interest rate changes and local sentiment however on the whole, the market remains solid and is underpinned by the twin fundamentals of a strong economy and strong demographic growth."

Article

3rd July 2007

'Long, slow house price collapse'

A UCD academic has argued that house prices could fall by up to 60% in real - or inflation-adjusted - terms in Ireland, if a pattern he has found in other countries is repeated.

Professor Morgan Kelly has looked at almost 40 house price booms and crashes on OECD economies since 1970. His study, published in the ESRI's quarterly economic commentary, shows that the larger the initial boom, the larger the subsequent bust.

Professor Kelly says that if this pattern held in Ireland, house prices adjusted for inflation could fall by 40% to 60%, with larger falls at the top and bottom of the market. But he adds that house price collapses are usually slow, so the most likely scenario is a drop of 6-7% in average selling prices over a period of eight or nine years.

Professor Kelly says reducing stamp duty will not change this. 'So long as there is a large stock of unsold houses and falling prices buyers have an incentive to wait for further decline to occur,' the report says.

He says the main reason to be worried about this is the effect on building activity, as house building currently account for 15% of the economy's GDP. Professor Kelly points out that 85% of building workers are Irish, and the effect of a slowdown on employment and government finances is likely to be substantial.

Article

20th June 2007

Income protection and options for Life Assurance

Homeowners are being forced into insurance policies to suit mortgage lenders, but they do not always represent value for money, writes Donal Buckley. DESPITE healthier lifestyles and longer lives, consumers are increasingly seeking to protect themselves against the possible losses and expenses they may incur as a result of an accident or serious illness. Usually, the question arises when applying for a homeloan. This is because mortgage providers raise the issue — not so much out of a concern for the children — but to protect their own stake in the home and to ensure that they will get their money back on the mortgage. Consequently, home buyers should shop around before choosing any income continuance insurance to cover against a serious illness or accident.

Permanent health insurance (PHI) is usually recommended as the most tax-efficient type of cover and it will usually cover a greater range of health problems, including stress and back injuries.

It is also tax deductible.

However, not everyone will be allowed to take out PHI especially if they are engaged in hazardous jobs such as farming or fishing or if, as is the case for many women homemakers, they work on only a seasonal or part-time basis. Instead, they may find it easier to get critical illness cover (CIC) although for some people this may prove more expensive should they or their family have a history of serious illnesses such as heart disease, cancer or diabetes.

CIC is designed to pay out a lump sum in the event of the policy-holder contracting a serious illness such as cancer or having a heart attack. However, the fine print of these policies is designed so that not all sufferers from cancer or heart disease will receive a payout. Nor do the insurers usually pay out specifically for accidents, although there can be cases where accident victims can successfully claim, such as in the case of paralysis or a coma. With many insurers, a policyholder will also need to live for at least 14 days after being diagnosed or going into a coma. One financial adviser quipped: “If you go on a life-support machine make sure your wife doesn't turn it off for at least 14 days!” Another adviser quipped: “Also keep the policy details with you at all times.” In a report on these policies, the Financial Regulator advises that with some policies: “You would need to be extremely seriously ill before you could claim any benefit.”

In response to concerns raised about CIC, New Ireland Assurance points out that “this insurance plays an important part in protecting family finances, but people who are deterred from buying it leave their family unit exposed if they become seriously ill. “After all, if the main income provider is taken seriously ill, the family's income can plummet. That means that the tax-free lump sum paid out by these policies can become central to the family's financial survival. “Consumers should base their decision on how comprehensive the critical illness policy is for their personal circumstances relative to price.” Investment adviser Eddie Hobbs says that international experience shows that between 30pc and 40pc of claimants may have their claims rejected.

In Ireland, the claims record is better. New Ireland says that it refused only 19pc of claims on average over the last three years and last year it paid out €15m in claims.Irish Life has had a similar claims rejection rate and paid out €20.1m for critical illness in 2006.

A New Ireland spokesperson pointed out that “any claims declined were either on the basis that the illness claimed for did not meet the policy definitions of the illness, for example angina which is not classed as a heart attack etc., or the claimant did not disclose a material fact relating to their health or family history of health at the time of application.” Some financial institutions engage in scare tactics — many of which are targeted at young people who stand better odds of not having to make a claim. On the other hand, many insurers point out that the younger a person is when taking out the insurance, the cheaper it is and the easier it is to qualify.

Furthermore, the premiums can be fixed for the 20 years of the policy so that they are as cheap when a person is 50 as they were when the person was 30.People aged over 54 who are more at risk of incurring a critical illness may find it difficult to take out a CIC policy as some insurers do not quote for this age group. This is yet another reason why it is best to start this type of cover before the age of 50. Costs can also vary considerably and a Financial Regulator report recorded a €20 per month difference between some insurers which would amount to €4,800 in savings over 20 years.

Cover when it was most needed

SEAMUS Bridgeman considers himself lucky to be alive and also fortunate to have taken out a critical illness policy with New Ireland Assurance. During his midnight to 8am shift as a machine operator with Teleflex in Limerick, he felt an uncomfortable feeling in his chest which he thought was indigestion. After finishing the shift he felt worse and told his wife Madeline who brought him to hospital. Just as he was walking into A&E, he suffered a heart attack. It took him 13 months to fully recover and it was only last week that he was able to go back to his work. “It was good to have the critical illness policy as otherwise I would have only had the social welfare payments of €165 per week to pay off the household bills.” His daughter got married about six months ago, and that meant more expense. So some of the €39,000 payout from the critical illness policy also helped for that occasion. Mr Bridgeman took out the policy about six years ago when he was about 48 years of age. At the time it cost only about €4 extra per week in conjunction with his life assurance. He also made sure to inform the company that there was a family history of heart illness.

Article

7th June 2007

ECB hikes base interest rate to 4 per cent
 

The European Central Bank (ECB) has raised its base interest rate for the Eurozone by 0.25 percentage points to 4.0 per cent, effective June 6.

The quarter percentage hike, the eighth since the ECB first started tightening monetary policy in December 2005, after a 30-month freeze at 2 per cent, doubles the key interest rate in just 18 months.

Analysts expect the current hike to be followed by two or more similar increases later this year.

The increase comes amid a growing optimism in the Eurozone economy. Spearheaded by a resurgent Germany, economic growth in the EU is expected to be around 2.5 per cent this year and next.

Unemployment in the Eurozone, which is already at a 15-year low of 7.1 per cent, is also expected to fall further.

But, with the Euro at near-record levels against the dollar and other currencies, some European leaders like the new French president Nicolas Sarkozy are worried that the ECB could damage the Eurozone's recovery by raising borrowing costs and forcing the Euro even higher.

The ECB rate hike comes ahead of a planned meeting of the Bank of England's monetary policy committee. Band of England, however, is expected to leave UK rates unchanged after last month's quarter point hike.

Read On

Other related articles/sites.

www.ecb.int/

http://www.finfacts.com/irelandbusinessnews/publish/article_1010271.shtml

http://www.independent.ie/business/rate-rise-arrives-on-cue-even-if-the-key-ecb-language-is-obtuse-692588.html

29th May 2007

Slow down in the market is due to people waiting until after the elections - myth busted!

Analysts at Goodbody Stockbrokers say that the issue of real estate stamp duty in Ireland is close to resolution, perhaps within weeks.

In a research note published this morning, the analysts mention that several political parties, including the ruling party, have released their version of the solution. The ruling party’s version suggests removing stamp duty for first time buyers, and increasing mortgage interest relief, the analysts say. Goodbody Stockbrokers adds, however, that with the ECB likely to raise interest rates, any positive effect of the move in Ireland is likely to be offset, leaving the affordability problems in the housing markets intact.

Article

24th May 2007

Consumer chief slams estate agent rise

The chief executive of the National Consumer Agency has described as 'incredible' a decision by estate agent Sherry Fitzgerald to increase its commission on house sales in the Dublin area from around 1% to almost 1.5%.

Ann Fitzgerald told RTE radio this amounted to a 50% increase in fees. She said estate agents had had ten years of a 'gravy train' and were now looking for a big increase after just six months of a downturn.

Ms Fitzgerald urged consumers to shop around, but said that if other estate agents raised prices, it would raise questions about competition in the market.

Estate agents say they were able to let fees fall back during the housing boom because of the increased level of activity in the market.

But now they have reassessed what they charge relative to the amount of business they are doing. In other words, the market has slowed considerably, and sales require more work to secure.

Sherry Fitzgerald says it has had to increase the commission to continue to provide a premium service to clients. It says it is carrying more stock than usual on its books because of the slowdown in the market. Commissions outside Dublin are traditionally higher, and they have also increased.

RTE News

21st May 2007

Economist warns on house prices.

The Construction economist, Jerome Casey has warned that the current downturn in the housing market could become a housing bust unless competitive issues in the economy are addressed through Government policy.

Mr Casey says structural difficulties in the economy, in relation to competitiveness, energy and healthcare,  have been unmasked by the tailing off in the housing boom.

Writing in the latest edition of Building Industry Bulletin, Mr Casey argues that a stable housing industry needs to be founded on a competitive economy and housing expectations have outrun the economic underpinnings since 2002.

He says economic growth will be constrained until competitiveness problems in the economy are overcome and that this will have a negative impact on house values.

He is predicting house prices will fall 5% this year and by up to a further 10% in 2008, while house completions will drop to 62,000 per year over the next five years.

Properties most vulnerable to sharp falls in value include holiday homes in the West and one-off houses with a 60 minute car drive to work, he says. 

According to Mr Casey, unless the Government introduces policies to restore competitiveness, then the cyclical downturn in the property market of 2007 (and which is expected to continue into 2008) will turn into a 'structural housing bust'.

He also notes that thus far, demand for new housing has been dominated by what he terms 'housing insiders' who are either existing house owners or investors, rather than first time buyers.

RTE News

30th January 2007

Building Energy Rating - Update.

The regulations were introduced on 22 December 2006. Despite publicity, implementation has not been delayed by representations from industry, rather because training, as envisaged, is not in place. One of the key reasons for this is that the software programme required for assessment is not yet available.

The following is an extract from a communication received by the RIAI from Sustainable Energy Ireland on 10 January 2007 -

'The European Communities (Energy Performance of Buildings) Regulations, 2006 (S.I. No. 666) were published by the Minister for the Environment, Heritage and Local Government on 22 December 2006.  As you may be aware, under these regulations the transitional exemption period for the introduction of BER for new dwellings is shortened to 18 months compared with the 2 year period proposed in the Action Plan published last July. It now begins on 31 December 2006 rather than 30 June 2006 but runs as originally intended to 30 June 2008.Dwellings for which planning applications are submitted as and from 1 January 2007, require a BER when constructed or offered for sale.

The above arrangements will facilitate the final development and the putting in place of the administrative and quality assurance systems by SEI. Given the normal planning and construction timescales it is expected that demand for BERs will begin to grow from about mid 2007 and that the initial volume of work to be carried out by registered BER assessors will be minimal in the first half of 2007.
 
A number of issues with the DEAP software were identified in the course of both beta testing and delivering first training courses. SEI is currently addressing the resulting requirements and it is now expected that a fully tested software package will be available by the end of March 2007, at which point training on the official DEAP software can commence.
 
SEI will be registering BER assessors from Monday, 2 April 2007. Only assessors who have attended a validated BER training course using Version 2.1 of the DEAP software (due for release in March 2007) will be eligible for full registration as BER Assessors. SEI would strongly recommend that training providers conduct BER training on Version 2.1 of the DEAP software only, as BER assessors who train on earlier versions of DEAP will require refresher training on Version 2.1 once it is available. '

For the last six months the RIAI and UCD ERG have been attempting to develop training for design and assessment with BER, but have not been able to make any progress because of changing deadlines and the non-availability of software. As above, SEI has confirmed that training cannot take place until the software is available. This is now projected as being the end of March 2007. Only when the software is actually available can development of training begin. In light of this development the RIAI and UCD ERG cannot commence delivering training until April 2007, using DEAP Version 2.1, as recommended by Sustainable Energy Ireland.

Article from the Royal Institute of Architects in Ireland website.