The Irish property market is crashing with extraordinary speed. In fact, prices are coming down faster than anyone could have anticipated. Prices in October fell by a staggering 1.3 percent, bringing the annual decline in prices down to almost 5 percent. The monthly decline was the deepest since records began in 1996.
Originally, I had expected that house prices would first slow and then stagnate. Over a period of five or so years, the real value of housing would be eroded by inflation. Frankly speaking, I had only ever anticipated a comparatively small downward nominal price adjustment.
However, property markets in many inflated bubble markets are experiencing rapid price falls. In some cities in United States, prices are already down about 20 percent from the peak. Now we have data from Ireland recording an annualised five percent decline.
Here in the UK, the market turned with frightening speed. In the early summer, house prices were still growing, and although there were signs of weakening demand, the slowdown appeared to be a modest affair. However, within six months demand has evaporated, mortgage approvals are down by 37 percent and the market appears to be gripped by panic.
By my reckoning, the UK market is about one year to 18 months behind the US and Ireland. By this time next year, we could well see normal declines in house prices similar to those recently recorded in the US and Ireland.