On The Likely Extent Of Falls In Irish House Prices

On The Likely Extent Of Falls In Irish House Prices:

The ESRI has an interesting report by Professor Morgan Kelly entitled:
"QEC Special Article: On The Likely Extent Of Falls In Irish House Prices"

In this paper Professor Morgan Kelly of University College Dublin looks at almost 40 house price booms and crashes that have occurred in OECD economies since 1970, and shows that the the larger the initial boom, the larger the subsequent bust. Were this pattern to hold in Ireland, Prof. Kelly would expect house prices adjusted for inflation to fall by fifty per cent, with somewhat larger falls at the top and bottom of the market. Unlike stock markets, house price collapses are typically slow: a likely scenario is for the selling price of houses to fall by around 5 per cent each year for the next decade. Prof. Kelly argues that reducing stamp duty will not alter this: so long as there is a large stock of unsold houses and falling prices buyers have an incentive to wait for further declines to occur. Prof. Kelly believes that the immediate reason to be apprehensive about falli"