The Central Bank said Irish property prices have overcorrected by between 12% to 26% compared with the fundamental value of properties.

Questioning why Irish property prices continue to decline, the bank suggested a lack of consumer confidence and expectations about further price falls is holding back purchases.

But it also said that a lack of mortgage finance from banks is restricting market activity and price levels.
The bank warned that any immediate revival of the sector still appears to be some way off.

Central Bank research said that as it enters its fifth year, the severe downturn in the residential property market has already become one of the Organization for Economic Cooperation and Development’s (OECD) largest and most protracted.

The Central Statistics Office residential property price index shows that the decline in value since the peak of the market in 2007 was over 47%.

The research points out that Ireland's housing prices have fallen for 16 quarters in row, but this compares to 82 quarters in Japan and 41 quarters in Switzerland.

The Central Bank points out that a positive trend in the housing market is the fact that affordability has improved in recent years, but it adds that the imposition of tighter credit conditions by the banks could diminish much of this benefit.

Meanwhile, The annual rate of decline in loans to households eased to 3.9% in March from 4% in February, latest figures from the Central Bank show.

The bank said that a drop in lending for house purchases and consumption again accounted for much of the overall reduction in lending.

Lending for house purchases was 2.4% lower in March, while lending for consumption and other purchases fell by 8%.

The Central Bank says that loans to households declined by 167 million in the month, following a net monthly fall of 355 million in February.

Irish homes now being sold at an undervalued priceGoogle Images