All of the economic data would suggest that 2009 will remain a challenging time within the industry. Rising unemployment, a huge exchequer deficit and a financial sector in decline has resulted in consumer confidence being at  a very low ebb with much of the public now genuinely concerned for their job security. This is not going to change over night and Ireland together with the U.S and many of our European neighbours are now firmly in recession. The circumstances that have brought this about are complex but particularly relevant has been the fall out within the finance sector.

Finance is the lifeblood of the property industry. Without access to debt finance, the wheels of the  industry simply do not turn and this has been evident for much of 2008. The major Irish banks have seen their share prices collapse in the least 12 to 18  months and at long last the government have acted decisively by seeking to re-capitalise AIB, BOI and Anglo Irish. But has it come too late and is it sufficient enough to avoid a longer downturn. These are questions that remain unanswered. Until such time that the major Irish Banks are comfortable in beginning to lend for both mortgages, personal and company debt, then the Irish economy will not begin to recover. The fortunes of the banks are inextricably linked indirectly to us all. It is therefore in everyone’s interest to see a strong banking sector but one I suspect that will be far more regulated going forward. Tighter regulation of the sector is to be welcomed given the obvious mistakes that have been allowed to happen. On a more positive note, any inflationary pressures have now been taken out of the euro zone for the time being at least. With much of the euro zone now in recession, the ECB would appear committed to a policy of lowering interest and we may well see further cuts at the next bank meeting. Interest rates are already at an historically low levels and thus the costs of debt are coming down very substantially. The combined effect of lowering prices and lower interest rates is that affordability has improved greatly.

Turning specifically to the property markets, there has already been a large correction since the top of the markets. In Dublin this is now considered to have been summer 2006 however, in provincial Ireland I believe the top of the market was probably early 2007. Since this time there has been a gradual but steady deteriation in the market with falling sales volumes and consequently prices. Prices form their peak are down somewhere in the region of 30%. How much further I hear you say. The fall in values has been large due principally for two reasons. There was over supply in the market with far too many speculative residential developments commenced in the lest number of years. Many of which are in questionable locations with poor infrastructure and lacking amenities. Secondly prices were too high driven by cheap easily accessible credit. The market overheated and a severe correction was due.

The short term prospects for homeowners, builders and developers are tied to recovery in the financial markets. There can be in my opinion no meaningful recovery until access to debt finance once again become available. This may be six months are more but it will happen as stability is restored. For those genuinely interested in buying a property because of relocation, those trading up or indeed first time buyers, there has never been a wider choice of property many now offering excellent value for money. Since the beginning of the year there are very early signs of genuine interest among buyers but only those properties that are well located, well presented and importantly those that are being offered at competitive prices are likely to find buyers.