READ MORE - House prices fall to 2002 levels in Ireland
House prices in Ireland will continue to fall for the next two years as people attempt to reduce their debts rather than investing, a leading analyst at Merill Lynch has predicted.
‘‘It will be 2013 before the housing sector in Ireland will really begin to see meaningful signs of recovery," Bill O’Neill, chief investment officer at the company’s wealth management unit in Europe Middle East and Africa, told the Sunday Business Post.
‘‘The housing sector will be constrained for an extended period of time, there’s no doubt about that."he added.
Mr O’Neill described Ireland’s recession as ‘‘the largest downturn in living memory’’ and said that Irish people would be dealing with the effects for several years to come.
He said that the ‘‘period of deleveraging’’, where by consumers are more focused on reducing debts than spending, would last for the next five years.
‘‘From the point of view of asset prices and real wage growth, there are four to five years to go in the deleveraging story," he said
‘‘Deleveraging cycles tend to take about six to seven years, which would fit in with the length of the bubble cycle for Ireland, from 2001 to 2008," he added.
The economist predicted that the downturn could be shortened by an export-led recovery.
‘‘A substantial part of the competitiveness that was lost during the crazy period of the bubble has been clawed back.
“You’ve got an incredibly flexible labour market, you’ve got very strong FDI, and it’s extraordinary the extent to which wages are deflating," said O’Neill.
He described the Governments’ target of 2.75 percent economic growth was ‘‘credible and sustainable’’ based on the continued strong performance of exports.
However he warned that the situation in the Eurozone would ‘‘get worse before they get better’’.
‘‘There will be a need for further bold measures in the next year," he said.
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