price drop Covid-19 restrictions will cause property prices to drop by nearly 3pc
The Covid-19 lockdowns and the unprecedented fall in economic activity will lead to a drop in house prices this year and the following year, a leading credit ratings agency has forecast.
Standard & Poor's says Irish prices had already softened ahead of the crisis.
However, the pandemic has added to the downward pressure on prices. The ratings agency expects prices in this State to fall by 1.6pc this year, and by 1.1pc next year.
It comes after there was a rise of 1pc last year.
By 2022 prices will be on the rise again, S&P said. It is forecasting rises of 4.6pc that year, with increases of 4.2pc in 2023.
"In Ireland, house prices had been softening already, ahead of the crisis, which now adds to the downward pressure," according to its latest European Housing Market report.
The lockdowns across Europe squeezed housing supply because construction activity dropped markedly, it said.
Price falls are predicted for this State, despite households reassessing their need for space.
This is due to the fact that they are spending and working more time at home. For those who can afford it, this means they have brought forward their decision to upgrade.
The ratings agency expects this to lead to greater demand for larger homes.
"We expect price increases to soften only a little this year, while we foresee a more pronounced slowdown next year as government support through the pandemic is phased out and labour market developments become less supportive of household income," said S&P Global Ratings' senior economist Marion Amiot, about prices across Europe:
The return to pre-pandemic levels of activity in 2022, and potential structural changes in housing demand post-Covid-19, should lead to a renewed acceleration in housing demand and prices, she added.
Last week the Central Statistics Office said prices fell in August, as the pandemic continues to infect the housing market.
There was a drop of 0.6pc in prices nationally in the year to August.
Prices fell by the same percentage in July, which was the first annual decrease in seven years.
Transaction levels were down 40pc in August, according to the figures from the Central Statistics Office.
Price falls and transactions dropping, reflect the impact of the lockdown earlier in the year. It restricted buying activity and construction output was also hit.
However, the figures also showed that property prices increased in August by 0.3pc when compared with the previous month. This follows a 0.2pc monthly increase in July and 0.1pc rise in June.
In Dublin, prices were down by 1.6pc in the year to August.
Experts said the decreases were now coming through, due to the disruption to the market from the pandemic. Up to the summer there had been a delay in prices falling.
The pandemic meant there was a 40pc drop in the number of residential properties purchased registered with Revenue in August.
Just 2,359 purchases were filed with Revenue in the month, 8pc lower than the number of purchases filed in July.