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Irish House Prices May Decline 2% This Year, Allied Irish Says

Irish house prices may fall 2 percent this year, Allied Irish Banks Plc said, citing rising interest rates and deteriorating affordability.

A decline would be the first in 20 years, based on prices collected by Ireland's Environment Ministry. House prices, which have quadrupled in the last decade, fell in April for a second month, according to a separate index.

``Given the degree of recent price changes and the depressed sentiment in the housing market, we have reduced our forecast for end 2007 house-price inflation,'' Dublin-based Allied Irish said in a note late yesterday. A 2 percent decline ``would still constitute a soft landing for the market,'' it said, which means the property market would avoid a crash.

The European Central Bank yesterday raised its benchmark interest rate to 4 percent and suggested it will increase the rate again later this year. Its eight interest-rate increases since late 2005 have slowed property demand in Ireland, curbing mortgage lending and homebuilding.

To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.

To contact the editor responsible for this story: Riad Hamade at rhamade@bloomberg.net

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