In the hope to help revive the struggling real estate market, Irish Financial Services Group (IFG) is preparing to offer home buyers the opportunity to purchase insurance against a price drop in the future from the price that they have paid.
Home prices have continued to fall for 42 consecutive months since the bottom fell out of the property market after years of careless lending. Since the peak in 2007, the prices have fallen by 43 percent.
The offer from IFG would allow house sellers to place up to 20 percent of the purchase price into a trust and receive the complete amount only if the price doesn’t fall any further within a set time period.
A Reuters poll determined that this year, property prices have been seen dropping by 11.5 percent and it is believed that they will continue to fall by another 4.5 percent by 2013 before any recovery is seen. This negative forecast is discouraging buyers and is leaving sellers with a property that no one will buy.
According to the chairman of IFG Ireland, Frank Ryan, all of the research that his organization has collected is indicating that a significant factor that is deterring potential buyers of homes is the fear that the value of the property will fall. He added that “There is a clear need for the consumer to be protected against the potential for negative equity when buying a home.”
IFG has explained that to use this coverage, it would deduct the service’s cost from the income built from the interest in the trust account, with a cap at the deductable amount at 90 basis points of the sale value of the home.