Asking prices for Waterford city and county houses dropped by 0.7 and 2.9 respectively in the third quarter of this year, according to the latest House Price Report.

The average city asking price in Q3 stood at €267,539, while the average county price came in at €303,292.

But it’s worth noting that asking prices in Waterford city, as also proved the case in Limerick, didn’t fall by as much as other major urban centres.

Its year-on-year average price change was -3.3 per cent, which compares with -12.2 per cent in Cork, -10.2 per cent in Galway and -11.9 per cent in South County Dublin. Prices in Limerick city actually rose by 1.6 per cent on the year-on-year graph.

Meanwhile, the year-on-year change in County Waterford stands at -4.3 per cent, with Tipperary recording an 8.1 per cent drop, Kilkenny coming in down 8.4 per cent and Wexford experiencing a 10.9 per cent decline.

“In the decade up to 2007, people’s expectations for the return to housing became grossly and unrealistically inflated,” writes UCD Economist Moore McDowell in his introduction to the report.

“The housing boom, with supply racing to catch up with demand, was the consequence of what economists call adaptive expectations. Falling interest rates from 1997 increased affordability, while rising employment and incomes per head increased demand at any price.

“What developed was the classic bubble: people purchasing an asset at a price based on the assumption that past rates of price increase would continue into the future, as opposed to the fundamentals. It had to end in tears, and the only question was when.”

McDowell said that Government fiscal policy stoked “the speculative fire, budget after budget” and such gung-ho economics had played a significant role in the still evolving banking crisis.

“The slow adjustment of expectations to reality is illustrated by the gap that has now emerged between asking prices for houses just put on the market and those for houses that have been on the market for a quarter or more,” he feels.

“Adding to the market hysteresis is the rational reluctance of potential buyers to buy. On the demand side, the longer the price decline continues, the greater the incentive for a potential buyer to hold off purchasing in the hope of a further fall in prices.”

McDowell’s most interesting comments were reserved for the old parental nugget about house acquisition – that it surely makes more sense to buy than to rent. But does it?

“They are not a safe (i.e. a low risk) investment,” he writes. “That means your decision to buy should not be based principally on what you might get if and when you sell it, but on how it will function as a home…

“The good life does not depend on owning the roof over your head: ask any Parisian, Milanese or Manhattanite. They get along while for the most part renting. They don’t suffer from our ownership obsession, and, for me at least, living in an apartment in Paris beats the hell out of a semi with a front and back garden five miles beyond the M50.”