KBC Bank has estimated that residential property prices in Ireland will fall by 12% this year, but a worst-case scenario could see valuations plummet by 20%. 

The prediction is contained in a document prepared for investors and analysts as part of the presentation of its first quarter results.

Peter Roebben, chief executive of KBC Bank Ireland, said the model reflects the correlation between GDP and house prices.

"Our house price drop is just what we would typically see in a 5% GDP drop across the board affecting house prices," he said.

"The difficulty is of course that there are so many moving pieces in this particular crisis that models that are difficult to run at the best of times are extremely difficult to run now, particularly at the moment. There is no such thing as a market right now, there are almost no transactions taking place."

The bank's base case for property values this year is a 12% fall, with an 8% increase in 2021 and 5% rise in 2022.

But in a pessimistic scenario, it says the drop this year could be as much as 20%, with a further decrease of 5% next year, before a 3% recovery in 2022.

Its most optimistic scenario envisages a 6% decline in property prices this year, followed by a 5% recovery next year. 

The bank also said it has received over 7,000 payment break requests as Covid-19 continues to impact homeowners and businesses across the country.

However, Mr Roebben said it wasn't likely that the payment breaks will be extended again beyond the six months already agreed.

"As things stand I think that it unlikely," he said.

"Of course a lot depends on what the Government's view will be and how the economy recovers and picks up as lockdowns are gradually eased."

"But in the given situation I think this is very unlikely."

He acknowledged that there would be a group of people whose lives will remain impacted by the crisis beyond the six month repayment moratorium period.

"With those we will have to work individually and find tailor made solutions," he said.

He said the bank would actively engage with customers who sought breaks in the first wave before their break term ends and then move to work with those in the second wave.

KBC said that a dedicated Covid-19 response team is available 24/7 to help customers with any financial concerns or questions.

The bank has also redeployed staff from other parts of the business to support this team and the customer contact centre.

KBC Bank Ireland reported a net profit of €12m, after tax and impairments for the first three months of the year, while its impaired loans reduced by €71m to €1.585bn. 

It also saw new mortgage lending of €192m, with switcher mortgage applications rising by 20% on an annual basis. 

The bank said it would provide guidance on what the financial impact of Covid-19 would be at end of the second quarter.

Mr Roebben said the bank had decided that in view of the extreme nature of the shock, its decision to put in place repayment breaks and the ongoing stimulus work by Government, it was far too early to take a view on the impact during the first quarter.

He said the bank had made some adjustments to spending in areas like marketing and travel, but does not envisage closing any "hubs" or carrying out major restructuring.

"We are, and this is very important to us, we are determined to stay on our strategic path and Covid is not going to divide us from our strategic path," he said.

In fact, he said, the lender would increase its pace of innovation.

The bank said it would provide guidance on what the financial impact of Covid-19 would be on it at the end of the second quarter.

Mr Roebben said the bank had decided that in view of the extreme nature of the shock, its decision to put in place repayment breaks and the ongoing stimulus work by Government, it was far too early to take a view on the impact during the first quarter.

He said the bank had made some adjustments to spending in areas like marketing and travel, but does not envisage closing any of its branches, known as "hubs", or carrying out big restructuring.

"We are, and this is very important to us, we are determined to stay on our strategic path and Covid is not going to divide us from our strategic path," he said.

In fact, he said, the lender would increase its pace of innovation.

In this regard he said he was pleased to see a significant increase in current account openings in the first quarter of 2020, with 9,400 added, many of which were opened online.

This was a 5% increase compared to the same time last year and marked the strongest first quarter since the launch of the retail bank here.

It noted a spike in account openings in the middle of March, which represented an increase of 30% when compared to the first half of March.

KBC Bank Ireland also today announced the launch of a bank insurance proposition here which is also being delivered digitally. 

It said the launch of the insurance business, which is a branch of KBC Insurance NV in Belgium, will be introduced on a phased basis beginning with the market launch of a digital pension product, followed with a life insurance product.

It also said it is providing additional supports to vulnerable customers having commenced a series of care calls to over 5,000 cocooning customers who may be negatively impacted by Covid-19. 

"KBC will continue to work with Government and all stakeholders including the BPFI to support the national effort and to help people as they adapt now, and in the future," the bank said.

Peter Roebben, chief executive of KBC Bank Ireland

"The economic impact of the Covid-19 situation will become more and more visible over the coming months and will undoubtedly have a significant impact on the financial performance of the bank," Mr Roebben said. 

"We have the strength and support of one of the biggest financial groups in Europe, KBC Group, whose strength of capital and liquidity ensure that we can face the future with confidence. This confidence means we will continue to offer innovative financial solutions in the Irish market," the CEO added.