Property & Mortgages

Thursday 10 July 2014

Property crash wipes €257bn off value of homes in six years

Mark Keenan

Published 01/04/2013|04:00

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IRELAND'S homeowners have collectively lost an estimated €257bn in property value in the six years since the market began to crumble, the Irish Independent can reveal.

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The 50pc collapse in value since the peak of 2007 also means that by the Central Bank's own estimates, Ireland's crash has now become the worst experienced by any country in the world.

The combined loss to the owners of Irish residential properties since the bubble burst equates to almost four times Ireland's total bailout sum of €67.5bn and more than half the total amount of money first set aside in the European Union's €500bn Financial Stability Facility.

The PTSB/ESRI Index, Ireland's former national price barometer, showed average house prices standing at €310,632 at the start of 2007.

An estimated drop of 50pc in value puts the average loss to an Irish household at €155,316.

With 1.6 million households across the country, that is a combined loss of more than €257bn.

Not everyone who owned property suffered anything near the same scale of loss in value. While those renting out their homes avoided a hit, multiple property owners, such as landlords and local authorities, experienced the biggest losses on residential values.

This time last year, the Central Bank marked Ireland out as having suffered the second worst crash in the world after Japan's, which stood at 49pc.

The year since the report was published has seen some house prices stabilise or even increase in parts of Dublin, but most continued to fall. It means we have now overtaken Japan's 1991 collapse.

However, if some critics of the Central Statistics Office (CSO) system are correct, then the average property capital value losses per household could be even higher.

Some say the price-measuring system has built in delays because it tracks sales from the point of mortgage draw-down rather than when the sale actually takes place – often a three-month gap – and it does not factor in cash transactions, which are likely to be cheaper.

Conall Mac Coille, chief economist with Davy, recently claimed that Irish values could have already shed as much as 60pc. If this were true, then the average property has lost €186,379 in value, and the nationwide equivalent loss in property value is, in fact, €310bn.

Prices first began falling in parts of Dublin in the second half of 2006, though the lack of a publicly accessible property price register meant that the phenomenon was not widely known or reported until early in 2007. However, it took until 2008 before falling prices became a reality throughout all rural locations.

Many experts believe that the recovery will spread out gradually from Dublin in the same way the crash did.

The latest figures show Dublin prices up 2.5pc on the year to January, though nationwide prices were down 3.3pc.

This compares with 4.5pc down for the year to December 2012 and with 17.4pc down for the year to January 2012.

The CSO estimates Dublin prices are 54pc lower than at the beginning of 2007 and apartments are 61pc cheaper.

Irish Independent

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