THERE has been a surge in the numbers of mortgage holders who owe more to the bank than their house is worth.
And a separate study has sparked fears of a two-tier property market as it suggests there is hope for a recovery in certain areas – notably Dublin.
New calculations by the Central Bank indicate that as many as 400,000 mortgages are in negative equity.
Negative equity means that if the property was to be sold today, the sale price would not cover the amount that is owed on the mortgage.
Despite the latest evidence of some slow recovery in the property market, Central Bank economists found that it will take a long time for negative equity to be eroded.
Their study has found that up to half of all residential and buy-to-let mortgages are in negative equity. House prices have collapsed by more than half since the market peak of 2007.
There are a total of 920,000 mortgages, held by both homeowners and investors.
Some 40pc of these are for amounts greater than the properties are currently worth.
"Given the substantial fall in Irish house prices, estimates suggest that almost 400,000 Irish properties are now in negative equity," said the study, entitled 'Price expectations, distress mortgage markets and the housing wealth effect'.
Property price rises between 1995 and 2007 were the largest in the western world. Prices rose at an average of 9pc a year here. At the peak of the market – between 2004 and 2006 – there were 340,000 new mortgages approved.
Many of these mortgages are thought to be in negative equity.
Economists at the Central Bank said between 40pc and 50pc of the total stock of mortgages were in negative equity. They updated original research by David Duffy, of the Economic and Social Research Institute.
Yvonne McCarthy and Kieran McQuinn at the Central Bank found that housing values play a huge role determining whether people spend on goods and services.
If people feel prices are rising, they are more inclined to spend elsewhere. This so-called 'wealth effect' is stronger in Ireland than in other countries.
Meanwhile, research by MyHome.ie shows that transactions in Dublin are up 13pc in the first six months of the year compared with the same period last year.
The analysis of the Property Price Register shows that the value of transactions is at a three-year high, with €1.197bn raised from sales in the capital in the first half of the year.
The comparable figure for the first six months of 2012 was €965m.
Angela Keegan, of MyHome.ie, said the fact transaction values were up 24pc in the first six months of the year was encouraging.
"The value of transactions are up but this comes off the back of six years of falling prices. That trend could not continue and the fact it has been arrested in Dublin and prices are beginning to stabilise or rise in most areas is a positive development for the property market in the capital."
Transactions have fallen back in a handful of areas, most notably in Dublin 5, 20, 14, 15 and 16. However, this is probably due to a lack of suitable houses being put on the market in these areas, as a limited supply of family homes are being snapped up very quickly by buyers.