Does negative equity reduce supply and boost prices?
It would seem ironic that the current bond between those householders in negative equity and their properties might actually benefit them as well as other vendors.
One agent recently suggested that in sought-after areas of Dublin supply of second-hand family houses is proving so low that another agent was pulling his hair out in frustration. Some agents believe that stocks are low but when they look at their figures the facts don't support their beliefs.
On the other hand Duncan Lyster of Lisney points out that stock levels are low and that this might well impact on price levels. He identifies negative equity as a key factor in curtailing supply of the more sought-after second-hand homes.
But how can this be, considering that the latest Daft research shows as many as 56,000 properties available for sale at the end of December? How can it be when Allsop Space are planning to hold their fifth auction next month with as many as 74 residential properties to go under the hammer?
But take a closer look at these figures. Firstly Daft shows that stock levels are at their lowest since 2008. The number of properties for sale in Dublin is estimated at 5,700 which is well below the peak of 7,100 and the level of stock in Dublin has fallen 20pc compared to 10pc for the country as a whole. Within the city, West Dublin has seen the greatest proportional fall, down 30pc, while North County Dublin has seen the smallest at 10pc.
About half the properties listed in Dublin sell within five months while the other half struggle to find buyers. Stock levels in Leinster at 14,700 are 17pc below the peak.
About one-third of properties in Leinster find a buyer within three months but only a further 20pc find a buyer within a year.
In other regions stock levels are also falling but are still high.
Which goes to prove the point that there are a number of pockets in the market which are trending much differently from others.
This is further reflected in the latest Allsop Space auction catalogue. Of the 35 residential properties for sale in Dublin only eight are houses and these are in a price range as low as €35,000 to €100,000. The other 27 are individual flats and their price range is even higher -- between €70,000 and €175,000.
This contrasts with Allsop Space auctions last year when guide prices for Dublin houses ranged between €280,000 and €1.45m. But those were in areas such as Dublin 4, 6 and 14. Robert Hoban of Allsop Space also attributes the low Dublin houses numbers in the next auction to the shortage of stock. However he does agree with Ronan Lyons of Daft that supply of houses are traditionally low at this time of the year.
Lyons acknowledges that within certain areas the types of houses available may not match demand and cites for instance the demand for cheap Victorian redbricks. Nevertheless he also warns against overstating the speed of the decline in stock levels. "Stock levels are very high still by any standard measure, so while I would say the process of correcting oversupply is under way, I wouldn't say it is nearly finished yet. There are seasonal ups and down so the best comparison is year-on-year."
So such evidence makes it difficult to claim that those in negative equity are curtailing supply or even more importantly that falling supply trends are likely to lift prices for houses in the near future.
But there are other factors which are contributing to the constraints in supply. Banks are slow to assist those who want to move house by curtailing mortgages for thse wishing to trade up. Even people who wish to trade down and who are in positive equity can find it difficult to get mortgage approval.
Furthermore the banks are also constraining supply by their forbearance in allowing those in arrears to stay in their homes. Then there are economic factors such as forecasts about average house prices falling nationally.
But it would be a brave person who would forecast that falling supply of second-hand houses will boost prices although it may help bring stability to pockets this year.