Monday 20 November 2017

Property crash 'over' as Moody's insists market at bottom

Ireland is now at the end of the housing crash, according to Moody's
Ireland is now at the end of the housing crash, according to Moody's
Ireland is now at the end of the housing crash, according to Moody's
Donal O'Donovan

Donal O'Donovan

RATING agency Moody's says Ireland is at the end of the housing crash – with price falls and arrears both bottoming out.

Evidence of a turnaround in the housing market has been building for months, but Moody's opinion carries special weight with many international money managers relying on its assessment before making their investment decisions.

The latest report from the influential agency is a boost to Irish banks, which are increasingly looking to the markets to provide the finance needed to kick-start mortgage lending.

Mortgage losses already clocked-up still have to be borne by the banks but "debt forgiveness" rather than repossession will be the solution in the majority of cases – the agency said.

While the worst may be over, Moody's said it did not expect house prices to recover quickly, despite the mini-boom seen in some parts of Dublin.

The report could signal good news ahead for the Government. Moody's is the only one of the big three credit rating agencies that classes Irish Government debt as a so-called "junk" or high-risk investment.

Its improving opinion on the property market will feed into its view of the banks, and, ultimately, its assessment of the State's finances. That could be a trigger for an upgrade of Ireland's national debt, which would make it easier for the State to borrow at low rates.

Yesterday, analysts at Moody's published a report that the Irish housing recession was finally showing signs of "bottoming out" after seven years of declining house prices.

Speaking to the Irish Independent Moody's vice-president and senior credit officer Anthony Parry went even further.

BOOST

"Prices look like they have hit the trough, arrears levels are about to peak. We do not expect any shock to reverse that, we are calling the bottom of the market," he said.

This is a particular boost for the banks. Moody's said the bottoming out of the property market put an implicit limit on the severity of losses associated with Irish mortgages. That will give comfort to investors backing the banks either as shareholders or as lenders.

But Moody's analysts don't expect house prices to start rising again any time soon. A boost to house prices in Dublin as a result of cash buyers and shortages of supply in some areas was temporary, they said. "Flat lending activity by the Irish bank and high outstanding household debt across the county will restrict the house price recovery process," Moody's said.

Instead, house price rises are anticipated to rise relatively slow, and it will be years before the effects of the crash are finally shaken off.

"It will take a decade or more for the consequences of the housing recession to be worked through given the high level of defaults in the system," Mr Parry said.

A mass wave of repossessions is now not expected to form part of the process, however. "There have been very few repossessions. Even with the hurdles removed we don't expect that to change," Moody's analyst Sebastian Hoepfner said.

High losses for the banks are inevitable, however, but Moody's says it expects debt forgiveness, not repossession, in a majority of cases.

Irish Independent

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