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NAMA bananas

• I am astonished to read that the National Asset Management Agency (NAMA) is now offering 100 properties under a deferred payment scheme. The scheme is designed to help mitigate the risks of further decreases in house values.

The initiative will see 80pc of the agreed sale price of the property paid up front, with the remaining 20pc due after five years, depending on an independent assessment of the property's value.

NAMA seems intent on trying to return property prices to as high a level as possible. Given the loans on their books this is understandable, but the result of their attempts to reflate prices is that in effect they are again skewing the natural course of the property market. How can this possibly be in the long-term interest of the Irish people, or economy?

Cheap credit, a lack of meaningful regulation and let's not forget corruption led to a skewed and dysfunctional property market that super-heated during the boom years. Unfortunately, many average citizens got caught up in the property nexus and bought massively overpriced properties, often in badly planned estates.

The Government needs to address the negative equity situation but whatever the solution it certainly is not going to be found by returning to the crazy prices paid for property during the boom.

With several billion euro a year yet to be taken out of the Irish economy, the outlook can only be bleak. Wages are being reduced and proxy taxes such as property and water charges are going to eat into real income. In effect, Irish people will have considerably less to spend on housing and prices will continue to drop in line with this reality. Any other view is nonsensical.

As a society, we should welcome lower house prices. Housing is not a commodity and should not be treated as such. My view on how house prices will look in five years is based on the relationship between current incomes, expected incomes and the amount likely to be loaned to people based on their salary. With such a view, only one conclusion is possible: continued reduction in house prices.

Beware the economists who predict increases in house prices: they missed the most obvious boom in history and could only see soft landings and green shoots. Furthermore, most of them work in areas that have a vested interest in the sale of property at prices disadvantageous to the consumer.

So, buyers beware: property prices will continue to fall. Let this be a warning.

Gerard O'Donoghue
Limerick city

Irish Independent