If Carlsberg did property collapses…then you would expect the collapse in the value of residential property prices in the Republicof Irelandbetween 2007 and today to be close to tops. After all, that is what the league table of Reinhart and Rogoff’s global property busts tells us. Adjusting the figures below which are from 2009 to 2011, theRepublic ofIreland would be in second place after Hong Kong 1997-2003.
The Republic’s bust has seen property decline 49.9% from peak in nominal terms, that is taking the actual settled price in 2007 and the actual settled price today. In real terms, taking into account the fact that inflation should have pushed up the price of our property by 1.9%, our residential property has declined 50.8%. Which is a colossal decline, and the betting is that nationally we have further falls in prospect.
But over the Border in Northern Ireland, there’s an underappreciated phenomenon unfolding with prices there having declined by 54% in real terms. This morning the quarterly University of Ulster/Bank of Ireland house price series has been released and it shows that the average settled selling price of a home in Northern Ireland in Q1, 2012 was GBP 134,560 (€168,347) which represents a decline of 1.9% from the previous quarter and a decline of 46.3% from the peak of GBP 250,400 (€313,274) in 2007.
On this side of the Border, the publication last week of the Central Statistics Office monthly residential property price index showed that prices here have decline 49.9% from peak and given our peak price of €313, 998 according to the PTSB/ESRI index, that indicates national prices here today of €157,360. So the nominal decline in the Republic is greater than inNorthern Ireland, which might be expected.
But if you consider inflation in the Republic is a mere 1.9% since the peak whilst in the UK it is a staggering 16.7%, the real decline in the Republic is 50.8% and in Northern Ireland, it’s 54% which would appear to be world record, at least according to the Reinhart and Rogoff league table.
Given that Northern Ireland doesn’t have a major problem with vacant property unlike the Republic – its vacancy rate is 7% which is pretty much in line with international norms whilst ours is 14%; given that Northern Ireland has an unemployment rate of 6.8% which is one half of ours and given their banks are no worse and are probably in better condition than ours, isn’t it truly remarkable that their property crash is worse than ours?
Of course in the Republic we have oversupply but there is suspicion that it is being withheld from the market by banks and developers who don’t wish to crystallise losses on loans. Although our mortgage arrears problem has become a crisis with 15% of mortgages in arrears or restructured, and with one in 13 mortgages in arrears for more than six months, there is massive forbearance on this side of the Border with repossession rates on defaulting mortgages running at a level of less than a quarter that of Northern Ireland. It is likely our draconian bankruptcy regime and forbearance is preventing repossession and sale of homes whose mortgages are unsustainable. Our banks aren’t lending for new mortgages as revealed a fortnight ago with just 2,200 new mortgages for home purchase approved in Q1, 2012.
Elsewhere theNorthern Ireland survey shows that transactions in the quarter remained at a low level of 925, down from 960 in the previous quarter. The authors of the report – Professor Alastair Adair, Professor Stanley McGreal and Dr David McIlhatton – said: “We consider the generally weaker market in the first quarter of 2012 reflects a lack of confidence arising from the poor performance of theUK economy, with buyers still deferring decisions because of economic uncertainty, rising bills and concerns about job security.” Hmmm, what’s the outlook on this side of the Border.