This is an estimate extrapolated from figures produced by Bank of Ireland last week and reported in the Independent today. Bank of Ireland has 199,000 of the 800,000-odd residential mortgages in the State and has estimated that 21.5% of its customers are in negative equity and that the average net debt of those in negative equity is €38,000. BoI’s figures are in line with ESRI estimates of upto 200,000 being in negative equity by the end of 2010. The ESRI have also predicted that it will take upto 10 years for some to escape the burden of negative equity (though consulting the ESRI reports it is difficult to see how this has been arrived at, though given the government assumption that net immigration in the next 16 years will be 0-600,000 and NO account has been taken of negative migration, one wonders whether they are aligning property prices with realistic population demand).
The immediate effect of negative equity is a slow down in consumer spending and an unwillingness to sell and realise the loss in cash. If negative equity is combined with greater unemployment or lower wages the prospect of mass repossessions comes into view together with large scale sell-offs of distressed property.
NAMA Wine Lake 
I agree with you on the large scale sell off of property but the question is who is going to buy these properties
Could it be the same bailed out Developers? Because they will be the only ones with money.
T
Thomas, given the general attitude of Irish banks in not seeking repossession and the relative difficulties of filing for bankruptcy in the State and the likelihood that property prices are not likely to recover for some time despite what the ESRI might say about peak prices returning by 2020, it may be that a large scale sell off won’t come about but negative equity and the economic behaviour it seems to encourage will both be a drag on any recovery in prices for some time. It’s a frightening statistic though – 170,000 mortgages in negative equity at an average of €38,000 so an overall total of €6.5bn of negative equity in our residential market and it’s likely to get worse by the end of this year.
Bank of I kindly told us that the situation was dismproving at a rate of €600m a quarter and they have 25% of the market.
That means that (crudely) Residential Mortgage holders IN NEGATIVE EQUITY are collectively undergoing a drop of €2.4bn in the value of their equity every quarter.
In trouble already and €10bn a year evaporating from their bottom lines and not a NAMA to be had anywhere. This for the 21% in Negative Equity.
And what about the 89% not (yet) in Negative equity, their assets are disimproving at the same rate. Throw in a bit of an oul NAMA for them too, sure why not.
Data from the slide named “Irish Residential Mortgages” in this
Click to access prelim_results_presentation_310310.pdf
Yes, doesn’t look good if property drops at the same rate as Q4 of 2009 (8.5%). Presently 79% (100-21) not yet in negative equity. What will Q1 of 2010 do – rumoured to be 10% but we’ll find out in two weeks and what for the rest of 2010 (Jim Power, economist predicts another 10% to come off)?
Thanks for the slides!
Most of the slides are twaddle, they clearly explain that their asset base is being eroded by €2.5bn a year on Res Morts alone and make no provision at all and describe their _Irish_ Res Mort book as being of uniformly high quality but not their slightly larger _UK_ book
Have we no auditors in this country and us awash with shaggin accountants ??
See slide “Group loan book asset quality profile” and you may have to read the full results to see how “High”quality this book is.