For anyone who believes that distortions and artificial supports in the Republic of Ireland are preventing residential property prices from reaching a floor, or bottom at which buyers and sellers operating freely with good information agree a clearing price, all they need do is look across the Border at our friends and neighbours in Northern Ireland. According to the latest survey of Northern Ireland residential prices by the University of Ulster in association with Bank of Ireland and the Northern Ireland Housing Executive, property prices fell by 2.6% in the fourth quarter of 2011 and are now down 45.2% from the peak in 2007; the average home in Northern Ireland, according to the survey, costs GBP 137,219 (€163,510). The full report doesn’t appear to be online yet from the University but can be accessed here, and the accompanying press release is here.
On this side of the Border the CSO says that to the end of December 2011, our residential prices have dropped 47.2% from peak and applying the CSO index to average prices recorded in the discontinued ESRI/PTSB survey indicates an average price here today of €165,781 (GBP 139,124). Think about that for a moment.
Northern Ireland doesn’t have our planning system, has a vacancy rate of 6.4% – 758,600 dwellings of which 709,900 are occupied – which is seen as the norm by international standards, compared to 14.7% on this side of the Border – 2,004,175 dwellings of which 1,709,973 are occupied. Northern Ireland didn’t have a Galway Tent though that’s not to say developers don’t have close relationships with politicians. Northern Ireland doesn’t have the euro and can’t blame the ECB for not putting the brakes on cheap German deposits pouring into the country. Northern Ireland has an unemployment rate of 6.8% compared to 14.2% here. And the UK has had inflation of 15.6% between 2007 and today, our inflation is up just 0.5% – yes, really, it recovered slightly in 2011 but had fallen in the previous two years – meaning that in real terms Northern Ireland residential property has declined 52.6% from peak whilst ours is down just 47.5%.
It is generally in a national economy’s interest to have stable and slightly increasing house prices on the condition that prices reflect the dynamics of supply and demand. Temporary distortions and supports can be justified in times of crisis, but our property bubble has seen slow-motion deflation since 2007 and the consensus seems to be that prices will fall 60% from peak, though there are views that we have already overshot and views that prices might fall 80-90%. For those who, for a variety of reasons, try to influence opinion on the Republic’s property market, just look across the Border and ask yourself if it’s not better to see a natural decline at this stage to a clearing price from which a genuine recovery can take place.
NAMA Wine Lake 
Don’t forget the change in stamp duty in terms of price changes in real terms since 2007.
Dropping the €1M from 9% to 2% was, in effect, a transfer from the seller to the state of a possible further 6% drop.
A classic example of a hidden state distortion and artificial support – much like NAMA’s “wine lake” :-)
Oops! WordPress misread my “less than” and “greater than” signs as tags!
The above should state:
Dropping the sub-€1M rate from 7% to 1% and the balance over €1M from 9% to 2% was, in effect, a transfer from the seller to the state of a possible further 6% drop.