Dublin Opinion

Oh this is not good . At least, according to the New York Times, which today has a piece on the Global decline in property prices following on from the problems with financial and housing markets in the U.S., its not. The august journal has taken it upon itself the gauge the mood in Ireland, and to them it ‘feels like a wake’ around here, ‘and not an Irish one.’

(Ha, they couldn’t resist the opportunity to make a quick joke, eh? But this is not the time for playing on a cultural stereotype.)

While the article deals with the decline in property prices in many countries, there is a particular emphasis on Ireland and Spain, perhaps because the drop in the property market in both is so much more startling than elsewhere.

Indeed, the majority of the article is anchored in Ireland. The photo used in the piece is of Irish woman, Emma Linnane, who is sitting on the balcony of her overvalued Dublin apartment, which, according to NYT, has dropped by $100,000 in value since Emma and her partner bought it.

First though, they deal with Spain, where the situation seems dire…

“In Spain, more than four million homes were built in the last decade, more than in Germany, Britain and France combined. Average house prices tripled in parts of the country, as Spain’s torrid economy attracted immigrants and Northern Europeans snapped up holiday homes along the Costa del Sol.

Now, though, thousands of those houses stand empty. The I.M.F. estimates that property is overvalued by more than 15 percent. With mortgages drying up and prices swooning, speculators who once viewed Spanish property as a no-lose proposition are confronting hard reality.”

To be over valued by 15 percent sounds bad, and it is, until you look at Ireland.

“Average house prices fell 7 percent last year, the most in Europe, according to the Royal Institution of Chartered Surveyors, a British real estate group. They are likely to fall by a similar amount this year.

After a 16-year boom that was interrupted only briefly after the Sept. 11 terrorist attacks, Ireland has the most overvalued housing market among developed countries, according to the I.M.F. In its recent economic outlook, the fund calculated that prices are 30 percent higher than they should be, given Ireland’s economic fundamentals.”

There’s a quote from an Irish estate agent, without which no article on the Irish property market is complete. David Bewley, of Lisney real estate agency ‘said houses were selling again, albeit for 25 percent less’, which says little for those who are paying for mortgages on houses that are now 25 percent less in value then when they bought them. It also suggests that prices won’t dip below that. Maybe they won’t, but the tone of this rather black piece suggests otherwise.

The article also argues that the situation in the States where foreclosures are now common is not the same as Ireland, because the banks here were less aggressive when selling their mortgages. But then, with a housing market on a sustained upward curve for a good number of years, inflating the prices considerably higher than their value should have been, ‘given Ireland’s economic fundamentals’, there was no need to be aggressive. There is also certain political reasons why Ireland’s property bubble is considerably higher than its economic fundamentals would suggest.

However, concluding the piece there is a suggestion that all might be okay as long as the rental market remains buoyant, so that property investors aren’t forced into foreclosure.

“Like Spain, [Ireland] attracted lots of foreign workers, many of whom came for well-paying jobs in the construction industry. That fueled the Irish rental market, which has remained buoyant and been a source of income for Ireland’s many real estate speculators.”

Anecdotal evidence suggests that many foreign workers would leave Ireland if the economic situation changed dramatically. A certain proportion of immigrants into Ireland, mainly from the former Eastern bloc, are not working in the construction sector. However, the majority are either working in construction or in the services industry, which is closely tied to it. The recent unemployment figures suggest that there has been a rapid decline in jobs in both construction and the services industry. The rental market is also the victim of the construction boom, which was partly fueled by a lack of awareness about what real demand there was from people who needed somewhere to live. The result is that there are now a startling number of unoccupied apartments available and this, inevitably, leads to a drop in the price of rent.

As I said, this is not good.