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Britain’s housing market, Ireland’s is not uniform. In Britain prices are rising in London, but falling almost everywhere else. Ireland is the mirror image – prices are rising in rural areas, but still falling in Dublin. In August, prices in the capital fell by another 0.5%.
And that’s worth paying attention to. Because as David McNamara of Davy Stockbrokers argues, the rural property market is a poor guide to what is really happening. This is because it is “illiquid’ and “dysfunctional”.
What’s happening is that, rather than cutting prices to where they would find buyers, heavily-indebted homeowners are choosing to stay in their property as long as lenders are willing to let them. This shortage of housing means that those who do want to buy in rural areas have to pay a premium to do so.
This mismatch between supply and demand is shown by the fact that mortgage lending and transactions outside Dublin are at historic lows.
It’s not unlike the situation in Britain, where homeowners who can’t afford to move or remortgage are only able to cling on to their homes for as long as interest rates remain near zero.
McNamara also warns that auction and portfolio sales suggest that the scale of the fall in Irish house prices may be even greater than official data recognises. Ulster Bank recently sold a package of apartments, along with some commercial property, at a price that was 70% below the 2007 peak, rather than the 50% that the house prices indices suggest.
