The Irish Times reports that this 200-year-old semi-detached at 10 Eglinton Park, next to the former Dún Laoghaire Golf Club course, was first put on the market in 2008 for €3.75 million. Now it’s for sale at €1.995 million - - a 47 per cent cut, with Sherry FitzGerald. Would it be too cheap after another cut of say 50 per cent?

UCD economist Morgan Kelly, who has done extensive work on contagion from economic bubbles, told the High Court hearing on the Carroll examinership bid on Wednesday, that Irish property prices are likely to fall back to mid-1990s levels, a view that is based on research on some 40 similar property booms. He said the current collapse of property sales, despite price falls of between 40-50 per cent, combined with large stocks of properties held by deeply indebted builders, developers and private investors, made it difficult to dismiss the possibility Irish property prices could remain below half their peak value “for the next decade or longer.”

The Irish Times reported last month that the Zoe group companies was seeking to appoint a former partner of KPMG, the accountancy firm which drafted an independent report backing their survival, as their court-appointed examiner.

It said the companies will seek the appointment of Ray Jackson, a retired partner of Big 4 accounting KPMG.

David Wilkinson, a partner with KPMG, said in an independent accountant’s report for the companies that they had a reasonable prospect of survival.

He estimated that the group has a net worth of €10 million with assets of €1.36 billion and debts of €1.35 billion if lenders agreed to fund ongoing development and a two-year moratorium on interest.

The group’s properties are estimated to be worth €1.2 billion if developed and sold on an orderly basis over three to five years.

€10 million is almost a comma in a margin of error and a forecast for the period of 3-5 years, is worthless, against the backdrop of the expected bumpy recovery across the developed world from the severest recession since the Great Depression.

‘‘Any deviations between actual results and the original forecasts will place added scrutiny on a transaction’s economics,” Wilkinson said in an unrelated article in The Sunday Post last February.

So what attention did Wilkinson give to economics?

Property values are sticky and are determined by market sales. In a downturn, volume plunges and the headline price decline can give a false sense that price falls are moderate. It takes time for sellers to accept that the paper gain during a boom was just that.

During the boom, prices of  Irish houses, with floor areas per person of around a fifth less than the western European average, even though a large number of dwellings (45 per cent) are detached houses, compared with high-income enclaves in San Francisco and Connecticut- - a favourite base for the plutocrats of Wall Street.

A glance at a selection of the more than 50,000 second-hand houses on Daft.ie, shows that asking prices still do not reflect the economic fundamentals and later next year, the European Central Bank is likely to begin tightening monetary policy.

In a report presented by ACCBank to the High Court, Prof Kelly examined 38 property booms in OECD countries between 1970 and 2006, including in Finland and the Netherlands, a commercial property boom in Japan in the 1980s, and a boom in Irish agricultural land in the late 1970s.

Kelly said all these boom and bust situations suggested, once the elevated bank lending which fuelled a property boom returned to its normal level, that real prices returned to pre-bubble levels, he said.

If this occurred in Ireland, prices of residential and commercial property would return to the levels of the mid to late 1990s - - half to two-thirds below peak values.

He said even if the Irish economy returned to growth, as forecast by the ESRI (Economic and Social Research Institute), it was not inevitable property prices would recover, he added. Data already suggested commercial property, agricultural land and Dublin houses had fallen by 40-50 per cent since early 2007.

Despite this, the property market remained inactive, with transactions, as measured by stamp duty receipts, at 20 per cent of 2007 levels. The “usual post-boom price correction” was likely to be aggravated in Ireland by large falls in national income and the dislocation in the banking system and government finances caused by the collapse “of our unusually large construction boom”.

From Morgan Kelly's ESRI paper 2007: Figure 4: Irish House Prices Since 1970 in Real Terms, Relative to Income, and Relative to Rent. Index: 1995 Equals 100 - - see below.

Kelly said that between 1995 and 2007, real prices of residential and commercial property in Ireland approximately tripled, growing twice as fast as national disposable income, he noted.

Between 2000 and 2007, when nominal GNP rose by 77 per cent, mortgage lending rose from €24 billion to €115 billion, lending to builders from €2.4 billion to €25 billion and to developers from €5 billion to €80 billion.

In a paper published by the ESRI in 2007, Morgan Kelly said: "Typically, real house prices give up 70 per cent of what they gained in a boom during the bust that follows. This is a remarkably robust relationship, holding across very different OECD housing markets over more than 30 years.

Were this relationship to hold for Ireland, it would predict a fall in real house prices of around 40 to 60 per cent, over a period of 8 or 9 years. Assuming an inflation rate of 2 per cent, this would translate into an annual fall of average selling prices of 6 to 7 per cent.

Falls of this magnitude and duration are not unprecedented internationally. For example, the real price of Dutch houses fell by around half during the 1980s, as did those in Finland during the early 1990s. However, other large housing busts occurred in economies with high rates of housing occupancy and relatively slowly growing stocks of houses. In Ireland, by contrast, housing stock has been growing at around 5 per cent per year, with about 15 per cent of the housing stock lying empty, increasing the potential for larger price falls than in previous OECD housing busts."

Policy makers need to be able to make judgments based on facts not hunches and plucking figures from the air.

Why was Ireland's boom so different from many others or was it?

SEE: Finfacts article for data on empty housing stock:

Irish property market may recover in 3 years or 10 years; Can there be a phoenix-style rise from the economic wreckage?

SEE: Finfacts article for house price data from 1970:

International House Price Comparisons 1970-2006: Irish price growth in 36-year period third highest among 18 Developed Countries

SEE: Finfacts article, which contains information on studies of teh time period of recovery from property crashes:

Lenihan, NAMA versus the “leave it alone liquidationists” or potential saviours of the Irish economy

SEE: Finfacts article on the Irish land system where no official data is published on development land:

Irish Farmers and Sacred Cows

SEE: Finfacts article on price comparisons with other markets:

International House Price Comparisons 2009: Dublin plummets but remains expensive; US average for management level house is $363,401; Most inexpensive at $112,675