The Irish Independent reports
that ptroperty prices have hit rock bottom -- but could stay there for
years, according to a new report.
The average price of houses and apartments is now
as low as €100,000, the report claims.
This is just a third of the average price properties sold for during the boom.
Prices have fallen so far in the last five years that it now takes less than
three times the income of a single person to buy a property.
But now that they have reached a floor, prices may stay at their current level
for ages, the report from Goodbody Stockbrokers says.
The report makes it clear that this is due to the current mortgage lending
The study by economist Dermot O'Leary found prices have now fallen 68pc from the
peak in 2007.
These are based on the prices reached on the Allsop Space distressed property
auctions which have drawn a lot of interest.
Mr O'Leary said this fall was far greater than the 48pc recorded by the official
Central Statistics Office (CSO) property price index.
His report contends that the prices achieved in the Allsop auctions more
accurately reflected what was really happening in the market.
This is because the CSO figures do not take account of cash purchases, which
account for up to a third of sales.
The lack of up-to-date data was contributing to the length of the house-price
crash, he said.
"Allied to tight credit conditions, housing oversupply and a weak domestic
demand environment, the lack of transparency on sales prices in the Irish
residential property market has contributed to the prolonged nature of the Irish
housing market crash," he said.
The report said that mortgage lending last year was back to levels last seen in
1971, adding that a key ingredient for any recovery in the Irish property market
was credit availability .
Mr O'Leary calculated that the price of houses and apartments was €100,000,
based on a 68pc price fall.
The average property price peaked at €314,000 in January 2007.
The new average price means that it now requires 2.8 times the salary of a
single person to buy a home. That calculation is based on an average wage of
This compares with a long-term average of three-and-a-half times to four times
income in the UK and a peak of 8.6 times income in Ireland.
Mr O'Leary said prices had now hit the bottom.
"While it would be our contention that prices are undershooting due to lack
of access to credit and a weak domestic economy, this analysis suggests that
residential property, at 60pc-plus from peak, is now transacting for prices very
close to, or at, fair value," he said.
However, he said that the mortgage market was set to "remain moribund for a
significant further period of time".
Goodbody Stockbrokers is owned by Kerry-based financial services group Fexco,
and not connected to any mortgage lender. Mr O'Leary's findings chime with a
study of 325 cities in English-speaking countries that found that property here
had now reached affordable levels for thousands on average salaries.
The prestigious Demographia International Housing Affordability Survey found
house prices were 3.3 times average salaries in the winter of last year -- just
a little above what international researchers deem affordable.
Mr O'Leary said a lack of mortgage lending was hurting the market.
Just AIB and Bank of Ireland are lending to first-time buyers.
AIB will lend to those who have a deposit of at least 8pc of the property's
value, but Bank of Ireland requires a deposit of at least 10pc.
Last year 14,000 mortgages were advanced, but this falls to 11,000 once top-ups
and re-mortgaging are excluded. A normal level of lending would mean 40,000
mortgages being advanced.
Independent also reports that Spain's budget-deficit target for 2013 is a tough
challenge and the country's peers have not "softened" by allowing it to run a
wider deficit this year, Finance Minister Michael Noonan said yesterday.
He played down the EU's decision to grant Spain leeway, adding that it would not
inspire Ireland to seek concessions.
"Spain is not comparable with Ireland -- Spain is not in a programme," he
told reporters after a finance ministers' meeting in Brussels yesterday
"I don't see any softening in Spain's target. Five point five per cent of
gross domestic product as an adjustment is some high jump to have to undertake,"
he said, referring to the difference between Spain's 8.5pc deficit in 2011 and
its 3pc target for 2013.
The EU has twice allowed Ireland to push out its deficit deadline, which is now
set at 2015.
"I sympathise with the Spanish finance minister, trying to find that level of
adjustment," said Mr Noonan.
Spain's government caused controversy earlier this month by raising its
budget-deficit target for 2012 to 5.8pc of GDP from a previous goal of 4.4pc,
arguing the existing target was unreachable because of a big deficit overshoot
But on Monday, finance ministers from other eurozone countries pressed Spain to
adopt a new target of 5.3pc of GDP, a figure to which Spain subsequently agreed.
Mr Noonan also said Ireland was opposed to a financial-transactions tax that is
wanted by some European governments. He said that because the UK would not adopt
it, firms based in Ireland might move to the City of London in order to avoid
The move on Spain has placed that country at the centre of a row over budget
targets. EU officials fear that being too lenient on countries would hit market
confidence and lead to countries demanding an extension of deficit deadlines.
Brussels is also battling accusations of double standards in applying the rules
to eurozone and non-eurozone countries, after it held to a threat to suspend
regional aid to Hungary next year if the government failed to make extra cuts.
Hungary will face the loss of €495m in EU funding next year, although the
government met its deficit deadline in 2011.
However, the commission said that Hungary had reached the target thanks only to
one-off measures, particularly the transfer of private pension funds into state
hands, and that it would miss its targets both this year and next.
The Irish Times reports that
the Government will have to pay a €3.1 billion bank debt due within days after
the European Commission ruled out delaying the payment in anticipation of a deal
to ease Ireland’s banking debt.
The commission’s stance, which mirrors that of
the European Central Bank, means the Government will have no option but to pay
the bill when it falls due on March 31st.
The money must be repaid under an EU-backed
arrangement under which Dublin is recapitalising the former Anglo Irish Bank and
the former Irish Nationwide Building Society with expensive IOUs known as
The Government has campaigned for months to
restructure this costly scheme, which will see the State pay €47.4 billion in
capital and interest charges to support these institutions – now known as Irish
Bank Resolution Corporation – for 20 years.
Talks are ongoing but no breakthrough is
imminent, leading Irish officials to examine whether the looming payment could
be delayed until the negotiation is completed.
In Brussels yesterday, however, EU economics
commissioner Olli Rehn rejected that notion and said in unambiguous terms that
the Government was obliged to meet all its debts. “I actually wonder why this
has to be asked at all because the principle in the European Union and in the
long European legal and historical tradition is, in Latin – pacta sunt servanda
– respect your commitments and obligations,” the commissioner told
“The European Union is a community of
law and that assumes by definition that each and every member state respects the
commitments it has undertaken and this is valid in the case of Ireland as well.
Any possible negotiation on the medium- to long-term solution is a separate
issue.” Mr Rehn’s forthright rejection of any
postponement came only one day after Minister for Finance Michael Noonan left
open that possibility, saying it was a long way to the end of the month and that
nothing was ruled in or out at this point.
In European circles, such remarks by the Minister
were quickly dismissed as “wishful thinking”. The bank debt question is highly
sensitive for the Government given the upcoming referendum on Europe’s new
fiscal treaty. In recent days, Taoiseach Enda Kenny and Tánaiste Eamon Gilmore
have rejected claims by Minister for Social Protection Joan Burton that Ireland
should be given a concession on the debt to boost support for the referendum.
A Government spokesman refused to comment on Mr
Rehn’s views last night, saying the issue of the promissory note was one for the
troika. He said the Government would wait and see what the troika recommended
and would not be commenting before that.
Separately, Government sources insisted that
there had never been a strong expectation that the promissory note issue would
be resolved by the end of March.
Sinn Féin president Gerry Adams called on the
Taoiseach to declare the State’s inability to pay the promissory notes.
As he left Brussels yesterday after two days of
talks on the financial crisis, Mr Noonan said the Irish bank debt question had
not featured on the agenda when EU finance ministers gathered. He also said he
did not expect the issue would be on the table when the ministers next meet in
Copenhagen at the end of this month.
“I bring it up in bilaterals all the time. You
know the meetings adjourn, meetings break, you sit down and talk to colleagues
and everybody tells each other their difficulties and it comes up like that,” he
said. Mr Noonan rubbished the suggestion that a concession granted to Spain to
ease its deficit-cutting target this year meant that double-standards now apply
in the euro zone.
“Spain is not comparable with Ireland.
Spain is not in a [bailout] programme,” he said. Spain’s position is different
but their targets haven’t been softened. They’re bringing in a budget at the end
of April and the destination is to get to the end of 2013 and have a deficit of
3 per cent or so over a 20-month period,” he added.
The Irish Times also reports
that banks may be granted greater powers to contact customers who are in
mortgage difficulty, under proposals being considered by the Central Bank.
It is understood the Central Bank is considering
a review of parts of the code of conduct on mortgage arrears which would give
lenders greater leeway in contacting customers who are in arrears on their
Under the existing code of conduct set out by the
Central Bank, lenders are forbidden from contacting customers who are in arrears
more than three times in one calendar month.
It is understood the Central Bank is seeking to
review this stipulation, amid concern that some customers are not addressing
their arrears problem. The development comes as the Government highlighted the
role played by the code of conduct on mortgage arrears in tackling the mortgage
Speaking in the Dáil yesterday evening in
response to a private member’s motion tabled by Fianna Fáil, Minister of State
Brian Hayes said the code of conduct was “an important
framework that governs the relationship between a borrower and mortgage lender
who is experiencing difficulty and provides a number of protections to the
According to the latest figures from the Central
Bank, almost 71,000 mortgages – around 9 per cent of total home loans – were in
arrears of 90 days or more at the end of December. The revised code of conduct
on mortgage arrears came into force on January 1st, 2011.
The code sets out the framework that lenders must
use when dealing with borrowers in mortgage arrears.
Banks are required by law to adhere to the code
which offers a number of protections to consumers, including restrictions on the
level of unsolicited contact banks are permitted to make with customers.
This includes all forms of communication, such as
phone, email, letter or personal contact. It is understood the banking community
has informed the Central Bank the current restrictions on contacting customers
is preventing them from dealing with arrears effectively.
Rachel Doyle, chief operating officer of PIBA,
the professional insurance brokers’ association, said any change to the rules
governing contact between banks and mortgage customers would be a cause for
“While we would advise people who find
themselves in mortgage difficulty to engage with their banks and not to put
their heads in the sand, you can not put people in a situation where they can
constantly being hounded by banks.”
She said that most people in mortgage arrears are
likely to be struggling with other kind of debt such as credit card debt or
Last month the Central Bank said that mortgage
arrears would be one of a number of issues the bank would examine this year as
part of a “series of themed reviews and inspections” planned for 2012.
The Irish Examiner reports
that Spain has to save an additional €5bn on its budget this year, while Hungary
has been told it stands to lose €500m in EU funds if it does not get its budget
back on track over the next three to six months.
The tough decisions by EU finance ministers were
hailed as a victory for strict new national budget rules just agreed by the
member states, despite a battle to ease the pressure on both countries.
Spain, whose deficit overshot its target last year, is forecast to do the same
this year from the original target of 4.4%. They had hoped to be allowed to
extend the deficit to 5.8%, but were told to take another €5bn off its spending
to ensure the deficit is no more than 5.3%.
This will be in addition to €15bn in cuts as part of the budget to be announced
later this month.
The new government blame overspending by regional governments for much of the
Spain must still cut deficit next year to 3% of GDP — a feat described as "some
high jump" by Michael Noonan, the finance minister, when he said he sympathised
with his Spanish counterpart trying to make that level of adjustment in just one
The additional cuts risk putting the Spanish economy into an even greater
recession and increasing the unemployment numbers — the highest in the EU.
The ministers took a vote when it came to deciding the action on Hungary when a
spirited fight was put up by Austria, Poland, the Czech Republic, Britain and
Sweden on behalf of the country that failed to take action demanded by the
European Commission some months ago.
Claims that double standards were being operated and that the member states were
willing to break their own rules, even before the Fiscal Treaty has been
enforced were denied.
Mr Noonan said there was no softening on attitudes towards the countries, as did
economics commissioner Olli Rehn, who denied they had been more lenient with
He said that in June the Commission will give its view if the measures adopted
by Hungary are sufficient.
His spokesperson Amadeu Altafaj Tardio said that the Commission recommended
action against five countries earlier this year, but Hungary was the only one
that had failed to comply and adjust its budget.
The ministers decide that they would conclude agreement on reinforcing the
European financial firewall by the end of this month. Germany is suggesting that
the EFSF with €250bn left after funding Ireland and Portugal’s bailout should
continue to run to its final date of 2013 and that the new permanent ESM fund of
€500bn should come into force as decided in July.