Chissà se ci sono le rivolte sociali in Irlanda
Ireland's house prices at lowest levels since 2000
• Property prices in Dublin have plunged by 65% in five years
• Analysts predict 'over-correcting market' will dip again in 2012
Lisa O'Carroll guardian.co.uk, Tuesday 3 January 2012 15.47 GMT
Property prices in Ireland are in freefall, according to housing analysts, whose latest figures show that prices in Dublin have collapsed by 65% in five years and by 60% across the country.
A house price index released by the largest residential sales group – the Sherry FitzGerald Group – found that the pace of deflation has sped up in Dublin, while prices across the country are now at levels last seen 11 years ago.
The group, which has been surveying a weighted basket of 1,500 properties since 1999, said residential property in Dublin was now worth 64.2% less than at the 2006 peak, with a national fall of 58.8%.
Separate surveys by two property websites also found large declines in 2011's asking prices: myhome.ie said sale prices were down 50% since 2006, while its rival website daft.ie reported an 8% drop in the last quarter alone, calling it the largest ever quarterly fall in house prices in Ireland.
"There is no doubt the market is over-correcting," said Marian Finnegan, chief economist at the Sherry FitzGerald Group, with house prices now making it cheaper to buy than to rent. "The pace of deflation picked up in the last 12 months, which illustrates a market that is in over-correction or in freefall," said Finnegan. She said the biggest reason for the freefall was the lack of mortgage finance available from Ireland's bailed-out banks.
In 2011, just €2.3bn (£1.9bn) was available in mortgage finance, according to the Irish Banking Federation, compared with €40bn at the peak of the property market in 2006. With no signs of mortgage credit returning to the market soon, and unemployment expected to rise in 2012, there are fears that property prices will continue to decline this year.
Finnegan said the biggest shock was the level of deflation in Dublin, which "defied logic to a certain extent". The new homes market was now "completely non-functional", she said.
The woeful state of the market is in stark contrast to the frenzied buying and selling of the mid-2000s when property in Dublin was achieving higher prices per square metre than Manhattan. One 550 sq metre house called Walford, in the embassy belt of Ballsbridge in Dublin 4, was sold in 2005 for a record price of €58m – €23m more than the asking price.
If Sherry FitzGerald's figures are borne out by other data and the decline continues this year, the crash will exceed the worst-case scenario outlined by the US asset management firm BlackRock Solutions, which conducted the stress tests for the Central Bank of Ireland that led to the fifth bailout of Irish banks in April 2011.
BlackRock's tests were the most severe ever applied to banks, and were the first to price in the cost of a new toxic wave of mortgage debt from the residential and buy-to-let markets. It predicted that, at best, house prices in Ireland would drop 55% before recovering and at worst 60%.
Ronan Lyons, daft.ie economist, said the crash was no surprise, as just 13,000 mortgages were issued in 2011 compared with 200,000 in 2006. "Given that the property market in any developed economy is inextricably linked to the mortgage market, it's no surprise that prices are down 50% or more, if lending is down by over 90%."
He is one of the few who thinks there is a positive aspect to the latest figures: "If you think of the fall in house prices as a necessary correction, whose size is determined by fundamental factors, then it is better for the prices to race to the finishing line than to crawl there."