House values surge to over €500bn
Monday, January 22, 2007
THE value of Ireland’s housing stock rose to over €500 billion last year as the property market showed no sign of any major slowdown, according to one of the country’s major mortgage providers.
A new survey by Halifax estimates that the total value of all private residences in the Republic was €516bn — an increase of 16% on the 2005 figure.
Halifax — the retail banking division of Bank of Scotland — claimed the results show that the Irish household balance sheet was in good shape with housing equity significantly outweighing mortgage debt.
The bank estimates that the value of Irish housing assets grew by €70bn last year compared to a €22bn increase in outstanding mortgage balances.
It means Irish homes are now worth 4.3 times the value of mortgage debt which currently stands at €121bn.
However, the figure provides no real comfort for thousands of mortgage- holders who struggle to meet their monthly repayments, especially homeowners who bought property in recent years. They face the real risk of negative equity in the event of any downturn in the market.
Dublin accounts for 21% of the value of housing stock with residential units in the capital worth a combined €110bn.
Halifax also finds the value of residential property in Dublin has more than doubled in the past five years.
Head of retail at Halifax, Chrissy Quinn, said the house price increases had significantly outpaced inflation as their value had grown at a much faster rate than consumer prices.
"The Irish consumer price index has risen by only 18% over the past five years versus a 111% increase in the value of the housing stock," said Ms Quinn.
Halifax also estimates that the Republic’s housing stock is now 4.7 times the value of housing assets in Northern Ireland, which are calculated to be worth €163bn.
Meanwhile, IIB Bank is expected to deliver a similar optimistic opinion on the Irish housing market when it publishes its latest annual outlook later today.
IIB Bank chief economist, Austin Hughes is predicting that there will be a soft landing for the price of residential homes as he forecasts a generally positive picture for the next 12 months.
Housing Minster Noel Ahern also remained upbeat about the medium-term future of the industry at the weekend as he announced 2006 was the 13th consecutive year that a record number of new housing units were completed.
Nonetheless, there are warnings of significant threats to the market.
A report prepared by the European Commission, to be presented to EU finance ministers later this month, is expected to express concern that there are growing risks of price corrections in the Irish property market.
A survey by the Society of Chartered Surveyors also identified properties in towns and villages at the periphery of Dublin’s commuter belt as being most at risk to losing value.