One analyst warned that the growing mood for action on mortgage-holders with long arrears could see property values plummet as much as another 20%.
Others said a phased rise in repossessions was the key to limiting impact on prices, but they differed on whether prices should be allowed dictate policy.
Central Bank figures show 23,500 owner-occupied homes and 7,500 buy-to- lets are more than two years in arrears, meaning a first round of repossessions could potentially unleash 31,000 extra units onto a market with more than 50,000 units already for sale.
The volume alone would affect asking prices, but their combined outstanding value of more than €7bn also swamps the €3bn in mortgage lending expected this year so they would have to be seriously discounted to have any hope of resale.
Financial adviser Eddie Hobbs said talk of a price recovery was a “delusion” and would be until the “repossessions cascade” ended. He said the process had not even begun and when it did, repossessed properties would be priced 20% to 25% below existing units.
Marian Finnegan, chief economist with estate agents Sherry Fitzgerald, said there was scope for managing the impact. “The challenge is when and where and how much at what time.
“We have a relatively tight stock in urban centres like Cork and Galway and all over Dublin. If the banks do this in a strategic way and if they release property in the locations where supply is tightest, for the market it would not be a concern.”
She said she hoped for a slow approach to increasing repossessions. “I’d want it to happen over as long a period as possible. The market has been through enough.”
However, Cathal MacCoille, chief economist with Davy, said delaying the problem would not solve it. “We should have seen 20,000 repossessions if we were on a par with the UK. There have been 1,300.
“Once you get past 365 days, the chances of recovering the loan is very low, but there is a big lump of people in arrears for more than two years. It’s better to sort through the underlying problems rather than protect house prices.”
Anticipation of a surge in repossessions came as the Government prepared to close off a legal loophole which has prevented banks seizing homes where they initiated action after Dec 2009.
The top official in the Department of Finance also described repossessions as “unnaturally low” this week and Finance Minister Michael Noonan said he was disappointed the banks were not moving faster to resolve mortgage arrears.
IMF chief Christine Lagarde said in Dublin yesterday that repossessions should be a last resort, but urged action on the mortgage debt crisis.