Property slump - Urgent clarification is needed

CONSTRUCTION authorities confirm that there are currently 35,000 new homes unoccupied at a value of about €9 billion. But is that the total extent of the problem, or are there also many more houses as well?

Some economists estimate the total number of new houses lying idle is more like 50,000. Goodbody Stockbrokers even estimate that 62,500 houses, completed between April 2006 and April 2008, remain unsold.

On the basis of those figures, it would seem that even the experts do not know the real extent of the current financial problems. The value of the unoccupied properties — on the basis of an average value of €270,000 for a new house — could be much higher than the €9bn figure cited.

In fact, if the Goodbody figures are accurate, the vacant properties could be valued at as much as €16.87bn. There is no figure for the number of those houses purchased without a mortgage. It estimates that the figure could be anything from 0% to 20%. This further emphasises the complexity of the problems. The average price of new houses has dropped 30% in the past year. The supply obviously exceeded the demand. The current glut would appear to suggest they are still overvalued. The Construction Industry Federation estimates 40,000 construction workers would lose their jobs next year, because there has been a dramatic decline in housing starts. During September, building began on less than 10 houses in 12 different counties and no new houses at all were begun in four counties.

Many of the more skilled workers are already being lined up to work in the oil rich states of the Middle East. If this country witnesses a return to the old-style emigration and many of the migrant construction workers return to their home countries in eastern Europe, there will be even less demand for the vacant houses. Figures provided by the Courts Service indicate that the repossession applications for mortgage property have been increasing. Repossessions by mortgage providers are likely to more than double this year. There have already been 608 applications in 2008, compared with 278 in the same period of last year.

ACC Bank has already seized more than 100 houses built by a construction company that owed the bank €20 million. If the banks begin taking possession of houses mortgaged to individuals, this will add to the number of vacant houses. Economists at the Organisation for Economic Co-operation and Development believe the Government will have to follow the rest of Europe in putting money into Irish banks in order to bolster them. Some experts are suggesting Irish banks have bigger problems than they have admitted.

There is a huge disparity between what they are saying and what some experts believe. The first thing to do in tackling any problem is to recognise the extent of the actual problem. We urgently need clarity in these matters.