According to NCB Stockbrokers, as reported in the Examiner today, if house prices have continued to drop at the same rate as in 2009 then over 50 percent of all mortgage holders will be in negative equity by June of this year (this assumes that house prices are on average down 45% since the peak). The same story reports that the ESRI predict that 53% of mortgage holders will be in negative equity if house prices fall by 50%, and that the Bank of Ireland report that 21.5% (40,000) of its residential mortgages are in negative equity, and that the average level of negative equity is presently greater than €50,000. There’s clearly a significant difference between 21.5% (BoI) and 50% (NCB), and it’s likely that the true number in negative equity is somewhere between the two.
It is also the case that there are significant geographical variations in rates of negative equity for two reasons. First, rates will vary in line with household growth, with some areas experiencing a large growth in new homes, and hence new mortgages, in the Celtic Tiger years. For example, there was significant household growth in the commuting counties around Dublin – Meath (69%), Fingal (68%) and Kildare (57%) between 1996-2006, whereas growth in other counties was substantially less, such as Sligo and Monaghan (both 22%). In the high growth counties, a large number of new mortgages would have been in the 2003-2008 period (with house prices in Dec 2009 having fallen to April 2003 prices according to the PTSB/ESRI index). Second, rates will vary in line with local housing markets. Daft.ie, for example, report that asking prices have dropped between between 43% (Dublin city centre) and 21% (Limerick) between the peak of the market and Dec 2009, with more people in negative equity in those areas with the highest price drops. It seems likely then that negative equity is likely to affect more people, with the size of the equity gap also larger, in the commuting belt around Dublin than in other places across the country. What that means is that the consequences of negative equity, in terms of ability to move homes and consumer confidence, also varies geographically and may have additional effects on local trade.