Credit ratings agency's warning on house prices

Wednesday 05 December 2012 11.22
Anti-repossession rules may be concealing the real picture in the housing market
Anti-repossession rules may be concealing the real picture in the housing market

The credit rating agency Standard & Poor's has said that residential property prices in Ireland may continue to fall.

In new research on the Irish mortgage market, it notes that property values have fallen by half since the peak in 2006/7 and says the financial regulator's "borrower friendly" policies designed to stop banks repossessing property without first negotiating with the customer may be concealing the real state of the market.

"Residential property values have halved since their peak, and the correction may not be over yet, in our view," it said in its report.

It says that "Total delinquencies in transactions that we rate have steadily risen since third-quarter 2008 to reach an average of 16% in fourth-quarter 2011."

And it raises concern that unemployment levels, now close to 15%, will continue to impact on people's ability to keep up with their mortgages.

It says that unemployment rate has risen more than threefold since the beginning of 2007- an increase on a par with Spain and Greece.

S&P noted that despite the sharp growth in the number of borrowers who are in arrears for over 90 days, repossessions have not materialised in any significant number in Ireland.

It also noted that although the rate of 180-day arrears was more than six times higher in Ireland than in the UK at the end of 2011, the proportion of loans where the property had been repossessed was similar.

S&P said that while the effect of the upcoming personal insolvency legislation is uncertain, it may accelerate widespread loan writedowns.

S&P noted that despite the sharp growth in the number of borrowers who are in arrears for over 90 days, repossessions have not materialised in any significant number in Ireland.

It said that instead lenders are introducing ''borrower friendly'' policies to keep the number of repossessions down. It also noted that although the rate of 180-day arrears was more than six times higher in Ireland than in the UK at the end of 2011, the proportion of loans where the property had been repossessed was similar.

S&P said that while the effect of the upcoming personal insolvency legislation is uncertain, it may accelerate widespread loan writedowns.