It may have come desperately late in the day, but yesterday the CSO finally published its long-awaited house price index for the first time. The availability of timely, official house price statistics is a welcome and long overdue development in a market that has far too often been characterised by spin and hype rather than cold, hard facts.
All previous attempts at gauging the true level of house prices had experienced severe difficulties. Now the CSO, which arguably should have been compiling official house price statistics all along, has belatedly stepped into the breach.
The news that the CSO has found that house prices have fallen by over 40pc since peaking in the spring of 2007 will have come as no surprise to anyone who has been keeping even an occasional eye on the market. Neither will the CSO's calculation that apartment prices have fallen by even more than house prices, with apartment prices in the Dublin area having fallen by a massive 52pc.
These statistics are merely the numerical representation of a market collapse that has caused enormous human misery and heartbreak. It has cost tens of thousands of people their homes and plunged hundreds of thousands of other homeowners into negative equity -- where the amount they owe on their mortgage exceeds the value of their house or apartment.
While it is the problem of mortgage arrears and the threat of repossession that has inevitably generated most public controversy and attracted most media attention, negative equity has the potential to cause much more economic and social damage in the long term. An entire generation finds itself trapped in homes that are now worth only a fraction of what they originally paid for them, with no prospect of prices recovering for years, perhaps decades, to come.
However, lower house prices aren't all bad news -- far from it. One of the factors undermining Irish competitiveness in the noughties, during which Ireland slipped from fifth to twenty-first place in the world competitiveness rankings, was soaring property prices. As rents and mortgages grew ever dearer, workers were able to demand higher wages in a booming economy while employers were able to pass on these higher wages by increasing their prices.
The property price collapse means that we have been able to get off the treadmill of higher housing costs leading to higher wages, which in turn led to higher prices throughout the economy. It may be scant consolation to those grappling with mortgage arrears or negative equity, but lower house prices are an essential first step towards restoring our international competitiveness and laying the foundations for recovery.
Friday, May 20, 2011
Lower house prices aren't all bad news - Independent.ie