Negative equity could be wiped out by 2017, ESRI predicts

Negative equity could be wiped out by 2017, ESRI predicts

The economy might be on the rise at present and pay increases being discussed but for many people the effects of the crash live on.

Many people remain in negative equity and are therefore stuck with a property that may no longer suit their needs.

Time can be a great healer though and earlier this week the Economic and Social Research Institute reported that the number of houses in negative equity could fall to zero as early as late 2017.

The think tank said the numbers in negative equity were falling rapidly such is the unexpected pace in house price rises.

The ESRI says the number of households in negative equity at the end of last year stood at 160,000.

That number will likely fall to 100,000 by the end of this year, and fall rapidly again, if home prices continue to rise at their annual rate of 9%, David Duffy, the senior housing expert at the ESRI said.

This would lift all houses out of negative equity by the end of 2017 if the current growth rate continued.

“There is talk of a slowdown in house prices, but if the annual rate were to continue there would be no household in negative equity by the end of 2017,” he told The Irish Examiner.

Mr Duffy said the number of households in negative equity peaked at over 300,000 three years ago, and by value the gap between market prices and the prices paid for homes across the country totalled €16bn at that time.

In 2010, there was around €8bn worth of household negative equity, which had increased to around €16bn in 2012, but assuming house prices increase by up to 10% this year, those 100,000 households in negative equity at the end of this year would amount to €2.5bn, Mr Duffy said.

“No one would have predicted the rapid rise in house prices since 2012. We had expected it would take to 2020 for price increases to lift all those affected out of negative equity,” he said.

The ESRI says falling numbers of households in negative equity could have a significant effect in boosting consumer spending and increasing economic growth.

Research last year by Kieran McQuinn of the ESRI and Yvonne McCarthy of the Central Bank of Ireland showed a strong link between house prices and the amount consumers spend.

  • Are you stuck in negative equity?
  • What effect has this had on you?
  • Would you sell your home if you were no longer in negative equity?
  • Do you believe the ESRI when they say everyone could be out of negative equity by the end of 2017?

Have your say below…

There are 16 comments for this article
  1. Cormac at 9:50 am

    I was given a 100% mortgage in 2007 for 220,000.
    As of January of this year, I still owed just over 204,000
    As of January of this year, the properly is worth somewhere between 65,000 and 80,000.

    There’s no way in hell I’ll be out of negative equity in 2 years …

  2. Pat at 4:06 pm

    more irrational nonsense… Properties in my locality bought on a 66% ltv basis still require a further 33% uplift just to exit neg equity. ( with a remaining loss of actual hard earned cash of 33% of the actual purchase price). Properties bought on a 90% ltv still require another …wait for it….. 87% increase to exit and be left with a loss of 10% of actual cash.

    Did the Mr Duffy of the ERSI really write that, or was it made, it annoys me where the headline indicates that he used the word “predicted”, whereas in the body of the article he used the word “if” One must always remember my home.ie is a website owned by real estate agents which does not allow consumers to advertise their own properties for sale …. Nuff said….If I’m wrong about that please feel free to disabuse me 🙂

  3. joe power at 2:48 pm

    Only those fortunate enough before the boom to buy in Dublin or indeed anyone with property in the Dublin region will ever see a return to price paid. I live in Portlaoise, bought 2008 €245000, 3 bed smi nothing special, asked for property valuation 2015 presently priced at €68000. So no I will never be back to price paid in my life time this is just more spin.

    • boand2014 at 3:26 pm

      I quite agree! I live in West Cork and bought in 2004. My house has fallen in value by over 30% so far and is still dropping. There are absolutely no signs of a housing recovery here with prices everywhere dropping and taking years to sell. I am exasperated by spin doctors who live in Dublin saying it will all go away soon. You need to look at the country as a whole, or better still the country without Dublin included, to get a real idea of what is happening. We are on the edge of a new raft of repossesions which will depleat prices even further. So hyped up fairytales don’t wash with anyone outside Dublin.

  4. peadar at 2:18 pm

    So. My kids live in Dublin. One with 1 Child – one with 2 children – infants. I would like to know how they will ever be able to buy a house in Dublin. Owning A house in Dublin will become a symbol of wealth – like owning a Mercedes. What about all the ordinary people – lower paid public workers, trades people, nurses etc etc – Willl they all end up on the housing list – and if they do – will they get a house when they are grandparents maybe !!!!! There is no coherent housing policy from the Government we have now.

    • Charlesm at 2:55 pm

      Peadar: The last coherent “housing policy” that catered well for “normal people” was post war between 1950 and 1965 when houses were build by councils and Dublin corporation on a semi purchase and rental basis. It worked.. The welfare state can not work in a housing context.. but FG could learn something from the past, and if they were able to make a decision for once we might see some light for our kids.

  5. charlesm at 2:01 pm

    I think that once again the ERSI have got it wrong.. Maybe they hope a positive spin will get some to believe but not me. I’m currently in negative equity and don’t see a way out for another five to eight years or for those others, like me, who purchased in 2006-2007. The Boom years have crippled so many.. we are the ignored class.

  6. Jim O Donoghue at 1:57 pm

    It all depends on the location of your property ???
    If you are fortunate to have a standard 3 bed Semi within 5 miles of O ‘ Connell St, close to good schools, shopping, hospitals and to your work, THEN your negative equity will disappear soon. Consider that 3 bed was close to € 1 million in 2007, dropped down to less than € 400k in 2012 and is now back up to € 700k in 2015 !!!!! It’s realistic value should have been about € 550k in 2007 and € 650k in 2015. The core problem for people working in Dublin is A) not enough suitable accommodation for families within the M 50 and B) Crazy planning forcing people to travel into Dublin daily from a 50 mile radius.
    Spare a thought for the people on TRACKER mortgages who may be getting excellent % rates now but who are ” Locked in ” and can’t move house. AIB will do you a great favour with their Tracker Mover – but look at the interest rate they will charge you for the Privilege !!!!

    The BUBBLE has already started all over again in Dublin, people panicking that Dublin houses will become unaffordable !!!

    The way to prevent the bubble is to build more new units – be they houses or multi family units – within easy reach of Dublin. Next priority is improve the Public Transport system to be more effective and cost efficient to reduce the numbers of cars coming into Dublin

  7. Dom at 1:42 pm

    I’m probably just at the point where I am exiting negative equity, but there is a long way to go before i would consider selling up and moving on. It is not just a matter of selling the current house to clear the current mortgage, there is also the matter of getting together enough money to qualify for a new mortgage under the new central bank rules. Add on top of that my other half losing her full time job during the down-turn meaning we would be lucky to qualify to buy the current house we have let alone something bigger/better. Also, we’re fortunate enough to be on a tracker mortgage so would be crazy to give that up without a very good reason. Planning to stay where we are for at least another 10 years – maybe another decade of paying off the mortgage and (hopefully) improved economic circumstances in the country will improve the outlook by then.

  8. deirdre at 12:43 pm

    But re above, I dont believe, I currently am 35% negative equity and dont see where i bought going up that much, as new houses around been built

    • Lynne at 12:46 pm

      Deirdre I agree, I don’t see how it’s going to increase that much. Have you considered renting out the house? Not an ideal situation but it might ease the pressure for you in some way…

  9. Lynne at 12:40 pm

    The way things are I’m giving it at least 10 years and see if the market has improved, if I sold now it would be like I never had the house… More should be done for house owners, the progress to help those in crisis has been far to slow…

    • deirdre at 12:44 pm

      Lynne your right, all the saving for deposit and struggle to keep it going, if it balanced out and we sold it would be like paying huge rent again and huge deposit for nothing…

      • Lynne at 1:05 pm

        Absolutely Deirdre, other countries that have handled the crisis efficiently should be looked at and a feesable solution for people given. Yet again the taxpayers have been overlooked, too little, too late. I don’t envy anyone trying to save the deposit that in itself is hard enough… I do feel like putting the keys through the letterbox sometimes, do you feel that way?

  10. deirdre at 12:34 pm

    Wouldnt sell but might be able to shop around for a better mortgage rate, as i am on a variable and its very difficult

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