One of the reasons that this is important is that it once again calls into doubt the solvency of the two pillar banks in Ireland.
Compounding matters is the simple fact that everyone knows the Irish banks have not been aggressive about dealing with the 20% of the mortgages that have or are experiencing performance problems.
Last year at this time, I urged the Irish government to require its banks to provide ultra transparency and disclose on an on-going basis their current asset, liability and off-balance sheet exposure details.
Had this been done, a bottom would have been put in place under the housing market as banks would have an incentive to resume mortgage lending while working through the troubled mortgages as quickly as possible.
Property prices in Ireland are in freefall, according to housing analysts, whose latest figures show that prices in Dublin have collapsed by 65% in five years and by 60% across the country.
A house price index released by the largest residential sales group – the Sherry FitzGerald Group – found that the pace of deflation has sped up in Dublin, while prices across the country are now at levels last seen 11 years ago.
The group, which has been surveying a weighted basket of 1,500 properties since 1999, said residential property in Dublin was now worth 64.2% less than at the 2006 peak, with a national fall of 58.8%.
Separate surveys by two property websites also found large declines in 2011's asking prices: myhome.ie said sale prices were down 50% since 2006, while its rival website daft.ie reported an 8% drop in the last quarter alone, calling it the largest ever quarterly fall in house prices in Ireland....
In 2011, just €2.3bn (£1.9bn) was available in mortgage finance, according to the Irish Banking Federation, compared with €40bn at the peak of the property market in 2006. With no signs of mortgage credit returning to the market soon, and unemployment expected to rise in 2012, there are fears that property prices will continue to decline this year....
If Sherry FitzGerald's figures are borne out by other data and the decline continues this year, the crash will exceed the worst-case scenario outlined by the US asset management firm BlackRock Solutions, which conducted the stress tests for the Central Bank of Ireland that led to the fifth bailout of Irish banks in April 2011.
BlackRock's tests were the most severe ever applied to banks, and were the first to price in the cost of a new toxic wave of mortgage debt from the residential and buy-to-let markets. It predicted that, at best, house prices in Ireland would drop 55% before recovering and at worst 60%.
Ronan Lyons, daft.ie economist, said the crash was no surprise, as just 13,000 mortgages were issued in 2011 compared with 200,000 in 2006. "Given that the property market in any developed economy is inextricably linked to the mortgage market, it's no surprise that prices are down 50% or more, if lending is down by over 90%."
He is one of the few who thinks there is a positive aspect to the latest figures: "If you think of the fall in house prices as a necessary correction, whose size is determined by fundamental factors, then it is better for the prices to race to the finishing line than to crawl there."
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