Ireland’s deadly undertow: Housing and household debt for the under 35s…

I’m grateful to Constantin Gurdgiev for his multi-parted dissemination of the fourth report (and here and here) on Ireland’s progress under the Troika’s funding… They’re not hitting the panic button, but the underlying message is that Ireland is doing well, but we’re asking them to do too much on their own…

One clear and unambiguous problem is the sheer amount of household and housing debt currently being piled upon the shoulders of the young…

Arrears tend to be highest in relation to buy-to-let properties and first-time buyers, as these purchasers took on large debts owing to high house prices during 2005–08.

Negative equity is extensive. It is estimated that 36 percent of owner-occupier households with mortgages in these institutions are in negative equity (at September 2011 house prices). [This, of course, is now higher again, as October and November price declines totalled 3.71%]

For owner-occupier loans taken between 2005 and 2008 (half of outstanding loans), 48 percent of properties are in negative equity, while 52 percent of buy-to-let loans are in negative equity.

  • John Ó Néill

    I would say that you could up that age limit to 45 or closer to 50. Generally, the 30-45 age group that entered at the top of the property market are more likely to be exposed elsewhere to the likes of the changes in child benefit, mortgage interest reliefs while not being able to avail of any of the exemptions that apply to retired people etc, or those in older age brackets who would be more likely to have paid off mortgages, have grown-up kids etc.

    Ironically, of course, the mortgage and kids mean that most of them can’t emigrate or even (in a lot of cases) re-locate for work purposes, since they are tied to a particular property by their mortgage.

    That 30-45 age group are also on downside of other mechanisms such as community rating for health insurance where costs are equalised regardless of risk (i.e. the opposite of most insurance properties where the premium is proportional to the risk).

    Chances are, too, that this is an age group that don’t bother to vote as much as those over 45.

  • There is general bad luck for some generations and good luck for others.

    Ireland’s property prices are now practically corrected to the long-term income-price ratio but the market will continue to fall.

    The property market can not start to recover until there is a significant stream of 1st time buyers who are confident enough to buy without fear of being caught in negative equity. For that to happen you need a recovery in the real economy.

    What is very bad for one generation is good for another. The twenty somethings, who have a job, are still living at home or in rented property and intend to buy a home in the future. They will buy in a heavily regulated market where irresponsible lending is a thing of the past. They will thrive.

  • orly

    “The twenty somethings, who have a job, are still living at home or in rented property and intend to buy a home in the future.”

    Would somewhat closely sum me up. The problem is the job I have is poorly paid and there are few prospects for advancement in it. It’s also unrelated to what I’m qualified and interested in. Jobs in my area of qualification (teaching and IT) are often hard to come by and/or over-subscribed. You’ll hear stories of 100 people for every job regularly on the street.

    I’ll be emigrating in the next 18-24 months and taking my “youth, skills, and lack of strings” elsewhere.