New ESRI Research Suggests Extent of Negative Equity Has Fallen

Negative equity occurs when the price of a property falls below the value of the outstanding mortgage secured on that property. In addition to movements in price, the extent of negative equity is also reduced by mortgage repayments. It is estimated that the total number of mortgage loans in negative equity, in Ireland, reached a peak of over 314,000 by the end of 2012. The recovery in house prices by the end of 2013 reduced that number by approximately 45,000 – a fall of 15 per cent. In 2011, Dublin accounted for 40 per cent of mortgages in negative equity. By the end of 2013, the number of mortgages in negative equity in Dublin had fallen by over 35,000 from a peak of close to 125,000. Hence over three-quarters of the improvement experienced nationally is due to the stronger increase in prices experienced in Dublin. Commenting on the results, the author Dr David Duffy said: “Negative equity can have harmful effects on an economy through its impact on a household’s consumption, savings and labour market mobility. The combination of property price increases and mortgage repayment has reduced the extent of negative equity in Ireland in recent times which is positive for the economy overall.” “The expectation is that, with house prices continuing to increase in 2014, we should see a further decline in negative equity numbers.”