The Debt of the Irish: Insights from the Boom and Bust in the Greater Dublin Area’s Residential Property Market,’

Ireland’s residential property market, which inflated rapidly between 1997 and 2007, has witnessed a dramatic slump since 2007 with house prices falling by over 50% on average. The systemic cause of this property crash was over-reliance by Irish banks on commercial and residential property lending. In the ‘bust’, many of these lenders have required recapitalisation or nationalisation, placing significant strain not only on the economy and society, but have also necessitated the financial intervention of the EU/ECB/IMF. At the household level, difficulties abound for recent house purchasers who are indebted through mortgage borrowing on highly overvalued houses. The numbers of households in negative equity has risen sharply, as have the number of mortgage accounts in arrears or default. This paper examines some of the consequences of the property slump, focusing in particular on the negative impacts on households who purchased at the height of the property bubble. It provides an overview of the bubble in the Dublin housing market from the mid 1990s and examines the pattern of unsustainable residential development in the region. It then explores the current Irish debt crisis in more detail by an examination of the trends in negative equity, mortgage arrears and house repossessions. The paper seeks to identify where concentrations of unsustainable mortgage debt are more likely to be experienced and the types of households under duress within the Dublin City region. The paper concludes by identifying further areas for research in the nature of mortgage debt, including the need for greater analysis of the coping mechanisms of households and the forbearance practices of lenders.