Trapped in a negative equity nightmare

When I bought my new home in May 2008, I knew exactly what I wanted. A two-bed apartment designed for modern living with a roof garden and outdoor space with great views of the city for holding summer barbeques on balmy evenings. When I saw just this, it accelerated my impulse to buy immediately, even though the market was softening.

The two-bed showroom unit apartment on the fifth floor wasn't exactly affordable, considering I was buying alone, but with its sleek Scandinavian furniture and skyline views I was prepared to stretch my cash limits and fork out the €525,000 sum required.

Printed in bold on the pastel-coloured brochure at the launch of the complex was the slogan: "contemporary tailored apartment living that won't cost you the shirt on your back". Truth is, it's costing me that and a hell of a lot more.

I now see my apartment devalue massively on a daily basis. Hooke & MacDonald have said 40 per cent is the typical price drop for new houses and apartments in Dublin. Trapped by negative equity, if I did decide to move, I would stand to make a massive loss on my investment. It has been reported that "those who bought a house in 2007 will have to wait until 2030 before they move out of negative equity".

The Sindo

HINDSIGHT IS a wonderful thing. Looking back at the prices people paid for Irish property during the boom, it’s easy to see how unsustainable they were.

However at the time, despite warnings from everyone from the Central Bank to the Economist magazine that Ireland’s property market was a bubble which had to burst, banks and consumers ignored the advice and ploughed money into property, propping up prices until the inevitable collapse during 2008.

Now, latest estimates suggest that as many as 340,000 home owners, or one in five homes, are stuck in negative equity and prices are still sliding.

If this is the case, then people who purchased property as far back as 2003 with loan-to-values (LTVs) of more than 80 per cent, will discover that they owe more to the bank than what their house is worth.

For example, at the peak of the market two-bed apartments at Wyckham Point in Dundrum, Dublin were selling at €525,000.

Now however, prices have slid back by over a third to €339,000, which means that someone who bought during the boom on a 92 per cent mortgage is stuck in negative equity of about €144,000, or have a loan-to-value (LTV) of 142 per cent. If the property was financed with a loan of 65 per cent of the purchase price, then the owner is just about in the black.

And it looks like negative equity is here for some time. According to the Economic and Social Research Institute (ESRI), those who bought a house in 2003 will have to wait another four years before they move out of negative equity, while those who bought close to the peak in 2007 will have to wait until 2030.

The Irish Times