Negative Equity in the Irish Housing Market

Having peaked in early 2007 Irish house prices have fallen steadily. Negative equity occurs if house price falls result in the house value being lower than the outstanding debt. Many in negative equity will be unaffected and will continue to pay their mortgage without difficulty. Negative equity can increase the probability of defaulting if it occurs at the same time as cashflow problems, possibly caused by illness or job loss. This paper estimates that 116,000 borrowers were in negative equity at the end of 2009, rising to 196,000 borrowers by end-2010. Borrowing at, or close to the price peak, high loan-to-value ratios, interest only mortgages and longer mortgage terms have contributed to higher numbers in negative equity. First-time buyers are more likely to be experiencing negative equity. The research shows that many of those who have mortgages are employed in sectors where employment prospects, to date, remain relatively robust. Policies that assist households overcome a loss in income may help lower the default rate.

FDI and the Availability of Dublin Office Space. ESRI Research Notes 2015/3/2

Foreign direct investment (FDI) is an important component of industrial policy in Ireland. Having pursued this policy for many years, Ireland is one of the most FDI-intensive economies in the OECD. The factors underpinning Ireland’s success in attracting FDI have been well documented and include EU membership, native English-speaking, low corporate tax rate, young and skilled labour force and demonstration effects.2 A recent policy statement on FDI identifies the role of cities as becoming increasingly important in FDI flows and cites the attractiveness of Dublin as a key determinant in Ireland’s overall FDI performance (Department of Jobs, Enterprise and Innovation, 2014)

THE USE OF LOCATION VARIABLES IN A MIX-ADJUSTED INDEX FOR DUBLIN HOUSE PRICES. ESRI Working Paper No. 138, 2001

The rapid increase in house prices that has occurred in Ireland in recent years has focused attention on the methodology used to measure the change. Traditionally measurement of the change in Irish house prices has been based on an average price compiled by the Department of the Environment. While this is the simplest method it does suffer the drawback that a change in the type of houses sold in a particular period will influence the mean and so the measure may reflect this change rather than an actual change in price. Recognition of this has lead to a considerable literature on how better to measure changes in house prices. In recent times a number of alternative measures have emerged for the Irish market based on hedonic regression techniques, whereby the price of a commodity is the function of the commodity’s characteristics. This methodology standardises for changes in the mix of properties and so should permit a more accurate record of how house prices have changed

Whither the stock market?

Stock market ; Stocks

Getting a Helping Hand: Parental Transfers and First-Time Homebuyers

A model that allows for inter vivos intergenerational transfers in a booming housing market is developed. The model is used to explain how transfers effect the first-time homebuyer’s consumption and housing decisions by alleviating borrowing constraints. The general implications of the model are tested using data from the leading Irish mortgage provider. We find that private transfers are targeted towards homebuyers that are liquidity constrained.Transfers, Housing, Borrowing Constraint

The Labour Market Characteristics and Labour Market Impacts of Immigrants in Ireland

The purpose of this paper is twofold. We first produce a labour market profile of non- Irish immigrants who arrived in Ireland in the ten years to 2003. We then go on to use the labour market profile in estimating the impact of immigration (non-Irish) on the Irish labour market. Immigrants are shown to be a highly educated group. However, they are not all employed in occupations that fully reflect their education levels. The model of the labour market that we use to simulate the impact of immigration differentiates between low-skilled and high-skilled labour. This allows us to estimate the impact of immigrants (a) if they were employed at a level fitting their education and (b) if they were employed in occupations below their educational level. Our results show that under scenario (a) immigrants who arrived between 1993 and 2003 increased GNP by between 3.5 and 3.7 per cent, largely by lowering skilled wages by around 6 per cent and increasing Ireland’s competitiveness. Under scenario (b), the increase in GNP is reduced to 3 per cent because the impact on skilled wages is lower. If we assume that immigration is primarily unskilled, the impact on earnings inequality found under (a) and (b) is reversed.