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The effects of Ireland’s property crash on owner-occupiers in the greater Dublin area who purchased their properties between 2002 and 2007

The effects of Ireland’s property crash on owner-occupiers in the greater Dublin area who purchased their properties between 2002 and 2007

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An essay for the 2011 Undergraduate Awards Competition by Iain Cobban. Originally submitted for Dissertation at Trinity College, Dublin, with lecturer Andrew MacLaran in the category of Agricultural & Environmental Sciences
An essay for the 2011 Undergraduate Awards Competition by Iain Cobban. Originally submitted for Dissertation at Trinity College, Dublin, with lecturer Andrew MacLaran in the category of Agricultural & Environmental Sciences

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Published by: Undergraduate Awards on Aug 29, 2012
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05/13/2014

 
The effects of Ireland’s propertycrash on owner-occupiers in thegreater Dublin area whopurchased their propertiesbetween 2002 and 2007
Chapter 1: Introduction
 
1.1: Aims
 The aim of this dissertation is to investigate the range of effects that theIrish property crash has had upon owner occupiers who purchasedresidential property during the Irish property bubble.
1.2: Rationale
According to the most recently published Permanent TSB/ESRI house priceindex (ESRI, 2010) house prices throughout Ireland have been fallingsteadily from the second quarter of 2007 through the third quarter of 2010 (See Figure 1.1). Prices have fallen by 38.3% nationally and by44.4% in the Dublin region. Nationally, this equates to a return to 2002price levels. Kitchin et al (2010) estimated that the number of units bywhich the Irish residential property market was over supplied in 2009 wasin excess of 120,000. As a result they suggested that even a small pricerecovery could take several years for many areas.
Figure 1.1: Irish house prices according to the Permanent TSB/ESRI home price index 
Source: ESRI, 2010
 
Considering the statistics cited above, it is clear that the Irish propertycrash has likely impacted the lives of thousands of Irish property owners.As of yet, relatively little is known about the specific effects the propertycrash may have had on these individuals.
Chapter 2: Literature Review
It has been suggested that the Irish property crash has affectedresidential property owners, particularly those who purchased theirproperties during peak price years. Apart from several speculativeaccounts of the potential problems facing those living in ghost estates(see Lyons, 2010; Kitchin et al, 2010), most of the existing literaturefocuses on the effects of ‘negative equity’.Negative equity occurs when the value of a property falls below theoutstanding balance of the mortgage used to purchase the property(Brawn, 2009; Duffy, 2010). Kitchin (2010) cites two estimates of theproportion of mortgage holders that may be in negative equity. NCBstockbrokers (2010, quoted in Kitchin, 2010) estimate that as many as50% of all mortgage holders may have been in negative equity by June2010. A Bank of Ireland report (2010, in Kitchen, 2010e) estimated that21.5% of their own residential mortgages were in negative equity. Kitchin(2010) suggests that the true figure probably falls somewhere betweenthese estimates.Duffy (2010) gives an account of who is most likely to be in negativeequity. Using the mortgage statistics published by the Department of theEnvironment, Heritage and Local Government (2008, in Duffy, 2010) heconcludes that buyers who bought near the peak of the market, first timebuyers, buyers with high initial loan to value ratios, buyers with interest

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