Dearth of Irish property data complicates IMF/EU task: analysts

By Lorraine Turner

DUBLIN (BestGrowthStock) – A dearth of information on Ireland’s property market will complicate the task of quantifying an external aid package for the country’s banks.

Officials from the International Monetary Fund, the European Central Bank and the European Central Bank will scrutinize reams of data this weekend ahead of a financial aid plan, likely to be unveiled next week, EU sources said on Friday.

But they will be doing sum of the sums blind.

“We have virtually no information on how mortgages have performed in previous economic cycles,” said Goldman Sachs analyst Nick Kojucharov, based in London.

“Official data on defaults are worse: they’ve existed for barely a year and are severely distorted – artificially depressed, to be more precise — by an official moratorium on defaults during that time,” he added.

Information on mortgage defaults, repossessions and even house prices is limited, a phenomenon which helped exacerbate the property bubble and the subsequent crash with prices falling by over 50 percent.

“I think it was contributory factor, it helped the bubble, as there was a lack of information,” said Ronan Lyons, economist at Daft.ie, describing itself as Ireland’s largest property website.

Dublin real estate prices surpassed those of Manhatten and Moscow during the boom, turbocharging the “Celtic Tiger” economy and sucking in banks before spitting them out when the bubble burst.

Ireland’s Central Bank Governor Patrick Honohan warned last year that a dearth of statistics was masking the pain ahead.

“No-one had information on the extent to which the developers’ own money was at risk in the seemingly ever-larger land deals that were part bank-financed,” he said, in his prior role as Professor of Economics at Trinity College.

“Still, we lack firm and detailed data,” he wrote in a paper.

20th CENTURY HANGOVER

Data on house prices, compiled by Daft.ie is based solely on seller’s expectations, not the actual selling price.

Lyons said estate agents do not have an incentive to provide them with selling prices, despite this being the most reliable information.

“This is essentially a hangover or remnant of business in the 20th century which was essentially a closed model,” he said.

Lyons said that the government had failed to put in place a system that provides reliable information for both economists and analysts — that could have stemmed the extent of the property bubble — but also home-buyers.

“I know the government is trying to put in place a database for transaction pricing, (similar to the UK’s Land Registry), but that is something we should have had, going all the way back to the 90s,” he added.

The delegations will be forced to talk to experts as opposed to poring over data spreadsheets, he added.

Indeed, the full extent of Ireland’s banking crisis –and the size of the bailout it may need — will be difficult to unravel.

“It is difficult to gauge how deep the underlying problem is given the amount of restructuring that is going on,” said Ciaran Callaghan, banking analyst at NCB.

(Editing by Carmel Crimmins, Ron Askew)

Dearth of Irish property data complicates IMF/EU task: analysts