Falling debt levels countered by worsening housing situation

Cantillon: Irish consumers reducing their debt levels faster than EU counterparts

There was mixed news for consumers on Monday with more gloom on the housing front offset by better news on our indebtedness.

Figures from the Central Bank show that Irish consumers are cutting their level of debt faster than anyone else in the European Union. The figure fell by more than 10 percentage points in the 12 months to the end of the first quarter of this year.

At that point, debt as a proportion of disposable income for every person in Ireland had fallen to 145.2 per cent – the lowest level since the third quarter of 2004.

However, while household debt fell below the €150 billion mark for the first time since the outset of the financial crisis, Irish households remain more indebted than all bar three other members of the EU.


And rising house prices are doing little to improve that position, especially for younger families and individuals.

An analysis by estate agency Sherry FitzGerald of listings on myhome.ie and daft.ie shows that just 25,100 homes put on the market in the 12 months to July.

Nationally that equates to just 1.3 per cent of housing stock: in Dublin, the position is worse with less than 1 per cent of properties in the capital on the market over that year. To put that in context, an average functioning market is generally expected to have between 4 and 5 per cent of properties on the market at any one time.

The figure has fallen dramatically in recent years. In July 2010 the figure was more than twice that, at almost 54,000.

Its impact on the market is real. Sherry Fitz says said the number of properties available for sale is now “critically low” in all urban areas, “inevitably” fuelling further property price inflation, which is running at almost 12 per cent.

A housing market relies heavily on confidence and, for consumers still wary after the scars of the recession, nothing Paschal Donohoe does in next month's budget can realistically flick a switch on that.