As his officials start to prepare draft budget estimates, Minister for Finance Brian Lenihan will be alarmed by evidence that the crisis in the residential property market is deepening. Even as home sales were sliding, the government tapped, by last summer, as much as €2bn, from sales activity in the property market. In the first seven months this year, that tax pool has halved, and will likely shrink further. The housing crisis means less tax revenue. The probability will grow that the government will breach the eurozone's spending rules this year, as it borrows more to replace dwindling property revenues.


Last week, the Sunday Tribune asked participants in the property business - estate agents, property experts, stockbroker economists and, the people who sell half the country's mortgage loans, the mortgage brokers - to give their first forecasts for home prices and home sales activity in 2009.


Based on their experiences during the summer months, all participants believe that prices will continue to fall through the autumn, and many believe, with certainty, that house prices will continue to slide next year. Their estimates for changes in residential house prices in 2009 range from 0% (agents selling second hand homes) to a drop of up to 10% (from a large group that includes agents selling new homes, property experts and the country's largest body of people who sell mortgage loans for the banks.)


And those best placed to know, people close to the builders, warn that the supply of unsold new apartment homes has increased, not decreased, since the spring. Estimates of new homes in the greater Dublin area that remain unsold this summer have increased to over 13,000 properties, worth almost €4bn. That's up from the €3.6bn worth of unsold property experts estimated remained unsold in the region in early spring. Estate agents warn such properties will remain empty, unless developers sell, or rent out, huge chunks of apartment blocks, at substantially reduced prices.


"No builder will tell you what they have, or do not have [in unsold property]. But my figures tell me it is more than 13,000," said a leading participant in the new home market in Dublin.


"I think that a zero percentage figure is optimistic. There is nothing on the horizon that will help," said another leading agent on forecasts for house prices in 2009.


Mortgage brokers warn that the new home mortgage market has all but dried up. Michael Dowling, spokesman for the Independent Mortgage Advisers Federation (IMAF) said that AIB, one of only two lenders advancing loans of 90% of the purchase price, was charging a tracker rate of 5.75%. That represents a huge margin of 1.5% above the European Central Bank's benchmark rate, that would have been unthinkable a year ago.


Ireland's largest mortgage lenders, including Permanent TSB and others, once the most active in the Irish mortgage market, are charging mortgage rates that many borrowers cannot afford. "They are saying that if you want to borrow, we are really going to charge you," said Dowling.


In new forecasts for the Sunday Tribune, IMAF forecasts that house prices will probably fall next year by up to 10%. Dowling at IMAF predicts the number of successful mortgage applicants will drop to 120,00 this year from 158,000 who were advanced mortgage loans last year. In 2009, the mortgage brokers forecast that the number of mortgage loans will fall to only 110,000. Barely a third of those will be first time buyers.


Meanwhile, the credit crunch has, it appears, caught up with the two roads in Dublin, Shrewsbury and Ailesbury, in Ballsbridge, that have long defined the very top end of the Irish property market, according to the agent who has sold most property there in recent years.


Simon Ensor of Sherry Fitzgerald said that, unthinkable only a while back, he has two properties on Ailesbury Road that have remained unsold for four months. "Year to date I have sold only two or three on those roads. It is the slowest since 2003," he said.


Minister Lenihan, at the Department of Finance, cannot bet on the property tax bonanza returning in 2009.


The mortgae brokers
hold a crisis meeting


For a mid August, it was a most unusual gathering of property people. In a south Dublin hotel last Tuesday evening, 34 mortgage brokers met to commiserate about the state of the mortgage market and talk of gloomy prospects for 2009. During the property boom years, a crisis summer meeting for mortgage sellers would have been unthinkable. But the talk last Tuesday among the people who sell up to half of the mortgage loans, was of downturn and consolidation. Mortgage banks, including Permanent TSB, First Active and Ulster Bank, had all but stopped lending, said Michael Dowling, spokesman for the Independent Mortgage Advisers Federation.


"There was a bit of putting the arms around each others' shoulders. The view of that room is that it will be at least a year before we see any recognisable increase in the level of activity out there. Genuinely, the number of files the guys are pricing is non existent," said Dowling. For the Financial Regulator, mortgage brokers have to record reasons they advised a borrower to approach a particular bank. "It's now a simple one-liner because there is now only one lender preparing to lend," he said. "No disrespect to AIB, but they are only interested in the quality end of the market. First time buyers would have typically been serviced by Permanent TSB, First Active, and EBS."


Dowling said that he agreed with stockbroker forecasts, including Dermot O'Leary at Goodbody Stockbrokers and Rossa White at Davys that home prices could fall by up to 10% next year.


In forecasts for the Sunday Tribune, Dowling predicted the number of successful mortgage applicants will reach only 120,000 this year and fall again to only 110,000 in 2009.


In 2007, 158,000 people drew down mortgage loans. And Dowling estimates the Irish mortgage market will shrink to only €20bn next year from €25bn this year. In 2007, mortgage loans advanced to first time buyers, investors, people trading up and loans to those tapping equity in their homes was worth €34bn.


"Mortgage applications, since May and June, are down easily by 25%. We are late on in the year. The issue people are looking at is that there is very little in the pipeline," he warned.


The credit crunch arrives belatedly in Ailesbury Road


Simon Ensor of Sherry Fitzgerald, has competed, mainly, with David Bewley and his team at Lisney to sell most property from the 75 houses that stand on Ailesbury Road and the 60 homes on Shrewsbury Road, the two Ballsbridge streets that define the uppermost end of the Irish homes market.


"It had been more resilient, but the credit crunch has finally caught up here too," said Ensor, who, until recent months had seen little effect on property transactions from higher mortgage rates in Ireland's costliest post code. But, unthinkable only a short while ago, he has had two Ailesbury Road properties unsold on his books for the last four months.


Another property, on Shrewsbury Road, has come on the market in recent weeks. Year to date, Ensor, says he has sold "only two or three" properties on the two roads where "entry level" prices start from €6m for a house of 4,000 to 5,000 sq feet, with a garden of a quarter of an acre. That makes it, he says, the slowest sales activity in the costliest roads for five years.


Properties sold earlier this year in the area sold for about €8m and €10.5m. "In 2006, we sold seven of the nine properties around there. In terms of price, it has come back to 2005 prices," said Ensor. A number of people were "settling in", knowing that they would unlikely get the prices they wanted, he added.


How two economists see it


Dermot O'Leary, chief economist at Goodbody Stockbrokers, forecasts house prices will fall by a further 10% next year. "Our survey of housing market participants reveals that tighter credit is particularly affecting the first-time buyer market, according to 50% of respondents. House price deflation continues to linger and there is now a risk that prices continue to fall into 2010 as a result of affordability constraints, reduced investor interest and a large overhang of unsold properties," O'Leary warns. Citing evidence from the house price falls in the Netherlands in the 1970s, he said "a decline of close to 30% from the peak by the end of 2009 would not be out of kilter with international experiences of house price falls." Rossa White, economist at Davy Stockbrokers forecasts that prices will fall 8.5% in 2009. He estimates that the number of unsold houses in county Dublin has increased slightly in the last six months.


What the estate agents are saying


David Byrne, divisional director at Lisney, forecast that, allowing for inflation, home prices will be flat next year. Byrne said his "wish list" for later this year was for the mortgage market "to get off its knees" and that the banks would start lending again.


Stephen Conway of Colliers Jackson Stops, who have been signing up investors who seek to buy luxury apartments priced between €650,000 and €1m at discounted prices in south Dublin, said the fund was awaiting planning permission on a Rathgar, Dublin, site. "I am not panicking to buy anything. There certainly won't be price rises," Conway said, predicting the market will soften in 2009. "You need a lot of good news if the market is to get going in the next 15 months," he said.


Paul Murgatroyd, economist at Douglas Newman Good, compiles his own index to track house prices, using a sample of 500 properties, of all types, sold across Dublin. With the approval rate of new mortgage loans remaining low, the time it takes for a home owner, from first marketing, to sell a property lengthened to a record 157 days earlier this year. His time-to-sale index had since shortened to 145 days, but remained at a very high level, Murgatroyd said.


Ronan O'Driscoll, a director at Savills, said that the property market will remain quiet for the rest of the summer. "People are gearing up for the autumn buying season, and it is a crucial time. I am getting ready to bring on my new developments. I would hope it would be busier when we start to advertise," he said.