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Europe is changing. Here's how. A reported blog.

A study in austerity: Irish property values slide further

The price of property has now sunk in value almost 60 percent in five years
Irish propertyEnlarge
In 2008, the asking price for this Dublin mansion, the former French ambassador's residence, was 60 million euros. Wonder what it would cost today? (AFP/Getty Images)

When it comes to house prices it's as if all of Ireland has stepped into a time machine and gone backwards half a decade.

A house in Dublin now costs 64.2 percent less than it did five years ago,

According to this 2011 year-end report by Irish property firm Sherry Fitzgerald, the figure nationally is 59.8 percent.  In much of the country property now costs what it did at the turn of the millennium.

No surprise then that the figures for mortgage lending show a dramatic shrinking as well. Banks are holding on to cash to re-build their balance sheets. Last year, 2.3 billion euros ($3 billion) was lent to buy houses. Ireland is a small country but it isn't that small. The last year of the boom 40 billion euros ($52 billion) was lent.

The result is cash is king in Ireland at the moment.  Almost a quarter of properties changing hands were paid for in cash.

The question is, is this a necessary, if painful price correction? or an over-correction that is as irrationally negative as what was happening five years ago was crazy positive?

In any case, this is a paradigm for students of austerity to study.