The latest house price figures, which show prices falling by 0.5pc in November, seriously underestimate the true extent by which prices have fallen. And there is almost certainly more bad news to come in the New Year.
Every month, mortgage bank Permanent TSB publishes its index of house prices. The index, which is compiled by the ESRI and has shown a decline in house prices for every month since March 2007, is generally regarded as being the most authoritative and up-to-date source of information on the state of the Irish housing market.
Unfortunately, the Permo numbers are not foolproof. They are based on completed house prices during the month. With huge stocks of unsold new and second-hand houses on the market, and up to 18-months supply at current levels of demand by some estimates, sales are taking much longer to close than they used to.
What this means is that the Permo numbers reflect sales that were agreed four, five or six months ago, as far back as last May or June, rather than the current state of the market. Since then the world has changed. The Irish banks have in effect gone bust and have, to all intents and purposes, stopped making new loans, while the economy has gone over a cliff.
And there is another problem with the Permo numbers. They don't include the huge reduction in asking prices as desperate sellers seek to offload unsold properties. A combination of the time lag between when sales are agreed and completed, and the huge stock of unsold property currently on the market means that, through no fault of its own, the Permanent TSB/ESRI house price is, at best, an incomplete reflection of the true state of the housing market.
House prices have fallen by a cumulative 15pc since February 2007, according to the Permo. It is also apparent that the rate at which house prices are falling is accelerating. They fell by 9.6pc in the year to November 2008, compared to 5.9pc over the previous 12 months.
Things are going to get much, much worse in the next few months. One of the factors underpinning the Irish housing has been strong inflow of people into this country. As recently as the year to April 2007, more than 67,000 immigrants came to live and work in this country. Most of these immigrants are young people who eventually plan to return to their own countries.
This made them more likely to rent rather than buy a house in Ireland.
The arrival of this large group of non-nationals, more than 420,000 at the time of the 2006 census, tempted many investors to borrow money to buy houses to rent to this new market.
Now the boot is on the other foot. The ESRI expects at least 50,000 people to leave this country next year as they flee the collapsing Irish economy.
While many immigrants are thinking of returning to their own countries, the cash-strapped banks are putting the squeeze on heavily borrowed rental landlords.
This lethal combination of declining rental demand and a rash of forced sales by landlords threatens to trigger a fresh downward spiral in the housing market. Rents are already down by almost 10pc over the past year, and will almost certainly fall further in 2009, piling pressure even on those landlords who were previously making ends meet.
This will, in turn, lead to more forced sales, reinforcing the downward spiral.
When the housing market first started to head south, even the most bearish forecasters reckoned that prices would fall by no more than a third.
With asking prices in many areas now down by a quarter, and the difficulties in the rental market likely to lead to tens of thousands of forced sales, it may well turn out that even the pessimists were being optimistic.
Report by Dan White - Evening Herald.