TALKING PROPERTY:EARLIER THIS year, in March, I boldly dared to suggest that the Irish property market had hit rock bottom and that all that was needed was a resumption of credit flow from the Irish banks to get the market moving again.

My certainty was short-lived. As it turned out we were far from the bottom, and my mistaken presumption that Ireland’s tiny “green shoots” of economic recovery might burst into leaf and perhaps even blossom, as they were doing elsewhere, was obviously overly optimistic, to put it mildly.

According to the most recent Permanent TSB property price index, house prices nationally dropped by 7.7 per cent in the first six months of 2009.

The most dramatic drop occurred between March and April – in March the fall in prices was 1 per cent, in April it was 1.9 per cent.

Even as property prices continued to drop, the banks and the lending institutions repeatedly insisted that they were open for business.

Indeed, they claimed that lending to first-time buyers had actually increased in the first and second quarters of the year. It just didn’t make sense.

However, figures from the Irish Banking Federation’s Mortgage Index now provide a clearer picture.

The total number of new loans issued in the second quarter (April, May and June) of this year was 12,686 and the value of those loans was €2,173 million.

Not bad, one would think, until you realise that this figure represents a 63.9 per cent drop in loans compared with the same period last year. The value of these loans was 71.3 per cent less than the figure for the same period in 2008.

To put these figures into perspective, they must be compared with the number of loans and their value in 2006 when the Celtic Tiger was in its prime.

In the same period (second quarter) of 2006 the number of new loans drawn down was 53,449 and the value of these new loans was €10,130 million. In other words, Irish financial institutions were lending over four-and-a-half times more money for mortgages in 2006 than they lent in the same period this year.

Listening to some top Irish bankers being interviewed, one might be led to believe that Irish people are just not applying to their banks for mortgages and that the demand for loans had decreased.

And with rising unemployment I am sure that there has indeed been a slowdown in mortgage applications. However, there is a strong possibility that our financial institutions are being somewhat economical with the truth.

According to Trevor Grant, managing director of Select Finance Group, whose survey found that banks and lending institutions have tightened their lending criteria so much that they are now rejecting four out of every five mortgage applications, only 20 per cent of applications were being accepted and that figure had decreased further since the survey was completed at the end of April this year.

AIB, Bank of Ireland and EBS are lending to first-time buyers, and indeed the Irish Banking Federation figures show that there has been a percentage increase in loans being drawn down by first-time buyers, which now amounts to 25.1 per cent of all loans.

However, let us not get too excited about the percentage increase in mortgage lending to first-time buyers, as although the percentage figure may have increased, the overall figure has decreased.

In the second quarter of last year (2008) when only 17.4 per cent of total loans were to first-time buyers, there were 35,154 loans drawn down with a total value of €7,566 million.

The same period this year shows that, although first-time buyers now amount to 25.1 per cent of the total loans, there were only 12,686 loans with a total value of only €2,173 million.

The truth is that the banks and lending institutions have, in fact, lent 2,933 less loans to first-time buyers this year compared with the same period last year and the total value of these loans equates to a drop of €771 million less than the same period in 2008.

Unlike Ireland, other nations such as Germany and France have recently announced that they have emerged from recession and are now showing small but definite signs of economic growth and last week the chairman of the US Federal Reserve remarked that “the prospects for a return to growth in the near term appear good”.

Ireland’s “green shoots” of economic recovery froze solid in the ground in April when the Government introduced the concept of Nama.

Why? Because Irish lenders stopped even pretending to swim to shore, but instead, started treading water in the sure knowledge that the Nama lifeboat was on its way to save them.