In the current environment, it is not unthinkable that another crisis could trigger some sort a similar chain of events domestically and commercially, rather than residential property, is seen as a weakness at the moment.But the two situations are not really comparable, at least according to the Central Bank of Ireland, particularly when it comes to the Republic’s main lenders.
Importantly, it noted that Irish banks are relatively underexposed to the market. Commercial property loans accounted for just 10 per cent of total lending at last count, compared with more than one-third in 2008. Lending is now “less concentrated in riskier development exposures“, it said. Moreover, banks are also required to carry much higher levels of loss-absorbing capital, meaning they are now less likely “to amplify rather than absorb shocks” from abroad.
The non-bank sector is a different kettle of fish. The Central Bank warned that Irish property funds own about 34 per cent of estimated investable commercial real estate here, “a cohort” of which are vulnerable to falling prices due to their high levels of leverage.