By and large, I'm for NAMA and the state-rescued banks taking their entire store of houses and apartments and saying "everything must go!". I hate it that a literal arm of the state (NAMA) and a de facto arm of the same state are deliberately and openly preventing a totally-needed commodity from finding its real price where demand equals supply. We don't need to go over for the millionth time why it's unjust that houses still have a floor of €150,000 even though there's hardly a sinner buying at that price.
But we should look at the other side of the equation. What happens if house prices fall? We've already seen that it would put lots of people who currently imagine they're not in negative equity slap-bang into NE.
But there is another outcome to a house-price fall that has occurred to me: insurance policies failing to work as desired. Most mortgages are sold with life insurance AFAIK. I'll admit I don't know how this insurance pans out if the mortgage-holder dies.
But I suspect that if a major house-price fall happens, there will be a new crisis. We can be fairly sure that if prices fall precipitously, life insurers will see a major collapse in new premium income. Lots of people (either foreign or domestic) will be buying houses outright, thus no reason to bother with life insurance. And the sums that people are insuring for will be much smaller, among those who do mortgage up. It looks to me as if we'd have another major recapitalisation on our hands, and insurers will find themselves forced to bid premia up to the sky, forcing companies right out of business.
This is all speculation on my part, but I really do think that a rapid fall in house prices to their real level could bring on some genuinely thorny problems. That's not to say I'd rule it out, I'd just like us to examine the scenario more carefully. My worry is that we've maybe painted ourselves into a corner where allowing house prices to fall would cause vastly more problems than it solves.