The headline news from the latest Central Bank paper on the housing market was that some 60 per cent of the transactions in the market are by cash buyers. But lurking under these figures are some other interesting trends. And they add up to one conclusion: the housing market is still not operating properly.

Take one measure: the turnover of houses each year, in other words the percentage of the housing stock that changes hands. In a normally functioning market this should be about 4 per cent. Now, in Ireland, it is just 2 per cent, with indications that Dublin, Kildare and Westmeath are experiencing the higher turnover rates.

Frenzy to stasis

While we often focus on prices, the housing turnover rates are also a reflection of what we have been through. The paper, by Central Bank economists Dermot Coates and Joe McNeill and UCD housing expert Brendan Williams, estimates that at the peak of the boom some 8 to 9 per cent of the housing stock was changing hands each year. This frenzy turned into stasis, with only a little over 1 per cent of the housing stock changing hands in 2010 and 2011. So the 2 per cent level shows a pick-up, but the market here is still "abnormal."

This is the backdrop to the high proportion of sales accounted for by cash transactions. The paper estimates that the total of these cash sales is now 28,000-29,000 a year. This is about the levels seen in the early 2000s. What this is telling us is not that there is a particularly high number of cash buyers, but rather that mortgage-financed sales are low. This is the missing “bit” in the Irish housing market.

Cash buyers

We should not be surprised at the number of cash buyers. After all, this includes the many people trading down – and using the proceeds from a house sale – as well as investors of all kinds. Some of the rest are the investment funds, but others are simply people who have a lump sum, perhaps from a redundancy deal, and are looking for somewhere to earn cash.

No, the missing part of the picture here is the “ ordinary” mortgage borrower. Numbers have started to pick up a little, but only after a period of years in which the total amount of cash extended to mortgage borrowers has fallen like a stone.

You could argue about the reasons for this – and they are many. Some younger families who would normally be moving are trapped by negative equity. Mortgage rates here remain high. Houses are expensive, particularly in urban areas and , crucially, there is a lack of new supply. It isn’t so much that the cash buyers are driving out those with mortgages, it is simply that the whole market in Ireland is still dysfunctional – as it crawls its way back from the crash.