End of road for soaring property market

The_Conductor

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1645649&issue_id=14300

THE runaway property market is finally beginning to cool and some homes are even seeing a drop in prices for the first time in more than a decade.

Estate agents said yesterday they had seen the first evidence of a "soft landing" after years of astounding growth.

But the Irish Auctioneers and Valuers Institute insisted there was no prospect of a property crash.

Its chief executive Alan Cooke said: "The soft landing seems to be happening. It won't happen across the entire market in one fell swoop and it won't hit geographically at the same time."

He said it would affect a range of mortgage holders across different sectors first.

"But it's only a question of time until it levels out."

Fintan McNamara, chief executive of the Institute of Professional Auctioneers and Valuers said a number of members had reported a significant drop in interest in property.

"In the mid-market sector there has been phenomenal growth," he said.

"An average three-bed semi in the inner suburbs of Dublin that was selling for €500,000 in autumn last year was selling for €700,000 six months later. That smacks of overheating.

"But agents are telling me that the same €700,000 property is now selling for about €20,000 less."

Those trying to sell recently constructed homes are having the same problems. The owners of a three-bed terraced house in Addison Park, Glasnevin, have been forced to reduce the asking price by a massive €75,000 to generate interest.

Agents have reported that both the number of inquiries and the number attending viewings is down.

This is partly due to the summer season, which is traditionally quieter, but also due to greater caution on the part of potential buyers.

"I'd say the experience in the next six months will be a levelling off in prices," Mr McNamara said.

A number of house-hunters have recently expressed surprise at the number of properties on the market and the duration of time it takes for the "sale agreed" sign to go up.

Mr McNamara said the effects of a price slowdown will be felt from the bottom up and will quickly have a knock-on effect.

First-time buyers will hold off getting onto the property ladder as they wait to see what happens and also in the hope of a drop in prices.

This in turn will affect those who are looking to trade up to their second property. If they cannot sell their home they will be unable to bid on mid-market properties.

Dublin is unlikely to see dramatic effects as one third of the population is concentrated in the capital.

But rental properties on the outskirts of the city are likely to be hit first. Although rents have increased in the past six months, Mr McNamara warned that they could drop "just as quickly".

A drop in rental income would also affect any first-time buyer who is availing of the rent-a-room scheme.

He also believes properties in the country won't see as dramatic a change as those on the outer edges of the capital, simply because they are not as expensive to begin with.

He pointed out that apartments and houses near the city centre are most likely to hold their value and to retain tenants.

But despite likely changes in the market Ireland continues to have one of the highest owner/occupier rates in Europe.

Edel Kennedy

bill_ashmount

Sell, Sell, Sell!!!!!!!!!!!!!:D :cool:

jhegarty

smccarrick wrote:

This is partly due to the summer season, which is traditionally quieter

Enough said..... everyone knows the housing market is seasonal....

Glenbhoy

Enough said..... everyone knows the housing market is seasonal....

Would'nt be like the Indo to seize on one instance where an estate agent had quoted a ridiculous price and sensationalising it!!

FillSpectre

Lets examine this for a moment. The people who could possible want to get people to buy property are saying something that might stimulate people in to viewing and buying property!

"Hey everybody look there are bargins to be got"

Shorten supply by telling people not to sell at the moment too.

While this is going on we are also told that delays in planning are casuing there to be a shortage of new homes in Dublin. I have said it before, if house prices crash Dublin will suffer the least and recover the quickest. It is also possible that prices may drop outside of population/emmployment centres and still go up in inside.

When estate agents meet do you think they talk about how to provide a better service or making more money? Any announcement from them is likely to be to provide btter service or make more money?

chump

FillSpectre wrote:

Lets examine this for a moment. The people who could possible want to get people to buy property are saying something that might stimulate people in to viewing and buying property!

"Hey everybody look there are bargins to be got"

Shorten supply by telling people not to sell at the moment too.

While this is going on we are also told that delays in planning are casuing there to be a shortage of new homes in Dublin. I have said it before, if house prices crash Dublin will suffer the least and recover the quickest. It is also possible that prices may drop outside of population/emmployment centres and still go up in inside.

When estate agents meet do you think they talk about how to provide a better service or making more money? Any announcement from them is likely to be to provide btter service or make more money?

Is there anyones opinion that could not be called biased?
Banks?
Gov?
EAs?
Home-owner?
Crash-waiter?

Everyone has a slant, personally I'm quite amazed that the most popular paper in Ireland has as it's main headline End of Road for soaring property market ...

That's a big change.

The thing worth thinking about most is what are the 'savvy' investors going to do now? Particularly the IO mortgage owners on a 2 bed apartment in places like Adamstown. They bought for capital appreciation - so why bother hang on?

And it will be interesting to see when the census stats come out how many un-let properties there in the greater Dublin area.

FillSpectre

chump wrote:

Is there anyones opinion that could not be called biased?

Everybody has a level of bias, however when the people responsible for pricing claim prices are going down using their own "over pricing" to prove it should not be trusted. THis is especially true when in the same day there are facts showing how planning permission is stalling development.

chump wrote:

Everyone has a slant, personally I'm quite amazed that the most popular paper in Ireland has as it's main headline End of Road for soaring property market ...

That's a big change.

No change if you ask me. They have been putting up these warning for the last 3 years IMHO. Unfounded stories are constatnly getting the lead story especially whne feeding into fears so nothing new.

chump wrote:

The thing worth thinking about most is what are the 'savvy' investors going to do now? Particularly the IO mortgage owners on a 2 bed apartment in places like Adamstown. They bought for capital appreciation - so why bother hang on?

And it will be interesting to see when the census stats come out how many un-let properties there in the greater Dublin area.

I have yet to hear any landlords come out saying they are having trouble. You are making massive assumption why people bought and a also have a short sighted view of what investment means. THe "savy" people tend to know what they are doing worry about the idiot investors and FTBs. You won't get those figures for un-let properties becasue nobody is/was counting. It is also only possible to count such things when people tell you

Calina

FillSpectre wrote:

Everybody has a level of bias, however when the people responsible for pricing claim prices are going down using their own "over pricing" to prove it should not be trusted. THis is especially true when in the same day there are facts showing how planning permission is stalling development.

Interesting: the estate agents should not be trusted when they say that prices are starting to slide but when they say that planning permission is stalling development we should believe them? It was Hooke & McDonald who revealed that last bit too, and they did seem to be the big operators in the new development market, didn't they?

Sorry. I'm cynical either which way.

FillSpectre

Calina wrote:

Interesting: the estate agents should not be trusted when they say that prices are starting to slide but when they say that planning permission is stalling development we should believe them? It was Hooke & McDonald who revealed that last bit too, and they did seem to be the big operators in the new development market, didn't they?

Sorry. I'm cynical either which way.

The differnce is one is control of the "evidence" and the other is not. Estate agents also get a benifit from reaction two fold. THe developers don't have such an obvious noticvable gain and are not in control of any "evidence".

You aren't actual cynical about information as you embraced it to suit your belief. You believed one side where a true cynic wouldn't beleive either. I am cynical about the people who can manufacture their entire story without any effort and not the group that have an obvious point about zoning.

lomb

Calina wrote:

It was Hooke & McDonald who revealed that last bit too, and they did seem to be the big operators in the new development market, didn't they?

correct, hooke had a huge ad in the business post, that was aimed at developers, saying theyl turn their field into a crock of gold, with a picture of a horse on a race track with the line AHEAD OF THE FIELD
personally i wouldnt believe anything hooke says, their new apartment properties are way over the top priced relative to even sky high market value.

flogen

I know very little about property but would the news of a slowdown create the risk of a crash in some ways?
Think about it; when everyone knows property is climbing up and up every day people (like first time buyers) feel the need to get on the market ASAP for fear of being priced out of it in a few months time, but now that prices have slowed and the rise isn't as dramatic the rush might die down, also if prices drop even a tiny amount won't people hold back thinking "well it's bound to drop even more in the next year"? If enough people hold off for fear of investing in something that's value is decreasing then surely its value will decrease...

The_Conductor

That is one way of looking at it. A lot of people have become accustomed to never ending increases in their property. A lot of people have taken equity release packages which they have used to supplement their spending.

Not only may a lot of people be put of purchasing by increases in property prices not occuring to the same extent- but I dare say a lot of people will postpone equity releases in their properties which may lead to a drop in economic consumption and a contraction in economic activity.

Simply put- if I think that my house is holding its value, rather than increasing in a predicatable manner- I am far more likely to exercise fiscal prudence and only spend money that I actually have, rather than hocking my house to pay for a lavish lifestyle.

अधिनायक

I can't understand why the estate agents associations would both make negative comments about the property market. Presumably the IAVI and IPAV consulted each other before doing this. My only guess is that they are so confident of the market that they are willing to do this to drum up even more business.

lomb

smccarrick wrote:

A lot of people have taken equity release packages which they have used to supplement their spending.

that is the risk in a slowing market, that people who borrowed on the strength of their home at low rates (secured lending) for everything from new kitchens , extensions and cars to holidays will stop spending if prices taper off .

newton said he could predict the movement of stars but not the madness of men. personally ive come to the conclusion recently that there is no real shortage of land, or labour , or materials to build more houses/apartments.

give things a few years and theyl settle at whatever people can afford, maybe were at that point now, maybe we arent, no one really knows. but limited supply always pushes prices up, and there are limits on certain houses of 'character' problem is these houses of character are passing the prices of mansions in malibu, or beverley hills...

Raskolnikov

Glasnevin is one of those areas (like Ballsbridge and Docklands) where the last modicum of sense went out the window a long time ago. I've seen a 3-bedroomed, terraced slum fall under the hammer for €800,000. One street away, a comfortable 4 bedroomed, semi might only fetch €650,000. The reason for the madness? The D9 postcode and in particular, the street name where the house lies. Is this going to result in a crash though? Absolutely not. It's just signalling the end of high capital appreciation in the area. A slight dip in the prices and the demand will cause the prices to steady up since Glasnevin will still be one of Dublin's most desirable areas to live in.

As for the article itself? It's clap-trap. They've taken a specific incident of a highly irrational housing but tiny market and predicted the 'end of the road'. We have a little way yet to go for that I'm afraid. In a few years time we'll see the true result of this. Maturing first time buyers anchored to tiny and dilapidated apartments and duplex's which will be unsellable. Plasterboard walls, high management fees, pokey little box rooms. Most look awful now, just imagine what a couple years use will do to the.

At least those with an actual house will have some hope.

Supercell

Housing in favoured areas was always likely not to be affected badly, but for price falls to be happening anywhere for the first time since 2001 is surely signs of things to come.
Most people living in Dalkey, Killiney, Howth etc have little to worry about, their prices will stabalise but hardly massively fall.

Shoeboxes in Darndale or Ballymun, or the commuter towns are likely to be much harder hit. Unless you come from these areas it was hardly your dream to own a shoebox in Darndale or the arsehole of nowhere down the country with an hour commute each way and little time to see your wife or kids and no facilites in the endless sprawl approved by corrupt polititions (from all parties .. http://www.ireland.com/focus/commuter/1.html ).

These places WILL see massive downturns, there will be no soft landing in these areas. For the biggest auctioneers to be gone from 17% growth in the first quarter of the year to now predicting soft landings...well its begun ..no question, they earn their money through sales, if people start panic selling instead of panic buying..all the better for business (that could just be the cynic in me though).

utopian

Longfield wrote:

Housing in favoured areas was always likely not to be affected badly, but for price falls to be happening anywhere for the first time since 2001 is surely signs of things to come.
Most people living in Dalkey, Killiney, Howth etc have little to worry about, their prices will stabalise but hardly massively fall.

Surely lower prices in Navan affect Dunboyne, which affects Clonee, which affects the Navan Road, and so on? It's not like there is a moat around Dublin...

I may want to live in Ranelagh, particularly if it is only 1.5 times the cost of living in Drumcondra or wherever. However, if it is 3 times the cost, I may rethink.

Personally, I would expect to see lower prices starting in Carlow and ending up in the "embassy belt" some time later.

Supercell

utopian wrote:

Surely lower prices in Navan affect Dunboyne, which affects Clonee, which affects the Navan Road, and so on? It's not like there is a moat around Dublin...

I may want to live in Ranelagh, particularly if it is only 1.5 times the cost of living in Drumcondra or wherever. However, if it is 3 times the cost, I may rethink.

Personally, I would expect to see lower prices starting in Carlow and ending up in the "embassy belt" some time later.

Well you are absolutely right in that the cost is a factor BUT a shoebox in Darndale will probably fall faster than a shoe box in say Drumcondra to use you're own example. I'd rather not live in either, however if prices fall and I can now afford a place in Drumcondra...and I no longer have to buy the cheapest piece of shoody shoebox on the market..I know where my money is going..and its not near Darndale!!

Some places will fall a lot faster than others, but if the semi decent areas (like Drumcondra) become affordable to people on a reasonable salary, then they will be the places people will want to move to...poorly built shoe boxes in areas with a bad reputation will fall like stones and the area will return to the state it originally was which gave it its reputation in the first place, sad but thats what is going to happen imho.

faceman

Take that article in the indo with a pinch of salt. Indo is an awful newspaper desperate for slant sensationalised headlines. and has been knocking the property market for years. See rte news with same stats putting a different slant on it.

http://www.rte.ie/business/2006/0703/houses.html

This time of year is property markets quietest. Auctioneers dont hold auctions in the summer. The article in the indo was written like it was written by a journalist student.

I for one dont want to see the irish economy fall into recession, lets hope property market remains strong.

Raskolnikov

utopian wrote:

Personally, I would expect to see lower prices starting in Carlow and ending up in the "embassy belt" some time later.

That has most definitely been the trend with other crashing property markets . . .

Afuera

अधिनाय&#2325 wrote:

I can't understand why the estate agents associations would both make negative comments about the property market. Presumably the IAVI and IPAV consulted each other before doing this. My only guess is that they are so confident of the market that they are willing to do this to drum up even more business.

It seems to be an acknowledgement by the industry that the peak has been reached. By announcing this I think they are warning sellers that they will have to lower their expectations. If they did not do this, then sellers could stubbornly refuse all offers and the estate agents would be left in a situation where nobody is buying and selling (a kind of standoff). That would be a doomsdays scenario for estate agents.

daveirl

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interested

Afuera wrote:

It seems to be an acknowledgement by the industry that the peak has been reached. By announcing this I think they are warning sellers that they will have to lower their expectations. If they did not do this, then sellers could stubbornly refuse all offers and the estate agents would be left in a situation where nobody is buying and selling (a kind of standoff). That would be a doomsdays scenario for estate agents.

I think someone already mentioned this but just because one analyst for one paper or lending institution makes a statement along these lines its the estate agents that can only truely know where is cooling off or not. They set the asking prices based on their knowledge of what will sell or not. They're also the only ones (apart from the buyer and seller) with knowledge of what the house finally goes for - and the margin above or indeed below the asking prices.

If the ECB raise rates by 0.5% on August 3rd and by another 0.5% at the end of August as is expected then supply may (in some areas) exceed demand for a period of time (it could be pretty brief).

A doomsday scenario for estate agents eh ? I for one would love to see alot of them suffer before their light goes out for good. Bidding wars, counter bids, asking prices going up by thousands between a phone call on friday morning and when you you turn up for a showing on a saturday morning ... Estate agents have been feeding off the property boom for quite some time as far as Im concerned - a little or alot of hurt for them at any time would be way over due ... IMHO.

daveirl

This post has been deleted.

The_Conductor

interested wrote:

If the ECB raise rates by 0.5% on August 3rd and by another 0.5% at the end of August as is expected then supply may (in some areas) exceed demand for a period of time (it could be pretty brief).

Concensus is for a .25% increase on August 3rd, August 31st, Oct. 5th and Dec 7th. (of course this may not come to pass). That would bring us to 3.75% by years end.

Ulster Bank are stating that they guarantee rates will rise to at least 3.25% by years end and to 4% by end of 2007.

daveirl

This post has been deleted.

अधिनायक

interested wrote:

They set the asking prices based on their knowledge of what will sell or not. They're also the only ones (apart from the buyer and seller) with knowledge of what the house finally goes for - and the margin above or indeed below the asking prices.

Lending institutions know the value of properties against which they advance mortgages. The revenue has exact prices for all land and properties sold that are subject to stamp duty.

The_Conductor

Lending institutions have not cared particularly about the 'value' of properties for sale- its in their interest to lend as much money as possible. What they do care about is repayment capacity. Of late they have become more sticky about repayment capacities- which is why the subprime market here is really beginning to take off.

As pointed out previously in this thread- estate agents are interested in selling property, not sitting on it in the vain hope that it will rise in value. They will do whatever they need to do to ensure that the market keeps moving. If this means advising sellers that their expectations are overly optimistic, and that to ensure a sale they need to reduce their prices- this is what they will do.

A calculation in the Irish Indo today states that interest rate increases in 2006 (allowing for a further .5% rise) will have added over Euro 300 per month to repayments on an average 260,000 mortgage. Unfortunately most mortgages issued lately have far exceeded this *average* level.

There are going to be a hell of a lot of people out there hurting very very soon, if not already.......

lomb

daveirl wrote:

This post has been deleted.

some are saying 4%, could be looking at 5+% shortly with the banks margin, can only be good news to cool the market is what i say. its about time the ecb withdraws the money suply. ironically they are worried about 2.5% inflation. china has helped to keep the inflation low, but one day even china will raise prices, and then inflation will be much higher. lets see what rates are then.

lomb

smccarrick wrote:

If this means advising sellers that their expectations are overly optimistic, and that to ensure a sale they need to reduce their prices- this is what they will do.

that is very true, thats probably what all this front page stuff is, propaganda to keep 'stock' rotating.

indiewindy

The estate agents wont lose out as they are living off the commissions by selling the houses, so they have little risks apart from staff wages. Though some of them are guilty of hyping the market by creating situations where people had to spend days wating in line for new developments. The end of the line for rises is forecast so often, but at the end of every month we keep on seeing record rises in borrowing in the central bank reports. How many interest rate rises will it take to cool off this demand?