If the property prices decline, when will you buy?

whizzbang

A lot of people here say that people will buy as soon a prices start to dip. Lets see if the readers here feel the same way.

The_Conductor

I think a reasonable price is five times gross salary.
Sooooo- when a 3 bed semi is priced at 5 times salary (say 200k for arguments sake) I would be interested. At current prices I am therefore looking at hmmm say a 70% drop in prices- seems pretty reasonable.

Of course price, and interest of course, is determined by a large number of factors- the biggest one being location. You will get a mansion in Wexford for less than the price of a garden shed in Howth....... While I might enjoy the mansion- practicalities deter me from expressing an interest in it.

Supercell

Interesting question, I bet a lot of people will jump on the "as soon as I can afford" bandwagon.

Its going to be fascinating, I reckon prices will drop a little, investors will start dumping and a large amount of these properties will be snapped up by people just priced out of the market and desparate to buy, Prices will start rising for a few MONTHS during this process.

However the rises will still be low and interest rates will still be rising ..investors will continue to dump (this is something to keep an eye on imho), some normal buyers from '05 and '06 start to sweat too as they are over extended.

18 months from now, the rise has stopped and is in freefall, the people that can afford houses/apartments ands haven't yet bought are now sitting on the sideline thinking i'll wait - bloodbath for the next 5 - 10 years, the amateur "investors" cannot afford their interest only second mortgages and are frantically trying to sell just as they frantically once bought.

The commuters that paid 300k for a 3 bed semi in Athy that work in Dublin see their properties tumble to values around 160-180 aka their real worth ihmo, this pattern is repeated around the commuter belt and in the one bed apartments in Dublin that currently fetch silly sums..aka one bed flats in knackerland in (Darndale type places) going for €280k+

The soft landing theory is just utter dreamland and not based on any economic reality.

The_Conductor

I might disagree with the timeline you are suggesting- but have to agree with what you're saying. I think things will happen sooner rather than later though- and would also query the temporary blimp upwards (as I believe that is where we are at already).

whizzbang

I think Longfield has the order spot on but I'm also not sure of the time frame. I do think the next 6 months will be very interesting though, will we see an autumn recovery after the traditional summer quiet period?

dochasach

Longfield wrote:

Interesting question, I bet a lot of people will jump on the "as soon as I can afford" bandwagon.

Its going to be fascinating, I reckon prices will drop a little, investors will start dumping and a large amount of these properties will be snapped up by people just priced out of the market and desparate to buy, Prices will start rising for a few MONTHS during this process.

Yes, this often repeated market phenomenon is known as the "Dead Cat bounce" (even a dead cat will bounce if it falls from a great height.) http://en.wikipedia.org/wiki/Dead_cat_bounce

However the rises will still be low and interest rates will still be rising ..investors will continue to dump (this is something to keep an eye on imho), some normal buyers from '05 and '06 start to sweat too as they are over extended.

18 months from now, the rise has stopped and is in freefall, the people that can afford houses/apartments ands haven't yet bought are now sitting on the sideline thinking i'll wait - bloodbath for the next 5 - 10 years, the amateur "investors" cannot afford their interest only second mortgages and are frantically trying to sell just as they frantically once bought.

The commuters that paid 300k for a 3 bed semi in Athy that work in Dublin see their properties tumble to values around 160-180 aka their real worth ihmo, this pattern is repeated around the commuter belt and in the one bed apartments in Dublin that currently fetch silly sums..aka one bed flats in knackerland in (Darndale type places) going for €280k+

Good analysis, I agree with most of it, though I suspect that property inertia will drag it out into 15 years of slow decline, peppered with a few spectacular drops and a couple of dead cat bounces.

The soft landing theory is just utter dreamland and not based on any economic reality.

In fairness, a "soft landing" could happen, it just relies on some unlikely coincidences:

* Supply exactly meets demand after the panicy ladder-chasing FTBs, imported construction labor and speculators head for the exits,

* When ECB settles on a "one size fits all" interest rate to best fit the 452,000,000 people living in the 24 E.U. states outside of Ireland, that interest rate will perfectly fit the 4.5 million Irish. (Their record isn't good here, its clear that the past 5 years of ECB interest rates have been much too low to keep Ireland's inflation in check.)

* That a decade or two of growth below the level of inflation will be soft enough to suit.

daveirl

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miju

planning on buying after 5% rise in order to minimise chances of getting caught out by the aforementioned "dead cat bounce" but would most defo buy before they rise 7% after bottoming out

coolhandluke

daveirl wrote:

This post has been deleted.

Exactly,i sold a property when it reached a value that i would not have paid for it,i will buy again when i think the property i wish to buy is worth the money i am being asked to pay for it.

whizzbang

dochasach wrote:

In fairness, a "soft landing" could happen, it just relies on some unlikely coincidences:

* Supply exactly meets demand after the panicy ladder-chasing FTBs, imported construction labor and speculators head for the exits,

* When ECB settles on a "one size fits all" interest rate to best fit the 452,000,000 people living in the 24 E.U. states outside of Ireland, that interest rate will perfectly fit the 4.5 million Irish. (Their record isn't good here, its clear that the past 5 years of ECB interest rates have been much too low to keep Ireland's inflation in check.)

* That a decade or two of growth below the level of inflation will be soft enough to suit.

good list! perhaps you could also add "Investors decide to hold on to slowly appreciating property despite very low rental yields" alternativly you could have "A meteoric rise in rental prices"