Housing Bubble Bursting

SkepticOne

gurramok wrote:

Prices everywhere whether in the best location or in backend of nowhere are massively overvalued.
For example. see price drops from irishpropertywatch.com, drops are happening next to dart stations as well as to the housing estate next to bogland.

I would agree with this. There is general overvaluation in the market due to easy credit. Rather than lack of infrastructure or facilities (nearness to Dart etc) I think look to those areas where there has been substantial speculative buying (i.e. where the buying has been on the basis of continued capital gains rather than intrinsic value) for the greatest drops. These could be anywhere in the country. For example, I understand there has been a lot of purchasing of expensive houses in Dublin 4 on interest-only mortgages. I would expect these to drop quite a lot.

HashSlinging

Recently after much much much looking and putting off I bought in Rathdrum Co.Wicklow.

Although I do anticipate a slowdown, these are the particulars that made me buy.

Estate is small 60 houses, only one phase, purchased a 3 bed semi. house with view over valley and river, house has a balcony at front, south facing rear garden. The town is marked for massive regeneration, e.g. an 8 million euro school nearing completion, the school has class leading sports facilities etc and can accommodate 650 pupils, within walking distance of house at most 100 yards.

Planning permission has been granted for 500 houses around the town, no houses have been built in the last 4 years due to a problem with sewerage this is now sorted.

There are links to Dublin via N11 motorway, rail and bus services.

Time: 0 hr 54 min
Total Distance (Km): 57.94

jank

This $hit has hit the fan.....
Good thing im off to OZ next year!

seamus

A Random Walk wrote:

Do you have any basis for this statement? Any evidence from other countries? In the UK, prices fell everywhere during their last housing recession. The US is experiencing house price falls everywhere currently (except for some very limited exceptions of course). Asking prices, which is the only real evidence we have in Ireland which isn't VI generated, are dropping everywhere also. So do you have any evidence to support your assertion that house prices in cities will not fall?

I don't have any particular evidence, just gut feeling from watching the market closely over the last 6-8 months.

Ireland has a rather odd setup (I won't say unique), in our population distribution. Although we've experienced phenomenal growth in terms of our economy and population, our infrastructure hasn't been developed at a level even approaching growth in these other areas. As a result, it has fallen vastly behind requirements. Even though residential property has expanded massively beyond the major urban centres, the jobs haven't followed them out. The jobs have stayed put. Migration towards the urban centres has remained as strong as it has for the last twenty years, and that doesn't look set to change - there's no reason why it should.

As prices begin to tumble, caused by the unoccupied properties in the sprawl, people looking to move or buy homes will realise that buying property in these areas isn't worth it, even if the prices have plummeted. Infrastructure is one of the primary factors that determine prices and desirability of an area, so these same people will look towards the more desirable areas, closer to the major urban areas as place to buy their property. Concordantly, the amount of vacant properties also drops as you get closed to the major urban centres - it makes no sense to have an investment property idle in a desirable area, because there's money to be made. This helps maintain the stability of said property.

Other countries (and I'm thinking of the U.S. and U.K. here) don't have this same setup - infrastructure, most notably public transport in the form of rail and underground, is far more comprehensive than Dublin, so the difference between living 10 miles from the city, and 4 miles from the city is ten minutes on a train. In Dublin it's 30-60 minutes in a car, or 20-30 minutes on a bus. Regional jobs are also far more plentiful in these areas, to the extent that many small urban centres can support a large amount of high-skilled jobs. You can't say the same of Athy or Tullow or Tyrrelstown.

jank

jank wrote:

This $hit has hit the fan.....
Good thing im off to OZ next year!

I dont know why the youth of today would want to hang around to pay these property prices and commute all when we have so many vacant properties - if it was done correctly property would be easily affordable here, the cost of living would be alot cheaper and our economy would be more successful.
Why stick around if you dont have to? Hang around for what exactly? To pay for the aging populations pensions ? HA! :rolleyes:

seamus

seamus wrote:

Tyrrelstown.

dude did you not hear the add? Tyrellstown is a whole new kind of living

SkepticOne

seamus wrote:

As prices begin to tumble, caused by the unoccupied properties in the sprawl, people looking to move or buy homes will realise that buying property in these areas isn't worth it

But unoccupied properties in the sprawl are only one reason that prices will fall. It is in city centre areas where there certainly is demand for accomodation you are also looking at yields of 1 and 2 percent. These tiny yields represent gross overvaluation and therefore prices will also fall.

I think the underlying false assumption in your post is that demand for accomodation means prices in central areas are justified regardless of how high those prices have become at the peak of the bubble.

seamus

But unoccupied properties in the sprawl are only one reason that prices will fall. It is in city centre areas where there certainly is demand for accomodation you are also looking at yields of 1 and 2 percent. These tiny yields represent gross overvaluation and therefore prices will also fall.

Certain areas, and certain types of property will always take the blows when a market drops. Apartments, for example, will see a fairly substantial hit, regardless of location. Even then, apartments in the more desirable locations will still hold better because their yields shoot up as speculators pull out of the less desirable areas.

SkepticOne wrote:

I think the underlying false assumption in your post is that demand for accomodation means prices in central areas are justified regardless of how high those prices have become at the peak of the bubble.

Not "justified", but maintainable for the time being.

I don't believe that actual demand for housing has dropped off much at all, only the inflated demand has been curtailed, and supply has increased massively. In the short-to-medium term, there will still be plenty of buyers in older areas closer to the cities. I'm not saying that *all property* close to the cities will continue to rise, but the more desirable areas close to the cities will maintain their values or keep some nominal growth, to the tune of 4 or 5% p.a. This means that although the prices of these properties remain high relative to today's wages, their affordability will increase in the long-term.

I should state that the property I'm referring to, really is in a minority in the state. From what I've seen, by and large the biggest supply of property in the state is in the €250k-€400k bracket, and then a tiny portion of property "valued" at over €900k. Both will take substantial hits, while the bracket in between will maintain because it represents a much more stable and predictable type of homeowner and location.

Zambia

jank wrote:

This $hit has hit the fan.....
Good thing im off to OZ next year!

Yes as the UK and Ireland go over and dump on there property market

Nowhere is perfect - Oz had its own bubble which burst in Sydney and is continuing in Perth.

But the quality of life still far surpasses it here.
My opinion.

DJDC

I think Seamus has hit the nail on the head. The reality is the housing market in Ireland has become overvalued and when the **** hits the fan, the poor suckers outside the M50 are going to be hit hardest. A good analogy is the stock markets.When the market suffers a crash/correction, the blue chip stocks fall in value but never to the same extent as newer riskier companies.

The blame goes back to the corrupt Fianna Fail politicans who destroyed the green belts around the city through constant rezoning.Instead of properly planned growth, what has happened has been an utter unplanned disaster.People spending 4 hours a day in traffic,packed schools,poor water supplies etc.

faceman

DJDC wrote:

I think Seamus has hit the nail on the head. The reality is the housing market in Ireland has become overvalued and when the **** hits the fan, the poor suckers outside the M50 are going to be hit hardest. A good analogy is the stock markets.When the market suffers a crash/correction, the blue chip stocks fall in value but never to the same extent as newer riskier companies.
.

its only overvalued at the moment, it wasnt overvalued in previous years as the demand was there. Its all relative. An by outside the m50 i presume you mean back arse of nowhere towns/counties very little decent employment opportunities?

(to all you old school posters in this thread, im back!)

We're currently starting to see reductions in house price values but it doesnt translate into an apparant bubble bursting. We wont know this for potentially 2-3 years. It depends on how rapid prices fall. I wouldnt see a 10-20% decrease in price as catastrophic.

Its regularly raised in this thread about the number of vacant properties in ireland as a signal of impending doom. At last i can now back up my countering argument with evidence from the census 06. (Yeah i know, its only taken me a year to get it!)

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1802401&issue_id=15431

OK the areas with the highest rate of unoccupied houses are leitrim donegel and kerry. Not exactly booming counties with ample skilled employment opportunities and cant be representative of the rest of the country.

McDowell has messed things around short term with his talk of abolishing stamp duty for FTB's which will never happen. However its hard to ascertain how much of an impact this has had on FTBs.

So demand has slowed, but rents have started to rise as a result (Cos rental demand has obviously increased) thus increasing the pressure of "dead money" goin down the tube over the medium to long term.

Supply of new properties is predicted to fall next year, which will also impact price.

gurramok

faceman wrote:

Its regularly raised in this thread about the number of vacant properties in ireland as a signal of impending doom. At last i can now back up my countering argument with evidence from the census 06. (Yeah i know, its only taken me a year to get it!)

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1802401&issue_id=15431

OK the areas with the highest rate of unoccupied houses are leitrim donegel and kerry. Not exactly booming counties with ample skilled employment opportunities and cant be representative of the rest of the country.
.

Not exactly countering argument!
Look at the evidence more closely from CSO. Open the complete report from http://www.cso.ie/census/Census2006_Principal_Demographic_Results.htm and scroll to page 92.
Dublin itself has 36,000 houses & apartments vacant as well as thousands of other units vacant in the other major cities. It is absolutely shocking the amount of newly built property lying vacant in last 5 years.

Can you accept that they were bought for speculation purposes for capital appreciation since last census?

Ask anyone especially in an apartment block built in last 5 years and they will tell you of these empty units.

They ain't all derelict already or even holiday homes ya know

faceman

gurramok wrote:

Not exactly countering argument!
Look at the evidence more closely from CSO. Open the complete report from http://www.cso.ie/census/Census2006_Principal_Demographic_Results.htm and scroll to page 92.
Dublin itself has 36,000 houses & apartments vacant as well as thousands of other units vacant in the other major cities. It is absolutely shocking the amount of newly built property lying vacant in last 5 years.

Can you accept that they were bought for speculation purposes for capital appreciation since last census?

Ask anyone especially in an apartment block built in last 5 years and they will tell you of these empty units.

They ain't all derelict already or even holiday homes ya know

whats the logic of a house lying vacant? The owner is an idiot, there is high demand for rental properties so there is no logic for it PARTICULARLY in dublin. Am i fool, have i missed something?

Again i remind that property is meant to be a long term investment, the celtic tiger resulted in massive short term wins for people (me included) but that should be the expectation of punters in the market. (the media seem to forget this)

i dont accept any speculation as to why they were bought because I dont understand why any "investor" would buy property to have it leaving vacant. Perhaps the property is in need of serious work? The CSO report doesnt tell us what properties would be deemed fit for purpose. Either way only an idiot would leave it vacant while paying the mortgage.

36,000 units in dublin is a small number of properties anyway when there are over 420,000 in total. its only approx 8%. PLus its representative of the capital on one night.

Can you elaborate on what a rate of 8% unoccupied units represents?

SkepticOne

faceman wrote:

its only overvalued at the moment, it wasnt overvalued in previous years as the demand was there. Its all relative.

Yes, there was a lot of unsustainable speculative demand in the past. Now that there is no more capital appreciation, this speculative demand (which was based on the belief that prices would continue to rise) is now working its way out of the system. According to one estate agent, there are now three times as many properties on the market as this time last year.

faceman

SkepticOne wrote:

According to one estate agent, there are now three times as many properties on the market as this time last year.

thats 100% right, some people are panic selling which is making things worse. The celtic tiger spawned many amateur investors who dont know how to play the market.

faceman

faceman wrote:

thats 100% right, some people are panic selling which is making things worse. The celtic tiger spawned many amateur investors who dont know how to play the market.

Welcome back faceman!
Your right about housing lying idle being a waste and your right about the amatuer investors who dont know how to play the market - I reckon this will be part of our downfall.


http://daftwatch.atspace.com/


The amount of properties for sale has been rising for months and months now on daft.ie alone its over 35,000 houses/apartments. Supply is far higher than demand. Prices will inevitable drop in this kind of a situation. Those who really need to sell and those who really want to sell will soon spark a bloodbath to exit the market causing a plummet in prices worse than what we have already seen.

ronbyrne2005

faceman wrote:

whats the logic of a house lying vacant? The owner is an idiot, there is high demand for rental properties so there is no logic for it PARTICULARLY in dublin. Am i fool, have i missed something?

Again i remind that property is meant to be a long term investment, the celtic tiger resulted in massive short term wins for people (me included) but that should be the expectation of punters in the market. (the media seem to forget this)

i dont accept any speculation as to why they were bought because I dont understand why any "investor" would buy property to have it leaving vacant. Perhaps the property is in need of serious work? The CSO report doesnt tell us what properties would be deemed fit for purpose. Either way only an idiot would leave it vacant while paying the mortgage.

36,000 units in dublin is a small number of properties anyway when there are over 420,000 in total. its only approx 8%. PLus its representative of the capital on one night.

Can you elaborate on what a rate of 8% unoccupied units represents?

The loss on rental properties from not renting can be offset against rental incomes from other properties and interest on loans can be written off against loss. Many people who bought for almost totally capital gains may have other jobs/businesses and have'nt time to manage rental property and deal with every little problem a tenant has. Many now who dont want to sell or cant sell will rent their investments(if they can) as capital appreciation has disappeared.
As for 32k units being vacant in Dublin, this figure is only for properties built between 2002-2006. Im sure theres as many or more that were built in last year and before 2002. This would mean a vacancy rate of close to 10% inDublin which is very high compared to other european cities such as London etc.

faceman

ronbyrne2005 wrote:

The loss on rental properties from not renting can be offset against rental incomes from other properties and interest on loans can be written off against loss. Many people who bought for almost totally capital gains may have other jobs/businesses and have'nt time to manage rental property and deal with every little problem a tenant has. Many now who dont want to sell or cant sell will rent their investments(if they can) as capital appreciation has disappeared.

C'mon thats a weak excuse on the part of investors. There are reputable companies and estate agents that handle all the ins/outs of renting for property owners. but yes as your last line says, those with half a brain will rent the property out.

ronbyrne2005 wrote:

As for 32k units being vacant in Dublin, this figure is only for properties built between 2002-2006. Im sure theres as many or more that were built in last year and before 2002. This would mean a vacancy rate of close to 10% inDublin which is very high compared to other european cities such as London etc.

Most other european countries dont have such a drive for property ownership like the irish do plus the markets/culture are completely different. (see my previous/other posts on the nature of CBD's in ireland) Have you figs on other european counties/london for reference?

faceman

Deleted User wrote:

Welcome back faceman!
Your right about housing lying idle being a waste and your right about the amatuer investors who dont know how to play the market - I reckon this will be part of our downfall.


http://daftwatch.atspace.com/


The amount of properties for sale has been rising for months and months now on daft.ie alone its over 35,000 houses/apartments. Supply is far higher than demand. Prices will inevitable drop in this kind of a situation. Those who really need to sell and those who really want to sell will soon spark a bloodbath to exit the market causing a plummet in prices worse than what we have already seen.

Thanks dude!
Panic selling is now a vicious circle. Someone hears johnny had to lower the price of his appartment to sell it so others panic and start to sell theirs. Its comical!! It becomes a buyers market overnight!

It again unnaturally affects the market conditions as panic selling isnt a long term action.

ronbyrne2005

faceman wrote:

its only overvalued at the moment, it wasnt overvalued in previous years as the demand was there. Its all relative. An by outside the m50 i presume you mean back arse of nowhere towns/counties very little decent employment opportunities?

(to all you old school posters in this thread, im back!)

We're currently starting to see reductions in house price values but it doesnt translate into an apparant bubble bursting. We wont know this for potentially 2-3 years. It depends on how rapid prices fall. I wouldnt see a 10-20% decrease in price as catastrophic.
Its regularly raised in this thread about the number of vacant properties in ireland as a signal of impending doom. At last i can now back up my countering argument with evidence from the census 06. (Yeah i know, its only taken me a year to get it!)

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1802401&issue_id=15431

OK the areas with the highest rate of unoccupied houses are leitrim donegel and kerry. Not exactly booming counties with ample skilled employment opportunities and cant be representative of the rest of the country.

McDowell has messed things around short term with his talk of abolishing stamp duty for FTB's which will never happen. However its hard to ascertain how much of an impact this has had on FTBs.

So demand has slowed, but rents have started to rise as a result (Cos rental demand has obviously increased) thus increasing the pressure of "dead money" goin down the tube over the medium to long term.

Supply of new properties is predicted to fall next year, which will also impact price.

10-20% fall in prices would lead to less construction=less employment and consumption and investment. It would also scare off FTBs(why buy in a falling market) and investors(why buy when rental yields are crap and prices are falling?).

The market was in trouble before MCDowell, new build properties don't have stamp duty and they are in trouble too. Interest rates have reduced affordability and borrowing capacity and supply may now be in excess of demand in Dublin and much of rest of the country.

Rents(even with recent rises) are only at their 2002 levels . This is a short term phenomenon, give it a year or two before assuming rents will stay at these levels or higher. People are'nt buying so naturally rental demand has risen, maybe developers will slash price of new aprtments etc and people will move into these and reduce rental demand, some people will move home or into shared accomodation if rents rise too much. Rental yields for new investors are crap and with no capital appreciation in short term the number of investors in market(estimated by esate agents to be 30-40% of market in recent years) will drop leading to less demand for properties .

If supply of new properties decrease this year then this means less employment in construction and knock on effects in economy in terms of investment and construction. For every 10,000 property drop in building gnp drops by around one per cent directly and possibly more indirectly.

ronbyrne2005

faceman wrote:

C'mon thats a weak excuse on the part of investors. There are reputable companies and estate agents that handle all the ins/outs of renting for property owners. but yes as your last line says, those with half a brain will rent the property out.



Most other european countries dont have such a drive for property ownership like the irish do plus the markets/culture are completely different. (see my previous/other posts on the nature of CBD's in ireland) Have you figs on other european counties/london for reference?

What ever their motives there are vast numbers of unoccupied properties(not holiday homes) across the entire country. London is something like 3-5% unoccupied. I know of several properties in grand condition in my area (Drumcondra/glasnevin) that have been unoccupied for years (when you take into account tax benefits and the costs of renting a property it is not as ludicrious to leave a rapidly appreciating asset yielding no income)

faceman

ronbyrne2005 wrote:

10-20% fall in prices would lead to less construction=less employment and consumption and investment. It would also scare off FTBs(why buy in a falling market) and investors(why buy when rental yields are crap and prices are falling?).

when people stop buying houses, they rent. rents increase. Investors see a market and buy property. FTB's desire for a house increases again. Its cyclical.

ronbyrne2005 wrote:

The market was in trouble before MCDowell, new build properties don't have stamp duty and they are in trouble too. Interest rates have reduced affordability and borrowing capacity and supply may now be in excess of demand in Dublin and much of rest of the country.

if you read the papers, the market has been in trouble since 2000. Google it. The media is primarly to blame for panic selling but thats the nature of an open market.
Re interest rates, the recent change to rent relief has helped ease the burden for FTB's. I dont believe the current rate over panic selling is of a direct result from rates.

ronbyrne2005 wrote:

Rents(even with recent rises) are only at their 2002 levels . This is a short term phenomenon, give it a year or two before assuming rents will stay at these levels or higher. People are'nt buying so naturally rental demand has risen, maybe developers will slash price of new aprtments etc and people will move into these and reduce rental demand, some people will move home or into shared accomodation if rents rise too much. Rental yields for new investors are crap and with no capital appreciation in short term the number of investors in market(estimated by esate agents to be 30-40% of market in recent years) will drop leading to less demand for properties .

i mite have read this paragraph wrong, but i agree with these comments.

ronbyrne2005 wrote:

If supply of new properties decrease this year then this means less employment in construction and knock on effects in economy in terms of investment and construction. For every 10,000 property drop in building gnp drops by around one per cent directly and possibly more indirectly.

wheres your source for that claim? i have a counter argument to your point but i havent time to type it now! From an employment view, a huge chunk of the construction industry are foreign nationals who arent in a position to purchase property short term

Just before i sign off, just saw this:
http://www.breakingnews.ie/ireland/?jp=MHAUEYOJMHCW

this will only further add to our current issue

ronbyrne2005

Could'nt be arsed debating with you faceman. The market is wildly overvalued and the economy is unbalanced. We are seeing the correction happening now and prices will drop 50% in real terms within next decade while economy will also be in recession in next few years. Rental yields have a long way to go before that are attractive to investors(on a primarily yield basis). The reasons why I hold these beleifs have been espoused by many bearish posters on here and on askaboutmoney and thepropertypin.com . You will only change your view when its too late. All the best.

http://www.daft.ie/report/index.daft

Daft report hinting at a healthy property market - some of the comments added to the article

Bulls

What crash?Property prices have not fallen and nor will they.What rush by investors to sell?A myth is all that is.What is driving up rents is both a lack of supply and the lack of affordability for ftb who have to rent as they cannot afford to buy

Bears

GO AND GET IN INDEPENDENT ECONOMIST TO REVIEW THE REPORTS NOT ONE TIED IN WITH ESTATE AGENTS

THE FIGURES ARE OUT THERE THE MARKET IS CRASHING - THIS REPORT COULD CAUSE MORE PEOPLE TO FALL INTO THE TRAP - WHICH I SUSPECT IS YOUR AIM

Non Nationals (a very very important cog in our economy)

i am leaving to england!!! I cannot afford this stupidity!!! 1000 to rent the house in Dublin (in a good case) and the city doesn't offer you anything!!! Only rubish in the streets!!!I see people walking in the street and leaving in rubish in the pedestian or in the parks and i wonder "I spend all my money for that??????" The people are uneducated and they thing that they will make money by housing!!! ENOUGH!!!

OK.There is a point of view from NON NATIONALS.
I am fro Ukrane(not EU)
Living in Ireland for 6 years.(family with 2 kids)
I like this country a lot- its my home. Have a lot of Irish freinds.
Didnt get chance to buy house that time.now its impossible to buy. renting house in d15 for 3.5 years.rent was increased in january 07. Its 1400 now,but same houses worth 1700 now. one of the reasons of rising that FTB couldnt afford to buy,and they need HOUSE TO LIVE.
but almost all new comers renting houses and sharing them with at least 10 people.and its not so expensive for them to rent even if its gonna be 2000 A month.
Most of them saving every single cent and investing it in property at home.
So ther is no reason for them to buy a house and pay thousands.
never met non national who want to stay here for long time.

I lived in New York City for five years just before coming to Dublin this past fall, and even there it is easier to find half-decent, vaguely afffordable housing than it is here. This is DUBLIN, people. Not London, not Paris, not New York: DUBLIN. I don't get it.
I came here with high hopes. I wanted so much to stay here initially, to build a life in what I thought was a better society than the one I left behind. It is telling, to me, that only one post was concerned with the quality-of-life that is sacrificed in this housing market. I'd hoped this place to be better than my own greedy country, and I am bitterly disappointed to learn that it is not; in fact in some ways, it is worse.
To quote an artist friend of mine: "Rent kills culture." Watch that yours doesn't die under this pressure, Dublin - it is dangerously close.

Take a look at apartment blocks around the countryside in particular at night time and see how many lights are on.

The countryside is going to suffer the most rather than Dublin. There are small towns and villages almost 100% dependant on construction. How many places entirely consist of a pub shop maybe a post office and a builders providers?

I am beginning to get even more pessimistic for Irelands future - this has the possibility for being worse than the 80s but it would take a few years to get there. In the 80s no one had money - no one could get a loan. Now people have money and loans out their ears but I can see the economy folding because of the housing industry and because of the cost of doing business here.
Its not rocket science how we enticed US companies here and other countries are mimicking it. Furthermore on a side note - watch Afghanistan and Iraq - Eastern European countries have forces there. The US loves that. Here we damaged a plane landing at shannon and the person got away with it. Now regardless of how you feel about the wars in Iraq and Afghanistan (and whether or not you believe the protestor was justified or not in damaging the plane) - this does impact on US companies investing abroad.

faceman

ronbyrne2005 wrote:

Could'nt be arsed debating with you faceman. The market is wildly overvalued and the economy is unbalanced. We are seeing the correction happening now and prices will drop 50% in real terms within next decade while economy will also be in recession in next few years. Rental yields have a long way to go before that are attractive to investors(on a primarily yield basis). The reasons why I hold these beleifs have been espoused by many bearish posters on here and on askaboutmoney and thepropertypin.com . You will only change your view when its too late. All the best.

this is why i stopped posting in forums like this, begrudgers throwing their toys out of the pram. I couldnt be arsed either ronbyrne but i aint gonna fall out with you over it. Ive made alot of money out of property so i cudnt care less either way. So all the best.

50% drop in real terms, whats that figure based on? Is it a national average?

came across this on www.thepropertypin.com

someone try and tell me this is not wildly overvalued



http://www.daft.ie/24850

http://www.myhome.ie/search/property.asp?id=290513

36 Thorndale Ave, Artane,
Dublin 5,
North Dublin City
House To Let - €1,600 Monthly

36 Thorndale Avenue , Artane , Dublin 5

For Sale by Private Treaty
Asking Price: €600,000
Type : Semi-Detached House
Bedrooms : 4

You could finance this home from...
€2646 pm*
With permanent tsb

*92% Mortgage for 35 years @ 4.6% APR Var

Do-more

Who in their right mind is going to buy a property for the asking price next week?

If I were looking to buy, the first thing I would be saying to an EA is "The ERSI says house prices are overvalued by 15%, so that's what I'll offer you, 15% below asking price"

What little activity there is in the housing market is going to stall completely next week.

Lord knows what the headlines will be in the Sindo tomorrow, but we can all guess...

There's a small development of 26 houses down the road from me, when Phase 1 went on sale a couple of years ago they were €385,000, Phase 2 was €449,000 and just before Christmas some genius paid €515,000 for the showhouse. IMO given the cost of building, land value etc. fair value on these houses is about €250,000 and that's the price they will be in 5 years time...(IMO)

faceman

Do-more wrote:

Lord knows what the headlines will be in the Sindo tomorrow, but we can all guess...

There's a small development of 26 houses down the road from me, when Phase 1 went on sale a couple of years ago they were €385,000, Phase 2 was €449,000 and just before Christmas some genius paid €515,000 for the showhouse. IMO given the cost of building, land value etc. fair value on these houses is about €250,000 and that's the price they will be in 5 years time...(IMO)

the indo is rag, the biggest scare monger of all!

re the prices you quoted, i have a simliar story. In newbridge a month or so ago, a new estate called the meadows launched. It was madness, lots of people there etc. The houses werent nice imho and were pricey. The has thing was there was nicer, larger houses in other estates around newbridge which had launched some months previous that were cheaper! (e.g. kilbellin)

Pa ElGrande

faceman wrote:

its only overvalued at the moment, it wasnt overvalued in previous years as the demand was there. Its all relative. An by outside the m50 i presume you mean back arse of nowhere towns/counties very little decent employment opportunities?

"Value" is a subjective quality in that its entirely derived from the psychology of market participants. Property may not have been over valued in recent years by purchasers but its certainly been over priced based on fundamentals and not the invalid apocryphal beliefs spouted by the banking and estate agent economists for the last few years now, the recent regurgitation of the November central bank report by the ESRI claiming prices are 15pc too high is way wide of the mark in my opinion and as I have expressed in a previous thread I expect an average 40 to 50% drop in prices from the peak year 2006 over a period of at least the next 5 to 7 years based on an historical observation of other property bubbles, as an example, Japan, the ending of the bubble in 1990-91, real estate prices plummeted by 50% for residential and 80% for commercial land in Tokyo and Osaka.

I come from one of those back arse of nowhere towns/counties and yes there are very little decent employment opptunities outside of construction & the public sector, all the established industries, co-ops, food processing, and electronics assembly closed down over the last 7 years and only construction & retail in the local major town keep the place ticking. I have not been able to find any recent housing bubbles in any western economy where construction employment is as large as the manufacturing sector, the most extreme example being perhaps Easter Island. The construction sector in Ireland is expected to account for 25% of GDP in 2007 compared to a 12% EU average, who are we kidding, this level of output is never going to last in the medium to long term? In Q4 2006, there were 281,600 people employed in construction in Ireland, over 100,000 of us are going to have to find alternative employment by the time this bottoms out.

If you are reading this, don't expect that you are going to escape the upcoming recession, we all have family members who work in the construction sector and attendant services. Potential buyers sitting on the fence expecting to capitalise on this may still not buy due to tighter credit controls imposed by the banks and a decreased appetite for risk due to uncertain economic outlook.

faceman wrote:

(to all you old school posters in this thread, im back!)

Welcome back

faceman wrote:

We're currently starting to see reductions in house price values but it doesnt translate into an apparant bubble bursting. We wont know this for potentially 2-3 years. It depends on how rapid prices fall. I wouldnt see a 10-20% decrease in price as catastrophic.

You are wading knee deep in a river in Egypt. Housing bubbles don't burst, they seize up and slowly unwind as people are forced by economic circumstance to accept the new lower price. If you are a highly geared specuvestor or first time buyer who bought a starter house/apartment and have a short investment horizon (say 5 years) to earn a return, then in 2-3 years it will be too late to exit without taking a substantial loss. For people who bought in 2006 and have seen the neighbours and developers selling for less than what they paid, it is really galling and I've already listened to one woman's reaction - "How dare they reduce the price", "I'll kill the developer, thieving b*****d!". Obviously if you are fully capitalised or earning a resonable yield on the property then a 10-20% decrease in price is not the end of the world.

faceman wrote:

Its regularly raised in this thread about the number of vacant properties in ireland as a signal of impending doom. At last i can now back up my countering argument with evidence from the census 06. (Yeah i know, its only taken me a year to get it!)

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1802401&issue_id=15431

OK the areas with the highest rate of unoccupied houses are leitrim donegel and kerry. Not exactly booming counties with ample skilled employment opportunities and cant be representative of the rest of the country.

Those empty properties are a misallocation of limited resources on a massive scale. The value in residential property is in the shelter it provides it's occupants be they owners or tenants, or as a vehicle for transfer of wealth in a speculative property bubble. Once the specuvestor exits the market and there are no people in the locality who will buy or rent it, it becomes worthless. Now that the councils in the main urban centers have seen sense and given the go ahead for high rise developments, then the value of property on the extreme end of the communter belt must fall further in years to come in order to sell it. Unless industry moves to these areas to provide local employment then I can see demand evaporate further as those formly employed locally in construction are forced to leave the area or sign on.

faceman wrote:

McDowell has messed things around short term with his talk of abolishing stamp duty for FTB's which will never happen. However its hard to ascertain how much of an impact this has had on FTBs.

The property market had already slowed before he made his comments and the polital distraction created by the stamp duty football will not prevent the slide in house prices. Anyone who thinks "sure the banks or government won't let a crash happen" is just burying their head in the sand.

faceman wrote:

So demand has slowed, but rents have started to rise as a result (Cos rental demand has obviously increased) thus increasing the pressure of "dead money" goin down the tube over the medium to long term.

We had a discussion on this last year, the changes in the rental market have happened faster than I expected.

faceman wrote:

Supply of new properties is predicted to fall next year, which will also impact price.

The industry will be doing well to shift this years inventory, that decreasing supply will mean more layoffs in the construction sector that feeds into the house price deflation cycle by reducing demand and money supply in the economy.