If house building is falling surely that means that house prices will stop falling?

gazzer

Im a little green around the guilds when it comes to this so maybe somebody else can explain to me.

In recent weeks we have heard stories about developments in D15 (3 bedroom houses for 299,000) and in Finglas having people q over night to place a deposit. On top of that the number of new developments been built this year is going to be a lot less than previous years (sorry I dont know the exact figure). Surely that means that if there are less houses/apartments to buy later in the year/ next year then more people are going to be competing to buy these houses and therefore prices will stop falling and maybe even rise.

Am I totally wrong in this assumption?

connundrum

I would have made that assumption to had I not read an article recently regarding the amount of purchased units which are unoccupied or tenanted out as a last resort. I think in Dublin alone there was well over 100,000 units.

The only way that prices would level or increase would be if building would dramatically fall, and the investors who bought 1,2 and 3 units purely for capital gains were able to sit on their units for a number of months. This would create a demand in theory.

DublinDilbert

gazzer wrote: »

Im a little green around the guilds when it comes to this so maybe somebody else can explain to me.

In recent weeks we have heard stories about developments in D15 (3 bedroom houses for 299,000) and in Finglas having people q over night to place a deposit. On top of that the number of new developments been built this year is going to be a lot less than previous years (sorry I dont know the exact figure). Surely that means that if there are less houses/apartments to buy later in the year/ next year then more people are going to be competing to buy these houses and therefore prices will stop falling and maybe even rise.

Am I totally wrong in this assumption?

How much housing stock is already out in the market? There is a massive amount of empty apartments. Also there's a large amount of people living in rental property which if there is a down turn will head for greener pastures hence freeing up a massive amount of rental properties....

How many people can afford and want to buy? Some people seem to think that the demand there was in previous years will be there in coming years... lots of first time buyers were forced into buying apartments to "get onto the ladder" this group need another sizable group to buy their apartments so they can move up the ladder, it seems like this group is very thin on the ground.

gamer

there are apartment developments ,half empty,with interest rates going up,bank credit crisis,factorys closing almost weekly, its harder to get a mortgage ,banks in the usa failing ,it has an effect on the mortgage market.PEOPLE are holding off buying,sure on the radio it says property falling ten percent a year, house a,in 2010 could be worth 20 percent less.ALL those builders ,out of work,that must affect the service economy that depends on their wages,it makes no sense ,running an economy on house building,eventually the demand will be met.
this government is wasting money on benchmarking ,and ridiculous pay rises for ministers ,tds,this country has lost competiveness with countrys like germany,poland ,wales.AT this rate ,most factorys will be closed ,apart from tech companys,like intel,and chemical companys which are here for low coporation tax.

gurramok

OP, put yourself in the feet of a FTB, they cannot afford at large the prices been asked. Hence along with oversupply, economy issues, the credit crunch, there are more sellers than buyers and prices must fall like in any market scenario like this.

There were no overnight queues in D15 or Finglas, the developments ended up less than half sold despite the hype by the Indo.

And why are FTB's so important?...They hold the whole housing pyramid up. When they stop buying, the chain is broken on the whole housing 'ladder'


Mr A on next rung...price - 300k
Mr B on next rung...price - 400k
Mr C on next rung...price - 500k
Mr D on next rung...price - 600k
Mr E on next rung...price - 700k
Mr F on next rung...price - and so on up to priciest gaff in the land

If Mr A who is on the first rung wants to trade up to Mr. B's rung, he cannot sell his gaff to a FTB who cannot afford to buy at 300k...
Then Mr.B has no buyer and this trickles all the way up to the top.

That's the uber traditional simple way of the ladder. Take out the investors/speculators who have left the ladder and your left with the above ladder today(FTB's & movers).

gamer

AND the investors have mostly gone,buy a house for 250k,get 1200 rent,theres not much profit ,after taxes,and little capital appreciation ,with rising interest rates ,much easier buy apartment in bulgaria ,get x amount rent.alot of investers bought houses,just for capital growth,when prices were going up.AND stamp duty discourages people from moving .

Supercell

Its not about prices.
Its not about availability.
Its not about sentiment.
Its not about the empties.
Its not about ECB interest rates.

It IS about what the banks will lend.

Irish people are obsessed with "land" ..
When developers drop prices the latest suckers that just missed out on the last price are queuing up to enslave themselves and bankrupt the next generation by paying their pension costs because none of them could afford to have kids..

The banks are not lending
The banks are not lending.

Even to each other.

Go Google Bear Sterns.

The banks are not lending.

Thats all you need to know.

Ireland is not immune, despite the fact that we would love to go on selling houses to each other at ever inflating prices.

The banks are not lending anymore.
The banks are not lending anymore.
The banks are not lending anymore.

Even to each other.

Rinse, repeat and get the hell out of Irish property.

gazzer

Thanks guys for all the replies. A lot of food for thought there.

Im putting my house on the market next week. I want to get out of the area and also I have gotten a job offer out of Dublin. I have been looking at daft.ie and myhome.ie to see what houses were been put on the market at in my area and it is strange the variations in prices in my estate alone. The exact same 3 bedroom houses are going from 295,000 up to 325,000. There is no difference in these houses at all in terms of size and layout (obviously the interior design is different).

Last year houses were selling for approx 340,000. My neighbours sold at that price 8 months back.

I reckon that if I price my house for about 275,00(im leaving most of the furniture in the house as well) I should get some viewings.(hopefully) Im not out to make a huge profit on the sale as I will be moving to Cavan so any house I buy there will be less than the current mortgage I have.

orbital83

Surely that means that if there are less houses/apartments to buy later in the year/ next year then more people are going to be competing to buy these houses and therefore prices will stop falling and maybe even rise.

About 48,000 completions are forecast for this year I believe, which will satisfy a lot of demand, in view of the emerging economic conditions.
Then there's the few hundred thousand empties lying about the place.

Don't believe everything you hear - especially if you hear it from the Construction Industry Federation, an economist linked with a mortgage lender or a newspaper carrying property supplements.

The exact same 3 bedroom houses are going from 295,000 up to 325,000. There is no difference in these houses at all in terms of size and layout (obviously the interior design is different).

Some are more reluctant to drop prices than others. In general, landlords will drop more easily than owner occupiers.
Of course, hesitancy in dropping prices can lead to greater losses later on.

I will be moving to Cavan so any house I buy there will be less than the current mortgage I have.

Cavan has one of the biggest over-supplies in the country.
There's a house or apartment on the market in Cavan for every 27 people in the county.
My advice - be incredibly ruthless. See a place you like, then offer 75% of the guide price.

This site may be of interest => http://daftwatch.atspace.com

Colonel Sanders

gazzer wrote: »

Im a little green around the guilds when it comes to this so maybe somebody else can explain to me.

In recent weeks we have heard stories about developments in D15 (3 bedroom houses for 299,000) and in Finglas having people q over night to place a deposit. On top of that the number of new developments been built this year is going to be a lot less than previous years (sorry I dont know the exact figure). Surely that means that if there are less houses/apartments to buy later in the year/ next year then more people are going to be competing to buy these houses and therefore prices will stop falling and maybe even rise.

Am I totally wrong in this assumption?

this pretty much the argument some VI 'economist' tried make on newstalk a few weeks back. He conveniently forgot to take on board

- hundreds of thousands of empty properties
- rising unemployment
- the very real prospect of a recession (foreign nationals leave freeing up more rental spaces => more buy to let properties forced onto market)
- scenario guarramok described pretty well.

young professionals bought apartmenst origianlly while single. When they get married and need to trade up they will need to off load their apartment onto the next lot of young single professionals. However jobs are not being created at the same pace as they were 5 or 6 years ago and with the current financial crisis job losses in the financial sector must be lost => lack of single professional to take their place on the foot of the ladder

SkepticOne

gazzer wrote: »

Surely that means that if there are less houses/apartments to buy later in the year/ next year then more people are going to be competing to buy these houses and therefore prices will stop falling and maybe even rise.

Am I totally wrong in this assumption?

I think the reason this is mainly wrong is that a lowering of supply will only lead to higher prices is if demand remains relatively strong. The problem is that the lower supply is being caused by lack of demand at prices demanded by builders. I think we can all agree that builders would love to be still producing 98,000 units a year if people would only buy them, but people are not buying and therefore builders are reducing output.

So supply has reduced but demand has reduced even more. Therefore prices must come down. If it were otherwise, there would never be property crashes yet these are fairly common occurrences internationally.

Eventually, however, demand will pick up and prices will rise though this may be several years from now.

johnnyskeleton

House prices will stop falling eventually, as in if someone offered you a flat for €100 you'd take it no matter what. When and at what level they will stop falling is the real question.

But as has been pointed out, it is much harder to get a loan now so people have less money to spend.

Victor

gazzer wrote: »

If house building is falling surely that means that house prices will stop falling?

It will have an effect eventually, but with too much stock in the market at the moment and more being built, it will take time.

SimpleSam06

Longfield wrote: »

It IS about what the banks will lend.

+1 and post of the thread tbh. The bubble only formed because of the banks' lending practices, and nothing will kill it faster than if the banks don't lend... All the rest is just trimming.

It doesn't matter what price a house is, if Johnny McLadder can't get a mortgage for it, as in doesn't get approval for that amount. What a lot of people don't grasp is that as of last weekend, the banks are going to clamp down with an iron fist on all lending, and you are going to need very good credentials to get a mortgage of any size over the coming years.

Basically, thats the heart of the property price equation.

MG

gazzer wrote: »

On top of that the number of new developments been built this year is going to be a lot less than previous years (sorry I dont know the exact figure). Surely that means that if there are less houses/apartments to buy later in the year/ next year then more people are going to be competing to buy these houses and therefore prices will stop falling and maybe even rise.

Am I totally wrong in this assumption?

Don't forget the knock on effect of building less houses. That means less building jobs, which means less spending power and further job losses in retail and luxury industries etc which means less money to go into housing.

The whole thing is a downward spiral at the moment really and calling the bottom is very difficult.