DOE - House prices could fall up to 46% in 2009

ntlbell

breakinngnews

House prices will continue to fall significantly over the coming year, according to an assessment conducted for the Department of the Environment.

The report by DKM Economic Consultants also predicts that the number of housing units completed in 2009 will fall to 25,000, compared to 43,000 this year and 78,000 last year.

It says that average house prices could fall by anything from 20% to 46% during the year.

Meanwhile, the issues facing the construction sector are due to be discussed at a conference in Dublin later today.

A panel of experts from various fields will be discussing ways in which key challenges might be tackled during the ongoing downturn.

Fine Gael TD Richard Bruton, who is on the panel, says any moves by the Government to delay projects under the National Development Plan will impede a return to normal activity levels in the sector.

Fatloss08

in a way they need to keep there mouths shut , because thats whats stopping people buying , obviously everybody wants to save money , but if they came out and said house prices are on the increase etc and economy is picking up etc

people would react and spend , and want to get house's before they went up ( so to speak )

its all scare mongering , the media is creating the scare i think

jetski

How can they predict that pre budget.. complete rubbish IMO. Thats one extreme statment given the interest rate slash announced only yesterday... im sure it will go on the list of "who said what" on the pin.

drunkmonkey

If house prices fell by 46% could it possible create a scenario where intrest rates rise to 20% as property will be so cheap....

Gareth37

drunkmonkey wrote: »

If house prices fell by 46% could it possible create a scenario where intrest rates rise to 20% as property will be so cheap....

I was thinking the same myself some years ago. I assume that history will repeat itself during the normalization process and that interest rates will really shoot up. Im not sure if there is a upper limit though

High interest rates are a good thing. They keep things stable as people don't over borrow and they keep general inflation down as the key property sector will only account for a small % of the economy, the way things should be

drunkmonkey

Gareth37 wrote: »

I was thinking the same myself some years ago. I assume that history will repeat itself during the normalization process and that interest rates will really shoot up. Im not sure if there is a upper limit though

High interest rates are a good thing. They keep things stable as people don't over borrow and they keep general inflation down as the key property sector will only account for a small % of the economy, the way things should be

I'm about to take out a mortage and that's what i'm really afraid of.....15% intrest in 5 years time would cripple me....:(

arctictree

Gareth37 wrote: »

I was thinking the same myself some years ago. I assume that history will repeat itself during the normalization process and that interest rates will really shoot up. Im not sure if there is a upper limit though

High interest rates are a good thing. They keep things stable as people don't over borrow and they keep general inflation down as the key property sector will only account for a small % of the economy, the way things should be

Why would the ECB increase interest rates so dramatically for a problem thats affecting about circa 1% of its population?

Heathen

If the house prices fell by 46%, the average joe on a ****e wage like me might actually be able to afford to buy a house and get my foot on the property ladder.. here hoping it all goes tits up so someone like me can own a house

ntlbell

Fatloss08 wrote: »

in a way they need to keep there mouths shut , because thats whats stopping people buying , obviously everybody wants to save money , but if they came out and said house prices are on the increase etc and economy is picking up etc

people would react and spend , and want to get house's before they went up ( so to speak )

its all scare mongering , the media is creating the scare i think

The reason people shouldn't be buying is because for the majority they can't afford to buy, the bank offering you the money != affordability.

Why would they come out and say the prices are on the increase when they're clearly not? A correction in the market is needed, "every bubble must burst" and every other cleche you can think of.

Borrowing money from Germany to buy an overpriced property to sell on to your neighbor for twice the price with more money borrowed from Germany does not make an economy.

El Stuntman

Heathen wrote: »

If the house prices fell by 46%, the average joe on a ****e wage like me might actually be able to afford to buy a house and get my foot on the property ladder.. here hoping it all goes tits up so someone like me can own a house

spot on Heathen

house prices will fall by up to 50%, the question is 'how long will it take?'

the best thing that could happen is that this would happen quickly instead of a long drawn-out Japanese style deflation which would cripple the economy for decades.

radical surgery instead of gentle physiotherapy if you will

The_Conductor

Heathen wrote: »

If the house prices fell by 46%, the average joe on a ****e wage like me might actually be able to afford to buy a house and get my foot on the property ladder.. here hoping it all goes tits up so someone like me can own a house

Presuming you still have a job, and average wages haven't fallen by a similar rate to house prices (or other living costs haven't risen by a commensurate amount- with another 22% rise of electricity and 18% for gas in the new year- its going to crucify people, regardless of what happens to house prices......)

ZYX

If you are wondering who DKM Ecconomic Consultants are? They are the ones who brought out the report in March this year, saying that it made more sense for a first time buyer to buy rather than rent!

The_Conductor

ZYX wrote: »

If you are wondering who DKM Ecconomic Consultants are? They are the ones who brought out the report in March this year, saying that it made more sense for a first time buyer to buy rather than rent!

It got a lot of press in the Irish Mortgages Magazine (why I keep buying that piece of toilet paper is beyond me).

Reminds me of the definition of an Economist- Someone who can you tell you tomorrow, why what he predicted today didn't come to pass.........

God, I hate economists.........

ZYX

Actually I just looked up their report and they seem to be saying that prices will drop that much in total not in 2009 although it is hard to be certain.

"Domestically as average house prices fall, Ireland is expected to follow international experience
in respect of property cycles, implying that average house prices would need to drop back by
some considerable amount. Depending on the severity of the drop in house prices, average
house price could fall by anything from 20% to 46%, reflecting the increase in real house prices
in the run up to the peak. However, the Irish housing market has already lost virtually all of the
gains made in the three years up to the peak (January 2007) as real house prices had fallen by
18.5% from the peak by July this year. But further losses seem inevitable."


So basically house prices may have fallen as much as they are going to, or, they may fall another 26%. Well thanks for that.

jetski

Quote

"It says that average house prices could fall by anything from 20% to 46% during the year"

As i said earler.... its complete **** given they only slashed rates by .5% the day before DKM came out with this and for all we know mortgage relief could be doubled in the budget come the 17th

SimpleSam06

jetski wrote: »

As i said earler.... its complete **** given they only slashed rates by .5% the day before DKM came out with this and for all we know mortgage relief could be doubled in the budget come the 17th

The world doesn't turn on interest rates alone. The Japanese dropped interest rates to 0% and it didn't stop their collapse, even though they were effectively paying people to take out loans, if you factor in inflation. The Euribor and Libor rates are high, and the divergence between them and the ECB rates is growing. Interbank lending has all but ground to a halt, and thats where a lot of bank financing comes from.

Regardless of where the money is coming from, the international financial situation has a lot more damage coming at it than we have seen so far, despite assurances, guarantees, rate drops and so on. Naked shorting with all its FTD fun and the subprime crisis were just the beginning. The Alt-A and Prime mortgage messes will be kicking in around 2009 or so (a lot of people who would otherwise be good credit risks that took out 3 or 4 year IO mortgages based on rising house prices, where they need to start repaying the capital as well as interest), as well as several other factors, not least of which is the overall economic effect of printing money from the treasury to cover private loans.

Its going to be damn hard to get a mortgage without significant amounts of the intial deposit saved, and thats going to drive prices through the floor.

drunkmonkey wrote:

If house prices fell by 46% could it possible create a scenario where intrest rates rise to 20% as property will be so cheap

Interest rates affect house prices, not the other way around. Especially in an economy like our own, where we don't actually set our own interest rates.

drunkmonkey

SimpleSam06 wrote: »

Interest rates affect house prices, not the other way around. Especially in an economy like our own, where we don't actually set our own interest rates.

So intrest rates should remain stable, no possibility of a spike in them?

The_Conductor

drunkmonkey wrote: »

So intrest rates should remain stable, no possibility of a spike in them?

No- we're governed by the ECB, which is based on the fundamentals of the old Bundesbank (though headed by a Frenchman- Trichet), so no, the possibility of a spike is from a probability perspective, exceedingly low.

jmayo

Fatloss08 wrote: »

in a way they need to keep there mouths shut , because thats whats stopping people buying , obviously everybody wants to save money , but if they came out and said house prices are on the increase etc and economy is picking up etc

people would react and spend , and want to get house's before they went up ( so to speak )

its all scare mongering , the media is creating the scare i think

Best laugh I had so far today
Yeah it's all the damm medjas fault isn't it

Jeeze if it wasn't for them and their bad news.

As for interest rates being driven by house prices :rolleyes:
Why do Irish people think the be all and end all of an economy is f***ing houses and their prices ? :eek:

dan_d

Because we've got into the habit of thinking that the fact that you could sell your house and be an overnight millionaire meant that things were good. Any other situation and things are bad.Especially when you've spent half a million on a shoebox and you'll be paying it back over 40 years.
The house prices were always going to go down. We are actually lucky that they haven't crashed suddenly, they have dropped relatively slowly.The real pinch was only felt in the last few months, and even then, it's not as bad as it could be.Prices will in all likelihood never be what they were again, and we might aswell just accept it. I'm 25, and have bought a house, and many of my friends from college are now looking around the market.We are all lucky enough to have good jobs, and steady salaries.But everyone I know is saving madly for a deposit, with the intention of getting the smallest mortgage possible.And they want 3 and 4 bed houses if possible, not 2 bed and DEFINITELY not apartments. Because they won't re-sell and they are not worth what you pay for them. The mindset is beginninyuyhg to change. And I definitely think the media contributed 100% to the price boom, and fed the flames with hysterical headlines and news reports about how much things were and how wonderful everything was. And now they're doing it again.Hope all their jobs are secure....

ParkRunner

With the stagnation in the housing market why is it that prices are not falling faster? I have been keeping an eye on price drops over the past 12 months and it has been in the region of 1 - 1.5%, which is a lot taking into account inflation..but it amazes me that developers have been able to sit on estates full of vacant properties and manage to survive this long.

Developers will go bust very soon unless they start being realistic. I would love it (move over Kevin Keegan), if the banks started calling in the debts. I have mortgage approval and a deposit waiting to put down but the developers must know that the vast majority of people are not going to buy until prices fall and fall sharply. Are they willing to go out of business in a few months time? I find it difficult to understand.

utick

jmayo wrote: »

Best laugh I had so far today
Yeah it's all the damm medjas fault isn't it

Jeeze if it wasn't for them and their bad news.

As for interest rates being driven by house prices :rolleyes:
Why do Irish people think the be all and end all of an economy is f***ing houses and their prices ? :eek:

ah but he is right it is the medias fault. all theose get rich quick property programs on the tv helped to feed the bubble, but i didnt hear anyone complaining about the dangers then, as long as house prices are going up everything is just dandy

SkepticOne

EF wrote: »

With the stagnation in the housing market why is it that prices are not falling faster? I have been keeping an eye on price drops over the past 12 months and it has been in the region of 1 - 1.5%, which is a lot taking into account inflation..but it amazes me that developers have been able to sit on estates full of vacant properties and manage to survive this long.

The main reason for this is the government's "Affordable Housing" scheme/initiative. Without this builders would be forced to drop prices radically.

The_Conductor

SkepticOne wrote: »

The main reason for this is the government's "Affordable Housing" scheme/initiative. Without this builders would be forced to drop prices radically.

And of course- the new First Time Buyers mortgage scheme- due to be formally unveiled on Tuesday. Any first time buyer can get a government backed mortgage of up to 300k, subject to some not-too-strict criterion, providing the mortgage is used to buy a new (and not a second hand) property. To be entirely honest- it seems more akin to a dig out for property developers than anything else, and is set to put an artificial floor under the prices of shoeboxes around the country. Why sell for less than 300k, when you are perfectly aware that its the bottom line for all FTBs?

jimmycrackcorm

smccarrick wrote: »

Why sell for less than 300k, when you are perfectly aware that its the bottom line for all FTBs?

Because second hand homes will have to go below that limit to sell instead and that will push down new house prices according to market demand. It's another mortgage lender not a free money scheme.

The_Conductor

jimmycrackcorm wrote: »

Because second hand homes will have to go below that limit to sell instead and that will push down new house prices according to market demand. It's another mortgage lender not a free money scheme.

However its aimed at "people who do not meet the strict lending criteria of the traditional lending institutions". Its not free money, no, it is however money devoid of the usual strings that might be attached to it. Given the lack of intelligence that a large portion of the populace appear to be displaying regarding their personal finances- its only a matter of time before the government is the top reposessor of property in the country......??

To be honest- its more meddling in the market- which the government obvious hasn't learnt from their previous experiences.......

jimmycrackcorm

smccarrick wrote: »

However its aimed at "people who do not meet the strict lending criteria of the traditional lending institutions".

Do you mean people like my parents and many others who got council loans years ago?

SimpleSam06

jimmycrackcorm wrote: »

Do you mean people like my parents and many others who got council loans years ago?

I thought they got council houses, but got the loan from the bank?

The_Conductor

jimmycrackcorm wrote: »

Do you mean people like my parents and many others who got council loans years ago?

Thats what the press release said- it didn't go into details. I suppose we will find out more tomorrow.......

jetski

whats this talk of tomorrow about.... i tought the budget was not untill the 17th ?

jetski

disregard the above. :eek: