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

The_Conductor

Freddie59 wrote: »

Explain please?

I think he was talking about the crap time we had in the 80s here in Ireland......

krugerrand

spockety wrote: »

I think most people who are not property owners want to be able to buy a home at what should be at a historically affordable price for their income level.

Exactly ! That explains the bias in the posts of most people who are not property owners.

spockety wrote: »

The correction of this is going to be very painful, you are right, but it is also a wholly necessary step on the path to recovery. The quicker it happens, the better in the long run.

My point is that a further 46% drop house prices in 2009 would be too much of a shock for the financial system and the wider economy.

EnoughSaid

krugerrand wrote: »

Exactly ! That explains the bias in the posts of most people who are not property owners.


My point is that a further 46% drop house prices in 2009 would be too much of a shock for the financial system and the wider economy.

Yes it will be a very big shock but there is very little that can be done to prevent it now! This is what happens in a big recession and why it is better to stay clear of debt. The property bubble has burst and even the dogs in the street now know that the emporer has no clothes.

The property boom was just an asset bubble fuelled by cheap debt. Now that cheap loans are no longer available, the party is over and it is the people who took out huge mortgages to fund this bubble in order to get "on the property ladder" are the ones who are left to carry the can and pay for it all.

saf

Hi Members,
t
I have recently finalised a property in cavan.its a four bedroom property whih i got it for 170K the price came from 210K. i have given a booking deposit for the property. After reading all these reply iam confused. do you thing the value of the property will go further beyond this. even if it goes what your idea of the value at the end of this year. i have my bank loan approved. please advice me in relation to this deal. did I got a good deal.

thanks

saf

321654

saf wrote: »

Hi Members,
t
I have recently finalised a property in cavan.its a four bedroom property whih i got it for 170K the price came from 210K. i have given a booking deposit for the property. After reading all these reply iam confused. do you thing the value of the property will go further beyond this. even if it goes what your idea of the value at the end of this year. i have my bank loan approved. please advice me in relation to this deal. did I got a good deal.

thanks

saf

in all honesty, none of can pretend that we know. The best thing to do is what you think suits your own position.

krugerrand

EnoughSaid wrote: »

it is the people who took out huge mortgages to fund this bubble in order to get "on the property ladder" are the ones who are left to carry the can and pay for it all

On the contrary, if house prices drop by 46% in 2009, everybody will be carrying the can and paying for it, including you. So you'd better hope that they don't drop by 46% in 2009:)

321654

smccarrick wrote: »

Well- with a forecast of an increase of over 140k in unemployed figures- possibly as high as 250k unemployed by the end of 2009- the era of dual income households may very well be well and truly over. In addition- while the government has said it will try to focus on cutting services, rather than increasing taxes- its also now considered likely that significant increases in taxes are necessary (the NTMA now estimate having to borrow between 21.5 and 24 Billion in 2009- and thats before tomorrow's revised financial figures are released).

On top of all of this- with individualisation of the tax bands- a married couple where both were working and one now chooses to stay at home- cannot offset their tax from the outside worker to the stay at home parent- in the manner they could in 1996.

While the situation may not be similar to 1996 *yet*- its looking like it'll be a hell of a lot worse before long.........

We dont know percentage of people who will lose their jobs have mortgages, or how much the payments on that morgage are, or how many will be half of a married couple, so we cant say that "the era of dual income households may very well be well and truly over". Thats pure speculation.

Just because you quote some figures in a post, and then make completely unsupported statements in there too, doesnt hide this wild speculation.

spockety

krugerrand wrote: »

On the contrary, if house prices drop by 46% in 2009, everybody will be carrying the can and paying for it, including you. So you'd better hope that they don't drop by 46% in 2009:)

Can you explain how? Some facts?

A lot people who predict relatively large falls in house prices tend to at least roll out something to back up their argument. We see calculations like multiple of rents, potential investment yield, salary multiples, historical data, inflationary adjusted figures etc., to really give good credence to an argument that house prices still have Z% to fall, where Z is a specifically cited number.

You might say that 46% drops would be bad, but you don't say exactly why, what measures would be introduced that would affect everyone in society as a result of such a drop. It has been shown without a shadow of a doubt that it was the ridiculous inflation of the housing/property market that has caused much if not most of the trouble that Ireland now finds itself in. Instead of putting our resources and intelligence to productive use in creating a long term sustainable economic model over the last 10 years, a relatively small number of people managed to railroad the country with bad decisions that caused a fever that benefited the few, and put everyone else in a ridiculously perilous position.

Current property prices are not conducive to an economic recovery, nor are prices 10% or 20% below current levels. We need to get back to historical norms before the country can 'get better'. It is high time that investing was left to professional landlords, that the ordinary person has a good chance at affording a home for their family, and the disgusting greed that characterizes the property bubble of the last 10 years is sent to the grave.

The Irish economy needs to refocus. We need to forget about property and development, and put our not inconsiderable talents to more productive uses that will sustain us for generations.

If it takes a 46% drop in property prices and some years of extreme pain before we can get on track, then that is what we shall have to do. But be under no illusion, this was all inevitable, and the warnings were being sounded almost from the beginning of it.

JTMan

Todays Sunday Business Post has an article that says that property prices (residential and commercial) will fall by 50% from todays prices. Development land will fall by over 50% from todays prices.

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqid=38577-qqqx=1.asp

We are on the verge of a full scale collapse.

Don't think about buying till the bloodbath is over.

gurramok

And a crowd called IMAF (mortgage people) are saying house prices will not recover until 2015!
http://www.tribune.ie/business/news/article/2009/jan/04/house-prices-will-not-recover-until-2015-says-mort/

krugerrand wrote:

On the contrary, if house prices drop by 46% in 2009, everybody will be carrying the can and paying for it, including you. So you'd better hope that they don't drop by 46% in 2009

Now, whether they go down by 10% or 49%, how exactly do high house prices benefit the economy?

That explains the bias in the posts of most people who are not property owners.

Another common misconcepton.

Trader uppers are also praying for cheaper prices.

Others who bought their house couldn't care less what price its valued at as they bought their house to live in for the long term.

Freddie59

smccarrick wrote: »

I think he was talking about the crap time we had in the 80s here in Ireland......

I hope so. Otherwise the comment makes no sense.:) Ah the 80s, when we thought we were paupers. Looking back now though.....

Krugerrand talks about the bias in the posts of most people who are not property owners

If someone is reading a market correctly regarding house price falls, how does that become 'bias'?

I myself am currently renting (having sold in November) but would not consider my own posts biased, merely a reflection of the information avaiable to me across several sources.

The_Conductor

321654 wrote: »

We dont know percentage of people who will lose their jobs have mortgages, or how much the payments on that morgage are, or how many will be half of a married couple, so we cant say that "the era of dual income households may very well be well and truly over". Thats pure speculation.

Just because you quote some figures in a post, and then make completely unsupported statements in there too, doesnt hide this wild speculation.

The figures I quoted are from the Department of Finance, The National Treasury Management Agency and the Department of Social and Family Affairs. While I accept that they could be 'wild speculation' as you put it- I wouldn't consider them to be unsupported.

Cori made a prebudget submission regarding dual income households- which drummed home the impact that individualisation of the tax bands will have in households where one of the two earners looses their jobs, to date from applications to MABS- it would appear that a very high proportion of those loosing their jobs do have mortgages- but there are no actual figures on this.

I don't really understand where you're coming from by the way?

Senna

krugerrand wrote: »

spockety wrote: »

Laughable.

The bias is obvious. Most people who are not property owners want house prices to fall.

People who do not own houses, and want to buy, will want prices to drop because they are unrealistic (high) at the moment. But plenty of home owners want property prices to return to normal levels, it benefits no-one to have over inflated assets that take 40 years to pay off. Inflation related price increases will keep most home owners happy.

saf wrote: »

Hi Members,
t
I have recently finalised a property in cavan.its a four bedroom property whih i got it for 170K the price came from 210K. i have given a booking deposit for the property. After reading all these reply iam confused. do you thing the value of the property will go further beyond this. even if it goes what your idea of the value at the end of this year. i have my bank loan approved. please advice me in relation to this deal. did I got a good deal.

thanks

saf

If you can comfortable pay for it, no more than 35% of your (both) net income. If you will be happy to live in the house for the life of the mortgage.
Have you links to the area? family or work? Your not commuting to Dublin are you?

As long as your happy and are fully aware that house prices in Cavan will fall alot further. This can be said will some confidence, by how much no-one knows but i'd say 20% as a very conservative estimate. Maybe read the website www.thepropertypin.com. It is bias, they will recommend you dont buy now, but there is some very useful info on there.
Best of luck

krugerrand

Freddie59 wrote: »

I hope so. Otherwise the comment makes no sense.:) Ah the 80s, when we thought we were paupers. Looking back now though.....

Correct. The 1980s. I presume nobody wants go return to the economic climate of the 1980s:)

Freddie59 wrote: »

Krugerrand talks about the bias in the posts of most people who are not property owners

If someone is reading a market correctly regarding house price falls, how does that become 'bias'?

I myself am currently renting (having sold in November) but would not consider my own posts biased, merely a reflection of the information avaiable to me across several sources.

Right, you sold in November 2008 and are renting at the moment.

My point is that there are alot of folks out there who have never bought a house are wishing that the prices come down further.

The title of this thread is "DOE - House prices could fall up to 46% in 2009" and the OP has stated that the DOE predict that house prices could fall up to 46% in 2009. My point is that this is not what the DOE predicted. Let's read the DKM report upon which this purported prediction was made.

http://www.environ.ie/en/PublicationsDocuments/FileDownLoad,18630,en.pdf

At page 6 of the said report is is stated:

"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."

Nowhere in the DKM report does it say that "house prices will fall by up to 46% in the 12 months between January 2009 and December 2009":)

On the contrary, the DKM report predicts a fall of between 20% and 46% from the peak and that this fall will take place over an unspecified time. The report also states that house prices have fallen by 18.5% from the peak by July 2008. So, add on to that 18.5% fall, the percentage fall between July 2008 and January 2009 and that's the fall that has already occured, if you accept the DKM report.

The OP and many other posters to this thread have misinterpreted the DKM report as saying that "house prices will fall by up to 46% in 2009." Some, not all, posters have latched onto this misinterpretation and thought that it would be great if house prices fell by 46% in 2009.

In summary:

1. Neither the Department of the Environment nor DKM Ecomomic Conultants have predicted that house prices will fall by up to 46% in 2009

2. Anybody who has misinterpreted the DKM report and/or wishes that house prices will fall by 46% in the 12 months between January 2009 and December 2009 would be need to be careful what they wish for.

spockety

krugerrand wrote: »

2. Anybody who has misinterpreted the DKM report and/or wishes that house prices will fall by 46% in the 12 months between January 2009 and December 2009 would be need to be careful what they wish for. [/SIZE][/SIZE][/SIZE][/SIZE]

You still haven't explained why? Perhaps your thoughts are somewhere deep inside that cryptic smiley?

The property bubble was bad for the economy, and property prices as they are currently in terms of asking prices remain a bad thing for the economy, as nothing is shifting. This is not healthy.

The power rested with the biased group of developers, bankers, and estate agents ('just doing my job') who drove a greedy pyramid scheme over the last 10 years, with themselves sitting at the top, trader uppers, flippers, and probates somewhere in the middle, and confused first time buyers and amateur buy-to-let'ters streaming in the bottom of the pile to fund the whole thing.

Now the power has shifted, the gift horse has been looked in the mouth, the goose that laid the golden egg has been slayed. Buyers are in control, but unfortunately too late for the inevitable not to be incredibly painful for a lot of people. This really should have happened 8 years ago.

Supply and demand, there is no shortage, in fact, it's the opposite.

krugerrand

spockety wrote: »

You still haven't explained why? Perhaps your thoughts are somewhere deep inside that cryptic smiley?

The property bubble was bad for the economy, and property prices as they are currently in terms of asking prices remain a bad thing for the economy, as nothing is shifting. This is not healthy.

The ecomomist and commentator David McWilliams has been saying for many years that house prices are overvalued and they need to come down. As many people know, he's been somewhat of a champion in this matter.

Let's read what Mr. McWilliams has to say in yesterday's Sunday Business Post, the 4th of January, 2009:

He says:
"now that prices are falling over a cliff, the plummeting market forces prices to overshoot on the downside. This price overshoot means that credit will contract further as banks rein in lending. This will cause prices to fall further and ensure that bad loans will be worse than they need to be."

He goes on to propose that land valuations should be based on a 20 year moving average in order to to reduce the price overshoot on the downside.

A price overshoot on the downside is very bad for every single person in this country and David McWilliams quite rightly recognises this.

The consequences of such a price overshoot on the downside are further credit contraction and more bad loans. This would lead to less credit available to sound businesses that wish to expand their operations.

spockety

But you haven't explained why 46% in particular would be bad. That might bring us back to 2001 prices adjusted? Maybe we need to go back to 1997 prices adjusted in order to get back on track?

Where _exactly_ is the "overshoot point"?

The market will return to normal when buyers decide, not when vested interests decide.

You say that we will all suffer. Well, perhaps we will, and nobody can really complain, since we live in a democracy, and our democratic decisions put people in place who created this mess. It is our fault collectively, and it's way too late to complain about it.

But again I point out, David McWilliams makes no mention of exactly at what point this overshoot happens. Given that he has been trumpeting a property bubble since 2001, I am guessing his idea of an overshoot and your idea of an overshoot are two completely different things.

spockety

Alan Aherne - Economics lecturer in NUIG - talks yesterday on RTE Radio 1 about why significantly lower house prices are needed to get the economy healthier:

http://www.rte.ie/news/2009/0104/thisweek_av.html?2469515,null,209

jmayo

krugerrand wrote: »

Laughable.

The bias is obvious. Most people who are not property owners want house prices to fall.

It is beyond doubt that house prices will fall by in 2009; the question is by how much. All those non-property owners, hoping to buy when house prices get cheaper, better not wish that house prices fall by 46% in 2009. By all means hope that that prices fall, if that's your preference, just don't hope that they fall by 46% in 2009:)

Be careful what we wish for, we might get it.

If house prices fall by 46% in 2009 the implications in terms of the extent of the prevelance negative equity and the resultant loan defaults, will cause such a severe shock to the banking system and thus the general ecomomy that you may well be on the dole yourself.

And why shouldn't non-property owners who do want to buy wish for property prices to fall ?
Should they want prices to remain artifically high, many multiples of the annual average salary ?
Why should they wish to sign up for a lifetime 40 year mortgages ?
Can you answer these questions ?

BTW I do own property (bought pre boom) and I have been accused over the last 7 years of being a whinger, a harpinger of doom etc.
I could never see why people thought that we would be different, that our bubble would be the one that survived and that the housing boom was great for us all.
Boll** to that, it was good for some but not for everyone and not the country as an entity long term.
The dumb smucks that bought through greed or the poor bast**** that had to buy due to circumstances are the ones that have to carry the can.

Now you are saying we should not wish that prices revert back to more realistic values because the poor old banks will be stuck with bad debts which could mean foreclosures and lower lending to business.
In case you haven't noticed the banks are already stuck with collosal debts due to their wreckless lending to developers, who then screwed the end buyers. In fact probably two of the banking institutions are so far gone, that they should be gone, but for the feeble attempts of government to bail them out.

You appear to think that property and it's prices are critical to an economy.
This is where Ireland Inc really screwed up in allowing the economy to become so dependent on residential property.
The sooner that this ends the better. It will be painful but the sooner the sh*** hits the fan and is over with the better for all.

krugerrand

Ok, I'll reply to spockety and jmayo together here.

What follows is all from the article of David McWilliams in the Sunday Business Post, yestarday the 4th of January, 2009. I am in full agreement with what McWilliams says.

Here's the crucial bit:
He says that unless action is taken house prices will overshoot on the downside and could fall by another 50% from here.

He says that a fall by 50% from here would be very very bad for Ireland.

And here's the reason why he says a fall by 50% from here would be very very bad for Ireland.

Quote:
"Higher unemployment, emigration and leading to an unprecedented explosion in government debt, with attendant higher taxation."

Quote:
"Ultimately, deflation corrodes an economy and a society more than inflation ever could, and we in Ireland must avoid this at all costs. At some stage, we need to change things. We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

The last sentence is worth repeating:

Quote:
"We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

David McWilliams has proposed a 20-year moving average of land prices as the basis for collateral as the way forward.

martian1980

krugerrand wrote: »

Ok, I'll reply to spockety and jmayo together here.

What follows is all from the article of David McWilliams in the Sunday Business Post, yestarday the 4th of January, 2009. I am in full agreement with what McWilliams says.

Here's the crucial bit:
He says that unless action is taken house prices will overshoot on the downside and could fall by another 50% from here.

He says that a fall by 50% from here would be very very bad for Ireland.

And here's the reason why he says a fall by 50% from here would be very very bad for Ireland.

Quote:
"Higher unemployment, emigration and leading to an unprecedented explosion in government debt, with attendant higher taxation."

Quote:
"Ultimately, deflation corrodes an economy and a society more than inflation ever could, and we in Ireland must avoid this at all costs. At some stage, we need to change things. We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

The last sentence is worth repeating:

Quote:
"We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

David McWilliams has proposed a 20-year moving average of land prices as the basis for collateral as the way forward.

how about answering this one in your own words:

why should our prices remain totally out of whack with fundamentals that every other country adheres to - i.e. a house price being 12/14 years rent? Mcwilliams thought house prices were our of control in 2001. would 2001 prices be 50% of what they are now?

krugerrand

martian1980 wrote: »

Mcwilliams thought house prices were our of control in 2001. would 2001 prices be 50% of what they are now?

Are 2001 prices 50% of what they are now? They might be. It depends on which house price index you are using.

The point is that David McWilliams does not want house prices to fall to 50% of what they are now and his reasoning is crystal clear in his article in the Sunday Business Post of the 4th of January, 2009. www.sbpost.ie

"Ultimately, deflation corrodes an economy and a society more than inflation ever could, and we in Ireland must avoid this at all costs. At some stage, we need to change things. We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

So, McWilliams states that house prices might need to fall another bit to become more competitive, but that's its time to put a stop to falling house prices. Furthermore, he proposes a a 20-year moving average of land prices as the basis for collateral as the way to put a stop to a further fall in house prices.

We all know that David McWilliams has been saying for many years that house prices were too high. So I'm sure you would trust his judgement if you were in agreement with him for the last few years.

David McWilliams now says, on the 4th of January, 2009, that house prices should not be permitted to fall much further, that "it's time to put a stop to this", that "we need to call a halt" and that too much more falling off in house prices would be bad for the economy not good for the economy. I agree 100%.

I come back to what I have said already:

This thread was started by an OP who misinterpreted the DKM report which was comissioned by the Department of the Environment.

The said report is available here:
http://www.environ.ie/en/Publication...d,18630,en.pdf

Nowhere in the DKM report does it say that "house prices will fall by up to 46% in the 12 months between January 2009 and December 2009"

On the contrary, the DKM report predicts a fall of between 20% and 46% from the peak and that this fall will take place over an unspecified time. The report also states that house prices have fallen by 18.5% from the peak by July 2008. So, add on to that 18.5% fall, the percentage fall between July 2008 and January 2009 and that's the fall that has already occured.

spockety

krugerrand wrote: »

We all know that David McWilliams has been saying for many years that house prices were too high. So I'm sure you would trust his judgement if you were in agreement with him for the last few years.

You know there is something not right when opposing sides of an argument use the same opinionated sources to bolster their argument..!

I think you are completely and totally twisting the McWilliams article, and taking snippets of it out of context to suit your agenda.

I mean, for crying out loud, you say

And here's the reason why he says a fall by 50% from here would be very very bad for Ireland.

Quote:
"Higher unemployment, emigration and leading to an unprecedented explosion in government debt, with attendant higher taxation."

But you left out the first part of that sentence, why?
Here it is for you:

More worryingly, with the current lending system, these falls will go on for many years, contributing to higher unemployment,.....

I can see NOWHERE in that opinion piece where McWilliams specifies that it is the falling prices themselves that put Ireland's economy in a perilous position. To me he is saying the madness whereby the existing 'death by a thousand cuts' over a prolonged period of stagnation is what will lead to serious problems in the longer term.

You haven't even bothered to actually look at what his proposed 20 year rolling average would do to the price of a house in the here and now, have you?

Well, let me give you some facts and figures, (as I said before, why is it always those of the opinion that prices need to fall drastically who are the ones producing actual figures and backing up their arguments with historical data, and established economic realities??).

The average price of a house in 2006 according to the ESRI was 287k. The ESRI has data going back to 1998 from what I can see, at which point the average price of a house was 98000. I don't have data beyond that to give us right back to 1986. But if I am extremely generous to you, and let us pretend that in the preceeding 12 years houses were a stagnant 80k, then McWilliams' rolling 20 year average introduced at the peak of the bubble would have given us a price of 130k! That is nearly 66% off! And I have been extremely generous in giving an 80k stagnant valuation from 1988-1998, as well as ignoring what has happened since 2006. I'll let you try to figure out what way the real numbers would affect that average!

So, as you see, McWilliams proposed 20 year rolling average means he thinks that there needs to be much more serious drops in house prices in order for things to get back on track.

My reading of it is that his concern is not with the amount of the drops, but the ridiculously slow speed at which this is all happening due to dilly dallying by those in positions of power in government, regulatory authorities, and the banking system.

johnnyskeleton

krugerrand wrote: »

The bias is obvious. Most people who are not property owners want house prices to fall.

That doesn't mean they're not right though.

krugerrand wrote:

Be careful what we wish for, we might get it.

If house prices fall by 46% in 2009 the implications in terms of the extent of the prevelance negative equity and the resultant loan defaults, will cause such a severe shock to the banking system and thus the general ecomomy that you may well be on the dole yourself.

My understanding that the default rate for residential mortgages is very low during a property bust. Most of the banks losses will be from developer and commercial property loans. Business & personal debts are usually next, with residential property loans making up the smallest part of the overall default liability. The banking system is in trouble, but not because of residential mortgage defaults.

johnnyskeleton

krugerrand wrote: »

Exactly ! That explains the bias in the posts of most people who are not property owners.

That bias could also be called a preference for rational spending rather than paying anything the market can throw at it. Put it this way, some of the people who are saying property prices have a lot more to go already own property. The rest could have bought property but, faced with the idea of a 40 year 100% mortgage on a shoebox 20 miles from work, decided against it. And rightly so. What you call bias I would call financial prudence.

krugerrand wrote: »

My point is that a further 46% drop house prices in 2009 would be too much of a shock for the financial system and the wider economy.

The main shocks to the financial system have already been priced into their share prices (Anglo Irish Bank down 99% from peak). It is unfortunate that the government is now liable for the banks if they go bust, but outside of these two factors, it doesn't matter how far property prices drop. Jobs are being shed in property related sectors because no one is buying and there is no incentive to developers to build more (even if they could get the finance). Contrary to what you are saying, further drops in property prices will be better for the economy because a) property will start selling again & construction will resume (albeit at a much lower level); b) the Irish economy regains competitiveness thus keeping MNCs and preventing domestic startups from going bust and c) confidence will begin to return to the stock markets as things settle down.

Whereas, if property prices remain artificially as high as they are now, we will stagnate for the next few years to the economy's detriment.

ronbyrne2005

DOE has access to actual selling prices so they must know what price falls are coming down the line.

jmayo

krugerrand wrote: »

Ok, I'll reply to spockety and jmayo together here.

What follows is all from the article of David McWilliams in the Sunday Business Post, yestarday the 4th of January, 2009. I am in full agreement with what McWilliams says.

Here's the crucial bit:
He says that unless action is taken house prices will overshoot on the downside and could fall by another 50% from here.

He says that a fall by 50% from here would be very very bad for Ireland.

Quote:
"Higher unemployment, emigration and leading to an unprecedented explosion in government debt, with attendant higher taxation."

Quote:
"Ultimately, deflation corrodes an economy and a society more than inflation ever could, and we in Ireland must avoid this at all costs. At some stage, we need to change things. We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

Quote:
"We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

Krugerrand,
you still did not answer any of my questions...

jmayo wrote: »

And why shouldn't non-property owners who do want to buy wish for property prices to fall ?
Should they want prices to remain artifically high, many multiples of the annual average salary ?
Why should they wish to sign up for a lifetime 40 year mortgages ?
Can you answer these questions ?

... but decided to EDIT McWilliams' article to fit your opinion.

You appear to believe that house prices are what determines how a normal economy is performing.
They usually are an indication of how an economy is doing, but of course Ireland Inc decided to hang the whole economy on housing.
By continuing with this debacle we only postpone the inevitable.

Do you think that we should only have a house price drop of say 10-15% this year and maybe then another drop next year ?
The sooner the sh** hits the fan, i.e. the ar** falls out of house prices, the developers go bust, the banks and building societies admit their collosal exposure to construction bad debts, the sooner we can start to move on.

The fact that people (people like yourself, our government, the banks, the developers, the builders) are burying their heads in the sand and living in hope, pretending that the value of property is something that the market deems it is definetly not, just means that the uncertainty is lasting even longer.
It means that no one wants to invest in Irish banks, because they know that the worst is yet to come.
No one wants to touch Ireland, because we are seen as another banking Iceland, even worse our bankers and regulators are now seen as a bunch of grubby little shysters, who can not be trusted to tell black from white.
Who will believe them when they say one thing, but hide the truth behind shady transactions.

Developers are refusing to sell at all costs, banks are refusing to foreclose or force the developers to ofload, the government is refusing to admit that some of our financial institutions are beyond redemption and not worth saving, that our public expenditure far outweighs our revenue streams and finally that their developer/builder buddies have to be cast adrift and let sink or swim.

Until something gives we are drifting along helplessly like a peice of flotsam on the ocean waves at the mercy of every new twist and turn of the current global economic climate.

krugerrand

McWilliams' artice in the Sunday Business Post of the 4th of January, 2009, (www.sbpost.ie) is very clear on what he sees as the danger. For years he was saying that house prices were too high. However, McWilliams is a pragmatist and, now that prices are falling, he is saying that the bigger danger is an overshoot on the downside. He says that deflation corrodes an economy and a society more than inflation ever could.

Reading his conclusion, on the second last paragraph, it is very clear what his views are:

"Ultimately, deflation corrodes an economy and a society more than inflation ever could, and we in Ireland must avoid this at all costs. At some stage, we need to change things. We might need prices to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

Prices falling "another bit from here" is ok according to David McWilliams but a 50% drop from current levels is not ok according to him. The two senarios are mutually exclusive! No matter what way you look at it, that's his bottom line. There's no twisting of words. David McWillaims quite rightly wants to limit the overshoot on the downside. Let's not jump to any conclusions about how McWilliams would propose the 20 year moving average would come into operation. In any event, he clearly wouldn't want it to result in a large drop in house prices as his conclusion is that house prices "might need to fall another bit from here to become more competitive, but it’s time to put a stop to this. We need to call a halt."

This whole thread predicated on a misinterpretation of DKM report comissioned by the Department of the Environment. The DKM report predicts a peak to trough drop of anything from 20% to 46%. According to the DKM report, prices have already fallen by 18.5% from the peak by July of 2008. Therefore DKM conclude that house prices will fall from July 2008 levels by anything from a few percentage points up to a maximum of 27.5% and that this drop will take place over an unspecified time. Nowhere do DKM or the Department of the Environment precict that house prices will fall by 46% from current levels. And more furthermore, nowhere do DKM or the Department of the Environment precict that house prices will fall by 46% from current levels in 2009! The title of this thread is entirely misleading!

End of story. Back in work tomorrow after the Chirstmas break. Good luck eveybody in the New Year and be careful what you wish for!

spockety

"If the new Financial Regulator has any wit, this idea would be introduced overnight."

I have showed you in easy to read figures _exactly_ what would happen with house prices were a 20 year rolling value system to be introduced right now. I can only assume that David McWilliams also did the maths before publishing such a proposal in a national newspaper.

You are making assumptions about what he is saying, I am dealing with the facts. Ok, let me pare it down for you again, we shall use the ESRI figures, flawed as they may be, as the indicator of national house prices.

November 2008 ESRI average national house price = 264,026

Average house price over the last 20 years using ESRI data for each November back to 1996, and giving a very very generous assumption of 75000 in value for each November from 1995 back to 1988 = 157,052.

The peak November price was November 2006 at 310,409.

The drop required from that peak, to the current 20 year average, is exactly 49%.

The drop required from the current ESRI indexed price of 264,026 to the 20 year average is 41%.

Again I stress, these are figures derived using the method that David McWilliams has suggested introducing. Based on what he has said, we must assume that he would like a system "introduced overnight" which would knock 41% off current house prices, and he wants it done quick.

Have you anything more concrete you can add for us? I notice the cryptic smiley is gone from your last post

Can you please explain to me (pretend I am stupid) how we will prevent property prices, that are being kept artificially high (I assume you want some sort of intervention in the market to stop the slaughter, rather than allowing simple supply/demand/consumer economics do their work?), from damaging our economy in the long term? Why it is that 40 year mortgages of upwards of 8 times the annual average salary for an average home are better in the long term for this country than getting back to historical norms, and norms that exist in internationally healthy property markets? I really want to know... you are offering nothing other than some crazy rant about the semantics of the thread title and misinterpretation of a single DOE report making everything wrong.

321654

David McWilliams has been trying to make a name for himself for over 10 years now. He had to be right one day. The same David McWilliams that im told is currently bidding on several properties in the Dublin area.