David McWilliams predicts further 50% fall in house prices

SoupyNorman

jmayo wrote: »

Ehhh we already have empty estates, half finished estates and derlict half finished houses or haven't you noticed ?

Ehhh (right back at you), these estates are in Roscommon and Leitrim and the rest of the BMW region. Planning permission was granted on sites in the arse of nowhere, all part of the building craze. Who in their right mind would or could live there?

Are saying there are 'new build' derelict houses, as I have not seen any.

Half finished houses better stay half finished for the sake of the economy but in the grand scheme of things its's a flippant number that wont have a real impact.

ntlbell

D3PO wrote: »

the same David McWilliams that is championing Ireland to remove itself from the Euro.

I used to have high time for McWilliams as a respected Economist. Over the last 6 months or so It seems hes more interested in selling papers and sensationalism than actually looking at the economic facts

can you tell us some specifics where you think he is wrong and why you think that is?

or are you just making general statements about him with no thought process behind it?

niceirishfella

oceanclub wrote: »

And there's a guy down the chipshop swears he's Elvis.

P.

LOL - but the Taxidriver must be right.....shure they always are.:D

uRbaN

I'm in the boat of hope that my property will only fall by 33% of its original value. That I may be able to come to terms with. Should it fall to 50% of its value I am shackled to it for the rest of my life unless

1. It goes on fire
2. A fire breathing dragon does me a favour

Either way, I'm hearing fire right now

The_Conductor

SoupyNorman wrote: »

Ehhh (right back at you), these estates are in Roscommon and Leitrim and the rest of the BMW region. Planning permission was granted on sites in the arse of nowhere, all part of the building craze. Who in their right mind would or could live there?

In many cases not only was bizarre planning permission granted- but the units were also wholly or substantially tax deductable. I.e. over a 12 year period- they could be written off against *all* tax. The tax allowances on these properties is acknowledged to have accounted for in excess of 80% of their financial value. Totally aside from just how appropriate it is to build in many of these locations- the reason many of them sold at ridiculous prices- is precisely because of the level of bribery built into the purchase. You could get people to live in igloos on an iceberg moored off Donegal- if you gave them sufficient financial incentive to do so.......

SoupyNorman wrote: »

Are saying there are 'new build' derelict houses, as I have not seen any.

There are entire estates in Monasterevin, Portlaoise and further down the Cork road that are defacto ghost towns. If you go up side roads towards Kildangan (the famous equine stud) you will luxury estates on the market with between 1/3 and 1/2 the properties vacant. I'm not even going to comment on the N4 west of Maynooth.......

SoupyNorman wrote: »

Half finished houses better stay half finished for the sake of the economy but in the grand scheme of things its's a flippant number that wont have a real impact.

Why? Surely half build houses will provide reasonable employment at better than social welfare levels for competent construction workers in dark economic days? How do you reckon its a flippant number in any case? Most developers have critical cashflow problems- and are either on lifesupport, or very close to it. Borrowings are the lifeblood of developers- and no-one is interested in lending to them. How many units are wholly or partially built and vacant. Depending on how you phrase the question- the CIF will give you answers between 25,000 and 140,000 units. Admittedly both upper and lower figures are probably cynical exagerations to prove whatever point it is they are making- suffice to say- there is most probably 4 or 5 years supply were market normalisation to occur.

oceanclub

smccarrick wrote: »

There are entire estates in Monasterevin, Portlaoise and further down the Cork road that are defacto ghost towns. If you go up side roads towards Kildangan (the famous equine stud) you will luxury estates on the market with between 1/3 and 1/2 the properties vacant. I'm not even going to comment on the N4 west of Maynooth.......

In the US, they've already started to demolish new estates. I have absolutely no doubt this will also happen here in the next 5 years:

http://www.usnews.com/blogs/fresh-greens/2009/05/05/what-a-waste-new-homes-demolished-by-bank.html

P.

The_Conductor

uRbaN wrote: »

I'm in the boat of hope that my property will only fall by 33% of its original value. That I may be able to come to terms with. Should it fall to 50% of its value I am shackled to it for the rest of my life unless

1. It goes on fire
2. A fire breathing dragon does me a favour

Either way, I'm hearing fire right now

The rate of fall is dependent on two factors-

1- Location
2- Type of property

Anything in a fairly central location will always have an inherent value associated with it- whatever that might be.

Apartments are going to be millstones- both because of the management charges associated with them- but also because of the limitations they place on owners.

Its very difficult to establish open market selling prices in the current climate. Banks are depreciating independent valuations by up to 30% to work out a 'mortgage valuation' for properties. Bank of Ireland seem to be leading the charge on this one.

If you accept that a mortgage value on a property is 25-30% below the independent valuation (which is already the case for apartments in the Dublin suburbs- such as Lucan) then for certain house classes we are already back at 1999-2000 valuations (and they are continuing to fall). Note: this is not the case (yet) for freehold residential property (of any nature).

Ps- if it accidentally burns down- regardless of what you have it insured for- the maximum you will be allowed to claim is the cost of reconstruction of the unit (providing you are not underinsured).

D3PO

ntlbell wrote: »

can you tell us some specifics where you think he is wrong and why you think that is?

or are you just making general statements about him with no thought process behind it?

I have plenty of thought behind it.

In terms of house prices I think even the most negative amongst us cannot see a further 50% drop in house prices.

Of course there is going to be further correction in the market but 50% is excessive. I dont believe McWilliams has put thought into this at all and is sensaitionalising.

now if he had his way and removed ireland from the Euro then yes we would see more than a 50% drop in house prices because the Irish Pound would devalue at a significant rate.

this would be worse fro the economy as interest rates would ikely rise and more people would struggle to pay thier bills including mortgages putting us into a deeper hole.

on the flip side our export business would become stronger but i dont think that even begins to cover the negatives that would occur in terms of FDI, loss of ECB support, and so on and so forth.

again I think hes sensationalising its almost the norm for McWilliams of late.

niceirishfella

oceanclub wrote: »

In the US, they've already started to demolish new estates. I have absolutely no doubt this will also happen here in the next 5 years:

http://www.usnews.com/blogs/fresh-greens/2009/05/05/what-a-waste-new-homes-demolished-by-bank.html

P.

wow...........amazing.:o

SoupyNorman

smccarrick wrote: »

In many cases not only was bizarre planning permission granted- but the units were also wholly or substantially tax deductable. I.e. over a 12 year period- they could be written off against *all* tax. The tax allowances on these properties is acknowledged to have accounted for in excess of 80% of their financial value. Totally aside from just how appropriate it is to build in many of these locations- the reason many of them sold at ridiculous prices- is precisely because of the level of bribery built into the purchase. You could get people to live in igloos on an iceberg moored off Donegal- if you gave them sufficient financial incentive to do so.......

Well I agree here.

smccarrick wrote: »

There are entire estates in Monasterevin, Portlaoise and further down the Cork road that are defacto ghost towns. If you go up side roads towards Kildangan (the famous equine stud) you will luxury estates on the market with between 1/3 and 1/2 the properties vacant. I'm not even going to comment on the N4 west of Maynooth.......

They are unoccupied, not derelict.

smccarrick wrote: »

Why? Surely half build houses will provide reasonable employment at better than social welfare levels for competent construction workers in dark economic days? How do you reckon its a flippant number in any case? Most developers have critical cashflow problems- and are either on lifesupport, or very close to it. Borrowings are the lifeblood of developers- and no-one is interested in lending to them. How many units are wholly or partially built and vacant. Depending on how you phrase the question- the CIF will give you answers between 25,000 and 140,000 units. Admittedly both upper and lower figures are probably cynical exagerations to prove whatever point it is they are making- suffice to say- there is most probably 4 or 5 years supply were market normalisation to occur.

I believe it is a flippant number in terms of current supply, I dont see any point in finishing the properties which will just add to the rising waters.
It's a grand idea to get construction workers off social welfare and working to finish these properties but the reality is that the properties are scattered across the country, half a house here...2/3rds of an apartment complex there, developers and builders have no funds for the completions anyway. (the land the property is on is more valuable in many instances)

HashSlinging

Originally Posted by oceanclub View Post
In the US, they've already started to demolish new estates. I have absolutely no doubt this will also happen here in the next 5 years:

Wow thats shocking stuff, very good find..

not sure I could see that happening in Ireland. We dont have the massive repossessions they have, so its a bit far fetched to say in 5 years this will be happening here. Dont loose the run of yourself.

partyguinness

Big difference with the US is

You can go bankrupt several times during your lifetime in the US and still borrow etc.

In Ireland it carries with you forever. That makes things alot easier in US plus Ireland is so small everyone hears everything.

CiaranC

D3PO wrote: »

I have plenty of thought behind it.

In terms of house prices I think even the most negative amongst us cannot see a further 50% drop in house prices.

Speak for yourself.

The_Conductor

HashSlinging wrote: »

Originally Posted by oceanclub View Post
In the US, they've already started to demolish new estates. I have absolutely no doubt this will also happen here in the next 5 years:

Wow thats shocking stuff, very good find..

not sure I could see that happening in Ireland. We dont have the massive repossessions they have, so its a bit far fetched to say in 5 years this will be happening here. Dont loose the run of yourself.

Mortgage interest relief is abolished after 7 years, and reduced for everyone else- at a time when we have the lowest interest rates, ever, and repossessions are soaring. The agreement to a 2 year moratorium on repossessing delinquent mortgages is the only thing stopping a bloodbath at the moment.

Look at it this way-

Unemployment is currently at 11.8% and continuing to climb
Interest rates are traditionally (in an EU, not an Irish context) 4 times the level they are currently at
Market supports- such as mortgage interest relief is being withdrawn
Income distortion such as non-means tested children's benefit is being reduced
Taxes are significantly higher (the increases on the 1st of May have reduced my net monthly income by EUR90), and there are further increases imminent in December

So- fewer people working, earning less money, getting less government assistance towards purchasing- a depreciating asset- that is going to cost them more as interest rates start to increase again.

We have the potential to be a whole lot worse than the US in the medium term.......

partyguinness

CiaranC wrote: »

Speak for yourself.

Another 50% drop means that the banks need to write off another 50% of bad debts...effectively doubling the bail out from the Gov.

So Irish banks really are dead and just hallow vessels?

Wages will have to take a proportionate hit also I would imagine.

CiaranC

50% fall from current selling prices is not 50% of 2006 selling prices. They have already dropped 40-60%, depending on who you believe.

suprasonic

Im 25 with a full time job,im looking to buy on my own at the end of the year im supposing this is good new for me as the most i can get is 125,000 on my own?

The_Conductor

suprasonic wrote: »

Im 25 with a full time job,im looking to buy on my own at the end of the year im supposing this is good new for me as the most i can get is 125,000 on my own?

Why is it good news? It really doesn't make financial sense buying in the current market- irrespective of the price and location. If there are factors totally independent of finances at play- its a different story. The Irish really have to get over their hangup on 'having' to own property (at any cost......)

ntlbell

D3PO wrote: »

I have plenty of thought behind it.

In terms of house prices I think even the most negative amongst us cannot see a further 50% drop in house prices.

Of course there is going to be further correction in the market but 50% is excessive. I dont believe McWilliams has put thought into this at all and is sensaitionalising.

ok, but why can you not see another 50% drop what's going to prevent that?

can you explain why you cannot see it?

partyguinness

Ireland has one of the highest rates of home ownership in the world if not the highest.

We the Irish are obsessed with it...then again any change in this attitude will have to come with stronger rights and security for tenants.

ntlbell

partyguinness wrote: »

Ireland has one of the highest rates of home ownership in the world if not the highest.

We the Irish are obsessed with it...then again any change in this attitude will have to come with stronger rights and security for tenants.

people with friends in up to 200K plus negative equity might start to change people's perception

partyguinness

Bet it will....as I said earlier I had very lucky escape 2 years ago. I shudder to think what state I would be in now especially now that I am down to 3 days a week.

I have no interest in buying at the moment plus the OH has a house so might just hang in there...;)

D3PO

ntlbell wrote: »

ok, but why can you not see another 50% drop what's going to prevent that?

can you explain why you cannot see it?

Well the fact the market value to a large extent will be perpetuated by significant determing factors.

Amongst those we have

Housing stock we clearly have an overstock. I strongly suspect NAMA might end up purchasing these ghost estate assets using their land value only with a good chance of rezoning back to agricultural land. thus significantly reducing the overstock, we also have a growing population that will in the next 3-4 years will most likely require us to up our current build rate which is only 16000 houses this year I think.

This will begin and I only mean begin to see supply & demand begin to balance.

Secondly all this talk about the worst recession ever bla bla bla hasnt come to pass yet. We had similar unemloyment rates in the 80's and didnt see the kind of house retraction being mooted by Mcwilliams back then and given the high interest rates back then it would have been all the more understandable

thirdly some f builders struck deals with the banks that repayment of loans was only due once their housing stock was sold, as they wont be compelled to allow NAMA take control of the assest that will to some degree keep house prices artificially higher than they should be/

You then have to factor in intangibles like the attitudes of Irish people. Its deep rooted in our psyche that owning your house is the thing to do which is very different than say central europe, or een the US to some extent.

that willingness to pay to own your own property will also ensure prices dont drop by another 50%.

My own view is a further 20 - 30% drop over the net 18 - 24 months before a levelling off period over another 2 years.

By 2014 we should begin to see a more measured rise in property prices.

Who knows I could be wrong but this is why I dont subscribe to what McWilliams is saying and hes comments about leaving the eurozone show his foresight recently in my opinion has been lacking

SoupyNorman

partyguinness wrote: »

Ireland has one of the highest rates of home ownership in the world if not the highest.

We the Irish are obsessed with it...then again any change in this attitude will have to come with stronger rights and security for tenants.

ntlbell wrote: »

people with friends in up to 200K plus negative equity might start to change people's perception

The laws and regulation that govern rental in Ireland certainly play their part in driving people to want to own property.

ntlbell

SoupyNorman wrote: »

The laws and regulation that govern rental in Ireland certainly play their part in driving people to want to own property.

of course and they need to change.

ntlbell

D3PO wrote: »

Well the fact the market value to a large extent will be perpetuated by significant determing factors.

Amongst those we have

Housing stock we clearly have an overstock. I strongly suspect NAMA might end up purchasing these ghost estate assets using their land value only with a good chance of rezoning back to agricultural land. thus significantly reducing the overstock, we also have a growing population that will in the next 3-4 years will most likely require us to up our current build rate which is only 16000 houses this year I think.

This will begin and I only mean begin to see supply & demand begin to balance.

Secondly all this talk about the worst recession ever bla bla bla hasnt come to pass yet. We had similar unemloyment rates in the 80's and didnt see the kind of house retraction being mooted by Mcwilliams back then and given the high interest rates back then it would have been all the more understandable

thirdly some f builders struck deals with the banks that repayment of loans was only due once their housing stock was sold, as they wont be compelled to allow NAMA take control of the assest that will to some degree keep house prices artificially higher than they should be/

You then have to factor in intangibles like the attitudes of Irish people. Its deep rooted in our psyche that owning your house is the thing to do which is very different than say central europe, or een the US to some extent.

that willingness to pay to own your own property will also ensure prices dont drop by another 50%.

My own view is a further 20 - 30% drop over the net 18 - 24 months before a levelling off period over another 2 years.

By 2014 we should begin to see a more measured rise in property prices.

Who knows I could be wrong but this is why I dont subscribe to what McWilliams is saying and hes comments about leaving the eurozone show his foresight recently in my opinion has been lacking

I think el stunt man quoted the over supply in another thread and it was like 10 years supply :eek:

how will our willingness to own property stop if

we have worsening unemployment

higher taxes + levy's

less disposable income

which are looking very likely

our attitudes won't do anything if they simply can't afford to buy.

i'm just failing to see why 30% is reasonable but 50% is a mad guy talking

for all the reasons you suggested 50% and more is as likely as 30% tbh

D3PO

Like I said NTL I could be wrong only time will tell, but theres every reason to believe that my views are just as likely to ring through.

funny how many economists have come out of the wood in the last 18 months with this projection and that projection.

where were they all in terms of projecting the buble burst ? (outside of George Lee and 2 or 3 others)

McWilliams didnt call the over inflation back then. he was wrong then what is there to believe he will be right now ?

also I believe it will be about 4 years overstock based on my projection that NAMA will rezone all these remote estates to agri land. Weather NAMA does this or not I dont know but it would be the logical step forward.

then again whens the last time a quango did something logical ....

ntlbell

D3PO wrote: »

Like I said NTL I could be wrong only time will tell, but theres every reason to believe that my views are just as likely to ring through.

funny how many economists have come out of the wood in the last 18 months with this projection and that projection.

where were they all in terms of projecting the buble burst ? (outside of George Lee and 2 or 3 others)

McWilliams didnt call the over inflation back then. he was wrong then what is there to believe he will be right now ?

also I believe it will be about 4 years overstock based on my projection that NAMA will rezone all these remote estates to agri land. Weather NAMA does this or not I dont know but it would be the logical step forward.

then again whens the last time a quango did something logical ....

i belive mc williams was one of the first to start talking about the bubble bursting a long with george lee

and he was blasted out of it and told he should kill himself..

MG

The P/E model has a very intuitive and robust logic underpinning it so I think it is possible - though shocking in it's repercussions.

gurramok

D3PO wrote:

Housing stock we clearly have an overstock. I strongly suspect NAMA might end up purchasing these ghost estate assets using their land value only with a good chance of rezoning back to agricultural land. thus significantly reducing the overstock, we also have a growing population that will in the next 3-4 years will most likely require us to up our current build rate which is only 16000 houses this year I think.

Growing population, now that is laughable. IBEC recently said that 100,000 left the country!

This will begin and I only mean begin to see supply & demand begin to balance.

D3PO wrote:

Secondly all this talk about the worst recession ever bla bla bla hasnt come to pass yet. We had similar unemloyment rates in the 80's and didnt see the kind of house retraction being mooted by Mcwilliams back then and given the high interest rates back then it would have been all the more understandable

We never had a 300% rise in house prices in the 80's.