Supply and Demand

strassenwo!f

Sunday August 14 2011


There's talk of an ECB interest rate U-turn and cut, but Bank of Ireland and AIB are on solo runs to hike rates, heaping more misery on mortgage payers.
That's not going to help an already static housing market, down some 50 per cent from peak, and with [COLOR=#009900! important]potential[/COLOR] to tumble by 70 per cent.
It's time to look for the floor in relation to house prices.
But with almost nothing selling, how do you call it? The fire-sale phenomenon is one way, Daft.ie economist Ronan Lyons suggests.
A recent one in Donegal was a damp squib but Allsop's sale in the Shelbourne in Dublin was thronged with buyers and another is planned for September. With almost nothing being sold in the regular way, the knockdown price auctions "give a price point to buyers", said Mr Lyons, who has researched and graphed their results.
"Fire sales show Dublin prices at 65 per cent below peak and prices elsewhere in the country at 70 per cent below peak," Mr Lyons added.
Official data on asking prices and CSO statistics suggest the Dublin housing market has dropped 50 per cent from peak and 40 per cent ballpark in the rest of the country. If the Allsop's auction next month attracts buyers, it will be interesting to see if the sale prices reflect more market softness than that.
"While the stats from Daft, the CSO and the ESRI appear to show prices for Dublin falling more than elsewhere, the Dublin market is adjusting faster and looks like it's actually probably closer to stabilising," said Mr Lyons.
Not so in other areas perhaps. Prices in the upper Shannon region (Leitrim, Roscommon, Cavan), places where councils were more trigger-happy with planning permission and tax-break uptake was high, and "where there was overconstruction and there is oversupply and fewer centres for jobs, it probably won't improve much within the next five years", he predicts.
However, recovery could start over 2012-2013 in Dublin, within six to 12 months, he suggests. "Cork will follow quite soon after Dublin, in the second half of 2012, and cities like Galway, Waterford and Limerick within 12 months of Dublin.
"Recovery does not mean prices going back up to where they were. What we need to see is prices moving in line with inflation, a little above that, growing by about two to three per cent a year," he said.

http://www.independent.ie/business/irish/so-what-is-your-house-worth-now-2847944.html

I'm new to this forum, though not to boards.ie, and I was wondering if someone knowledgeable on this board could explain some of the comments in the above.

(I don't currently live in Ireland, though I am from Dublin).

I gather that there are a lot of unoccupied, and even unfinished, homes in Ireland. My understanding of economics is not what it might be, but I do remember all those old supply and demand curves.

Is Mr Lyons right that, apparently, "What we need to see is prices moving in line with inflation, a little above that, growing by about two to three per cent a year"?

Is he right, or am I right in thinking that it's no wonder I f*****d up that Leaving Cert economics.

I'd have thought that prices should be coming down, but it may be that supply and demand ain't what it used to be in my day.:o

dory

I think what he means is that prices should be what they would be had they gone up with inflation over the past 15 years instead of jumping ahead in leaps and bounds as it did in the bubble. So rising with inflation would still mean a drop from today's prices.

ShadowHearth

In my opinion this was a bit of bull**** call with prices stabilising in next 12 months in dublin , 12 in cork?

Properties that already droped to mark of 100k-130k might drop slower and not that much. All 200k-250k in Legoland estates will go down alot.

Bank are still not giving much of mortgages, but they say that there are huge huge savings in Ireland. Irony..

strassenwo!f

@Dory, Okay, if that's what you get from it. Not saying you're wrong.

My understanding from that article was that he was talking about the recovery. Not saying I'm right, of course.

Idbatterim

it seem like bull sh*t to me. Noboby can change the market fundamentals! Even if there is a fire sale like Allsops, the amount of property being sold is miniscule in the scheme of things. banks just arent lending, interest rates are going up and as the amount that can be borrowed depends on income, which will be hit again in the budget, by changing the bands rather than the rates, so less can be borrowed again, ditto with the rate rises. Also factor in the water charges, property tax etc etc etc. Im sure the vast majority of this country (basically anyone who owns property or benefits from the industry) would love for it all to kick back off again. Surely with a "firesale" what seemed like great prices then, may well look over the top when the next one comes around, exact same situation as houses that sold last year or this year...

ShadowHearth

Funny enough there is a huge estate about 1 mile from where I live.

Old part of it is pretty much full, but the new one us scary...

They built those 3 level terrense houses which were going for 350k at boom times.

Now almost whole mew part of estate is empty and prices going from 190k to idiotic 260k. It's really scary when you see for sale: nr 3, 4, 6, 7, 8, 10 ... Etc.

Thay estate is just a reminder and a prove that there is still alot of space to go down!