Cormac Lucey predicts 80-90% fall from peak prices

Villa05

Well written and explained analysis from Lucey
http://cormaclucey.blogspot.com/2012/01/prospects-for-irish-residential.html

D3PO

I will give it a read but its just not realistic to make a statement like that in the market not least because, location, property type etc all have a significant bearing

A million euro house in Killiney will drop to 100k ? no chance.


A 400k apartment in wherever drops to 40k yeah ok thats realistic.

Jo King

D3PO wrote: »

I will give it a read but its just not realistic to make a statement like that in the market not least because, location, property type etc all have a significant bearing

A million euro house in Killiney will drop to 100k ? no chance.


A 400k apartment in wherever drops to 40k yeah ok thats realistic.

There are houses which were on the market in the mid 1980s in Ranelagh at £36K. I am talking about 4 bedroomed in Ashfield Road. The same houses would have been over the €1m at peak.Houses in Mt Merrion for £60k in 1990 went to €1.5m in 2006. There is no reason why prices cannot go back to where they came from.

hmmm

D3PO wrote: »

I will give it a read but its just not realistic to make a statement like that in the market not least because, location, property type etc all have a significant bearing

And that's why rents are such a good indicator of the value of a property. I don't buy this argument that you can't exclusively look at rents because of location etc, all those factors will be reflected in rents that people are willing to pay.

gigino

He was / is an advisor to a former PD minister. Given some PD ministers like Minister Harney are reported to be on a pension of 140,000 a year, and given the PD's were in government for much of the property boom, surely he should look at his own conscience and wonder how he can sleep at night. Some new 2-bedroom apartments in the country can be bought for 38,000. Thats not much more than 3 months pension for his PD boss. And he thinks prices should fall further. I can think of other things which should fall.

Mr. Loverman

gigino wrote: »

He was / is an advisor to a former PD minister. Given some PD ministers like Minister Harney are reported to be on a pension of 140,000 a year, and given the PD's were in government for much of the property boom, surely he should look at his own conscience and wonder how he can sleep at night. Some new 2-bedroom apartments in the country can be bought for 38,000. Thats not much more than 3 months pension for his PD boss. And he thinks prices should fall further. I can think of other things which should fall.

I don't see how this is relevant.

Senna

gigino wrote: »

And he thinks prices should fall further. I can think of other things which should fall.

Prices will find their own level, no-one has control over them (bar NAMA propping them up). People can speculate, give an opinion on where they will end up, but no person saying anything will change house prices.

Average house prices are a guide and a good guide. x% drop is an average, some will fall by more, some less. I cant see the average house cost dropping by 90%, will some houses fall by 90%, without a doubt. Land prices in some areas have dropped by more. 75% was a figure said around 2008 and i still think its not far off, AFAIK that would leave an average house price of around 90k.

Dub.

Why would a house in Killiney be worth more than a Hundred thousand?

I remember them being worth less than that, and that was a time with jobs.

The_Conductor

Dub. wrote: »

Why would a house in Killiney be worth more than a Hundred thousand?

I remember them being worth less than that, and that was a time with jobs.

Why would it be worth more than 100k?
Simple supply and demand.
Very few properties were built in Killiney over the past 15 years.
Lots of people want to live there.
Prices are determined by demand- when sufficient people satisfy the availability at a given price point- prices stabilise. QED- Killiney may remain unobtainable for most- precisely because of the number of people who want to live there......

Is a price of over 100k sustainable in the long run? How long is a piece of string really. If a teacher could buy in Killiney in the 80s (which I assure you they couldn't), it would stand to reason that the price point would stabilise around a similar multiple of their now salary.

Mr. Loverman

I agree, Killiney (etc.) will never hit 100k. Too many people want to live there. But places where people don't really want to live (e.g. Citywest) will most likely see under-100k prices, if the people currently living there accept the reality of their negative equity that is...

zulfikarMD

unrealistic analysis..

res ipsa

zulfikarMD wrote: »

unrealistic analysis..

No prices will undershoot fundamental value by about 35% due to lack of mortgage lending
Were going back to 1996 just like the ISEQ. There is nothing new under the sun.

Mr. Loverman

Does anyone know how long the lack of mortgage lending will probably last?

Mr. Presentable

Mr. Loverman wrote: »

Does anyone know how long the lack of mortgage lending will probably last?

I'd say until Tuesday at least

res ipsa

Mr. Loverman wrote: »

Does anyone know how long the lack of mortgage lending will probably last?

2014 will be the nadir but 2018 will be when things pick up a bit. Expect to pay a 20% deposit or even 25% in keeping with what your parents payed.

P. Breathnach

res ipsa wrote: »

2014 will be the nadir but 2018 will be when things pick up a bit. Expect to pay a 20% deposit or even 25% in keeping with what your parents payed.

Lucey did numbers and then made guesses.

Are you making guesses without even pretending to do numbers?

The_Conductor

P. Breathnach wrote: »

Lucey did numbers and then made guesses.

Are you making guesses without even pretending to do numbers?

Not exactly- lenders are becoming more and more cautious- a 20% deposit is rapidly becoming the norm, you may get some lenders who are still satisfied with a 10% deposit, but they are very much in the minority and reviewing this practice.

With respect of the 2014 and 2018 dates- the 2014 date probably refers to Eurostat figures alongside stated Commission policy- whereas the 2018 figure slots into 10 year German and French development plans. Not sure if the use of these by the poster was deliberate or not, but there are some backgrounds to both.

In an Irish context- I genuinely do not expect a recovery fullstop, until such time as either our debt is restructured (read defaulted on) or a second bailout on far more favourable terms- akin to that offered to Greece, is agreed on. Its simply not viable that we raise taxes and/or cut spending by a combined 26 billion on current figures (more if we have economic contraction and/or lower than expected taxation figures). The figures simply don't add up. If people are muttering about how bad things are now- think about just how bad things will be if another 26 billion is syphoned out of the economy...........

There are all sorts of wonderful suggestions about getting private pension funds to convert their holdings into Irish government debt- ok, you get a maximum one off hit of 75-78 billion- you still have another 130 to go, and you need to pay a dividend to the pension funds, unless you plan on totally raiding them, as was done with the National Pension Reserve Fund.........

A nadir of 2014 and a recovery by 2018? Wishful thinking in the extreme in my opinion.

stepbar

Jo King wrote: »

D3PO wrote: »

I will give it a read but its just not realistic to make a statement like that in the market not least because, location, property type etc all have a significant bearing

A million euro house in Killiney will drop to 100k ? no chance.


A 400k apartment in wherever drops to 40k yeah ok thats realistic.

There are houses which were on the market in the mid 1980s in Ranelagh at £36K. I am talking about 4 bedroomed in Ashfield Road. The same houses would have been over the €1m at peak.Houses in Mt Merrion for £60k in 1990 went to €1.5m in 2006. There is no reason why prices cannot go back to where they came from.

That would be realistic if wages also returned to where they came from too.

gigino

smccarrick wrote: »

If a teacher could buy in Killiney in the 80s (which I assure you they couldn't), it would stand to reason that the price point would stabilise around a similar multiple of their now salary.

Killiney is an exceptional area and its where Rock stars, some of the highest paid TV, media and business personalities etc live. If you want to compare wages to property prices in Ireland then lets choose average public sector salary which is € 48,000 per year according to the CSO. www.cso.ie We could choose average private sector salary but statistics on that may be less reliable. Now lets look at what you can buy new 2 bedroom apartments for in ordinary, middle Ireland. You can get them for not just less than 48k, not just less than 38k but less than 30k even.
http://www.daft.ie/searchsale.daft?id=631593
http://www.daft.ie/searchsale.daft?id=614632
http://www.daft.ie/searchsale.daft?id=613282
http://www.daft.ie/searchsale.daft?id=630903
http://www.daft.ie/searchsale.daft?id=629156
http://www.daft.ie/searchsale.daft?id=629383
http://www.daft.ie/searchsale.daft?id=627468

The above are asking prices from Donegal to Waterford city, Louth to Leitrim to Wexford etc. Sale prices may be less that than even, as any auctioneer in todays climate will tell you.


Now, what other country in the world could you buy a new 2-bedroom apartment, guilt to Irish government standards, for as little as 7 ot 8 months ( not years ) average public sector salary ? This suggests to me that property prices are already very low. The average Guard retiring after 30 years service can buy 2 or 3 apartments with a tax free gratuity , without touching the monthy pension. Property is already buttons in many areas of this country. It cannot fall much more in many areas surely ? If it does, will you see an apartment for sale for only 2 or 3 months wages ? And with low interest rates property was never so affordable ? If a person has savings equivalent to 7 or 8 months wages, are they not as well putting it in to something tangible like a new apartment rather than in to a bank ?

ILikeBananas

gigino wrote: »

Killiney is an exceptional area

And the properties that you have shown are also exceptional in that they are either in undesirable areas or are undesirable themselves.

gigino wrote: »

It cannot fall much more in many areas surely ? If it does, will you see an apartment for sale for only 2 or 3 months wages ? And with low interest rates property was never so affordable ? If a person has savings equivalent to 7 or 8 months wages, are they not as well putting it in to something tangible like a new apartment rather than in to a bank ?

The key indicator is not the price of apartments in Longford nor mansions in Killiney but, the staple of Irish middle class families, the three/four bed semi-detached houses in the cities all over the country. They still have plenty of room to fall in value.

gigino

ILikeBananas wrote: »

And the properties that you have shown are also exceptional in that they are either in undesirable areas or are undesirable themselves.

Dunno. People have to live in the country too. Many country areas do not have "undesirable" areas the way large cities like Dublin do. Take Bundoran for example, I do not think there is a posh end of Bundoran and a no-go area in Bundoran. The apartment there has a spectacular sea view. Many people go there for surfing. Not an undesirable area for some, especially if you had a job there or in nearby Donegal town.

ILikeBananas wrote: »

The key indicator is not the price of apartments in Longford nor mansions in Killiney but, the staple of Irish middle class families, the three/four bed semi-detached houses in the cities all over the country. They still have plenty of room to fall in value.

some new 3 / 4 bedrommed houses have changed hands for 50,000. You think they still have plenty of room to fall ....do you think they will fall to 20 or 30 k ?

The_Conductor

gigino wrote: »

Killiney is an exceptional area and its where Rock stars, some of the highest paid TV, media and business personalities etc live. If you want to compare wages to property prices in Ireland then lets choose average public sector salary which is € 48,000 per year according to the CSO. www.cso.ie We could choose average private sector salary but statistics on that may be less reliable. Now lets look at what you can buy new 2 bedroom apartments for in ordinary, middle Ireland. You can get them for not just less than 48k, not just less than 38k but less than 30k even.
http://www.daft.ie/searchsale.daft?id=631593
http://www.daft.ie/searchsale.daft?id=614632
http://www.daft.ie/searchsale.daft?id=613282
http://www.daft.ie/searchsale.daft?id=630903
http://www.daft.ie/searchsale.daft?id=629156
http://www.daft.ie/searchsale.daft?id=629383
http://www.daft.ie/searchsale.daft?id=627468

The above are asking prices from Donegal to Waterford city, Louth to Leitrim to Wexford etc. Sale prices may be less that than even, as any auctioneer in todays climate will tell you.


Now, what other country in the world could you buy a new 2-bedroom apartment, guilt to Irish government standards, for as little as 7 ot 8 months ( not years ) average public sector salary ? This suggests to me that property prices are already very low. The average Guard retiring after 30 years service can buy 2 or 3 apartments with a tax free gratuity , without touching the monthy pension. Property is already buttons in many areas of this country. It cannot fall much more in many areas surely ? If it does, will you see an apartment for sale for only 2 or 3 months wages ? And with low interest rates property was never so affordable ? If a person has savings equivalent to 7 or 8 months wages, are they not as well putting it in to something tangible like a new apartment rather than in to a bank ?

I was replying to Dub. who stated he/she remembered property being less than 100k in Killiney- I wasn't inviting a debate on the merits of public sector pensions. I used a teacher's salary- and a multiple thereof, as a reasonable barometer of how to price property in the future- aka if (and its not a valid 'if', in the case of Killiney) a teacher could afford a property in any given area back in the 80s- that its a fair assumption that going forward any given property in any given area would have a price of a comparable multiple of their now salary. It is a useful yardstick- nothing more, nothing less. If you want to debate public sector salary and/or pensions- please take it elsewhere, this is not an appropriate venue.

Regards,

SMcCarrick

astrofool

smccarrick wrote: »

I was replying to Dub. who stated he/she remembered property being less than 100k in Killiney- I wasn't inviting a debate on the merits of public sector pensions. I used a teacher's salary- and a multiple thereof, as a reasonable barometer of how to price property in the future- aka if (and its not a valid 'if', in the case of Killiney) a teacher could afford a property in any given area back in the 80s- that its a fair assumption that going forward any given property in any given area would have a price of a comparable multiple of their now salary. It is a useful yardstick- nothing more, nothing less. If you want to debate public sector salary and/or pensions- please take it elsewhere, this is not an appropriate venue.

Regards,

SMcCarrick

I think you're neglecting population growth that tends to push the 'burbs out more and more, thus Killiney may never represent the "100k" price point against average earnings again (prices were in fact lower than this in the 80's as I remember looking there in '88 '89), but places like Bray/Greystones might.

As an extreme example, back in the 50's/60's Donnybrook was the suburbs, and priced accordingly, Foxrock was the countryside.

jmayo

hmmm wrote: »

And that's why rents are such a good indicator of the value of a property. I don't buy this argument that you can't exclusively look at rents because of location etc, all those factors will be reflected in rents that people are willing to pay.

I would say the rental market has got an artifical government sponsored floor just like the house prices.
Take out the massive state rental allowances and where exactly would the base rental rate be ?
Yes just like house prices some properties will always be above the norm and some below it, but where will the average be is the question.

res ipsa wrote: »

No prices will undershoot fundamental value by about 35% due to lack of mortgage lending
Were going back to 1996 just like the ISEQ. There is nothing new under the sun.

I am of this opinion as bubble crashes almost always result in the prices going back to pre bubble prices, the bigger the bubble the bigger the fall.
Some believe our bubble began in 2002 but that was only when it really took off.
House prices had been going up for the preceeding 6 odd years.

desertcircus

Mr. Loverman wrote: »

Does anyone know how long the lack of mortgage lending will probably last?

Until Irish banks' capital ratios stabilise and improve, and the possibility of a further shock recedes to a negligible level, lending will be constricted. When will that happen? Hard to say, but it's going to be a few years more.

jmayo

gigino wrote: »

Dunno. People have to live in the country too. Many country areas do not have "undesirable" areas the way large cities like Dublin do. Take Bundoran for example, I do not think there is a posh end of Bundoran and a no-go area in Bundoran. The apartment there has a spectacular sea view. Many people go there for surfing. Not an undesirable area for some, especially if you had a job there or in nearby Donegal town.

Right unless you want to go there for surfing then what are you going to do with the property ?
Live there and commute to Sligo or Letterkenny where there might be jobs ?
Oh wait can't one buy closer to either of those towns in the myriad of cheap property and cut the commute time and cost :rolleyes:
BTW talking to someone recently who lives in a Donegal town (not mentioned here) he says the place is now a ghost town.

Apartments in Bundoran just like Section 23s in Dromod or townhouses in Carrick on Shannon are going to take a hammering because they are not needed or desirable.
There is not going to be the local employment and there is an oversupply.

gigino wrote: »

some new 3 / 4 bedrommed houses have changed hands for 50,000. You think they still have plenty of room to fall ....do you think they will fall to 20 or 30 k ?

It can depend where they are and what condition the estate is in.
If they are in half finished estate that is going to be diverted to social housing then the only ones that will buy are investors who may think they can rent them out to local council.
If they are out in the middle of nowhere it depends on location and if local really wants them at all.
If you are talking about rural West of Ireland the thing to remember is emigration is going to cut the demand drastically.