Glut of repossessed houses could depress prices ‘by up to 25%’

kaymin

SeanSouth wrote: »

This idea of government policy and NAMA artificially influencing market prices by curtailing supply is utter nonsense. Releasing all these houses on the market at the same time will cause nothing but a very short lived ripple. People still need to live somewhere.

NAMA possesses huge amounts of development land - the manipulation of the prices at which this land sells for has a knock on effect on the prices at which houses can be built.

SeanSouth wrote: »

Repossession doesn't make the demand for housing to go away and it doesnt increase the supply. At most. It will shift the supply and demand balance between property owners and property renters.

So repossession does increase supply then albeit demand also increases. The point is the price at which such properties sell for should decrease following repossession for fundamental reasons such as the low average earnings of the average worker.

SeanSouth wrote: »

At present it would be difficult for a developer to buy a site and build houses for less than it would cost to purchase 2nd hand equivalents. This can only be solved by price increases.

It can also be solved by lower site costs and lower build costs.

SeanSouth wrote: »

Finally the poster who talks about average salaries of 45K as a guide to setting average house prices at 150,000. Buying property in major cities is never cheap and was never cheap . The average buyer cant expect to buy a property in a central location in London, Paris, Brussels,Amsterdam,New York or any other capital city at average prices. I would say an average buyer can expect to pay average prices 45 minutes out of such cities but not centrally. A property in Ballsbridge was never accessible to the person on 45K but one in Leixlip might be.

True, except the average price of properties that sold in Leixlip in 2013 to date is €211k. So shall we agree that properties are over-priced by 29%?

Calina

SeanSouth wrote: »

In the meantime I raise my glass to the guy that believes that properties in Ballsbridge will eventually find their natural level at around 150,000 because we are a SMALL country :-)

No one has ever claimed this will happen and it ill behoves you to suggest they have. What they have suggested is that the current rate of property prices in South County Dublin remains above what it is a sustainable level for the population available to buy property in Ireland.

There are a couple of major issues here.

1) what happens in SCD is not fully reflected around the country. In fact, it's not fully reflected around Dublin as a whole. You can call it a whole little market in itself. The one thing it is not is typical of the property market in Ireland as a whole.

2) the average/mean property price in the Dublin area is significantly above the median price. I'm sure you understand what this means but the median price is that point at which half the houses sold are below it and half are above it. In a reasonable market, the median and mean shouldn't be too disparate. They are massively disparate in Dublin and in such away as to suggest that well over half the number of houses being sold in Dublin are being sold for below the average of mean price of housing.

3) I have not done a similar analysis on house prices achieved in Cork but what I have noticed is that I seem to frequently receive notices of reduced asking prices in the area around Douglas because I have automated notices set up for houses in areas in the south of the city.

As a result, I'm having some issues believing that property prices in Cork will globally rise when asking prices in what is a comparatively good area seem to be subject to a number of revisions downwards.

4) a property market rising at 10-15% per annum is non-sustainable and definitely nowhere near equilibrium.

The simple truth is we are probably quite a few years away from any sort of equilibrium. We do not have a mature rental market, and the last few years have seen a certain amount of see-sawing of houses between rental and sales market with the corresponding messing with prices on both.

I'm unclear as to what is going to happen in the Dublin market over the next 7-8 months. I've seen some evidence of supply being dumped on the market, correlated with reports that prices in Dublin have been rising. Into the January/February market, this isn't usually great.

With respect to comments about NAMA, there are a couple of points to raise:

1) reportedly a significant to majority proportion of the property they control directly or indirectly is commercial and not residential.

2) where they do control residential it is also problematic because I suspect quite a lot of it is apartment based. Apartments built in Ireland during the property boom have a reputation issue - I wouldn't buy them now as I am concerned about construction quality - if they have been unoccupied for a long time, there may be questions over the condition of same anyway. And above all else, apartments were not really designed for living in but for exploiting for money, be it renting out or packing as many of them for a developer return as possible.

People's requirements have changed. People tend to desire extra space for a play room or a home office. There is a chronic shortage of 4 bedroomed houses in Dublin in general because not that many of them were built compared to three bedroomed anyway way, even during the boom. So in my view, demand for houses of that size will probably be sustainable.

However, all other sectors of the market will have to be handled with care taking account of who the expected market is - for example, how many people earning 100KE/pa are willing to live in one bedroomed small boxes, for example?

The interplay of the property market in Ireland is complex. It's not, of course, immediately logical everywhere but in Ireland, where a lot of decisions are not made logically with regards to property, it's particularly difficult to predict what is going to happen.

I do believe, however, that as long as we pretend it's possible to have a functional banking system with people borrowing money and not paying it back because Where's Their NAMA, the property market in Ireland will not find an equilibrium. There will be toos and fros and property will shoot up temporarily and fall back down as supply moves around the place. Houses that are for sale may not, for example, be occupied either by owners or renters, renters will find their Part VIs terminated for reason of sale.

You seem to suggest this means that there's no great change in society. What I believe is that it means we will have a highly unstable supply on both the sales and rental markets. I don't think this is healthy either.

handlemaster

In do some property porn today. Prices set to rise up to 30% in dublin next year !!

earlyevening

Here's the link. Jesus wept.

http://www.independent.ie/business/personal-finance/property-mortgages/house-prices-to-rise-30pc-in-city-shortfall-29859068.html

handlemaster

I'm sure the prices will rise in dublin but the indo have lost all reasonable balance in their journalism

December2012

It's almost as if the print media made lots of money from property supplements and ads for housing.

gaius c

December2012 wrote: »

It's almost as if the print media made lots of money from property supplements and ads for housing.

You're an awfully cynical boy. It's almost like you lived in a country where the media pimped property at every available opportunity. Luckily I don't live in a property obsessed country like that.

gaius c

SeanSouth wrote: »

In the meantime I raise my glass to the guy that believes that properties in Ballsbridge will eventually find their natural level at around 150,000 because we are a SMALL country :-) Might make a good topic for a doctoral thesis.

And you were doing so so well...

The_Conductor

Guys- I'm deeply unhappy with people personalising their posts- please stick to the facts- and similarly refute other people's posts, without resorting to personalising your responses. Our forum charter is there for a reason- to stop people behaving in a manner that might be viewed by other posters as antagonistic, which upkeeping the standards and decorum of the forum for posters in general.

If you disagree with these fundamentals- thats fine by me- but you also loose the right to post here, period.

If you have an issue with this- also, from the forum charter- there is a dispute mechanism that can be invoked where you can make your displeasure felt, rightly or wrongly.

Thats all I'm saying.

Villa05

handlemaster wrote: »

In do some property porn today. Prices set to rise up to 30% in dublin next year !!

Meanwhile in the same rag

STAFF at a debt resolution agency are undergoing training in suicide prevention due to the increasing number of distressed mortgage-holders who are threatening to end their lives over their crippling debts, the Sunday Independent has learned.

http://www.independent.ie/business/personal-finance/debt-firm-staff-trained-to-calm-clients-suicidal-over-mortgages-29859089.html

The definition of stupidity should be revised in the Dictionary and put the independent logo beside that word.

Daith

Villa05 wrote: »

Meanwhile in the same rag



http://www.independent.ie/business/personal-finance/debt-firm-staff-trained-to-calm-clients-suicidal-over-mortgages-29859089.html

The definition of stupidity should be revised in the Dictionary and put the independent logo beside that word.

Won't somebody think of the family home!!!!

gaius c

Daith wrote: »

Won't somebody think of the family home!!!!

Renters have family homes too.

gaius c

DebDynamite wrote: »

Exactly - the BTLs are making money. Where is that money going if it's not to pay off the mortgage? Into a secret bank account somewhere?

If enough noise is made and the threat of repossession becomes real, perhaps the strategic defaulters will put up a big chunk of money from said bank accounts and promise to keep on top of repayments from there on in.

That's a very broad assumption to be making. Half the banks mortgage book is from the height of the bubble and even with interest only and trackers, that's a hefty sum to be repaying.

moxin

By the way the rate of increase in Dublin overall prices has fallen for the 3rd month in a row since the big increase in Sept. Its the same fall for Dublin houses(Apartment increases per month are all over the place)
http://www.cso.ie/en/releasesandpublications/er/rppi/residentialpropertypriceindexnovember2013/#.Urga4vvLJka

Dub overall increase
Sept - 3.9
Oct - 2.3
Nov -1.3

Dub houses increase
Sept - 4.2
Oct - 2.0
Nov - 1.4

The_Conductor

Factoring inflation into the equation, we're back in negative territory again........

lima

The_Conductor wrote: »

Factoring inflation into the equation, we're back in negative territory again........

Is inflation not really low like 0.3% at the moment though?

So with decreasing increases, is this expected with the time of year? looks like a decrease at least in possibly Feb/March next year

gaius c

Think trying to read anything into the rate of change of the change on such low market volume is tea leaves stuff.
Headline figure is that prices are still increasing and it's probably fairest to report it that way.

Then again, it could just be the market drawing a breath before the big three O increase next year.

The_Conductor

lima wrote: »

Is inflation not really low like 0.3% at the moment though?

So with decreasing increases, is this expected with the time of year? looks like a decrease at least in possibly Feb/March next year

Hmmm- just looked up tradingeconomics- year to date we have an average rate 0.3%- you're right. This is up from a 0.1% in September- the rise being attributed to increases in restaurant and hotel prices. The forecast is for a negative rate of inflation of 0.1% for January........

Soooo- at current trends- Dublin prices should stagnate or even fall again within 2-3 months.

Funny how September seems to have been a turning point- what happened then?

Glenbhoy

handlemaster wrote: »

I'm sure the prices will rise in dublin but the indo have lost all reasonable balance in their journalism

That's hardly fair, they have quoted a leading economist with absolutely no connections to any vested interests, so it seems to be a pretty reasonable assumption to me!!

By the way, can anyone make sense of this statement attributed to Robert Ganly:
"He said there was not sufficient lending to the small builders who want to build the needed houses, and said demand could push prices up by up to 30 per cent, if lending was made available."

Snakeblood

Glenbhoy wrote: »

That's hardly fair, they have quoted a leading economist with absolutely no connections to any vested interests, so it seems to be a pretty reasonable assumption to me!!

By the way, can anyone make sense of this statement attributed to Robert Ganly:
"He said there was not sufficient lending to the small builders who want to build the needed houses, and said demand could push prices up by up to 30 per cent, if lending was made available."

Its simple, the more houses that are built the more demand there is from the people immigrating to build the houses, and from people buying more houses because cheap loans made it viable. It worked up to 2006.

gaius c

Glenbhoy wrote: »

That's hardly fair, they have quoted a leading economist with absolutely no connections to any vested interests, so it seems to be a pretty reasonable assumption to me!!

By the way, can anyone make sense of this statement attributed to Robert Ganly:
"He said there was not sufficient lending to the small builders who want to build the needed houses, and said demand could push prices up by up to 30 per cent, if lending was made available."

Lets look at who they quoted:

Prof John FitzGerald of the Economic and Social Research Institute (ESRI)

Family member of a leading estate agent.

Robert Ganly, managing director of Ganly Walters estate agents

An actual honest to god estate agent.

So in conclusion, yes you're right. They couldn't possibly have any vested interest at all and that their predictions are based on cold, hard scientific methods.

gaius c

Snakeblood wrote: »

Its simple, the more houses that are built the more demand there is from the people immigrating to build the houses, and from people buying more houses because cheap loans made it viable. It worked up to 2006.

Are NAMA going to warehouse unemployed Irish builders too so that foreign builders can come in and create extra demand for accommodation?

gaius c

Also at times like this, it's instructive to look at the past predictive records of these bould economists.

John FitzGerald (ESRI economist) stated that if he believed there was a crash coming that he would sell his house and rent it back. Tellingly he is not doing so because he believes, as I do, that if (and that is a big 'if') the market is going to crash it will do so in a patchy, selective way which will not impact to any great degree on many of the existing homes in Ireland.

The biggest asset bubble in recorded economic history and a trained economist managed to ignore it to the extent that he didn't see any price drops at all for most houses in the state???

Glenbhoy

gaius c wrote: »

Lets look at who they quoted:

Family member of a leading estate agent.

An actual honest to god estate agent.

So in conclusion, yes you're right. They couldn't possibly have any vested interest at all and that their predictions are based on cold, hard scientific methods.

I just wanted to be sure, nobody else seemed to have mentioned just who exactly the economist was!

Villa05

Hope you all had a Happy Christmass and best wishes for the new year

Here is some comedy Gold from the rag and vested interests

Sherry FitzGerald has said the 2014 property market will be "the most normal we've seen in quite a number of years".............
"We have been seeing some parts of the country with values falling almost as much as Dublin has been rising,"....................
"The lack of houses being marketed for sale is being exacerbated by the fact of many owners being in deep negative equity.................
This means just over 1pc of all housing stock is changing hands compared with approximately 4pc being sold in the UK market..............
Mr Lowe also pointed to demographics as a key factor for increased demand for housing. While no new homes are being built

http://www.independent.ie/irish-news/property-recovery-to-grow-as-prices-rise-in-country-29866841.html

The_Conductor

We need to have some sort of reprecussions for people who issue journalistic prose like this. Unfortunately a lot of population simply don't have the intelligence to question the ridiculous opinion pieces this organ in particular comes out with- and it is the most popular paper in Ireland by a country mile.

There is no counter balance to the crap they come out with- even with people who recognise how stupid their arguments are such as many of the posters here- we only reach a very small subsection of the online audience.

People- as a group- do follow herd mentality- and those outliers who do not subscribe to the group mentality- are reviled by the population. Lots of people want prices to inflate again.......

People are stupid. I'm being blunt- but its a truism.

lima

Unfortunately the Independent knows that it's a self-fulfilling prophesy. The most we can do right now is get on to Twitter etc. and remind people that these are vested interests trying to pump up the market.

SeanSouth

I spent years (before the crash) posting on Askaboutmoney and other sites and crying that property prices were way too high. The crash eventually happened Prices then fell by the predicted 50% to 60%. That all happened six years ago. Prices had to fall then because developers were making supernormal profits, land prices were exhorbitant, salaries were out of line with the rest of europe, the quantity of building was unsustainable for a country of our size,credit was in freeflow to people who had no hope of paying back, the ratio of selling price to cost of construction was farcical, Irish house prices were out of sync with everywhere else.

What I don't get now is the people who still hold a view that property prices should continue to fall.I simply do not get it. In my view property is now at absolute bargain prices. We have overshot the bottom of the collapse and we are now experiencing a typical bounce.

1. Someone has mentioned that the average worker should be able to purchase a family home for 150,000 in SCD. The answer to this is as follows
a) The cost of construction of a decent residential home (to current building regulations) costs in the region of 1300 euro per square metre to build. A small modest home of 120 Sq metres will cost 156,000. On top of that is the site cost. The most basic tiny site is costing a minimum of 150,000. On top of that the builder must get a little profit. The minimum to build a small house is 300,000 to 350,000. Anyone dreaming for houses at 150,000 might as well start dreaming for a new Mercedes at 10,000. It can never happen. Builders cannot and will not build at a loss and we shouldnt expect them to.

2. Anyone hoping for prices to fall should be hoping that building activity increases to address the supply problem. Building activity will only happen when credit availability improves and the selling price of houses allows the builder to make a profit over the cost of construction and cost of site. Neither of these conditions are present at the moment.

3) For prices to fall, demand needs to abate. At the moment we are witnessing huge pent up demand. Young people in their 20s have held off purchasing for the past seven years and are extremely anxious to get into the market. Population is also growing. It is recognised that 25000 new houses per year are required to satisfy the current demand and at present we are building practically none. If we are building zero new houses and the demand is increasing then the prices can only go in one direction and rapidly.

4) For those who say that the supply is being distorted by NAMA and the lack of repossessions, I would say that the market is being equally distorted by buyers who have held back from buying in the hope of lower prices. There is about six or seven years of pent up demand by buyers who didnt buy into a falling market. These people now wish to buy and they are more than equal match for any flood of homes that may come from repossessions or from NAMA.

5) Our house prices are now substantially lower than other comparable capital cities. Lower than Helsinki, lower than Stockholm, lower than Bern, lower than London.

The only way for prices to fall from here is if development land was to become available for almost nothing. We know this cant happen as there is almost no land available or indeed,the amount of available land in SCD as a percentage of the land already built is not enough to affect the overall market price. So if NAMA gave away all the land it is holding for nothing, "in the common good" the amount of land in question is way too insignificant to affect market prices. The amount of mortgages in arrears for more than 90 days is approximately 100,000. This represents about 4-5% of the entire housing stock and if placed on the market suddenly is not enough to impact the market for any significant time period and in any case is a highly unlikely event.

Houses in South County Dublin were never cheap. They were always the reserve of the highly paid. They were never accessible to the average paid.
I estimate that the affordability of houses in SCD is similar now to what it was in 1990. In 1990 interest rates were higher but overall affordability was about the same. Any younger people getting into this market then and now need something more than good income. They need family support (wealth) to make it possible.

I would be very interested to hear any views, based on fundamentals, as to why house prices are likely to decrease.

Calina

SeanSouth wrote: »

1. Someone has mentioned that the average worker should be able to purchase a family home for 150,000 in SCD.

Please provide a citation for this. I never argue this but I still say house prices are way to high for the economic health of the country.

I am sick of arguing against this canard but you've mentioned it twice now so please provide evidence that someone asserted it.

Villa05

The_Conductor wrote: »

We need to have some sort of reprecussions for people who issue journalistic prose like this.

People are stupid. I'm being blunt- but its a truism.

Reprecussions, Indeed

MEDIA group Independent News & Media said yesterday that it has completed its restructuring, resulting in a reduction of its debt to €118m.

Core debt has been reduced to approximately €118m from over €400m --

http://www.independent.ie/business/media/inm-slashes-debts-in-restructuring-29862804.html

Just as well, people are stupid, the system is designed to reward stupidity, wonder how much of their debt has been passed to you and me.