Dead Cat Bounce

davet82

Well it seems the cat is a Dublin cat

Are we in a price bounce on Dublin property that had been predicted by the likes of David McWilliams or is it upwards and onwards from here on in or maybe we'll just bobble along from here on in for the next few years...

I think we definitely saw the bottom (so far) in the first half of 2012 with prices creeping up with MIR which I had expected but what I didn't expect was the lack of decent housing after a surge in buying (there were more houses bought in Dublin in December alone than the first three months of this year). So because demand and supply is balancing out we seem to have held on to these gains, my questions is though are these gains sustainable?

Are there really enough decent BTLs in distress that will be repo'd? How many of these would actually be in Dublin and would the banks manage the repos that they would only trickle on to the market, more money borrowed to pay towards the ill advised lending to others if you know what I mean...


This is all a guessing game of course...

Interested in peoples opinions on if this is 'the bounce' and if so when will it end?

desertcircus

Something I'm curious about but haven't seen much on is whether we can be said to have a recovery without analysing the number of sales relative to historical data. If only one house was sold in the whole of May this year and it got half a million euro, nobody would seriously claim it represented a recovery, but we seem to be having long discussions about whether recovery is here without really looking at the fact that transactions by volume are at 5-10% of what they were at the peak. That level of transactions was obviously unhealthy and unsustainable, but there is surely a "normal" level of transactions, and it's surely a great deal higher than the current figures. We're furiously arguing over whether the numbers mean we're recovering while ignoring the fact that the size of the market itself has fallen off a cliff.

Scortho

davet82 wrote: »

Well it seems the cat is a Dublin cat

Are we in a price bounce on Dublin property that had been predicted by the likes of David McWilliams or is it upwards and onwards from here on in or maybe we'll just bobble along from here on in for the next few years...

I think we definitely saw the bottom (so far) in the first half of 2012 with prices creeping up with MIR which I had expected but what I didn't expect was the lack of decent housing after a surge in buying (there were more houses bought in Dublin in December alone than the first three months of this year). So because demand and supply is balancing out we seem to have held on to these gains, my questions is though are these gains sustainable?

Are there really enough decent BTLs in distress that will be repo'd? How many of these would actually be in Dublin and would the banks manage the repos that they would only trickle on to the market, more money borrowed to pay towards the ill advised lending to others if you know what I mean...


This is all a guessing game of course...

Interested in peoples opinions on if this is 'the bounce' and if so when will it end?

There is certainly enough btls in distress. Landlords buying at yields of 1-2% are never going to make good investments so I can see a lot of them getting repossessed.
The biggest issue with dublin is the supply of good quality family homes in settled areas. People don't want houses built in the last 10 years, unless they're of extremely good quality but a lot of what was built was shoddy.
Where dublin property is going is a tricky one. Most btls are apartments and most of the demand for houses at the moment are young families or professionals looking to start a family in the next few years. I don't think they're going to want to live in apartments.
Repossessing btls in arrears will have an effect on dublin property prices, but it's hard to see how they'll have an effect on three bed semis in terenure.
If repossessions of family homes do occurr, it won't be until the latter end of 2014 to the start of 2015.
Question is how many 3 bed semis in arrears, are in the sought after d6 area?
Dublins property market, is itself made up of many markets.

galwayjohn89

Probably a stupid question but what is btls?

Ritchi

Vuzuggu wrote: »

Probably a stupid question but what is btls?

Buy to lets

by the seaside

Scortho wrote: »

There is certainly enough btls in distress. Landlords buying at yields of 1-2% are never going to make good investments so I can see a lot of them getting repossessed.
The biggest issue with dublin is the supply of good quality family homes in settled areas. People don't want houses built in the last 10 years, unless they're of extremely good quality but a lot of what was built was shoddy.
Where dublin property is going is a tricky one. Most btls are apartments and most of the demand for houses at the moment are young families or professionals looking to start a family in the next few years. I don't think they're going to want to live in apartments.
Repossessing btls in arrears will have an effect on dublin property prices, but it's hard to see how they'll have an effect on three bed semis in terenure.
If repossessions of family homes do occurr, it won't be until the latter end of 2014 to the start of 2015.
Question is how many 3 bed semis in arrears, are in the sought after d6 area?
Dublins property market, is itself made up of many markets.

I'm an interested observer form England, and also with family in Spain. What appears to have happened in Spain is that the banks were reluctant to repossess or would repossess but not put on market. My mum has just bought a house out there (not new build and in an established village location) that the bank put on at E50k and sold to her for E39k - very significant write down on mortgage debt we can assume and a big drop in value.

Anecdotally, what appears to be happening is a shift from a banking solvency crisis to a liquidity crises. During the solvency crisis phase, the banks preferred to keep the property / debts on their books at an inflated property value. However, as it turns into a liquidity crisis, the banks must raise cash and the properties go for the true (fire sale) market value.

As I say, I'm overseas but visit Ireland often enough. As long as the banks in Ireland have a solvency crisis but not a liquidity crisis, they will not repossess as this will exacerbate the solvency problem (not in reality as the values applied to distressed mortgage properties are fictional). It will need to move into the liquidity crisis stage, I think before there is action. Will the state / troika be willing and able to prevent a liquidity crisis? Is there no danger of this because the economy / banking system can limp along as it is? Have I got this completely wrong?

davet82

desertcircus wrote: »

Something I'm curious about but haven't seen much on is whether we can be said to have a recovery without analysing the number of sales relative to historical data. If only one house was sold in the whole of May this year and it got half a million euro, nobody would seriously claim it represented a recovery, but we seem to be having long discussions about whether recovery is here without really looking at the fact that transactions by volume are at 5-10% of what they were at the peak. That level of transactions was obviously unhealthy and unsustainable, but there is surely a "normal" level of transactions, and it's surely a great deal higher than the current figures. We're furiously arguing over whether the numbers mean we're recovering while ignoring the fact that the size of the market itself has fallen off a cliff.

Nicely put, it actually seems a little senseless trying to predict small quantities of sales of small quantities of property with little data.

The PPR is a funny one to try figure out what is going on I find, I always thought of it this way when reading about so called price rises...

5 houses sell for 100k in January so the average house in the area is 100k obviously

in February another 5 houses sell, 4 for 100k and 1 for a million the average has no been distorted and we now have a price rise in the average house

Scortho wrote: »

There is certainly enough btls in distress. Landlords buying at yields of 1-2% are never going to make good investments so I can see a lot of them getting repossessed.
The biggest issue with dublin is the supply of good quality family homes in settled areas. People don't want houses built in the last 10 years, unless they're of extremely good quality but a lot of what was built was shoddy.
Where dublin property is going is a tricky one. Most btls are apartments and most of the demand for houses at the moment are young families or professionals looking to start a family in the next few years. I don't think they're going to want to live in apartments.
Repossessing btls in arrears will have an effect on dublin property prices, but it's hard to see how they'll have an effect on three bed semis in terenure.
If repossessions of family homes do occurr, it won't be until the latter end of 2014 to the start of 2015.
Question is how many 3 bed semis in arrears, are in the sought after d6 area?
Dublins property market, is itself made up of many markets.

Good points here too. Each area is its own little market at the moment I suppose and each area will be more rented accommodation than others. I'm imagine the D6 or 4 areas would be pretty immune to BTLs situation?

take Blanchardstown/Dublin 15 area, I'd reckon they would be pretty venerable in regards to property prices with a high volume of BTLs in the area but the question still remains are these the ones in trouble...

Dades

I don't see repossessions making even a ripple in the current Dublin family home market.

Supply is starved, and there may be a lot of people who've waited during the drop to get into the market. Perhaps this demand will abate somewhat, or perhaps the baby boom of the last 5 years or so will maintain the demand for family homes indefinitely.

With all the negative equity around, as well as people on trackers, prices will have to increase before more people can/will sell. Until then, buyers will be fighting over executor sales like they are today.

It's all f*cked up basically, and nobody knows what way it's going to go. If I had to throw my hat in the ring, I'd say it's more likely this market will see slow price strengthening rather than any slip backwards. Any further declines, imo, will be restricted to apartments, or further out commuter belt housing.

Basically there's no dead cat afaic.

gaius c

Dades wrote: »

I don't see repossessions making even a ripple in the current Dublin family home market.

Supply is starved, and there may be a lot of people who've waited during the drop to get into the market. Perhaps this demand will abate somewhat, or perhaps the baby boom of the last 5 years or so will maintain the demand for family homes indefinitely.

With all the negative equity around, as well as people on trackers, prices will have to increase before more people can/will sell. Until then, buyers will be fighting over executor sales like they are today.

It's all f*cked up basically, and nobody knows what way it's going to go. If I had to throw my hat in the ring, I'd say it's more likely this market will see slow price strengthening rather than any slip backwards. Any further declines, imo, will be restricted to apartments, or further out commuter belt housing.

Basically there's no dead cat afaic.

Your understanding of supply and demand is a little bit off there.

Galego

Dades wrote: »

I don't see repossessions making even a ripple in the current Dublin family home market.

I would disagree on the above statement but this is just my opinion.

If banks went on today and repossessed all those households (BTLs or not) and threw them for sale in the market, surely that would affect ALL house prices. The market would be over-flooded with new stock (bad or good) and surely would react to it in some way.

I think people in this country still do not understand the hole of debts which banks face with mortgage in arrears. There could be potentially 25% of households in Ireland in arrears. This is in a time in which the ECB rate is at a historical low.

davet82

Galego wrote: »

If banks went on today and repossessed all those households (BTLs or not) and threw them for sale in the market, surely that would affect ALL house prices. The market would be over-flooded with new stock (bad or good) and surely would react to it in some way.

If they would then you would be right but they wont I reckon.

Dades

gaius c wrote: »

Your understanding of supply and demand is a little bit off there.

Waiting for yours.

gaius c

Dades wrote: »

Waiting for yours.

It's the bit where you suggest that prices have to increase in order for houses to start selling that makes me think that.

pburns

OP hits nail on head for me - the end of MIR lead to a lot of properties being sold Q4 2012 and a resultantant shortage in early '13 meant prices remained stronger than mid-2012.

However I've been away for a few weeks and it seems at a quick glance - for the first time in a long time - new apts are being added at a greater rate than I've seen in the last 5-6 months. Maybe the natural supply is kicking back in or some are beginning to believe the game is up for debt forgiveness for the BTL sector. Maybe sellers are all thinking prices are off the bottom because of scarcity! I don't know...

Also, there seems to be a concerted effort by the EA industry to muddy the waters for the price register - not including size or details of properties and making sure the old ads no longer available on a Google archive search. I think there's been a lot of BS built around a small number of MIR-related purchases late 12 and to an extent early 13...

Glenbhoy

gaius c wrote: »

It's the bit where you suggest that prices have to increase in order for houses to start selling that makes me think that.

Prices have to increase in order for vendors to take an interest in selling though.

gurramok

Glenbhoy wrote: »

Prices have to increase in order for vendors to take an interest in selling though.

Perhaps the Indo's propaganda machine of "prices are rising" has helped to persuade vendors to put their properties on the market? Maybe the gullible have fallen for it

gaius c

Glenbhoy wrote: »

Prices have to increase in order for vendors to take an interest in selling though.

So everybody in the country sits on their property until buyers stump up cash that they don't have in order to pay what the seller thinks it's worth?
How long will this take?

Got news for you, an asset is only worth what a buyer is willing (or is able) to pay for it.

The Spider

Of course people won't sell unless they have to, that's why supply is so tight in Dublin, only people selling are those who absolutely have to.

smellslikeshoes

gaius c wrote: »

So everybody in the country sits on their property until buyers stump up cash that they don't have in order to pay what the seller thinks it's worth?
How long will this take?

Got news for you, an asset is only worth what a buyer is willing (or is able) to pay for it.

Not wanting to sell is only one part of it though, there is a serious amount of people that are in negative equity and couldn't move if they wanted to.


I personally think that until there is a decent number of repossessed properties released for sale to get things moving again it's just going to continue to stagnate for years to come. Any of these small monthly rises that have sporadically appeared and will continue to appear are not a sign of recovery and are just a sign of a broken market where the usual movements just aren't happening.

The Spider

There isn't going to be a huge amount of repossesed properties, released at once (why do people think this is going to happen?) if the government or NAMA can prevent price drops they will, it's in everyone's interests to have property prices rising, the government gets more tax, owners are no longer in negative equity, if a bank does reposess they can sell the asset and cover costs.

House owners feel richer they spend in the economy, the economy rises, the only beneficiaries of low house prices are people renting and looking to buy something cheap, and as far as the country is concerned they are vastly outnumbered by owners, who are more likely to vote in elections as they don't move around as much.

Anybody hoping for a cheap house, I've got news this isn't a dead cat it's a recovery prices are rising and will continue to do so!

gaius c

The Spider wrote: »

Of course people won't sell unless they have to, that's why supply is so tight in Dublin, only people selling are those who absolutely have to.

Dead right. If I was allowed to live in my house mortgage-free, I'd be pretty slow to sell up too.

Galego

The Spider wrote: »

it's in everyone's interests to have property prices rising, the government gets more tax, owners are no longer in negative equity, if a bank does reposess they can sell the asset and cover costs.

Sorry but I do not agree at all with the above statement.The longer that mentality stays in Irish people's head (high property price = good wealthy economy), the longer it will take for a possible economy recovery in this country.

Just look at Germany's house prices for the past 10 years.

Glenbhoy

The Spider wrote: »

Anybody hoping for a cheap house, I've got news this isn't a dead cat it's a recovery prices are rising and will continue to do so!

I think you forgot to insert "in my opinion" there. It's all about opinions, you're entitled to yours and only time will tell.

As for looking for a cheap house, that would be great, but the majority would be happy getting something half decent which they can afford. Unfortunately to buy in the 400K odd price bracket, one essentially has to be in the top 10-15% of earners, in my opinion it doesn't make sense that a couple with income in that bracket can afford at best a 3 bed semi in d6w. Equilibrium seems a little out of kilter as befits a market where there is massive interference.

The Spider

Galego wrote: »

Sorry but I do not agree at all with the above statement.The longer that mentality stays in Irish people's head (high property price = good wealthy economy), the longer it will take for a possible economy recovery in this country.

Just look at Germany's house prices for the past 10 years.

It's not about that mentality, there's too many interests, you may point to Germany, but we're more closely aligned to the states and Britain in terms of our way of thinking.

And even when people want low house prices, as soon as they buy they switch camps and immediately hope it's the bottom and prices rise, so anyone who says 'great house prices are falling, think I'll buy one' as soon as they do they're on the opposite side of the fence.

Like I said when that kind of money is involved everyone gets selfish and wants prices to rise.

Scortho

Anyone else seeing btls being packaged off and sold in blocks to institutions and funds?
It'd be a good way to sell tenanted units by the banks and prevents the whole firesale aspect. Instead of 1000 btls going onto the market you could have 20?

If you look at the gasworks, the block of apts in rathgar and clancy quay they seem to selling them this way, instead of individual units. Faster for the bank to shift a 100 lot of apartments in one go, than 100 individual apartments.

Ok the above example has all of the apartments in contained in the one unit but I'd still wager that 50 apartments in one lot in the same area would be attractive to the likes of kennedy wilson and such, especially if they are sold at yields of 10+%.

The Spider

Glenbhoy wrote: »

I think you forgot to insert "in my opinion" there. It's all about opinions, you're entitled to yours and only time will tell.

As for looking for a cheap house, that would be great, but the majority would be happy getting something half decent which they can afford. Unfortunately to buy in the 400K odd price bracket, one essentially has to be in the top 10-15% of earners, in my opinion it doesn't make sense that a couple with income in that bracket can afford at best a 3 bed semi in d6w. Equilibrium seems a little out of kilter as befits a market where there is massive interference.

Plenty of houses below 300k, the problem is everyone wants to live in south county Dublin, which was always a premium area, there's this sense of entitlement about that people who called the crash that they feel they deserve a house in south county Dublin for below 300k.

Sorry but this is the most desirable area in the entire country and will always be out of reach of people on average or just above average wages.

Anynama141

The Spider wrote: »

There isn't going to be a huge amount of repossesed properties, released at once (why do people think this is going to happen?) if the government or NAMA can prevent price drops they will, it's in everyone's interests to have property prices rising, the government gets more tax, owners are no longer in negative equity, if a bank does reposess they can sell the asset and cover costs.

House owners feel richer they spend in the economy, the economy rises, the only beneficiaries of low house prices are people renting and looking to buy something cheap, and as far as the country is concerned they are vastly outnumbered by owners, who are more likely to vote in elections as they don't move around as much.

Anybody hoping for a cheap house, I've got news this isn't a dead cat it's a recovery prices are rising and will continue to do so!

Yeah it really is in everyone's interest to have a basic requirement for living to get more expensive - sure doesn't everyone celebrate increasing fuel prices, more expensive food and heating?

Holy god.

desertcircus

The Spider wrote: »

Plenty of houses below 300k, the problem is everyone wants to live in south county Dublin, which was always a premium area, there's this sense of entitlement about that people who called the crash that they feel they deserve a house in south county Dublin for below 300k.

Sorry but this is the most desirable area in the entire country and will always be out of reach of people on average or just above average wages.

Given that you'd need an income of about 80k to qualify for a mortgage of 300k, I really don't see why south Dublin is different enough to sustain those kinds of prices. What percentage of the population is that? How does it compare to the percentage of housing that's in those areas?

We're talking about a recovery based on asking prices, while the size of the market is a twentieth of what it was. If Tower Records increased the price of CDs tomorrow, would we be describing the CD market as recovering? Of course not.

The Spider

Anynama141 wrote: »

Yeah it really is in everyone's interest to have a basic requirement for living to get more expensive - sure doesn't everyone celebrate increasing fuel prices, more expensive food and heating?

Holy god.

That argument doesn't stand up when it comes to buying a house, you are using the rising cost of utilities and services against the rising cost of an asset someone has invested in? You can use that argument against the rising cost of rent as it's an outgoing cost with no return.

Put it this way if you invest your money in shares do you want to see that price drop? If you have a pension that you invest in do you want to have less than you put in when you cash in, all of this applies to people buying houses.

The Spider

desertcircus wrote: »

Given that you'd need an income of about 80k to qualify for a mortgage of 300k, I really don't see why south Dublin is different enough to sustain those kinds of prices. What percentage of the population is that? How does it compare to the percentage of housing that's in those areas?

We're talking about a recovery based on asking prices, while the size of the market is a twentieth of what it was. If Tower Records increased the price of CDs tomorrow, would we be describing the CD market as recovering? Of course not.

Nope recovery is based on supply and demand, as it always was, if those prices are being achieved, then thats the new baseline, recovery was always going to begin in the most desirable location.

80k salary isn't that much especially for a couple, your basically talking about one earning fifty and the other earning 30, and if they have a substantial deposit this lowers again. Plenty of people have the cash working in IT etc, cashing in shares from company sponsored schemes will give them a healthy enough deposit.

desertcircus

The Spider wrote: »

Nope recovery is based on supply and demand, as it always was, if those prices are being achieved, then thats the new baseline, recovery was always going to begin in the most desirable location.

80k salary isn't that much especially for a couple, your basically talking about one earning fifty and the other earning 30, and if they have a substantial deposit this lowers again. Plenty of people have the cash working in IT etc, cashing in shares from company sponsored schemes will give them a healthy enough deposit.

80k would comfortably place a household in the top 15% in the country. And banks are increasingly wary of lending on the basis of two incomes. And how does a couple on 50k and 30k build up a deposit big enough to make a significant dent in necessary earnings? To bring it down by 25%, you'd need a deposit of about sixty thousand quid more - in other words, a year's pretax salary for a couple aiming for the 240k mark.