Property Market 2015

seamus

fret_wimp2 wrote: »

A lot of discussion in the thread about how Dublin prices are still much too high and need to come down.

Of course being a potential buyer I agree with this ( surprise surprise!), one thing i would like to get an answer to is how can it be imperially proven that they are "too high" in relation to prices from Period X or compared to another country?

If there are a small percentage of vendors overpricing then those particular properties are priced too high, but when everyone is pricing high and people are still buying, doesnt that just mean that houses cost what they cost in that particular country/region?

Individually yes, a house is worth what someone is willing to pay for it. And even locally the same rule applies; properties in a locality are worth what people are willing to pay for them. Locality A might see 3-beds going for €400k, locality B will see the same property selling for €100k. Is locality A overpriced? Well, no, not necessarily, in fact they could be underpriced.

Anyone who's been watching property threads here will know there is a small subset of posters who believe that all 2 bed apartments over €100k are overpriced, and anyone spending more than €250k on any property needs their head examined.
They're wrong too of course.

Empirically the best way to judge whether property is overpriced is to track historical prices against various economic indicators, like inflation, incomes, employment and so forth.

Irish prices still though are hard to gauge at this stage because we're just coming out of a crash and there are various parts to a property market which are not operating normally at the moment like building output, repossessions, vacancy rates, etc.

mr_seer

seamus wrote: »

Individually yes, a house is worth what someone is willing to pay for it. And even locally the same rule applies; properties in a locality are worth what people are willing to pay for them. Locality A might see 3-beds going for €400k, locality B will see the same property selling for €100k. Is locality A overpriced? Well, no, not necessarily, in fact they could be underpriced.

Anyone who's been watching property threads here will know there is a small subset of posters who believe that all 2 bed apartments over €100k are overpriced, and anyone spending more than €250k on any property needs their head examined.
They're wrong too of course.

Empirically the best way to judge whether property is overpriced is to track historical prices against various economic indicators, like inflation, incomes, employment and so forth.

Irish prices still though are hard to gauge at this stage because we're just coming out of a crash and there are various parts to a property market which are not operating normally at the moment like building output, repossessions, vacancy rates, etc.

I would agree with that post and I think it is pretty balanced. I would however add that house prices should correlate to incomes. In many parts of the country they do or they are indeed undervalued relative to incomes. In Dublin prices certainly appear overvalued by the same metric - don't just believe me, Ronan Lyons and Prof Honohan believe so as well

The Spider

mr_seer wrote: »

I would agree with that post and I think it is pretty balanced. I would however add that house prices should correlate to incomes. In many parts of the country they do or they are indeed undervalued relative to incomes. In Dublin prices certainly appear overvalued by the same metric - don't just believe me, Ronan Lyons and Prof Honohan believe so as well

It depends on the income, if a highly desirable area only has a small amount of properties for sale then those prices will track higher than average incomes.

Using the average income as a catch all for house prices doesn't work, if fifty people on salaries of 150 grand a year want 30 houses in a certain area then that's what those prices will be set at.

Villa05

The Spider wrote: »

It depends on the income, if a highly desirable area only has a small amount of properties for sale then those prices will track higher than average incomes.

Using the average income as a catch all for house prices doesn't work, if fifty people on salaries of 150 grand a year want 30 houses in a certain area then that's what those prices will be set at.

Govt has always being banging on about how taxes on employment are too high and the need to find other sources of revenue. Situations as Spider has defined above should be fair game.

A significant portion of the houses value is derived from the services around it e.g. Transportation, Parks, Good schools. Govt should be considering a significant tax on high priced properties to both help cool these markets and ring fence funding for the "housing crisis"

Maybe a decision like this is too fair and too close to home for a politician to initiate

fret_wimp2

Villa05 wrote: »

Govt has always being banging on about how taxes on employment are too high and the need to find other sources of revenue. Situations as Spider has defined above should be fair game.

A significant portion of the houses value is derived from the services around it e.g. Transportation, Parks, Good schools. Govt should be considering a significant tax on high priced properties to both help cool these markets and ring fence funding for the "housing crisis"

Maybe a decision like this is too fair and too close to home for a politician to initiate

But if your house is beside a great school, or a super reliable transport line (luas), you should be able to ask more. Its certainly worth more to a lot of people.

why should the government then penalize you, just because you have a house people want?

Again, im not saying there's a right or wrong here, im just finding it difficult to gauge what we mean when we use terms like "expensive".

IMO, expensive is something that i have to stretch to afford, or cannot afford completely. if im on 20k a year, a 100k house is expensive. if im on 200k a year a 1m house is expensive.

Perhaps capitalism has permeated my brain so much so that socialism style taxes that penalize your advantages (taxing your more expensive house) seem unfair.

Villa05

fret_wimp2 wrote: »

But if your house is beside a great school, or a super reliable transport line (luas), you should be able to ask more. Its certainly worth more to a lot of people.

why should the government then penalize you, just because you have a house people want

Because as you describe, much of its value is derived from infrastructure that has been provided using tax payers money. Is it not fair that the state should get a dividend from that.

Villa05

fret_wimp2 wrote: »

Again, im not saying there's a right or wrong here, im just finding it difficult to gauge what we mean when we use terms like "expensive

We have a system that classifies areas as disadvantaged. How about a system that classifies areas as advantaged and implement a tax there. Areas like SCD, Salthill......

Bob24

Villa05 wrote: »

Because as you describe, much of its value is derived from infrastructure that has been provided using tax payers money. Is it not fair that the state should get a dividend from that.

A propert next to the LUAS in Tallaght is half the cost of the same propert in Sandydord though. not sure Sandyford resident would like the idea of being considered super wealthy and have a special tax imposed on them to fund the LUAS though.

Not a black and white thing at all.


Having said that, to me the local property tax is a good thing all the way: it does (to some extend) do what you are saying by getting owners in wealthier areas to contribute more, and givr disincentive for people to hold onto properties they don't need - making them available to those who need them. I would be very much in favour of increasing LPT and using the extra cash to reduce income tax.

Taylor365

Bob24 wrote: »

Having said that, to me the local property tax is a good thing all the way: it does (to some extend) do what you are saying by getting owners in wealthier areas to contribute more, and givr disincentive for people to hold onto properties they don't need - making them available to those who need them. I would be very much in favour of increasing LPT and using the extra cash to reduce income tax.

That would just make the poor poorer and the rich less rich...maybe increase the upper brackets only :pac:

Bob24

Taylor365 wrote: »

That would just make the poor poorer and the rich less rich...maybe increase the upper brackets only :pac:

It is a zero sum game, it can't make everyone less well off. If combined with an income tax decrease as I mentioned: the idea is to make workers (rich and poor) better off while hitting property investors (rich and "poor").

handlemaster

Peehaps local council s could charge some special tax for cost of bringing a Luas to an area. Just thinking about dublin 15 it could do with luas link. There would be a lot of households and businesses that could benefit from little rail public transport.

mr_seer

The Spider wrote: »

It depends on the income, if a highly desirable area only has a small amount of properties for sale then those prices will track higher than average incomes.

Using the average income as a catch all for house prices doesn't work, if fifty people on salaries of 150 grand a year want 30 houses in a certain area then that's what those prices will be set at.

The median price of a Dublin 3 bed semi is €350,000. That is a massive multiple of median Dublin household income. Your point about desirable areas is correct but alas all other areas in Dublin are also overpriced.

If a property pimping paddynomics expert Finance Minister like baldy insists that prices 'need to go up another bit' and uses all means at his disposal to strangle supply of housing and to increase demand amongst investors, then prices will go up unsustainably, just as they have done since 2012. Sadly gravity will take them back down to earth and possibly much of this phoney recovery along with it

johnp001

mr_seer wrote: »

The median price of a Dublin 3 bed semi is €350,000. That is a massive multiple of median Dublin household income. Your point about desirable areas is correct but alas all other areas in Dublin are also overpriced.

If a property pimping paddynomics expert Finance Minister like baldy insists that prices 'need to go up another bit' and uses all means at his disposal to strangle supply of housing and to increase demand amongst investors, then prices will go up unsustainably, just as they have done since 2012. Sadly gravity will take them back down to earth and possibly much of this phoney recovery along with it

I agree with your point but to be fair to finance minister the CGT exemption for property investment has been removed (albeit with hindsight a year too late.
I think gravity has taken hold now. I really hope the deposit insurance scheme isn't implemented and this time the falling market is allowed to find its level.

MarkAnthony

johnp001 wrote: »

I agree with your point but to be fair to finance minister the CGT exemption for property investment has been removed (albeit with hindsight a year too late.
I think gravity has taken hold now. I really hope the deposit insurance scheme isn't implemented and this time the falling market is allowed to find its level.

Oh? What gives you this impression. I'm seeing predictions of another near double digit growth again this year. This will be driven by people buying in areas which are still showing good value. I expect to see apartments increasing at a higher rate also.

Archaeoliz

For right or wrong, here's my prediction for 2015. I'm not an expert, but I am hoping to buy this year so I've been watching the market closely and forming opinions.

Talking to a mortgage advisor there appears to be alot of people who have rushed to get their mortage approval in before the new lending criteria have been enforced. Those formal offers last 6-10 months. My prediction is with lots of people in a race to draw down their mortgages and a shortage of supply there will be an ever increasingly inflated price bubble for that period. From July there there are going to be far fewer buyers with mortgage finance in place out there. I don't think prices will crash, but I do think there's going to be a gradual tailing off to a stagnant period while there's a slight downwards adjustment. I think the state of the housing market this year is going to entirely rely on access to credit and the gradual (and sensible I have to say) restriction of access to it. I'll also be looking at the statistics of sales falling through due to lack of finance quite closely.

I seem to remember some posters saying that it's going to take them another five years to accumulate a 20% rather than a 10% deposit so I suspect that the slow down is going to last for about another 5 years until those buyers are able to save enough and salaries will hopefully have risen enough to allow a greater percentage of the populace access to home ownership.

I reckon the best time to be a buyer this year will be from July onwards and the best time to be a seller will be up to that point.

For me, one of the indicators that the banks might be thinking that the market is going to turn downwards is the 10 year fixed mortgage. I doubt that they would offer this product if they didn't think that they would need to be more competitive (i.e. cheaper) on average over the next ten years. They must also be relatively confident about their economic predictions for the next ten years to be offering a product over that term. We all know they're not altruistic.

The biggest variable in this as far as I can tell is the share of the market which are cash buyers, or have a low LTV and/or high salary. If I were them I'd be sitting on my heels until the end of the year.

MarkAnthony

My latest reading of the tea leaves pulled from my...

FTBers

Several things are going to happen here. As the year progresses there are going to be a scramble for the supply that's out there, that's going to force up prices. As people get priced out they are going to do one of several things:

-Continue renting
-Look at a different area
-Look at a smaller property

I think option 1 will come under more and more pressure to the point that forces more and more people into options 2 & 3.

We'll see a significant upswing in prices across Dublin in many area on this basis including a larger upswing in apartment sales as people jump in not wanting to be left behind with deposits they were going to put on a house. (Bubble behaviour)

More affluent FTBers will be pushed out of SCD by demand and the deposit rules nearer the end of the year. This is the segment that is more likely to pick option 1 IMO.

Cash Buyers

There is going to be a huge drop off in numbers but they will still be there trying to cash in on the upward swing in rental prices. Again this segment will be pushing prices in the 'less desirable sector'; apartments, smaller houses, less desirable postcodes.

Trade Ups

They are going to fuel the bubble in certain areas of Dublin which will pop Q4 of 2015 or Q1/2 of 2016 and pop in a big way. It's not going to the that disastrous as many of those buyers will be in the 'forever' house at that point.

This will be where people make some serious gains by waiting where as everyone else is going to see at least a 9% increase this year followed by 6% next year despite CB rules and the predictions of doom.

Apartments will see a correction in 2017/18 as I suspect a 15% increase this year followed by a 10% increase the following year on the backs of FTB and investors. That's when we'll see rents begin to reduce as supply begins to come on stream.

Most of this is based on the heebeegeebees but frankly it's all a self fulfilling prophecy - as we're told it's going to happen it happens.

Panda_Turtle

Why didn`t everyone buy in late 2011,2012 and early 2013 when the prices were very reasonable? :pac:

Clonnative

Panda_Turtle wrote: »

Why didn`t everyone buy in late 2011,2012 and early 2013 when the prices were very reasonable? :pac:

Prices were reasonable as most people could not get credit. Loosening of credit equals rise in prices. Hand in hand if you ask me.

johnp001

MarkAnthony wrote: »

Oh? What gives you this impression. I'm seeing predictions of another near double digit growth again this year. This will be driven by people buying in areas which are still showing good value. I expect to see apartments increasing at a higher rate also.

Estate agents will always predict double digit growth. Cash buyers have dried up. People with deposits and incomes within the new rules are holding out for price drops. The only people buying are those with AIP that cannot be renewed under the new rules. EA need to reassure them that they are not buying into near guaranteed negative equity in the near future or they would have no-one to sell to.

As regards what tells me that gravity is affecting the market:
1. Supply inflow in Dublin (the main area where supply is a major driver of prices) has increased by 60% for the first 6 weeks of this year as compared to last year. Rush to the exits?
2. Daft Q4 report clearly shows a market that has peaked. RLs blog about this report is very clear that this is a definite trend rather than statistical noise.
3. PPR figures for Dublin also show a market that has peaked and is starting to decline.
4. CGT exemption makes property investment less attractive.
5. CB rules tighten credit, that can only have one effect on prices.
6. Repossessions are starting to happen in larger numbers and are predicted to accelerate.
7. A lot of large NAMA sales took place in mid-late 2014 and are accelerating further easing supply and adding to rental availability in the near future.
8. Double digit price inflation in a deflating economy with high unemployment and low salary inflation is in no way sustainable.

Apart from the predictions of vested interests what are the reasons for your statements above? For example "apartments to rise at a higher rate", latest CSO figures are showing Dublin apartments down in the last month and also in the last quarter. Do you have a source of data that shows apartment prices rising?
Also, what are the areas that are still showing good value? Are these areas in Dublin or across the country?

handlemaster

the market is to early into recovery to have peaked.

dubrov

handlemaster wrote:

the market is to early into recovery to have peaked.

Look up "Dead cat bounce". It's a fairly common occurrence.

Not that I'm convinced that's what's happening here

handlemaster

dubrov wrote: »

Look up "Dead cat bounce". It's a fairly common occurrence.

Not that I'm convinced that's what's happening here

that would be a fluctuation in price not a top of the market call

Sarn

I expect to see increases this year as people vulnerable to the new mortgage restrictions scramble to buy before their approval in principle expires. This will inflate expectations of sellers who have managed to hold off selling until now. As a consequence, even with the credit restrictions and removal of CGT incentives, asking prices will stay elevated well into next year. This will result in sales times lengthening and an increase in the number of sale agreeds falling through. The buoyancy in the market can only last so long, aided by the restricted supply. How long that will be is anyone's guess.

The Spider

Clonnative wrote: »

Prices were reasonable as most people could not get credit. Loosening of credit equals rise in prices. Hand in hand if you ask me.

Nah, credit was as easy/hard to get then as it is now, I bought in 2012 and had zero problems getting access to credit. The reason people didn't buy was simple herd instinct and that no one else was buying and maybe prices would keep dropping.

Same in the boom everyone was buying and prices were going up everyone was buying everything. There was a huge amount of posts here in 2012/2013 about how prices would keep dropping, but nope bottom's been and gone when will they crash again? Couldn't tell you, but it won't be 2015 that's for sure.

handlemaster

Sarn wrote: »

I expect to see increases this year as people vulnerable to the new mortgage restrictions scramble to buy before their approval in principle expires. This will inflate expectations of sellers who have managed to hold off selling until now. As a consequence, even with the credit restrictions and removal of CGT incentives, asking prices will stay elevated well into next year. This will result in sales times lengthening and an increase in the number of sale agreeds falling through. The buoyancy in the market can only last so long, aided by the restricted supply. How long that will be is anyone's guess.

supply will only come with new builds and we are having none presently. people mention bank repos but these do nothing as people living there or are renting it all need to be housed

P. Breathnach

johnp001 wrote: »

... Cash buyers have dried up....

Is this supposition, or can you provide any evidence in support of that claim?

johnp001

P. Breathnach wrote: »

Is this supposition, or can you provide any evidence in support of that claim?

Cash buyers overtaken by mortgage buyers in Q2 2014

Dr. John McCartney of Savills (published Dec 2014)
with cash buyers becoming scarcer, the traditional mortgage-financed buyer has once again become the mainstay of the market lending

Apart from buyers buying a PPR for cash (who I can only suppose would be an extremely small cohort) anyone wanting to buy for cash would have done so prior to CGT exemption expiration. Otherwise they stand to lose 33% of any capital appreciation compared to buying in 2014.

"Less visible has been the withdrawal of cash buyers from the market with the latest BPF figures showing that 28pc of transactions in the third quarter of 2014 were cash deals as against 44pc in the third quarter of 2013."

MarkAnthony

johnp001 wrote: »

1. Supply inflow in Dublin (the main area where supply is a major driver of prices) has increased by 60% for the first 6 weeks of this year as compared to last year. Rush to the exits?

There was a pent up demand to sell which is now crystallising as people creep out of negative equity or see a price they are willing to sell for. This is creating a floor price which the properties won't be sold below.

johnp001 wrote: »

2. Daft Q4 report clearly shows a market that has peaked. RLs blog about this report is very clear that this is a definite trend rather than statistical noise.

Looked like statistical noise to me, in fact that's exactly what I'd argue it was a simple wobble due to uncertainty over the CB rules.

johnp001 wrote: »

3. PPR figures for Dublin also show a market that has peaked and is starting to decline.

As above

johnp001 wrote: »

4. CGT exemption makes property investment less attractive.

Increasing yields will counter that to a degree, but I'm largely conceding this point.

johnp001 wrote: »

5. CB rules tighten credit, that can only have one effect on prices.

I don't agree on that point as stated above.

johnp001 wrote: »

6. Repossessions are starting to happen in larger numbers and are predicted to accelerate.

All that does is feed into the issue with rents. Also these will only happen at a floor price where the bank think they will recoup a significant amount of the loan.

johnp001 wrote: »

7. A lot of large NAMA sales took place in mid-late 2014 and are accelerating further easing supply and adding to rental availability in the near future.

All going to investors buying in bulk, they'll rent because of yield and dump at the top (2018 most likely - hence predictions of a bursting bubble there)

johnp001 wrote: »

8. Double digit price inflation in a deflating economy with high unemployment and low salary inflation is in no way sustainable.

It's not hence why I think we'll see single digit - but I don't the climb is over yet. I also think (as we're stupid enough as a country) that we'll start to feel as if the economy is recovering.

johnp001 wrote: »

Apart from the predictions of vested interests what are the reasons for your statements above? For example "apartments to rise at a higher rate", latest CSO figures are showing Dublin apartments down in the last month and also in the last quarter. Do you have a source of data that shows apartment prices rising?

Very much heebeegeebees as I said but in all honesty a sample of one quarter with huge uncertainty introduced is about as good as the heebeegeebees IMHO :pac:

johnp001 wrote: »

Also, what are the areas that are still showing good value? Are these areas in Dublin or across the country?

Finglas, Ballyfermot, Ballymun, some areas of D15, Tallaght. Basically anywhere you can get a 3 bed house at under €200K. I base this on a single income of €35K + PT income of 15K + savings. That income bracket is achievable for a couple with no more than leaving cert.

All just chewing the fat, lets wait and see!

Heisenberg1

Panda_Turtle wrote: »

Why didn`t everyone buy in late 2011,2012 and early 2013 when the prices were very reasonable? :pac:

I did in 2012:D my prediction for the market for 2015 is that prices will remain the same with small increases towards the end of the year the biggest problem in the market is supply which is very limited and until that is sorted prices will remain high.

griffzinho

The Spider wrote: »

Nah, credit was as easy/hard to get then as it is now, I bought in 2012 and had zero problems getting access to credit. The reason people didn't buy was simple herd instinct and that no one else was buying and maybe prices would keep dropping.

Same in the boom everyone was buying and prices were going up everyone was buying everything. There was a huge amount of posts here in 2012/2013 about how prices would keep dropping, but nope bottom's been and gone when will they crash again? Couldn't tell you, but it won't be 2015 that's for sure.

Sorry. I really think credit is a lot more available now than in 2012, but maybe that's just my opinion.