Irish Property Market chat II - *read mod note post #1 before posting*

Bannasidhe

My resident in Switzerland since 1979 brother is selling a house he bought in a Cork commuter town for our late father to live in.

Valuations put this house as worth €250 k based on what a nearby house sold for in July.

Brother is horrified.

Why?

Because the house he is selling is in a small development of 48 semi-d's built in the early 90s.

There are 3 house Types:

A = 3 bed, 2 bath, L room, Family Room, Kit/diner, garage/additional family room, very large enclosed garden, floor area c 127 sq m.

Type B = 3 bed, 1 bath, L room, Family Room, Kit/diner, room, large enclosed garden, floor area c 100 sq m.

Type C 3 bed, 1 bath, living room, kit/diner, small enclosed garden, c 85 sq m.

The auctioneers reference the last house sold as the benchmark (July 21).

The last house sold was a Type A BER D1 127 sq m in turnkey condition - it sold for €2,188 per sq m (property in Switzerland is always sold/rented by sq m).

The house he is thinking of selling is Type C BER D2 82 sq m and the engineers report states it is structurally sound but needs new windows and heating system as a matter of urgency, it has zero insulation, needs a new kitchen (incl ceiling) due to a leak in the upstairs bathroom while unoccupied. Since it was built the only work done was the bath was removed and replaced by a walk in shower to aid an elderly man. It has been 'valued' as worth €3,049 per sq m.

A nearby hse gone sale agreed which is bigger and has an addition living room and larger garden but BER is D2 and it needs work is valued at €1,479 per sq m.

A another nearby hse of slightly diff design, also bigger with additional L room, BER D2 sold Dec 2020 at €1,442 per sq m.

These two houses were not mentioned at all by the auctioneers.

If the sale price of the house that was genuinely in a similar condition was the benchmark the value of my late father's home is €130,800.

Brother, who owns property in Switzerland where it is considered very expensive- and his 3 daughters have bought apartments/houses in the last year - has concluded EA's are taking the Micheal with property valuations not based in market reality as evidenced by the sale prices in the local area but on how much commission they wish to earn. If the 'valuation' of €3,049 per sq m was used as the valuation price of the home it was benchmarked against that house would have have sold for an additional €110k.

Auctioneers keep telling him how much money he can make, he keeps telling them he doesn't need to make any more money. He made millions by being an honest dealer in business. He want's a valuation based on what the property is worth which references properties in a similar state of repair - not what it might make in a frenzied bubble based on price achieved by a far superior property.

Or to put it another way - don't blow smoke up his ass and tell him a Skoda can be valued based on what a Merc of the same age in better condition sold for.

mcsean2163

https://www.boards.ie/discussion/comment/117890311#Comment_117890311

Never have i heard such crap in my life. Man unhappy because he wants less money for his house.

If he really wants, I'll pay him 130 and sell it on for 250.

mcsean2163

https://www.boards.ie/discussion/comment/117889978#Comment_117889978

What's this about letters?

Bannasidhe

https://www.boards.ie/discussion/comment/117891403#Comment_117891403

And that kind of crap is why house prices spiral. Greedy little hands all want to get their greedy little share of easy money. But crap or not, rich man thinks estate agents are gougers out for a quick buck for little work.. Seem there's a lot of that around.

Any comment on why property price cannot be based on price per square metre achieved by local dwellings of the same type?

Pussyhands

https://www.boards.ie/discussion/comment/117891405#Comment_117891405

Basically yer man who runs the instagram page said he wanted to live in a certain place in D8. So he went around putting letters in the doors asking if they were selling. Apparantly someone bit and he bought a house without an estate agent.

mcsean2163

https://www.boards.ie/discussion/comment/117892000#Comment_117892000

House prices are based on whatever people will pay. It is the estate agents job to get the best price for the seller.

It sounds like your brother is upset by the loss of the deceased and wants a fair price and not a market price. He can easily do the research to invent a 'fair' price based on historical prices and insist the EA sell at that price.

First world problems.

mcsean2163

https://www.boards.ie/discussion/comment/117892036#Comment_117892036

Wow, maybe it was a mate of Bannasidhe.

Fair play to him anyway.

Cyrus

https://www.boards.ie/discussion/comment/117892036#Comment_117892036

That lad is a spoofer, but reflective of the age we live in.

rob316

https://www.boards.ie/discussion/comment/117890311#Comment_117890311

What is this crap. The market is whatever someone is willing to pay for similar properties. Auctioneers job is to get as much as he think he can get for the property. In what planet does the seller want less than it's worth?

Bubbaclaus

The residential property price index out in the morning, given how flat property prices were last year I am expecting another headline grabbing 12 month increase.

Cyrus

https://www.boards.ie/discussion/comment/117866532#Comment_117866532

Where are you getting your numbers? They look like gross margin figures, you do realise that the 'generous' pay for management isn't a cost of sale.

cnocbui

https://www.boards.ie/discussion/comment/117890311#Comment_117890311

Your brother has an interesting viewpoint, given the average apartment price in Switzerland is €6,133 per square metre. https://realadvisor.ch/en/property-prices

And you really don't want to even look at the Zurich or Geneava prices.

Bannasidhe

https://www.boards.ie/discussion/comment/117892579#Comment_117892579

His viewpoint is that in Switzerland property is bought and sold based on verifiable published figures, not on what some EA can 'get in the current market'. No one said property is cheap to buy in Switzerland - far from it. It doesn't have a culture of buying - it has a culture of secure renting. We have a situation where in a country with a buying culture we have people in insecure high cost renting and unable to save for deposits. Extremely large deposits as house prices increase and increase to where a 30 year old small semi in a Cork commuter town with a justified BER of D1 is half the price per sq m as an apt in Switzerland.

Asking over €3000 ppsm for a needs serious upgrades small house in a commuter town is insane - particularly when a larger house needing no work just sold for a little over €2 k ppsm. That is blatant price inflation.

Because an EA's 'job is to get the most dosh' isn't the stunning argument people seem to believe it is. It is an indication of how dysfunctional the Irish market is that Gordon Gecko seems to be the poster boy. Again. I'm old enough to remember a few other bubbles bursting and we are heading that way again.

It is interesting that quite a few people got their portfolios in a twist because a man believes that system is immoral. Who believes The EA's job is to facilitate the sale, not inflate prices to inflate their own commission.

But once again no-one has answered exactly why Ireland cannot use a system of valuing property using PPSM achieved in similar dwellings as a guide price. How property is valuated needs to be more science and less wet finger in the air. If after that people want to get into bidding wars that's their own business. At least start from an honest and verifiable place.

cruizer101

Who believes The EA's job is to facilitate the sale, not inflate prices to inflate their own commission.

The EA's job is to get the best price for vendor, the result of that is inflation of prices, I'm no fan of EA's but they are just doing their job in that respect. It is the governments responsibility to moderate the market.

But once again no-one has answered exactly why Ireland cannot use a system of valuing property using PPSM achieved in similar dwellings as a guide price

I think anyone who is sensible will look at that themselves, yes it is not explicitly stated but you can work it out. Also there is a lot more to a total price than the PPSM, garden size, aspect, on street parking, potential for expansion as well as the fact PPSM will go down the bigger the house as there is an inherit value in a property regardless of size.

Bannasidhe

https://www.boards.ie/discussion/comment/117893167#Comment_117893167

There is nothing stopping EA's getting the best price, they are at the end of the day sales people. My issue is with inflating the valuation - so they start from a false base which heats up the housing market until the point where 350k is deemed affordable.

I really don't think expecting that valuation prices be based in some verifiable reality is too much to expect. PPSM is accepted in many countries - it's used by the CSO to work out the property price register. Yes, there are variables. Some of which are quantifiable (e.g ERSI says BER grade affects sale price - 10% per grade), others like state of interior are not. But at least by using the same formula across the board there is a level playing field and a verifiable starting point to begin negotiations.

It's then up to the EA to 'get more' if they can.

AdamD

You're severely overestimating the power of EAs. Houses aren't selling for 350k because the EAs stuck on a higher price on the ad. They're selling for 350k because demand is huge and supply is tiny. They could stick 250k on the ad and they'd still end up selling for the same price

Asking prices mean little

https://www.boards.ie/discussion/comment/117893299#Comment_117893299

It’s not the EA ‘getting more’ or ‘inflating the valuation’. EAs are actually pitching asking prices below market in most cases right now, to generate interest. It’s multiple people being interested in the same property and there being a lack of supply that’s the issue. If no one is interested then how does the EA ‘get more’? If you want to blame anyone, blame the government for mismanaging our housing stock

I just paid 30% over asking for a rural property. Because I wanted it and so, unfortunately, did a couple of other people.

Cyrus

https://www.boards.ie/discussion/comment/117892777#Comment_117892777

Im not sure what point you are trying to make, an EA is there to facilitate a sale, an extra 20/30/50k isnt a whole lot of extra commission for them they just want the property sold and move on to the next one, and price per sq/m (along with various other factors) is the general guide here as it is everywhere else for a price for a property.

If someone is way off on the price it wont sell.

As for secure tenure, we are working towards that here with institutional land lords, but it turns out we dont really want them either.

Bannasidhe

https://www.boards.ie/discussion/comment/117893584#Comment_117893584

My point was quite simple.

A house was just valued at €250k by an EA, €240k by another, and €200k by a third.

The EA's giving the first 2 valuations quoted the price achieved by a house sold in July 2021 as the basis of their valuation. A 127 sq m house with a higher BER and in turn key condition. The house was sold for €2,047 per sq m. The house going on sale is valued at €3,048 per sq m according to one EA, and €2926.82 by another.

Even ignoring the variables if the actual ppsm of the house sold was applied to the house being valued (since the EA's claimed this is what they were using to arrive at their valuation) the house would be for sale for €167,854.00.

If people are ok with that that is their business. But it is not good business if one is trying to buy a home.

How quickly the shock of the last crash has been forgotten.

Cyrus

https://www.boards.ie/discussion/comment/117893833#Comment_117893833

and if people dont see it as value they wont buy it, no one is forcing anyone to pay anything, people make up their own mind what something is worth.

Sarn

The main issue I would have, as a seller, with EAs using unrealistic asking prices is that it could scare off potential buyers. If the property is that overvalued compared to recently sold properties, it could languish on the market for a very long time.

It is surprising that two EAs gave such high valuations. I wonder if the other properties were sold at full market value.

Amadan Dubh

In what is likely to be the least surprising news to anyone, 8.6% YoY increases in house prices in Ireland. Frothy, buoyant, growth, this time it's different etc. Add in CPI inflation and wage growth to these stats which are the highest they've been for a decade and the red warning lights are flashing in the economy! Extremely troubling news.

https://www.irishtimes.com/business/economy/growth-in-house-price-jumps-to-3-year-high-of-8-6-1.4674616

Growth in house price jumps to 3-year high of 8.6%

Dublin prices rise 8.1% over 12 months while prices outside capital increase 9%

Annual house price inflation jumped to 8.6 per cent in July, the fastest level of growth seen in the market in almost three years. The headline rate of growth was up from 6.9 per cent in the previous month.

Buyers paid on average of €310,641 for a home in the 12 months to July. The mean price in Dublin (€479,454) was the highest in any region or county. Dún Laoghaire-Rathdown had the highest average price in the Dublin region at €649,916, while South Dublin had the lowest at €391,652.

At the same time, we have two other stories today of homebuilders offloading ready-to-go sites, Glenveagh and Gannon Properties. Peculiar.

https://www.irishtimes.com/business/commercial-property/north-dublin-site-with-full-planning-for-1-937-homes-for-50m-1.4673718

https://www.irishtimes.com/business/commercial-property/foxrock-site-at-4-75m-has-scope-for-bespoke-dermot-bannon-housing-scheme-1.4672824

Mad_maxx

https://www.boards.ie/discussion/comment/117891403#Comment_117891403

Il pay 190 k so you'll have to outbid me

L1011

https://www.boards.ie/discussion/comment/117893833#Comment_117893833

People are not obliged to bit what an EA has put a house up for.

Cyrus

https://www.boards.ie/discussion/comment/117893936#Comment_117893936

What are you inferring from the developers selling the sites?

On the glenveagh one its very obvious that its not a core asset for them.

fliball123

https://www.boards.ie/discussion/comment/117892000#Comment_117892000

As that is not how it works its simply supply and demand with a few other factors such as quality , location and size. You cannot simply base it on size the property or an any one of the above areas alone. The market has worked this way since its conception. I think we can see your bias in your last post as its all pi$$ and vinegar. I don't think there are many people who would turn down an additional 40% more on an asset they own or maybe that's just me. Mmm I wonder?

Bass Reeves

https://www.boards.ie/discussion/comment/117893299#Comment_117893299

I am amazed about the amount of people who think if X or X +1 was done it would radically change the market. The market is the market. Estate agents are paid for by the vendor. In other countries EA are paid by vendors and purchasers. This has it flaws as well as purchasers can get stung on EA fees as only the vendor get to negotiate fees.

If you look at that house your brother has at 130k reference price to last December below build cost. I do not get people referencing house prices that are below build cost. Give that house a site cost of 40k. At 85 sqM it's about 900 sqfeet at a build costs if 130/sqft( presently 170) to builders finish that's 115k, add in ancillary costs, planning, design, certification, utilities etc and you are at new build cost of 180-200k. Present build prices are adding 27k to that price. You have to factor in as well the larger the build footprint the lower the price/ sqM.

Pussyhands

Just the 8% rise a year in house prices. Definitely sustainable. The rich getting richer.

Just goes to show you how much the supposed "experts" know.

The second scenario, involving a more “sluggish recovery”, and the one the ESRI thinks is more likely, would see a more severe decline, with prices down 12 per cent by the fourth quarter of 2021.

The contraction in property prices is due to the likely decline in household disposable income and the fall-off in mortgage market activity which it said would inevitably result “from the administrative closedown implemented by the Irish authorities”.

Bannasidhe

https://www.boards.ie/discussion/comment/117893862#Comment_117893862

https://www.boards.ie/discussion/comment/117894106#Comment_117894106

Point a - I believe I said it was up to people what they wanted to pay so your point is?

Yup - same small development, same builder, same age, same location. House sold has better BER and was in turn key condition. House being valued needs new windows, boiler, and repair to kitchen following a leak when unoccupied.... but apparently its worth c1k more per sq m. Okey dokey.

.

I do wonder what 'but but consider this reason why ....' people going to throw up next. But sure lookit, if folks here think the figures I have laid out are all fine and indicative of a functional housing market it's no skin off my nose except apparently I could sell my house for a fortune, but It's not for sale as it my home. Not an investment.

Enjoy the next bubble burst when once again all EA's will be the bad guys for inflating valuations and "getting the maximum for the vendor".

https://www.boards.ie/discussion/comment/117894213#Comment_117894213

And interest rates are the giant elephant in the room that has the potential to smash everything to pieces. Maybe not immediately because of the fixed rates on most new loans, but in 2 or 3 years time when they reset….

Sierra Oscar

https://www.boards.ie/discussion/comment/117894243#Comment_117894243

Agreed. An interest rate increase will have an immediate impact on the market in my view. There’s a mindset out there now that interest rates are set to remain perpetually low. I don’t think the possibility of an increase even features on the mind of many mortgage applicants, there’s an entire generation of buyers who have known nothing but static interest rates at CB level.

Some people are in for a surprise when an increase in rates could see repayments increase by a few hundred quid. There’s no discussion of this possibility in the media whatsoever, a sure sign that people are totally tuned out to its possibility. It’ll have a cooling effect on first time buyers taking out a mortgage at the very least, in my view anyway.

I reckon some upward movement in rates is inevitable given the manner in which inflation is trending.

https://www.boards.ie/discussion/comment/117894324#Comment_117894324

They don't seem to feature on the mind of mortgage lenders, central bankers or policymakers around the Western world either. The elephant is hiding away behind the curtain right now (I await the armchair economists coming on to say how it wont happen)

Sierra Oscar

https://www.boards.ie/discussion/comment/117894348#Comment_117894348

I think policy makers genuinely believed they could commit to low interest rates due to the monetary policy that was being pursued and the tight control over inflation that we’ve seen over the last decade.

Covid has destroyed that monetary policy, it’s inevitable that inflation will pickup in a serious manner.

Pussyhands

https://www.boards.ie/discussion/comment/117894324#Comment_117894324

Exactly my thoughts.

As you said, there's a whole generation who think this is the norm. It's easy to get into the mindset that the way things are now will the way things will always be.

Interest rates are what dictates our economy. As Warren Buffet said for years and continues to say..."interest rates are to asset prices what gravity is to matter"

Ray Dalio did a great video 8 years ago on how the economy works and how interest rates affect it.

Now, unless this time REALLY IS different, the rules of economics stay the same as they always have done. When interest rates rise, interest portion of repayment increases, meaning the capital payment portion decreases (mortgage value is dependent on your repayment ability)...which means lower mortgage values which means lower demand which means lower prices.

Hubertj

I expect house price inflation to level off in 2022 and prices may even fall in some areas as supply of new and second hand homes increases. Hopefully first time buyers and people trading up or down will have more choice in the market. This should reduce the number of people budding on a single property.

also interesting inflation stats out of the US yesterday, flat for the last 3 months or so. Some predicting inflation to fall in 2022. There was a piece on breakfast business on Newstalk yesterday morning.

fliball123

https://www.boards.ie/discussion/comment/117894231#Comment_117894231

It has been pointed out that EAs do not have sway on the price, a lot actually use a strategy of going in under what they think a property is worth to garner interest it is the demand and lack of supply that sets the price. The EA gets very little in the way of commission if a house sells for 50k more and its actually in their interest to sell quicker at a lower cost to get the next house going so if there is going to be another bubble it will not be the EAs fault.

It has also been pointed out that the price garnered for a property is down to supply/demand, size, location and quality. Demand is hard to measure the exact same house in the same location and lesser quality may get more due to there being more demand for that house. Proof is in the pudding see what the house gets, if it goes for more then you have to admit that your supply vs demand is the over riding determinant factor on the price.

AdamD

https://www.boards.ie/discussion/comment/117894231#Comment_117894231

Nobody's arguing that the housing market is functional, they're arguing your point that EA's have any tangible effect on market prices.

ionapaul

Will interest rates rising have as much impact as would otherwise be the case in a 'normal' market? It seems to me - and maybe this is all anecdotal - that for the houses that people back in Celtic Tiger days would have borrowed to the hilt to pay for, let's say the €600K+ segments, this time around people are mainly financing with a large cash element, and the average mortgage amounts are lower compared to properties of the same selling price as in years past. Are there any stats on this I wonder? If the cash element is larger/mortage amount is lower, higher rates are not quite as scary I guess.

mcsean2163

https://www.boards.ie/discussion/comment/117893936#Comment_117893936

Yes. Strange Gannon is passing on the opportunity to develop nearly 2,000 apartments.

Assume low average sale price of 250. €500 million development near the sea and Gannon saying no.. Maybe we've hit peak apartments?

Jmc25

Given the length of time to get from sale agreed to sold to the property price register, the 8/9 per cent increase figures are based on properties sale agreed at the start of the summer, maybe before in some cases. Things were hot on every single property I enquired about back then - eg one house was 40k above asking when I called about it the day it was listed. Absolute madness.

I took a break from looking at that stage and have recently started again and houses that are priced realistically (ie highly) are going for around asking in most cases from what I can see. The mad bidding now is on houses that, based on the trend in 2021, are priced too low to begin with.

Long winded way of saying I would guess that the CSO will be reporting increases leveling off (albeit at a very high level) towards the end of the year.

cnocbui

https://www.boards.ie/discussion/comment/117892777#Comment_117892777

The EA's job is to get the best price possible for their client. Twisting it into some rant about EA's trying to line their own pockets is a basic failure in understanding the relationship and responsibilities. If your brother sold his Irish property for less than the going rate as a protest at the current market dynamics, well it sounds like he can afford to and lucky someone who snagged a deal. I hope to put my house on the market in the near future and have no intention of telling the EA to discourage bidding wars or to find me the lowest price.

yagan

Have been helping a relative progress a house purchase in Cork, and when we went looking during the summer supply was tight. However difficulties with the title has stalled the purchasing process for the moment which made them look again at the market and supply and value have definitely improved.

They've already lined up viewings of houses that could save them 20% of what they went sale agreed on a month ago.

cruizer101

Until they actually go sale agreed again they can't know what is the potential saving.

Asking prices may be lower than what they agreed but that is fairly meaningless.

cnocbui

https://www.boards.ie/discussion/comment/117895079#Comment_117895079

A very good thing for your friend there are no other interested parties in the market looking to buy at this time who might bid the prices up.

From another thread:

"Latest property we’ve stoped biding on was listed at 475k and we walked with 6 others still actively bidding (according to EA) currently on 520k… estate agent was glowing with the fact there were 6 battling it out"

"Similar story, two I viewed recently:

Listed for 380 current bid 455

Listed for 375 current bid 433

Both almost 20% over asking and not gone sale agreed yet"

https://www.boards.ie/discussion/2058202484/looking-to-move-wtf-is-going-on-with-prices#latest

Timing belt

https://www.boards.ie/discussion/comment/117894430#Comment_117894430

if house price inflation is to level off the first signs will be seen in the rental market as apartments are where the majority of supply is coming on stream.

MacronvFrugals

Blatant lie from the minister about the CB approving of the Shared-Equity scheme

https://www.rte.ie/news/primetime/2021/0914/1246786-central-bank-housing-darragh-o-brien-shared-equity/

Pussyhands

He's got some neck on him!

cnocbui

https://www.boards.ie/discussion/comment/117894648#Comment_117894648

A lot of people no longer want or will put up with an apartment - that is one of the fundamental shifts in the market due to Covid that has driven house prices up, so yeah, probably peak apartment, but I don't think that indicates an impending price collapse. However, it does appear the intense upward price pressure is reducing in markets like Australia and the US so I would say we have probably plateaued pricewise, for the moment.

Timing belt

https://www.boards.ie/discussion/comment/117894324#Comment_117894324

All lenders take into account the ability to repay a mortgage if rates rise so don’t rates rising leading to a fire sale of properties driving price downwards.

Also you need to remember that in a low interest rate environment a small interest rate rise of 0.25bps would have a similar impact on cooling inflation as a 250bps rise if rates were 5%.

i also suspect that we will see more QE to finance the green revolution if governments are to meet climate targets. If I am correct on this it will keep rates low.

yagan

https://www.boards.ie/discussion/comment/117895184#Comment_117895184

When I went viewing with them in June and July interest was really intense. The first place they were interested in went into a protracted bidding war but three months later still hasn't gone sale agreed. I reckon there were engineering issues that would only show up on survey.

The house they did go sale agreed actually only had one other bidder and only went agreed at the asking price. This is Cork though and I'm not that familiar with it. I'd said I'd go along with them to their next viewings so it will be interesting to see what interest is like compared to coming out of lockdown.