Second Wave of Weakness to Come?

Eoin Fahy, Economist

5th Apr 2011

Eoin Fahy, chief economist at Kleinwort Benson Investors, commenting on the latest Daft research on the Irish property market.

The huge decline in house prices over the last five years or so was caused in large part by the recession, which led to hundreds of thousands of people losing their jobs, and/or emigrating from the country. At the same time, the problems in the banking industry meant that credit became very hard to get. And of course the extremely high prices seen at the peak of the market (based largely on the absurd view that Irish property prices could never fall) had to reverse, even in the absence of a credit crunch or recession. The latest Daft survey shows that the fall in prices may be beginning to slow. Residential property asking prices fell a further 3.1% in the first quarter of the year, relative to the previous quarter, bringing the total decline since the peak to 43%. That fall was the second-smallest quarterly decline since the current crisis began in 2008.

It's likely that the relative improvement, or at least slower disimprovement, is because some of the factors driving house prices down are moderating. Jobs are not being lost at anything like the pace that we saw a year or two ago. Valuations are certainly not expensive on almost any measure. And while the credit crunch will certainly not go away, it is unlikely to get much worse.

But, and it's a big "but", a new set of problems may be on the way. Firstly, and most importantly, it's clear that the ECB is about to raise interest rates, probably as early as this week. And once interest rates begin to rise, they will surely to continue to rise steadily for the next year or two, as the ECB seeks to return rates to more normal levels, say 2% to 3% above the current 'emergency' rate of 1%. This will impact on house prices in several ways:

  • New buyers will get a smaller mortgage approval for a given level of income, as the monthly mortgage payments increase.
  • Existing mortgage borrowers will have to finance higher monthly repayments. In many cases the extra strain could push borrowers into arrears and for some that could mean that they have to sell their homes, increasing the supply of houses on the market.
  • Potential buyers, even those that are not significantly directly affected by the increase in mortgage rates, will be concerned that higher interest rates will lead to further house price declines, and may defer their purchase.

Of course, many borrowers have already had to cope with interest rate increases, as all Irish lenders have passed on to their customers the much higher interest rates that the banks must now pay on the financial markets, given the question marks about the banks' credit worthiness. Some borrowers have already seen several interest rate increases. Borrowers on tracker mortgages have seen no increases at all, as their lending rate is linked to the ECB's official rate, which has not changed - yet! It is the tracker-rate borrowers who will, of course, suffer for the first time when ECB rates rise soon.

Secondly, there is a risk - though only a risk, not a certainty - that there could be a surge of repossessions and forced sales of properties. While the banks have, in general, been quite unenthusiastic about forcing families out of their homes, for obvious reasons, and have furthermore been very constrained by the new code of conduct for lenders, this may not last forever. At some point the so called "extend and pretend" policies of the banks (extend the loan and pretend there is a chance that it will ever be repaid!) will come to an end. In a benign scenario, by the time the banks get tough on borrowers, the recession will be over, house prices will be rising, and so the problems won't be all that large. In a less benevolent scenario, the banks won't be able to wait that long and will be forced to start repossessions and forced sales of homes while the economy and the housing market is still very weak - and that's a recipe for yet further declines in house prices, of course.

Thirdly, there is a risk that the very negative assumptions used in the banking stress tests, and the large capital requirements announced as a result, will frankly give borrowers such a negative outlook about the future that even those that can pay, don't pay, as they can't see why they should pay their mortgages each month when so many others will not. This is called "strategic default", in banking jargon. In practice, I doubt that this risk will materialise. I can't really see many thousands of people deliberately running the risk of losing their house, and of course ruining their credit records, even though they can afford to pay their mortgage. But while I don't expect it to happen, it remains a risk.

All in all then, while I believe that there are genuine grounds to think that the economy as a whole has passed the worst, and may even be recovering very slightly at the moment, I am far from convinced that the same can be said about the housing market. Significant risks remain, and higher interest rates, in particular, could do further damage to house prices in the months ahead.


HIGHLIGHTS:

Sale Index
Asking Prices, Residential Sales

Stock and flow of properties
Stock and Flow of Sale Properties


SNAPSHOT:

Snapshot of Asking Prices Nationwide
Snapshot of Asking Prices Nationwide

Discuss This Article

  • Re: The Daft House Price Report Q1 2011

    Posted By: jonocon Date: Tuesday April 5, 2011 @06:53AM

    I think this analysis is correct in the main, the fear factor is huge, however this will mean that the rental market will be more buoyant, if people don't buy they must rent so I can see rents rising especially in Dublin, the majority of people are still working in this country and they need somewhere to live.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Simon Date: Tuesday April 5, 2011 @10:02AM

    They already live somewhere. Anytime they move somewhere new they'll leave that property empty unless they are new immigrants coming into the state to take up new jobs. Again though emirgrants will outnumber immigrants.

    Also regarding rents the bankrupt state that is paying half of the rent in the rental sector might decide it can no longer pay so much. Rents are unlikely to boom

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Laura Date: Tuesday April 5, 2011 @04:48PM

    Rents will remain most bouyant at sharing and lower levels, as people hedge into lower realised rents for themselves, as a means to prevent themselves falling into enforced homelessness in future created by redundancy.

    One of the silent movements of the last 3 years of redundancies has been a massive haemorraging of tenants as people lose jobs and either move back in with family or into much cheaper accomodation (sharing or smaller, cheaper units).

    As a result, prices will remain good for 3 bed and larger units, and cheaper small units. I think 2 beds will be demolished though - asking prices still regularly look for 500-600 per room, which is unaffordable for many at current salary/tax levels never mind the consequences of job loss, which would leave them unable to claim or pay rent subsidies from SWA.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Andrew Meehan (financial advisor) Date: Monday April 25, 2011 @08:06PM

    I completely agree, rental market will increase and prices should go up as people hold off from buying. prices in my opinion will fall another 30-40% as we have an over over supply of houses that there simply is not the demand to buy them which means prices will fall furthur and I still believe unemployment has still not reached the bottom which will in turn reduce the demand to be in a position for people to buy a house. it will pay to keep saving and wait to buy, it only looks like good value if we are comparing it to 2007 price levels

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Oliver Date: Tuesday April 5, 2011 @08:13AM

    "Potential buyers, even those that are not significantly directly affected by the increase in mortgage rates, will be concerned that higher interest rates will lead to further house price declines, and may defer their purchase"

    ???

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Bryan Date: Tuesday April 5, 2011 @11:49AM

    He means that potential buyers will be put off because they expect further price declines, so if they buy now they'll be buying into a loss. They expect that because the coming higher interest rates will exacerbate the problems faced by existing owners.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Anthony Palmer Date: Tuesday April 5, 2011 @09:22AM

    Savvy landlords with money to invest may soon start cherry-picking well located 2/3 bed properties. I'm guessing the Irish property market will be kick-started by investors, maybe we will see a move toward the European model where people consider medium-long term rental as an alternative to buying.
    Anyone care to do a few sample yield calculations?

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Kango7 Date: Tuesday April 5, 2011 @09:47AM

    Is there any relative data on the true availability of finance from banks (accepting there has to be ability to pay) and how this is affecting prices. At the peak most domestic mortages were actually based on ability to pay. Has take home pay declined also by as much as the 43% decline in prices from peak. I accept there are also the other factors of uncertainty on employment and prospective interest rate increases.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Anonymous Poster Date: Friday April 15, 2011 @10:24PM

    Most domestic mortgages were not based on ability to pay at the height of the "madness" money was foisted upon a gullible public, happy to bury their heads in the sand and accept the analysis from the establishment that the good times were here to stay!

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  • Re: The Daft House Price Report Q1 2011

    Posted By: seller Date: Tuesday April 5, 2011 @09:57AM

    Good advice but it depends are you the person who will read that article and say Yahoo we are turning a corner positively or say see I told you so we are all up the xxx creek without a paddle.

    We all need somewhere to live and first time buyers should buy now as the 7 year tax breaks on interest payments are due to cease at the end of june and for them the dream homes are within reach of first time buyers if they don't buy now the window of opportunity is slowly closing.

    I have turned down 4 offers on my house because I am currently paying a smaller mortgage than I would to currently rent a property of the same size. Why should I pay a landlords mortgage when he/she can sit back and wait for prices to rise which they will again, maybe not to the celtic tiger levels but they will rise.

    Rents will rise!

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Crumlindweller Date: Wednesday April 27, 2011 @04:36PM

    The answer to that is very simple: if you lose your job (and therefore your ability to pay said mortgage) the social welfare will give you very little assistance. Their position on the matter is that they "cannot be seen to be paying 'peoples' mortages". However, they are quite happy to pay up to 930 euros per month as rent allowance, never mind the fact that they are paying a landlord/investor's mortgage indirectly. For around 1000 a month you can live quite handsomely in a brand new modern 2 bedroom apartment.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: seller Date: Tuesday April 5, 2011 @10:02AM

    I never know why you guys doing your charts above don't list the areas under the heading rural and urban within a county. as that is what determins the house prices currently.

    The prices are steady in the larger towns and cities but they are plummeting in the once off houses rural areas without any infrastructure. Petrol prices have risen and commuting costs are a factor in making house purchases. Lots of homes have given up the second car.

    Makes sense? what do your readers think?

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Paul lakes knee Date: Tuesday April 5, 2011 @10:20AM

    Good summary- the over supply of housing stock and the increases in interest rates make Morgan kelly's 60 to 80% fall from peak to trough prediction all the more prescient- ah sure he was only cribbin and moanin from the sideline- wasn't he Bertie??

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Tuesday April 5, 2011 @10:35AM

    There are elements of truth in this report; scarce and fragmented, yet there are some statements that ring true. Again I find it disappointing that a practiced and somewhat distinguished economist has so vague an opinion on the crisis that is the Irish economy and housing market. Indeed he delivers his estimation with all of the assertion and enthusiasm of a fairground Tarot card reader.
    "But, and it's a big "but"", "there is a risk", "and may even be recovering very slightly at the moment", "It's likely that".
    These prepositions should not exist in such a report, and these are just a sample of the "semi-certain" or "tongue -in-cheek" sentiment that is all too evident in this the report presented above.
    Frankly this report appears to be disjointed and lacks credibility. A collage of vague economic generalities cushioned by a few solid sentences.
    The only points delivered with any certainty are the three bullet points made after the third paragraph, and these sentiments echo strangely true with the sentiments made by economist Morgan Kelly six weeks ago in his radio interview on the Matt Cooper show.
    I'm afraid I remain agnostic to the truth value of such reports which I feel are more self serving to the estate agents than to the people. I believe that there has been a substantially larger drop in property prices than has been suggested i.e. 3.1% in Q1 of 2011 and that this drop in percentage terms may in fact be the change in asking prices and not the final sale prices. All agencies message figures for their own benefit. What use to estate agents is it to release a report that stringently undermines their own business with unnecessary truths.

    In my business alone there has been a reduction in conveyance requests from 167 cases in 2006 (54 in Q1) to 3 cases (3 in Q1) this year 2011.
    Because of the sensitivities associated, I may not reveal any factual house prices, but in percentage terms, the sellers in all three cases without exception accepted bids below their asking prices. In one of the three cases the final agreement was 20% below the listed asking price for the property.

    Talking to colleagues in Cork the same situation exists except to a greater extent, where the difference in accepted bids and listed property prices range from 5% to 30%.

    So to state that property prices have only dropped 3.1% this year so far is misleading and should be reconsidered.

    Patso

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Eugene Davy DFM Date: Tuesday April 5, 2011 @11:09AM

    in Dublin North we noticed your report shows little difference between 1 bed's and 2 bed prices

    it would not be our experience on the ground

    regards Eugene

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  • Re: The Daft House Price Report Q1 2011

    Posted By: NAMAwinelake Date: Tuesday April 5, 2011 @11:20AM

    Well done to DAFT.ie for producing this report and to Eoin for providing commentary and expert opinion. The opinion is forward looking and as expert as it is, the Central Bank last week produced the results of its €20m stress tests where the *baseline scenario* for rpeak-to-trough esidential property declines was 55%. The adverse was 59%. Although the Central Bank denies the baseline scenario is a forecast, they haven’t done so convincingly and in other stress tests the baseline has been the forecast of likely outcomes whereas the adverse is the worst foreseeable outcome – I think it unfair of Eoin to classify the baseline scenario as “very negative assumptions used in the banking stress tests”. If DAFT’s statistics are correct then it looks, on the Central Bank’s numbers, that we might have a drop of 21% in store from levels today (if a property was worth 100 at peak and is worth 57 today according to DAFT and will be worth 45 at the end of next year according to the Central Bank then the drop of 12 today to 45 next year is 21% of 57). So a property worth €250k today will on the Central Bank’s baseline scenario be worth €197k at the end of 2012. But I suppose which of us has a crystal ball and how credible is the Central Bank’s compared to other projections?

    “Valuations are certainly not expensive on almost any measure” I suppose Eoin might be referring to affordability or multiple of average salaries. On a rental yield basis property on average looks expensive still and on a demand:supply equilibrium basis it most certainly looks expensive. But all of this “hard analysis” ignores the fact that in a property recession prices overshoot the “hard analysis” on the way down just as they did on the way up.

    It would be good to get to a position of price stability. It would also be good to have true price discovery. NAMA says prices were down 50% from peak on average in November 2009 – 16 months ago!

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Anonymous Poster Date: Friday April 8, 2011 @09:07PM

    price stability HERE who on earth would trust what the central bank says who in their right mind would would have anything to do with property in ireland ,
    dont forget the so called cb sorry i tried to use smaller initials , is totally now
    controlled along with the fifth rate debating soceity govt by the ecb thank
    godness / outsidders rule the show because strict eurapeans i can trust,the integraty of the euro is what matters now and all irish banks must proudly dance to this tune or it will be backto the irish pound that pretend boom ahem that never was is gone this is the price for poor bank regulation O and the property market it will now decline at an unprecedentl rate

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  • Re: The Daft House Price Report Q1 2011

    Posted By: colmf Date: Tuesday April 5, 2011 @01:12PM

    I know of an estate where new houses were purchased for 147K in 2002 off the plans. At the peak in 2007 houses sold for for 245K-250K. A few weeks ago a house in the estate sold for 165K. Thats a drop of 34% from the peak.

    Now the person selling that 165K house actually bought off the plans in 2002. That means they have made a profit of 20K and actually have perhaps 40-50K in total in their pocket depending on how much they had paid off the 142K mortgage in the 9 years. They are probably annoyed at not having made the 100K profit from the peak but they are still able to sell and walk away with a profit to put into their next house (or in this case the owner has emigrated to Australia).

    At the same time the people who purchased in 2007 at or close to the 245K peak are trapped with ~80K negative equity. They can't possibly sell for the new market price of €165K. If they had to put it on the market they would have to ask for at least 240K. Factor in that houses were constantly selling between 2002 and the peak of 2007 and you have a very diverse range of break-even points. Hence you now have a diverse range of sellers each with a different range of minimum asking prices. Looking at Daft.ie there are currently 7 houses for sale in the estate and the range of prices are: 175K, 175K, 195K 208K, 205K, 220K, 240K. It's fairly easy from that to pick out which ones are original buyers looking to sell 9 years later and which ones are boom buyers trapped in a nightmare.

    It would be interesting to see an analysis of house price now in "celtic tiger estates" (i.e. built since 2000) versus the original off the plans asking price.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Owen Whelan Date: Friday April 8, 2011 @05:26PM

    Your idea is smart, as it would cast in stone the median and average price of all similar homes within any time period. I do not understand why in Ireland that the actual sale price is not public knowledge and then reported on a monthly basis by a real estate body. This is how it is done in Canada, on a region by region, and neighbourhood by neighbourhood basis. There is no guessing here as to what sale prices actually are, and the facts are presented in a manner anyone can understand.
    I hate to say it, house prices will continue to fall as long as rent yields are not in the right place (say 7 to 8%) for landlords or investors, and for purchasers that servicing a mortgage does not exceed 30% of take home pay. As long as there is such a huge stock of vacant places to live all over the country, sale prices will continue to drop until stabilization occurs. Stabilization will occur when investors are confident of the yield, and purchasers are certain prices have stabilized. The guessing game will be over for sure when the current stock of properties of all types are sufficiently depleted, and the actual sale prices of this stock is properly measured over time. Then builders will build again at cost plus a competitive margin which will almost mirror the value of existing properties. This will be the bottom of the housing bubble. So stop guessing for now how long more will it be that prices drop and how much further prices will drop, simply wait until stabilization is known to have been reached. Builders and investors have the answer for you - once again, except this time they will be relying upon the globally understood fundamentals of real estate rathar than their stupid heads.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: bob one Date: Tuesday April 12, 2011 @07:06PM

    @colmf
    quote
    " Now the person selling that 165K house actually bought off the plans in 2002. That means they have made a profit of 20K and actually have perhaps 40-50K in total in their pocket depending on how much they had paid off the 142K mortgage in the 9 years"

    as a renter i always find it interesting when people say they brought a house at X amount and then sold if for a profit. in your quoted case 20k. i would doubt very much that the person you mention made anywhere near that profit.
    factor in the solicitor fees, possibly the fact they might not have been a first time buyer, the surveying fees, mortgage insurance. house insurance and then the interest they have paid to the bank for servicing the mortgage. once all added up POP the 20k is easily eaten up..

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  • Re: The Daft House Price Report Q1 2011

    Posted By: PM Date: Tuesday April 5, 2011 @02:26PM

    It's quite possible this time next year prices will fall another 10%
    and in 2012 by 20%.

    First time buyers won't be in a rush while the economy fails to grow and the over supply issue stagnates. Not to mention rising interest rates and stricter criteria.
    2016 is the earlies I can see a return to growth in house prices.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: ... Date: Tuesday April 5, 2011 @10:46PM

    good point

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Nick de Mowbray Jeffrey Date: Tuesday April 5, 2011 @03:32PM

    Wonderful piece of conjecture.
    Interesting reading but hardly a definitive piece of information.

    Ideal if you live in a large town or a city.

    Valuations of rural properties are another matter altogether and based upon opinion, very few are based upon fact.

    There are no virtually no rural sales taking place except where the sale /offer price is ridiculously low and with the current market conditions and almost no mortgage funds available, the only real sales are to cash buyers.

    Sale prices reported to the stamp duty collectors are hard facts based upon real evidence. Without either based upon stamp duty amounts sales facts and figures or a transparent regular report on sale prices area by area we are flying in the dark.

    Asking prices in the countyside are mainly based on,'well if that house is on the market for X then mine has to be worth X+Y'

    Not a healthy way of assessing values and asking prices.

    Most rural properties differ in size, accommodation, acreage, rural or urban and then we have age to consider, notwithstanding condition and location coupled with desireability.

    There are buyers out there now waiting and also there are buyers actively looking.
    Without confidence in either the property market, lenders or the other financial institutions coupled with the lack of knowledge of the full implications of the last budget, rates or water rates chearges or a land tax plus the devious way Banks have mislead their customers, shareholders, bond holders and their own staff, what chance does the poor property market have in the immediate future.

    Precious little would seem to be logical conclusion at todays date.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Lorcan Date: Tuesday April 5, 2011 @06:07PM

    "Valuations are certainly not expensive on almost any measure."

    This statement isn't just misplaced it completely incorrect.

    According to the latest release from By most measures Irish house prices are still over valued by most measure. And on one of the key measures house-price to incomes Ireland is still the most expensive market according to the economist.

    http://www.economist.com/blogs/freeexchange/2011/03/global_house_prices

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  • Re: The Daft House Price Report Q1 2011

    Posted By: rational optimist Date: Tuesday April 5, 2011 @07:15PM

    I have yet to hear an actual industry expert actually get of the fence and state the real facts bar M. Kelly.

    Fact no1. On the investment b2L side we have a oversupply of accommodation notable 1/2/3 beds that will take approx. 4 to 5 years to clear at best, current yields on these properties at 43% discount range from 3.25% to 4.9%. (ex. 1 bed at 700 PM / asking prices), thats dublin, it worse down the country. Unemployment and emigration are still high and will be for the near future. Interest rates are still low and only going one way hence the yield is still low.

    Show me a minimum yield of at least 6% to 7% on a guaranteed letting at 6% or 7% APR and real investors will either the market. I suspect asking prices will reduce again toward the middle of the summer but overall, I would expect CB worst case scenario to come through i.e. 60% on average. Peak to bottom and we will slide along that for long long time.

    Fact2: The demographic aged 27 to 40 traditional trader uppers are by in large in negative equity they are in no hurry to move until the 4 / 5 bed house start to reprice (And they have not yet), also many have to content with not only mortgage, but childcare costs and lower pay and impending rate hikes.

    So come on, experts you need to show some common sense its bit like going to a AA meeting its best to come clean admit the truth that we have a way to go and the sooner we get there we can draw and line and move on. Only then will the smart money enter the market and we will see some stock move and a rapid pace.

    A family house should be seen as a utility not a asset and thus the market will eventually get back to fair value. i.e. 33% on net disposable income no more on a monthly mortgage me thinks we have at least 20/25% to go before the smart money begins to enter the market.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Tony Date: Wednesday April 6, 2011 @11:28AM

    The overhang of properties to let is falling rapidly according to the last daft rental report. If that trend continues, by the end of the year there will be a strong demand for properties in well serviced areas. Once rents stabilise and show signs of growth, investors will pay more attention. The upcoming rental report will be interesting from that point of view.

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  • house prices and the folly of greed and the punishement for corruption and stupidity

    Posted By: joe Date: Sunday April 10, 2011 @03:49AM

    Ojust one thing house prices will now fall and fall and fall THEN THE BANKS WILL COLLAPS hopefully then we will have foreign banks here by then irish banks will become extinth AND rightly so

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  • Re: The Daft House Price Report Q1 2011

    Posted By: PD Date: Tuesday April 5, 2011 @08:53PM

    PM is spot on we will have another 5 years to go. Ask him to comment on the Q2 report.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: told ya Date: Tuesday April 5, 2011 @11:07PM

    KA'BOOM

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Tuesday April 5, 2011 @11:20PM

    Looking at Ireland's national broadcast service; RTE.ie I noticed that the RTE online property section have finally corrected the figure which purportedly represents "Average Sale Price Nationwide". This figure now reads €210,000 for March 2011.
    For those keen eyed individuals out there this represents an increase from last Septembers figure which indicated that the "Average Sale Price Nationwide" was €195,000.
    This news could represent either one of two things;

    1. We are well and truly on the road to recovery with a six monthly increase in average property prices in percentage terms at +7.14%.

    Or

    2. Our national broadcasting service is as badly informed as the rest of us in terms of reliable data and hence embarrasses itself by publishing said data unashamedly without apology or explanation. Probable because they know that no-one will question their decision to do so and also because they have been getting away with such lazy, underhand reporting for far too long to care now.

    Basically what they are saying is that property prices are increasing. At the same time, available in the same property section which indicates that property prices are continuing to decrease in value (as if we property owners didn't already know). Blatantly a contradiction in terms. Yet not so much as an explanation as to why the discrepancy in the figures. It really annoys me to see our national broadcaster bring itself into disrepute. I am a proud Irish man after all. I think we can do much better than this, really. Start trading in truth and stop hiding behind the vagaries of random figures.

    This sort of bad judgment not only confuses the readers and potential property buyers; it removes their capability to make rational, informed judgments and further undermines consumer confidence.

    Well done RTE. Good research and nice to see you as the national broadcaster ignore the obvious discrepency in your own information. Good job and although you cast a tardy shadow over Ireland as a whole in terms of your work ethic; you are not representative of me or many of my hard working clients.

    Patso, now fighting for the free man.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: M Date: Wednesday April 6, 2011 @08:22AM

    This report seems to be based on asking prices. Asking rices are not the prices that properties are being sold for. Until we have the actual accepted sales prices, we can't know for sure what the price falls have been, are or will be.
    However, it's a fair bet that prices will continue to fall.
    I echo another poster re the language uses in the report. Hardly convincing.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: bob one Date: Tuesday April 12, 2011 @07:09PM

    all reports are based on asking prices. there is no / never has been / probably never will be any information on selling prices. you would have to be an estate agent or a bank manager to know that info and there swarn in like the massions never to tell anyone that information..
    there is no freedom of information on house prices ..

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Anonymous Poster Date: Sunday May 29, 2011 @04:17PM

    There is in the UK at http://www.nethouseprices.com it makes the overall picture clearly and more importantly TRUE!

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Yields or Bust Date: Wednesday April 6, 2011 @02:13PM

    It seems that the message I and others have been posting on this site for quite some time is finally beginning to filter into the mindset of the ordinary house buying folk in the country.

    Why the basic housing message has yet to make it to some of the so called ‘experts’ is a worry.

    I'd refer most readers to the post above by 'rational optimist' as it conveys the real massage about the housing market.

    Well said 'ro'.

    Just to note the Prime Time program last night (worth reviewing on the RTE Player) finally started to get to the true horror of the housing calamity. Albeit only a very limp start.

    I and others have been suggesting for some time that to have 100% of the housing mis-pricing error shouldered by ordinary consumers is crazy and nonsensical.

    On average the standard couple transact in the domestic housing market once or twice in their adult lifetime. They rely on ‘experts’ as result to guide them and in the main the ‘experts’ all had the snouts in the trough so independent advice was pretty thin on the ground.

    Ordinary consumers cannot, repeat cannot be held liable for 100% of the pricing error over the past decade. It’s delusional to think they can.

    Banks price property, they always have and they always will if property continues to be a leverage driven market. Which it undoubtedly will.

    Pricing is nothing to do with consumers, estate agents, developers etc its all to do with banks.

    The sooner we as a nation understand this plain fact the quicker we can realise that banks who mis-priced an asset class for a decade and sold mortgages to property novices on the back of it must be held to account and consumers should have no hang ups about seeking debt write downs as a result.

    Banks who priced property on rental yields at c1% at the height of the market which was c70% less than an equivalent risk free investment yield cannot turn around in any sane society and place the repayment onus of this shocking error in the hands of the consumer.

    Any Government which allows this to continue any longer loses any sort of credibility by the day.

    (A small digression - I would ask readers to review page 58 of the recent CBI Stress test announcement.

    I have been indicating in recent posts that the position of the Regulator in relation to the mortgage distress proposals by the working Group set up last year were as mad as the proverbial mad hatter.

    Now the proof of my skepticism is printed in black and white and plain for all to see.

    Have a look at the house price growth estimates in both the base and adverse case scenarios (which previous commentators have indicated are already the market reality by the way).

    One of the proposals by the Regulator/Working Group was to allow an ongoing interest only mortgage repayment by a distressed mortgage holder. The idea was that over time a potential sale would wash away the negative equity and allow the distressed mortgage holder to perhaps re house themselves in smaller accommodation and move on. Not so fast dearest Matt.

    The schedule on page 58 indicates that by 2040 (not a misprint) in the base case scenario the CBI et al are forecasting housing to recover to their previous bubble highs. That’s 29 years away.

    In the distressed case (i.e. the here and now) by 2040 the forecast is that the house only recovers to 91% of its previous bubble high.

    Now please can someone explain to me exactly how by making interest only repayments over the foreseeable future how in Gods name someone faced with these metrics is ever likely to repay the capital on the loan when the CBI themselves see no reasonable prospect of any significant house price recovery back to bubble levels in the next c30 years.

    What happens when such an individual reaches retirement age? Does the bank take their pension book? Does the bank request a sale? Where and how does such a mortgage holder then afford rent when they’re pension pot is already impaired by virtue of the fact that by that time most services will not be State subsidized etc etc.

    Work it out - its lunacy gone mad. )

    In my view the past decades’ mortgage market in the ROI will be seen in time as the biggest mis-selling scandal ever recorded in any developed economy. Making previously noted UK insurance mis-selling scandals look like forth division diversions.

    The saving grace in a mortgage (albeit a limited one) is that the consumer pays for the underlying product over 20 to 25 years i.e. unlike a cash market where 100% is paid over on day one. So consumers have the right to ask banks to correctly re-price the underlying product and move on. This will give rise to write downs but should not in my view involve bankruptcy light options as others have been requesting.

    What natural right does a bank have to instigate bankruptcy proceedings against average consumers where the mispricing error sits 100% on the banks side?

    It’s that mispricing error which is at the root cause of the impending bankruptcy. This makes no sense. The potential stigma attached to such a situation makes the clamor for bankruptcy friendly solutions misguided in my view. Much easier to arrange a sensible write down agreement where the bank owns up to its error and not the other way around.

    We all know there is only one real solution to this problem and that’s debt write offs, the sooner we devise a model to properly calculate that fair value solution the better.

    My very basic model which has been posted here before essentially means re-pricing houses based on a long run rental yield at the time of purchase and using a 7% capitalisation method applied to market rents at the time of purchase to establish the truer fair value of the house at the time of purchase.

    As a result a recalculation of the mortgage this truer fair value would have given rise to at the time be it at a LTV of 90%/85% of whatever was agreed at the time. From this deduct what has been repaid to date. The balance remaining is compared to the actual outstanding today and difference is written off.

    The problem is establishing and using other methods is that one runs into affordability issues. My definition of affordability will differ to someone else’s – as in does affording your mortgage mean sitting in the dark with no heat on but making the monthly repayment or having enough cash to perhaps even to feed yourself. I don’t know the answer to this – and more to the point nobody does. So adjusting mortgages to affordable levels is recipe for delay and argument. Easier to focus on yield calculations where the mis-pricing error can be verified.

    No matter what method write down method is established it’s required and required quickly. When agreed watch the country recovery in rapid fashion as a result.

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  • Re: The Daft House Price Report Q1 2011 - response to Yield or Bust

    Posted By: Peter_Paul Date: Wednesday April 6, 2011 @06:03PM

    "Now please can someone explain to me exactly how by making interest only repayments over the foreseeable future how in Gods name someone faced with these metrics is ever likely to repay the capital on the loan when the CBI themselves see no reasonable prospect of any significant house price recovery back to bubble levels in the next c30 years."

    Maybe pray for inflation to make the outstanding principal sum a minimal amount, and thus affordable in real-term value by 2040?

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: Yields or Bust Date: Monday April 11, 2011 @05:39PM

    @Peter_Paul

    You said:

    'Maybe pray for inflation to make the outstanding principal sum a minimal amount, and thus affordable in real-term value by 2040? '


    It’s been a while since hope was ever a workable or even a sensible strategy to pursue in any venture in life - my thought would be that now is probably not the time to entertain such an out clause.

    You may very well be right, in that inflation could indeed be our debt mountain saviour but I'm not sure it’s a proposal your local bank would have in mind as you fall 18 behind in the mortgage repayments.

    Proclaiming that inflation will see us right may just be stretching the 'hard sell' that bit too far as a negotiating tactic.

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: vincent Date: Wednesday April 6, 2011 @03:00PM

    One thing is for sure , property professionals and economist will have no clue when the top or bottom of the market will be reached

    Regards

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Wednesday April 6, 2011 @04:51PM

    Yields or Bust,
    You have hit the nail on the head yet again. Excellent stuff. I love reading your articles. It’s the only time I really get the feeling someone knows what they are talking about. I hope someone from the press highlights your point.

    Thank you again for taking the time to write this well thought out idea. I wish some of these economists or "experts" daft roll in to "trot out" the “same old story” could make a case as well structured, well presented and articulate as the ones you appear to be able to structure and present on a whim.

    It would be well worth people’s time to look back over your sentiments expressed after Ronan Lyons's report of Q4 2010.
    Are you in fact Morgan Kelly perchance, as you have the rare knack of having your finger consistently on the pulse of the market?
    Yet again you have stated exactly where the central problem is in terms that can be clearly interpreted by any person (even those not versed in economics).

    Keep up the plight to highlight the problems and common misconceptions,

    Patso

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Jp Date: Wednesday April 6, 2011 @08:36PM

    All very good and different comments- irelands fasination with property ownership is well and truely over- I am an investor who got into the Market in 1999 and put a few properties togeather in good locations- I pulled out of the Market in 2005 well before the peak- but still a bit late- negative equity is a slight problem but I would be reasonably confident over time it will be ok- I would be willing to stick at it with the view that a greater percentage of people will rent long term- the Market needs landlords who provide nicely presented well located properties
    I have been lucky that properties have all rented well, all properties well taken care off)- I hear of stories of some banks writing off debt for those who bought at the very peak- anyone out there knows of any example of this.don't think it is fair- also many developers are renting properties at what ever they can get and competing with the genuine landlord with a handfull of properties-
    and then the government jumps on the band wagon with 200 tax
    the country needs landlords and it is time those sensible amongst us got a fair deal

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: Yields or Bust Date: Thursday April 7, 2011 @12:21PM

    @Patso the Fatso

    Thanks for the comments.

    Please be reassured that I'm not in fact Morgan Kelly nor even a clone or a close relation of his so sleep easy it's not only economists who claim to understand economics - which by the way I don't.

    I do understand markets however and what’s gone on and going on in the Irish residential property market is worthy of debate as the social implications of same will be felt for generations to come.

    The CBI has now confirmed this fact.


    @JP

    Your comment regarding fairness insofar as debt forgiveness is concerned is odd - as a seller in 2005 I would have thought fairness would be the last of your worries.

    Nevertheless on the assumption that the buyer of your property was an average consumer has the thought that the supposed 'unfair' write offs related to the buyer of your premises entered your mind at all?

    I make the above comment in jest obviously however we need to understand that property markets are unlike cash markets. Those institutions that provide the credit that oils the property market hold all the aces and they ultimately determine the price at which transactions occur.

    If the price paid for your premises (as an example) made little or no sense relative to risk free assets yields at the time of sale surely it's only reasonable that the market participant who prices that product bear some element of responsibility for the mis-pricing error.

    Sadly the law in the ROI assumes no fault on the side of the bank - this is daft, and more to the point all right thinking adults in the country know this is daft.

    Why as result do we let this craziness continue?

    My argument has been that thus far the consumer has be demonized because in plain mans speak they general opinion is that 'they should have known better' .

    The facts of the property market however suggest differently.

    The market participants that actually control prices in the market being the credit providers i.e. the banks, had and still have a much higher level of responsibility to get the pricing of the underlying product right. It is correct and right that the banks should therefore be accused of 'knowing better' ahead of all other property market participants.

    Longer term a mis-pricing error in a leverage driven market can have devastating consequences to the market and the wider economy - which we now know to be the case.

    That's why these guys are Regulated, their meant to be conservative and careful.

    Sadly Irish banks were none of these things for the past decade and as a result fairness is not a word I would describe their actions in prevaricating over whose to blame on the pricing error.

    Any reasonable man looking at the property market could only come to one conclusion that the banks have an overwhelming duty of care to get these pricing decisions right.

    When they fail that test which they undoubtedly have ordinary consumers cannot be expected to bear 100% of the cost of their pricing error.

    If writing off a portion of the debt to right size it against fairly valued property based on long run rental yields is not being fair to all market participants then I’m clearly missing something. Which, I don’t believe I am.

    My own opinion is that it now seems ‘unfair’ because the cost of this debt write is being borne by all taxpayers. This however misses the point. In some respect we need to divorce ourselves away from the cost of the fix and look at the market and its drivers and make the correct decision on the facts at play in the market, regardless of the cost.

    Unless we do what I’m suggesting we run the risk that this market impacts and disrupts social cohesion a lot longer than is necessary and ultimately costs both society and taxpayers significantly more in the long term.

    The bankruptcy lawyers are lying in the long grass with their pens sharpened - let them wait.

    In my view far easier to be up front and honest and have the banks fess up to their own errors first and not the other way around.

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: ww Date: Thursday April 7, 2011 @04:28PM

    All of the daft reports have failed to mention the big white elephant in the room and that is that oil supply has reached its peak and therefore will decline thereafter. Which means that the price of oil is going to rise and rise until a new type of energy is put into motion (none so far). All renewable energy products need oil for their production.

    As the oil prices rise so does the cost to build a house. At the moment it is possible to buy a house for less than it cost to build (and the land it stands on free of charge). This scenario will not last. Only the clever ones and of course the ones that can get the money from the bank will by able to buy at these present prices.

    A very interesting book to read is" the party is over".

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: JOHN Date: Thursday April 7, 2011 @06:14PM

    I have a question that i need help with. This is my situtation,
    I bought a 3 bed terrance house in co clare in a good estate. The problem is i do not live in the country but the property is rented for 525 a month. My morgtage is 925 a month. I am paying money from my pocket every month. I payed 230 for the house, the current valve is 160. I cannot afford to keep paying for something that is going down in valve and is going nowhere.

    What should i do? Why should i keep paying if i am going nowhere. What i want to do is hand the keys back to the bank. I spoke to the bank two weeks ago about getting an interest only loan, the problem is they are saying you can afford to pay the full mortgage so pay it. They will not give me a break.

    If you break down the the monthly payments 500 goes to interest and 425 goes to principial. I want to say good buy to this house.

    Can you please give me some advice on what you would do ?

    Thanks,
    John

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Owen Whelan Date: Friday April 8, 2011 @07:00PM

    This rental property is a lost cause for you as a landlord. It sounds like you bought the property at a price that could not be supported by rent receipts. You need to ask youself if rents will ever be high enough to support your investment. I don't think so, so like any investor sitting with a perpetual loss, my advice is to sell the property and cut your future losses. Forget about whether the value of the property will increase over time, as an increase in value of the property will not provide you with increased rent receipts to support your costs. The bank has no reason to give you a break. Furthermore, you are making your payments. The property is draining you, so sell the property to another investor who can make the numbers work with your current tenant in place, and move on. Cut your losses before values drop further, because they surely will if you cannot find a buyer at 160k who can calculate a market yield with a 525 rent. Do the math and you can figure out how much more the property value is going to fall in County Clare. Next time you buy residential real estate as an investment, forget about residual value. If the numbers work at the time of purchase, then you have a reasonable prospect of a decent stable return. It's that simple.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Rational optimist Date: Saturday April 9, 2011 @12:34PM

    John,

    IMHO - Sell it... asap. if you can get 145K for it take it and run. your current yield is 2.7 % and rates are rising put the cash into a bond or etf, move on .

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: Tony Pony Date: Tuesday April 19, 2011 @06:22PM

    I would consider the responses of the other posters with a pinch of salt.

    I'm going to assume you bought in 2007 and paid a 20K deposit with a 30yr tracker and have paid 10K off the principal over the last four years.
    So you currently owe about 200K and the house is worth 150K realistically.
    Selling now will crystallise your total losses at about 80K
    Assuming mortgate rates rise about 1.5% on average over the coming 5 years your repayments should max out at about 1100. (Very rough and ready calcs here)

    House prices are near the bottom now, if your house is nice, well insulated etc and in a good estate it will have a reasonable chance of maintaining some value. It may even gain value *very* slowly over the coming 5 years.

    If you can keep the house rented at least you will have some hope of getting out a few years down the line with a smaller loss.
    Rents are due to slowly rise in the coming months so as interest rates rise there is a fair chance that your rent should approach 600pm in the coming years, somewhat taking the sting out of mortgage rises.

    Say for example that you hang on for 5 years.
    1. You will have paid off more of the principal ~15K
    2. Your house value may get to 170-180K
    3. From your pocket you will have paid 30K on top of rent to service mortgage.

    Your losses at 5yrs will be about 10K (mortgage-value) plus the 30k you paid in= 40K. Half of the cut and run cost.

    So if you can tolerate being a landlord (and all the crap that goes with it!) for 5 more years, and suffer the drain of 500-600 per month from your pocket you will reduce your overall losses by 40K.

    This assumes that *things will get better* (be positive) over the next 5 years but only very slowly (be practical).
    Its a risk hanging on, rates could rise more drastically (possible), house prices could completely tank by another 50% (improbable), rents could fall (unlikely).

    I think you need to sit down and ACCURATELY do your sums, be realistic, project best case scenario, worst case and the realistic based on sluggish growth.

    There is risk in hanging on, but you will definately lose by running now. Maybe since you live outside Ireland you can chuck back the keys and not come back, but thats another option......

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Sunday April 10, 2011 @12:09PM

    Iceland, do we take the same option?

    Patso

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Mortgage less Mike Date: Monday April 11, 2011 @06:35PM

    Is it just me or have the house prices on this site gone up by over 10 grand?
    Whats that all about thought the ar*e was still falling?

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: john Date: Tuesday April 12, 2011 @01:16AM

    Thanks for the feed back. The only problem is I do not have the money to cover the loss. It would be nearly 80,000 euros. Thats a lot. Any better ideas?

    John

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  • Re: The Daft House Price Report Q1 2011

    Posted By: PC Date: Friday April 15, 2011 @01:06PM

    It is quite misleading to compare prices to the peak. I recommend anyone looking into buying a house to have a look at prices before 2008 as you will see the unsustainable increase of property prices. We are a small country with an oversupply of property increasing emigration and unemployment do the math.
    Yields or Bust I understand your point but the bank is under no obligation to do this (read your contact) but it may be on the cards for people who can’t make their payments rather than those who won’t. A big part of the problem is that people keep looking at their property as an investment and not a home. They agreed to pay what they agreed to pay and they were part of the problem.Any form of debt forgiveness will also mean the bank taking a stake in the property.

    • Reply to this message
  • Re: The Daft House Price Report Q1 2011

    Posted By: Mark Fitz Date: Tuesday April 19, 2011 @08:55AM

    Lets face it. Investors see far more attractive investment opportunities in other countries in Europe at the moment. Don't be hoodwinked into thinking that Irish properties will rise on account of an influx of foreign investors coming in to snap up bargains. No investor in his right mind would invest in a commodity that is guaranteed to fall in value over the next few years. That would be buying into a negative equity and it just won't happen. This is not a fairytale, so there won't be a fairytale ending to the story.
    I see every day more and more "for sale" signs going up in town. Many investors and homeowners just don't want to be caught with too much negative equity; some just can't afford the repayments and others may be moving abroad or away for a better standard of living.
    Ireland is still overpriced. Just look at the results of that auction last week. Compare the prices achieved to the asking prices associated with your area and you will realize that there is a vast discrepancy in expected values and achievable values for properties. Many properties were sold at the auction, many achieved more than their reserve values; but the reserve values had been set so low it was a giveaway. It served to highlight the realizable value of property at the moment. Example. 3 bad house in Lois; 30,000 euro. a large 4 bedroom house in Churchtown with a huge site attached; 490,000 euro.
    Now the media talked these figures up saying that more money was achieved for these properties than their reserve; but the sad fact is that if you compare these prices with the prices for other houses for sale currently in these areas; then you see that there is a huge gulf in the difference.
    Take the Churchtown house and site for example. The house is a large 4 bedroom house and has a huge site attached at the back. the garden is extensive; much larger than many regular 4 bedroom houses in Rathfarnham and Ballyroan or even Terenure. It achieves a price of 490,000 euro. Another house with a smaller garden in the same area is currently on the market for an asking price of 2,300,000. Yes, 2.3 million.
    Now after this auction, how much do you think this 2.3 million property has been devalued by?

    Get real and see the obvious discrepancy. And by the way there are at least two more of these auctions due this year.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Should've seen it coming... Date: Wednesday April 20, 2011 @02:05AM

    @Yields or Bust

    Your comment:
    "Sadly the law in the ROI assumes no fault on the side of the bank - this is daft, and more to the point all right thinking adults in the country know this is daft."
    got me thinking.

    Has anyone else noticed the irony of the largest property website in Ireland, established in the late 90s, being called DAFT!!!??! Says it all really.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Wednesday April 20, 2011 @04:31PM

    6203 properties down to 6155 properties in Dublin in the space of an hour. They may be Daft but that is some selling record for the auctioneers.


    ??????????????????

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Peter Heaslip Date: Wednesday April 20, 2011 @06:18PM

    Has anyone else noticed that there has been a huge correction of the "property for sale figures" around Ireland today on the Daft website and consequentially on the RTE property web page.
    By god if the auctioneers don't know how many properties are on offer at any given time and still post figures as a rough average, how then can we as consumers use any information posted on these forums to make informed decisions. I am told that the prices advertised on the Daft web site are only there to "guide the buyers". If the prices are likely to make such sudden drops in value as a result of a sudden correction on behalf of the Daft website then I for one would be most appalled by the lack of clarity and reliability of such figures.

    Must talk to my friends in RTE about these discrepancies.

    Peter

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  • Re: The Daft House Price Report Q1 2011

    Posted By: mr h Date: Saturday April 23, 2011 @02:47PM

    most comments here are what is the problem in this country with the property market,

    its all linked to income, im now aware of people working for 3-5 euro an hour, well below the minium wage, and when you factor in the cuts in wages and pensions to the beloved public sector who live in a fantasy world along with the head bangers in nama you will soon see wats affordable, first time buyers will not buy, if all you get in wages only covers your car expence's and your mortage, no first time buyers do that any where else in the world! they wont do it here. so either employers start paying proper rates of pay, or in 18-30 months there is going to be a fire sale of property forced by imf/eu to find the bottom of the market and let the econmy start to grow again, as is the whole country is being held up to protect the people in nama and a handfull of others, this is fast becoming clear, and buyers will not be fooled.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Joe Date: Monday April 25, 2011 @10:31PM

    Average house prices could still be overvalued by up to 30%. This is the stunning revelation as appropriated by one Mr. Martin Walsh (former head of lending at EBS, 1988-2003) in today's Irish Times.

    Read this article and weep. When you hear the hangman come out to eulogise the corpse then you start to realize that the “poor sod” is actually dead. Similarly when you start to hear people like Minister Brian Lenihan saying that he was forced by Europe to accept certain conditions while in negotiations about Ireland’s financial bailout; you start to get the “Ponchos Pilate” feeling about the whole story.
    Furthermore you start to wonder how much worse is it going to get?????

    Anyway this paradigm of modern decency, Mr. Walsh, has written the following statement amongst others:


    "From 1953 to 1996, (i.e. before the bubble), the average ratio of the price of new houses in Dublin to average industrial earnings was 5.3. That is also where it was in 1996. In 2006, it reached 13.7 and by 2010 it had fallen back to 7.4.

    Based on a return to the pre-bubble level of the ratio, average house prices in 2010 should have been approximately €180,000 instead of approximately €250,000. Here we are talking about average house prices and average incomes. Of course there are exceptional houses and special buyers but for the country and economy overall it is the averages that matter."



    This “roughly” meets the criteria that the price of a house or apartment should be 14 times the annual rental income that a similar house would attain.
    In many parts of Europe; like Germany for example; this ratio is 12 times the annual rent.

    I am starting to wonder if perhaps even the estimation that property prices will fall a further 30% is a little optimistic and that in fact we could be in for a far greater correction than is anticipated.

    Please read the full article and draw your own conclusions. I am but a humble servant of the public. And although this article serves to illustrate that even the “horses’ mouth” is now “starting” to say how things really are; I would hasten to add that your mental filter may not allow you to digest the truth or magnitude of this commentary.
    If that is the case, then I will summarize as follows.

    Things are worse not better than they appear and they are going to get progressively worse until we again reach a certain equilibrium in terms of what is paid for property and what property makes in terms of rent.

    Sure what would a silly eejit like me know about these things.


    Joe

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Andalin Date: Saturday April 30, 2011 @05:36PM

    Case study:

    Family: Wife, myself (32) a 2 year old and another one coming.

    Money: Good jobs, good contracts, 5000 in the house/ month, 30000 in savings.

    House: Renting in Cork city 700/ month.

    What options do I have.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Tuesday May 3, 2011 @12:21PM

    Was going to give you a big breakdown of pros and cons but I am fatigued by this whole debate.

    Read latest article posted by Joe above and related press releases. I know information scouting is tedious and painstaking but if you research the market you are less likely to make mistakes.

    General consensus at the moment is that house prices will fall somewhere between 20-30% in the next two years, depending on the area in which you wish to buy.
    If you factor this fall in property value against your annual rent and find that by not buying you will save money then don't buy. It is equivalent to saving. Otherwise you might consider seeking cheaper rental accommodation or buying.

    Example: If you are currently renting in Rathfarnham; 4 bedroom house; 1,400 Euro per month.

    Then annual rent is 12 x 1,400 = 16,800 euro (I am ignoring rent relief etc) or 33,600 Euro over two years.

    Let’s say that other houses in the area are currently on the market for 400,000 Euro.

    Then a 20% (over a two year period) drop in property values (note I am being fairly conservative with percentage drop) would result in an 80,000 Euro devaluation.

    Money saved by continuing renting = 80,000 – 33,600 = 46,400 Euro.
    Note the 20% figure used in the depreciation calculation is conservative. It is eminently conceivable that this figure could be as high as 30% which in this calculation would result in a saving of 86,400 Euro.

    This is a no brainer really. Even if the drop in property values was not so severe; let’s say 10% over two years there is still a benefit by not buying of about 6,400 Euro. But realistically when you hear former bank managers coming out and saying that there will be a drop in property values of up to 30% within the next two years, you would be taking a huge risk by not paying attention.

    Fitz

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Shirley Date: Friday May 6, 2011 @12:24PM

    Silly poster, this guy is living in Cork, not Rathfarnham, a rent of 700pm in Cork if transposed to a mortgage should service a loan of about 150K, adding his savings will allow him purchase a house valued 180K without any extra financial pressure at all. Depending on where he lives in Cork 180K+ will buy a very nice house. As long as he likes the house and its location, can service the loan, and has no intention of moving in the next few years who cares about the short term valuation?

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Friday May 6, 2011 @07:53PM

    Ten out of ten for observation Shirley. You should have been a detective. However you appear not to have noticed that I was using the Rathfarnham case as an "example" hence the word "Example" written before the crude "example" I gave to support my argument.

    Thats what you get for rushing in to admonish someone when you are not aware of all the facts.

    Do you think the bank will give him a mortgage of €150,000 euro just like that. Perhaps the bank would. But we do not have enough private information to make that judgment. Even though there is a good salary coming into the house on a monthly basis, and money in the bank to boot; that does not guarantee that they will get a mortgage.

    I know a solicitor in Dublin who works for one of the "big three" accountancy firms, who was turned down for a mortgage of €460,000 even though she has a deposit of €78,000 euro. She was refused on the basis that she didn't have a sufficient savings history.

    She has been saving for three years and has an annual salary of around €75,000. Her job is permanent and pensionable. She does not have any other loans and also has no dependants.

    She has since decided to continue renting for the time being and has saved an estimated €20,000 odd euro by doing so. See my "Example" to find out how.

    So you see where you would rush into the market and buy now; I would caution not to buy and also to study the market a bit more. Pay close attention to detail. Your advice is as good as mine as I am only offering my opinion. You are welcome to offer yours too but please refrain from being rude and calling names.

    Fitz

    Fitz

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Patso the fatso Date: Sunday May 8, 2011 @09:33PM

    P.S. Shirley,

    Proportionally the savings inherent in my argument are equal if the same equation was to be applied to buying versus renting in Cork.

    Let me explain to you in a simplistic manner by "example".

    Mr. and Mrs Andalin currently pay 700 euro per month on rent. Leaving rent allowance aside as I have done in the above example; then over a one year period (12 months) The Andalins have paid 8,400 Euro in rent.

    Let’s say that other houses in the area are currently on the market for 200,000 Euro.

    Then a 20% (over a two year period) drop in property values (note I am being fairly conservative with percentage drop) would result in an 40,000 Euro devaluation.

    Money saved by continuing renting = 40,000 – 16,800 = 23,200 Euro.
    over a two year period.

    And your assertion that the devaluation in property will be short term leads me to believe that you have not researched what almost every economist believes to be the case i.e.
    "while the boom in Ireland had lead to a short term change in lifestyle for most of the Irish population; the after effects will echo far into the future, affecting generations of people to come. The collapse of the Irish property market is perhaps the most noticeable aftershock, with property prices devalued by as much as 55% of their peak values. However if you think that we have reached rock bottom and are on the "green shoot" lined road to recovery, then you had better think again. Even if the Irish government does manage to renegotiate the interest rates on borrowings from Europe, you can be sure that any recovery will be slow and it will often appear as though the anesthetized patient is closer to death than to life as a result of critical underlying statistics such as high unemployment, High fixed costs, loss of consumer confidence etc."

    I know your argument makes some sense but the idea of buying into some "very nice" debt doesn't appeal to many people. On top of this the age profile of the young couple leads me to believe that they are trying to establish when is the best time to enter the property market, i.e, starter home. In short, they are too young to grow old. Too young to be pegged down when they might not want to remove the possibility of travel or immigration.

    Your court my lady,

    Fitz

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  • Re: The Daft House Price Report Q1 2011

    Posted By: NO2011FAN Date: Monday May 2, 2011 @03:39PM

    a fairly stagnant easter once again. traditionally the start of the house sales season, has once again returned to a damp squib. i think most people looking to buy have now begun to take everything into account. wages aren't going to rise for a few years, we've more stages of hardship to come for the next four years.although, to be honest, we can't really call it hardship, instead, a return to normality.
    prices are still too many times the average yearly wage.... hence , until they've dropped another 25% or so, the market probably won't get going.
    i yhink even the above posts reflect the fact that the majority seem to accept where we now are.
    as i heard someone quote, this weekend- "house prices were driven by....house prices" wages merely had to keep up with the rising house prices accompanied by the rip off in the retail industry. if house prices were reduced to half what they are now, we wouldn't need to demand current pay rates. with that, Ireland would become more attractive to foreign businesses wishing to base themselves here.

    something's gotta work.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Mark in Canada Date: Tuesday May 10, 2011 @11:42AM

    How are the banks responsible for the overvaluation of properties?
    Yes they were irresponsible in the mortgages they approved, but this only enabled the general greed that fed the bubble.
    Housing bubbles were not invented by the Celtic Tiger economy, I have sympathy for the average homeowner, but they were complicit in this property boom. Although desirable to own a home, nobody is forced to buy a home.
    The worst of it is that those who profited the most from the boom will have little to do with paying for the hangover, or with driving recovery in the economy, their money will have been spirited away long ago.
    Lesson from this is that regulatory bodies need to have power to reign in free market economies. Thankfully in Canada our banks were regulated sufficiently that none failed or needed bailout money.
    Ironically the conservative government the country just voted in were the ones clamouring for bank deregulation and mergers to make them more competitive when in opposition 5 or 6 years ago.
    I grew up in Limerick and dublin and am sad to see the fall from the heights that the Irish economy has experienced. But I am more disgusted by the corruption and abuse of the tax regime and ineptness and collusion of politicians in this debacle.
    Next time someone is brave enough to say the emperor has no clothes, maybe someone should listen.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Jane M. Date: Monday May 16, 2011 @10:09PM

    Did anyone else read last weeks report in the Irish times where data compiled by the central statistics office showed an acceleration in the value of property in the last few months.

    What is happening when sources such as Permanent TSB and Myhome.ie both reported earlier this year that things were definitely improving?
    Even the international standards agency S&P said that things were getting better.

    Then I read that data from our own central statistics office proves that property values are actually accelerating downwards???????///

    Is there any wonder that most ordinary people are quickly loosing their shirts when then people we rely on for accurate information are the people feeding us garbage.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Kb Date: Sunday May 29, 2011 @05:05PM

    I'm looking to buy a holiday home in Kerry where my parents are from.

    I live and work in London where I among other businesses am also a landlord!!

    We looked at this house (my wife and I) during the boom times 2007 when we went over staying in my parents holiday home.

    It was 390,000 euros, I would come back from my annual holiday depressed thinking that would never get to own my own holiday home in the area (I won't say where!) even more so seeing my similar aged cousins that I argued worked less hours then me but had 5 bed houses 2 new cars and a "hot" holiday every year!!

    We watched a helicopter land one day while out walking with the kids and saw people get off and walk around the show house on this pretty little estate of about 10 houses near the sea and we were told the agent had hired a helicopter to bring down "investors" and they where all sold at 390,000 off plan.

    Now there are 6 up for sale.

    Last year the asking price was 190,000 euro and I offered 160,000 euros, the house is in the control of NAMA. I was told 163,000 and I had 24 hours to decide.

    I decided not to after looking on this (perfectly named) website and I thought they were a little rude, I went to the agents office with a cheque, thank god they were rude really!!

    I received an e mail in January saying I could have it for 150,000 euros.

    My question is should I offer less 20% as it seems everyone knows that will reduce by 20% or even 30%?

    Is NAMA open to offers? Should I just bite the bullet and go for it? I have a mortgage offer from an Irish Bank but I would be putting up a big deposit....

    If I do buy do people on here (obviously a clever bunch of posters!!) think that the annual tax of 200 euros for holiday homes will rise?

    Sorry a very vague post I basically want someone to predict the future don't I? Ha ha, I will google Mystic Meg now.....

    Thanks in advance.

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  • Re: The Daft House Price Report Q1 2011

    Posted By: Peter in Dalkey Date: Tuesday June 28, 2011 @09:29PM

    Hi all,

    Am new to this service so found some of the opinions over the past three quarters insightful.
    Looking forward to next Tuesday when we will have the definitive answer to all of the speculation.
    Personally, I do think that house prices are going to continue to fall. I am not just saying that because I am one of the fortunate few who sold my home, moved back in with my father following the death of my mother two years ago; and now stand to take advantage of a falling market. No, even if property prices fell I would be caught between two stools as I am an only child. I watch my inheritance devalue with each and every passing day.
    It might sound awfully mercenary of me, but the cruel irony of my situation gives my father something to jibe me about.

    Needless to say, it matters not a whit to me whether the market falls further or suddenly rises again. But I do hear the desperation in others here on this blog and can only offer this advice.
    "Money is not everything".
    I know you have heard this sentiment thousands of times before but have you ever really listened. Unfortunately it took the death of my mother to bring myself and my father back together after years of non-communication. I would give every cent I have to have my mother back alive again.
    Not even the richest man on this earth can buy the luxury of an extra day of life. Faith seals the deadline for us all, rich or poor.

    Many would argue that they would rather die rich and enjoy the luxury of all the finery that money can buy during even a short life.
    Little do they know that even in the poorest places on this planet, the benchmark of luxury can be measured by comparison.
    Once when I was working in the Congo, I was asked by a young girl if I would give her my empty Coke bottle once I was finished with it. I laughed off the request embarrassed by the question and soon forgot that I had promised the empty container to the girl. I simply discarded it into a waist basket and thought noting of it.
    Later that day there was a commotion in the courtyard. I was startled to find that a group of people were fighting over the same empty bottle.
    To me it was rubbish. To them it was a valuable storage container which wouldn't break if dropped, was light to carry and could hold two liters of goats milk.
    What was rubbish to me was a great luxury to the people I considered poor, and yet what I learned from those people enriched my life greatly.

    So I repeat, "wealth is not everything".

    There is so much more to life than just Assets and liabilities.

    When is the last time you told your father you loved him? when will it be too late?

    Peter

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