Friday, Mar 19, 2010
Exegesis of long term international house prices
Finfacts: Real price of Amsterdam house only doubled in more than 350 years
Interesting on chart 5 to see how far above historic averages prices in Ireland are despite falling 31% (and counting). A recent survey showed Irish FTBs now think prices offer good value and plan to buy this year if they can get finance.
"The upturn in this most recent cycle lasted twice as long on average as those in the past (41 quarters compared with 21 quarters) and was more pronounced, with prices rising nearly three times as much." Because this boom lasted longer than its predecessors, most FTB cannot remember prices at long term average of income/ rent ratio as they would have been at school or college. They think prices now are good value because they are so far down from peak but they could easily only be 75% or even halfway down.
7 Comments
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1. tenant super said...
* A recent survey showed Irish FTBs now think prices offer good value and plan to buy this year if they can get finance.
Forgot to add... this information is from an article in the Irish independent published last month.
As an aside, RTE business published an article today about a report from Bloxham Stockbrokers who predict prices will fall another 10-15% this year.
2. monty032 said...
What a great quote from Adam Smith to counter people who say that ever-rising house prices are vital to the economy. They are just an asset that put you in a position to earn real money. The more costly the asset, the happier the current owners are and the poorer in comparison all the non-owners.
3. easybetman said...
But nominal house price very seldom fall though and with the current debasement exercise and 0.5% interest going on right now, perhaps house is still a better store of value compared to cash over 10 years?
4. King5ton said...
I really need to learn how to speak Dutch.
I feel like I've been born in the wrong country of Stupidonia instead of Coolandgroovistan
5. Hello said...
If you measure it from 2 years after the start date they chose, you get house prices not having moved at all in real terms over 350 years.
6. bystander said...
I have spent many years in the lowlands and I have to let you all know that the stupidity of over leverage was prevailent here as well, and forget about 125% together mortgages. I bought a place when I lived just outside Amsterdam and was offered the price of the property+the taxes, equating to 112% of the purchase price and then the lender and broker tried to get me to take an extra 30% of the properties value to do it up a bit. The total I was able to borrow would have been 142% of the properties value. So anyone who thinks the Brits and Yanks were the only ones up to this bit of exotic accounting, think again. I didn't take them up on their offer, but I am certain many did. Also the Dutch have Miras, remember that?.....but there are rumblings in high places that this is headed the same way as the dinosaurs.
7. Emily said...
"But nominal house price very seldom fall though and with the current debasement exercise and 0.5% interest going on right now, perhaps house is still a better store of value compared to cash over 10 years?"
The reason we have 0.5% base rates is because that's what wage inflation is, which means it's a bad time to buy a house, especially with the imported price inflation that's resulted from Sterling's demise.
"But nominal house price very seldom fall though"
I presume this is based on the observation that it hasn't happened all that much for decades, which actually means that the probability of nominal falls is now much higher.