Sunday, Sep 24, 2006

Prices crashing in Dublin?

Firstrung: House prices falling by up to 20 per cent in Ireland

The extraordinary glut of houses coming on the market this month has led to widespread falls in the prices being demanded by estate agents. While the downward trend is most evident across more expensive houses on the prime southside suburbs of Dublin, the Sunday Independent has uncovered significant falls in asking prices in other areas of the city

Posted by converted lurker @ 01:03 PM (609 views)
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1. talking rot said...

First we had Australia's property growth coughing and spluttering; then the mighty USA giant came to a halt - some articles report drops of 42% in some regions over the past year. Now we have Ireland in the Doldrums. The common link in all these countries is that the price reductions appear to affect the very very expensive houses. I haven't seen much news reporting that the sort of houses Joe-Average buys have dropped. Or is this because Joe doesn't really matter.

More importantly, the articles report price reductions but do not state the reasons why. Perhaps the market is turning opr perhaps over greedy sellers are bring their inflated prices into a more realistic band? Any clues anyone?

I wonder if the UK will see these type of stories within the next year?

Sunday, September 24, 2006 10:36PM Report Comment

2. markd said...

Good to see the price drops getting closer to home.

Monday, September 25, 2006 10:20AM Report Comment

3. george monsoon said...

I cannot back this up, but there appears to be mention of an abundance of available property in this article. This may also be the case in Australia and the US. Unfortunately the numbers of available property is not yet increasing in Britain, but one can only hope!

Monday, September 25, 2006 10:23AM Report Comment

4. the bald man said...

Reply to george: I do not believe to much about the supply side arguement spread by the VI's. Like roads you can never build enough houses. I believe the availability of cheap and plentiful credit is fuelling prices not lack of housing.

Monday, September 25, 2006 10:59AM Report Comment

5. denzil said...

the bald man said:
>>I do not believe to much about the supply side arguement spread by the VI's. Like roads you can never build >>enough houses. I believe the availability of cheap and plentiful credit is fuelling prices not lack of housing.

I believe that cheap and plentiful credit helped fuel the boom but lack of supply is currently stopping the market falling significantly at present. The lack of supply, which in some capacity is fuelled by immigration but primarily BTL has taken a large proportion of housing stock out of the food chain. Until such time that the BTL and those that have really over-stretched themselves get shaken from their trees by some kind of economic shock/s I still see broad stagnation as the road ahead.

Monday, September 25, 2006 11:36AM Report Comment

6. Nervousbuyer said...

have to agree with much of what denzil just hoping that the proverbial...dosn`t hit the fan, just after i buy at these ridiculously inflated prices!(still, i am buying in london...and there are thousands of immigrants to let to, if need be!) gordon"prudent!"brown...and the rest of the labour morons get kicked out...the better for us all!!

Monday, September 25, 2006 11:57AM Report Comment

7. Geed said...

"I believe that cheap and plentiful credit helped fuel the boom but lack of supply is currently stopping the market falling significantly at present" + Sentiment. Sentiment is all too powerful especially in media driven UK.

The majority of FTB's hell bent on getting on the property market at any cost, believing almost religiously, that property rises in value year upon year. Where do they get this from, the mainstream media. Their decisions to buy are irrational and made all too easy by cheap credit. This is sustaining the low end of the market, no doubt. How many FTBers have seen the graph of historical house prices on this web site? The current generation of FTBers only know a rising market and mortgage lenders, banks and real estate agents are not going to enlighten them.

Yes property rises in value over time, but it is cyclical, we all know that. Historical data suggests we need a big correction...this appears to be happening in some regions of the world and sentiment appears to be changing in the media in the UK. I firmly believe Sentiment will kick this thing off.

Monday, September 25, 2006 12:15PM Report Comment

8. paul said...

My goodness, the "soft landing" myth is pervasive in the UK.

It was in Australia too, and the US.

It's funny how some people are happy to accept the irrationality of price rises but somehow fell the need to get logical and pragmatic when it comes to price drops in the housing market. There's a world shortage of oil but the price is still currently falling. Market fluctuations are not about real supply and real demand - they are a measure of sentiment.

With over 50% of under 40s unable to own their own property (also a testament to the economic mismanagement of recent years), prices are undoubtedly overvalued.

Prices will fall here. There is no such thing as a soft landing, as the ditherers look to exit the market to consolidate their positions.

Keep watching.

Monday, September 25, 2006 12:25PM Report Comment

9. bidin'matime said...

Thinking yesterday about BTLs and the supposed shortage, it suddenly struck me that owner-occupied property is rarely, if ever, without an occupant, whilst BTLs are on a regular basis. So if we assume that a BTL spends on average say 1/2 a month a year empty, lets call it 5% of the time, this is effectively a 5% increase in demand, because the place is effectively out of the supply side for 5% of its life. So the BTLs have a bigger effect than just increasing demand - they actually reduce supply.

However, this is only the long term impact, which will take time to 'unwind' as they sell up over the coming years - maybe enough to take the edge off future real demand increases.

More interesting is the short term impact - given that a lot of them buy new and don't seem to mind if their new pride and joy sits empty for a month or so while they find a tenant (they're making a fortune on it empty, so what's the hurry..?!), the effect is probably far more significant while they are buying. Once they stop buying, all this capacity that they were soaking up and leaving empty will instead be sitting empty in the hands of the developers - the impact of that will be very significant.

Monday, September 25, 2006 01:34PM Report Comment

10. denzil said...

>>My goodness, the "soft landing" myth is pervasive in the UK.

>>It was in Australia too, and the US.

I'm not saying prices won't fall because if they stagnate they fall in real terms but they do not crash. Looking at the US and Australia, the US have upped rates for 27 consecutive months and reports of a crash in Australian property seem to focus on one or two cases in Sydney. I can see the US crashing as I can Ireland (due to the huge bubble inflated due to low European Base rates) but the UK in comparison started ratcheting rates significantly in advance of the US. I have read many a report from economists stating that the US kept rates too low for too long which then forced rates to rise for many months.

I would love a crash in property prices as much as the next person but houses are still selling, BTL are still investing and decent competitively priced properties around my area are selling if not in days then in several weeks. One thing I can say with absolute certainty is that prices are not rising but at present they are certainly not crashing either.

Monday, September 25, 2006 02:07PM Report Comment

11. denzil said...

bidin said:
>>However, this is only the long term impact, which will take time to 'unwind' as they sell up over the coming years - maybe enough to take the edge off future real demand increases.

The thing is and this is probable where we diverge is this "unwind" as you call it. I know a load of people who have bought in to BTL, often at times it became a competition to see who could own the most property. In most cases they bought the BTL as part of a future pension top-up and do not intend on selling until they retire OR their BTL becomes a poor investment vehicle. At present their retirement nest-eggs in their opinion are good investments so they sit back and do next to nothing with their BTL.
For what it's worth the most common age of people I know who have invested in BTL is probably 40-45 years of age so they are unlikely to sell for 15-20 years.
Now either my logic is warped but if a large proportion of BTL housing stock has been bought in a very small (3-5) year window but that stock will only trickle back when people sell at retirement which depending on their age when they bought could mean mean that the BTL stock returns to the market over a much larger window than that window which it left the market.

Monday, September 25, 2006 02:30PM Report Comment

12. Mjchum said...

Anyone remember Gordon Browns "affordable housing" sound bite. Haven't heard it for a while. Have you?

Monday, September 25, 2006 08:24PM Report Comment

13. bidin'matime said...

Denzil - I don't entirely disagree, hence my reference to it being a long-term impact. However, it will inevitably be faster than simply waiting for them all to retire - some who have made gains will not be able to resist the temptation to spend a bit, once it becomes clear that it's no longer the 'in' thing to be amassing ever more - it might well become the 'in' thing to sell up and put your nest-egg somewhere else (wherever the 'smart money' is going at the time.)

Others will fall on hard times and not be able to keep up the mortgage payments during void periods. Others will already be subsidising the letting and will lose the will to keep doing so once it becomes clear that it's not such a money spinner after all. Some will fall into both these categories, ie be unable to afford to keep subsidising.

As interest rates rise this process will inevitably accelerate – there will always be those who hang on, but at the margin there will always be those who fall off the edge and, no matter how small the rise in interest rates, some will fall off.

But my analysis was mainly focussed on the supply side, ie the fact that BTL's physically take the stock out of circulation by leaving it empty while they find a tenant. I am certain that this has a more significant effect during the buying phase and, once the buying stops, the reversal of this effect will add to the downward pressure on prices as the availability of empty property to owner-occupiers suddenly accelerates.

Monday, September 25, 2006 10:06PM Report Comment

14. Cstanhope707 said...

This is very interesting what is happening in Dublin. As I tried to explain to a mate of mine the other day the BTL crowd are a bunch of amatures who just get conned by the media propoganda in particular these stupid annoying and even more annoying presenter property shows. True property investors those that do it for a living and have been for many years know all about booms and subsequent busts.
Given we are now at the peak of the boom (sorry maturing to stable growth) why would any investor spend the money to make such a small return when they can now buy cheap in Poland and Eastern Europe and get much better returns there, thing is I strongly suspect what Pro's are already getting rid of there UK stock (quietly) knowing all to well that they can get away with it this time because a hugh bunch of BTL amatures still believe everything that the media tells them and when they finally get it the HPC has already started....

Tuesday, September 26, 2006 12:57PM Report Comment

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