House Market Weakening?

[whizzbang]

No bother, Sally Army will be delighted to see you!

hehe, not buying a house doesn't mean you are going to be homeless! Unless you are expecting a big increase in unemployment which doesn't effect house prices?!

 

[southsideboy]

Re the possible cool off in the market and the lack of sales at auctions recently - I don't really think the market is cooling off at all. I think that definitely the time of the year has a major factor in the lack of sales. And with many auctions scheduled for the last week of June and the first week of July I wouldn't be surprised if that continues.

But another thing which I have definitely noticed is that agents are becoming very ambitious with the AMVs. If u look at the average 4 bed terrace red brick in somewhere like Ranelagh AMVs are now running at around €1.6-1.9m while just a few months ago they were in and around €1.3-1.5m. It seems that a lot of agents and vendors don't mind withdrawls as houses seem to be selling fairly quickly after auction and sometimes in excess of the after auction asking price. For example my parents were recently looking at at house for investment that had an AMV of €850,000. It got no bids at auction but agents set an asking price of €950,000 after auction but when my parents offered €950k it wasn't accepted and ended up going north of €1m. So I don't really think auction withdrawls are the best indicator of a slowdown in the market. If we see a lot of houses sticking on the market over the summer then I would get worried but that doesn't seem to be happening. Also as usual a lot of vendors are not accepting bids well in excess of AMVs. such as a house in Rathmines that had an AMV of €2.4m, was withdrawn at €2.7m and is now quoting €3m. - Ironically AFAIK this property belongs to a well known tv personality in the property business.

 

[tiger]

Re the possible cool off in the market and the lack of sales at auctions recently - I don't really think the market is cooling off at all. I think that definitely the time of the year has a major factor in the lack of sales. And with many auctions scheduled for the last week of June and the first week of July I wouldn't be surprised if that continues.

I would agree. I think in a booming market, auctions are a way of maximising the selling price. At the moment alot of "ordinary" houses are being sold by auction. If/when things cool, they'll be sold by private treaty instead.

Interestingly development sites seem to be going for "best bids" these days. (e.g. the CRH site on east wall road)

 

[sonar]

Ah yes, the Irish housing market..

Our elites have found a way to become super rich by doing sweet f-beep all but indebting the rest of us like never before in history.

As stated above and it's sad but true, we need foreign help to end this mess.

Monsieur Trichet! .. plus haut! plus haut!

 

[room305]

Our elites have found a way to become super rich by doing sweet f-beep all but indebting the rest of us like never before in history.

To be fair people are indebting themselves. Nobody forced them to buy a house and most of the people leveraging themselves so heavily wouldn't have been homeless had they not bought.

 

[southsideboy]

To be fair people are indebting themselves. Nobody forced them to buy a house and most of the people leveraging themselves so heavily wouldn't have been homeless had they not bought.

Yeah I agree. Nobody is being forced and a lot of people seem to be obsessed with buying investment properties despite not really being in a position to buy one. I can never understand what possesses people who are heavily mortgaged on their 3 bedroom semi feeling the need to go out and buy a 2 bed apartment which again would require a massive mortgage that would not be covered by rental returns.

Also you have to rememeber that a lot of ordinary men and women who bought before before the late 1990s have found themselves well-off as a result of the property boom. These aren't 'elites'.

And I don't agree with the idea constantly being put forward by the left in this country that property prices need to fall. Tell that to somebody who has a 100% mortgage on their 3 bed semi in Lucan or wherever and would find themselves faced with negativity equity if house prices fell. Or tell that the people like my parents who have opted to invest in property rather than pension. The markets are driven by demand and supply and despite some propaganda in the media there still are loads of first time buyers entering the market everyday.

 

[whizzbang]

And I don't agree with the idea constantly being put forward by the left in this country that property prices need to fall. Tell that to somebody who has a 100% mortgage on their 3 bed semi in Lucan or wherever and would find themselves faced with negativity equity if house prices fell. Or tell that the people like my parents who have opted to invest in property rather than pension. The markets are driven by demand and supply and despite some propaganda in the media there still are loads of first time buyers entering the market everyday.

These people are the very reason it needs to fall, so people stop putting themselves at such risk! If prices keep going up like this more and more people will overstretch themselves to a dangerous degree.

In reality I don't think many people are saying they need to fall, I think most are just saying they are going to fall, no matter what anybody does. We are just not in a sustainable enviroment, and the sooner that changes the better it will be for the country. It would have been better if it happened years ago but the it didn't and the longer it goes on the worse the situation will get when a turn does come.

 

[southsideboy]

These people are the very reason it needs to fall, so people stop putting themselves at such risk! If prices keep going up like this more and more people will overstretch themselves to a dangerous degree.

In reality I don't think many people are saying they need to fall, I think most are just saying they are going to fall, no matter what anybody does. We are just not in a sustainable enviroment, and the sooner that changes the better it will be for the country. It would have been better if it happened years ago but the it didn't and the longer it goes on the worse the situation will get when a turn does come.

I don't really buy the argument that house prices are going to fall, in the near future anyway. Obviously eventually the market will slowdown but the housing market is dependent on the overall economy. If unemployment stays low, immigration remains high and interests rates don't rise too much, the supply and demand situation shouldn't change much. Some people seem to view the Irish property market as if prices are being kept artificially high by property developers. But this isn't the case. As long as the overall economy booms and a similar supply/demand ratio remains in place so should house prices. And also in comparison to other countries our prices aren't astronomical. Prices in Dublin seem cheap compared to a lot of London of New York or other major cities. I think that it is easy to look at house prices as being extremely high because they rose so fast from such a low base. But in reality high house prices have just been a consequence of economic success. Since the start of the property boom people have been predicting the bubble bursting but this has never materialised.

 

[walk2dewater]

I don't really buy the argument that house prices are going to fall, in the near future anyway. Obviously eventually the market will slowdown but the housing market is dependent on the overall economy. If unemployment stays low, immigration remains high and interests rates don't rise too much, the supply and demand situation shouldn't change much. Some people seem to view the Irish property market as if prices are being kept artificially high by property developers. But this isn't the case. As long as the overall economy booms and a similar supply/demand ratio remains in place so should house prices. And also in comparison to other countries our prices aren't astronomical. Prices in Dublin seem cheap compared to a lot of London of New York or other major cities. I think that it is easy to look at house prices as being extremely high because they rose so fast from such a low base. But in reality high house prices have just been a consequence of economic success. Since the start of the property boom people have been predicting the bubble bursting but this has never materialised.

Demand to buy property in Ireland in 2006, that is buying with little or no money down, or leveraged against existing "equity", is driven by the expectation of future capital gains. It's a psychological, sentiment driven demand. Little or no downside risk is recognised; "money for old rope" "prices might fall, but by 20% at most" "favourable demographics" etc. Price doesn't dictate the decision to buy. Price is irrelevant. All that matters is the ability to obtain the loan and meet the monthly payment. It's a bubble market plain and simple. Bubbles don't plateau or soft land. They burst in a fear induced panic.

 

[kirian]

And also in comparison to other countries our prices aren't astronomical. Prices in Dublin seem cheap compared to a lot of London of New York or other major cities.

Is this true? I'm not sure that the avarage price of housing is higher in either of those 2 cities compared to Dublin.

 

[Duplex]

Southside I’m a bear but a bear with no political ideology. To compare Dublin with London and New York is frankly beyond preposterous. Foreign investors are heavily involved in these markets, (many being Irish incidentally), conversely there is no foreign based investment market in Dublin, that tells me something. Rental yields continue to fall in Dublin as the cost of borrowing starts to rise, Irish export growth is starting to slow as the growth in imports starts to pick up, incomes growth in the US is static, as the pace of incomes growth in Ireland (officially sanctioned by our government) continues to rise, the property bubble is starting to burst in the US as our bubble continues to expand. Productivity in Asian countries is starting to increase as productivity in Ireland is falling. Manufacturing employment in Ireland continues to fall and indebtedness soar, our major cities won’t be connected by a motorway network this decade, 80% of our exports are reliant on footloose multinationals.
There is no evidence that the economic migrants currently living in Ireland intend to remain here, more EU countries are opening their borders to migrants from the accession states.

The situation where average Dublin house prices are higher than in a frantically bubbly London market is absurd beyond words. The only reason I labour the point about the existence of a bubble now, at this late stage; is to prove to posterity that not every single Irish person was consumed by the mania.

 

[kirian]

I did a bit of googleing on average prices in Dublin, New York and London and found the following

Dublin average - EUR388,466 http://www.irishlifepermanent.ie/ipm/media/pressreleases/permtsb/ptsb2006/2006-05-30/

New York average - US[FONT=Arial, Helvetica, sans-serif]$296,000 ([/FONT]EUR234,047)
http://www.mc-mncppc.org/research/data_library/real_estate_development/housing/hc23.shtm

London average - UK£250,137 (EUR366,374)




So it seems Dublin is the most expensive of the lot.

But to get back to the main topic, is the house market weakening? I'm not sure. I think there is strong demand due to the Irish mentality of having to own your own place but we are nearing the limit of affordability and I don't see much room left for allowing the Irish borrower to borrow more than they all ready can. I will say that IMHO there has been an increasing tone of bearishness to the commentry in the media recently.

 

[whizzbang]

I did a bit of googleing on average prices in Dublin, New York and London and found ...

And this doesn't even take into account the higher salaries in these cities!

 

[southsideboy]

- OK I'm sure there are many different sources giving a wide variety of prices but this would put average price in London at around €440,000, making property more affordable in Dublin than London.

Duplex, I agree that of course IF unemployment rises and immigration falls then house prices will probably fall but I don't agree that this will happen any time soon. A declining manafacturing industry is not necessarily a bad thing. It can be the sign of a progressive economy and as long as jobs are being created in other sectors and the government encourages investment I wouldn't be worried.

Of course there is no guarantee that migrant workers are going to stay here but I don't think there are any strong arguments that they are not. I've failed to see any predictions based on strong arguments that would suggest that we won't continue to have high immigration. As long as the jobs are there and Ireland seems an attractive place to work, immigrants will keep coming. Ok, other countries may be opening up borders but a lot of these places have high levels of unemployment and therefore won't be that attractive.

Also the lack of foreign investment in the Irish property market was evident 10 years ago. But yet house prices have soared since then. In major cities like London or New York foreign investment will always be high, just because they are major cities.

Also as has already been said, there is an Irish obsession with owning property and this has inevitably driven prices up and up during the good times. The high level of debt is definitely worrying and a lot of this borrowing took place at interest rate levels that were far below what the natural rates would have been if we had control over our own rates. This is without a doubt one of the biggest threats to the housing market.

Duplex, you can say that you weren't consumed by the mania but when exactly is this bubble going to burst? Anybody can predict a crash in the housing market. Its bound to happen eventually. Thats how markets work. People said five years ago the bubble would burst and it never happened. Saying that there will be a crash is like predicting an earthquake in Califiornia. Yes its bound to happen but the question is when? All I'm saying is that I really don't buy the argument that the Irish housing market is going to defy basic economics by prices falling when demand remains higher than supply and the economy continues to boom.

 

[Duplex]

Southside, all I'll say is that trees don't grow to the sky.


I can cite many examples of property manias that have ended in busts, I have yet to find an example where this hasn’t transpired. I’m pretty philosophical about what I see as inevitable now, the damage is done, Warning someone about the cliffs edge as they tumble headlong is rather pointless, but it keeps me off the streets.

My I refer you to; The Irish Property Bubble Blog which comes highly recommended and has some links worth a butchers.

http://irish-property-bubble.blogspot.com/

 

[whizzbang]

S
My I refer you to; The Irish Property Bubble Blog which comes highly recommended and has some links worth a butchers.

http://irish-property-bubble.blogspot.com/

Congratulations on your new found fame!

 

[Duplex]

Congratulations on your new found fame!

Thanks Whizzbang, I wont let it go to my head.


P.S.
Anyone interested in securing my services for , public appearances, barmitzvers, after dinner speaking etc. please contact my agent. I am currently working on my biography which I can confirm will be serialised in Ireland's Own.

 

[bearishbull]

Southside boy i think your wrong on london.Theres several factors that mean london prices are so high(i still think they are highly overvalued as do all on www.housepricecrash.co.uk).
These reasons include
-average salaries in london are around 45keuro and many more have large amounts of assets as it is a global centre for wealth and such "super cities " always claim a premium. theres lots of super rich non english people buy in london as it has tax advantages and is one of the major world cities(for many industries like entertainment finance art engineering etc) like new york tokyo and paris and their high end purchases can distort market averages.
-infrastructure in london is excellent so a house miles out in suburbs can access london city very easily on tube etc,this pushes up house prices for all areas with such infrastructure.
even If you take the london average of 440k eur its around ten time average salary , here in dublin average prices are around 11/12 times average wage,its london that should cost a premium not us !!

 

[Neffa]

I don't really buy the argument that house prices are going to fall, in the near future anyway. Obviously eventually the market will slowdown but the housing market is dependent on the overall economy. If unemployment stays low, immigration remains high and interests rates don't rise too much, the supply and demand situation shouldn't change much. Some people seem to view the Irish property market as if prices are being kept artificially high by property developers. But this isn't the case. As long as the overall economy booms and a similar supply/demand ratio remains in place so should house prices. And also in comparison to other countries our prices aren't astronomical. Prices in Dublin seem cheap compared to a lot of London of New York or other major cities. I think that it is easy to look at house prices as being extremely high because they rose so fast from such a low base. But in reality high house prices have just been a consequence of economic success. Since the start of the property boom people have been predicting the bubble bursting but this has never materialised.

Dublin isn't cheap compared to London - far from it. We had a long set of posts about this on another AAM thread which you can search. I moved to Dublin from London last year - Dublin is 30% higher on a like-for-like basis in the better areas. You can buy a 1300sq ft 4-bed period house with a reasonable garden near the tube the smart parts of West London (e.g. Fulham or Chiswick) for about 600K Stg (i.e. 875K Euro) in London - try doing that in Ranelagh or Dun Laoghaire!

In any case, why is London the reference point? Surely it should be Helsinki, Oslo, Stockholm or Copenhagen - mid-sized European capitals of small-ish countries. Dublin prices are very much higher than what you'd find there. And the Finnish economy is going gangbusters with local industry and no "specials" to get FDI rates up.

 

[purplealien]

Why is everybody saying the market is going to crash? It might just level off. Im sure if all first time buyers were to take a stand and not buy any property for the next six months, the market would have no alternative but to settle down