Housing Bubble Bursting

Glenbhoy

New figures show that the average house price has fallen by almost €6,000 over the past 12 months.

The house price index compiled by Permanent TSB and the ESRI shows that prices dropped by 0.3% in August compared with July, giving an annual percentage drop of 1.9%.

The average price paid for a house in August was €300,375, compared with €306,173 in the same month last year. House prices have now fallen 3.3% since the start of this year.

AdvertisementThe monthly fall in August was the smallest since prices began their downward trend in March.

Permanent TSB's Niall O'Grady said the figures showed that the rate of change in prices across the country 'remained modest'.

Prices in Dublin and outside Dublin declined by 0.1% in the month, but Dublin prices recorded their first annual fall of 0.6%.

House prices in the commuter counties around Dublin slumped by 1.3% in the month and are now down 5.4% in the first eight months of the year.

Prices for first-time buyers were unchanged in from July, while they were down 0.2% for second-time buyers.

New house prices were down by 0.4% in August, while prices of existing houses fell by the same percentage.

http://www.rte.ie/news/2007/1004/housing.html

More bad news, especially considering the views expressed here previously that the PTSB index tends to understate the decreases.

ixoy

Anyone catch the Sunday Times Home supplement last weekend? There was a two-page article about the difficulties, and extreme over-priced housing, for first-time buyers.

The article mentioned how, in the '80s, buyers would be able to get a mortgage that cost 20% of their take-home pay and would be over 25 years compared to now up to 40% and over 35 years. It also had figures about the complete insane increase in prices relative to wages and how the average Dublin home would, on monthly repayments, cost the total net average monthly salary of an industrial worker.

The article did take quite a sympathetic tone to the hardship and basically told first-time buyers to resign themselves to being unable to affordany of the luxuries they enjoy anymore (including minor ones like the cinema) in order to deal with it.

It certainly wasn't appealing but it was good to see a somewhat VI acknowledgeing the difficulties FTB face financially in this property mess.

D'Peoples Voice

Does anyone think that maybe Cork has too many properties for sale - given ti's populaiton relative to Dublin's?

Properties for sale in Dublin 6,000 approx (http://daftwatch.atspace.com/daftcounty_1.html)

Properties for sale in Cork, fractionally under 6,000.
(http://daftwatch.atspace.com/daftcounty_15.html)

What county in county has the highest number of houses for sale per capita - it would be one way of finding out where oversupply exists!

iguana

The ECB holds at 4% today, though Trichet will be holding a press conference at 2.30 today where he is expected to hint that there will still be rises on the horizon.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7TQvxH0K6C4&refer=home

And the BOE stays at 5.75%.

nesf

ixoy wrote:

The article mentioned how, in the '80s, buyers would be able to get a mortgage that cost 20% of their take-home pay and would be over 25 years compared to now up to 40% and over 35 years.

In the eighties people would get a much smaller loan though, relative to the value of the house.

I'm not trying to justify our house prices or anything, but making a direct comparison there is misleading, mortgages were less expensive for people but a) you were much less likely to have a job to begin with and b) you needed to come up with a much bigger fraction of the house price yourself.

ronbyrne2005

nesf wrote:

In the eighties people would get a much smaller loan though, relative to the value of the house.

I'm not trying to justify our house prices or anything, but making a direct comparison there is misleading, mortgages were less expensive for people but a) you were much less likely to have a job to begin with and b) you needed to come up with a much bigger fraction of the house price yourself.

85% of people were employed at worst period of 1980's compared to 95% today, hardly that much more likely to have a job now(95%versus 85% approx). Plus I reckon the black economy was much larger in 1980's so unemployment stats overplayed the state of the economy and money was remitted here from migrants abroad too. My point is that the article is not as irrelevant as you would have us beleive, although without more data its hard to make accurate comparisions.

nesf

ronbyrne2005 wrote:

85% of people were employed at worst period of 1980's compared to 95% today, hardly that much more likely to have a job now(95%versus 85% approx).

There's a very big difference between an unemployment rate of 15% and 5%.

ronbyrne2005 wrote:

Plus I reckon the black economy was much larger in 1980's so unemployment stats overplayed the state of the economy and money was remitted here from migrants abroad too.

I agree.

ronbyrne2005 wrote:

My point is that the article is not as irrelevant as you would have us beleive, although without more data its hard to make accurate comparisions.

I don't think it's irrelevant, I just think you need to put the different stats in context of their timeframe. The LTV difference in your average mortgage is an important point. Are people's mortgage payments too big a percentage of their salaries? Sure. Were things a lot better in the 80's? No, not really.

pjbrady1

Someone posed the question which county has the highest supply per capita.
For some time now it has been Roscommon. Then Waterford followed by Mayo. Leitrim is up there as well.
Towns with most oversupply is either Foxford in Mayo or Strokestown in Roscommon. Compare those towns to somewhere like Bray or Navan and you get some idea of the crash inducing oversupply.

BendiBus

ixoy wrote:

The article mentioned how, in the '80s, buyers would be able to get a mortgage that cost 20% of their take-home pay and would be over 25 years compared to now up to 40% and over 35 years.

20% of take home pay in the '80s may have been as difficult to cover as 40% today.

The real comparison is how easy it is to cover a mortgage payment after other essentials like food, clothes, heating etc are paid for.

mathie

pjbrady1 wrote:

Someone posed the question which county has the highest supply per capita.
For some time now it has been Roscommon. Then Waterford followed by Mayo. Leitrim is up there as well.
Towns with most oversupply is either Foxford in Mayo or Strokestown in Roscommon. Compare those towns to somewhere like Bray or Navan and you get some idea of the crash inducing oversupply.

I know this is only anecdotal evidence but I recently sold my house in (very) modest 3bed Bray.
It was on the market for 3 months before we got a bid.
We accepted it straight away.
4% lower than what the EA valued it at.

So if Brays a good example then ...

M

D'Peoples Voice

pjbrady1 wrote:

Someone posed the question which county has the highest supply per capita.
For some time now it has been Roscommon. Then Waterford followed by Mayo. Leitrim is up there as well.
Towns with most oversupply is either Foxford in Mayo or Strokestown in Roscommon. Compare those towns to somewhere like Bray or Navan and you get some idea of the crash inducing oversupply.

No offence to Roscommon but can't help but feel that counties like this feel the downturn worse than other areas. As for Mayo, well Enda will fight to ensure that they get a disproportionate amount of funding - even if it is wasted on the Western Rail Corridorhttp://www.boards.ie/vbulletin/showthread.php?t=141318&page=1!

miju

good for you mathie, you done right in accepting and not trying to hold out

ronbyrne2005

Prices at suction may be undermining asking prices for neighbouring houses. According to the tribune last sunday a 3 bed semi in roebuck downs d14 sold for approx 635k yet others in same estate are looking for 715k and 835k for houses no bigger than the one sold at auction,they may have got their asking price in early 2006 but prices are significantly down even in prime south dublin.

http://www.tribune.ie/article.tvt?_scope=Tribune/Property/Commercial&id=78433&SUBCAT=Tribune/Property&SUBCATNAME=Property

http://www.myhome.ie/search/property.asp?id=NLXBF313941

iguana

ronbyrne2005 wrote:

Prices at suction may be undermining asking prices for neighbouring houses.

How are they undermining prices. The prices achieved at auction are market value. An auction is a great way of determining what the market is willing to pay.

A bit like the "desperate seller" you posted about the other day. I think it's a good way to sell as that seller is acknowledging that the market is falling and is out to get the highest price possible in the fastest time possible.

miju

how can you not see a house selling for 635k in the same area as houses selling for 715k - 835k undermines these prices?

SkepticOne

If you regard the auction price as the true realistic market price then that would not really be undermining unrealistic higher prices which will come down anyway. Undermining would imply coming in at a deliberately low price to bring down what would otherwise be the normal market price. My 2c.

Do-more

pjbrady1 wrote:

Towns with most oversupply is either Foxford in Mayo or Strokestown in Roscommon.

I'd say Kenagh Co. Longford must be top of the list, probably one vacant new build for every occupied house in the village.

ronbyrne2005

iguana wrote:

How are they undermining prices. The prices achieved at auction are market value. An auction is a great way of determining what the market is willing to pay.

A bit like the "desperate seller" you posted about the other day. I think it's a good way to sell as that seller is acknowledging that the market is falling and is out to get the highest price possible in the fastest time possible.

Maybe undermine is the wrong word then. I agree , an auction with no reserve is a good way to sell in current market. From the viewpoint of those people asking for much higher prices than achieved by similar property at auction it makes their asking prices seem unrealistic. The fact that auction results are public knowledge makes potential buyers aware of going rate in given location.

BendiBus

miju wrote:

how can you not see a house selling for 635k in the same area as houses selling for 715k - 835k undermines these prices?

But ARE they selling for 715k -835k? Or are they just on offer at that price and not selling at all?

A Random Walk

ronbyrne2005 wrote:

The fact that auction results are public knowledge makes potential buyers aware of going rate in given location.

And there's the nub of it. It's important to be able to offload your overpriced property on someone who doesn't know the real value.

There was a lot of similar incidents in the US this time last year (our property market is following the US quite closely). There was arguments from neighbours that others who were selling at a lower price were in effect lowering the value of their own property. That sort of idiocy stopped pretty quickly as everyone raced to the bottom.

It's the old prisoners dilemma again, if everyone keeps their house price high you will be ok, but the minute someone breaks everyone else needs to do the same. The trouble with property is that there's always someone who needs to sell.

iguana

A Random Walk wrote:

It's the old prisoners dilemma again, if everyone keeps their house price high you will be ok, but the minute someone breaks everyone else needs to do the same.

But what are they ok at? They want to sell their house but they can't. I could put my house on the market for £500k if I wanted and sit in it smuggly telling everyone my house is worth £500k, but that's all I'd be able to do as it's unlikely anyone would buy it. If you want to sell your house, in any market, you can only do so at a price someone is willing to pay and which a mortgage company will lend for.

Personally I think auctions/sealed bids are a good way of selling in a falling market as they get all interested parties to make their highest offers, so the price you get is market value.

Do-more

I'd say that there are probably lots of houses currently "for sale" in situations where the owners are not desperate to sell, the majority I would say. There reasons for sale are more speculative. These people are content to stick to their asking prices or make small drops. But then there are some who are in trouble and need to sell, such as those on bridging finance who can't sell their original property or those whose personal circumstances have changed, relationship breakups, job losses or enforced job moves, developers unable to service loans etc. Throw in on top of that executor's sales, repo's etc. and at some point in time, probably in the spring, then this relatively slow decline in prices should start to accelerate.

I'd expect to see a large decline in the quantity of houses for sale as those not desperate to sell will withdraw their properties from sale and for the most part we will be left with those who "need to sell". In the face of this, buyers will continue to bid low in the hope of having their offer accepted by a desperate seller and the rot will truely set in.

Personally I would expect a 20% fall in prices in many areas between now and this time next year.

miju

20% is pretty conservative given what the ESRI said during the week about prices dropping 14% between now and christmas

ronbyrne2005

miju wrote:

20% is pretty conservative given what the ESRI said during the week about prices dropping 14% between now and christmas

I though they said down 14% by xmas since their peak in 06???

miju

i'm pretty sure they said it was on top of the falls but i may have misheard on newstalk so am well open to correction

digitally-yours

Sorry i forgot to post the link to my previous post

post

Source is here

digitally-yours

Irish Construction activity continued to fall in September; New orders fell at marked rate



some more interesting data here

galwaybabe

Just had phone call from London telling me to look at the opinion page on Irish Times. Seemingly quite scary stuff re property values falling by 50%. Has anyone got the paper at hand? Care to give us a run-down of what it says?

ronbyrne2005

galwaybabe wrote:

Just had phone call from London telling me to look at the opinion page on Irish Times. Seemingly quite scary stuff re property values falling by 50%. Has anyone got the paper at hand? Care to give us a run-down of what it says?

http://www.thepropertypin.com/viewtopic.php?t=3792

El Stuntman

more anectodal stuff: the house 3 doors down from me is for sale for an asking price of 400k

the last house to go on sale on this road (~4 months ago) was asking 450k

400k is quite close to what we bought for at end 2004 :eek: