DOE - House prices could fall up to 46% in 2009

ntlbell

breakinngnews

House prices will continue to fall significantly over the coming year, according to an assessment conducted for the Department of the Environment.

The report by DKM Economic Consultants also predicts that the number of housing units completed in 2009 will fall to 25,000, compared to 43,000 this year and 78,000 last year.

It says that average house prices could fall by anything from 20% to 46% during the year.

Meanwhile, the issues facing the construction sector are due to be discussed at a conference in Dublin later today.

A panel of experts from various fields will be discussing ways in which key challenges might be tackled during the ongoing downturn.

Fine Gael TD Richard Bruton, who is on the panel, says any moves by the Government to delay projects under the National Development Plan will impede a return to normal activity levels in the sector.

Fatloss08

in a way they need to keep there mouths shut , because thats whats stopping people buying , obviously everybody wants to save money , but if they came out and said house prices are on the increase etc and economy is picking up etc

people would react and spend , and want to get house's before they went up ( so to speak )

its all scare mongering , the media is creating the scare i think

jetski

How can they predict that pre budget.. complete rubbish IMO. Thats one extreme statment given the interest rate slash announced only yesterday... im sure it will go on the list of "who said what" on the pin.

drunkmonkey

If house prices fell by 46% could it possible create a scenario where intrest rates rise to 20% as property will be so cheap....

Gareth37

drunkmonkey wrote: »

If house prices fell by 46% could it possible create a scenario where intrest rates rise to 20% as property will be so cheap....

I was thinking the same myself some years ago. I assume that history will repeat itself during the normalization process and that interest rates will really shoot up. Im not sure if there is a upper limit though

High interest rates are a good thing. They keep things stable as people don't over borrow and they keep general inflation down as the key property sector will only account for a small % of the economy, the way things should be

drunkmonkey

Gareth37 wrote: »

I was thinking the same myself some years ago. I assume that history will repeat itself during the normalization process and that interest rates will really shoot up. Im not sure if there is a upper limit though

High interest rates are a good thing. They keep things stable as people don't over borrow and they keep general inflation down as the key property sector will only account for a small % of the economy, the way things should be

I'm about to take out a mortage and that's what i'm really afraid of.....15% intrest in 5 years time would cripple me....:(

arctictree

Gareth37 wrote: »

I was thinking the same myself some years ago. I assume that history will repeat itself during the normalization process and that interest rates will really shoot up. Im not sure if there is a upper limit though

High interest rates are a good thing. They keep things stable as people don't over borrow and they keep general inflation down as the key property sector will only account for a small % of the economy, the way things should be

Why would the ECB increase interest rates so dramatically for a problem thats affecting about circa 1% of its population?

Heathen

If the house prices fell by 46%, the average joe on a ****e wage like me might actually be able to afford to buy a house and get my foot on the property ladder.. here hoping it all goes tits up so someone like me can own a house

ntlbell

Fatloss08 wrote: »

in a way they need to keep there mouths shut , because thats whats stopping people buying , obviously everybody wants to save money , but if they came out and said house prices are on the increase etc and economy is picking up etc

people would react and spend , and want to get house's before they went up ( so to speak )

its all scare mongering , the media is creating the scare i think

The reason people shouldn't be buying is because for the majority they can't afford to buy, the bank offering you the money != affordability.

Why would they come out and say the prices are on the increase when they're clearly not? A correction in the market is needed, "every bubble must burst" and every other cleche you can think of.

Borrowing money from Germany to buy an overpriced property to sell on to your neighbor for twice the price with more money borrowed from Germany does not make an economy.

El Stuntman

Heathen wrote: »

If the house prices fell by 46%, the average joe on a ****e wage like me might actually be able to afford to buy a house and get my foot on the property ladder.. here hoping it all goes tits up so someone like me can own a house

spot on Heathen

house prices will fall by up to 50%, the question is 'how long will it take?'

the best thing that could happen is that this would happen quickly instead of a long drawn-out Japanese style deflation which would cripple the economy for decades.

radical surgery instead of gentle physiotherapy if you will

The_Conductor

Heathen wrote: »

If the house prices fell by 46%, the average joe on a ****e wage like me might actually be able to afford to buy a house and get my foot on the property ladder.. here hoping it all goes tits up so someone like me can own a house

Presuming you still have a job, and average wages haven't fallen by a similar rate to house prices (or other living costs haven't risen by a commensurate amount- with another 22% rise of electricity and 18% for gas in the new year- its going to crucify people, regardless of what happens to house prices......)

ZYX

If you are wondering who DKM Ecconomic Consultants are? They are the ones who brought out the report in March this year, saying that it made more sense for a first time buyer to buy rather than rent!

The_Conductor

ZYX wrote: »

If you are wondering who DKM Ecconomic Consultants are? They are the ones who brought out the report in March this year, saying that it made more sense for a first time buyer to buy rather than rent!

It got a lot of press in the Irish Mortgages Magazine (why I keep buying that piece of toilet paper is beyond me).

Reminds me of the definition of an Economist- Someone who can you tell you tomorrow, why what he predicted today didn't come to pass.........

God, I hate economists.........

ZYX

Actually I just looked up their report and they seem to be saying that prices will drop that much in total not in 2009 although it is hard to be certain.

"Domestically as average house prices fall, Ireland is expected to follow international experience
in respect of property cycles, implying that average house prices would need to drop back by
some considerable amount. Depending on the severity of the drop in house prices, average
house price could fall by anything from 20% to 46%, reflecting the increase in real house prices
in the run up to the peak. However, the Irish housing market has already lost virtually all of the
gains made in the three years up to the peak (January 2007) as real house prices had fallen by
18.5% from the peak by July this year. But further losses seem inevitable."


So basically house prices may have fallen as much as they are going to, or, they may fall another 26%. Well thanks for that.

jetski

Quote

"It says that average house prices could fall by anything from 20% to 46% during the year"

As i said earler.... its complete **** given they only slashed rates by .5% the day before DKM came out with this and for all we know mortgage relief could be doubled in the budget come the 17th

SimpleSam06

jetski wrote: »

As i said earler.... its complete **** given they only slashed rates by .5% the day before DKM came out with this and for all we know mortgage relief could be doubled in the budget come the 17th

The world doesn't turn on interest rates alone. The Japanese dropped interest rates to 0% and it didn't stop their collapse, even though they were effectively paying people to take out loans, if you factor in inflation. The Euribor and Libor rates are high, and the divergence between them and the ECB rates is growing. Interbank lending has all but ground to a halt, and thats where a lot of bank financing comes from.

Regardless of where the money is coming from, the international financial situation has a lot more damage coming at it than we have seen so far, despite assurances, guarantees, rate drops and so on. Naked shorting with all its FTD fun and the subprime crisis were just the beginning. The Alt-A and Prime mortgage messes will be kicking in around 2009 or so (a lot of people who would otherwise be good credit risks that took out 3 or 4 year IO mortgages based on rising house prices, where they need to start repaying the capital as well as interest), as well as several other factors, not least of which is the overall economic effect of printing money from the treasury to cover private loans.

Its going to be damn hard to get a mortgage without significant amounts of the intial deposit saved, and thats going to drive prices through the floor.

drunkmonkey wrote:

If house prices fell by 46% could it possible create a scenario where intrest rates rise to 20% as property will be so cheap

Interest rates affect house prices, not the other way around. Especially in an economy like our own, where we don't actually set our own interest rates.

drunkmonkey

SimpleSam06 wrote: »

Interest rates affect house prices, not the other way around. Especially in an economy like our own, where we don't actually set our own interest rates.

So intrest rates should remain stable, no possibility of a spike in them?

The_Conductor

drunkmonkey wrote: »

So intrest rates should remain stable, no possibility of a spike in them?

No- we're governed by the ECB, which is based on the fundamentals of the old Bundesbank (though headed by a Frenchman- Trichet), so no, the possibility of a spike is from a probability perspective, exceedingly low.

jmayo

Fatloss08 wrote: »

in a way they need to keep there mouths shut , because thats whats stopping people buying , obviously everybody wants to save money , but if they came out and said house prices are on the increase etc and economy is picking up etc

people would react and spend , and want to get house's before they went up ( so to speak )

its all scare mongering , the media is creating the scare i think

Best laugh I had so far today
Yeah it's all the damm medjas fault isn't it

Jeeze if it wasn't for them and their bad news.

As for interest rates being driven by house prices :rolleyes:
Why do Irish people think the be all and end all of an economy is f***ing houses and their prices ? :eek:

dan_d

Because we've got into the habit of thinking that the fact that you could sell your house and be an overnight millionaire meant that things were good. Any other situation and things are bad.Especially when you've spent half a million on a shoebox and you'll be paying it back over 40 years.
The house prices were always going to go down. We are actually lucky that they haven't crashed suddenly, they have dropped relatively slowly.The real pinch was only felt in the last few months, and even then, it's not as bad as it could be.Prices will in all likelihood never be what they were again, and we might aswell just accept it. I'm 25, and have bought a house, and many of my friends from college are now looking around the market.We are all lucky enough to have good jobs, and steady salaries.But everyone I know is saving madly for a deposit, with the intention of getting the smallest mortgage possible.And they want 3 and 4 bed houses if possible, not 2 bed and DEFINITELY not apartments. Because they won't re-sell and they are not worth what you pay for them. The mindset is beginninyuyhg to change. And I definitely think the media contributed 100% to the price boom, and fed the flames with hysterical headlines and news reports about how much things were and how wonderful everything was. And now they're doing it again.Hope all their jobs are secure....

ParkRunner

With the stagnation in the housing market why is it that prices are not falling faster? I have been keeping an eye on price drops over the past 12 months and it has been in the region of 1 - 1.5%, which is a lot taking into account inflation..but it amazes me that developers have been able to sit on estates full of vacant properties and manage to survive this long.

Developers will go bust very soon unless they start being realistic. I would love it (move over Kevin Keegan), if the banks started calling in the debts. I have mortgage approval and a deposit waiting to put down but the developers must know that the vast majority of people are not going to buy until prices fall and fall sharply. Are they willing to go out of business in a few months time? I find it difficult to understand.

utick

jmayo wrote: »

Best laugh I had so far today
Yeah it's all the damm medjas fault isn't it

Jeeze if it wasn't for them and their bad news.

As for interest rates being driven by house prices :rolleyes:
Why do Irish people think the be all and end all of an economy is f***ing houses and their prices ? :eek:

ah but he is right it is the medias fault. all theose get rich quick property programs on the tv helped to feed the bubble, but i didnt hear anyone complaining about the dangers then, as long as house prices are going up everything is just dandy

SkepticOne

EF wrote: »

With the stagnation in the housing market why is it that prices are not falling faster? I have been keeping an eye on price drops over the past 12 months and it has been in the region of 1 - 1.5%, which is a lot taking into account inflation..but it amazes me that developers have been able to sit on estates full of vacant properties and manage to survive this long.

The main reason for this is the government's "Affordable Housing" scheme/initiative. Without this builders would be forced to drop prices radically.

The_Conductor

SkepticOne wrote: »

The main reason for this is the government's "Affordable Housing" scheme/initiative. Without this builders would be forced to drop prices radically.

And of course- the new First Time Buyers mortgage scheme- due to be formally unveiled on Tuesday. Any first time buyer can get a government backed mortgage of up to 300k, subject to some not-too-strict criterion, providing the mortgage is used to buy a new (and not a second hand) property. To be entirely honest- it seems more akin to a dig out for property developers than anything else, and is set to put an artificial floor under the prices of shoeboxes around the country. Why sell for less than 300k, when you are perfectly aware that its the bottom line for all FTBs?

jimmycrackcorm

smccarrick wrote: »

Why sell for less than 300k, when you are perfectly aware that its the bottom line for all FTBs?

Because second hand homes will have to go below that limit to sell instead and that will push down new house prices according to market demand. It's another mortgage lender not a free money scheme.

The_Conductor

jimmycrackcorm wrote: »

Because second hand homes will have to go below that limit to sell instead and that will push down new house prices according to market demand. It's another mortgage lender not a free money scheme.

However its aimed at "people who do not meet the strict lending criteria of the traditional lending institutions". Its not free money, no, it is however money devoid of the usual strings that might be attached to it. Given the lack of intelligence that a large portion of the populace appear to be displaying regarding their personal finances- its only a matter of time before the government is the top reposessor of property in the country......??

To be honest- its more meddling in the market- which the government obvious hasn't learnt from their previous experiences.......

jimmycrackcorm

smccarrick wrote: »

However its aimed at "people who do not meet the strict lending criteria of the traditional lending institutions".

Do you mean people like my parents and many others who got council loans years ago?

SimpleSam06

jimmycrackcorm wrote: »

Do you mean people like my parents and many others who got council loans years ago?

I thought they got council houses, but got the loan from the bank?

The_Conductor

jimmycrackcorm wrote: »

Do you mean people like my parents and many others who got council loans years ago?

Thats what the press release said- it didn't go into details. I suppose we will find out more tomorrow.......

jetski

whats this talk of tomorrow about.... i tought the budget was not untill the 17th ?

jetski

disregard the above. :eek:

The_Conductor

jetski wrote: »

whats this talk of tomorrow about.... i tought the budget was not untill the 17th ?

No- its tomorrow, Tuesday the 14th.

mrgaa1

also all these "economists" couldn't forecast the weather if it was raining. It'll drop 10% by this month, this year, 46% by sometime etc.... what a load of F***ING rubbish. Economists are a complete waste of space - the media hangs on their every word and then sensationalises what is being reported by picking out snippets and not actually reporting the facts. There is absolutely no way house prices will drop 46% as being forecasted. Does this mean that a house on sale at 200k is going to be worth 108k or a house in comparison thats for sale at 1million going to be suddenly worth 540k. What a load of bo**ocks. We are very near the bottom of the market and we will see steadying of house prices, in general, by March next year. There will always be anomolies but isn't there always this. We won't have the crazy prices of before but we are near levelling out. But then again if we could all tell the future then we wouldn't be on this board having a healthy debate :cool:

martian1980

mrgaa1 wrote: »

We are very near the bottom of the market and we will see steadying of house prices, in general, by March next year. There will always be anomolies but isn't there always this. We won't have the crazy prices of before but we are near levelling out.

How do you know this? are you an economist?

mrgaa1

was waiting for that remark

The_Conductor

Quit messing around you two!

ntlbell

mrgaa1 wrote: »

. We are very near the bottom of the market and we will see steadying of house prices, in general, by March next year.

I'm not stating your wrong, but could you explain what makes you think the bottom is march next year?

jaycen

We're already seeing advertised prices 'change' quietly, sometimes the change is quite dramatic : one recent house went from 540k to 400k asking price on myhome, that's a 25% drop in 1 year, 50% could happen.

This though assume that the original asking prices were realistic, most weren't.

mrgaa1

I'll explain very unscientifically why I think next March is going to tell us whats happening. From being involved in selling houses for quite sometime the traditional period for selling - in my own experience - has been September and February. February because people have made decisions after the new year and start to take the bull by the horn and decide to buy, move etc.... September seems to follow on from the return to school period where people are looking to move before Christmas. I can tell you that the spike in sales has always lead from these two times regardless of the condition of the housing market.
September gone by saw an awful lot of people looking - some buying that was it. Liquidity has almost gone from the market but I know of people getting mortgage approval in the past week. As the government has led the world in what to do we should see some stabilising and in the new year when people can see where they are going with their jobs they will look to purchase. The social habits of people can't stop - we by nature have to breed (sorry for the cruel way of putting it but its how we survive as a species) so when we decide with our partner to get married, live together, have to move out to attract a partner a home is needed. As house prices are extremely low at the present and they may dip a little more people will be hoping to buy at an affordable level. What we may need to re-introduce is the haggle - sometimes we get content paying what the price sticker states because its been like that. Haggle, get your deal, and move in.
So I'm not an economist - who would want to be - but I'm looking at people - the irish people - and the way we are and what we're about. We are survivors and we will move on from this and tell children about the time this all happened. Also we can't all jump on planes or boats and escape whats happening so we'll stay, we'll have pride in our country and we'll work our way through it. Is there any other way?
BTW - and I hate politics - I've been very impressed with the conduct of Brian Lenihan and from the UK Gordon Brown and Alistair Darling. They've all kept their composure and dignity when if we had to follow the antics of stockbrokers, analysts etc.. we'd all be wearing rags, jobless and homeless.

Just seen this http://news.bbc.co.uk/1/hi/uk_politics/7667284.stm - interesting reading.

punchestown

mrgaa1 wrote: »

So I'm not an economist -

But I am a vested interest

mrgaa1 wrote: »

From being involved in selling houses for quite sometime

20goto10

The problem is that everything is based on asking prices which are set by the vendor and are 99.99% of the time overvalued even in todays climate.

Lets assume prices need to drop by 50%. So I can put my house for sale at an inflated asking price, wait a month or 2 and then drop it by 50%. Low and behold the value of my house has dropped by 50% :eek:

ntlbell

mrgaa1 wrote: »

I'll explain very unscientifically why I think next March is going to tell us whats happening. From being involved in selling houses for quite sometime the traditional period for selling - in my own experience - has been September and February. February because people have made decisions after the new year and start to take the bull by the horn and decide to buy, move etc.... September seems to follow on from the return to school period where people are looking to move before Christmas. I can tell you that the spike in sales has always lead from these two times regardless of the condition of the housing market.
September gone by saw an awful lot of people looking - some buying that was it. Liquidity has almost gone from the market but I know of people getting mortgage approval in the past week. As the government has led the world in what to do we should see some stabilising and in the new year when people can see where they are going with their jobs they will look to purchase. The social habits of people can't stop - we by nature have to breed (sorry for the cruel way of putting it but its how we survive as a species) so when we decide with our partner to get married, live together, have to move out to attract a partner a home is needed. As house prices are extremely low at the present and they may dip a little more people will be hoping to buy at an affordable level. What we may need to re-introduce is the haggle - sometimes we get content paying what the price sticker states because its been like that. Haggle, get your deal, and move in.
So I'm not an economist - who would want to be - but I'm looking at people - the irish people - and the way we are and what we're about. We are survivors and we will move on from this and tell children about the time this all happened. Also we can't all jump on planes or boats and escape whats happening so we'll stay, we'll have pride in our country and we'll work our way through it. Is there any other way?
BTW - and I hate politics - I've been very impressed with the conduct of Brian Lenihan and from the UK Gordon Brown and Alistair Darling. They've all kept their composure and dignity when if we had to follow the antics of stockbrokers, analysts etc.. we'd all be wearing rags, jobless and homeless.

Just seen this http://news.bbc.co.uk/1/hi/uk_politics/7667284.stm - interesting reading.

Do you have experience in politics too?

You said we will see the bottom of it in March 09, you didn't say march 09 will be a month that will give us more information obviously in 6 months time we will have more information

but why will march 09 see the bottom of the decline?

ionapaul

March 2011 or 2012, maybe...

whizzbang

mrgaa1 wrote: »

... As house prices are extremely low at the present

ye see, that's yer problem right there. Houses are ludicrously expensive still.

You make some interesting points but I think your view that the economy will be fine and everyone will feel secure in their jobs in 2009 is overly optimistic.

The_Conductor

By what measure would one decide that a property was reasonably or unreasonably priced? Multiple of one's earnings? Portion of net take home pay? If a person on 30k can draw down a mortgage of 300k, costing them almost 65% of their net take home pay- surely something is wrong? Thats where we are at......

ParkRunner

Those who were desperate enough to take out a 100% mortgage have what they wanted, a vastly over-valued asset which will need to be re-paid over 35 - 40 years at crippling rates. And I dont envy them for a second. But the pendulum has swung and I really hope the Irish public hold off buying into any short term scheme which is introduced in the coming weeks, and let the market sort itself out. If there is anyone out there about to acquire the deeds to a first time property dont do it!

The_Conductor

EF wrote: »

Those who were desperate enough to take out a 100% mortgage have what they wanted, a vastly over-valued asset which will need to be re-paid over 35 - 40 years at crippling rates. And I dont envy them for a second. But the pendulum has swung and I really hope the Irish public hold off buying into any short term scheme which is introduced in the coming weeks, and let the market sort itself out. If there is anyone out there about to acquire the deeds to a first time property dont do it!

You are arguing that they were fully aware of what they were doing though- I am arguing that they were not. They bought into the media whipped up hype about "having to get on the property ladder", "sure as houses", "buy-to-let mortgages", "house-in-the-sun", "property millionaire" etc- how many more headlines can you remember? People were bombarded with this crap, day in, day out- quite literally for years. Regardless of how intelligent someone is- if you throw enough mud at them for long enough- some of it will stick.

So- in the midst of this media hyped frenzy- people felt compelled to purchase- if they did not, they "would be left behind". Totally aside from the peer pressure involved- these people were not in a position to make a decision that has 30-40 year implications. It would be very interesting to see if someone tried to have contracts annulled on the basis of temporary insanity- if they had a good barrister- it is most probably an arguable situation.

These people were pressurised into parting with silly amounts of cash to buy substandard accommodation, and are now being thrown to the wolves- abondoned by the government who allegedly are there to act on their behalf.

It is these scores of thousands of people I am talking about.

Certainly- there are thousands who were well aware of what they were doing- but its an equal assumption that there were at very least as many who simply bought into the hype.

An interesting poll here might be- how many people have read the lease associated with their apartment / terms and conditions associated with their mortgage / conditions attached to their mortgage approval in principle (etc)- you get the picture- people are making far ranging decisions without equipping themselves with all the facts. There is an assumption that other people are acting on our behalves, I argue that this is not a valid assumption.

20goto10

smccarrick wrote: »

By what measure would one decide that a property was reasonably or unreasonably priced? Multiple of one's earnings? Portion of net take home pay? If a person on 30k can draw down a mortgage of 300k, costing them almost 65% of their net take home pay- surely something is wrong? Thats where we are at......

Is it because houses are too expensive or because wages are too low? I take it you are saying 30K is the average salary and 300K is the price of an average house. Therefore a person on 30K should be able to comfortably afford a 300K mortgage. If that is true then why is it that houses are too expensive and not that wages are too low? Or that there are too many people in the country without decent qualifications and therefore do not have a decent profession?

btw, a person with a 30K salary according to yourself should not be lulled into a 100% mortgage. So they will actually be looking at a 240K mortgage with a 20% deposit or a 270K mortgage with a 10% deposit. Does that still sound overpriced to you?

What state will our country be in if people do not have to work hard to buy a nice house?

The_Conductor

20goto10 wrote: »

What state will our country be in if people do not have to work hard to buy a nice house?

There is a difference between working hard, and selling your soul to the local bank manager. Keep in mind- traditional mortgages were for 15-20 years- now there are 45 year mortgages on the market.......Working hard should not equate with penury in old age.

CallieO

Excellent debate which made interesting reading this morning.

When you are talking in a broad sweep about property prices, are we talking all the new builds in urban areas? Or does this include second hand properties in the countryside.

I get the distinct impression that it is such a vast band of parameters that a 46% drop could be effected by one house in Dub cutting a totally unrealistic asking price to a realistic price?

I am also interested by the number of investment properties that have found their way onto the auction boards over the last weeks. And are being snapped up lol

Not by the Irish in the main either.....

Personally its land or gold ( both???)

Callie

Shambo

From being involved in selling houses for quite sometime

Right so- a totally unbiased opinion there then!

. As house prices are extremely low at the present and they may dip a little

House prices low? That's a laugh- if house prices were low then people would feel more comofortable about buying them- prices in this country are still a disgrace and hopefully will continue to fall dramatically so that the average Joe Soap can actually afford one without taking on a 35 year mortgage.

Reasons for people not buying hopiuses in Ireland?

Too expensive- most people have copped on to that at last

Banks not lending (Though I believe our wonderful govt is going to do something about that today:mad:)

Unemployment is up and forecast to go through the roof next year- again people are not as thick as Fianna Fail think- who would want to take on a 35 year mortgage when you think you could be out of a job in 6 months?

Oh, hello by the way - great forum- long time lurker and I finally got my arse in gear to register
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