Have price's bottomed out?

seamus

gurramok wrote: »

Seamus, i wasn't comparing figures literally as i do know the maths

I know, sorry I wasn't implying that you had it wrong, just illustrating that the scales are different.

mathie wrote: »

Has it not been shown that all bubbles give up all the gains that were made over the course of the bubble?

Has it?

No, Ireland is not different, but there is one particular factor which needs to be taken into account, and that's actual economic growth. The jump in average wages and quality of life in this country soared between 1997 and 2007, and hasn't contracted by anything close to the same degree that house prices have. And it's not going to - we're not going to go back to 1997 wage levels. Remember that we started from a very low economic base - the entire economy wasn't based on a bubble like Japan's was.

So if you consider that had the bubble not occured, the average house price would still have increased in line with inflation, to reflect the increased buying power of the average person. To keep it simple, let's ignore the small impact that construction workers wages had on the average.

The average wage increased by 53% in the period 1998 - 2006. Roughly 6.5% per year. If you take a leaner figure for a healthy economy and estimate 4% inflation per year over that period, then the average price of a house in 2010 *should be* around €210,000 - €220,000.

Which indicates to me that houses at present are still 12.5% - 15% overvalued - assuming that credit is available relatively freely and wages stay static.

Of course those last two assumptions probably won't hold. But credit will free up again and wages won't collapse to 1997 levels.

ricman

THE INDEPENDENT today has a report from a bond rating company that says home prices will go down by at least 20per cent more, in ireland..SEE independent.ie , property

AARRRRGH

seamus wrote: »

I know, sorry I wasn't implying that you had it wrong, just illustrating that the scales are different.

Has it?

No, Ireland is not different, but there is one particular factor which needs to be taken into account, and that's actual economic growth. The jump in average wages and quality of life in this country soared between 1997 and 2007, and hasn't contracted by anything close to the same degree that house prices have. And it's not going to - we're not going to go back to 1997 wage levels. Remember that we started from a very low economic base - the entire economy wasn't based on a bubble like Japan's was.

So if you consider that had the bubble not occured, the average house price would still have increased in line with inflation, to reflect the increased buying power of the average person. To keep it simple, let's ignore the small impact that construction workers wages had on the average.

The average wage increased by 53% in the period 1998 - 2006. Roughly 6.5% per year. If you take a leaner figure for a healthy economy and estimate 4% inflation per year over that period, then the average price of a house in 2010 *should be* around €210,000 - €220,000.

Which indicates to me that houses at present are still 12.5% - 15% overvalued - assuming that credit is available relatively freely and wages stay static.

Of course those last two assumptions probably won't hold. But credit will free up again and wages won't collapse to 1997 levels.

Quite right. I remember starting a job on £19,000 in 1996 and i thought it was a great wage then. Far from it now though.