House prices still too high!

Benedict

Hi Everyone,

It absolutely intrigues me why on earth estate agents insist on asking prices for houses which are still so high that it is unlikely that any buyer will even go to view them! The true value of a residential property can be estimated in a number of ways and each method should produce roughly the same figure. You can go by rental potential (a property should be 13 to 15 times the potential annual rental). This is the case whether you rent it or live in it. The value is the same either way. Yet daft and myhome are laden with properties that have an asking price of double (or more) what they are worth according to this method.
You can go by income. The average house should be about 3 times the average income. Yet they tend to be more than 6 or 7 times. Again, gross overpricing.
You can estimate by percentage yield. Going by this method, the seller should be paying the buyer to take the property - not the other way around!

So when will reality dawn?

Anyone know? Are the estate agents still praying that some buyers will emerge from an underground cave and not have heard that the boom is over?

Do they not realise that it is better to sell now for 50% of the current asking price than to wait another year and sell it for even less?

It beggars belief!

Regards,

Benedict. (29 May 10)

SoupyNorman

Relax and be patient there is nothing left to analyse in relation to property
prices and the behavior of EA's. Property prices are taking their natural and inevitable course, the patient will be rewarded.


You know what I think beggars belief....

Regards,

Benedict. (29 May 10)

billybigunz

SoupyNorman wrote: »

Relax and be patient there is nothing left to analyse in relation to property
prices and the behavior of EA's. Property prices are taking their natural and inevitable course, the patient will be rewarded.


You know what I think beggars belief....

Who posted that? What date was it?


What can you do. Prices are too high, houses aren't selling. We have years to play this out.

AARRRGH

Yeah, the key is patience and just as importantly checking the source of your information. Like everything in life, there are vested interests (sometimes really well disguised) who want to trick you.

To me it is common sense property is still waaay overpriced. I earn a good wage (quite a bit above average) yet I would have to take out a huge mortgage to buy a fairly ****ty house. This is obviously wrong.

delux

I think it will be a long slow drop rather than some big one-time drop. The reason being that there'll always be some people buying, you know the type, young couples etc. who can't wait and just want to own their own house etc.. So that'll keep the estate agents ticking away but house prices will keep slowly dropping for some time while supply is > demand, until the economy picks up and investors buy again and immigrants come back.

johnnyskeleton

delux wrote: »

I think it will be a long slow drop rather than some big one-time drop. The reason being that there'll always be some people buying, you know the type, young couples etc. who can't wait and just want to own their own house etc.. So that'll keep the estate agents ticking away but house prices will keep slowly dropping for some time while supply is > demand, until the economy picks up and investors buy again and immigrants come back.

My theory is that as people start buying the drops (in asking prices) will increase. What we have seen is severe market resistance by sellers and selling agents. If they have say one or two low ball enquiries for a property in a six month period, they will maintain the price at its unrealistic level because they don't consider the low balls to be "genuine" buyers. As this happens across their entire loan book (bar the occasional executor sale) they will think there is "no market" and that the executor sales are "below their real value". However, as people begin to buy they will begin to see a market clearing price and encourage more sales at this price. This realisation will encourage others to drop to more realistic prices so I think that as people start to come back to the market it will not slow the rate of asking price drops but will rather increase it (i.e. the people asking 600k for a 2 bed in Dublin will seem increasingly foolish).

The above relates to asking prices, obviously if there were some way to measure actual selling prices in the absence of a large volume of sales we would see that the price drops have actually done the dropping and we are merely waiting for the sellers (not the buyers as is often touted) to come back to the market.

Zamboni

Just to add, there are sellers there who have been holding onto their asking prices for dear life.
Pressures such as interest rises will eventually force them to drop their prices. It is inevitable.
Executors sales will have also have people who just want their inheritances for variety of reasons, unemployment, their own mortgages etc.
The market is only going one way.
Patience is a virtue.

johndaman66

Benedict wrote: »

true value of a residential property can be estimated in a number of ways and each method should produce roughly the same figure. You can go by rental potential (a property should be 13 to 15 times the potential annual rental). This is the case whether you rent it or live in it. The value is the same either way. Yet daft and myhome are laden with properties that have an asking price of double (or more) what they are worth according to this method.
You can go by income. The average house should be about 3 times the average income. Yet they tend to be more than 6 or 7 times. Again, gross overpricing.
You can estimate by percentage yield. Going by this method, the seller should be paying the buyer to take the property - not the other way around!

Although I would agree with your sentiment generally I do not understand why you say that the true value of residential property can be estimated in a number of ways and each method should produce roughly the same figure. You mention two methods that would give a positive figure and then mention a method whereby the seller should be paying the buyer to take the property?? Also percentage yield? Are you referring to rental yield as am a wee bit lost here also?

Benedict wrote: »

Do they not realise that it is better to sell now for 50% of the current asking price than to wait another year and sell it for even less?

While I like most I'm sure would anticipate further price drops I think less than 50% of current asking prices in a years time is unrealistic to assume....although you probably will see this happening in some cases no doubt I do think they will be the extreme exception rather than the general rule.

Benedict

What I said about the percentage yield valuation method was a throw-away comment and I agree that it could have been mis-leading. The method is often used when comparing buying property to putting your money on deposit. Currently, with the ridiculous prices being asked, it is better to place your money on deposit - the likes of Nationwide UK (Ireland) will get you 3.3% gross for instant access. The current farcical asking prices mean that you wouldn't get any interest - you would actually lose money - and a lot of money at that.

Anyone buying property without using sane valuation methods will lose money. The rental potential system is a good method - tried and tested internationally - and indeed we used to use it in Ireland before the insanity took hold.

Okay, prices no longer tend to be 4 or 5 times what they are worth. But they tend to still be double and the estate agents are up all night every night praying that Joe and Mary Public will not cop on to the fact that buying a house in Ireland is still a rip-off.

But that is exactly what it is!

johndaman66

I very much agree with your logic in assuming that even still current asking prices are ridiculous from an investor point of view or indeed otherwise Benedict. I reckon you might at best match the rate of return for putting your money on deposit at a rate of 3.3% which you mention if you buy to let. Especially when one considers if you are letting a house long term there will no doubt be vacancy periods between tenants during which the house will still need to be heated and esb and the like paid also. One also needs to factor in the opportunity cost of maintaining the house or cost of employing somebody to do so...cutting lawns, weeds, painting, servicing boilers etc. There is also the risk of your house being trashed by tenants (which I have seen happen on more than one occasion from a casual observer point of view).

Think such has being the case with a right long time really...even during the "boom years" but unsustainable property appreciation was part of the equation then.

I think myself there is a generational factor at play to a certain extent. To me it seems that much of the older generation seem to have this mindset that you cannot loose in property or land and there is never a bad time to buy. My parents who are very conservative and in no way extravigant to the extent of being tight with money follow this logic. I have tried to explain the rent multiplier rule to them on a number of occasions and although they understand the methodology behind it they appear to dismiss it all the same as not being relevant or at least thats the impression I seem to get. I do see this divide in my workplace also to a certain extent... Its hard to believe that managers and people with many years experience working in the financial services industry would still proclaim that "rent is dead money". I think having seen the mistakes made by their counterparts and siblings and the mess some of them are in more and more of the younger generation are very weary of taking the plunge and even see owning a property as a noose around their neck and realise the advantages and the added mobility of renting.

Think also there will be some activity in the market regardless of market conditions. Some people regardless of age will attach too much emotional involvement to buying a house and buy regardless as opposed to renting if they get mortgage approval. For example the young married couple type with a kid or two who will buy as oppossed to renting because they will have the freedom to paint the kiddies room what colour the kiddies wish, which they perhaps believe they couldn't or wouldn't be bothered doing if they were to rent because its not a place of their own. Then there may be those who buy now because it seems to them as if there is marvellous value out there compared to a few years ago and they think they are picking themselves up a bargain. This may be through a lack of research or failure to acknowledge further anticipated price drops or indeed couldn't care less if prices are going to drop further.

Sorry for all the waffle and am probably going of a tangent even but just to express my thoughts on the subject. By the way Benedict would you have any further information or perhaps a link to that 3.3% gross NationWide deposit account. Also do you know if it falls under the state guarntee scheme?

Benedict

Yes, in bygone days, one always felt safe about buying a house because you could always sell it if you wanted to move - and sell it at a profit too.
Things are different now and a major concern for the buyer must be that prices are still too high. For the most part, houses appearing on the market at say 350K to 400K in Dublin will fall by hundreds of thousands in the coming year or two - and it could be a lifetime before they recover! And that sort of loss is financially devastating. I know a couple who paid 700K for a house in 07 and are financially ruined for life. They can't get 350K now - and the price will fall further! They thought they could sell it in maybe 5 years and make a profit. And this is still happening - though on a smaller scale.

Anyone who buys at the current asking prices is nuts!

You mentioned Nationwide UK (Ireland). You'll find the details on the Web. They are guaranteed by the British system up to 50K (Sterling equivalent).

OMD

Benedict wrote: »

You can go by rental potential (a property should be 13 to 15 times the potential annual rental). This is the case whether you rent it or live in it. The value is the same either way.

This is said a lot. Can anyone back it up? Obviously prices go up and down a lot. But say over the last 40 years, for how many countries in the world does this "14 times rental income" stand up?

Benedict

This 14 times rental calculation is based on sound economic principles. If you imagine paying 500K for a property. If the rental income is 1.5K per month, then your gross rental income will be 18K per annum. At this rate, it would take nearly 28 years just to recover your basic outlay. This is assuming that it will be occupied 100% of the time and that rents do not fall (and that is quite an assumption the way rents are going). What about interest on your loan? Refurbishments? The opportunity cost of not having the 500K at your disposal? And all the other factors?


The market is laden with property for 500K which wouldn't even get 1.5K per month!

Total madness - that's why investors won't buy houses until the asking prices go down by at least 40% to 50%.

The only people that even might buy are the poor unfortunate couples trying to set up a home - and heaven help them when they realise how they have been ripped off!

SoupyNorman

OMD wrote: »

Can anyone back it up?

Why should anyone have to?

Who ever had evidence to back up the astronomical valuations appended to property during the bubble?

The rental yield valuation model is not exact(as with most economic models) however it is a/some formula to base a valuation on. I for one feel comfortable with that model, I have priced properties I am interested in and noted the valuation, in zero instances were the asking prices within €50k of my valuation (and 50k above was the closest).

OMD

Benedict wrote: »

This 14 times rental calculation is based on sound economic principles. If you imagine paying 500K for a property. If the rental income is 1.5K per month, then your gross rental income will be 18K per annum. At this rate, it would take nearly 28 years just to recover your basic outlay. This is assuming that it will be occupied 100% of the time and that rents do not fall (and that is quite an assumption the way rents are going). What about interest on your loan? Refurbishments? The opportunity cost of not having the 500K at your disposal? And all the other factors?


The market is laden with property for 500K which wouldn't even get 1.5K per month!

Total madness - that's why investors won't buy houses until the asking prices go down by at least 40% to 50%.

The only people that even might buy are the poor unfortunate couples trying to set up a home - and heaven help them when they realise how they have been ripped off!

But the 14 times rent argument. Obviously it is a good return. But you say based on international experience it happens. My question is where does it happen in the long term?

OMD

SoupyNorman wrote: »

Why should anyone have to?

Who ever had evidence to back up the astronomical valuations appended to property during the bubble?

The rental yield valuation model is not exact(as with most economic models) however it is a/some formula to base a valuation on. I for one feel comfortable with that model, I have priced properties I am interested in and noted the valuation, in zero instances were the asking prices within €50k of my valuation (and 50k above was the closest).

Yes but I would be more comfortable with 10 times rent or 5 times rent. Why 14?

ei.sdraob

wtf is this crap in last few posts

knock yourselves out

compare Ireland to other countries against various metrics

Benedict

It will work this way anywhere the same economic principles pertain. In the same way as 2 + 2 = 4 wherever you are.

For example, it is used in the USA. Check it out for yourseld. Try to sell a property there for an asking price of 30 times the potential annual rental income and don't be offended when they laugh at you!

During the boom, investors didn't even care about rents - a property could increase in value by 20% - or more - per annum.

Now, since there is no capital appreciation, rental evaluation is crucial - and it is irrelevant whether you intend to rent it out or live in it. You don't pay double for a car on the basis that you will drive it yourself and not rent it out!

OMD

Benedict wrote: »

It will work this way anywhere the same economic principles pertain. In the same way as 2 + 2 = 4 wherever you are.

For example, it is used in the USA. Check it out for yourseld. Try to sell a property there for an asking price of 30 times the potential annual rental income and don't be offended when they laugh at you!

During the boom, investors didn't even care about rents - a property could increase in value by 20% - or more - per annum.

Now, since there is no capital appreciation, rental evaluation is crucial - and it is irrelevant whether you intend to rent it out or live in it. You don't pay double for a car on the basis that you will drive it yourself and not rent it out!

I know the formula is used. My point is where does it actually happen in real life. Over the long term, say 40 years, in how many 1st world countries has property averaged 14 times rent? Or is property overvalued just about everywhere?

Benedict

Personally, I'm not interested in wasting time trawling through every first world country has paid for houses of the past 40 years - I'm talking about here and now. David McWilliams has stated that the annual rental formula is valid that that it is the one normally used in the USA. Prof Brian Lucey agrees with him. So does Prof Morgan Kelly! All three of these great men (and most intelligent thinking people of Ireland too), believe that houses are still a complete rip off. All 3 cite the rental potential method as back up evidence for this. If you think these men are incorrect - then I (and all readers of this blog) would love to hear your evidence. Do you have evidence that this formula is invalid. If you do, then let's hear it!

We're waiting!

OMD

Benedict wrote: »

Personally, I'm not interested in wasting time trawling through every first world country has paid for houses of the past 40 years - I'm talking about here and now. David McWilliams has stated that the annual rental formula is valid that that it is the one normally used in the USA. Prof Brian Lucey agrees with him. So does Prof Morgan Kelly! All three of these great men (and most intelligent thinking people of Ireland too), believe that houses are still a complete rip off. All 3 cite the rental potential method as back up evidence for this. If you think these men are incorrect - then I (and all readers of this blog) would love to hear your evidence. Do you have evidence that this formula is invalid. If you do, then let's hear it!

We're waiting!

I love the logic that I should prove it incorrect. I am simply questioning the formula. I know of no country in the world that has averaged 14 times rent over the longer term. Certainly not in the USA although it has happened in oarts of US. Therefore following the logic then almost every country in the world is over valued and has always been so. OR the formula may be incorrect as a method for predicting house prices.

Benedict

We are talking about the here and the now and you have not given any evidence that the 3 experts I have cited are incorrect. I ask you again to do so.

If it your opinion that anyone in his right mind would spend 28 years waiting just to get back the original sum spent on a house, then you are living in cloud cuckoo land.

But if you are not prepared to say why you think the 3 eminent experts are wrong, then I won't continue this discussion.

OMD

Benedict wrote: »

We are talking about the here and the now and you have not given any evidence that the 3 experts I have cited are incorrect. I ask you again to do so.

If it your opinion that anyone in his right mind would spend 28 years waiting just to get back the original sum spent on a house, then you are living in cloud cuckoo land.

But if you are not prepared to say why you think the 3 eminent experts are wrong, then I won't continue this discussion.

I have told you why I think it is wrong 3 times but you don't want to listen. If it is right and it applies all ove the world as you say then that means you can go to any 1st world country, look at average rents multiply it by 14 and you will get average property price. Except you cannot. In almost all cases the average price will be higher.

In other words this is a theory that only works in theory.

Benedict

So Prof Brian Lucey, Prof Morgan Kelly and David McWilliams are wrong?

And I'm wrong too - but I'm in good company!

I am talking about Ireland now - forget "all over the world" for heaven's sake!

But nobody is stopping you from paying double for a property.

Go right ahead.

Property prices aren't as stupid as they used to be - but by heavens they're still a joke!

Take your head out of the sand and confront the issue which is not what a 3 bed semi costs in Jamaica or Japan. This is Ireland and the experts say the asking prices are still bananas. End of story.

The Pontiac

You can use all the technical analysis you like for valuing a property, but sometimes a little common sense doesn't go astray. Sometimes (nearly always now actually) when you see a house for sale on daft.ie etc., you just know in your heart and soul it's way over priced. If I had 'ready cash' to buy a property now, and had a family etc., I'd choose to rent instead.

Sometimes I really wonder what planet auctioneers and bankers are living on. We've got a country full of ghost estates of overvalued property; and the deluded bankers and property owners are waiting for some kind of miracle to happen.

This townhouse/duplex was on page 1 of daft.ie for results for "properties for sale in Co. Cork". Anybody would know this property isn't worth anything close to this. Get a bloody grip!!

OMD

Benedict wrote: »

So Prof Brian Lucey, Prof Morgan Kelly and David McWilliams are wrong?

And I'm wrong too - but I'm in good company!

I am talking about Ireland now - forget "all over the world" for heaven's sake!

But nobody is stopping you from paying double for a property.

Go right ahead.
This is Ireland and the experts say the asking prices are still bananas. End of story.

first of all DMcW is a journalist not an expert.

I am not saying prices are not overvalued. My point is that you cannot use a model like 14 times rent as it dies not work. It does not work in Ireland it does not work elsewhere in the world c

SoupyNorman

OMD wrote: »

first of all DMcW is a journalist not an expert.

He's an economist foremost, then a journalist/author and pretty damn close to being an expert in his field.

Tristram

Don't think there's any need to be so defensive about OMD's posts. He asks a simple question that hasn't been properly answered and seems to be taking criticism for something he didn't say (imo).

I won't dispute the existence of the rental model mentioned but I am curious as to where it comes from and if there is an example of it in operation. If you can provide a link much appreciated!

MRBEAVER

Have also seen this theory much quoted and would also be interested if Benidict can give an example of any developed country where it actually works. IMO it is pretty meaningless if he can't.

Archie D Bunker

Even without proof, the theory is sound - basically becasue you have to take into account people who invest in real estate (as opposed to people who buy real estate to live in).
Such investors would not invest in real estate unless they get a certain minimal return on their investment when they rent it. The minimal return needs to be more than the return such an investor might get in other venues of investment, and from experience a savvy real estate investor would aim for at least 7% yearly return over his investment, and I have seen investors get 10% - 13% returns (albeit these were achieved in sort of high risk areas).

Just do the calculation yourself - if a property costs X and you want a 7% yearly rental return (even if we don't take into account other real estate associated costs and expenses which lower the overall rental income) - check and see how many properties you can find that will give you that.

If you can't find such properties, it means the real estate market is not tempting any investors, and without these investors the market will only continue to go down.

MRBEAVER

That doesn't make much sense to me. Even if investors used this theoritical formula and they clearly didn't when prices were rising why does the housing market need investors. why would people buying houses to live in use this formula. would not say comparing rent to cost of mortgage payments make more sense and even then this should take account if the advantages owning would have over living in a rental property.

Archie D Bunker

When house prices were rising, investors were counting on making a profit by selling these properties after a certain period of time, or they were counting on their investment to profit from the rises in prices.
If prices are falling, and the rental income is not tempting enough, investors stay out of the market or they invest someplace else where the conditions are better for them.
Property buyers who buy to live are only a part of the whole real estate market, and that is true for any country in the world.
A prosperous real estate market needs both components to thrive, and as long as investors stay out of the market, prices will continue to fall.

OMD

ei.sdraob wrote: »

wtf is this crap in last few posts

knock yourselves out

compare Ireland to other countries against various metrics

If you look at the graph you linked to and look at all the European countries. It only lets you look at Q1 2003 to Q1 2010. But in those 7 years every country except Germany had higher price growth than Ireland.

Also in the 12 years from 1998 to 2010 Switzerland, Netherlands, Canada and Denmark had lower growth than Ireland. South Africa, Australia, Spain, Britain, Sweeden and France all had higher growth. (Data was not available for other countries)

Pretty much the same can be said for prices in real terms from 1998 to 2010. Most countries according to the graph had higher price growth than Ireland.

I don't really think too much stock can be put into these types of graphs.

MRBEAVER

There are practically no investors in the market at the moment but it doesn't necessarily follow that they are required before prices begin to rise. And they will reenter when they think that there will be capital appreciation rather than whether prices fit some arcane formula that has worked nowhere in practice.

OMD

Archie D Bunker wrote: »

Even without proof, the theory is sound - basically becasue you have to take into account people who invest in real estate (as opposed to people who buy real estate to live in).
Such investors would not invest in real estate unless they get a certain minimal return on their investment when they rent it. The minimal return needs to be more than the return such an investor might get in other venues of investment, and from experience a savvy real estate investor would aim for at least 7% yearly return over his investment, and I have seen investors get 10% - 13% returns (albeit these were achieved in sort of high risk areas).

Just do the calculation yourself - if a property costs X and you want a 7% yearly rental return (even if we don't take into account other real estate associated costs and expenses which lower the overall rental income) - check and see how many properties you can find that will give you that.

If you can't find such properties, it means the real estate market is not tempting any investors, and without these investors the market will only continue to go down.

One problem here is you are talking about 7% after inflation. The property should go up with inflation and the rental income should go up with inflation. So what you are saying is that a property investor should expect a return of 10% a year. Now I am not saying that cannot happen but it is higher than you would expect from the stock market with a lot less risk. This formula says this is the minimum you should expect.

Also what distinguishes property from the stock market is most people who buy property are not investors they are looking for a place to live so will pay more if it suits their particular needs. Also rental property is not the same as owner occupied property. People will pay large sums for some houses that would never go on the rental market eg €10 million for a house in Dalkey or Ailesbury Road.

Also the rental market and the owner occupied market are not necessarily the same. Rental market will have a much larger number of apartments and multiple occupancy units.

However to say it again, unless this model can be replicated throughout the world (not just one or 2 countries) then I don't see why it should particularly apply to Ireland. What makes us different? Indeed as the rental market makes a much smaller proportion of the property market in this country than most other countries, it should be less relavent here than elsewhere

knuth

I personally believe that EA's are reluctant to inform the client of the realistic figures they should be selling at.

Majority of people are still living in cuckoo land and would probably take offence if the EA suggested the real value.

As times are tough, will an EA really put their neck on the board with the possibility of loosing their business out to other EA's?

johnnyskeleton

OMD wrote: »

However to say it again, unless this model can be replicated throughout the world (not just one or 2 countries) then I don't see why it should particularly apply to Ireland. What makes us different? Indeed as the rental market makes a much smaller proportion of the property market in this country than most other countries, it should be less relavent here than elsewhere

I don't think it can either. However, as general investment advice, if prices are 12x rent it is time to buy, if prices are 20x rent it is time to sell. This sets these as the two extremities of price:rent ratio. However, that is not to say that it is a universal rule.

As with all markets, supply and demand will set the price.

As a general trend for houses, they seem to average out around 3.5x gross earnings in the UK and I believe this is the general trend in house prices. They also tend to track inflation but none of these are hard and fast rules:

http://www.housepricecrash.co.uk/graphs-average-house-price-to-earnings-ratio.php

However, the crucial thing to note is that there is a large excess of supply over demand in this country at the moment. So, whatever metric is used to say what house prices ought to be, supply and demand should bring these prices lower.

Benedict

David McWilliams is a highly respected economist who also happens to write books and articles. He claims that the rental x 13 to 15 method is valid and I put my faith in him. He has said that the USA - among others - uses this method. Irish investors also use this method and that is what should really concern us.

But let's forget the rental method for a moment. Another method is the income multiple. Your house should cost you 3 to 4 times your gross annual income. 5 times at a push. Yet the average house in Dublin is now costing 10 times the average income.

This is lunacy!

House prices have to fall by 40% of current price at least.

OMD

Benedict wrote: »

David McWilliams is a highly respected economist who also happens to write books and articles. He claims that the rental x 13 to 15 method is valid and I put my faith in him. He has said that the USA - among others - uses this method. Irish investors also use this method and that is what should really concern us.

The last I heard USA prices were about 25 times rental income but they may have dropped recently.

Benedict wrote: »

But let's forget the rental method for a moment. Another method is the income multiple. Your house should cost you 3 to 4 times your gross annual income. 5 times at a push. Yet the average house in Dublin is now costing 10 times the average income.

This is lunacy!

House prices have to fall by 40% of current price at least.

It is hard to say how unafordable house prices are at present. Finfacts had this from January of this year where they looked at prices as a multiple of income
http://www.finfacts.ie/irishfinancenews/article_1018886.shtml

"There were 62 severely unaffordable markets this year, down from 64 in 2008. The least affordable markets were concentrated in Australia (22) the UK (19) and the US (11). Nine of the 11 US severely unaffordable markets were in California. There were 5 severely unaffordable markets in New Zealand and 5 in Canada.

Housing in Ireland has become moderately unaffordable with a Median Multiple of 3.7, showing a trend toward historic norm of 3.0.
Irish housing had been affordable as late as the middle 1990s, with a Median Multiple below 3.0."


Obviously house prices have fallen since this survey was done

Jabber2

The old adage still applies as it did during the boom and as it does presently during the downturn and as it will into the future, "a house is worth exactly what someone is willing to pay for it", rightly or wrongly, foolishly or wisely.
Irish people buy houses its what we do......
I'm sure Mr Mcwilliams and Professor's Lucey and Kelly own houses did they purchase their "home" on the 14 times annual rent multiplier?
Personally I think the idea that houses will fall another 40-50% is as pessimistic as EA's were optimistic. This would push prices back to the early 90's most people who bought houses then would be mortgage free (60% of home owners) why would they sell now, too upgrade?
Who knows when they'll bottom out but if they fall back that far most of the country just wasted the guts of 20 years paying a mortgage..

accensi0n

Jabber2 wrote: »

Personally I think the idea that houses will fall another 40-50% is as pessimistic as EA's were optimistic.

Aren't people who think this, optimistic?

Benedict

When (not if) the house prices fall further, some will be hurt, and this is sad. But it will be good for the country overall. I mean, Daft has now produced a statistic that the average house has fallen to 342K. EBS now refuses to grant a loan where the LTV is less than 20% (and other lenders are set to follow this) - so the buyer of an "average" house will have to find 68,400K in cash before he/she can even think about getting a mortgage? Throw in the associated costs - like a solicitor and a few chairs to sit on! You're talking about needing cash of well over 70K! This will drive more and more people away from even thinking of purchasing which will, in turn, drive down demand and price.

If anyone thinks the property market has already collapsed, just wait until 2011!

OMD

Benedict wrote: »

I mean, Daft has now produced a statistic that the average house has fallen to 342K. EBS now refuses to grant a loan where the LTV is less than 20% (and other lenders are set to follow this) - so the buyer of an "average" house will have to find 68,400K in cash before he/she can even think about getting a mortgage? Throw in the associated costs - like a solicitor and a few chairs to sit on! You're talking about needing cash of well over 70K! This will drive more and more people away from even thinking of purchasing which will, in turn, drive down demand and price.

If anyone thinks the property market has already collapsed, just wait until 2011!

Where did you get the statistic that the average house price "has fallen to 342K"? I don't think house prices were ever at that level even at the peak of the market. According to the ESRI quarterly report (which probably overestimates house prices) the average price is €204,830.

You previously said prices have to fall 40%. €204,830 is 40% less than 342k. Have we reached the bottom;)

By the way EBS are offering 80% loans on apartments outside the cities. In cities they offer 85% LTV on apartments. For houses they are offering 92% mortgages.

Benedict

Benedict wrote: »

Daft has now produced a statistic that the average house has fallen to 342K.

This and your tendancy to place 100% faith in whatever DmW comes out with doesn't give you much credibility. Despite the recession there are loads of single folk on lots more than the "average" income you quote. There are also loads and loads of couples both on this average income, also there are loads of folk out there who have no probs getting substantial wads of cash off mummy and daddy.

Anyone out there who reckons they will buy a 3 bed semi in a good area in Dublin, Cork or Galway in 2011 for the figures thrown around in this thread are quite simply off their head. Time will prove me correct

Also if no one is buying rents will only go one way

McTigs

Nobody has been buying for the past three years and rents have been falling everywhere.

McTigs

RoverJames wrote: »

Despite the recession there are loads of single folk on lots more than the "average" income you quote. There are also loads and loads of couples both on this average income, also there are loads of folk out there who have no probs getting substantial wads of cash off mummy and daddy.

I earn more than the "average income" and also have access to "substantial wads of cash" and i still wouldn't buy at todays prices.

Just cos you have the wherewithall to make a crap money decision does mean you will or you should.

Truth is nobody can say for certain what way it's going to go but for me all relevant criterea point to further drops. There is nothing to be gained from buying now and everything to be gained by waiting to see how it turns out.

McTigs

McTigs wrote: »

I earn more than the "average income" and also have access to "substantial wads of cash" and i still wouldn't buy at todays prices.

Just cos you have the wherewithall to make a crap money decision does mean you will or you should.

Truth is nobody can say for certain what way it's going to go but for me all relevant criterea point to further drops. There is nothing to be gained from buying now and everything to be gained by waiting to see how it turns out.

Quite a few folk are buying though, rightly or wrongly.
Those that haven't property all still want to own some, that will in time drive the market again.

OMD

McTigs wrote: »

I earn more than the "average income" and also have access to "substantial wads of cash" and i still wouldn't buy at todays prices.

Just cos you have the wherewithall to make a crap money decision does mean you will or you should.

Truth is nobody can say for certain what way it's going to go but for me all relevant criterea point to further drops. There is nothing to be gained from buying now and everything to be gained by waiting to see how it turns out.

I think the market will definitly fall further. The question really is how much? The average home is now affordable to the average earner which it wasn't before. That at least is progress.

average_runner

You wouldnt buy now for an investment, but if your looking for a family home it could be worth buying now.


Main reaosn for sure is interest rates will continue to rise, if you buy now you could and I said could get a better fix term deal now than in a years time. So you will save money there.

Also prices in the shops will now start to rise because of currency etc.

Personally i got in three years ago with a .5 tracker, even though the house has lost 40 - 50 grand, we will make that back on the money we are saving on interest now, as if we bought now we be paying over 4% interest almost, instead its 1.5 %

But i do think the time to buy was when prices started to fall initailly and trackers were at their lowest, but people said dont buy as trackers be around forever:eek: and prices get lower.

People forgot interest rates will go up and now banks got rid of tracker they can hike their rates as much as they want

Its our family home so doesnt matter.

Mr. Presentable

OMD wrote: »

I think the market will definitly fall further. The question really is how much? The average home is now affordable to the average earner which it wasn't before. That at least is progress.

This is true.

NB:There have been signs of recovery at the top end in Co Dublin, with million Euro plus prices paid exceeding asking in April. Historically, recovery starts at the top and filters down, so it could be two more years before houses in Leitrim etc start to recover.

am i bovvered

=average_runner;66286007]

Personally i got in three years ago with a .5 tracker, even though the house has lost 40 - 50 grand, we will make that back on the money we are saving on interest now, as if we bought now we be paying over 4% interest almost, instead its 1.5 %

But i do think the time to buy was when prices started to fall initailly and trackers were at their lowest, but people said dont buy as trackers be around forever:eek: and prices get lower.

I have often thought about this, someone who bought in 2007 on a tracker could work out better off in the long run as opposed to a purchaser in 2010 or later because the long term cost of borrowing has increased.