The press (and rating agency) hyping the market again...

pburns

Today's Sindo: 'Signs of life as houses sell above guide prices'

http://www.independent.ie/national-news/signs-of-life-as-houses-sell-above-guide-prices-2209813.html

I bet a few regular posters who have a pretty jaundiced view of the unholy alliance that is the Irish EA sector almost spit out their cornflakes reading this article this morning...

I just don't understand how they can say:
'The market appears undervalued today compared with long-term historical averages'. I mean according the stats I've seen house prices are still a l-o-n-g way off where they were pre-bubble (which started around 1996)

So...are Standard and Poor right that Irish property is currently 'undervalued'? What credibility do they have given the poor calls these agencies have had in the recent pass? Or are most of us here just overly pesimistic???

MRBEAVER

Mark Keenan who wrote the Sunday Times piece was pretty bearish on propery prices until he decided last week based mainly on price rises on trophy homes that we have reached the bottom.

BobbyD10

I have given up reading all these articles but what I did hear on the radio was they said they are under valued by 10% but have still some to fall

MRBEAVER

That's not a contradiction. It just means that when prices fall further they will just be more undervalued based on what they estimate to be the long term value. I agree there is a lot of spin and vested interests who want to influence sentiment. but consider the possibility that we might be approaching bottom.

SoupyNorman

Hooray, the property market is better again because a few ostentatious homes sold at auction.

Funny it didnt have any mention of a 3bed semi in Portlaoise or a 1bed apartment selling. The type of houses sold are more uncommon therefore attain the title of snob or veblen good, it is recognized that they buck the demand curve.

Meanwhile, a north Dublin farmer last Tuesday paid €1.26m, or an average of €18,529-per-acre, for a non-residential, 68-acre tillage farm at Broomfield, Ballyboughal, Co Dublin.

Priceless, that North Dublin farmer was more then likely paid 10, 20, 30 million for land that was zoned during the bubble. He probably bought back his own land!

MRBEAVER

There are many different markets. In Summer 2006 it was the prices of high end homes in Dublin that collapsed first. It was a year after that before prices of appartments and houses in commuter towns began to fall. Nobody doubts that in market segments where there is an oversupply like appartments and houses in places like Mullingar, Portlaoise and North Cork there is a long way to go. But we may be close to bottom for houses close to main cities.

seamus

pburns wrote: »

I just don't understand how they can say:
'The market appears undervalued today compared with long-term historical averages'. I mean according the stats I've seen house prices are still a l-o-n-g way off where they were pre-bubble (which started around 1996)

Yes, but as I've said before, we're also a long way off wages as they were in 1996. Anyone waiting for property to fall back to mid-90's levels is kidding themselves because the market can and will support a much higher average than that.

There are however two factors which mean that prices will drop below what they "should" be before correcting themselves again:
1. Lack of credit in the market
2. Oversupply of housing in the market

Until the first is resolved, we won't see prices rising, and possibly won't even see them stabilising. Until the second is cleared up, prices will continue to drop in places where this oversupply exists.

Gurgle

pburns wrote: »

I mean according the stats I've seen house prices are still a l-o-n-g way off where they were pre-bubble (which started around 1996)

In '96 the prices were even more unrealistic than in '06.

The celtic tiger was young and fit, you could buy a house with monthly mortgage payments less than it would cost to rent -if you could get the mortgage.

Thats what started the whole boom in the first place.

If you want to compare historical data, you'll need to dig up house prices, rental yields and salary statistics from 1982.

dan_d

Ah the media and the word average.
We should make a list of words they're not allowed to use. Statistically.Average.On average.Property ladder.First-time buyers.Anyone want to add to that?

I would imagine that what S&P means is that say, for example, in 1996 if you take the ratio of the "average" house price to the "average" wage, it's a smaller (?) ratio than if you carry out the same exercise on today's "average" house price vs "average" wage. That's what the illustrious author of this article omitted to explain thus proving statistics can be used to prove anything, particularly in the hands of journalists.

Wages dictate house prices, among other things, and although it might not seem like that to many of us, wages have not yet dropped enough to pull house prices down further. However if something such as EBS' new measures for approving mortgages spreads to other banks - that could have quite an affect on the housing market.

The moral of the story is not to believe everything you read.