More drops to come yet

RATM

Was speaking to a developer last night who is up to his eyeballs in debt. Told me he bought land in Blanch, D15 in 2005 for 30m and sold it recently for 4m. That represents a near 90% crash in value. He reckoned on the basis of land values taking such a hit that the housing market can only follow suit (properly)and also said to hold tight on buying, the best is yet to come for FTB'ers. Said that the problem is if NAMA drip drip property onto the market it could take a while but it will happen.

gurramok

Firesales all the way. But i'd be apprehensive buying new these days with the legacy of unsold unfinished estates.

jimmycrackcorm

I don't think you can equally equate house price drops to development land price drops. They are two different markets that while related, are totally seperate. Prices are continuously dropping but development land has totally crashed whilest people will still buy houses depending on their circumstances.

spockety

The oversupply is so large and the economy so f***ed that I genuinely believe NAMA could bulldoze every asset they have to the ground to distort the market supply and it would still have no effect on the trajectory of house prices.

cursai

Hope what you say is true op. At the way things are now, estate agents and sellers are still taking the mick. A swift kick up the greedy arse will get them desperate to sell! My mortgage application limit has gone from €250000 in early 2009 to €1650000 now!

Juwwi

cursai wrote: »

Hope what you say is true op. At the way things are now, estate agents and sellers are still taking the mick. A swift kick up the greedy arse will get them desperate to sell! My mortgage application limit has gone from €250000 in early 2009 to €1650000 now!

the banks are offering you €1m 650,000 now :eek:

johndaman66

robbie1977 wrote: »

the banks are offering you €1m 650,000 now :eek:

I'm assuming and guessing that this is a typo error on the part of cursai? Either that or he/she has won the jackpot or had some extremly rich grandfather or somebody die in the interm!

indiewindy

Dividing house prices by the average industrial wage is a good rule of thumb for determining what a property is worth

mrgaa1

indiewindy wrote: »

Dividing house prices by the average industrial wage is a good rule of thumb for determining what a property is worth

and whats the calculation then?

Cookie_Monster

ave ind wage x 4 = house price for 3-4 bed
35k x 4 = 140k

when you think back to the mid 80's where you could get a 4 bed house in south county Dublin(Killiney) for 40-45k IRL it doesn't seem so low though.

JoeyJJ

Rte "News" had a piece on about houses in Drumshambo going for 140k and 148k, not sure how they thought this was news worthy, to me this is close to their true value probably spot on considering the tax breaks they have on them. Their angle was the price difference to the boom values.


The news worthy element of the story should have been, there are buyers for empty estates is the price is tempting enough and not people queue to houses.

mrgaa1

Cookie_Monster wrote: »

ave ind wage x 4 = house price for 3-4 bed
35k x 4 = 140k

when you think back to the mid 80's where you could get a 4 bed house in south county Dublin(Killiney) for 40-45k IRL it doesn't seem so low though.

thanks for that.
Does anyone know what the average public / private wage is?
We can't look back to mid 80's as the cost of building then and now are so different. We are now in a situation where it costs more to build a house than to buy it - which is, to me, an unbalanced situation. Obviously over supply creates this but when you take in all the factors between land prices, planning permission, services costs, material and labour costs, and then finishing costs we can create a formula for what a house price should be as opposed to what it is currently.
Correct me if I'm wrong your house insurance will only pay out what it costs to rebuild as opposed to market value???:o
in the calculation above do we need to factor in a location value? Dublin city centre, outside Dublin, rural sligo for example.
Perhaps NAMA needs to start dozing these ghost estates and create a bottom - however the dose of reality for a lot of people hasn't kicked in yet.

Jo King

indiewindy wrote: »

Dividing house prices by the average industrial wage is a good rule of thumb for determining what a property is worth

It does not tell you what an individual house is worth. It might tell you about the state of the market generally. Deviations from the log term historic multiple might be a useful tool in trying to anticipate where the market will move in the future but can tell you nothing about the value of any individual house. You can tell with virtual certainty that if you toss the euro coin in your pocket 10,000 times that you will have 50% heads and 50% tails. That does not mean that you can predict with any certainty what the result of the next toss or any one of the 10,000 tosses will be.
A house is worth what a willing and able purchaser will pay for it after it has been properly marketed. Identical houses in different locations will often attract vastly different prices. There were detached houses sold in Leitrim last week in a receiver sale for prices of about . Put those same houses on similar size sites in D4 and see how much they would get. You could easily multiply the prices by 10 and still have a queue.

Anyone

Cookie_Monster wrote: »

ave ind wage x 4 = house price for 3-4 bed
35k x 4 = 140k

when you think back to the mid 80's where you could get a 4 bed house in south county Dublin(Killiney) for 40-45k IRL it doesn't seem so low though.

Where did you get 35k from? And what was the avg industrial wage at the time those houses were for sale for 40-45k?

Theboinkmaster

I think average industrial wage was about €35k 2 years ago and averagr professional salary was about €45k - but i could be wrong. Obviously knows figures would have reduced now.

I think if you use the annual rent x 14 then compare this as a multiple of the above it should make sense.

am i bovvered

Cookie_Monster wrote: »

ave ind wage x 4 = house price for 3-4 bed
35k x 4 = 140k

when you think back to the mid 80's where you could get a 4 bed house in south county Dublin(Killiney) for 40-45k IRL it doesn't seem so low though.

add another 10% to the interest rates of today, plus generally one income family's where the norm.

I think if you use the annual rent x 14 then compare this as a multiple of the above it should make sense.

+1 but I have yet to see many examples of this, don't know if we ever have or ever will, if it's ever going to happen it will be in the next two or so years.

spockety

mrgaa1 wrote: »

thanks for that.
Does anyone know what the average public / private wage is?
We can't look back to mid 80's as the cost of building then and now are so different. We are now in a situation where it costs more to build a house than to buy it - which is, to me, an unbalanced situation.

Indeed, though I think that's more a reflection on the cost of building against historical norms than it is against the cost of buying against historical norms.

i.e. The cost of building will have to come down, labour and materials.

The housing market crash is in full swing, but there are other bloated areas of the economy which haven't corrected yet to the extent they need to if Ireland is to get back to normality.

gurramok

JoeyJJ wrote: »

Rte "News" had a piece on about houses in Drumshambo going for 140k and 148k, not sure how they thought this was news worthy, to me this is close to their true value probably spot on considering the tax breaks they have on them. Their angle was the price difference to the boom values.

The news worthy element of the story should have been, there are buyers for empty estates is the price is tempting enough and not people queue to houses.

That was only for 9 houses. They're not worth 140k to me, Drumshambo is in an extreme rural location. http://www.irishtimes.com/newspaper/ireland/2010/0927/1224279760576.html

Treehouse72

Rather than using one rigid valuation method, why not use 3 or 4 methods and create a price band? Throw in some common sense and you should end up with a reasonable estimate for the high and low ends of the band. In fact, when using each valuation method you should probably already be creating mini-bands, as with yield below.

Very often these valuation methods corroborate each other. So I'd tend to:

> Work out for yield, using 5% - 7% for a mini-band of valuations
> Work out for price per sq. ft using international comparisons or trend
> Work out for 3x salary through 5x salary, creating another mini-band. You could do it for disposable income but it's much of a muchness.
> Work out based on long term real trend and comparison with the past
> Work out by straight qualitative comparisons with other comparable Euro cities in the case of Dublin

Doing that for any property will give you a band of prices. Then apply common sense with regards to where, say, IR's should be, what the "long term" is, what will happen with the deficit etc., and you should end up in the right ballpark.

When I use any of these methods for Dublin, it usually says - all things considered - that falls of 25%+ are still to come.

johndaman66

Theboinkmaster wrote: »

I think if you use the annual rent x 14 then compare this as a multiple of the above it should make sense.

While I agree with this as a pretty good indicator of what prices at least should be in towns and cities I don't think its generally an appropriate formula that can be universally applied. For example houses in the countryside and rural settings where the rental market is generally non existant as is often the case in more rural parts.

Thats not to say that there is no demand for houses in these places as people do buy houses in such areas also. My point is that the formula does have certain limitations and cannot always be readily applied if as per my example there is a practically non exsistant rental market.

liger

So most people agree that house prices will continue to drop. I was considering buying a house shortly but every type of forum site i look at like this says its still a bad time to buy.

If a house is listed at 195k what type of bid would you consider to be good value to buy it now. Typical 3bed mid ter in D24. 135k?

dan_d

mrgaa1 wrote: »

thanks for that.
We are now in a situation where it costs more to build a house than to buy it - which is, to me, an unbalanced situation.

I don't think we were ever in that position and we certainly aren't now. Costs of labour, material etc rose alright, but it was always cheaper to build than to buy. Simply because our famed developers were creaming off the profit from over-priced houses. A bog standard house could probably have been built for 200 - 250k, or less, but it was then sold for 300k upwards (obviously dependant on region/house type etc). It's not that much more work to build a 3 bed house as opposed to a 4 bed, especially when there was no difference in the downstairs layout - yet there could be up to 150k in the price differences in a single housing estate between the 3 and 4 bed. Greed.

mrgaa1 wrote: »

Correct me if I'm wrong your house insurance will only pay out what it costs to rebuild as opposed to market value???:o
in the calculation above do we need to factor in a location value? Dublin city centre, outside Dublin, rural sligo for example.

Correct on both counts. I've posted here before, I recently got my house rebuild revalued (for house insurance purposes). I had a disagreement with the surveyor who produced the revised number for me and told him to explain his formula for working it out (I'm a civil engineer, and I told him that)

He said it's the square area of the house x 0.1 (percentage for the garden area) x Y (Y being a factor applied by the Chartered Institute of Surveyors, which is worked out based on the house size and location and cost of rebuild)

Obviously, Y is the variable. It increased in recent years vastly...he had calculated my revised rebuild cost at the Y value from 09, which was based on 08 costs, when labour and materials etc were still at very high prices. I told him to go away and come back with a new, up to date Y value. He did.

The first rebuild cost he gave me was 11,000eur more expensive than what I insured myself for in 08 when buying the house.

The second rebuild cost was 9,000eur less expensive than what I insured myself for in 08 when buying the house.

There was 20,000eur in the difference between those 2 numbers, all because I told him to get an up to date factor based on recent labour and material costs (among other things).

Things have changed a lot and are still changing. I wouldn't be expecting anything to move upwards anytime soon.