Property Market to bottom out in Q1 2013

RATM

According to Ronan Lyons of Daft if price falls continue at the rate they are going at then it will take until Q1 2013 for prices to reach a multiple of average salaries.

Full Report & Graphs here
http://www.ronanlyons.com/2011/10/04/irish-house-prices-calling-the-bottom-and-worrying-about-the-next-bubble/

Calling the bottom
Three month ago, when the last Daft.ie House Price Report was released, I put its figures into a longer-term context. In particular, I compared current asking prices with long-term series for two standard metrics for calculating the value of housing – income multiples and rent ratios. Both of those metrics suggested that the average house price in Ireland “should” be about €150,000. As of three months ago, it was €201,000 and it is now €194,000.
How does that compare with the fire-sale prices we are seeing? Last week, I took a look at the latest fire-sale prices in Ireland. The finding was that the typical fall in price from the peak is of the order of 70%. A 70% fall in the typical value of a home would equate with an average house price of €115,000.
I think the fire-sale prices differ from equilibrium prices in two key respects: firstly, they are almost exclusively cash-only prices (i.e. no mortgage credit). And secondly, they are overwhelmingly investors, not owner-occupiers. As longer-standing readers of the blog may remember, part of my academic research is investigating just how investors and owner-occupiers differ in their real estate decisions. But theory would suggest that owner occupiers will pay more, like for like, than an investor will. So 70% marks the watermark for the Irish economy as it currently stands, an economy without credit.
But what if Ireland does actually return to being an economy with credit? When might the market bottom out in such a circumstance? It’s worth noting just how steady the average quarter-on-quarter fall in asking prices has been since 2008, at basically 4% with only minor variations either side. What would happen if this trend continued? If asking prices continue to fall 4% every quarter, by the first quarter of 2013, the average asking price nationwide will be €150,000, or 60% below the peak, in line with the expectations from using income or yield metrics of what house prices should be.

He also says that his calculations are based on credit & mortgage markets getting going again. If this doesn't happen then they'll continue to drop for a further two years, down to an average price of €115k for a 3 bed semi nationally.

He hasn't made any mention of a default so this analysis could yet prove to be incorrect. But if it is correct we have another 1.5 years of falls to go.

Hold tight first time buyers

jmayo

RATM wrote: »

According to Ronan Lyons of Daft if price falls continue at the rate they are going at then it will take until Q1 2013 for prices to reach a multiple of average salaries.
...
He hasn't made any mention of a default so this analysis could yet prove to be incorrect.

He might as well have stuck his finger in the air and come up with a date.
Forgetting to mention the elephant in the corner doesn't exactly say much for his predictions.

And even if we don't default in some fashion, there are going to be huge changes in the Eurozone in the next couple of years which will have a huge bearing on our economic well being and availability of credit.

BostonB

jmayo wrote: »

He might as well have stuck his finger in the air and come up with a date....

+1

LOL be just as accurate

Theboinkmaster

Does this really required a dedicted thread

"According to Ronan Lyons of Daft....."

Why would you listen to this vested interest? Like turkeys voting for thanksgiving etc

RATM

Theboinkmaster wrote: »

Does this really required a dedicted thread

"According to Ronan Lyons of Daft....."

Why would you listen to this vested interest? Like turkeys voting for thanksgiving etc

Not really sure how Ronan Lyons is a vested interest

Yes he works for Daft , who make money on regardless of whether property prices rise or fall. If anything they'd make more money now as properties are taking longer to sell so therefore they earn more advertising revenue per listing. In a rising market they'd make less as properties get snapped up quicker.

If anything it is against Daft's interests to be calling the bottom of the market, unless I'm missing something here

I don't think you could put him on par with Lisneys, Sherry Fitz et. al tbh and I'd put a good deal more credence in his analysis than that of the BOI and AIB shills who pass for mainstream economic commentary on RTE.

Mr. Loverman

RATM wrote: »

Not really sure how Ronan Lyons is a vested interest

I've read a few of his reports before and they were nonsense. (I think we talked about some of them on this forum, or maybe it was thepropertypin). He was trying to talk up the rental market as far as I remember.

This report seems OK, but I don't really agree with him. Ireland is full of fools and the deluded, so house prices will take a lot longer to bottom out. And once they bottom out they will stay bottomed out for many years.

hinault

Lyons is guessing at best.
And as others here have said his previous guesses haven't been accurate.

I recall Lyons suggesting that 2010 would see the end of the property prices falling. I think he cited the fact that rents had stabilised too.
In his defence he uses the data that he has to try to call the market at a given point.

There are several issues that make me think he's premature citing 2013.
(a)interbank lending internationally has started to seize up in the past few months. It was exactly the same as the run up to August/September 2007 crash.

(b)domestically, Irish banks need to get their lending/reserve ratios sorted to 125% LTV. With deposit flight from our banks coupled with no banks prepared to loan to Irish banks, domestic banks cannot loan money that they don't have.

(c) the domestic economy needs to generate savings to reduce our deficit to 3% of GDP by 2015. Tax increases and cuts in government expenditure is going to make dampen further the domestic economy. There will be less disposable cash and less economic activity which means that mortgage applications will fall. Mortgage approval levels are at their lowest level since 1970's.

(d) nationally there is still an oversupply of accomodation.