Property - down, down; how long until dead-cat bounce?

Monty Burnz

Well, the CSO figures for property prices and the falls continue unabated; the headline figure they are going with is a 62% drop in Dublin apartment prices (ouch), and the nationwide figure for all property is down 49%.

So I've two questions:

1. When will we get the inevitable dead-cat bounce* that will catch out many of those waiting on the sidelines to buy?

2. How big do we expect the bounce to be?

This can be considered an experiment in 'the wisdom of crowds'; this, however, is After Hours, so perhaps 'wisdom' is something of an exaggeration...

*not the band

prinz

..............................................................splat.

Nothingbetter2d

i hope they continue to fall more... then maybe one day i might be able to afford one.

benway

All depends in the banks - if credit is easily available, prices will soar...as we know. While lending conditions remain tight, I wouldn't expect to see much of a bounce.

foxyboxer

We are seeing an inverse of the psychology noted during the boom.
i.e. Prices have risen so much, I better buy now or I'll pay a fortune if I wait.

My guess would be a return and (licks thumb and raises to the air) stabilise at mid to late 90's Prices. There is a worrying idea that the boom level prices are the new benchmark for 'normality' in the housing market. I think the biggest factor influencing property market sentiment
is the crisis in Europe. Once Brussels gets it's house in order and a renegotiation of the troika deal is inevitably delivered then sentiment will become more confident. This would lead not necessarily to a bull market in property price but rather it may convince those waiting on the sidelines that it's a rational time to buy when the uncertainty in Europe is quelled. This will produce the dead cat bounce where we'll see a temporary rise in the prices of quality homes as the deluge of demand from sideliners influences the prices.

AH answer: About three fiddy.

Monty Burnz

benway wrote: »

All depends in the banks - if credit is easily available, prices will soar...as we know. While lending conditions remain tight, I wouldn't expect to see much of a bounce.

'Soar'? I'd be astonished. Dumbstruck. I won't list the dozen reasons why we are still fracked beyond belief, I guess everyone knows them already, but I'll throw in the fact that nearly 10% of mortgages are 90 days+ in arrears, 3 more years of tax rises (lower spending power), and increasing mortgage costs (lower borrowing power) as gentle reminders.

'Soar' as in the type of dead cat bounce we've seen a million times in a million crashing markets where it 'soars' 10% and then resumes crashing - yeah, that's possible. In fact, that's exactly what you would expect - it's standard market behaviour.

bnt

I'm watching for the traditional link between salaries and mortgage sizes to be restored. A sensible mortgage is 3-4 times your salary. This link was lost during this bubble, as it was in previous bubbles, but we always see "regression to the mean". After the bubble burst, banks overcompensated in the opposite direction, offering smaller mortgages and demanding larger deposits, and they haven't relaxed back to "normal" yet.

I see here that AIB require a 25% deposit for a 1-person apartment, less for other types of property. They don't say what multiplier they use (as far as I can tell), but I wouldn't take out a mortgage for much more than 3x my salary, even if the bank offered one, simply because the payments would be too high for comfort over the full length of the mortgage. (Yes, the full length: I would be buying to live in, not buying to "flip" for profit. So I'd want to pay more per month over a shorter period, such as 20 years.)

For example, a single person on €30,000 p.a. should be thinking of a mortgage in the €90-120k range - no more. That's after stumping up the hefty deposit, so the total flat price might be €120-160k. What does that buy in the Dublin area today?

spoonface

Monty Burnz wrote: »

Well, the CSO figures for property prices and the falls continue unabated; the headline figure they are going with is a 62% drop in Dublin apartment prices (ouch), and the nationwide figure for all property is down 49%.

So I've two questions:

1. When will we get the inevitable dead-cat bounce* that will catch out many of those waiting on the sidelines to buy?

2. How big do we expect the bounce to be?

This can be considered an experiment in 'the wisdom of crowds'; this, however, is After Hours, so perhaps 'wisdom' is something of an exaggeration...

*not the band

As I see it, there's a few factors that haven't even kicked in yet that will bring prices down further, so I can see prices continuing to fall for a minimum of 4 years.

1. From later this year, there will be an online register where you can view the actual sale prices of any Irish properties sold since 2011. This will bring some reality to the market, both for buyers and sellers.

2. Even though we now have a household tax, we still don't have a substantial property tax. I could see this coming in during the next few years and adds to the cost of ownership and further erodes the case for people to buy to let, and effectively erodes the affordability of any property, especially at the high end where even a cash buyer would need to pay substantial annual property tax.

3. The banks haven't really begun repossession in earnest. There could still be quite a lot of this ahead as people can no longer keep up their repayments.

4. As people pass away, their houses often go up for sale for splitting proceeds by relatives etc and they won't wait for the property market to recover before doing so. This means sellers who have to take the going price, which affects the rest of the market who are watching what properties can be had for.

5. Salaries are going down not up. This determines the level of mortgage that can be taken out, which affects demand.

6. A large amount of emigration among newly graduated people will have to have a knock-on effect in terms of how many young first time buyers are out there looking for a home.

7. A lot of people are staying those extra few years with mammy and daddy rather than get out and create rental demand or buy

8. There will be more auctions like Allsops to inject further reality into achievable prices. As the apartment market is dumped with lots of cheap apartments, this drags the overall market price down.

subway

theres a dead cat bounce coming along in the middle of this year.
we will exit 2012 higher than we started... within 6 months of starting 2013, it will be on the way back down.

cats told me in a dream

Monty Burnz

subway wrote: »

cats told me in a dream

I think they might be onto something, but I note they didn't tell you how high the bounce would be - devious cats.

Clanket

spoonface wrote: »

From later this year, there will be an online register where you can view the actual sale prices of any Irish properties sold since 2011. This will bring some reality to the market, both for buyers and sellers.

Who is responsible for this? Any links?

subway

Monty Burnz wrote: »

I think they might be onto something, but I note they didn't tell you how high the bounce would be - devious cats.

they tried to tell me figurateively, by killing each other then bouncing the corpses on a bubble, but i had no frame of reference other than the facebook timeline (thats how i know the dates)

average_runner

Have people not learnt their lesson yet? Property is not an solid investment. You should only buy property when you need it(ie to live and not to resell) and not for an investment.

Monty Burnz

Clanket wrote: »

Who is responsible for this? Any links?

Very long thread here with information and discussion.

SeanW

I hope property never goes back to anything resembling boom levels.

Seriously, Ireland (and the West in general) needs to economise to survive in the 21st century. That means we need lower costs of living and doing business, and it's pretty hard to have that with sky high cost of accommodation.

Low property costs are better for the poor and lower-middle classes.

And as for Dublin apartments, the cost needs to go down by something in the region of 100%, followed by the buildings themselves, given that Irish apartments are built to the lowest possible stardards. Priory Court is just an extreme example of rubbish that was built nationwide.

SEPT 23 1989

I look to what happened to Japan

so another 10 years or so

Monty Burnz

SEPT 23 1989 wrote: »

I look to what happened to Japan

so another 10 years or so

Hmm - interesting - I just had a quick gander at a graph of Japanese domestic property and they never had a dead cat bounce. Just a smooth nominal decline year after year for 15 years.

The Japanese - 'being different just for the sake of it since 263 AD'.

prinz

Monty Burnz wrote: »

The Japanese - 'being different just for the sake of it since 263 AD'.

They love the sake.

kincsem

Spend €20 on this before spending €500k.
http://www.amazon.co.uk/Manias-Panics-Crashes-Financial-Investment/dp/0471389455

Monty Burnz

kincsem wrote: »

Spend €20 on this before spending €500k.
http://www.amazon.co.uk/Manias-Panics-Crashes-Financial-Investment/dp/0471389455

[Bubble buyer] But reading is hard and maths is boring. Meh. Everyone else is buying - I'll take my chances. [/Bubble buyer]

FoxT

Monty Burnz wrote: »

.
.
.

1. When will we get the inevitable dead-cat bounce* that will catch out many of those waiting on the sidelines to buy?



*not the band

I don't see why a bounce is inevitable?

Monty Burnz

FoxT wrote: »

I don't see why a bounce is inevitable?

Market psychology. I think it's inevitably, based on what I saw and heard during the bubble, and what I see and hear today. People seem to be extremely willing to believe we have reached the bottom, and as soon as there's a month where things level out (temporarily, ceteris paribus) then I can see a lot of people plunging in head-first and buying. But then economic gravity will reassert itself and the falls will resume, carrying on lower than before the bounce.

That's how I see it anyhow.

In case we are talking at cross-purposes, I've put a definition of a dead-cat bounce in the first post.

foxyboxer

I'm a believer in price momentumm, trend following, whatever you want to call it. A key thought with this is that you can never buy at the bottom or hope to sell at the top but you will capture the 'meat' of a price move in between.

If I were looking to buy a house, then I'd personally look for a sustained six month-on-month price increase before buying as psychologically it makes sense to me to buy something with momentum. (assuming credit were available).

Just because prices have risen in one quarter would not be sufficient. Some people may in future buy at the very bottom and in hindsight will pride themselves and point out to anyone willing to listen on how smart and ballsy they were, discounting that their timing was simply lucky.

Do we know what the average period for a dead cat bounce is for property? The most illiquid asset there is?

Fighting Irish

average_runner wrote: »

Have people not learnt their lesson yet? Property is not an solid investment. You should only buy property when you need it(ie to live and not to resell) and not for an investment.

Sure we'll just blame, Bertie, The Banks and The Developers again!

Dyr

that cat ain't gonna bounce, its gonna hit the deck and then roll into a mineshaft

Dyr

average_runner wrote: »

Have people not learnt their lesson yet? Property is not an solid investment. You should only buy property when you need it(ie to live and not to resell) and not for an investment.

But what about the inner glow you'll get from knowing that you've hit the pinnacle of achievement for any irishman?
You are a LANDLORD. Quite literally a lord of land, a prince of the city, a big d**k player, surely you can't put a price on that?

foxyboxer

Consider the famous Foxyboxer's Cat thought experiment.

You have a cat in a box, when you observe the cat it's dead.
When you're not directly observing the cat in said box, it's still fcuking dead.

benway

Monty Burnz wrote: »

Market psychology.

Maybe, but I would imagine that the availability of credit on favourable terms would be the biggest psychological incentive to "get into the morket", throw a foot on the "property ladder", etc. People won't need much encouragement if they can access the funds - this is what I mean when I say that prices would soar if we were to jump back to the days of easy lending.

Above all else, this is what's keeping the prices down, imho., and I don't foresee a "bounce" of any description until the banks are lending more freely, especially given the amount of properties that are subject to distressed sales. At least 5, probably 10 years before there's any kind of bump, in other words.

saa

Yeah funny how shocked people are when they discover their "investments" can do down as well as up or in this implode, my partner wants to get a mortgage to live somewhere nicer but both our jobs are freelance and not steady, I've seen plenty of nice gaffs for around the 200 mark, some for 170 ish that you'd need to put money into anyway and some for 90 k that you wouldn't live in (area wise) if you paid me all in Dublin suburbia that is.

aquaman

There is a thing called supply and demand that people what know about business are always banging on about.
I'm no economist but as long as there are fields of unsold houses sitting there, supply outstrips demand and prices won't be bouncing anywhere.
If NAMA decides to raise 30,000 or so houses to the ground it may be a different story but just hoarding them as it's currently doing changes nothing. ie there are far more houses than prospective buyers.

What to look out for in anticipating this "bounce" is something which changes the status quo the reverse the supply demand situatuion.

As I say, I'm no economist.. this is just my opinion and may well be a load of cods.

MonkeyTennis

knock everybody's house down and start again.