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.

Duggys Housemate

I am looking at coming back to Ireland ( I know, I know) but would have to rent for a while. Can anybody explain rental stickiness in Ireland. On daft.ie Dublin 5 has lots of stuff for €1,200 month. Seriously? I could buy two for that. Whats up - rent supplement?

Doc Ruby

Property prices are directly related to the amount the banks will lend. When the money for something is provided by someone else, that someone decides the price. Its no coincidence that property prices soared when credit was so loose, and collapsed when credit was tightened. Its called "what the market will bear".

A sustainable level is between 12-15 times annual rent for an area, its got nothing to do with average salary. I say this because those are the returns an investment buyer (a real one) will consider being worth their while to invest, and its fairly well accepted as being the tide mark. We're pretty close to that now, some areas are at that level already.

If the banks don't start lending again though it can keep falling for a long, long time, so some opportunities for aspiring landlords out there. Its a pretty easy game to get into if you have the money, although a word of caution - there's a surplus of supply as well, so maybe rents can keep dropping too, feeding back into property prices.

It's drops all the way down, really.

OfflerCrocGod

aquaman wrote: »

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.

There can be 30,000 houses in the middle of a bog in the middle of the country but they won't matter a fig if no one wants to live there, that is basically what NAMA have. They aren't hoarding them, no one in their right mind wants the houses, that's the problem.

As Doc Ruby said it's mostly down to rental yield, if you get a gross rental yield of 10% then a lot of people will rent instead of sell. It happened in the UK, 'accidental landlords' as they are called. The auctions are hitting those figures and that would mean Dublin is not too far from that point, probably another 10% fall which is achievable this year if we keep falling fast. If not 2013 (probable first half). Rest of the country is behind by over a year I'd guess.

At a certain point the rental yield is just too much to throw away.

Duggys Housemate

Well the rental yield looks like it is approaching 10%. That was my point - however that market is also distorted. 41% of private rental is state subsidised.

LH Pathe

sure that's the trend now; down. In today's society have seen many actual dead cats physically being bounced. Some still alive

shawnee

No one can predict a dead cat bounce.... if they could then it wouldn't be a dead cat bounce , cos no one would buy on the bounce :D There is very good value in property out there at present if you have the money and it is good value providing you don't want to resell it in the next few years:D

Messi54

Property prices won't hit bottom for at least another 2-3 years. Currently dropping by 15-20% per year. Predict at least 15% drop in 2012, followed by 7-10% in 2013, 5% in 2014. Might break even in 2015. Price crash will accelerate in the summer after house price register is released showing actual prices, not what estate agents tell everyone. Towards end of 2012 price drops might slow down due to people buying before Mortgage Interest Relief expires but in Jan/feb 2013 there will be a huge crash again.
Think it will bottom out with standard 3 bed semi detached outside Dublin worth E80,000 - E100,000. In Dublin a 2 bed apartment in good area on southside will be worth about the same. With property taxes and other charges coming in, cant see value of studios/one room apartments staying above E50,000 - E60,000 even in good areas in Dublin. There is a reason banks will only give 75% mortgages on one bed apartments - they're sure they will drop at least that much more. Any thoughts regarding musings?

Grayson

Messi54 wrote: »

Property prices won't hit bottom for at least another 2-3 years. Currently dropping by 15-20% per year. Predict at least 15% drop in 2012, followed by 7-10% in 2013, 5% in 2014. Might break even in 2015. Price crash will accelerate in the summer after house price register is released showing actual prices, not what estate agents tell everyone. Towards end of 2012 price drops might slow down due to people buying before Mortgage Interest Relief expires but in Jan/feb 2013 there will be a huge crash again.
Think it will bottom out with standard 3 bed semi detached outside Dublin worth E80,000 - E100,000. In Dublin a 2 bed apartment in good area on southside will be worth about the same. With property taxes and other charges coming in, cant see value of studios/one room apartments staying above E50,000 - E60,000 even in good areas in Dublin. There is a reason banks will only give 75% mortgages on one bed apartments - they're sure they will drop at least that much more. Any thoughts regarding musings?

I was thinking along the same lines except I didn't think the price would drop as much. There's still a lot of developers who won't build to sell that cheaply and private sellers won't sell that cheaply because of the amount of negative equity they'll be in (if they bought in the boom and a lot of people did). So, although buyers aren't willing to spend a lot anymore, the people who sell have too much vested interest in keeping the property prices higher. And the way they'll do that is by holding onto property until the feel they get a price the can sell at. That'll just mean less property trickling onto the market.

When it reaches a price that a large number of sellers are willing to sell for (It won't be as much as they want, just as much as they'll settle for) they will start to sell, that'll cause an excess of property on the market will cause the dead cat bounce. Then the increase will start again, just slower.

aquaman

OfflerCrocGod wrote: »

There can be 30,000 houses in the middle of a bog in the middle of the country but they won't matter a fig if no one wants to live there, that is basically what NAMA have. They aren't hoarding them, no one in their right mind wants the houses, that's the problem.
away.

There are a substantial amount of new, unoccupied houses in urban, perfectly liveable location (In particular outside the capital).That, if the price was right, people who are currently renting would choose to buy.
Supply outstrips the demand of those in a position to buy.

Either they are not available to purchase (due to not being offered to the market in the hope of artificially supporting prices by NAMA) or the prices will continue to fall until demand again matches supply.

the groutch

if anything was to instigate a DCB, it'd be the impending end to mortgage interest relief at the end of the year.
a bit like the upsurge in car sales back in december, with everyone getting in ahead of the VAT increase.

gosuckonalemon

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

Admit it OP, you just found out the origin of the phrase "dead cat bounce" and you just had to start a thread about it, complete with wiki link.

cgarrad

If you can produce a 8% yield on the property it's time to buy.

Jack_Russell

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.

Sorry to disagree but i bought a few apartments in the mid 90s and off-loaded them in 2006.
i am now mortgage free, and at the age of 45 can afford to retire.
i am off to Italy in 2 weeks time for 2 months.:D

Monty Burnz

gosuckonalemon wrote: »

Admit it OP, you just found out the origin of the phrase "dead cat bounce" and you just had to start a thread about it, complete with wiki link.

Yeah, that must be it. I've been following the property bubble and equity investments for over a decade, and just yesterday heard the term 'dead cat bounce'...

Are you sure you aren't mixing me up with yourself?

gurramok

Grayson wrote: »

I was thinking along the same lines except I didn't think the price would drop as much. There's still a lot of developers who won't build to sell that cheaply and private sellers won't sell that cheaply because of the amount of negative equity they'll be in (if they bought in the boom and a lot of people did). So, although buyers aren't willing to spend a lot anymore, the people who sell have too much vested interest in keeping the property prices higher. And the way they'll do that is by holding onto property until the feel they get a price the can sell at. That'll just mean less property trickling onto the market.

When it reaches a price that a large number of sellers are willing to sell for (It won't be as much as they want, just as much as they'll settle for) they will start to sell, that'll cause an excess of property on the market will cause the dead cat bounce. Then the increase will start again, just slower.

The sellers will be waiting many many years to achieve their 'dream' price. As said already, executor sales will undermine them. Also Mortgage Interest Relief ending is a gimmick, the buyer will save more in the drop in prices than a few quid a month in savings though it may suck in the naive who listen to govt propaganda.

Rabidlamb

If this dead cat does show a flicker of life NAMA will flood the market & reverse the trend inside a few months.
I'm still waiting for the slow fluffy soft landing, 80% from peak.
How far did Japan drop, 90% ????.

Nothingbetter2d

i hope it keeps falling. the more the better... if they drop low enough many of us might actually be able to buy one.

Doc Ruby

gurramok wrote: »

The sellers will be waiting many many years to achieve their 'dream' price.

Yep, sort of like that saying, the market can remain irrational longer than you can remain solvent. Prices would only rise sharply if the banks started lending like lunatics again, and that's not going to happen in this generation at minimum. Even if it did, its quite likely that enough people were burned that they just wouldn't buy if prices rose that high again.

Messi54

gurramok wrote: »

The sellers will be waiting many many years to achieve their 'dream' price. As said already, executor sales will undermine them. Also Mortgage Interest Relief ending is a gimmick, the buyer will save more in the drop in prices than a few quid a month in savings though it may suck in the naive who listen to govt propaganda.

Completely agree, take example of someone buying house at current national average price of approx E165,000,(E164,000 by time I finish writing this!), 1st time buyer in 2012.
Mortgage of 150K after approx 10% deposit @ 4% interest over 30 years.
Following Tax relief applicable: -
2012 - E1,460
2013 - E1,433
2014 - E1,264
2015 - E1,237
2016 - E1,209
2017 - E1,049.
Total of E 7,652 over 6 years.
That's only if bought in Jan 2012, the first figure of E1,460 can be divided by 12 and multiplied by number of months mortgage paid in 2012. ie Is mortgage only starting in November and 2 payments in 2012, tax relief of E243 for that year.
Result: E6,000 -E7,652 which is approx 4-5% of initial price. consider now that prices dropping by over 15% per annum.

Jack_Russell

i think now is a very good time to buy.
i don't think prices will fall much further, and there's great value to be had atm.
once this economy starts to lift you'll be surprised just fast things will turn around.

people/the economy tend to react like sheep.

people right now are being unduly pessimistic imo, and property prices are reflecting this, therefore it becomes a self-fulfilling prophecy.
just like unrealistic exhuberance sparked the property bubble.

Baaaa!