Irish property prices have overcorrected - Central Bank

Brussels Sprout

So apparently house prices are too low now!

The Central Bank has said that Irish property prices have overcorrected by between 12% to 26% compared with the fundamental value of properties.
The bank suggests that a lack of consumer confidence and expectations about further price falls is holding back purchases.
It also said that a lack of mortgage finance from banks is restricting market activity and price levels.
The bank warns that any immediate revival of the sector still appears to be some way off.

The bank’s researchers used four separate models to assess property prices for the research.
One model found that prices were 26% below what economic fundamentals in the economy would warrant....

link

I wonder what these fundamentals are considering that most people believe that property prices are still overvalued.

Count Dooku

Not so long time ago

Central Bank predicts soft landing for housing

rodento

People can only spend what they have or can borrow, so if they can't afford the prices at the moment and the banks won't lend, than prices will continue to fall

Monty Burnz

I'd have a lot more respect for these clowns if they told us property was twice the price it should be five years ago. What were they saying then? Oh yeah, 'everything is fine'. They were wrong then and they are wrong now.

Brussels Sprout wrote: »

So apparently house prices are too low now!

The Central Bank has said that Irish property prices have overcorrected by between 12% to 26% compared with the fundamental value of properties.
The bank suggests that a lack of consumer confidence and expectations about further price falls is holding back purchases.
It also said that a lack of mortgage finance from banks is restricting market activity and price levels.
The bank warns that any immediate revival of the sector still appears to be some way off.

The bank’s researchers used four separate models to assess property prices for the research.
One model found that prices were 26% below what economic fundamentals in the economy would warrant....

link

I wonder what these fundamentals are considering that most people believe that property prices are still overvalued.

unknownlegend

Monty Burnz wrote: »

I'd have a lot more respect for these clowns if they told us property was twice the price it should be five years ago. What were they saying then? Oh yeah, 'everything is fine'. They were wrong then and they are wrong now.

It's disheartening when an institution such as the central bank which should be considered as impartial and fair as possible spews garbage like this.

I guess it serves as a reminder that;
1 even though it's an institution it has a vested interest in the economy at large and seems to think increasing property prices is the cure to the very disease which blights it
2 it is run by people. People are irrational, tend to forget quickly, have their own interests at heart, and given their industry probably own plenty of bricks and mortar, which they'd like to grow in price and "pass the parcel" to the next fool.

Idbatterim

Well if the central bank say it...

meglome

Is there any analysis of how they come to this, quite frankly hard to believe, conclusion.

KyussBishop

We're not quite there yet:
http://www.nakedcapitalism.com/2012/03/housing-bubbles-house-prices-and-interest-rates.html

Farmer Pudsey

Can some let us know what is the average industrial wage is and what is the average price of a 3 bed semi detached in Ireland I know it depends wheather you are in Dublin/Cork/ Waterford/Limerick

comeback_kid

while the overall market will perhaps continue to fall or languish for several years , thier is tremendous value to be had in top locations in dublin right now , thier is always a certain number of moneyed people who will keep prices from dropping below a certain level in the kensington - manhatan versions of dublin , that said , everywhere has seen huge falls so anyone who has a bit of money right now and secure employment has a golden opportunity to buy in locations they could only dream to have ever lived in some five or six years ago

The_Honeybadger

comeback_kid wrote: »

while the overall market will perhaps continue to fall or languish for several years , thier is tremendous value to be had in top locations in dublin right now , thier is always a certain number of moneyed people who will keep prices from dropping below a certain level in the kensington - manhatan versions of dublin , that said , everywhere has seen huge falls so anyone who has a bit of money right now and secure employment has a golden opportunity to buy in locations they could only dream to have ever lived in some five or six years ago

Agree with this, prices may well have overcorrected in some of the cities. There is considerable stock across the country however in small towns and villages which has to "correct" quite a bit more yet, up to 50% more in many cases judging by the asking prices on daft. It should be possible to get a nice 3 bed semi in a midlands town for under 100k which is give or take 3 times the average wage, we're a bit off this at the moment. It's these prices I watch as I have never lived in Dublin and don't ever intend to. The problem in certain cases in negative equity, I personally know people who would love to offload their NE properties and carry the shortfall in the form of a personal loan but the banks aren't allowing them to.

rodento

What i'd like to know is, has the central bank factored in the housing stock that has yet to be released on the market, as well as the 80,000 odd thousand units were people are in mortgage difficulty:eek:

Add in another bailout and a slash in wages/saleries across the public sector and you have alot further to go

creedp

rodento wrote: »

What i'd like to know is, has the central bank factored in the housing stock that has yet to be released on the market, as well as the 80,000 odd thousand units were people are in mortgage difficulty:eek:

Add in another bailout and a slash in wages/saleries across the public sector and you have alot further to go

There we go again .. another thread with the ubiquitous 'slash public sector pay' comment. It sure didn't take long!! Earlier on I read a comment saying that public sector pay caused the property bubble so I suppose the reasonable corollary is that 'slashing publicbsector pay" will bring it back down .. obviously the rest of the economy's fundamentals are strong and valid .. now if only ......!!!

Farmer Pudsey

mickeyk wrote: »

Agree with this, prices may well have overcorrected in some of the cities. There is considerable stock across the country however in small towns and villages which has to "correct" quite a bit more yet, up to 50% more in many cases judging by the asking prices on daft. It should be possible to get a nice 3 bed semi in a midlands town for under 100k which is give or take 3 times the average wage, we're a bit off this at the moment. It's these prices I watch as I have never lived in Dublin and don't ever intend to. The problem in certain cases in negative equity, I personally know people who would love to offload their NE properties and carry the shortfall in the form of a personal loan but the banks aren't allowing them to.

20 years ago you would get 3 times one wage once the other wage and you had to have saved 10% of the value of the house ( as well as stamp duty,fees etc if it was a second hand house) and no new house was painted , carpeted you were lucky if you had a fitted kitchen.

So is the real test for affordability about 4-5 times the average industrial wage

Also there was a lot of fiddling to get the highest cert for wages possible

Dannyboy83

It's difficult to refute the figures when they haven't shown how they were calculated.

But,
The average industrial wage is €35,000
The maximum borrowing limit at the moment for 4.5 times the average salary, which would be €157,500

In order to qualify for for a 92% mortgage of €144,900 - you must show that you have a net disposable income (including rent) of €1200 per month.

€35,000 after tax is approx €2,350 per month - net.
Difficult to factor in fuel costs because they're so volatile, but we'll say a frugal person could manage to live on €600 per month with no girlfriend/wife or kids. (We all know a woman isn't capable of living on €600 per month so don't bother with the sexist remarks!)

For a mortgage totalling 35 years then,
starting with a 5 year fixed rate @ 5.35%=€763.95
followed by 30 years @ 3% = €607

763+600=1,363
2,350 - 1,363= 987

Now factor in your insurances and assurances, add Property Tax, Water tax, broadcasting charge and the general cost of living.
.
.
.
.
Sod it - I'm not even going to bother finishing it.
It's pretty obvious the figures do not add up unless there are 2 people working.
I would say if you were a complete hermit you just may scrape by.

I don't see that many houses priced @ 150k (the ones that I generally do see at this range or below it, are lowered priced because the fuel bills are significantly higher)


TLDR version; What a crock of sh1te by the Central Bank

thebman

I'd question the person writing the article TBH. I don't see any quotes from the central bank.

Here is the actual report:
http://www.centralbank.ie/publications/Documents/HP_Let5.pdf\

Title and Authors:
Why are Irish house prices still falling? - Gerard Kennedy and Kieran McQuinn

However, as noted in earlier work (Kennedy and
McQuinn (2011)), it is not uncommon for prices
to fall in such a manner following a significant
house price crash. Investor confidence, a key driver
in a buoyant market, has been critically impaired
and will likely take some time to recover. Further
more, the natural inclination for a financial sys-tem to deleverage after a significant credit bubble
is compounded in the Irish market, where finan-cial institutions are obliged to reduce their balance
sheets in order to achieve a more stable funding
profile. A growing array of evidence suggests that
the difficulty in providing mortgage finance in the
Irish market is having a contractionary impact on
market activity and price levels.

It seems our journalists are constantly looking for anything that might suggest our property is undervalued or we should be out buying houses and it is a common theme across media organisations so there must be another driver for such behavior.

Seems a lot less like your all mad not to be out buying houses that the articles referencing the report seem to be trying to make it out to be.

Suryavarman

This is a ridiculous claim to be making. In my opinion, depending on economic growth over the next few years, prices would need to fall by another 15-25% just to get back to normal. Then on top of that prices will probably need to fall another 10-20% to clear the market of all the excess housing stock.

RobAMerc

comeback_kid wrote: »

while the overall market will perhaps continue to fall or languish for several years , thier is tremendous value to be had in top locations in dublin right now , thier is always a certain number of moneyed people who will keep prices from dropping below a certain level in the kensington - manhatan versions of dublin , that said , everywhere has seen huge falls so anyone who has a bit of money right now and secure employment has a golden opportunity to buy in locations they could only dream to have ever lived in some five or six years ago

you are looking at house prices in the wrong period if you think the current prices are value - stop looking at the house that was 1.5 mill in 2007 and is now 800 odd, think of it as having been only 400k in 2000 and work from that - hardly seems like tremendous value now !
Also, nowhere in Dublin is comparable to Kensington or Manhattan by the way, both are major cities in major global countries. Dublin is the capital of a northern European westerly outcrop who due to some liberal use of tax laws attracts a few big names here to funnel their cash through.

Farmer Pudsey

Dannyboy83 wrote: »

It's difficult to refute the figures when they haven't shown how they were calculated.

But,
The average industrial wage is €35,000
The maximum borrowing limit at the moment for 4.5 times the average salary, which would be €157,500

In order to qualify for for a 92% mortgage of €144,900 - you must show that you have a net disposable income (including rent) of €1200 per month.

€35,000 after tax is approx €2,350 per month - net.
Difficult to factor in fuel costs because they're so volatile, but we'll say a frugal person could manage to live on €600 per month with no girlfriend/wife or kids. (We all know a woman isn't capable of living on €600 per month so don't bother with the sexist remarks!)

For a mortgage totalling 35 years then,
starting with a 5 year fixed rate @ 5.35%=€763.95
followed by 30 years @ 3% = €607

763+600=1,363
2,350 - 1,363= 987

Now factor in your insurances and assurances, add Property Tax, Water tax, broadcasting charge and the general cost of living.
.
.
.
.
Sod it - I'm not even going to bother finishing it.
It's pretty obvious the figures do not add up unless there are 2 people working.
I would say if you were a complete hermit you just may scrape by.

I don't see that many houses priced @ 150k (the ones that I generally do see at this range or below it, are lowered priced because the fuel bills are significantly higher)


TLDR version; What a crock of sh1te by the Central Bank

If you go back to the old affordability ratio and this was when mortgage Intrest rates were 7-10% in the early ninty's ( there was six months when it hit nearly 15% when bertie was finance minster) but in general the ratio was 3 times one wage and once the second and this was for a twenty year mortgage it was the longest you get.

Now take a house costing 150k you have to save 10% cost so max mortgage needed = 135K= 3.86 of average Industrial wage

Over 20 years assuming 4% intrest rate repayments are 787euro/ month
over 20 years assuming 5% intrest rate repayments are 843/euro/month
Over 30 years assuming 4% intrest rate repayment are 600 euro/month
over 20 years assuming 5% intrest rate repayment are 656 euro/month

For a couple on a joint wage of 70,000 with a take home pay of 4660 it seems very manageable

I am not using a mortgage calculate I am using a maths formula to calculate the cost.

washman3

Is Jim "soft landing" Power cheerleading this by any chance..!!!!

Monty Burnz

Dannyboy83 wrote: »

It's difficult to refute the figures when they haven't shown how they were calculated.

But,
The average industrial wage is €35,000
The maximum borrowing limit at the moment for 4.5 times the average salary, which would be €157,500

A word to the wise Dannyboy - the average industrial wage is not the 'average wage': the average industrial wage is a good bit higher. So you'll have to lower your borrowing limit etc.

Monty Burnz

comeback_kid wrote: »

while the overall market will perhaps continue to fall or languish for several years , thier is tremendous value to be had in top locations in dublin right now , thier is always a certain number of moneyed people who will keep prices from dropping below a certain level in the kensington - manhatan versions of dublin

HA HA! Brilliant! Sure you can't move in Dublin for Arab, Chinese and Russian billionaires...:D

Reminds me of that estate agent's advert where they compared some flats overlooking the Shannon in Athlone to Monaco and Manhatten!!

BornToKill

Dannyboy83 wrote: »

Difficult to factor in fuel costs because they're so volatile, but we'll say a frugal person could manage to live on €600 per month with no girlfriend/wife or kids.

Seriously? €600 a month in fuel costs? Maybe if our imaginary buyer was doing a lot of commuting by car.

shedweller

BornToKill wrote: »

Dannyboy83 wrote: »

Difficult to factor in fuel costs because they're so volatile, but we'll say a frugal person could manage to live on €600 per month with no girlfriend/wife or kids.

Seriously? €600 a month in fuel costs? Maybe if our imaginary buyer was doing a lot of commuting by car.

Add in heating oil or gas and you could get there. Two cars with 100 euro a week between them is 400 odd euro per month. That leaves up to 50 a week on heating. Ok 600 a month is on the high side but not that high.

Sleepy

A facepalm pic just doesn't quite cover my reaction to this report. Such irresponsible reporting is breath-taking. Obviously the media would like the bubble to re-inflate so they could get back to the housing-porn "property supplements" and all that lovely estate agent advertising but there's no way prices are going anywhere but down in this economy.

Brussels Sprout

rodento wrote: »

What i'd like to know is, has the central bank factored in the housing stock that has yet to be released on the market, as well as the 80,000 odd thousand units were people are in mortgage difficulty:eek:

Add in another bailout and a slash in wages/saleries across the public sector and you have alot further to go

creedp wrote: »

There we go again .. another thread with the ubiquitous 'slash public sector pay' comment. It sure didn't take long!! Earlier on I read a comment saying that public sector pay caused the property bubble so I suppose the reasonable corollary is that 'slashing publicbsector pay" will bring it back down .. obviously the rest of the economy's fundamentals are strong and valid .. now if only ......!!!

To be fair I think that comment was meant more as in "this is inevitable" rather than "this should be carried out".

Dannyboy83

BornToKill wrote: »

Seriously? €600 a month in fuel costs? Maybe if our imaginary buyer was doing a lot of commuting by car.

That's €50 per 2 week period for fuel costs, or €100 per month.
Total living costs are €600, discluding rent

I calculated it as follows:

€50 per 2 weeks for fuel= €100
€50 per week for food = €200
€50 for car insurance = €50
€60 for health insurance = €60
€15-25 for phone = €15-25
€25 for broadband = €25
€40 for gym membership = €40
€15 for ESB = €60
€50 for Emergency Fund = €50
=======================
€600


God forbid you ever have to buy anyone a birthday card or an alcoholic beverage on that budget!:pac:

Dannyboy83

Monty Burnz wrote: »

A word to the wise Dannyboy - the average industrial wage is not the 'average wage': the average industrial wage is a good bit higher. So you'll have to lower your borrowing limit etc.

The most up to date source I could find for the average industrial wage was here:
http://www.cso.ie/quicktables/GetQuickTables.aspx?FileName=EHQ03.asp&TableName=Earnings+and+Labour+Costs&StatisticalProduct=DB_EH

which is roughly about 35k per year.

Personally that seems over the top to me, but then I work in IT and it's generally not a well paid industry, so I probably have a skewed perspective.

It's extremely difficult to find recent figures for this stuff, if anyone has any, I'm all ears.

Solair

My only response to this is : LOL!

Does the Central Bank have any credibility left?

Since when has property had a 'fundamental price'?

The market dictates the price, and there appears to be absolutely nothing indicating a market recovery anytime soon.

1) Banks not lending.
2) Wages down.
3) Economic uncertainty - We don't even know if the currency will survive the next 5 years.
4) Rising taxes / charges.
5) Really high unemployment.
6) Massive oversupply of housing - most of which is off the market due to NAMA interference.
7) Emigration of those with high earning potential.

Doesn't seem to stack up to a cheery report like the CB released!

comeback_kid

RobAMerc wrote: »

you are looking at house prices in the wrong period if you think the current prices are value - stop looking at the house that was 1.5 mill in 2007 and is now 800 odd, think of it as having been only 400k in 2000 and work from that - hardly seems like tremendous value now !
Also, nowhere in Dublin is comparable to Kensington or Manhattan by the way, both are major cities in major global countries. Dublin is the capital of a northern European westerly outcrop who due to some liberal use of tax laws attracts a few big names here to funnel their cash through.

it was a figure of speech , i was not comparing any part of dublin to kensington , chelsea or manhattan , i was trying to illustrate the fact that highly sought after locations in dublin ( they exist ) will always command a certain price as thier is always a class of people who can afford to live in theese areas regardless of how bad the broader economy is , in the year 2006 , the likes of a guard could not ever dream of affording to buy a house in somewhere like blackrock of donybrook , in 2012 , they very much could due to have security of employment etc and the fact that even in theese locations , property prices have seen huge falls ,while propery in tullamore or naas could theoretically fall to early nineties levels , the same is not likely to happen in premium locations in dublin

Permabear

This post has been deleted.

Monty Burnz

comeback_kid wrote: »

it was a figure of speech , i was not comparing any part of dublin to kensington , chelsea or manhattan , i was trying to illustrate the fact that highly sought after locations in dublin ( they exist ) will always command a certain price as thier is always a class of people who can afford to live in theese areas regardless of how bad the broader economy is , in the year 2006 , the likes of a guard could not ever dream of affording to buy a house in somewhere like blackrock of donybrook , in 2012 , they very much could due to have security of employment etc and the fact that even in theese locations , property prices have seen huge falls ,while propery in tullamore or naas could theoretically fall to early nineties levels , the same is not likely to happen in premium locations in dublin

You are perhaps unaware that the largest drops of all are at the top of the market?

It was once Ireland’s most expensive house, but now Walford on Shrewsbury Road in Dublin's embassy belt has been withdrawn from the market.

At the height of the property boom, Walford sold for a reported €58 million in mid-2005, soaring above the guide price of €35 million.

Bought by an entity known as Matsack Nominees Ltd, the beneficial owner was known to be Gayle Killilea, wife of property developer Seán Dunne.

Property firm Lisney, which was appointed joint agent with Savills, confirmed the property had been taken off the market, but did not say why the decision had been made.

The detached Edwardian residence sits on 1.8 acres and looks out on to Dublin’s most expensive residential road. However, last year it was listed with a reserve price of €15 million, 75 per cent below its selling price, and invited interested parties to submit tenders for the property by October 27th last.

Built in 1902, the house was owned by the Duggan family since the mid-1950s. However, it is now in need of complete refurbishment, with two 18th-century marble fireplaces in the main reception rooms removed by thieves while it was vacant for six years.

Monty Burnz

Permabear wrote: »

This post had been deleted.

Unfortunately, I think we are still a good way off capitulation. In fact, I think we are heading into bull trap territory with the upcoming dead cat bounce.

Permabear

Permabear wrote: »

This post had been deleted.

I'm not sure if I can trust the accuracy of that graph when dealing with Irelands current situation. The jump to "return to normal" might have happened were we not in the middle of a massive global recession and credit crunch, but there simply hasn't been the credit available to fund one.

Our "return to normal" phase might have transpired had NAMA not backed developer debts. Who knows.

comeback_kid

Monty Burnz wrote: »

You are perhaps unaware that the largest drops of all are at the top of the market?

the half dozen propertys in ireland with hampton like price tags tell us nothing about anything

Sleepy

There's a certain logic to the "more desirable areas" still attracting interest.

It's purely anecdotal but from what I can see, property in Clontarf is moving once the asking price is anywhere near realistic. There are dreamers that have been advertising for months but I've noticed quite a few that have changed hands within a month or two of a sign being up...

Monty Burnz

comeback_kid wrote: »

the half dozen propertys in ireland with hampton like price tags tell us nothing about anything

Um...they do. The more expensive the property, the bigger the percentage drop. Properties that were in the 5 million range are now around 1.5 million. Properties that were in the 400k range are now around 200k. And the most expensive places (and development land) are down 80% and more.

QED.

Mr. Presentable

So basically we don't know the criteria used so we'll make up our own?

What if the over correction is versus build and fit cost? Does anyone know what it costs to buy a site in South Dublin and build a 3 bed semi, connect services, then paint and fit it?

Monty Burnz

Mr. Presentable wrote: »

So basically we don't know the criteria used so we'll make up our own?

What if the over correction is versus build and fit cost? Does anyone know what it costs to buy a site in South Dublin and build a 3 bed semi, connect services, then paint and fit it?

A lot. But the value of things routinely falls below what it costs to make them. I don't see why property would be different.

comeback_kid

Monty Burnz wrote: »

Um...they do. The more expensive the property, the bigger the percentage drop. Properties that were in the 5 million range are now around 1.5 million. Properties that were in the 400k range are now around 200k. And the most expensive places (and development land) are down 80% and more.

QED.

purely academic , the numbers of theese multi million properties is so small that it tells us nothing about who is buying and what kind of shape the market is in , the kind of premium locations im refering to are affordable to solicitors , doctors , well paid middle class professionals , your refering to bono and denis o brien


anyone who is in the 80 k + pay range has a once in a lifetime opportunity right now to make thier home in a premium location in dublin , blackrock , donybrook , raneleagh etc

Monty Burnz

comeback_kid wrote: »

purely academic , the numbers of theese multi million properties is so small that it tells us nothing about who is buying and what kind of shape the market is in , the kind of premium locations im refering to are affordable to solicitors , doctors , well paid middle class professionals , your refering to bono and denis o brien

Bono and Dennis O'B aren't the guys buying the 2 million euro houses.

comeback_kid wrote: »

anyone who is in the 80 k + pay range has a once in a lifetime opportunity right now to make thier home in a premium location in dublin , blackrock , donybrook , raneleagh etc

There's a lot of South Dublin and not a huge number of big earners who aren't already up to their necks in debt, I would suggest.

comeback_kid

Monty Burnz wrote: »

Bono and Dennis O'B aren't the guys buying the 2 million euro houses.

There's a lot of South Dublin and not a huge number of big earners who aren't already up to their necks in debt, I would suggest.

the former wealthy,s present misfortune is the prudent savers opportunity right now , i pity those dubs who moved out to places like mullingar , navan or even cavan due to the fact that they thought they could never afford to own in dublin , apart from the fact that had they waited , they would have the ball at thier foot now , they will spend the price of a house on petrol commuting to work in dublin for the next few decades

creedp

Monty Burnz wrote: »

A lot. But the value of things routinely falls below what it costs to make them. I don't see why property would be different.

For how long? Undervalauation is an unsustainable as overvaluation. If a property is undervalued then the market dictates that ....... I'm not going to buy another thing until its price falls below it cost of manufacture as it obviously routinely does.

Sleepy

Given that the build price of a 3 bed semi is about 80k, the rest of the value of a house is the site it's built on. Since the land has no value beyond that which the market places on it, unless house prices dip below 80k or so (which I'm aware of in some rural areas that have huge over-supply) I don't think there's that much undervaluation going on tbh.

Monty Burnz

Sleepy wrote: »

Given that the build price of a 3 bed semi is about 80k, the rest of the value of a house is the site it's built on. Since the land has no value beyond that which the market places on it, unless house prices dip below 80k or so (which I'm aware of in some rural areas that have huge over-supply) I don't think there's that much undervaluation going on tbh.

But why does a building have to be worth at least its build cost?

Monty Burnz

creedp wrote: »

For how long? Undervalauation is an unsustainable as overvaluation. If a property is undervalued then the market dictates that ....... I'm not going to buy another thing until its price falls below it cost of manufacture as it obviously routinely does.

Who said anything about undervaluation? I'm just challenging this idea that things can't fall below their cost to build. It's clearly ridiculous. In Japan you buy a new house and over the next 20-25 years it drops in value until all that's left is the site value. Then you knock it and build a new one.

And if anything, I'd suggest property is still well over-valued.

creedp

Monty Burnz wrote: »

Who said anything about undervaluation? I'm just challenging this idea that things can't fall below their cost to build. It's clearly ridiculous. In Japan you buy a new house and over the next 20-25 years it drops in value until all that's left is the site value. Then you knock it and build a new one.

And if anything, I'd suggest property is still well over-valued.

We've been talking about property prices during a a bubble .. its pretty safe to assume these propeties were overvalued. Its the use of 'routinely' that I'm a bit unsure of .. unless you're specifically referring to property post a 'bubble'

Edit: my apologies I misread your post and thought you referred to overvaluation .. I think its commonly accepted that property can over correct post a bubble - see graph in earlier post. I'm not saying it is currently undervalued as Im no expert just voicing an opinion

Monty Burnz

creedp wrote: »

We've been talking about property prices during a a bubble .. its pretty safe to assume these propeties were overvalued. Its the use of 'routinely' that I'm a bit unsure of .. unless you're specifically referring to property post a 'bubble'

Well, if you buy a car or a bike or clothes or anything else subject to wear and tear, 99% of the time it loses value and you won't recover the 'build' cost when you sell it (unless you sell it very quickly).

This is what I mean when I say that you can ignore the build costs - they are a sunk cost, and 'fair value' can certainly below what it cost to build something.

creedp

Monty Burnz wrote: »

Well, if you buy a car or a bike or clothes or anything else subject to wear and tear, 99% of the time it loses value and you won't recover the 'build' cost when you sell it (unless you sell it very quickly).

This is what I mean when I say that you can ignore the build costs - they are a sunk cost, and 'fair value' can certainly below what it cost to build something.

Agree but I don't think you can compare a house/property in general with consumables.

Monty Burnz

creedp wrote: »

Agree but I don't think you can compare a house/property in general with consumables.

I'd suggest that you can't compare the land, but I think you can compare the building itself which gets consumed and worn with use and time.

Sleepy

Aye but the longer a house has been standing and maintained, often times the more valued it is. Personally, I'd buy something that was built in the 60's/70's and that has been modernised since / or is priced to allow for the fact it needs modernisation far faster than I'd buy something that was built during the late 90's / 00's due to the perception that celtic tiger houses were thrown up and the knowledge that if a house has stood for 50 years it's somewhat solid / anything that needs doing should be blatantly obvious to a surveying engineer.