Houses undervalued by up to 26pc... Time to buy buy buy!!!....again

Mickey Dazzler

http://www.independent.ie/business/personal-finance/property-mortgages/houses-undervalued-by-up-to-26pc-claims-central-bank-report-3095929.html

So what say you? Time to jump back on the roller coaster?

noxqs

The problem with an analysis like that is that they don't account for situation.

They assume that the world magically reverted back to pre-depression times with slightly changed variables.

* Interest rates are historically low - they're negative at the moment as the inflation in the eurozone is higher than the ECB rate. Does anyone think this will last? Surely not.

* Housing stock - is it 600,000 empties or so ?

* Pay cuts for many including sustained high inflation above the eurozone target of 2% p.a.

* High unemployment - and no recovery in sight just yet

So given a model couple who will never be unemployed in the next 30 years, with an inflation fitting their model and interest rates never increasing and assuming increase in wages on par or slightly above inflation. Then yes, perhaps.

But this is not the case. It sickens me that these vested interests get to frontpage with their drivel while bad news are hidden in some sub article 'to avoid talking down the market!'.

The market can't be talked up or down - it reacts to the underlying key fundamentals which aren't healthy at the moment.

P.S. I would expect a recovery only when there has been decisive action by the government regarding what is to happen to NAMA stock, ghost estates, CPA and all the other issues which remains largely unanswered including how / when and on what terms Ireland can properly return to the money markets and some confidence that a stabilization + recovery is under way, in a sustained manner. Right now, no one knows. How can anyone commit to a mortgage with everything being a toss up? The uncertainty doesn't exactly cause price stabilization let alone increases.

But property prices could rise suddenly and significantly if the causes of the undershooting in prices were removed.

Why aren't the journalists drilling into this to have it explained and rationalized. As far as my graphs show - this has never happened in history, ever, in real terms - ie inflation adjusted..

One model found that prices were 26pc below what economic fundamentals in the economy would warrant.

Two other models found that prices were 16 per cent to 18pc undervalued.

A fourth model suggested that they were undervalued by 12pc.

So they are basically just pulling numbers out of their behinds. How is it that their models can differ so much - which parameters make it so vastly different .. Why arent the journalists asking questions ?

Slydice

NamaWineLake sounds baffled by their ideas. From what I can tell, he says they haven't provided any backing info or data. He says he's asked them for it:
On what basis is Irish residential property 26% undervalued?
April 30, 2012 by namawinelake
http://namawinelake.wordpress.com/2012/04/30/on-what-basis-is-irish-residential-property-26-undervalued/
Selected (by me) quotes:

But on what basis does the Bank arrive at its conclusions? Despite studying the 13-page report, I’m afraid the best you’re going to get, is the Bank has used four models to examine actual prices versus expected prices.

How did they get to 26%? I have not a clue. You can’t tell what actual prices have been used. The CSO’s index is probably the most reliable in recent times but it only goes back to the mid 2000s but as noted in the Bank’s paper there is a range in actual house prices of between 43-70% recorded at Myhome, DAFT, the CSO and the Allsop Space auctions. So which actual house price has been used?

The Bank is being asked for its calculations as it is noted that the report states “Detailed econometric results are available, upon request, from the authors”

cynics might suggest it is in the Bank’s own interest to undershoot the adverse estimate in order to avoid additional calls on taxpayers’ funds to prop up the banks

Speaking of cynicism towards house prices forecasts, yesterday the Sunday Independent – “Ireland’s most profitable newspaper group” according to the Independent but a group which made a loss of €41m in 2011, is balance sheet-insolvent and has seen its share price dive by 66% in the past year according to everyone else – claimed that house prices in Dublin had “finally hit the floor” based on the monthly release of the CSO’s index during the week. If that is true, then Dublin house prices have “finally hit the floor” seven times since prices started declining from peak in 2007, and on each occasion after a rise, prices subsequently fell. For a media company starved of property advertising revenue, with negotiations with banks over €400m of debt looming and with circulation falling, you’d wonder if IN&M is reporting fact or merely composing a prayer.

There does seem to have been so many bottoms in the last 6 years that they could use them all in a remake of the Braveheart film

jmayo

Hogwash.
Probably written when the guys were on the p***.

Isn't it nice to see how the muppets in the media ran with this story immediately. :rolleyes:

TheFarneyman

Worth a look at houses if you're circumstances dictate that its time for someone to buy. However, the media propaganda that there was slight growth in the last month is laughable at best, it's only the third time in the last 53 months when prices have not fallen; there have been declines in all other months since the peak in 2007. If you were a betting man and looking at the form guide ya wouldn't make alot of money predicting that the end is here now!!!!!!!!!!
To say that houses are 26% undervalued is another way by this government to get the market moving again. Ridiculous!!!!!!This may well be the case but that doesnt mean its gona stop just because they said so!

maxpowers

its all situational really. Good Family homes in SCD are in short supply and anything priced fairly will get a buyer and will probably even go over the asking. Good luck trying to sell an apartment tough in some areas.

bobbyg

The same article says "The bank warns that any immediate revival of the sector still appears to be some way off."

So in other words house prices will continue to fall for the foreseeable future.

daltonmd

"A CENTRAL Bank report claims that Irish home values have been "overcorrected" by between 12 and 26pc."

"One model found that prices were 26pc below what economic fundamentals in the economy would warrant. "


Makes no sense - looking at the price falls below from 2010 and 2009, which would account for the % "overshoot" they are speaking about then how could the "economic fundementals" warrant anything other than price falls?



"The reduction in average national house prices for the full year 2010 was 10.8%. This compares to a fall of 18.5% in 2009 and a year on year decline of 14.8% to Quarter 3 2010. "

http://www.finfacts.ie/irishfinancenews/article_1021427.shtml

kennyb3

The models used are complete and other tosh.

comeback_kid

i would have thought now is an excellent opportunity to buy a home in a premium location in dublin , prices in theese areas have a floor as thier is always going to be a class of people in every country who are high earners , legal professionals , doctors etc , that said , everywhere has seen large falls and despite what daft.ie says , i would have thought 300 k would buy a place ( however modest ) in many exclusive parts of south dublin right now

kennyb3

comeback_kid wrote: »

i would have thought now is an excellent opportunity to buy

Can you give valid reasons?

What about these:

- increased deleveraging of banks
- larger property tax on the way
- Increase in other taxes and fuel cost coupled with reduction in government spending
- rent supplement likely to fall
- public sector salaries likely to fall post 2014 (numbers receiving salaries falling in the interim)
- interest rates at bottom and can only rise
- more stringent mortgage rules from the FR
- stagnant local economy
- global uncertainty and double dip recession in europe

comeback_kid

kennyb3 wrote: »

Can you give valid reasons?

as i said , thier is always a class of people in every country who have secure high earning jobs , legal professionals , doctors , etc , someone who might only have been able to afford to buy in drumcondra six years ago might be able to afford to buy in raneleagh or blackrock today , thats a very attractive proposition for many , none of this changes the overall market all that much , thier are places in west dublin and all of ireland which might fall or languish for ten years yet but highly sought after locations are not going to drop to 150 k per joint ever

kennyb3

comeback_kid wrote: »

as i said , thier is always a class of people in every country who have secure high earning jobs , legal professionals , doctors , etc , someone who might only have been able to afford to buy in drumcondra six years ago might be able to afford to buy in raneleagh or blackrock today , thats a very attractive proposition for many , none of this changes the overall market all that much , thier are places in west dublin and all of ireland which might fall or languish for ten years yet but highly sought after locations are not going to drop to 150 k per joint ever

What % of the population do these people make up? Which area's are secure exactly? For example many many solicitors practices have closed or virtually ceased given the lack of conveyance. There are so many doctors in the country many of which would have purchased some years ago. Is there much job prospects for those now graduating who would be next to get on the so called 'ladder'?

comeback_kid

kennyb3 wrote: »

What % of the population do these people make up? Which area's are secure exactly? For example many many solicitors practices have closed or virtually ceased given the lack of conveyance. There are so many doctors in the country many of which would have purchased some years ago. Is there much job prospects for those now graduating who would be next to get on the so called 'ladder'?

guards, teachers , public servants with secure jobs and good wages ,theese people will be itching to buy into areas that were off limits for anyone earning less than a six figure some just a few years ago , i dont mean ballsbridge or kiliney but upper middle class parts of leafy south dublin

kennyb3

I actually don't know what to say to you. You've thrown a few ancedotes out there.

I'll ask again what evidence is there that now is a good time to buy?

daltonmd

comeback_kid wrote: »

as i said , thier is always a class of people in every country who have secure high earning jobs , legal professionals , doctors , etc , someone who might only have been able to afford to buy in drumcondra six years ago might be able to afford to buy in raneleagh or blackrock today , thats a very attractive proposition for many , none of this changes the overall market all that much , thier are places in west dublin and all of ireland which might fall or languish for ten years yet but highly sought after locations are not going to drop to 150 k per joint ever

To be honest - if there are these high earners then they are aiming at this:

http://www.daft.ie/searchsale.daft?id=620833

And not this:

http://www.daft.ie/searchsale.daft?id=590087

There will always be a "premium" for location but a floor? That's another thing altogether.

comeback_kid

kennyb3 wrote: »

I actually don't know what to say to you. You've thrown a few ancedotes out there.

I'll ask again what evidence is there that now is a good time to buy?

Those geniuses who say houses are 26% undervalued , what proof have they , it's all hunch when it comes to property , one factor I forgot to mention was fuel price , that will help Dublin prices but hurt the commuter belt

kennyb3

StillWaters

kennyb3 wrote: »

What % of the population do these people make up? Which area's are secure exactly? For example many many solicitors practices have closed or virtually ceased given the lack of conveyance. There are so many doctors in the country many of which would have purchased some years ago. Is there much job prospects for those now graduating who would be next to get on the so called 'ladder'?

Whether you like it or not, there are a cohort of people who are ready to buy, cash rich, either from saving, inheritance, or being canny and selling in the bubble. They are mortgage approved, and want to buy family homes in premium areas. They have called value now. As has been said already, this is a micro market, only occurring with family homes in premium locations in Dublin. I agree it will be a long time before there is any recovery in the apartment market or areas outside the cities.

As for what areas are people still pulling good wages in, I would have thought pharma and IT fairly high on the list.

noxqs

StillWaters wrote: »

Whether you like it or not, there are a cohort of people who are ready to buy, cash rich, either from saving, inheritance, or being canny and selling in the bubble. They are mortgage approved, and want to buy family homes in premium areas.

They are there but there's really not that many of them. You sound like there is an army of people with cash ready to buy any day now. This is serious delusion, case in point the amount of savings in cash in Irish Banks which has been dropping dramatically since 2006.

People haven't been saving since 2007, they've been scraping by. The money didn't go into the mattress it went away entirely via paycuts and taxes.

kennyb3

StillWaters wrote: »

They are mortgage approved, and want to buy family homes in premium areas. They have called value now. As has been said already, this is a micro market, only occurring with family homes in premium locations in Dublin.

I don't disagree with you on a very micro level in very specific area's based on anecdotal evidence i have available.

However my point was that there is no concrete evidence of this at this time. There has been a one month CSO increase (of only 0.7%) over the course of the past 5 years. It's very plausible that this will reverse next month. One swallow doesn't make a summer. When there are quarter on quarter and year on year increases i'll believe. Just because a few people are calling value in these areas doesnt mean everyone should go wading back in.

StillWaters

noxqs wrote: »

People haven't been saving since 2007, they've been scraping by. The money didn't go into the mattress it went away entirely via paycuts and taxes.

That is simply not true, the household savings ratio to disposable income has been rising since 2007, and is at over 12%, one of the highest in the EU. During a recession, people with disposable income save rather than spend.

More people have savings now than they did in the early 2000s.

comeback_kid

noxqs wrote: »

They are there but there's really not that many of them. You sound like there is an army of people with cash ready to buy any day now. This is serious delusion, case in point the amount of savings in cash in Irish Banks which has been dropping dramatically since 2006.

People haven't been saving since 2007, they've been scraping by. The money didn't go into the mattress it went away entirely via paycuts and taxes.

There is still plenty of money in this country , take one section alone , farmers , they have always bought property in Dublin , land went up 25% last year in value , when they see houses in the likes of rathmines at 15 year lows , they will swoop , property was not a good bet for the last ten years as an investment ( let alone for living ) as yields were only a few.percent , there heading for ten % , with shares extremely volatile and interest rates at near zero , real estate looks profitable

thewing

comeback_kid wrote: »

There is still plenty of money in this country , take one section alone , farmers , they have always bought property in Dublin , land went up 25% last year in value , when they see houses in the likes of rathmines at 15 year lows , they will swoop , property was not a good bet for the last ten years as an investment ( let alone for living ) as yields were only a few.percent , there heading for ten % , with shares extremely volatile and interest rates at near zero , real estate looks profitable

I take it you are talking gross yield here - not taking in to account the cost of funding or upkeep? Not too many people with the money for buying houses in Rathmines for cash, even at current prices.

Folks - nothing to worry about - will someone wake me up when they have dropped another 30%?!

kennyb3

StillWaters wrote: »

That is simply not true, the household savings ratio to disposable income has been rising since 2007, and is at over 12%, one of the highest in the EU. During a recession, people with disposable income save rather than spend.

More people have savings now than they did in the early 2000s.

I think your confusing real saving with paying down debt (see CSO website)

edit: This might be worth a read too (fig 23 especially useful)

comeback_kid

thewing wrote: »

I take it you are talking gross yield here - not taking in to account the cost of funding or upkeep? Not too many people with the money for buying houses in Rathmines for cash, even at current prices.

Folks - nothing to worry about - will someone wake me up when they have dropped another 30%?!

yes , im refering to gross yield , im not a union coached public servant who quotes thier NET income , banks when they offer a savings rate dont discount DIRT

with nervousnes about the euro and stocks volatile , even you see no capital appreciation on an property for years , a decent rental yield is as good as a dividend on a stock which crashes twice per year , karl deeter was on radio pointing to the very decent rental yields on property right now , investors will target quality locations while prices are low and lift prices in theese areas , anyone who has thier eye on a place in blanchardstown can sit it out for another few years , different story in rathmines

desertcircus

comeback_kid wrote: »

thewing wrote: »

I take it you are talking gross yield here - not taking in to account the cost of funding or upkeep? Not too many people with the money for buying houses in Rathmines for cash, even at current prices.

Folks - nothing to worry about - will someone wake me up when they have dropped another 30%?!

yes , im refering to gross yield , im not a union coached public servant who quotes thier NET income , banks when they offer a savings rate dont discount DIRT

with nervousnes about the euro and stocks volatile , even you see no capital appreciation on an property for years , a decent rental yield is as good as a dividend on a stock which crashes twice per year , karl deeter was on radio pointing to the very decent rental yields on property right now , investors will target quality locations while prices are low and lift prices in theese areas , anyone who has thier eye on a place in blanchardstown can sit it out for another few years , different story in rathmines

Anyone buying property to rent out at the moment needs to take a long, hard look at what they're doing. Yield might look good right now, but rent can fall just as severely as price. Rent allowance won't stay at its current level, and all of Nama's apartments will come onto the market eventually. Add to that the fact that property tax is only going to go up and you're faced with the fact that current yields are close to meaningless

gurramok

comeback_kid wrote: »

land went up 25% last year in value ,

Evidence?

comeback_kid

desertcircus wrote: »

Anyone buying property to rent out at the moment needs to take a long, hard look at what they're doing. Yield might look good right now, but rent can fall just as severely as price. Rent allowance won't stay at its current level, and all of Nama's apartments will come onto the market eventually. Add to that the fact that property tax is only going to go up and you're faced with the fact that current yields are close to meaningless

does rent allowance apply in blackrock of raneleagh ? , thier is also a increase in dividend tax on stocks on the horizon in many countries

Theboinkmaster

comeback_kid wrote: »

karl deeter was on radio pointing to the very decent rental yields on property right now

I wouldn't listen to anything Karl Deeter has to say.

comeback_kid

gurramok wrote: »

Evidence?

was in the farmers journal and the faming independant at the start of the year , if i can dig out a link i will , farming is booming right now and besides , farmers have plenty of money , they are experts at talking poor but have any amount when thier is a half million euro farm for sale up the road , i should know , i come from farming stock

comeback_kid

Theboinkmaster wrote: »

I wouldn't listen to anything Karl Deeter has to say.

he,s not what you would call a populist hack journalist or observer , as a foreigner , always got the impression he didnt adhere to any hive mindset

kennyb3

comeback_kid wrote: »

was in the farmers journal and the faming independant at the start of the year , if i can dig out a link i will , farming is booming right now and besides , farmers have plenty of money , they are experts at talking poor but have any amount when thier is a half million euro farm for sale up the road , i should know , i come from farming stock

Well we'll wait with baited breath for this evidence!

Kosseegan

desertcircus wrote: »

Anyone buying property to rent out at the moment needs to take a long, hard look at what they're doing. Yield might look good right now, but rent can fall just as severely as price. Rent allowance won't stay at its current level, and all of Nama's apartments will come onto the market eventually. Add to that the fact that property tax is only going to go up and you're faced with the fact that current yields are close to meaningless

A lot of NAMAs apartments won't come onto the rental market. The will be bought by owner occupiers. The activities of the banks at the moment are forcing many landlords to sell properties, so reducing supply. Many multi -unit houses are being de-converted because of increasing regulation and taxation. There are more rental units going off the market than going on. There is very little building and a growing population. If someone buys a property in a reasonable location and rents it, they have security of income with a strong possibility of rent rises on the way.

Theboinkmaster

comeback_kid wrote: »

he,s not what you would call a populist hack journalist or observer , as a foreigner , always got the impression he didnt adhere to any hive mindset

He's the same as Ronan Lyons and the other vested interests. He's full of shiit.

Theboinkmaster

comeback_kid wrote: »

land went up 25% last year in value

No it didn't.

kennyb3

Kosseegan wrote: »

A lot of NAMAs apartments won't come onto the rental market. The will be bought by owner occupiers.

Best of luck to them finding owner occupiers for the 8,000 apartments on their books, many of which were literally thrown up and are in the back arse of nowhere.

thewing

http://www.farmersjournal.ie/site/farming-Agricultural-land-prices-rise-by-9-13364.html

In fairness, we are talking about a very small segment of the market in both area and client terms.

IF you have the spare CASH to buy a house in SOUTH Dublin (D2, D4, D6) there would be a nice tidy yield to be had.

Take this place for example - http://www.daft.ie/searchsale.daft?id=650046 - if you had the cash, you could earn 10% yield per annum GROSS.

Not withstanding property taxes, maintenance fees etc. etc., you would still be clearing a nice yield.

HOWEVER, most of the market requires funding for such a property, and the max you could borrow for this (taken from AIB calculator) is 375000 (as an investment property). Your funding CURRENTLY would cost you about 27k per annum, so your 55k is halved (before you talk tax and maintenance). Also bear in mind that funding is at an all time low, so you could get nicely burned when interest rates rise (by which time you might be looking to offload this property, but it could only be worth 300k?!)

So essentially, if you have 500k to splonk, there are better options than stocks and bonds currently in certain areas of the property market.

But what fuelled prices - the fact they every Jim, Jack and Joe with an average salary could get the 520k needed to buy this property plus a few more to refurbish it. Those days are long gone, and while they are, we do not need to worry about house price stabilisation in the short to medium term.

Fair play to the Central Bank for trying to stabilise the market, knowing that NAMA has delayed offloading the taxpayers property portfolio, and the longer the slide goes on, the less chance of recouping the taxpayers money.

They got it wrong then, they got it wrong now and will continue to do so.

OAO

desertcircus

Kosseegan wrote: »

A lot of NAMAs apartments won't come onto the rental market. The will be bought by owner occupiers. The activities of the banks at the moment are forcing many landlords to sell properties, so reducing supply. Many multi -unit houses are being de-converted because of increasing regulation and taxation. There are more rental units going off the market than going on. There is very little building and a growing population. If someone buys a property in a reasonable location and rents it, they have security of income with a strong possibility of rent rises on the way.

Almost nobody in this country wants to buy an apartment to live in, and even fewer have a bank who want to lend them the money. Population increase will do nothing for the market as long as huge chunks of new adults are emigrating. Rent rises are a desparate hope in a market that currently has tens of thousands of cheap properties being held back and rent allowance defining the price floor.

As for a previous poster's question about whether anyone on rent allowance lives in Blackrock or Ranelagh: if you can find a place that provides 10% yield in either of those places I'll be more than surprised.

Spiritofthekop

http://www.herald.ie/news/experts-rubbish-banks-claims-that-homes-are-50k-underpriced-3096371.html

comeback_kid

kennyb3 wrote: »

Well we'll wait with baited breath for this evidence!

15% was the figure , my mistake

http://www.independent.ie/national-news/farmland-prices-buck-the-national-trend-with-15pc-rise-3023163.html

comeback_kid

kennyb3 wrote: »

Best of luck to them finding owner occupiers for the 8,000 apartments on their books, many of which were literally thrown up and are in the back arse of nowhere.

no one is refering to those properties

kennyb3

comeback_kid wrote: »

no one is refering to those properties

You ll see i directly quoted kosseegan in relation to a specific point he made!

kennyb3

comeback_kid wrote: »

15% was the figure , my mistake

http://www.independent.ie/national-news/farmland-prices-buck-the-national-trend-with-15pc-rise-3023163.html

You ll have to excuse me if i don't take the survey of an estate agent at face value given their vested interest.

Anyway this adds nothing to the discussion on house prices

Kosseegan

kennyb3 wrote: »

Best of luck to them finding owner occupiers for the 8,000 apartments on their books, many of which were literally thrown up and are in the back arse of nowhere.

If nobody wants to buy them, nobody will want to rent them either. Investors will not touch them. They will not affect the yields in good areas.

desertcircus

Kosseegan wrote: »

kennyb3 wrote: »

Best of luck to them finding owner occupiers for the 8,000 apartments on their books, many of which were literally thrown up and are in the back arse of nowhere.

If nobody wants to buy them, nobody will want to rent them either. Investors will not touch them. They will not affect the yields in good areas.

Not true: people will be a lot more willing to rent a lousy place than buy one, because there's so much less risk and because it's temporary.

And rents in places like the Grange will have a huge impact on rents in Blackrock.

snubbleste

Theboinkmaster wrote: »

I wouldn't listen to anything Karl Deeter has to say.

+1
Karl Deeter is definitely a vested interest. He's given advice on the airwaves to landlords not to rent out to rent supplement tenants due to some problems he had with his properties. So he is a mortgage broker with a BTL portfolio.

jmayo

comeback_kid wrote: »

There is still plenty of money in this country , take one section alone , farmers , they have always bought property in Dublin , land went up 25% last year in value , when they see houses in the likes of rathmines at 15 year lows , they will swoop , property was not a good bet for the last ten years as an investment ( let alone for living ) as yields were only a few.percent , there heading for ten % , with shares extremely volatile and interest rates at near zero , real estate looks profitable

For every farmer that can buy one of those houses, I bet I can point out 10 fulltime farmers that are only now getting back on their feet after the poor prices that preceeded the recent boom.
Also I can point out a hell of a lot of farmers who sidelines in construction related enterprises which have collapsed.
That is not even factoring in the farmers who are now helping out their kids who have lost jobs and are in serious debts.

comeback_kid wrote: »

does rent allowance apply in blackrock of raneleagh ? , thier is also a increase in dividend tax on stocks on the horizon in many countries

Do you have a clue ?
There are corporation houses in Blackrock.
Not everyone lives in a mansion. :rolleyes:
Any other reasons besides possible taxes on dividends which already exist
that makes property a better investment.

comeback_kid wrote: »

was in the farmers journal and the faming independant at the start of the year , if i can dig out a link i will , farming is booming right now and besides , farmers have plenty of money , they are experts at talking poor but have any amount when thier is a half million euro farm for sale up the road , i should know , i come from farming stock

Ah FFS.
For someone that comes from farming stock you really show a poor understanding of the area.
A farmer or farming family may have only one chance in a hundred years to purchase property that is near or ajoining theirs.
Thus farmers will move heaven and earth to purchase such land if it comes up.
Also buying agricultural land is actually supposed to be an investment in the business.

Of course you can carry on with the stereotypes. :rolleyes: