Housing bubble starting to pop?

mad m · 09-11-2006 12:55AM

Maybe Morningstar hit a hard landing instead of this so called soft one.

thejuggler · 09-11-2006 10:21AM

The long awaited Q3 Daft Report has been published at

http://www.daft.ie/report/DaftReport-Q32006.pdf

miju · 09-11-2006 10:38AM

hmm not quite as interesting as one would of thought, however, given that asking prices were initially tracked from Augustish the Q4 report will be the killer one IMHO

though it is all over radio this morning about this report indicating house price growth has completely stalled

sapper · 09-11-2006 12:14PM

But isn't the daft.ie survey based on asking price only? And doesn't this report therefore illustrate that vendors/estate agents are just being cautious in their AMVs/marketing prices rather than an indication that actual sale prices have stopped increasing?

miju · 09-11-2006 01:55PM

well you could argue that but if you've seen that monster thread over on AAM you'll see the 60 or so examples that show this is not the case as asking prices have been dropping over the last few months by as much as up to 30%

sure if you look at that daft report it actually shows a 16% price drop in south dublin

conor_mc · 09-11-2006 04:38PM

sapper wrote:

But isn't the daft.ie survey based on asking price only? And doesn't this report therefore illustrate that vendors/estate agents are just being cautious in their AMVs/marketing prices rather than an indication that actual sale prices have stopped increasing?

The thing is that asking prices are usually based on the achieved price of a similar property in the locality.

If asking prices have stalled, it can be inferred that achieved prices have also stalled. It is indicative, but it isn't proof-positive.

hmmm · 09-11-2006 06:22PM

For the past couple of years, actual prices you'd pay were always "asking price + x%". If asking prices are falling, you could reasonably infer that not only is "asking price +x%" not being met, neither is the asking price itself (i.e. a big change).

mad m · 09-11-2006 06:44PM

Recently we bid on a place which had an asking of €675...We bid €620 and to be told it was noted but it was a no go....Got a phone call from EA to say there was another bid in and it was €630 and how do we stand? And that the new offer would not be accepted either

The property is on market a good few weeks now.I told EA that we weren't going any further,she didnt seem surprised and then asked were we looking for a place in particular. I said well *yeah* and she said well I would advice you to wait till december, when you will be able to get sellers down to a level you want...Strange sort of remark I thought...

Just on a side note,what way will this new U-Value affect house prices,when does it come into affect?

whizzbang · 09-11-2006 06:51PM

Here is the difference between Q2 Daft Report snapshot and Q3. Red is prices going down, 1 - 5 is the number of bedrooms.

Lots of red there! I'd ignore the 5 bedrooms column as there are so few of them that go to market, but the others sure are itneresting.

D'Peoples Voice · 09-11-2006 06:53PM

These results make sense.
Think about it, they are asking prices not sale agreed prices. People will seek last month's price plus X % as hmmm said, and see how the market responds.

The FACT that the number of houses for sale on DAFT.ie is increasing by a factor of 2 over the past few months would point to houses not actually selling at their asking price.

Hence we have a standoff. However as we discussed earlier in the post, this will only last so long. Perhaps sellers are expecting to see some favourable changes in the budget and are unwilling to drop prices now, just in case. However, if the budget is neutral or negative, then you can expect people to offload their house at a cheaper price.

The key is to keep an eye on housing inventory and the length of time it takes to offload a house(it increased in all but 5 categories from Q2 to Q3). If both these factors continue to increase, house construction will seriously have to slow down and house flipping will cease to exist.
Of course, people holding off reducing prices to sell now will have to comtemplate the INCREASING number of Section 23 properties coming on the market each month. Yes that's right, it was in the mid to late nineties that there were launched.
Investors were told they could buy a house, write off the FULL rental income against the cost BEFORE paying ANY tax on their rental income, on the condition they hold the property for 10 years.
A lot of those properties are hitting and will continue to hit their 10 year anniversary over the next 2-3 years. As many of these were in less desirable areas, and seeing as they will be paying tax on the rental income, many landlords won't wish to hold onto them and soon they will be flooding the market. That's when the sh1t hits the fan.

Sponge Bob · 09-11-2006 07:05PM

mad m wrote:

what way will this new U-Value affect house prices,when does it come into affect?

How is it calculated ???? How much does the test cost ??? How many can conduct the test ???

eg if it costs €5k to do the survey could a lot of owners of 1960s single glazed and uninsulated iceboxes not flood the market before they have to do the test ????

mad m · 09-11-2006 07:09PM

Sponge Bob wrote:

How is it calculated ???? How much does the test cost ??? How many can conduct the test ???

eg if it costs €5k to do the survey could a lot of owners of 1960s single glazed and uninsulated iceboxes not flood the market before they have to do the test ????

Yeah thats what I should of said,there is alot of 1960's houses I have looked at in past,that are either rented or have been and are now on the market...

Do-more · 09-11-2006 09:32PM

Sponge Bob wrote:

How is it calculated ???? How much does the test cost ??? How many can conduct the test ???

eg if it costs €5k to do the survey could a lot of owners of 1960s single glazed and uninsulated iceboxes not flood the market before they have to do the test ????

The Energy Performance in Buildings Directive (building energy rating (BER))comes into force as follows:

• 1 January 2007 - BER of new dwellings;
• 1 July 2008 - BER of new buildings, other than dwellings;
• 1 January 2009 - BER of existing dwellings and other existing buildings, when offered for sale or rental.

For new buildings it will cost approx. €100 and is calculated off plans using a computer program.

Existing dwellings will have to be surveyed and the likely cost will be €300.

At present NO ONE can contuct the tests as Sustainable Energy Ireland have still not finalized the training programme!

There are exemptions for buildings that have received planning permission before June 2006 so don't expect to see many Energy labeled houses for sale before the middle of 2007.

More info can be found here

Sponge Bob · 10-11-2006 01:01AM

new houses, right.

what sanction happens if the attic is not insulated properly so the calculated test off plans is <ahem> misleading at best. eg builder put 100mm of insulation instead of 200mm and nothing out in the soffit and fascia and it happens with the sleevens we have building.

without sanctions the whole thing is gobble IMO

Do-more · 10-11-2006 07:59AM

Sponge Bob wrote:

new houses, right.

what sanction happens if the attic is not insulated properly so the calculated test off plans is <ahem> misleading at best. eg builder put 100mm of insulation instead of 200mm and nothing out in the soffit and fascia and it happens with the sleevens we have building.

without sanctions the whole thing is gobble IMO

Certifying off plans is certainly open to abuse, but as far as I know there will be "spot checks". How effective they will be remains to be seen, however at least the labelling system will be a giant leap forward from what controls we have at present!

As I see it any developer who is committed to building next year will have to have the best label possible on his houses, in a falling, over supplied market they will have to have the best available product on the market or else suffer the consequences.

I have done a little work in the area and the increased cost of insulating and heating systems to attain a good label is about €10K for a semi, but SEI will grant aid a developer by €8K a unit for the first 50 units in a development, so the real cost is tiny.

The real shakeup will happen in 2 years time when secondhand houses will have to be labelled, it just can't happen soon enough for the retro-fit insulation boys, they will be out the door with work! Many badly built older houses will become virtually unsaleable and many owners of houses built in the last 10 years will be shocked at how badly built there houses are.

Sponge Bob · 10-11-2006 10:47AM

Do-more wrote:

As I see it any developer who is committed to building next year will have to have the best label possible on his houses, in a falling, over supplied market they will have to have the best available product on the market or else suffer the consequences.

very true, it will add or detract on the margins .

I have done a little work in the area and the increased cost of insulating and heating systems to attain a good label is about €10K for a semi, but SEI will grant aid a developer by €8K a unit for the first 50 units in a development, so the real cost is tiny.

hmm,did not realise that , thanks.

I can see the entire upgrade cost (from crap to modern insulation) coming off the value of a s/h house in 2008 and 2009 though + a 3k hassle premium on top.

If I _personally_ bought a 60s house I would pump the cavity and dryline the yoke to boot.

D'Peoples Voice · 10-11-2006 02:34PM

Do-more wrote:

As I see it any developer who is committed to building next year will have to have the best label possible on his houses, in a falling, over supplied market they will have to have the best available product on the market or else suffer the consequences.

The real shakeup will happen in 2 years time when secondhand houses will have to be labelled,

I've spoken on this thread about this issue before.
I DON'T think it will be two years before secondhand houses start to be labelled, and the reason for that is demand.
For example, when people are selling a second hand car, and it's NCT is not due for another 2-3 months, they put the car in for the NCT early so that it's an easier sale.( Not everyone does this i grant you)
A house will be similar. If you want to sell in a market where new houses are also for sale, you must be prepared to provide information about it's U-values if you want to sell.

DonalMcTavish · 10-11-2006 07:59PM

Personally i dont think energy rating will make the slightest difference to house prices. People buy houses because they want to live in them. They are not too worried about an extra few hundred a year to heat them. If they were you would never see a light on and all fridges and cookers people buy would be a-rated.

I think if rating is to effect house prices it will be like this.

House a is much better insulated, so the price goes up by €5000 in a year.
House B isnt insulated so the price goes up by €3000 in a year.

All it will be is an excuse to put an extra few thousand on a well insulated house.

Supercell · 10-11-2006 08:57PM

DonalMcTavish wrote:

Personally i dont think energy rating will make the slightest difference to house prices.

<snip>

All it will be is an excuse to put an extra few thousand on a well insulated house.

If it didn't make a difference to anyone why would there be a price differential??!

Long term fossil fuel prices are only going north, well insulated houses will have a definite selling advantage imho.

DonalMcTavish · 10-11-2006 10:30PM

Longfield wrote:

If it didn't make a difference to anyone why would there be a price differential??!

Long term fossil fuel prices are only going north, well insulated houses will have a definite selling advantage imho.

I thought i used the word 'if'. Oh yes, I did indeed. You snipped it out.

SkepticOne · 11-11-2006 11:20PM

Growth in House Prices Grinds to a Halt
9th November 2006, Daft.ie Ireland's busiest property website, today released the Daft.ie report for Quarter 3 2006. The report shows that growth in house prices has come to a halt. Average asking prices for residential property did not increase between the 2nd and 3rd quarter of this year. Prices fell slightly over the summer months but recovered somewhat in September. Preliminary figures for October indicate slight growth but all signs point to a levelling off in prices.

While demand may have weakened, supply of houses on the market is at an all time high with more houses for sale advertised on Daft.ie in October than ever before. There are currently over 22,000 second hand houses for sale on Daft and nearly 15,000 new homes and apartment for sale. This is more than double the amount of properties for sale 3 months ago.

Full press release here.

As this is only asking prices, it will take a several months for this to filter through to such as the tsb/ESRI index which is based on mortgage drawdowns. The fact that houses are taking longer to sell means the delay will be longer than normal.

Pat McArdle, chief economist at Ulster Bank suggests that supply should be curtailed in order to keep property prices at close to their currently overvalued (according to the central bank) levels.

"The housing market should experience a soft, rather than a hard landing. A soft landing does not rule out a temporary fall in prices. A hard landing, on the other hand, would be associated with significant and sustained falls in prices." He warned that the way to avoid the latter was to ensure that supply be curtailed as demand eases.

I think curtailing supply would be difficult given the economy's dependence on the construction sector. Any upset to the economy would lead to further deterioration in demand.

miju · 12-11-2006 11:10PM

SkepticOne wrote:

I think curtailing supply would be difficult given the economy's dependence on the construction sector. Any upset to the economy would lead to further deterioration in demand.

exactly my thoughs skepticOne , i think at this stage we're firmly between a rock and a hard place and no matter what is done the end game isn't going to be pretty

best to hope for IMHO would be a short , sharp correction no matter how ugly or brutal to allow the economy to return to a solid fundamental footing and to grow / strengthen the proper way an economy should

a curtailing of supply or a stand off delays the inevitable and will be a disaster sending us more towards a japan style end game lasting over a decade

speaking of japan i see one of the banks in last thursdays indo suggested the multi-genarational mortgages as the way to increase affordibility, seems we may be going japanese afterall :mad::mad::mad::mad::mad::mad:

Do-more · 13-11-2006 09:08AM

Did ye read Jim Power's article in the business section of the Sunday Indo?

As a vested interest in talking up the market himself it was limp to say the least!

Quote: "It could, of course, be possible that investors would suddenly decide as a bloc to offload their low-yielding investments, and take their profits. This would result in a serious glut of supply and send prices crashing."

Get a grip Jim, there already is a serious glut of supply and in any case if investors just stop buying new properties, house builders will start dropping prices as there just arn't enough FTB's left to purchase 90,000 next year...

Investors have driven the market up and it will be investors who pull the card that will send the house of cards toppling to the floor!

antoinolachtnai · 13-11-2006 10:48AM

Many things could be said about Jim Power, but it is hard to see how he has a vested interest in talking up the property market (other than the fact that he might own his own house). What is his interest?

gamer · 13-11-2006 11:53AM

THERES ABOUT ,240 thousand houses,built in the last 3 years,with hollow blocks, which reduce insulation,value of walls, ie house with those blocks are twice as expensive to heat,as older house with solid walls.the building regs,re insulation levels are way too low, and theres not proper inspection re insulation levels,and levels of sound proofing.Especially in apartments.The builder saves money,time using hollow blocks,and you pay twice as much on your gas/oil bills. duncan stewart says the best built houses are being built by local authority s ,they have high standards of insulation,sound proofing,designed and built for , low energy use.THIS government doesnt care about environment,global warming,if it did it would bring in strict regulations re ,building,level of insulation,and bring in proper inspections as house is being constructed.AFTER house,apartment is built its expensive to put in insulation,and sound proofing.In many houses being built, the low level insulation,is not inspected or tested ,or installed properly.the builder or architect just signs certs,that this building complyswith current regulations.Its like making new cars that only go 20 miles to the gallon of petrol.Proper inspections and mandating ,solid block construction would improve insulation levels by 50percent overnight.Imagine paying 240k for an apartment that doesnt have proper insulation or sound proofing .It,ll get a bad rating ,re cert when it comes time to sell it.

Sponge Bob · 13-11-2006 12:34PM

hollow blocks are a Dublin thing ...for some peculiar reason.

yer culchie will have solid block with aeroboard in cavity and drylining inside that again .

D'Peoples Voice · 13-11-2006 02:24PM

gamer wrote:

THERES ABOUT ,240 thousand houses,built in the last 3 years,with hollow blocks, which reduce insulation,value of walls, ie house with those blocks are twice as expensive to heat,as older house with solid walls.

Surely this must be disclosed in the prospectus!
That is, if you are buying a house, surely to god, the deeds of the house etc/ or brochure must disclose details of its insulaiton. NO ?

Do-more · 13-11-2006 07:37PM

antoinolachtnai wrote:

Many things could be said about Jim Power, but it is hard to see how he has a vested interest in talking up the property market (other than the fact that he might own his own house). What is his interest?

Friends First do endowment mortgage products and Pensions, almost all pension funds have a property element.

DonalMcTavish · 13-11-2006 08:23PM

Regarding Energy rating.

My girlfriends parents house is a 4 bed detatched house. It has hollow block wall and is not dry lined. No insulation in the walls at all. The attic is insulated with 100mm fiberglass.

Her sisters house is a 4 bed detatched about the same size and has cavity insulation and 200mm fiberglass in the attic.

The heating in her parents house is used during the day also, while its not in her sisters house.

It is cheaper to heat her sisters house but not much.
The difference last year heating those 2 houses (both oil) is less than it costs to feed my cat in a year.

People care more about where they live than what it costs to heat a house. It doesnt cost as much more as you might think.

antoinolachtnai · 13-11-2006 08:28PM

Do-more wrote:

Friends First do endowment mortgage products and Pensions, almost all pension funds have a property element.

Well, then they're trying to talk down the property market by getting people to invest in other types of long-term investments (which is mostly what they sell).

Housing bubble starting to pop?

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