Dublin property prices falling by €4,500 a month

[krayZpaving]

There'll be a bump in prices once the issue of Stamp Duty in the Budget is out of the way (either way). A lot of people are refusing to close at the moment while they wait to find out what Brian Cowen does. The last thing anyone wants is to hand over €20k to the Revenue today, and find out next week that Stamp Duty limits have been raised.

[Sidewinder]

There'll be a bump in prices once the issue of Stamp Duty in the Budget is out of the way (either way). A lot of people are refusing to close at the moment while they wait to find out what Brian Cowen does. The last thing anyone wants is to hand over €20k to the Revenue today, and find out next week that Stamp Duty limits have been raised.

This Stamp Duty nonsense is a complete red herring. The market stalled and started to slide 3 months before McDowell opened his mouth. House prices are ridiculously high, nobody can afford them any more no matter how loose the banks make their lending criteria, rationally BTL stopped making sense years ago and has been providing negative yields now for about 3 years - and with the VIs trumpeting a "soft landing" the dream of capital appreciation to make up for the rent subsidy has vanished.

There'll be no significant change to stamp duty in the budget. The government is far too dependant on property taxes to risk destabilising the market altogether.

There may well be a weak dead-cat-bounce in the Spring, as the biggest fools of all rush in "before it's too late!" but with rate rises in December and March I can't see this being very strong or very sustained.

Kerrynorth: on interest rates, I personally believe interest rates are going much further up, and will stay up, for many years to come. The ECBs main remit is price stability, and all the inflation risks are most definitely on the upside and will be for the forseeable future. The Japanese deflation is over, the German slump caused by the shock of an unplanned unification is over, the deflationary impact in the West of a flood of cheap Chinese goods is over as Chinese inflation takes off (and is in turn exported to us), energy prices are only going one way as we hit Peak Oil, and the massive surge in global liquidity/money supply caused by real-negative interest rates from 2001 onwards has to be mopped up somehow. The BoJ will raise again in Jan or Feb to 0.5% and this in turn will have all sorts of knock-on effects on the global economy.

Eurozone M3 growth is still running at 8.5% - until this starts trending strongly downwards towards the 4.5% target, and until the Eurozone CPI gets below 2% and stays there for at least 4 months, then the ECB will keep hiking rates.

Holding at 4% will only result in a stagflation scenario, and the ECB will only have to emulate Paul Volcker in the end. You can have rates rising to 6% (possibly causing a short slump) over the next 3-4 years hopefully soaking up the excess liquidity, or you can hold at 4%, unleash stagflation, and end up with inflation and rates back at 12% again by 2010. That's the dilemma the ECB face. The Fed face the same dilemma but with the added complication of the Twin Deficits. My bet is Bernanke will deliberately allow the stagflation scenario, hoping to erode away the value of America's massive debts.

[Akrasia]

Yeah, and global warming is just part of a natural climate cycle (oh and evolution isn't real either)

[eurocrat]

5% by Q1 2008 is odds-on, I'd say.

I'll take you up on that. €100 says it wont. Given my 'economic illiteracy' and your obvious expetise in the area, you shouldn't be afraid?

Oh by the way, this survey doesn't prove nothing (as they say in NYC). It can be taken as part of a body of evidence suggesting a slowdown in the rate of growth in house prices nationally. Whether that is a bad thing remains to be seen. Continued house price growth is also not particualry positive. Economics is tricky like that, best no go around making wild predicitions about crashes and sham tigers.

[Sidewinder]

I'll take you up on that. €100 says it wont. Given my 'economic illiteracy' and your obvious expetise in the area, you shouldn't be afraid?

Yer on. ECB base rates 5% or higher in March/April 2008. €100.

Easy money 8)

[Rocky]

It is worrying, although I wouldn't panic yet. However it is fact that it will crash eventually and if that was to happen now, then quite simply Ireland’s economy would collapse and for this reason we need to strengthen other aspects of our economy. This is something FF/PDs are failing to do at all and it’s also something Richard Bruton has been talking about for a long time.

[Eddiepops]

Well one swallow doesn't make a summer. We have to be very wary in dianogsing a 'soft-landing' or 'slow down' or 'crash'. Basically one website has reported that three of the sureveyed areas (I believe each dublin post code and every county was surveyed) has reported slight decreases in house prices for one particular economics quater. Every other area in the county have reported growth, albeit at a lower level than previous.

Also 'average' house prices can sometimes be a bit misleading as one or two freak results can distort the picture, particulary when we are dealing with low numbers. The article does not state how many houses were 'surveyed' in each area and to what degree price varied in these areas.

Having said that, it is a wonderful marketing exercise by the very media savy guys at Daft.ie.

Now economics aint my major, but here's why I think any landing might not be that soft. The housing market enjoys high elasticity as the amounts of money involved are vast. As prices take a downward trend or even stabilise buyers will hold off buying in the belief that prices might reverse in which case they would stand to lose out. So they wait, forcing comission dependent estate agents to balk and start to lower prices further, which of course just worsens the trend. As prices drop some people freak out and try sell before it's too late, increasing the supply as demand contracts. Prices will have to continue to drop as panic takes hold. Meanwhile in the rental sector prices actually head up as no one is moving on from their rented accomodation as they wait to see which way the housing market goes.

Commence tearing that to shreds if u will, it's a hypothetical model of the way I think things could go.

I do think though that to a certain extent this is inevitable; the crappy clapped out house next to ours that has been student accomodation for as long as I've been alive is just simply not worth 2 million euro. At the back of our minds we all know that the properties we are investing our future in are simply not worth what we are paying for them. The OECD agrees when it says that we have one of the most overpriced property markets in the world. Throw in a minor recession and we're talking about a possible disaster :/ I for one will not be buying anytime soon.

[Sidewinder]

Meanwhile in the rental sector prices actually head up as no one is moving on from their rented accomodation as they wait to see which way the housing market goes.

And as the over-leveraged BTL brigade take their rental properties out of the rental market and try to sell them before their value drops any further.

This is exactly what we are seeing now, with a massive increase in supply in properties for sale in recent months (see daftwatch), a marked slowdown in the number of properties being sold, and a rapid increase in rents (up to 10% in some areas). Fundamentals, fundamentals, fundamentals.

Eventually, in a few years time, the market will stabilise to historical and international norms, where net rental yields (after 1 month voids and maintenance costs) reach 7%. This will require rents to more than double, prices to more than halve, or a combination of the two.

There has never been a "soft-landing" from a speculative asset bubble. Never, in all of human history, and in asset bubbles going back to the 13th century. Never, ever, ever. The Soft Landing is a myth, a cruel lie, a chimera peddled by VIs to squeeze that last drop of foolish money out of the market before the end.

[Eddiepops]

Meanwhile in the rental sector prices actually head up as no one is moving on from their rented accomodation as they wait to see which way the housing market goes.

And as the over-leveraged BTL brigade take their rental properties out of the rental market and try to sell them before their value drops any further.

This is exactly what we are seeing now, with a massive increase in supply in properties for sale in recent months (see daftwatch), a marked slowdown in the number of properties being sold, and a rapid increase in rents (up to 10% in some areas). Fundamentals, fundamentals, fundamentals.

Eventually, in a few years time, the market will stabilise to historical and international norms, where net rental yields (after 1 month voids and maintenance costs) reach 7%. This will require rents to more than double, prices to more than halve, or a combination of the two.

There has never been a "soft-landing" from a speculative asset bubble. Never, in all of human history, and in asset bubbles going back to the 13th century. Never, ever, ever. The Soft Landing is a myth, a cruel lie, a chimera peddled by VIs to squeeze that last drop of foolish money out of the market before the end.

Indeed, I just don't understand the mechanism of a soft landing - it ignores the fact that the very concept of house prices going down induces utter terror in every single person who has bought in the last decade - I know coz everytime I mention it I get asked to leave their lovely overpriced homes :/

[Catalpa]

Meanwhile in the rental sector prices actually head up as no one is moving on from their rented accomodation as they wait to see which way the housing market goes.

And as the over-leveraged BTL brigade take their rental properties out of the rental market and try to sell them before their value drops any further.

This is exactly what we are seeing now, with a massive increase in supply in properties for sale in recent months (see daftwatch), a marked slowdown in the number of properties being sold, and a rapid increase in rents (up to 10% in some areas). Fundamentals, fundamentals, fundamentals.

Eventually, in a few years time, the market will stabilise to historical and international norms, where net rental yields (after 1 month voids and maintenance costs) reach 7%. This will require rents to more than double, prices to more than halve, or a combination of the two.

There has never been a "soft-landing" from a speculative asset bubble. Never, in all of human history, and in asset bubbles going back to the 13th century. Never, ever, ever. The Soft Landing is a myth, a cruel lie, a chimera peddled by VIs to squeeze that last drop of foolish money out of the market before the end.

Indeed, I just don't understand the mechanism of a soft landing - it ignores the fact that the very concept of house prices going down induces utter terror in every single person who has bought in the last decade - I know coz everytime I mention it I get asked to leave their lovely overpriced homes :/

I know coz everytime I mention it I get asked to leave their lovely overpriced homes :/



Tact isn't one of your strong points EP is it?

I guess I'm in the lucky position of owning my own home so if the market crashes I have nothing personally to lose.

That being said the economic effects would have consequences for us all.

I hope we don't end up like Germany in 1923...

OK I know the inflationary aspect is out of our hands now but in a way that gives us one less weapon to tackle internal monetary pressures.

TBH I think we are f.cuked and we have only ourselves to blame.

We might end up looking like a bunch of Tulips:

http://www.investopedia.com/features/cr ... ashes2.asp