Dublin property prices falling by €4,500 a month

[Coles]

Depressing stuff... I think the problem will be compounded by a fall off in consumer spending as rates bite. And there is SO much wealth tied up in property... where will business investment come from? oh dear... the long, dark night...

http://www.investopedia.com/features...s/crashes4.asp

[hmmm]

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 :/

Same here. There seems to be some national delusion that house prices may may not increase, but can't actually decrease. It's one of those instinctive things that people say, even if it makes no sense. Houses don't have a memory, there isn't a point where a house will start speaking and demand that you stop lowering the price if you're trying to sell.

House prices in Ireland make no sense. We all know it, we just think we won't be the last one selling and there will always be some eejit who will buy. Unfortunately the supply of those eejits dried up around April/May of this year.

[supamolli]

Depressing stuff... I think the problem will be compounded by a fall off in consumer spending as rates bite. And there is SO much wealth tied up in property... where will business investment come from? oh dear... the long, dark night...

http://www.investopedia.com/features...s/crashes4.asp

There is debt tied up in property for the overwhelming majority of people, not wealth.

[ibis]

It's still got some way to go, I think. I would think people are holding off to see what happens to stamp duty in the Budget - this is a short-term buyers' market, not the crash.

However, the fact that prices can slip during a lull of such short duration and relatively obvious origin shows what nonsense the talk of "sound underpinnings" is. It means (a) that there is a need to sell, even if the price is not top dollar, and (b) that people are chancing their arms with the prices, rather than the price being a sound and well-supported valuation.

It's worth pointing out that bubbles, by definition, cannot end in a soft landing or a permanently higher valuation. They're called bubbles because they burst - if they don't burst, they're called readjustments. The real question is - has every deviation from the long-term trend returned to the trend, with overshoot?

[Sidewinder]

The real question is - has every deviation from the long-term trend returned to the trend, with overshoot?

Of course not, sometimes there are very good reasons - technological innovation, demographics, structural change in the economy - that do actually support a permanently higher revaluation of an asset's value.

I think this was the case with the Irish property market between 1995 and 1999. 2000 was the natural peak of that cycle - driven by real fundamentals - and a "soft landing" could have occured there (except it wouldn't really be a "soft landing", just a fundamental readjusment. Soft landings do not, and have never, existed - and are only ever mentioned by VIs in a bubble scenario). In fact the evidence is that in Q4 00 - Q2 01 property prices in Ireland peaked and then declined by a few percent to what may have been a long-term new sustainable level (assuming we never return to the bad old days of the 80s economically).

Then came the Great Liquidity Splurge (thanks Mr Greenspan!). Then came Laddermania.

Everything since has been pure bubble. I fully expect house prices to return to Q2 01 levels, adjusted for inflation of course. And if the worst happens, and we have a large downturn in the economy as a whole, and we do end up in a major recession, then prices will revert to (in real terms) 1995-6 levels.

[ibis]

The real question is - has every deviation from the long-term trend returned to the trend, with overshoot?

Of course not, sometimes there are very good reasons - technological innovation, demographics, structural change in the economy - that do actually support a permanently higher revaluation of an asset's value.

I think this was the case with the Irish property market between 1995 and 1999. 2000 was the natural peak of that cycle - driven by real fundamentals - and a "soft landing" could have occured there (except it wouldn't really be a "soft landing", just a fundamental readjusment. Soft landings do not, and have never, existed - and are only ever mentioned by VIs in a bubble scenario). In fact the evidence is that in Q4 00 - Q2 01 property prices in Ireland peaked and then declined by a few percent to what may have been a long-term new sustainable level (assuming we never return to the bad old days of the 80s economically).

Then came the Great Liquidity Splurge (thanks Mr Greenspan!). Then came Laddermania.

Everything since has been pure bubble. I fully expect house prices to return to Q2 01 levels, adjusted for inflation of course. And if the worst happens, and we have a large downturn in the economy as a whole, and we do end up in a major recession, then prices will revert to (in real terms) 1995-6 levels.

Overall, I suspect you're right. 1996-2000 the Celtic Tiger drove the property market. 2001-200? the property market is self-sustaining, driven by expectations of continually rising prices. Well, I'll keep my fingers crossed.

[Coles]

Depressing stuff... I think the problem will be compounded by a fall off in consumer spending as rates bite. And there is SO much wealth tied up in property... where will business investment come from? oh dear... the long, dark night...

http://www.investopedia.com/features...s/crashes4.asp

There is debt tied up in property for the overwhelming majority of people, not wealth.

The effect is the same... no, its worse! Rather than people opting to sit out a slide in valuations, they are forced to service debt that has no relation to the market value. This could be the situation for ten or more years, drawing massive amounts of liquidity out of the economy.

[Ponzi]

A bursting speculative housing bubble is likely to cause a massive shift in the Irish zeitgeist. From Roaring Twenties feel good to Grapes of Wrath somberness, lickety-split.

[kerrynorth]

Morning Ireland this morning had an NUI Galway economist (did not catch his name) on stating that he expected a housing crash at some point next year and most likely at any point from Spring (just in time for the election!). He also pointed out that there is no example worldwide of a 'soft landing' following the rapid house price inflation that has occured in Ireland on the contrary all the evidence is that such booms are followed by a sharp corrections such as is occuring the US at present.

He stated that the clearest evidence of the Irish property market having run well away from fundamentals is that fact that house price inflation at 15% this year is occuring at a time when interest rates are rising rapidly.
He further went onto suggest that when the presenter asked him whether prices could fall by as much as 25% he stated that they actually could fall by far more than this once the correction takes hold.

I am the only one noticing the unmistakeably trend that all the 'economists' and 'analysts' working with financial institutions and estates agents (that is all those with a vested interest) cling to this 'soft landing' mantra whereas those economists whom are not conflicted by their ties to various financial instutions etc. are singing from a much different hymnsheet!

[Twin Towers]

He further went onto suggest that when the presenter asked him whether prices could fall by as much as 25% he stated that they actually could fall by far more than this once the correction takes hold.

Glad I own a home and not a mortgage but this will be suicide territory for many with interest rates rising over the course of an ill considered loan.

I certainly hope it will be a "soft landing" for all these people.