Dublin property prices falling by €4,500 a month

[ibis]

[quote=John Braken's Minder]

2) Anyone who has not yet bought, the fundamentals have not changed, if you find a well built house, in a good location, which you can afford to repay (allowing for 25% increase in mortgage repayments) and are prepared to live in for 3 to 5 years- now is as good a time as any to buy. [color=darkblue]One fundamental has changed and that's interest rates....[/color]

3) Those who bought in 2006- 2007, will have to sit out the storm for a while. But only sellers can be losers.

4) If the above does not apply, then continue cheerlead a fall in AVERAGE price falls from the PEAK. But don't be suprised if in 2 years time, that a similar house which you refuse to buy now is more expensive in nominal terms. But if your income increases significantly you're a winner, if not a loser.

[color=darkblue]If inflation runs at 4-5% a year why look at it in nominal terms? It's real terms including inflation that count. What's going to drive everyone's income up? Are we all going to start getting very productive all of a sudden?[/color][/quote:2lm7cqy8]

To be fair, returningofficer has a point. If the house you want goes up in nominal terms from 280K to 300K over the next couple of years (a 7% rise in nominal terms), while your salary only rises 3%, then even though the property has dropped in real terms (assuming 5% annual inflation, 280K should have risen to 309K), the property is still less affordable from your point of view, particularly if interest rates have risen - the more so because inflation is already eating into your salary.

Of course, you can turn that point on its head, and make the case that unless people's salaries rise, or remain steady, in real terms over the next couple of years, then the combination of inflation and interest rate rises means that drops in nominal values are required to bring affordability back into the market - and drops in nominal are what will really panic the market.

[noodles]

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

Aren't most houses owned outright? Certainly none of my parents, aunts and uncles or virtually any of their friends are paying mortgages any more.

Exactly, and still we have some of the highest levels of personal and resedential debt in europe. If all the older people have no mortgages the debt is held by the youngest people in society. 300000 will take an entire lifetime to pay off. Thats at 35% + of net salary at the moment an with rising interest rates it could be ten years before monthly repayments reduce (in relative terms) as pay inflation etc will be negated by higher interest rates. (assuming the ever increasing wage packets continue)

[feargach]

then the combination of inflation and interest rate rises means that drops in nominal values are required to bring affordability back into the market - and drops in nominal are what will really panic the market.

drops in nominal are what is happening right now.

I have a very simple explanation why houses have peaked, by the way:

in order to afford a house, you have to be from a very rich family or part of a couple with a combined after-tax income of over 40K. Quite simply, people who answer that description have run out: they all have houses now and the only people without are those who cannot afford to buy.

Thus, prices have to adjust downwards.

If the nominal price of a house falls a mere €1500 per month, then it always makes sense to put off buying for another month, until the crash stops. Suddenly, the dynamics of the deflating market favour the buyer

[returning officer]

drops in nominal are what is happening right now.


No we currently have drops in asking prices - these never reflected value. Value was the market created by at least two potential buyers.

1)There are still plenty of individuals on €40K+ who are renting and looking to move on.
2) Plenty more €56K couples around who feel the need to buy.
3) There are so many different markets eg FTB, upgrade-ers, Dublin inside M50, outside, townies, out of town ghost estates, trophy homes etc.

Falls from over-inflated averages will scare the specuvestors and put the last two on hold from selling but there is still high demand for housing - particlularily in Dublin.

We have had panic buying for a while, we do not need panic selling now.

[ibis]

then the combination of inflation and interest rate rises means that drops in nominal values are required to bring affordability back into the market - and drops in nominal are what will really panic the market.

drops in nominal are what is happening right now.

I have a very simple explanation why houses have peaked, by the way:

in order to afford a house, you have to be from a very rich family or part of a couple with a combined after-tax income of over 40K. Quite simply, people who answer that description have run out: they all have houses now and the only people without are those who cannot afford to buy.

Thus, prices have to adjust downwards.

If the nominal price of a house falls a mere €1500 per month, then it always makes sense to put off buying for another month, until the crash stops. Suddenly, the dynamics of the deflating market favour the buyer

Up to a point, that is true. Price is not the only driver of house prices, so some people will want to buy even in a declining market. It depends on how steep the fall is - but even a fall in asking prices makes it sensible to wait as long as possible before buying.

The problem with "soft landings" is that they ignore the positive feedback supplied by faster price drops making it ever more sensible to wait - and more people waiting means faster price drops. Eventually, the market floors when people find the house they want affordable enough for the other factors (children, schools, usually) to dominate the decision.

[james_collins]

drops in nominal are what is happening right now.


No we currently have drops in asking prices - these never reflected value. Value was the market created by at least two potential buyers.

1)There are still plenty of individuals on €40K+ who are renting and looking to move on.
2) Plenty more €56K couples around who feel the need to buy.
3) There are so many different markets eg FTB, upgrade-ers, Dublin inside M50, outside, townies, out of town ghost estates, trophy homes etc.

Falls from over-inflated averages will scare the specuvestors and put the last two on hold from selling but there is still high demand for housing - particlularily in Dublin.

We have had panic buying for a while, we do not need panic selling now.

This seems like the most logical post on this site.

I completely agree that demand should be strong in the medium term with further increases of population likely.

If anything the drop in house prices may scare investors from buying up capacity and may leave those houses left for people who actually want to live in them!!!

[The Langerboy]

[quote=james_collins]

drops in nominal are what is happening right now.


No we currently have drops in asking prices - these never reflected value. Value was the market created by at least two potential buyers.

1)There are still plenty of individuals on €40K+ who are renting and looking to move on.
2) Plenty more €56K couples around who feel the need to buy.
3) There are so many different markets eg FTB, upgrade-ers, Dublin inside M50, outside, townies, out of town ghost estates, trophy homes etc.

Falls from over-inflated averages will scare the specuvestors and put the last two on hold from selling but there is still high demand for housing - particlularily in Dublin.

We have had panic buying for a while, we do not need panic selling now.

This seems like the most logical post on this site.

I completely agree that demand should be strong in the medium term with further increases of population likely.

If anything the drop in house prices may scare investors from buying up capacity and may leave those houses left for people who actually want to live in them!!![/quote:2i4eks3f]

Logical sounding in an anecdotal sense only, yet MORE posts on this sites pointing to statistics why without quoting or reasearching those same statistics.

What we learned from the boom is that asking prices LEAD the market, ie if the AP in 2005 was say €300k the bidding would usually be far above this, pleanty of examples sighted in the press and online of potential buyers being told by EAs that the vendor will consider offers far below the AP. Anecdotal evidence is all the evidece there is on this matter.

The CSO yesterday said that the number of people living at home with parents droped by 8% for those in their 20s and 7% for those in their 30s between 2002 and 2006. So it seems that far from building up the so called "pent up demand" during the boom there it would appear that this supply of new buyers and renters could easily reverse as they hold off in a declining market.

Population growth is strong but this has been driven largely by imigration due to employment growth, this morning AIB predicted that employment growth will be 2006 70k, 2007 60k, and 2008 45k. Our population is growing by about 100,000 PA (2.5%) a huge rate of increase by current European stadards but where near enough to justify our housing output. The short term demand for housing drove the output of housing up but short term demand is subject to speculative purchase, long term supply and demand must come into eqilibrium or the the number of vacant units will continue to grow, currently we have 300,000 empty units clearly influenced by speculation, the long term demand is the need for housing for us that's 45k-60k PA right now if imigration dose not slow. I agree there will always be people who will buy even in a declining market but the massive oversupply will seriously depress prices and all markets in Ireland are conected via the ripple effect, ie just becuse a house is half a mile inside line like the M50 dose not mean people will pay €200k more for it.

Panic and the heard mentallity are what drive all speculative bubbles up and down the simple facts are we have too many homes and sooner investors get out the more money they will get. The the big problem for house prices is that the builders can't turn off the supply of houses like a tap (too much money already invested) as they will not see a return till they build.

[feargach]

1)There are still plenty of individuals on €40K+ who are renting and looking to move on.
2) Plenty more €56K couples around who feel the need to buy.

We have had panic buying for a while, we do not need panic selling now.

plenty of individuals on €40K+ after tax who are renting?!?

I really think not. I think there's very few of these people, and those who do exist have good reasons not to want a house in Dublin. For instance, on that income, they can seriously expect to be able to buy a nice furnished house in Paris.

Plenty more €56K couples around who feel the need to buy.

Really? What were they doing up until now? If they have been feeling the need to buy, and have an after-tax income of 56K, they have the means to do so. Why didn't they? Of course, some such couples exist, or have only recently come into existence, but I think they're not all that numerous.

[libertarian-right]

so when is this bubble going to explode? within the next 2 years?

[Paddylekker]

1)There are still plenty of individuals on €40K+ who are renting and looking to move on.
2) Plenty more €56K couples around who feel the need to buy.

We have had panic buying for a while, we do not need panic selling now.

plenty of individuals on €40K+ after tax who are renting?!?

I really think not. I think there's very few of these people, and those who do exist have good reasons not to want a house in Dublin. For instance, on that income, they can seriously expect to be able to buy a nice furnished house in Paris.

Which would be great if they spoke French, had a job in Paris and the French economy was providing jobs in their sector.

As it stands I think the commute from Mont Marte to Dublin might be a bit of a drag.