Morgan Kelly ESRI paper predicts 40-60% housing crash

[kerrynorth]

The full paper is available on www.esri.ie but I will give just a short summary as with most academic economic papers it has a good amount of econmetrics which is very heavy going stuff, although he seems to have conciously kept it to a minimum and to have written the remainder of the paper with a view of making it readable to people other than economists.

The headline from the paper is that from his analysis of housing collapses across the OECD since 1970 is that housing booms give up upto 70% of there gains. On this basis he reckons that the Irish housing market could fall 40-60% over the next 8-9 years. However, what is not highlighted in the reporting of the paper is that he actually reckons the 40-60% fall is an fact a conservative estimate and that it could be even higher!!!

Note also that his figures are based on real (inflation adjusted) figures. So for comparative purposes if house values fell 5% nominally this year then combined with a 5% inflation rate then that would be the first 10% of the 40-60% fall that he is predicting. A lot of people I think will eronously assume that he means 40-60% of the nominal value rather than the real (inflation adjusted) value. This should really have been made clear in the reporting but never was.

[feargach]

No, you haven't been paying attention: house prices only ever go upwards.

Must try harder

[irishpeoplearewhingers]

And what will lead to this supposed crash?

[feargach]

The usual, I suppose. More sellers than buyers, that sort of thing.

[jake76]

The usual, I suppose. More sellers than buyers, that sort of thing.

Down with that sort of thing.

[feargach]

Careful now

[rockyracoon]

According to Bertie it is unpatriotic to talk down the economy. Therefore, as a reformed Republican, can someone point me in the right direction to turn you in? Is it the gaurds, the central bank or FF that I report this UN-Irish activity to?

[irishpeoplearewhingers]

The usual, I suppose. More sellers than buyers, that sort of thing.

And given that completions are due to decline, while the population is projected to grow..............

[Thac0man]

My biggest dear is that rent is going to be the new cash cow of investment portfolios. That would make for a grim outlook, but one entirely in keeping with Bertie Aherns statements about our housing needs being catered for in the same way as many continental countries. He happened to omit the closed shop practices and greed that other countries do not suffer from to the same extent.

I don't expect the government to insure people who desperatly need a home will be given preferance over monied estate agents and institutions.

[feargach]

Were it not for 300,000 empty houses, I'd be inclined to agree with you that a swift return to price rises was imminent.

My analysis is that, at current price levels, the market is almost completely tapped out. You need two people earning a full adult wage to pay for a house and such people are no longer plentiful in the FTB market.

We'll have to earn more to catch up with house prices and interest rates, or prices will continue to fall as they have in the last three months.

The populace can grow to 50 million, but unless it contains new people who are willing and able to borrow 400K to buy a poorly located, costly-to-heat gaff, house prices won't get back on the ladder to the sky.