Fall in house prices fizzling out.

[freedomlover]

The latest monthly report by Permanent TSB/ESRI on house prices in Ireland was published today. This showed that average house prices in Ireland fell by 0.3% in August, the sixth consecutive month in which house prices fell. Since average house prices peaked in February, the falls each month have been as follows:

March -0.6%
April -0.8%
May -0.8%
June -0.5%
July -0.4%
August -0.3%

When houses prices were falling last Spring, there were widespead predictions that the fall would gather momentum and accelerate in Summer and Autumn. But, its clear this isn't happening. The monthly falls are decreasing and August's fall was the lowest yet. It looks like average house prices will bottom out in the next six months at no more than 5% to 7% below their peak before rising again. This is all the more likely as the ECB left interest rates unchanged today, meaning we are now entering the longest period without an interest rate rise for two years. Add on the increase in mortgage interest tax relief promised for the next budget, and it looks like the turning-point will occur early in the new year. In addition, even at the August rate, the monthly falls are now so small that it becomes scarcely worthwhile for people to hold off buying in the hope of the house they're after being massively cheaper in a year's time. For example, if average house prices fell for the next twelve months at the same rate as in August, they'd only be 3% lower next August than they were this August. Indeed, average prices for some categories of houses have allready started to increase again - the most popular type of house, 3-bedroom semi-detached, have now recorded average price increases across the country for two consecutive months, with a cumulative increase of 2% between June and August. Just to complete a bad day for the doom-mongers, the ISEQ rose today for the seventh consecutive day.

[Akrasia]

um, August was just before the start of the 'Autumn selling period'. Optimistic vendors would have waited a few extra weeks to see if the market picked up.

They haven't and I can assure you, house price declines are going to get worse between now and the end of the year.

[905]

I'm just glad David McWilliams wasn't right, again. Imagine the consequences for society if anyone took him seriously. Still, he only has to be lucky once.

[Akrasia]

Oh, and despite the ECB holding its base rate steady, Irish banks are still increasing their mortgage rates for new borrowers.

[Ard-Taoiseach]

It's a possibilty, freedomlover, but buyers remain quite risk averse. What you say is valid, but I feel we'll have to see more fizzling out before we can truly say that we are out of the woods with regards to housing.

The interest rates the banks charge on mortgages are incumbent on Euribor rates falling further, but, again, mortgage interest relief should ameliorate this.

If this trend continues into September and October, we can be confident that the housing market has made its adjustment and will be cleared for low single digit price gains next year.

[Ard-Taoiseach]

This is the commentary attached to the report:

Niall O'Grady, head of marketing at Permanent Tsb, said: "While we have seen attention-grabbing stories about declines in the asking prices for some houses, the index confirms that the actual rate of change in house prices across the country remains modest.

"Since the start of this year, prices have declined by 3.3 per cent on average."

3.3% isn't too much in an economy growing by 6.7% in the first half.

[General_Hoche]

It just shows how the builders/developers have the real power in this country. They shut off house building like a tap when prices drop marginally. Heaven forbid that an affordable house, or even a fairly priced house, be available to the people of this 'republic'.

[Ard-Taoiseach]

It just shows how the builders/developers have the real power in this country. They shut off house building like a tap when prices drop marginally. Heaven forbid that an affordable house, or even a fairly priced house, would ever be available to the people of this 'republic'.

If they kept supply going at the rate it was las year, we wouldn't see the orderly adjustment we see here, we would have seen carnage. Irish builders learnt the US lesson well. Over there, the builders failed to react in time and were too complacent.

Ours are far more sensible. Becuase of that, this slight cut in prices is perfectly healthy. It points to a much more stable market.

[freedomlover]

It just shows how the builders/developers have the real power in this country. They shut off house building like a tap when prices drop marginally. Heaven forbid that an affordable house, or even a fairly priced house, be available to the people of this 'republic'.

Its predicted that between 70,000 and 80,000 new houses will be completed this year. This is hardly turning off the tap. Its still about 4 times the rate of new house building in other EU countries.

[Badboy]

I stated months ago on another forum that there was no housing crisis just people wishing for one.

Prices will level out and are still a great investment. so get out there and buy one all you doom and gloom merchants

All house purchases are currently a speculative investment.

The only way an investment makes sense in the long term is if the discounted value of future income streams (rent + proceeds of sale) exceeds the price.

Given that rent won't pay the interest on an avergage house now, the only way for this to happen is for rent to rise, or for future house prices to rise at a rate that makes up for the deficit between rent and interest and inflation combined.

Any model that is based on a necessity continously rising prices at higher than the rate of inflation despite there being an excess of supply over demand is fundamentally flawed.

There only difference between the Irish housing Bubble and the Dot Com bubble is the fact that the govt can't allow a housing crash. Once the momentum behind falling prices starts to build, gvernment intervention may become as futile and expensive as the last curreny crisis (when deposit interest rates hit 14%).

It is possible that house prices will continue to grow at the rate of inflation, meaning it will be cheaper to rent, making the economic decision to buy a house stupid.

That said we have a cultural attachment to home ownership so maybe if we all wish hard enough and the ECB is nice to us it might just hold together.