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Thread: Daft : Latest figures suggest a 75% fall in land values

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    Politics.ie Member Dreaded_Estate's Avatar
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    Default Daft : Latest figures suggest a 75% fall in land values

    Prices fall 3% in the latest quarter.


    Latest figures suggest a 75% fall in land values

    As far as residential densities are concerned, as prices have fallen across the board for houses and apartments for sale, the buyers that remain in the market are looking to get more for less; more bedrooms, more space - in essence, lower densities than would have prevailed during the boom years. Additionally, developers are not willing to take the risk associated with building high-density developments; higher density means more units to sell and also requires a longer turnaround than individual homes. In 2007, a suburban town in the greater Dublin area would have seen planning for a density of upwards of 25 residential units an acre (higher density was seen as a solution to a perceived housing shortage). In the current market a density of 8 to 12 units per acre is more realistic. The lack of funding to facilitate transactions exerts further downward pressure on prices.

    We can get a sense of the changes in land values by using some simple arithmetic. For example: where before a developer may have been able to expect to sell 25 units at an average of €370,000 each, a total of €9.25 million in revenue per acre, now the same developer would be able to only expect to build around 12 units per acre at an average of €195,000, total revenue of €2.34 million. Just based on these average asking prices from Daft and falling densities, we're looking at a drop in revenue per acre of 75%. Not only does this figure ignore VAT, building costs and a margin allowing for developer profit and risk, it is based on Daft asking prices and not the final sale price of the house or apartment. If buyers are still negotiating sellers down from asking prices, then the decline in land values is even more staggering. So, although house prices have fallen by 40% from peak according to the Daft Report and commercial property prices in Ireland have declined by up to 60% in the most recent cycle, the knock-on impact for land values is even more pronounced.

    As previous Daft Report guest bloggers and we at CB Richard Ellis have frequently stated, a national house price database is essential at this stage. So too is a true accounting of the number of vacant residential units in the country, which we are set to receive from the Department of the Environment in the coming weeks. With this information, not only could we engage in more robust analysis of the residential property market, but we could also assess the impact that house price movements are actually having on land values.

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    Well this is terrible news.

    The Bank of Ireland Governor was on Vincent Browne last night explaining to us that Nama had valued the recent amount of properties at 2009 levels.

    This now means those valuations were wrong in reality further bailouts will be needed.

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    Politics.ie Member Mitsui2's Avatar
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    Quote Originally Posted by Bi ciuin View Post
    Well this is terrible news....
    This now means those valuations were wrong in reality further bailouts will be needed.
    And why on earth would this surprise you?

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    Can we not get more Leitrim people to queue outside some of the 350,000 vacant houses to talk up the market like they did last weekend? Come on patriotism for NAMA and all that...

    Anyone see Loonahan on V Browne last night saying that the max they have factored for mortgage toxic loans is 5%? He couldn't back that figure up with anything tangible. More or less dartboard econometrics.

    You couldn't script this,
    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich A. Hayek

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    Politics.ie Member dresden8's Avatar
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    Quote Originally Posted by Bi ciuin View Post
    Well this is terrible news.

    The Bank of Ireland Governor was on Vincent Browne last night explaining to us that Nama had valued the recent amount of properties at 2009 levels.

    This now means those valuations were wrong in reality further bailouts will be needed.
    He is inside the tent pissing out on us, just like the rest.

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    Politics.ie Member Aindriu's Avatar
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    People have to realise that prices are going to continue to fall untill the average house price here is €150,000 or less.
    If you continue to elect idiots in elections, don't be surprised when the result is an idiotic government.

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    Interesting stuff and good to finally see an estimate of the average fall in land values, something which NAMA could have given us but didn't and therefore presumably desperately needs.

    Something that hasn't really been picked up this morning, with all the various house price reports, is the latest estimates of the number in negative equity:
    House price falls of 40% suggest 100,000 in severe negative equity
    Seems to be, unsurprisingly, bunched in Dublin and surrounding counties.

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    Politics.ie Member HarshBuzz's Avatar
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    hmmm, so Morgan Kelly was right

    quelle surprise
    “'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors

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    Brilliant news for the landless/renters.

    Keep on falling.

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    Why would prices do anything but fall when people are still losing jobs, while salaries are still being cut, when emigration figures are at a record high and when the cost of mortgages is increasing for new purchasers (to offset the losses incurred by the banks on tracker mortgages).
    Last edited by johnfás; 5th October 2010 at 12:51 PM.

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