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Thread: Could Dublin House Prices double-dip?

  1. #1
    Politics.ie Member seabhcan's Avatar
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    Default Could Dublin House Prices double-dip?

    Both the US (in 2011) and the UK recently saw false recoveries in house prices, followed by a second drop, before more sustained price increases took hold.

    Home Prices: Why the Case-Shiller housing index is showing a double-dip | TIME.com

    House prices: Double dip | The Economist

    Could this happen here? There are plenty of reasons to think so.

    Dublin, and only Dublin, is experiencing price rises at present. This is having two effects. One is what seems to me as panic buying. Plenty of people are rushing into the market in the fear that they will miss the bottom. Nearly 50% of buyers are paying cash. The second effect is sellers pulling houses off the market in the hopes of getting a better price in 6 months. An estate agent told me today that one North Dublin seller's 400k asking price on a 3-bed had been met, but he was going to hold off anyway.

    Here are a number of reasons why I think this is a false dawn for the Irish property market, and why rationality will return after Christmas.

    * The supply of cash buyers will soon run out. There is a very limited number of people out there who both have cash, and want to spend it on housing.

    * Rents cannot increase fast enough to justify property price rises. Rents are way below where they should be to justify these house prices, probably 30-40% below. And rents are not really increasing much. This fact effects cash buyers particularly - the smart ones will realize the return is abysmal. For mortgage buyers, it is still cheaper to rent than to repay a mortgage on the same property.

    * The real economic recovery isn't here yet. It just feels like a recovery because things have stopped getting worse. There could easily be a quarter of zero or negative growth next year, especially if some hiccup hits a trading partner. Wages are not increasing (yet)

    * Supply is very limited at the moment because of the lack of repossessions, tracker mortgages, NAMA, etc. There is a significant volume of houses that could come onto the market when things look like they are picking up. Increased supply on its own would end the panic buying and set prices back

    * What is on the market is in a dismal state. 40%+ of houses on the dublin market are probate sales - dead granny houses. I've looked at a bunch of them in recent weeks. Many have been vacant for 10 year or more while the owner was in a nursing home. They need significant renovation, and most buyers cant afford that as banks only lend mortgages to cover purchase prices, nor renovation costs.

    * Finally, it does seem to be just Dublin, and perhaps just parts of Dublin, that are seeing increases. Anything outside the m50 seems flat. That hints the buyers are a very select group - those with money who have been eyeing city property and waiting to pounce when the market turns.

    My money is on prices flattening or falling early next year, with another upturn in late 2014 or 2015.

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    What would put buyers off?
    Interest rates going up (would now be a good time to fix?),
    fear of unemployment/drop in pay (possibly over the worst except for some industries), LPT/water charges/broadcasting charges (tenants will incur them anyway)
    Fear of drops to come (caused by double dip, banking crisis, euro crisis, ww3, etc)

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    Politics.ie Member Telemachus's Avatar
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    39,000 are 720 days or more in arrears.

    When are the next set of arrears figures out? - must be soon.
    ..the Irish nation can become other than white, by privileging the voices of the racialised and subverting state immigration but also integration policies. Ronit Lentin

  4. #4

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    Quote Originally Posted by seabhcan View Post
    Both the US (in 2011) and the UK recently saw false recoveries in house prices, followed by a second drop, before more sustained price increases took hold.

    Home Prices: Why the Case-Shiller housing index is showing a double-dip | TIME.com

    House prices: Double dip | The Economist

    Could this happen here? There are plenty of reasons to think so.

    Dublin, and only Dublin, is experiencing price rises at present. This is having two effects. One is what seems to me as panic buying. Plenty of people are rushing into the market in the fear that they will miss the bottom. Nearly 50% of buyers are paying cash. The second effect is sellers pulling houses off the market in the hopes of getting a better price in 6 months. An estate agent told me today that one North Dublin seller's 400k asking price on a 3-bed had been met, but he was going to hold off anyway.

    Here are a number of reasons why I think this is a false dawn for the Irish property market, and why rationality will return after Christmas.

    * The supply of cash buyers will soon run out. There is a very limited number of people out there who both have cash, and want to spend it on housing.

    * Rents cannot increase fast enough to justify property price rises. Rents are way below where they should be to justify these house prices, probably 30-40% below. And rents are not really increasing much. This fact effects cash buyers particularly - the smart ones will realize the return is abysmal. For mortgage buyers, it is still cheaper to rent than to repay a mortgage on the same property.

    * The real economic recovery isn't here yet. It just feels like a recovery because things have stopped getting worse. There could easily be a quarter of zero or negative growth next year, especially if some hiccup hits a trading partner. Wages are not increasing (yet)

    * Supply is very limited at the moment because of the lack of repossessions, tracker mortgages, NAMA, etc. There is a significant volume of houses that could come onto the market when things look like they are picking up. Increased supply on its own would end the panic buying and set prices back

    * What is on the market is in a dismal state. 40%+ of houses on the dublin market are probate sales - dead granny houses. I've looked at a bunch of them in recent weeks. Many have been vacant for 10 year or more while the owner was in a nursing home. They need significant renovation, and most buyers cant afford that as banks only lend mortgages to cover purchase prices, nor renovation costs.

    * Finally, it does seem to be just Dublin, and perhaps just parts of Dublin, that are seeing increases. Anything outside the m50 seems flat. That hints the buyers are a very select group - those with money who have been eyeing city property and waiting to pounce when the market turns.

    My money is on prices flattening or falling early next year, with another upturn in late 2014 or 2015.
    The phrase for this is a dead cat bounce.

  5. #5
    Politics.ie Member Analyzer's Avatar
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    Seabhcan, I reckon you are right to be suspicious of what is going on.

    The entire economy is still being propped up by borrowing. In particular, state borrowing. This money is propping up the economy inside Dublin, in particular with respect to the banking system.

    The growth area of the economy in Dublin is based on technology, and that is based on corporate taxation policies.

    With the SPD as part of the new government in Berlin, and with France running out of money, this is going to get a lot more attention.

    There is also a lot of growth in the IFSC and related finance related activities - and again these are targets of governments who are investigating ways of increasing their own domestic tax take.

    In Ireland's advantage is the fact that the current NYSE bubble could be popped by any interference in the earnings figures by the tech sector corporations that are incur revenue in Ireland. Once the NYSE bubble pops, it makes no difference, and at that point the governments will want the revenue for themselves.

    What I am saying is that the Irish economy is very vulnerable in the medium term to policy decisions that could impact the level of investment here.

    Apart from that the people who are bidding for houses, are unable to bid beyond a certain point. And that point is set by income tax levels, property tax levels, and their own savings. The old days when the banks would throw money at them, and they would bid higher are gone. The banks don't have that money.

    And finally there is another factor. DIRT at 40% from January 2014. Chances are that the deposit base will decline. Nobody knows yet how much. It really is a question of how much. In a country where saving is extremely hard in the first place, this is a classic case of Noonanesque stupidity. People will have to spend even less to have any savings in the first place. Combine this with Noonan's pension raid, and you get the basis of an idiotic policy framework. This will undermine the banks.
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    Politics.ie Member seabhcan's Avatar
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    31 Main Street, Raheny, Dublin 5 MyHome.ie Residential

    This is the property that got me thinking that something is seriously wrong. It is half a burned out building in Raheny.

    The description is: "The property has fire damage, but offers outstanding potential to be transformed in to any number of different uses, subject to planning permission. It does require complete modernisation throughout."

    This 'modernisation' would include a roof. Any 'outstanding potential' would require agreement with the owner of the other half of this burned out building.

    They want 450,000 for it.

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    Quote Originally Posted by seabhcan View Post
    31 Main Street, Raheny, Dublin 5 MyHome.ie Residential

    This is the property that got me thinking that something is seriously wrong. It is half a burned out building in Raheny.

    The description is: "The property has fire damage, but offers outstanding potential to be transformed in to any number of different uses, subject to planning permission. It does require complete modernisation throughout."

    This 'modernisation' would include a roof. Any 'outstanding potential' would require agreement with the owner of the other half of this burned out building.

    They want 450,000 for it.
    How big the site? That's not a good example to prove any point.

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    Politics.ie Member Catalpast's Avatar
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    Nonsense

    The Fundamentals are Sound!
    If you can convince a People to engage in the mass elimination of their own offspring - you can probably get them to do anything...http://irelandinhistory.blogspot.ie/

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    Quote Originally Posted by Congalltee View Post
    What would put buyers off?
    Interest rates going up (would now be a good time to fix?),
    fear of unemployment/drop in pay (possibly over the worst except for some industries), LPT/water charges/broadcasting charges (tenants will incur them anyway)
    Fear of drops to come (caused by double dip, banking crisis, euro crisis, ww3, etc)
    The broadcasting charge is the TV licence under a different name. It's not an extra cost.
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    Politics.ie Member wombat's Avatar
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    Quote Originally Posted by seabhcan View Post
    * What is on the market is in a dismal state. 40%+ of houses on the dublin market are probate sales - dead granny houses. I've looked at a bunch of them in recent weeks. Many have been vacant for 10 year or more while the owner was in a nursing home. They need significant renovation, and most buyers cant afford that as banks only lend mortgages to cover purchase prices, nor renovation costs.
    .
    2 houses on our road sold for 400k, 350k in the last 2 years, both still vacant, in need of renovation.
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