House prices in the city… headache, heartache, who knows

Headache, heartache, who knows ...

For quite some time people (myself included) have been saying that we will start to see a two tier market, one in cities and another everywhere else. The most recent CSO figures on house prices seem to indicate that this may be the case because while prices fell 1.1% nationally, the same didn’t occur in Dublin (which is the only city separated out from the rest of the statistics).

In Dublin house prices are down 55% and apartments by 60% – a recent Central Bank report indicated that this implies an over-correction of between 12% and 26% which also mentions that in a significant ‘bust’ that often prices over correct by up to 35%.

Of course, there are mortgage arrears, only today the Central Bank has release new figures showing that 77,630 accounts are more than 90 days behind, banks claim to be lending but the most recent Irish Bankers Federations numbers only reinforce what everybody is saying (that they aren’t), and with 2011 having been a 40 year low in lending the anaemic start to 2012 doesn’t bode well.

People also mention NAMA and the stock they are holding (c. 14,000) of which almost 30% are not completed but will be and the rest are either rented out or sold, this is not enough to ‘sway the market’ – as long as it isn’t all offered for sale on the same day.

And while credit is down property prices are not falling in Dublin, the higher participation of cash buyers (some say up to one third) could be a factor, people deciding to hold out and not sell may also be having an effect – a recent study stated that at least 34% of households have no mortgage.

Realising the end of a downturn will only come after the market has already turned, the hard thing is to know whether that is a live event happening now or if the current prices in Dublin are merely a temporary reprieve?

So is this a divided market? Are we getting near a bottom? If we were to follow international examples (the exception being Japan) then these are all tentative signs of a levelling off, what do you think? Have your own say….

[poll id=”60″] [poll id=”61″]





Irish Mortgage Brokers

There are 11 comments for this article
  1. paddy at 11:47 am

    Does anybody believe that prices will increase madly after the absolute bottom has been reached?
    I know some people think so, well it is more of a hope they have!
    It will be a long time until house price give you a better return than a savings account!

  2. liam Scott at 2:32 pm

    Any sensible financial institution should not lend more than 3 times annual earnings and/or more than 90% of the value of the property. If one assumes ( on the generous side ) that average industrial wage is €35k, then max loan is €115K. Add once the spouse earnings say another €35k and we are looking at €145 K being 90% so when the average house is selling for €161K , that is the bottom of the market.
    Look at it another way the average 3 bed semi in Dublin is available for rent at €1100 to €1200 per month. Ten times the annual rent so that property is worth €144,000

  3. Phillip at 12:31 pm

    Speculation on whether house prices is futile, as nobody (but a select few) actually knows the prices. I agree with tha above comment about asking prices, where there are some who still seem to have very unrealistic expectations. This is where estate agents and (may I say) sites like myhome and daft have some responsibility.
    On recent arguments that prices have over-adjusted, and are cheaper than they “should” be. These analyses are based on affordability criteria and assume incomes will remain at present levels. I believe, even with a “yes” vote, this is unlikely, as further adjustment to public service pay (downwards) is all but inevitable. Downward adjustment of public service pay is certain with a “no” vote. This will pay merry havoc with “affordability” indices, and we will see the “over adjustment” is an illusion.

    Lastly a plea, if any bosy out there haa access to the real house price data (promised time and again by government) please please leak them to the public. The Irish property market is a rigged game until the buyer know true market prices.

  4. Noelli Leinnonahanan at 12:37 pm

    Ahern, Lowry, the Healy-Raes, Flynns P&D, what a shining example these specimens are to the rest of the world. My life has been destroyed in a country run by such egregiosities and I will never forget that.

  5. Tony M. at 4:34 am

    Determining average house price is tricky.

    Because the median value is rarely ever the value published or reported in reports or by the media (and it is mostly the mean value) the average sales price is most likely always falsely inflated. Grossly so! This practice of over price reporting serves the interests of the usual suspects: seller, estate agents, banks’ Nama…

    When all recognise what’s is actually up then properties may start to sell again once the price is reflective of the over-supply and reducing demand scenario.

    Everybody in the game knows or should know what I’m about to illustrate using a simple example of how reporting the mean value doesn’t work and in fact seriously skews the results in favour of a particular outcomes, example:

    Thirty Five residential properties were sold in a month in the Dublin area. Of these twenty five are sold at 100k and the remaining ten are at the top end of the market and sell to an Outside Investor (perhaps an Oil Barron or Chinese factory owner) for a million each. In this case example to report the mean or average figure rounded up would put average unit price of the 35 properties sold at almost 360k. Well out!! The median if reported would place average unit price at 100k. The median is more representative of the normal purchasing behaviour of the average Irish buyer. The exclusive purchaser is not typical and in not typical of average purchasing behaviour either.

    After considering how to report the average unit price you then have the further problem of comparing apples and oranges and even a few bad bananas as well. How do you go about comparing a three bed semi in D4, D6, D8… while also factoring in the equation individual conditions (Ha! put your own stamp on it? Well…) of each property; let alone the problem of factoring in issues specific to each neighbourhood and street (the leafy banks.., the rodents, traffic noise, light etc…).

    Personally, I think it best to skim quickly over these bias figures, as they serve only those with heavily invested interests in the holy grail of the property market – real estate agents, developers, banks and general profit making operators.

    I trust better other variables to guide me in determining what future house prices will be. For example, growing unemployment, short-term contracts and low pay (work contracts are a feature in other counties, Holland being only one example. And these are becoming popular here also and will reduce further peoples’ ability to borrow money).

    There is also the problem of population decreases in particular there is a steady drain in the crucial 25-30s age brackets, in particular over the last number of years (outward migration). This will impact present and future demand.

    And for those still employed many are experiencing income decreases, in addition to increasingly stressful work and living conditions. Some will likely face unemployment in the future. The public sector and private sector…!

    Then more generally there is the over-supply of units (100,000 potential market ready properties reported above between defaults and NAMA holdings if you can agree these figures?). Also reported today in an Irish Paper is half that half of the south Dublin mortgaged properties are at significant risk of default and possession. Its like putting Oil back in the ground the way the figures available don’t seem to reflect the extent of units vacant or potentially on the threshold of for sale.

    On the up-side of all this there is a good percentage of non-mortgaged properties in the country. However, how to represent this in a population that has the highest personal indebtedness rates in Europe is anyone’s guess.There is also the issue of increased dependency on those working (Tax deductions) due to an ever ageing population.

    There is also the issue of buy-to-lets. There is a big bundle of them around according to the latest figures. What percentage of these are in mortgage difficulty is not represented, it is not yet know how those that are are to be redistributed following possession. It would seem it is only a matter of time for the buy-to-let issue to be resolved. The Central Bank is calling for measures!!

    Personally I predict there is to be a BIG surprise in the next few months on the issue of buy-to-lets in mortgage difficulty and that the issue will mostly likely decided on and dealt with before the Personal Insolvency Bill is enacted. This would need to happen to establish the wood from the trees in respect to the problem surrounding those who can’t pay, won’t pay. Also the non-action up to know on possessions and sale of excess property has inflated rent yields, also propped up by subsidy payments from the government by way of rent allowance. This ship may also have set sail and may change the dynamic in the next number of months for those relying on rental income to keep buy-to-let mortgages afloat.

    So in respect to the question has the market bottomed out? I personally think no in so far as we are dealing with a set of factors never ever before seen in this country , or perhaps in many others either.

    How these factors eventually interact and play out is anyone guess; but one must consider exercising caution in respect to taking on any type of debt. This would seem silly when the entire country and beyond is desperate to de-leverage.
    There is also the memory of past frights, think back to the 1980s when mortgage interest rates were in the 18% range…

    Opp’s that reminds me I nearly forgot to mention the European crisis. And also the imminent danger of a Financial Global meltdown; there are plates shifting and surface cracks appearing in the USA AND also in China… (Despite the mostly goody goody reporting about China this concern is becoming more evident).

    Personally I’ve not given up totally. One must live somewhere after-all. In fact I think there are lots of people like me who will consider purchasing an average home once the price reflects reality. At the moment I feel there is a bit of loose cheering at empty fences in an effort to get some punters rushing along to the bookmakers stand. There will be no easy money to be had at this track for the ordinary Joe at least.

    In sum if anyone in the Dublin City area is considering selling an average house at a average price I’m looking to set down roots. I’d love to hear from you:


  6. Matt Nugent at 12:22 am

    I know a lot of people have got stung with the property crash over the past 6 years but it hopefully has been a reality check that property just like stocks or any other investment can fall (or collapse) as well as rise, but in the last 6 years life has moved on and people who were say 18 or 19 at the time are now in there mid 20,s and are looking for there own home to live in but with the uncertainty in the property market there left waiting until there sure there money is not going to be wasted, but there lives are moving on and the population in Ireland is rising not falling so i think now is as good a time as any to buy that property especially if it is to be a home.

  7. Karl Deeter Author at 3:37 pm

    The rebuild cost argument is always an interesting one and I have referred to that myself in the past, but something that is a factor (mentioned by Andrew) is emigration. If you have a massive loss of population it means the prices stay below building costs – this occurs in the US in ghost towns and is starting in cities like Detroit etc. I don’t personally think that will occur in Ireland and for that reason think it is a fair consideration. Watching yields is a good indicator as well, within the M50 things are starting to look far better these days, nationally it’s anybody’s guess

  8. Andy at 3:19 pm

    A number of factors have to be taken into account, the first being the population of Dublin age profile etc.

    No significant number of new houses are being built in the city to cause the prices of existing stock to fall.

    When looking at the house prices excluding the site cost the price of many houses are at a stage where they could not be built for the selling price.

    It would appear (if I am right) that the existing houses must be very near to levelling off especially if the population is not falling as there is existing demand.

    The banks lending practices will continue to have a major impact on prices in much the same way they did during the boom years.

    Also a lull can be expected as the potential buyers must save for the deposits unlike the past where they could borrow 100% (plus in some cases).

    The elephant in the room is the number of apartments available, like it or not the people of Dublin do not like apartment living when it comes to rearing children, most likely due to bad planning and development with no facilities for children.

    So as long as the figures continue to include apartments as homes (no offence intended) the real average prices for houses will remain unreliable because there appears to be a lot of people who bought apartments who are now looking to move to the house with a garden (natural progression) however the demand for apartments appears to remain weak and so will the prices.

    Yes we have a two tier system where the houses far into what was the commuter belt will not have the same demand because people are looking for convenience when travelling, one car instead of two, quality local amenities such as shops / services etc and very important a reliable public transport system.

    I think our potential buyers are now taking everything into account and will be looking at their quality of life in their new home and the affordibility of the mortgage payments.

    For every person / family experiencing mortgage difficulties there is the extended family learning from the mistakes of the recent past and being more cautious.

    There are a lot of wounds to heal before there will be demand for houses in the extended commuter belt, of course more industries setting up offering local employment could change that picture.

  9. Andrew at 3:05 pm

    Euro in deep crisis, EU in danger of fragmenting, job market stagnation, more emigration, further impending austerity… the market has turned alright… for the worse.

  10. Frederick Webster at 2:53 pm

    I am no Einstein or economist but I predicted this last January while all around me were in total disagreement.
    Of course the estate agents and developers would try to make us think differently including the Central Bank just a couple of weeks ago and they have done so all along and continue to do so. The public listened to them previously and everyone is paying the price now, but no more.

    Also the posted and asking prices on Daft and myhome are ridiculous, evidently there are some or most vendors who think there is some ejits out there with more money than sense.

    The decline in 2012 will exceed that of 2011 and I am waiting for rock bottom before I buy. They will try to tell you that renting is a waste of your money. On the contrary, my money on deposit is increasing in value every day while property continues to decrease.
    One would be foolish to buy now unless one wants to throw away their hard earned money.

  11. Philip at 2:48 pm

    Property prices in Ireland have fallen a lot since 2007 but prices are still a lot higher in real terms than they were in 1996. I sold a house in 2001 for 125K thinking that prices could not go any higher. Some commentators say that the 2001 level is the correct level for house prices. Checking websites shows that houses in the same location are asking 170K – 200K (they were over 300K in the boom…. boy, was I kicking myself). Further falls should therefore be expected.

Leave a Reply