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

Dreaded_Estate

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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.
 

Cassandra Syndrome

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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,
 

dresden8

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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.
He is inside the tent pissing out on us, just like the rest.
 

Aindriu

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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.
 

Scorpio

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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.
 

HarshBuzz

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hmmm, so Morgan Kelly was right

quelle surprise
 

johnfás

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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).
 
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Rebel_Yell

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Surely there is a significant difference between the revenue gained per acre and the land value of that acre. Builder buys acre for 1 million. Was putting 10houses on that and selling each of them for 200k. Total revenue of 2 million.

Assuming it has dropped by 50%. He is now buying that land for 500k. Still selling the houses for 200k but now they are a lot bigger. So he is only selling 4 of them. The revenue is 800k.

His margins and a whole heap of things have changed but there is no direct relationship between the land value and the density. Clearly there is an indirect relationship, but if we're gonna read data, we should read it right.

Still a mess, maybe a bigger one.
 

meriwether

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Why would prices do anything but fall when people are still losing jobs, while salaries are still being cut and when the cost of mortgages is increasing for new purchasers (to offset the losses incurred by the banks on tracker mortgages).
Precisely.

Wages down.
Taxes up.
Unemployment increasing.
Emigration suppressing demand.
Interest rates about to rise in near future.
Banks tightening lending.
Still an overhang of supply from excess building in boom years.

No fundamentals support any sort of rise.
 

Paddythai

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I rent.
if the property near me drops in price from 350,000 to 150,000 I still can't or wouldn't buy it because;
1. Banks not lending
2. Self employed with uncertain income
3. Looking at long term future of Ireland house may fall in price further or certainly not increase.
4. Outlook for kids future not good so considering emigration.
5. Quality of life, crime, difficulty doing business here means I have to consider emigrating.

If others are like me then prices can fall but property still not as attractive as it was.
 

constitutionus

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its painfully obvious isnt it?

the banks are going back to their old lending practices. with the average wage dropping all the time now its inevitable that therell be knock on effects on the price of housing.

right now i dont think theres an average gaff worth over 160k anywhere in the country.

which means alot of the country should be less than that.
 

gayguy2000

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I still think the rent here is outrageous. I can't afford to rent anywhere alone these days, cheapest half decent one bed is about 7 or 800 euro. My lease is up at the end of this month and i dont know what i'm going to do.
 

Gemlarkin

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A 50% fall in house prices gives you a 90% + fall in land values

A 50% fall in house prices gives you a 90% + fall in land values
 

Pabilito

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I still think the rent here is outrageous. I can't afford to rent anywhere alone these days, cheapest half decent one bed is about 7 or 800 euro. My lease is up at the end of this month and i dont know what i'm going to do.
I know someone who is renting an apartment that is also for sale. His rent is significantly less on the understanding that he will facilitate viewings and will vacate the property within one month if it is sold. However he is there 7 months now and there hasn’t even been one viewing.

Again its rent allowance that is artificially keeping rents (and house prices) high. There is a load of vacant stuff out there so its only a matter of time before rents and prices fall dramatically to a natural level.
 

Gemlarkin

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There is a huge wave of default in the pipeline on buy to regret property

There is a huge wave of default in the pipeline on buy to regret property
 

DCon

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I know someone who is renting an apartment that is also for sale. His rent is significantly less on the understanding that he will facilitate viewings and will vacate the property within one month if it is sold. However he is there 7 months now and there hasn’t even been one viewing.

Again its rent allowance that is artificially keeping rents (and house prices) high. There is a load of vacant stuff out there so its only a matter of time before rents and prices fall dramatically to a natural level.
When will FF do away with the landlord supplement?
 

Aindriu

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There is a huge wave of default in the pipeline on buy to regret property
I like the twist on the name.

Far too many people bought into the idea of buying a couple of aprtments and letting them out to be their pension pot come retirement. Far too late they have realised the folly of that.

Part of me feels sorry for them but part of me feels that they had a lot to do with property prices and rents being driven up in the first place.
 


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