Fall in house prices fizzling out.

freedomlover

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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

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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.
 
9

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

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

Ard-Taoiseach

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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

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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

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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'. :evil:
 

Ard-Taoiseach

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General_Hoche said:
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

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General_Hoche said:
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'. :evil:
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

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misty said:
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.
 

Ard-Taoiseach

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As well as this, rental inflation was 12.1% in the latest CSO report. That suggests a solid underlying demand for accommodation. The marginal buyer of 2006 is now the renter of 2007.
 

Badboy

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Ard-Taoiseach said:
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.
Until house price indices are based on actual sales prices and not AMVs, those stats are meaningless.

There was an article in a local paper this week claiming a house was withdrawn from auction at 440k and later sold for 515k.

Amusingly the AMV was 495k.

Are we expected to believe that someone is prepared to pay 70k more than the highest bidder at a public auction and 20k more than the AMV.

If thats the case then there are people so stupid out there that the bubble will keep expanding
 

Badboy

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Ard-Taoiseach said:
As well as this, rental inflation was 12.1% in the latest CSO report. That suggests a solid underlying demand for accommodation. The marginal buyer of 2006 is now the renter of 2007.
I am loathe to query anything from the CSO, however as a renter in Galway, I can confirm its happy days.
 

jake76

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The Index, is based on repeated subjective valuations....'rather than actual market transactions' according to the PTSB. In other words its a load of tosh.

http://www.permanenttsb.ie/dynamic/pdf/ ... dology.pdf

Prices have fallen by more than 3.3% this year.

http://www.treesdontgrowtothesky.blogspot.com/
http://irishpropertywatch.com/

There is no rental shortage either. There is more rental accommadation available than a year ago in Dublin. I would expect that rents to at best flatline in Q3 and Q4 this year
http://daftwatch.atspace.com/daftcounty_1.html
 

rockofcashel

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Ssssshhhh... you're not supposed to talk down the economy Jake..

However, for real evidence I can tell both FL and AT that rents in Cashel are far from rising, and are in fact dropping. My brother in law is moving into a house tommorow paying 650 euro a month in a development that was renting for 850 per month less than 6 months ago.
 

droghedasouth

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misty said:
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
Anyone who believes that a reduction in the rate of decline for a couple of months means it is time to buy will be gratefully received at an estate agent near you.

From what I have read, the property market does not do rapid price corrections like the stock market. The slow decline in house values (especially taking inflation into account) could last for the life of this government,
 

pluralist

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905 said:
I'm just glad David McWilliams wasn't right, again. Imagine the consequences for society if anyone took him seriously.

905 said:
Still, he only has to be lucky once.
The consequences for society would actually have been extremely positive if David McWilliams had been taken more seriously back in 2000/01.

(1) People wouldn't be deep in hock to the banks

(2) There would have been more investment in productive business

(3) We wouldn't have such an unbalanced economy.

(4) Hardly anyone would be in negative equity

(5) The 100% 40 year loan would never have been invented.

On the negative side, not as many property developers would have been able to buy Bentleys and Porsches. Actually, come to think of it that could also be seen as a positive.
 

saratoga

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General_Hoche said:
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'. :evil:
By 'power', you presumably mean the power to not build houses if you don't want to? Wow, they really are underhand.
 

General_Hoche

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saratoga said:
General_Hoche said:
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'. :evil:
By 'power', you presumably mean the power to not build houses if you don't want to? Wow, they really are underhand.
By 'power', I mean the scam of constantly selling houses for €400,000 when they were built for €100,000. If supply ever overtook demand, this scam would end. Supply will NEVER overtake demand in this country as long as builders can operate outside the scrutiny of government [and dont hold your breath for this current crowd to ever introduce housing targets for builders]. The same government who paid homage to Michael Davitt last year! You obviously believe that the bankrupting of young people to buy a roof over their heads is right and just.
 

saratoga

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General_Hoche said:
saratoga said:
[quote="General_Hoche":1i6t28up]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'. :evil:
By 'power', you presumably mean the power to not build houses if you don't want to? Wow, they really are underhand.
By 'power', I mean the scam of constantly selling houses for €400,000 when they were built for €100,000. If supply ever overtook demand, this scam would end. Supply will NEVER overtake demand as long as builders can operate outside the scrutiny of government [and dont hold your breath for this current crowd to ever introduce housing targets for builders] You obviously believe that the bankrupting of young people to buy a roof over their heads is right and just.[/quote:1i6t28up]

No. And that's not what you referred to or implied by the use of the term 'power' in your original post. You specifically talked about 'turning off supply like a tap'. Obviously you think builders don't have the right to stop building houses when they, well, don't want to build houses anymore? They're trying to make a profit, do they have to apologise for that?
 


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