Conditions leading to a decline in property values

Property, no matter where, only declines where 3 conditions are met out of the 4 below:

  1. A recession, forcing lower wages (or increases in wages) AND large increases in unemployment, causing very poor consumer confidence.
  2. Property bought with very high proportion of mortgage debt. (95% - 100%+)
  3. In tandem with the above rapidly rising interest rates to very high levels
  4. Massive oversupply of property.

At the moment the VI’s like to quote strong employment, strong demographics and affordable mortgages as the reason for continued growth or a soft landing but their arguments can be condensed into one line: We’re building houses for builders who are building houses.

HI GB

interesting post, but I have to disagree with your assesment. While the reasons you have stated are often those given for “corrections” and, indeed, can in and of themselves be the cause of a price drop, they are not always.

Asset prices (not just property) in a market can (and often do) correct mearly on a change of sentiment. If a market has seen a significant increase (run up) in prices, particularly where there is significant speculation on the continuation of the price increases, a point is often reached where the price growh very suddenly deminishes or stagnates, purely because the majority of buyers are priced out and the majority of sellers believe the rate of increase can be sustained and lose sight of their clients buying power. The result, volumes of sales drop, followed by prices, followed by the speculative holders dumping their asset, increasing suppy thus forcing prices further down.

In a situation like our property market, where, over the last number of years (more than 5 less than 10) on average one in ever three houses sold was as “an investment” and latterly where a significant number of these “investment properties” are being held vacant, purley for the predicted/hoped for capital gain, in the event of a “revulsion phase”, we have a significant overhang of latent supply, on top of the new builds and “normal run rate” of property comming on to the market.

While any one of the condtions you have listed could indeed trigger a property crash here (even though they keep telling us that it’s different this time/in Ireland!) given the position the market has developed into over the last number of year I, for one, do not believe we need any external factors to trigger a correction in the Irish property market.

But then again, that’s just me.

Blue Horseshoe

I’ll add this since it’s in the same vein. Hope PJ Brady does not mind me formatting it a bit for easier reading.