Disconnect between house prices and the state of the economy

Bit of a rant here. All this week there has been media commentary about how this recession/depression is worse than the eighties and about how much of a hole we are in. Yet still during all this, properties are appearing new to the market on daft for mad prices. e.g. 4 bed semis in estates in SCD for more than half a million.

Something big is going to happen in the next few months. I predict a major property crash…

as opposed to the 50% we’ve had??!

you could be right

gulp

Indeed. One would think if this doesn’t induce the start of the Panic Phase, then nothing will.

“Celtic Tiger Prices” still asked for property in County Dublin, just compare it to countries the IMF are not interested in.

On the other hand
maybe impending global financial collapse and hyperinflation will lead to panic buying of property…?

Once interests rates rise you will see some serious carnage… and I suspect you may see a lot of folk just abandon their houses and do runners abroad.

My only fear would be that the banks use the new bailout cash to desperately try and prop up the property prices and in doing so piss away our very last chance of survival.

Sales market has almost completely died in the last 6 weeks. People are expecting stamp duty to be cancelled in the budget as suggested in various newspaper articles.

Still rental business ticking over of course and lots of startup businesses in technology and the like delightedly taking up cheap commercial leases. Landlords have gotten very flexible about terms and tenant quality.

Viewed a house in early summer. Asking price was X. After viewing the agent said they would accept an offer between 80% and 90% of X. I said I wasn’t ready yet. Listed asking price dropped to 90% of X. Viewed again early autumn. Offered 70% of X. Agent tried to push me closer to 80% but I wouldn’t budge. The magic letters IMF start appearing all over the news and suddenly the agent is in touch again a couple of days ago saying they will take 70% of X. I politely declined. This house has been on the market for some time and the previous adjustments indicate that the vendor had taking at last some reality on board. Unfortunately for him/thankfully for me not enough reality to accept my offer when I first made it. But there are many other vendors out there with much more unrealistic view points. It will take a while for them to get the message.

That’s something I worry about too.

The banks will have no “new” money to lend and prop up property prices. The 100bln or so we are most likely getting from IMF/EFSF is in a round about sort of way just going to be used to allow the banks repay the ECB 100bln or so. This allows the the ECB to breath a little as they cut their exposure to Irish banks (at the moment its the highest in Europe, which makes no sense considering places like Spain are 10x the size, which made the ECB very nervous)

The EFSF/IMF money will be;

1]More expensive, 5% vs 1%
2]It will come with conditions. None of which are likely to be property market positives as they will be based on austerity and getting us into a position where we can actually repay the 100bln; ie they will gradually force the country to de-lever and cut its debts Versus the staus quo at the moment where we just sat there like zombies thinking we could borrow forever off the ECB at 1%

The new Era is upon us. The subsidies from Europe are getting more expensive and tougher
I cant see how any of this is in any way positive in the next 5 years for property prices!

It may be a national embarrassment with the IMF coming to town. To look at it another way Ireland could offer them their stiffest challenge ever. The next edition of the IMF How To manual could have a specific case study about our little Island of Abject Vested Interests or IAVI for short :wink:

Seriously

we should tell them that we’re prepared to bring the whole edifice down and start again rather than sign up for 100billion at 5%

There would come a point when foreign capital would flow into the Irish market and buy up cheap property. A total collapse to 1990’s prices would mean that outside investors would have a massive buying opportunity in much the same way that irish investors viewed the Hugarian bulgarian market etc.

Which would be a bloody good thing

Interesting, thank you.

would be a sign of the real (not false bottom) tbh.

You reckon SD will be cancelled ?

Ask the IMF

But I wouldn’t say it’s top of their list of to-dos eh…

I bet if prices did fall to a level that we now think would seem reasonable to a foreigner, that they still would be too scared to touch it.
There comes a point after an economic collapse where you worry about your “property rights” and the stability of the political / legal /tax structure that surrounds it.
Lets face it, our Politicians are generally perceived as being corrupt. Property taxes etc on the horizon and the potential for them to increase further is another
The only foreigners I can see buying up property are Irish citizens who currently live abroad. They would have less fear in these respects and would be more willing to take the risk.
A Chinese buyer though? They would just stick to buying in the more stable parts of the world, like London, Paris, Hong Kong, US etc where they trust the rule of law a bit more.

The older generation remember 1987, when the IMF were on the verge of being called in. It marked the bottom of the last property cycle. It’s always darkest before the dawn etc. Then a deal was done with the public sector unions (the ESB almost shot it down but it survived) and the property market didn’t look back until 2007. I believe this is what has been stiffening seller resolve up to now.

I’ve heard more than a few make comparisons between then and now, all looking for a psychological crutch to support the valuation of their own home. It helped shore up the belief among older sellers that the bottom was nigh.

Well the IMF/ESF are here and that particular argument is blown away. With that crutch pulled out from under them, the older generation are likely to start really losing heart. Don’t underestimate the power of the latest developments to completely shatter their base of assumptions. First the Church, and now this. It must be very difficult for people who have clung all their lives to a few simple certainties to have them swept away in a tidal wave of change. While I have sympathy for them, I think it will result in a real softening of seller resistance over the coming year or so.

My own benchmark is to see the ratio of average annual household disposable income to the average house price hit 3.5. Ideally I’d like to see 3. Currently we’re around 4.5 but the property tax and water charges will bring down the disposable income side of the equation. Not to mention the higher taxes from self-inflicted debt slavery for years to come. So a further fall of at least 27%, more likely c.35% over the next 2-3 years is what I require for Irish property to become “reasonable value” once more.

+1.
Ireland Inc. is now sygmatised for at least a generation. The World will now view us in the same patronising manner we looked down on Latin America or Eastern Europe.
People will fear investing in Ireland or buying property in a failed State.
That coupled with our crappy weather and high prices will scare off the bravest of property speculators.
Ex Pats living abroad may eventually return with wads of cash, but they will be the least likely bracket to pay over-inflated prices.
We’re just Greece with rain right now.

To what end? Why would foreigners come in and snap up wholesale all this cheap property in an IMF controlled basket-case backwater of a country? In the expectation of Bubble 2.0? As evidence to disprove your own point - all those Irish investors in Hungary and Bulgaria you mention…how did that work out for them then?

Ed re: OP: You’re dead right. Property prices are still absolutely insane.

House prices are going down a black hole like the rest of the economy.
But there still seem to be a few jokers in the rental market.
I am on a general Daft watch for south country Dublin out of general curiosity
Recently received in my basket two that are worthy of note:
4 bed house Rockfort Avenue Dalkey priced at E8,500 per month!!!
Two bed so called coach house - Ardeevin Road Dalkey - that looks like a garden shed at E1,600 per month!!!
Perhaps Dalkey is different ha ha ha ha ha ha…