DNG boss believes 2012 “will be turning point in the market"

mambo · January 17, 2012, 2:28pm

DNG CEO Keith Lowe believes that property prices in Ireland are now “over-correcting” themselves but insisted that 2012 “will be a turning point in the market” with “increased transaction levels in the year ahead.”

Speaking at the release of the property company’s 2011 review and 2012 outlook, Mr Lowe said that the industry was being badly affected by the lack of mortgage lending currently available but welcomed the fact that the banks were slowly starting to release funds again.

In his report, Mr Lowe said: “Following five years of sharp price falls in the residential property market, it is our belief that property prices are now over-correcting due to the unusual economic conditions that we find ourselves in. This is also predicated by a lack of liquidity and in particular restricted mortgage finance both in the owner-occupier and investment sectors.

“Property prices did get out of control over the last decade, but they have now dropped by an average of 65% in the Greater Dublin area since 2006 and prices are now back to levels not seen since the year 2000. A number of distressed property auctions, whilst successful in terms of sales, have also added to the over correction as, in the main, they are limited to cash buyers only.

“It is also interesting to note that Dermot O’Leary, Chief Economist of Goodbody Stockbrokers, who has provided an independent assessment of property prices for us, feels that a fall of 60% is “about right” based on a UK comparison with average price to income ratios and yields.

“The property related measures adopted in Budget 2012, in the form of additional mortgage interest relief and very attractive Capital Gains Tax provisions are welcome and they are an indication to us that the government has finally realised that one of the key factors for economic recovery is to have a vibrant and fully functioning property market. This will not happen without adequate funding for mortgages being available to all sectors of the residential market.

“Certainly, we have noted an increased appetite to lend from the two pillar banks and from a number of non-Irish banks in the last number of weeks. This will assist market recovery and we believe 2012 will be a turning point for the market.

“We have also noted a heightened demand and an increase in transactions for large residential portfolios from cash rich Irish and non-Irish investors which is likely to escalate in 2012 as investors take advantage of low prices, lack of liquidity and the new CGT exemption measure.

“It is our belief that property prices will continue to over correct this year due to liquidity issues in the mortgage market. However, we do believe that prices in some sectors, such as the upper market and properties positioned in mature south and north side Dublin locations will level out, with the possibility of price increases in some pockets where the supply of properties is limited.

“On the basis of low and falling interest rates, the new budget measures and some improvements in the availability of mortgage finance, there is also likely to be increased transaction levels in the year ahead,” he said.

blogs.myhome.ie/2012/01/17/dng-b … he-market/

Full DNG report: dng.ie/pdf/DNGReview2011Outlook20121.PDF

kennyb3 · January 17, 2012, 2:32pm

Fingers · January 17, 2012, 2:41pm

It’s always darkest before it goes completely black.

23rdbuchan · January 17, 2012, 2:43pm

Nah at this stage it is more like

Blue_Horseshoe · January 17, 2012, 2:50pm

In a normal circumstances, the property market has has limited impact on the economy, and certianly none on recovery. GDP is measured by the sum of 4 components;

Consumer Spending
Capital Investment
Government Spending
Balance of exports over imports

What impact the property market exerts is not included in Comsumer Spending, but rather under the Capital Investment proportion (so it is the initial construction of the building, rather than its first or subsequent sale, that gets counted).

Blue Horseshoe

jxbr · January 17, 2012, 2:50pm

I am constantly amazed at macro-level statements by estate agents on property price falls - in the past few weeks, there have been reports from Sherry Fitzgerald, sunday Times, DNG and others all with essentially the same message - that are contradicted by micro-level behaviour from the same estate agents regarding the asking prices for houses they are selling. Prices are falling but the asking prices for individual houses are not.

Prices have dropped 60+ %. Prices dropped significantly in 20111. Prices are continuing to drop in 2012. The asking prices of individual houses are not.

needle · January 17, 2012, 3:00pm

mocame · January 17, 2012, 3:09pm

mambo:

“It is also interesting to note that Dermot O’Leary, Chief Economist of Goodbody Stockbrokers, who has provided an independent assessment of property prices for us, feels that a fall of 60% is “about right” based on a UK comparison with average price to income ratios and yields.

So what? Property in the UK is also very significantly overpriced IMO particularly in the south east.

“The property related measures adopted in Budget 2012, in the form of additional mortgage interest relief and very attractive Capital Gains Tax provisions are welcome and they are an indication to us that the government has finally realised that one of the key factors for economic recovery is to have a vibrant and fully functioning property market".

Jesus wept! Proof as if proof were needed that politicians are still in the pockets of the property development/ sales industry and they have learned nothing from the economic catastrophe which has befallen this country. Cheap house prices and rents are one of key factors for economic recovery. Does anyone in Dáil Éireann understand this? Joan Burton maybe but none of the rest as far as I can see.

mairz · January 17, 2012, 3:13pm

Sherry Fitz don’t seem to be quite so upbeat in their 2011 report. A lot of whingeing regarding lack of bank lending to potential punters.

sherryfitzgerald.briefyourmarket … brandId=15

fishfoodie · January 17, 2012, 3:35pm

I’m fairly confident that the people predicting the End Of the World in 2012, due to their misunderstanding the Mayan Calendar, are much more likely to be correct than this gobshite

coc · January 17, 2012, 4:05pm

In fairness, the market conditions could turn from a slow lingering death over a decade into a sudden precipitous cardiac arrest of a collapse. If we’re dumped from the euro in 2012, DNG could finally get to put a tick in the ‘correct’ column after years of ticking the ‘incorrect’ column.

tiger · January 17, 2012, 5:47pm

At least causation & correlation is part of project & leaving cert maths now, I believe.

darwi · January 17, 2012, 7:06pm

What we need in this country is really really expensive bread.

Understanding the underlying fundamentals of bread value will make us all rich. Bread has been under priced for too long and it’s true value has been suppressed by an all too common (communist?) view that it is a ‘staple’. Once we realise the value of trading bread we can pass it back and forth between us, generating more and more money as we do so. That’s how you generate ‘economic growth’ as they call it at the fancy parties. We can then use our new found wealth to feed the economy further by getting fancy haircuts and buying coffee and, you know, doing spendy stuff. Before we know it we’ll be fighting each other to own the most expensive bread in the land and the economy won’t know itself.

darwi

Homemaker · January 17, 2012, 10:46pm

My kids ‘believe’ in Santa Claus…