Dublin property prices are falling again


#21

The Irish Times have reported that Savills is scaling back its operations " to concentrate on the high end of the market".
What do other pinsters make if this? Could this be a canary in the coalmine?
I seem to remember other estate agents of note closing branches at the end of the last boom.


#22

I would have thought the high end would have been the area under most pressure since the levelling off in the latter part of last year followed by the drops of this year. Is there much of a top end to keep them occupied?


#23

In Cork Savills have been going for the new builds market. They are going for 150K-200K more than 2nd hand so higher commissions


#24

I reckon asking prices in SCD are now down 5% since the recent peak in Q2 2018. All of the rest of Dublin is flat or falling. (Based on myhome.ie average asking prices per sq. ft).


#25

I keep an occassional eye on the changes in the Property Price register for Dublin and in general it fluctuates between 2 and 3 hundred sales per week. a couple of weeks ago it hit 375 then went back down to 260 and then back up around the 300 mark. This pretty much matches the number being added to the market. The number of houses for sale in Dublin at the moment is 5502 - just under the peak that I noticed last year in August at 5600, the figures have drifted around 5500-5600 for the last few weeks so it seems that sales and supply have increased - as you would expect in a peak selling season. Overall sales in Q1 seemed to be a bit down on last year - I reckon Q1 is pretty much complete:

3911 sales in 2018 in Q1 (830 new)
3715 sales in 2019 in Q1 (857 new)

so this suggests a slight reduction in the number of sales even with falling sale prices. The median selling price in the PPR so far this year is 335k - the median asking on myhome is 399k - last year this gap (which I call the expectation gap) was about 42k (380k to 338K). That suggests sellers have trended in reverse of the market.

To be honest I don’t think any of these figures affect the high end market. The high end market is suffering because there isn’t a new flow of rich people coming through - all the talk of high end jobs coming with Brexit and influencing the market has come to naught. The jobs may have come (and I think there are less than people might have us believe) but the people coming are renting for the moment because of the level of uncertainty. These people also won’t pay London prices for a Dublin house. The next generation of locals are not wealthy, neither are their parents - many of whom got burned with property/bank shares in the last crash. The diminishing share of cash buyers is, I think, another indicator of that situation.

One anecdote is a friend who was talking of downsizing and retiring earlier. His house would have been worth 1m in the last boom, he was looking at luxury 2 bed apartments around the 350k mark and calculating that 650k tax free could buy a nice retirement - he gave up on that when he found that he would only get around 700k for the house and he also started to understand the the cost and nature of apartment management fees etc. To be honest I think a lot of high end pricing can be explained based on a seller attitude of - ‘I’ll downsize if I can find somebody willing to pay X for my house but otherwise I’m happy just to stay on’. A well-designed property tax would disincentivize this behaviour but ebven the so-called socialists don’t want this.

I don’t think that median price is going to shift an awful lot. At current interest rates - a couple at the house buying stage (say 26-35) on average ‘good’ salaries (ca 60k) can afford the median house and can save for the deposit over a reasonable time frame. The problem is that a ‘very good’ salary isn’t much more - say 90k at best for someone in that age range - this will only a house costing around 500k. Very few people in that age range are getting salaries that can push them into the over 500k market. Parental money is much less an influence than people seem to think - I would view myself to be reasonably well off but I doubt that I could raise 100k in the morning to help my kids buy a house - and remember whatever you raise has to be shared between your kids.

The other problem with this ‘squeezed’ higher end market is that single people on the average ‘good’ salary have little hope of buying much more - I think this where the CB cap bites. In the last boom a joint income of 200k showed you were a ‘good bet’ and you could get a mortgage 6 to 7 times that salary - that’s where the 1.2m houses in Ranelagh came from. Now that cap and the deposit requirements pretty much force a top of 800k - there are also a lot less joint salaries of 200k - most of these came from Finance Services companies and the Law. IT was still in the doldrums in the last boom - it’s certainly in better health now but the number of people with salaries over 100k is pretty minimal - in software dev companies I reckon less than 10% of staff earn over 100k even with bonuses/ share options etc. In the Google/Facebook/IT Service end of the market it’s well below 5% of the market. So a squeezed upper end shouldn’t be a surprise - also the stalled median should not be a surprise - salaries (certainly in IT) are rising very slowly - you have to make a move to get an increase in IT - but if you move too much your employment prospects diminish - one short move is fine but a sequence of moves less than 18 months raises alarm bells. I compared IT salary levels from 2013 to 2019 at a number of levels using the Morgan McKinley salary reports. Over 6 years salaries have changed little despite the supposed pressure on salaries - in %age terms developers have done best but at the highest levels salaries have stagnated:

Graduate Developer have moved from (25-28) to (35-45) MM does not deal with this level - figures from Sigmar
Java Developer 5+ years have moved from (65) to (60-80 Ave 70)
SDM 5+ years have moved from (125+) to (90-140 Ave 120)
CTO 5+ years have moved from (145+) to (100-180 Ave 130)

There are certainly exceptions to these bands but looking at this from a hiring perspective as well as an employee perspective these ring pretty true with me. If anything contract rates are worse than they were 6 years ago - contracting is now viewed as cheap labour and only highly specialised contractors are getting over the 600pd mark and that’s usually based on personal knowledge/recommendation of the contractor.


#26

These developments will presumably hinder bonus expectations of all the Google/Facebook high rollers around town:

Nasdaq drops more than 1%, enters correction territory as regulation fears batter big tech
Alphabet shares pulled back 6.1% after reports said the Justice Department is preparing to launch an antitrust probe on Google. Meanwhile, Facebook dropped 7.5% after The Wall Street Journal reported the Federal Trade Commission would be able to look into Facebook’s practices and how they impact digital competition.

“The whole component of what’s going on in tech right now goes back to the rhetoric of Sen. Elizabeth Warren threatening to break up tech giants,” said Jeff Kilburg, CEO of KKM Financial. “We thought that was just rhetoric. But now with this news hitting, it’s really impactful.”

Amazon shares fell 4.6% after The Washington Post said an arrangement between the Federal Trade Commission and the Justice Department put the e-commerce giant under the FTC’s microscope. Apple also slipped 1% after Reuters reported the Justice Department received jurisdiction to investigate the company’s practices.

https://www.cnbc.com/2019/06/03/stocks-rise-but-trade-battles-keep-gains-in-check.html


#27

I think this is excellent analysis. I don’t believe the level of jobs being created in the IT FDI industry in Dublin are high paying positions with skill transferability. I’ve no evidence of this as its more of a hunch. Is there any career progression working at Facebook in Ireland? At the higher management end probably yes but these positions are not typical.


#28

People in tech roles in tech companies in Dublin have generally have highly desirable and transferable skills. Dublin has gotten so expensive that tech staff within the EU wont come here anymore so demand for decent tech talent is very high and some companies are paying serious premiums. The % of people in Facebook and Google etc doing tech stuff is prob relatively low compared the sales, support and marketing types they employ. I’ve never seen a tech job at Linkedin Dublin for example (not to say that there isn’t). Career progression in tech usually means changing companies periodically, thats the same the world over not just Dub.


#29

To be fair to Facebook they do try and promote from the lower levels. They provide access to technical education so that people can move on and it does happen. It’s one of these things that can be a win-win although Facebook will win a lot more than the employee does.


#30

CSO data.

…records began in this instance in 2008?

ICT bracket: The large increase was 7.9pc in the information and communication sector where average annual earnings climbed from €56,758 to €61,269


#31

The CSO Residential Property Price Index for April shows prices increasing almost 6% outside Dublin but only 0.5% in Dublin. House prices in Dunlaoghaire-Rathdown fell 1.5% year-on-year.


#32

CSO Apr 2019

https://www.cso.ie/en/releasesandpublications/ep/p-rppi/residentialpropertypriceindexapril2019/

Dublin - houses
Peak: Oct 2018
Apr 2019: -0.4% decrease and +0.0% annual
As of Apr 2019 prices have fallen back -3.4%

Dublin - apartments
Peak: Sep 2018
Apr 2019: +1.1% increase and +2.2% annual
As of Apr 2019 prices have fallen back -2.1%

Dublin - all residential
Peak: Oct 2018
Apr 2019: 0.0% change but +0.5% annual
As of Apr 2019 prices have fallen back -3.0%


#33

I don’t know whether this is blind panic , sheer stupidity or an attempt to influence Central Bank policy. If it’s the third option then if the new CB head reads it I think he’ll see the first two before he sees the third.

I used to think Mark Fitzgerald was a buffoon who got lucky in the property business , possibly because of his family connections, and then I thought he handled the business well, seemed affable and knew what he was talking about - I’m back to the first opinion now. This is just an aimless, idiotic rant:


#34

No surprise there. Vested interest posing as voice of reason wants to increase people’s ability to spend the rest of their lives repaying ridiculous mortgages on cramped, substandard dwellings, or overpriced fixer uppers they can’t afford to fix-up. Hopefully Makhlouf is smart enough to see it for the snake-oil it is. The caps seem to be just-about working to put the brakes on the train. I shudder to think what would happen if they were relaxed.


#35

Utter lunacy considering the dark clouds that are hanging over us. And downright scandalous that the IT is giving a voice to this dangerous guff. Vested interests alright.


#36

I reckon Fianna Fail are going to restart their “bring back the good times” snake oil lax lending lubricant hints to the masses, especially in the rural areas where voters know there’s fuck all hope of any other type of boom coming close.


#37

I am easy about relaxing the mortgage caps after we are a full year into the next cyclic recession. Not now at the very top of the market when it would deliver a huge and procyclic thump.


#38

How do you get the genie back in the bottle? - if it’s a political decision then never going to happen.


#39

Does anyone really expect that even if the Irish CB wanted to do this that the ECB would allow this?


#40

First main media article I think I’ve seen on the price drops this cycle