House prices returning to realistic levels - IT

And they will continue their journey to realistic prices for quite some time to come…

Main front page headline no less and a good article with a balanced viewpoint. This is an important article and goes a long way to redeeming the times after their financial supplement last Friday.

The bit about the IMF will have a lot of people asking why they haven’t been hearing about this sort of thing to date.

I thought that piece read like a CIF press release, with a quality authority figure used to relay the message to the masses. Hurley now has no credibility in my eyes, talking up the property market. For national competiveness, he should be talking it down. Should the head of the central bank not be more concerned with jobs and keeping high employment (to reduce poverty), rather than saving the hides of the landlord classes?

How much does Hurley get paid to come out with rubbish like this?

It must be a matter of perception, because I read it the other way. We have the scary 30% IMF figure quoted in bold, followed by the central bank telling us “it’ll be alright”. It challenged the reader to decide who they trust more.

The credit default swaps brought up in the final paragraph was a nice (and important) touch. Again we find international markets saying one thing with the central bank saying otherwise.

Sure what would they know about economics anyway!

Was Irish inflation 5% last year? I thought it was a bit lower.

Mr. Hurley seems to be suffering from rounding errors.

Given that we are in the eurozone, should price inflation not be based on overall european figures? Otherwise we are perpetuating the disconnect between Ireland and the rest of the eurozone. We can’t very well inflate our way out of high house prices, not without totally destroying the competitiveness of the economy.

His Primary role is to promote stability in the Irish Banking System. Given that the Central Bank was powerless to do anything to prevent the current situation fed by cheap international credit, and that to be fair, the CB did issue may warnings along the way to which all the lenders gave a preverbable two fingers, it how has the unenviable task of having to fight a damage limitation battle on behalf of the same lenders.

Had he made a comment along the lines of “yeah, 30% on top of the 20% already seen sounds about right”, or “30% overvalued? Are you mad? Run for cover, it’s a bubble and she’s about to blow” (all be it veiled in slightly more diplomatic language) then I think the recent speculation on the downward direction of Irish Banking Stocks would have seemed like the bullish highpoint of the year for the institutions.

As to a further 30% drop … given the demographics and economics … that and then some …

Blue Horseshoe

There need to be more articles more hard hitting and realistic than this one in the media to bring it home to people just exactly where we stand at this present moment in time. While I might not agree with or have a more bleak view of property and our economy at least this article is a start and hopefully we may see even more honest views as time passes.

Do the central bank have the authority to restrict lending in terms of amount (100% mortgages) and duration (40 years)? If they did then they are partly responsible for the situation - the drop and resulting impact wouldn’t be as great if the inflation had been controlled by restricting ridiculous mortgages.

LTV was not the biggest issue. Salary multiples are. Agreed on terms as well.

Realistically in a healthy market, a 100% mortgage is okay provided that it is not interest only and is not part of a ladder scenario.

The historic norm on salary multiples was 2.5 times primary and 1.5 times secondary. We are so far beyond this at the moment that property prices will definitely have to halve to get back there. Currently I think I can still get at 6 to 7 times my salary although now of course, they’ve gotten excited about LTV so the deposit is making things slightly out of reach now.

Calina said

Things are at a stage now where the banks seem to be slowly but surely making their way back to this criteria because they are tightening lending to the extent that the risk for securitising mortgages in the future should be easier for them.

That being the case I would think that should squeeze what people can afford and hence the prices should fall because you cant spend what you dont have.

In that case, average house prices are looking at a near 60-70% fall when we get there.

I suspect that your hope for an attack of reasonably objective reporting by Irish financial journalists might be in vain. In my opinion, there are too few capable journalists covering economics and finance in Ireland. As many posters on this site have demonstrated, there is adequate data out there but there are not enough true journalists at work - we have however, a surplus of reporters.

This could be very well nearer the mark than you think. I posted the following on another PropertyPin site today

Not what fall would we need to equate to end of last century prices :question:

Increase this by 15% to bring up to date and annualise - c. €60,000.

Therefore average value of house in Ireland should be €168,000 i.e. €60k *2.8

Proof:

The average house price €168,000 figure is still over the EU average.

Yes,** Calina**, your 60 - 70% expected fall is bang-on :wink:

I would suggest that it is a surplus of columnists and commentaters with no journalistic instinct

No problem with the word reporter

I always thought that a journalist investigated whilst a reporter just, well, reported. Word play aside, I do agree with you. As long as you fill column inches you have done your job.

it is a symantic disagreement

in my view -reporters need to establish the facts and then report them which is the essence of good journalism.

I think any benefit of Monday’s frontpage article has been negated by a very strong editiorial in today’s PD Times ARW where Madam Editor criticises the IMF report (understating recent sharp % drop in Irish house values thus overstating the possible future drop, Ireland’s borrowers more prudent then their UK and Dutch counterparts, average LTV mortgages of 70% lower then these comparative territories, average length of mortgage 20 years etc.) and also uses last week’s report by the EBS/DKM advocating buy over rent as a justification for in Madam’s view price stability returing to the market. Country Tom couln’t have written it better himself.

I viewed a property yesterday afternoon and the EA viewed the Central Bank’s opinion as a clear statement that the market had bottomed out and he did not blush once in passing this pearl of wisdom onto me.

Reassurance for home owners
CENTRAL BANK governor John Hurley has offered home buyers and home owners some much needed reassurance by stating that domestic house prices are returning to realistic levels. In saying so, he has rejected claims in a recent International Monetary Fund (IMF) report that Irish house prices may still be significantly overvalued: more than 30 per cent higher than market fundamentals can justify. etc etc etc”

I think we need to update the Future Shock programme to take into account where we are now. It is worth remembering how prophetic this programme was re oil,property and currency movements and it maybe just what is needed to kick some reality into the populous and to kick some of the stuffing out of the VIs before they destroy this country altogether. :angry: