Indo: House prices 'have hit bottom and will stay there for

I know this report was referred to elsewhere but here’s the Indo’s take:

independent.ie/business/personal-finance/property-mortgages/house-prices-have-hit-bottom-and-will-stay-there-for-years-3049095.html

*PROPERTY prices have hit rock bottom – but could stay there for years, according to a new report.
The average price of houses and apartments is now as low as €100,000, the report claims.
This is just a third of the average price properties sold for during the boom.
Prices have fallen so far in the last five years that it now takes less than three times the income of a single person to buy a property.
But now that they have reached a floor, prices may stay at their current level for ages, the report from Goodbody Stockbrokers says.
The report makes it clear that this is due to the current mortgage lending famine.
The study by economist Dermot O’Leary found prices have now fallen 68pc from the peak in 2007.
These are based on the prices reached on the Allsop Space distressed property auctions which have drawn a lot of interest
*

So no undershoot coming?

The report is from Goodbody stockbrokers and says that the current mortgage lending ‘famine’ will keep prices moribund for years. Nice terminology there, a mortgage famine, nice.

No mention of sensible and sustainable prices being key to a recovery, just oodles of credit.

It’s all in here

Did O’Leary really say that prices have hit the bottom or is that just the Indo’s opinion?

Anyone who knows anything about financial markets knows that “fair value” is never “the bottom”.

Besides, what is fair value for an EU/IMF controlled bankrupt country with 14% unemployed, a huge budget deficit and no functioning banking system? Ask that of anyone who points to this report as the signal to start buying property.

“The new average price means that it now requires 2.8 times the salary of a single person to buy a home.”

Really?

Fair enough, I live in Dublin where the national average may not apply…but I’m finding it a stretch to believe that the average single person in Ireland is able to buy a home for 2.8 times their salary.

can’t see the ‘famine’ word in the Goodbody release here - goodbody.ie/morning_wrap.html#1. Not sure why it’s called a report - it’s a paragraph or 2 from DO’L (maybe I’m missing something) - and I can’t see a whole lot wrong with the analysis either. Just looks to me as if the non Allsop’s vendors are still delusional about values…

@Locutus

So Charlie Weston that added the famine bit.

My only issue with the report is that they identify 4 factors as contributing to the current malaise

  1. tight credit conditions,
  2. housing oversupply
  3. weak domestic demand environment
  4. the lack of transparency

And only one factor a a key to recovery, namely credit.
One of the first things you’ll get thought in economics is supply vs demand.
If you have oversupply and weak demand all the credit in the world will not matter a jot.

One cloud add in more factors such as, buyer confidence, unemployment, IMF bailouts, austerity budgets, increasing stealth taxes, emigration, upcoming property taxes…

Replacement value, in urban areas where there is demand. :wink:

Remember the calculation is any salary against any property. The huge supply of crappy one-beds will severely distort average “affordability” calculations. Sane planning would never have allowed them to be built in the first place.

In the current market someone on say 30-40k can “afford” to buy a shoe-box. We’re supposed to slap ourselves on the back and look forward to a brighter future because a few years back he’d have had to lie about his income, get a joint mortgage with his girlfriend who was also lying about her income.

According to the Demographia affordability study the median Dublin salary is about €50k.

Magpie

couldn’t agree more with what you outline. Personally I suscribe to the supply & demand theory first & foremost, then confidence & then credit. All under the umbrella of IMF, crappy econony, etc, etc, taxes & the like & I don’t see any recovery (increase?) in property prices for quite a while yet. What I do see, and I think it’s all DO’L was saying, is that prices do seem to be somewhere around a fair value point. The link is now gone to today’s breifing, so I can’t double check. I suppose the other surprising thing is that a paragraph from Goodbody’s makes front page headlines in the Indo…

I can get my head around how it may be calculated.
Its the spin on it/cheerleading that gets me.

Charlies summation that “…it now takes less than three times the income of a single person to buy a property.”

If the average person could buy property, many eager buyers would be doing doing exactly that.

Here’s the thing Charlie, they’re not.

I see it’s a full report, can’t find the link - might get a chance to read later…

Temporarily because the banks won’t lend them the money to and because for the last couple of years it’s basically been a sure bet that property would be cheaper the following year.

Open up the credit tap and people will line up around the corner to buy a 45sqm one bed off the plans. Not a thing has been learned because there’s only about 20 people in the entire country interested in having a properly functioning property market that provides decent housing for a decent price in a decent area with decent amenities.

Citing the Allsop auction prices as proof that property is now affordable is misleading. The Allsop properties were priced at realistic levels (going by yield), hence they sold.
The vast majority of properties you see advertised through the usual estate agents are not priced at realistic levels, hence they don’t sell.
Simple.

The problem is, in the housing market, demand is a nebulous concept. There’s constantly pent-up or (what I call) ‘aspirational demand’ for bigger and better property in nice locations. The issue is translating that into ‘actual demand’ where buyers have the cash and are ready to take the plunge. That’s where confidence and credit come in. And, currently, there’s very little.

Can’t disagree with that.
Think its just Charlie’s/The Indo’s stance of “Hey folks, what stopping you grabbing a piece of the action…” that got the heckles up :slight_smile:

That’s a bit misleading. For the average 100k in Dublin, close to the city, it seems you pretty much get a one bedroom apartment or a two bed terrace in and around the Coombe, Rialto, Finglas, Cabra, Ballyfermot, etc

When I searched on daft there appears to be a disproportionate amount of boarded up windows.

Reading the article one might assume that an average person on an average salary can buy an average home in an average area, but it appears not to apply to Dublin

Full report here;

goodbody.ie/include/pdf/Iris … 0Space.pdf

'pin referenced as source of info…

Wow, is that not a bit lazy!? They could have done the comparison themselves but just used the one already done on the pin, by an anonymous internet poster… I wonder if they checked it??

Sure why would you need to chaeck your sources. RTE certainly don’t…