New Second-hand Market Bubble emerging...

The Irish Property Bubble (2006) Sell, Buy or Rent?
1

Does it look like a new bubble is already in place? Supply and Demand, as well as access to credit should control the market, but with only 8k houses finished in 2012 it looks that there really is only one market and that is the second hand house market.
The lowest number of completions since 1970 when records began (and that had nearly 14k completions in 1970 apparently).
I’m seeing EAs back to the old days of bunching people into viewings (If I’m spending hundreds of thousands of euro on a house I would like to see it myself thank you).
It’s my belief that we are not in so much of a dead cat bounce situation, but rather a manufactured mini bubble.
I’m sure the government want houses prices to stabilize as they don’t need any more threats of default and more people in NE (even though that is really down to the ability to pay a mortgage and not the actual price of the house).
I’m sure also that they would like to keep prices higher for property tax, stamp duty etc.
There is certainly quite a large number of people that want to buy quality houses in and around the large towns/cities however there are little or no houses being built. So many empty houses around the country which are un-sellable due to location/build quality etc.
Basic enough 4 bed houses in average areas looking for half a million euro, and with interest rates on the up, that is a life time of debt.
Decent houses in decent areas around the cities are needed. Jobs would be created. The houses would sell.
Second hand houses are massively overpriced IMO.

The Bogger

2

Where are these average areas?

3

What factors other than supply and demand are at work, in your opinion?

4

What do you want? Second had prices are 50% of peak. Parts of Dublin (for example) were never cheap and never will be. There is no right of supply, affordability or accessability in the market.

Lots of cheap apartments - because that was all we built in the boom.

5

There has been a shortage of detached 4 bed family houses with large gardens. There is a surplus of terraced and semi 2 and 3 bed houses with tiny gardens and a surplus of apartments. The buying demographic has changed from the FTB to whom the building boom was nearly solely aimed, to older couples with children wanting bigger houses. Also the buying-for-cash elderly person was not catered for during the boom, because of the fact that they didn’t need mortgages they were of no use to the economy. Hence there is nothing for them to downsize to, nor has their been during the boom. Elderly people want neat little bungalows with small gardens in low density leafy estates at an affordable price to allow them to move out of their 4 bed detached family homes. So I think depending on where you live there will be fierce competition for some houses and little or no competition for others.

6

There are loads of 4 bed semi-ds around where I live (west Dublin) for around €250k.

Much as I’d prefer to live in Áras an Uachtaráin and have someone else pick up the heating bill, the gaff I have is well built, warm & dry, near decent enough schools and my neighbours are lovely.

There are reports on the Pin of cash buyers scrambling over each other at the top end, but that doesn’t bear much relation to the reality most people live in.

7

exactly, West Dublin is an average area, I think the IP needs to revise what he considers average.

bulid more in decent areas? where exactly? These average areas you speak of where a 4 bed costs half a million have no room to build, that’s what they are expensive!

8

The reality of the Irish residential property market is that there has been an increase in stock of 8,500 additional units (with more to come), annual estate sales of circa 10,000 additional units per year available to the market (estimated here previously, most of which will be “family home” in urban areas), throw in some units coming to market as home owners emigrate, there will be some “pre-63” units coming to market (as discussed here, albeit they will be for the “braver” home buyer) all on top of the existing stock of nearly 300,000 vacant units, a significant percentage of which are in and around the urban areas … so why should there be a bubble?

Massive existing stock, constant supply of new and pre-owned units coming to the market and buyer cohort that’s decimated by unemployment, emigration, reductions in after tax income, mostly shut out from mortgage credit and even those that are in a position to buy scared by the recent experience of their friends and family having been badly burnt by believing the sales hype of the banks, builders, EA’s and their political buddies.

Hardly circumstances to result in price inflation. Oh, and don’t forget to factor in a couple more austerity budgets.

Blue Horseshoe

9

There’s not so many places in the world where average families live in detached 4 bed family houses with large gardens (certainly not in urbanised nations).

Big problem with the building (as has been repeated ad-nauseum) is that we got a lot of badly thought out badly sized apartment developments (apartments can be great, but not if they try to squeeze as many rooms as possible into as small a floor-plan as possible, building for lowest cost).

But having different properties at different prices (based on differences in location, size, and market preferences) is not a sign (in and of itself) of a bubble.

10

Nail on the head. Either nowhere to build, or sites the price of which would produce prohibitively priced houses.

11

The State by doing all it has done to date has totally and I am mean completely utterly undermined it’s powers and duty to oversee the proper regulation of the land usage and everything else that entails. It’s a Checkmate for a checkmate. Nothing can be done or else Jengaland all fall down bad.

12

+1

According to the census just 11.8% of houses in Dublin are detached. The median house in Dublin is terraced with 5 rooms.

Nationally, just 20% of houses have 8 rooms or more (hallways excluded) so a 4 bed house + bathroom + kitchen + 2 other rooms downstairs would not be the norm outside Dublin, never mind in Dublin

13

Hmm… the norm the median. They are valid points to a point, but…

The technology exists by design and design applied to provide ample massive low cost housing that is not only beautiful but functional.

What’s the functional beauty?

What’s the median norm?

Norm?

https://ifanboy.com/wp-content/uploads/2012/04/norm-peterson.jpg

14

We’ve the smallest houses in Europe don’t we?
And that’s with the lowest population density…

15

Definitey a mini bubble emerging in Clontarf/Drumcondra/Glasnevin. 3/4 beds now back up into 450k-550k asking price ranges.

Below is an example-HomeFarm Road in Drumcondra. 3 Bed in 2011 sold for 310k.The house two doors down (a four bed), is now asking
for 479k.

myhome.ie/priceregister/180- … in-3-22825

myhome.ie/residential/brochu … -9/2280017

Crazy-the four bed has a decent back garden but is weirdly shaped!

16

I also am of the opinion that a new manufactured bubble appearing.

Last week alone, I inquired about three properties:

One relatively nice apartment in the 500,000-1,000,000 bracket, which was on the market for no time at all and the latest offer was already about 20% over the asking. Another apartment, which I think may have been about €1m was also a very high percentage over the asking price. These are apartments in reasonably good areas, not detached family homes with relatively low maintenance costs, they have big management charges associated with them.

And don’t think it is only the top-end apartments, I also inquired about one investment apartment that was totally basic, in an area I would consider to be undesirable in the €100,000-200,000 bracket and that went from having an offer of 20% under the asking to somebody coming in and offering 10% over the asking with nothing in between.

There is a frenzy out there at the moment, with people dying to buy everything in sight and pay whatever it takes to get it. Personally, it seems like it doesn’t matter what whether there is a lack of supply or not, people are going out and throwing money at everything on the market and bidding everything up to a ridiculous level. Coupled with this frenzy, estate agents are rapidly increasing asking prices and nobody seems to care. Last year, Sherry Fitz got €165k for a one-bed at 11 Merton Hall, Mount Saint Annes. This apartment was in very good condition and had good outdoor space.
Savills just listed the apartment above it, which is marginally bigger (I would image they’re pretty much the same size, and not even 60sqft between them as the estate agent claims) for €225k and it is an absolute dump that has been rented since it was built years ago. Even at that, it will probably somehow sell above asking when some genius amateur investor takes a look at it and falls in love with the 5% gross return. New apartments come up in Mount Saint Annes practically every week, I don’t think there is any problem with supply there. The same goes for other developments like Bushy Park in Terenure, where asking prices have been rapidly creeping up. Two ground floor apartments have come on the market recently; 35 Bushy Park came up about a month ago for €225k and I think around last week 115 Bushy Park came up at €295k. 115 has nice floors and bathroom, but it hardly justifies the price difference. It would be one thing if people just ignored these ridiculous hikes and bid logically, but it saddens me that 115 may get above the asking as people seem to just pay whatever agents ask for these days. Everytime EA’s bump up prices and the property sells almost immediately, its practically a concrete precedent for the next property on the market to be bumped up by another 10% above the last one listed, and so on, and so on.

I have pretty much given up on the market at the moment as I feel a lot of the price increases are caused by estate agents rapidly increasing prices, leading to average joe panicking with thoughts that his plans to buy may be slipping from his hands, leading to bidding wars, leading to further price increases. Sometimes I think that this country is beyond mad and I’m glad that I’m in no rush to buy any more property, because I pity people who are stuck in this the market at the moment ‘needing’ to buy.

17

What they’re asking seems a bit rich, I have to say, though it appears to be a fairly big place. That said, not altogether out of kilter with Lambay Road recently and some other stuff.

I don’t know if there is a bubble (or to be less emotive/specific: housing inflation trend) emerging, but I suppose it’s possible that there is.

If so, could this partially be a consequence of the lack of repossessions? I mean, there must be people living in desirable neighbourhoods whose financial situations have declined dramatically. Maybe they’ve given up on paying the mortgage (because they can’t, or because of some strategic choice). So they’re sitting in a house, with a defaulted loan. They won’t/can’t move. If they sold (somehow) they’d end up with a chunk of unsecured debt and they’d be unable to buy somewhere else. Plus they’re in a house that many (enough) people consider nice enough to live in. So they sit tight.

This means that there are houses that just won’t enter the market. What does enter the market are normal trades (but a reduced number), executor sales, etc., Meanwhile a chunk of the market stays locked because the bank won’t repossess, and the householder won’t move because they’d never get this deal again. (Some people may even be staying put because they have a tracker mortgage that they’d never get again, and so can’t afford to trade up even if their income is same/increased from boom-time.)

Maybe there’s some magic price level where house prices start to clear the outstanding debt, at which point people start to want to trade again (and maybe bank wants to repossess at that stage too since they could close the loan out)

18

I’ve been looking at properties around there too and was very tempted by that 1 bed for €165k. Since then only 2 more have cropped up - 43 Convent Hall which has just gone sale agreed asking €225k and is probably driving the asking price of €225k for 49 Merton Hall. Don’t know what 43 went for yet.
1 beds are getting €1,200pm in Mt St Anne’s so at €225k you’re looking at a gross yield of about 6.5%. (there’s only one advertised on DAFT at the minute and that’s in Convent Hall and asking €1,250 p.m.)
The register is showing just 21 sales with maybe 6-7 for sale or sale agreed. That’s not many over a 3 year period.

19

The 1-bed for €225k in Merton Hall would struggle big time to get €1200. I think they were only getting that much per month for 43 Convent Hall, which was in pretty good knick, a good 100sqft bigger, in a much nicer block and with pleasant views. I would think 49 Merton Hall would be closer to €1050/mo for a 600sqft one bed that has been rented for such a long time and is in bad shape. I’d imagine that we’ll see plenty more coming to the market with the rest of the BTL owners in there probably eager to sell up with prices now coming back to what they paid for them during their celtic tiger launch - €247k for the one beds for Merton Hall.

20

So what? I’m offerring this tulip bulb for only 500 euro. That’s way less than it would have cost you…

The bubble price bears little relation to the price level required to build a sustainable second-hand market. It’s an old paradigm…