Predictions for different falls to different properties/area

The Irish Property Bubble (2006) The Republic of Property
1

I think one thing that most people tend to agree on is that different types of properties will fall in price by different amounts (or land softly to different stability regions). But I’d like to see some opinions on what types of falls we’ll see in different sections of the markets.

Imo, apartments/tiny houses on commuter estates will be hit worst and could easily see drops of 50% or worse. They are often badly built, the estates are badly planned as far as roads, public transport and amenities are concerned, have outlandish management fees and nobody in their right minds would plan on living someplace like that long term.

I also think that the ridiculously higher end of the market will see severe drops. How can this house myhome.ie/search/property.as … earchlist=
be worth close to 2mill? It’s just a slightly bigger than average semi. Yes Rathgar is a lovely area but paying such sums for ordinary houses can not be sustainable. Especially as larger than average semi-s in nice areas aren’t exactly rare.

And as for the likes of
myhome.ie/search/property.as … earchlist=
:open_mouth: WHO would pay this kind of money? And it’s not even that well laid out according to the floor plans.

However the middle of the market is, i think, harder to predict. Nice family houses in established areas of Dublin, not too far from the city are a complete mystery to me. On the one hand I think they can’t fall far, as they are the kind of house that whoever is still buying in two years time will be looking for. On the otherhand, these houses rely on the “property ladder” as not too many people can afford €500-800k without selling a previous property with good equity. So I guess they will have to come down too, perhaps 20%.

I don’t like to think too much about what will happen to apartments and small houses in the city or it’s inner suburbs. I have too many friends who own these kinds of places - and despite the fact that most bought between 2002 and 2004 I worry too much about them. I’ve tried gently suggesting that it might be time to re-evaluate the market but it tends to not be welcome.

Despite the fact that I don’t come from Dublin it’s the only part of Ireland I’ve ever tried to buy a house in, so my knowledge of the rest of the country is pretty weak. I know Limerick seems to have an endless supply of apartments and they just keep building and building them. Apartment blocks that were fantastic places to rent 5/6 years ago are now derelict hellholes by all accounts though. So I think these will possibly become some of the least desirable properties in the country and I think it won’t matter how low the price drops nobody will buy them.

2

have to agree with you on the gaffs out in estates with no proper facilities … if there are any flippers out there they are going to be completely and utterly utterly utterly screwed … no one is so desperate to get on the ladder these days… buying a place just to have a place is finished for the foreseeable future … i reckon 50% minimum on some of those places … and i think i am being generous!

if you have a reasonable 3/4 bed room gaff and bought a few years ago , you will be fine … i reckon … prices today are too high and yes i see the 3/4 bd good location gaffs getting a 20 - 25% drop …

those super big gaffs for millions … i reckon they will get a huge chopping as well … there is simply no reasonable case to be made for buying some of those places IMO.

small 1 beds in the city centre … i still think they will rent out no prob … theres always a market for those places students/loners/young couples etc… so i think they will still fetch more than ordinary civilians on here think its “worth” …

as for outside the pale … i have no idea …

3

this may be a different topic altogether but your post made me think of what will happen in those areas as the economy gets worse. are they ready made ghettos?

4

Jaysus 2 Gaffs - reading the Pin must be rubbing off on you!! Thats quite a negative outlook.
As for the question posed I think that nobody knows for sure. I agree that places closer to the city centre should always rent due to that being where people work (myself included) etc but with the amount of commercial and office space vacant around Dublin lately Im beginning to wonder whether this will remain the case in the future. If more and more retail jobs migrate to the suburban shopping centres the city centre could become a place to be avoided with the resultant effect of decreasing demand for accommodation. Hopefully this wont be the case. However, I dont think rent itself will hold up. There are a load of apartment blocks only coming towards completion at the minute in D8 for example and the added supply will eventually drive rents down.It might take a while but it will happen. Property values will drop as well but I dont think as much as some places providing the city centre retains its commercial core.

As for commuterville, I think we are going to hear a lot of hard luck stories emanating from these areas over the next few years. I fear people who bought there simply to get on “the ladder” will find themselves stuck on the bottom rung for the next 15-20 years. Drops of up to 50% or even more are possible in these places where people basically dont want to live. Real prices allowing for inflation will never come back and theres a possibility of ghetto type areas emerging IMHO.

As for good quality Dublin suburban family homes, as stated above these places will always remain desirable but they will have to drop substantially to become affordable again. With the “ladder” scenario out the window and presumably not coming back for the forseeable future its hard to see how anyone could afford these type of places. Id imagine that most people who could afford such a home have been either trader uppers from your FTB starter home which cannot now be sold, thereby removing that segment of the market or they were couples who earn good salaries and were allowed generous mortgages by banks on that basis. With the increased lending restrictions and the increase in interest rates they have been removed from that price category as well. Therefore, in order to sell a vendor must reduce price. In a situation where vendors must reduce across the board its unclear at what point reductions would stop as surely buyers would be wary of jumping in when they could possibly be buying a house which will be worth less next month.

IMHO it is impossible to predict at what stage normality will return to the housing market. It has been absent on the way up and it will be absent on the way down. Its possible that prices could undershoot on the way down just and they overshot on the way up.

5

If you look at Verbatim’s posts dated 27.06.07 re price drops in Sth Dublin you see D4 (18.5%), D8 (20%) - yes D8 and Dalkey (25%).

So wake up folks - talk of 20% in ‘ordinary middle of the range Dub properties’ is wishful thinking. We’ll have a 50% across the board because that’s what is needed to get back to fair value, at least. Then the overshoot, perhaps as much as another 10-20% and being particulary badly felt in apartments and commuterville’s fine dwellings!

6

Parts of Dublin rose to dizzying heights for no reason and will see a realignment to normal values.

I still thinks holiday homes are going to feel the brunt of it. Places like Roundstone, Achill, Lahinch etc are popular spots for people to have a holiday home. Prices in these places are waaaay out of whack for the counties they are in - Lahinch has a mobile home for sale for €150k!

When the squeeze is comes home to roost, people will start flogging these 2nd homes.

7

This is the 6 million Euro question. Here’s my reckoning:

In a dip or uncertain times, there will be the flight to quality- and quality can depend on various factors- it might be short Travel to Work Time (I could have written TTWT but some would not know what it means- like I don’t know what means IMO), Schools/ Green space/ or fabulous character, orientation and views.

But that flight has to be tempered by two things- (1) availability of cheaper options not too far away, and; (2) concern over the stability of the quality property values, themselves (“why take the risk if we can rent for another year at below base rate!”).

So, while some areas and types may be more resilient than others- as John Donne might have said- no property is an island and purchasing decisions are made against a background of alternatives.

However, I think we can reasonably anticipate that the dip on quality property will start later, be shallower, and finish earlier. I think we can expect a fall of 10 to 15% anyway and if people buy between that 10 and 15% range then they shouldn’t be at risk of negative equity for long.

The peripheral, less prestigious and oversupplied markets are a different kettle of fish! I would make one point on the proliferation of apartment schemes. They’re sexy now and yes they can be fabulous- good location, outlook, balconies, low maintenance. But we should not expect a culture change away from low rise preference. I am especially dubious about potential for long term capital appreciation on such property as oversupply kicks in.

In sum then- I reason on serious consequences generally at circa 30% and less serious consequences (but still damaging) on the quality markets, except for apartments which have yet to prove themselves over time in our culture.

These consequences will roll out over a couple years. In that timescale, inflation itself will take a 10% toll on price even if prices only stagnate. The rest of the damage will be done by discounts on sticker price of up to 20% depending on quality. Only then might we expect market stability and confidence to return.

It is inherent in this argument, that quality property will find a new position relative the rest. I think that is quite possible- location is difficult to manufacture and there will always be elites who will pay what they can reasonably afford to be there.

This is all subjective of course and consensus of opinion may end up at different figures. So Pin- do your work …!

8

Remember price does not equal value. Sure some properties may retain their “value”, but that doesn’t mean they aren’t 50% overpriced right now.

9

Don’t forget extortionate management fees in the new developments that have propped up over the last few years is a big disincentive to a buyer.

Paying up to 2k yearly on a 2 bed apt(not talking upmarket areas here!) in fees is a big turn off especially in a recession.
Some people will find themselves unable to afford that and refuse to pay, mgt company will not be able to function and hence the development will become run down hence the term ghettoisation.

This is where value will be wiped out on such properties.

10

I’m sticking with the good Prof. Morgan Kelly who actually studied previous bubbles in great detail.
His conclusion of course is that in a bust house prices give up 70% of their gains and this happens on average over a period of 9 years.
That 70% is an average figure for the whole country and so the good located houses will lose 60% and the badly located ones 80%.
Another thing Prof. Morgan mentioned is that sometimes it takes very little for a bubble to burst - purchasers just wake up one morning and realise that houses are way over priced and interest rates can have very little to do with it.
If we take that 9 year time line,I believe that will take us well past peak oil and all bets are off for any prospect of a recovery.