The precious 3 bed house

Hi, everybody, just starting a new thread based on the ideas in a current thread…

I believe like others here, I am saving with a view to buying a house in the next 1-2 years, and am watching the house price fall with some happiness. However…I may be giving myself false hope. I would want a good 3 bed house in a nice area close to centre (perhaps ringsend/irishtown, S. Circular/liberties area, Marino - these seem like they might be affordable) but it seems so does everybody else! I actually can’t see most people in 3 bed houses either trading down (3 beds isn’t huge) or up (unless they’re popping out sprogs at a very fast rate) when things are rocky, so supply limited, and I reckon that most smart FTB couples will want to skip the 2 bed stage to go straight to 3 bed, so demand is there.

So should I accept that these aren’t going to fall much in price? Certainly not 20 - 30% people are talking about which I could certainly see happenng to houses in general.

I know that this has been discussed on other threads, but I would love to see people’s predictions and rationale in one place (so I can adjust my expectations accordingly!)

You may be right about the high demand for 3 bed places. That is why you have to start working now so you have an advantage over other buyers in 1 to 2 years time. By this I mean start saving a big big deposit now. Banks are going to be very cagey about money for the next few years so having a decent chunk saved will put in you a much stronger position that your house buying competition. Try and figure out how much you will be willing to put down on a place in 2 years and aim to have 15% to 20% of the cost price saved up.

Cash will be king for the next few years.

Right now you can rent a 3 bed house for less than the interest on a 3 bed mortgage.

Right now you can rent a 3 bed house for less than the interest on a mortgage for a 2 bed apartment.

So there’s no rush. You’ve put a time frame of 1-2 years on yourself to buy, and you’re hoping for a 20% to 30% drop.

I guarentee you I can find you a 3 bed to rent in an area you like which will cost you the same or less than buying a 3 bed for 20% less than it’s current asking price. So I can get you that 20% to 30% price drop today if you’re willing to rent. It’ll take me about 5 minutes in Daft.

Find a nice 3 bed that you’re willing to rent long term. For all the talk of being chucked out by landlords, it hasn’t been my experience.

If it takes 3, 4 or 5 years for prices to either drop, or for you to save a bigger deposit, then you won’t care. You’ll have the nice house today.

Just figure out what you plan to pay in interest in 1-2 years when you eventually buy and then look at what that can rent you today.


A very good question. Here are some reasons why I think 3-4 bed quality semis in good city suburbs will remain sticky:

  1. They can’t build any more of them and the commuter belts are chock full of families who would dearly like to own one.
  2. They have always appealed to homeowners rather than investors, the latter having been seduced by apartments and spec houses in the commuter belts. This is because 3-bed semis are more expensive, attract stamp because they are second hand and pricey, and have traditionally yielded lower rents by comparison. Also, you can’t flip them!
  3. A significant number of public sector workers were priced out of these houses by the boom. They can still get 100% mortgages and will use this opportunity to trade up. Decentralisation is off the agenda so they can now buy in Dublin with confidence.
    4.As unemployment increases, available employment will tend to concentrate in large cities, making rural residences even less attractive.
    5.For older people, the centralisation of health care will tend to make them stay put or move into an apartment in a really top area (the Gay Byrne strategy - move next door to Vincent’s private!). Previously they might have considered cashing in and buying a small retirement place in the countryside.
    6.Most Irish people think apartments are not for families and have little experience of apartment life. They hear stories about management fees, noisy neighbours, immigrants living 10 to a flat, landlord power etc. and whether true or not, think no thanks.

My theory is that these houses are priced according to maximum affordability (homeowner criteria), whereas apartments and spec houses are more closely linked to rental yields and prospects for capital appreciation (investor criteria). If that’s true, we should continue to see a divergence between these two classes of assets, with investor-type properties declining more due to forced sales, developer discounts and amateurs being chased out of the market.

For now, Dublin 3-bed semis in good areas have tracked affordability, and are about 10-20% off the peak due to the interest rate rises and credit term tightenings since 2006. With Trichet on the warpath I see another 5% down at least before year end.

But it will be very interesting to watch these properties as soon as interest rates stabilise or appear to be headed back down.

Why can’t they build anymore ? Have you ever flown over Dublin ? There are thousands of acres of land in Dublin which is undeveloped. It takes about 10 seconds to rezone it if the will is there & hey presto 20,000 more 3-Beds inside the county border.

Again, are you serious ??

From Daft,

Seems like quite a few investors maybe did buy houses ? I rent in an estate in Lucan where 40% of the houses are rentals.

On the one hand your saying that 3-beds are incredibly attractive & on the other your saying that investors aren’t interested in them. You don’t see are rather fundamental flaw there ?

I am very interested by the continued use of the ‘banks will be careful who they give money to’ theme on many of the threads on PIN.

Is there anyone in the sector who can give more info on this?

I’m sure the banks will (are going) go back to the days where you need a deposit to get a mortgage, proper evidence of earnings and more controlled application of the multiple of earning to mortgage ratio that used to apply.

However FTBs will save a deposit (just as most people in my generation - late 30s - had to) and lots of other people in the market who are trading up or down will have decent enough LTV ratios.

So who exactly wont they be giving money to? I think this might be a bit of a red herring wrt impacting the market prices. As prices continue to fall surely it will become easier for the banks to give out money as the level of deposit’s required, and total mortgage values required, will fall.

Mark my words. They will fall. There may be some modest realignment of relative prices in the market, but not very much at the points where the bulk of the market operates.

In technical jargon, there is signifcant cross-price elasticity.

In normal speak, The more people avoid the market above and below this 3 bed semi sub market in certain suburbs, the more those prices will change. As those prices change people will alter their choice and then affect the price of 3 beds.

All the same sorts of preditions made a year or so ago about South Dublin etc. have already fallen in a heap.

We are not witnessing a relative price adjustment here, it is an absolute price adjustment for property. Everything will keep falling and this fall in the absolute level will be far greater than any fall in one type or area relative to another (excluding the ruidiculous outliers like 1 bed flats in the middle of a cow paddock)/

3 beds in Dublin are overpriced.
Therefore the price of 3 beds WILL fall.

Come on people, surely we’ve all moved past the age of “overpriced things can remain overpriced forever”.

No need for further debate on this.


Prices will fall but dont you think there will be a short supply of these houses on the market? As mentioned above people are unlikely to trade down from a 3 bed semi and few are trading up at the moment - meaning lots will stay where they are. Shortening supply will help reduce the price drops to more reasonable levels.

To be fair much of that undeveloped land isn’t exactly situated in a prime location, in terms of transport and amenities. Also, it’s clear that developers simply don’t intend to build the type of houses we’re talking about here - even though that’s the primary type of property that’s in demand. Practically every large site that I have seen developed in “good” areas in Dublin over the last 5 years has been used to build apartments, occasionally with a few ludicrously over-priced garden-less townhouses thrown in. Developers have used the “we need high density housing” line, but in reality the apartments simply yield a much better profit.

Having said that, I don’t agree with the idea that we won’t see any more drops for 3 beds in Dublin. In most “good” areas there is still an awful lot of junk still on the market at late 2005 prices.

There are plenty of 2 & 3 bed for sale at the moment in Ringsend/Irishtown, a lot of which have been on the market for a long time.

Surely if this was a heavily undersupplied market, they should be selling?

The reality is that there will be an even shorter supply of people with the ability to raise finance to purchase these properties. Until prices drop across the board to meet the clearing price, i.e. the price where there is the same number of purchasers with finance to proceed as there are houses available, supply will exceed demand and prices will drop.

Houses across the board are too expensive. There simply isn’t enough finance available to purchase them. People with the finance to purchase would have higher expectations in terms of area and size of house. What’s the point in buying in Marino when there’s the potential of buying in Clontarf in a year or two’s time. What’s the point in buying a 3 bed when a 4 bed is a possibility in Raheny or Sutton in 1 to 2 years time. This is market psychology.

Sorry, but there is no long shortage of supply of 3 bed houses in Dublin. There has been mass manipulation of the market over recent years. Pushing people to buy 2 be apartments on the outskirts etc. The comment about flying over Dublin was a very apt one. Certainly along the Northern suburbs there is huge availability of potential sites both along the Dart line and the Malahide Road. There’s loads of industrial sites that are basically lying idle (not to mention a certain golf course) that could be rezoned for residential under proper planned schemes once the corruption is removed from the system.

Over recent years people seem to have forgotten the principal of location, location, location. There will always be premium, middle of the road, rougher areas, and outer areas. Each area will attract a different price but people will demand better areas for less money. The concept of better areas holding and better sized houses holding is complete nonsense. Everything is over priced and everything will have demand at ever lower prices pushing everything down across the board. The opposing view is simply VI speak to try and keep parts of the market going. It’s simply not true in basic supply/demand micro-economic terms.

As far as I can see the two influencing factors are the Banks, and the un/employment rate. Banks have become super twitchy, and my gut feeling (ala Country Tom) is that they will be slow in opening the taps again. I can see this going for 2 to 3 years. As said time and time again, it is supply and demand, and because the banks are not paying out, there is no demand, so the supply bit is technically irrelevant.

I am sorry to say it, but it is looking like the American Multinationals are pulling out, never mind the construction sector. They have to keep house back home, and we are just to damned expensive for productivity levels, caused by house prices. So between the banks not paying out, and people just unable to apply for mortgages, the prices across the board are going to have to fall.

As and aside, did anyone see the Panorama program on BBC World Service last night. It was about the property sector in England, and the looked the the renter, the buyer, the BTL investor, and people in negative equity. They had a panel of bankers and financial advisor’s access each persons circumstances, they they only one they said was in the clover, was the renter, and they all expected the crunch to last 2 to 5 years. … =1&nbram=1

I think if you separate out the different classes of property then the 3-bed semi won’t be as badly affected, though I can still see plenty of scope for falls…

I can foresee apartments getting murdered though.

There’s an abundance of 3 bed houses, but the oversupply of apartments is massive in comparison.

I wouldn’t be surprised, when the dust settles, if the peak to trough fall of apartments, percentage wise, is twice that of the 3 bed semi-d.

Lucan! Give me a break :laughing:

I’m referring to traditional (c. 1960s) 3-4 bed semis in good City suburbs - hardly Lucan! which along with Leixlip is a creature of the Boom. That is precisely the type of area which is doomed to underperform, along with much of West Dublin. Think Churchtown, Dundrum, Cabinteely, Rathfarnham, Templeogue, Kilmacud, parts of Killiney. Now where are you going to build such houses with such gardens today?

In these estates, what do you think the percentage of renters vs owner-occupiers is vs a typical apartment block in, say, Cherrywood or Sandyford? Or an estate in Lucan, Leixlip or West Tallaght.?

My point is that they should outperform investor properties on a relative basis, not that they won’t go down further.

And when rates stabilise and the crunch eases, I predict the pent up demand for trading up will lead to further outperformance in this segment.

By treating all properties as equivalent (like a commodity), and by assuming a typical housepurchaser is looking at rental yield vs mortgage cost (i.e. purely price conscious) is to misread the Irish homebuyer.

No shortage of land in this image !

The problem in Ireland is Serviced , Infrastructurally linked land.

Indeed - having build damned all new infrastructure (mainly upgrading existing infrastructure) for decades, there really isn’t much to go round.

They need to have some room to built houses, sorry, apartments in 20 years time, when Dublin population probably will double.

In Lucan a lot houses has been purchased as investment for kids and grew by 80% at peak time. Plus mortgage has been paid for 6-8 years. Its means that even 40% drop in rents is not a disaster for landlords…

I’d love you to introduce me to a landlord who doesn’t think a 40% drop in rent is a disaster :laughing: :laughing: :laughing: :laughing: :laughing: :laughing:

So people will turn up their noses at 1000 sq ft apartments to live in 600sq ft houses? Or opt for £1m houses over equivalent 650k apartments. Sounds unlikely to me.

Apartment or house *as such *is largely irrelevant.

People rank the

  • size,
  • location
  • aspect,
  • presence of private external space,
  • internal decoration,
  • and cetera

of a dwelling and then maximise their utility according the funds they have available.

As there is a direct equivalency between houses and apartments, equality on the above criteria means they’re pretty much substitutes.

All unwinding bubbles have the myth of the ‘untouchable sector’. In late 2000 prognosticators were certain that the share prices of tech blue chips (Intel, MSFT etc) would survive where and other internet featherweights had blown away. 2001 proved them utterly wrong.

Substitutability means that the market tends to move as a piece, as Gekko notes above. Semi-d’s have been bid up by 'People will always want houses ’ crowd and, judging by their terrifyingly low yields, they remain relatively overpriced.

True, much of the newest and least desirable supply consists of apartments, and there will be spectacular declines in midland towns and other areas of over-building.

But in general there is no hiding place. ‘People will always want houses’ was an article of faith for the robo-paddy crowd in 04, 05 and 06. Hence it’s in the price and there is a greater risk of relative underperformance here than anywhere else. With yields in Sth. Dublin at 2ish percent, and hundreds of amateur millionaires in retreat in said leafy boroughs, the counter-intuitive trend of 09 and 10 could see out-sized declines in Our Most Desirable Suburbs.