Warning that house prices may fall by 80%

I can quite easily see drops of 80% or close to it. Asking prices are still mental.

Look at some of these pie in the sky prices: Even if these prices were cut by half I’d struggle to see value.

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daft.ie/1359607 this is a good one!!

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I like Morgan’s finger-pointing. There’s an obvious desire by the Government to get on with “fixing things”, without the need to identify what went wrong and why? Though in FF’s case, this would pretty much destroy them. It’s possible that when future generations look at this period of government, the single successful policy will be the plastic bag levy.

As for 80%, it’s quite possible. If people can’t make a living here, owning property won’t be worth much to you. Even if a couple of large drops have been recorded, I haven’t seen anything that seems reasonably priced. Good value remains a concept at this point. If the government don’t get spending back to sustainable levels/lower the cost of living, 80%+ from peak seems quite feasible.

I wonder how many house have increased in value by 400% in the last 10 years

Would have to be the smoking ban.

I’d add the smoking ban to this… but that’s about it then.

No - 3rd world countries like smoking :wink:

Good examples, but your idea of a “good one” is I think still overpriced.

I think it was good in its comedy value.

Also did anyone actually hear what he said? The IT are terrible at reporting anything involving stats and unless it is a straight quotation I would not be surprised if the ballsed it up some how.

Yep, I meant good with regard to it’s comedic value. It is a shit looking 3 bed squeezed into a corner site in a fairly shit part of swords.

The asking prices are a complete and utter joke, I could have listed dozens more in the swords area.

He was really having a go at the so-called 200 professional economists in the room for getting it all wrong compared to what he referred to as a bunch of ‘amateurs’ here on the Pin.

If there’s one thing I can’t stand it’s academic snobbery. Pay 'em enough and they’ll say anything, that’s the real point and either he’s too polite to mention it or very naieve.

I was presuming amateur in the sense of not being paid for the work that is done. Maybe hobby would be a better term, but anyway as a juxtaposition to the so-called professional economists in the room.

Not at all.

At the middle to upper end of the market, I believe house prices will settle at the international average of the rental value multiple. In the US, the 15-year average house value is 17 times annual rent. (San Francisco did reach a high of 33 times).

As reported here previously, some houses in Ireland are still priced at 70 to 80 times annual rent - and that is after a reduction in the asking price!
Example: asking price is reduced to from EUR 2,500,000 to EUR 2,200,000 and its rental value is EUR 2,300 per month.
Annual rent = EUR 27,600
17 times rent = EUR 469,200
From EUR 2,500,000 to EUR 469,200 is a 81% drop.

AND rents are currently in freefall…

Quite simplistic but I can see anyhting over 300k having drops of 50% or greater.

The days of jumbo mortgages are gone. Hopefully.

That could mean prices just fall a few percent from here and go sideways for ten years and if inflation lets rip at 10% per annum for those ten years house prices will not have fallen appreciably at all.It doesn’t even mean house prices have to fall at all.

A prediction like that is meaningless,nobody knows what is going to happen to share prices,house prices or any other asset in the future.

Yep, and even if he is, he has earned the right for his opinion to be held in higher regard than most simply because he has been pretty much spot on in his predictions thus far. I don’t think he’s stupid enough to be sensationalist and bump the figure up 20% or something just to shock people. i think he has more integrity than than. I think he’s calling it as he sees it and i’m inclined to agree with the 80% figure. All the signs are there and more.

Either way, i’m gonna give him the benefit of the doubt.

As extreme as Kelly’s prediction may sound, I think it is quite plausible.

Irish house prices peaked at over 60% above their long term mean. If a reversion to that mean is in progress, it is likely that we will over-correct on the way down before eventually settling somewhere near the mean.

It may take a near collapse of the Irish economy to overshoot to the extent that -80% would be reached, but given the unravelling of the economy already under way, is that unthinkable? Is it even unlikely? :open_mouth:

Remember that Kelly’s prediction is not for where house prices will ultimately settle, but where they will hit bottom.

80% fall probably depends upon (some) rental fall.

In 2006, the average rent/house price yield (as far as I could tell at the time) was appx. 2.5%.
If house prices fall 80% and rent stays the same, this means the yield will go up to 12.5%

12.5% is high and I could see investors bail-in prior to this yield being achieved, thus increasing prices, making 12.5% less achievable.

However …

Traditionally, if people dont buy, they rent.
This increases rental yield and helps stabilise prices.

But as we all know, a large component of renters are foreign.
As many return home/go elsewhere this has the effect of reducing rent at a time where it would normally increase.

Consequently, whilst an 80% fall in prices may achieve a 12.5% yield based upon 2006 rent, if rents fall in the near future, so does the yield, making the 80% more possible.

All the more frightening in a low inflation or deflationary environment.

The gloom is getting gloomier.