Is it just me or have people (some pinsters included) a warped view of ‘value’ because of crazy prices over the last 10 years?
A 2 bed shoebox for 1/4 of a million Euro is seen as a bargain? Or a 3 bed semi in a good area of Dublin is ‘becoming realistic’ at over €1m? Average salaries in Dublin are good, but not that good.
20% down? 50% seems more on the cards to me.
If I was an investor (aged or new to the game) I’d be rushing to the exit already, yet things seem sticky. Somethings got to give and I reckon its going to give this summer. gimme an offer and I’ll bite you’re hand off
Those cutting asking prices early and being most flexible with offers will get out less harmed than the staunch supporters of ‘the market will be back next year’.
Edit:Apols for the rant but I’ve just had a conversation with somone who is going to supplement the rent of their ‘investment’ for the next year by renting it (rent shortfalls). In a year they’re going to sell it, because the papers told them the market would be back then.When I asked what the reason for prices going up next year was, the answer: “They said it the paper, they’re all saying it in the papers”
Let me take to back to the year 2000. The tech stock/dot.com bubble was bursting. Valuations were absurd and it is easy to see that now. But at the time, when one was caught up in the madness and euphoria of the “new paradigm”, it wasn’t so straightforward. I was there too and up to my neck in it.
Stocks fell 20% then 30% and then 40% and we thought “that’s it, surely they can’t go any lower”. Many bottomed out in 2003 having lost 90% and some (Baltimore, Marconi, Boo, Lastminute etc.) were gone.
It was a lesson I learned the hard way and never forgot. Yet many of my then colleagues sound so clever today, like they knew the score all along. This is crap of course. They were just as daft as me and lost just as much.
And the same investment banks that were up their eyes in Tech back then are now writing off billions in subprime losses.
Even the bears were completely taken by surprise at the ferocity of the downturn, a slump that took every good tech stock with it and left many solid, profitable businesses selling below their cash per share - incredible bargains (that turned out to be multi-baggers in the following years), yet no one would touch them in 2002, because they were technology.
You see, the market is just as irrational after a bubble, when sentiment really takes hold and the credit taps are turned off. Therefore (and I’ll probably get critical responses for this), I wouldn’t predict a bottom for the housing market and your 50% suggestion may well happen - more easily than many dare to think.
I’m inclined to agree that Irish people have no notion of the value of a house/home anymore. The day I realised it was all a bubble (and resolved not to buy a house) was when I spotted council houses in McGrath Park in Mahon, Cork looking for over quarter of a million euro. I was already an avid fan of the “take 5” piece in the IT but seeing that ad for McGrath park really drove it home for me.
I totally agree, people seem to have no understanding of the value of money at all and ask for stupid ridulous prices for properties that you would’nt keep a dog in. Ive seen 3 bed terraced properties in Clontarf looking for around 750k and these places are so antiquated that on purchase the first thing you would need is a skip for the 1970s decor and another 250k to make it livable. Roll on the crash is all I can say because it will bring people to their senses if nothing else.
You’ve hit the nail firmly on the head here. Expectations (including those of us bears) have become firmly anchored in the insane prices of the last few years. The real question is - will this collective delusion continue to prop up prices or will we at some point remember how to use a calculator?
The financial reality that the era of cheap money is over will win out in the end - the mcsavvies may be able to drag it out, but it will only cost them more in the long run - anyone wanting to sell now should cut (the price) and run, because paying interest to hold on to a depreciating asset is leaking money both ways. On this, the ‘bottom spotters’ are really not doing current owners any favours - encouraging them to spend another 5% to hold on to that asset in the vain hope that the ‘recovery’ shows up next year, when in reality they’ll lose probably 5% interest, at least as much in price drops and forgo the ability to get any equity out and earning somewhere else.
The harsh reality is that there is much less money which can be borrowed, and no matter how much an FTB or other buyer would like to pay any given price for a gaff, if the banks won’t keep the lights on, the party ends.
I thought people had lost all grasp of the value of money years ago. And no matter how hard I thought about it prices went up.
There’s two schools of thought.
Prices went up after I started thinking this way, therefore I was wrong.
Prices went up after I started thinking this way, therefore I was even more right.
As long as both sides of this argument can be made with equal conviction what hope have we?
There’s a story I heard about an estate agent from France who was visiting friends in Ireland (years ago…2002-2003ish). They took him around Dublin showing him houses and asking him to guess the asking price of a few of them.
He consistantly guessed way below the asking price, and infact was completely baffled and stunned by what was going on.
I had a similar experience showing MyHome and Daft to Americans, it was like showing a card trick to a dog. For them it was like living through a David Lynch Movie.
I’ve come to the conclusion that you just have to accept that value is in the eye of the beholder. I would not spend a couple of grand on a watch, but I know people who have. The most I’ve ever spend on a watch is £200 and that was 10 years ago and I’ve worn it every day since.
I see the £200 watch as good value considering the use I’ve gotten out of it and the fact that I like it. Someone else would say the same about a €10,000 Watch and I’d think they’re mad.
Another person who buy’s a watch for €10 would think I’m crazy for paying £200.
I’m now content that I have my own formula that will tell me when to buy a house. I’m also happy that if the formula never gives me the thumbs up then I won’t buy. Although the nature of the formula is such that it almost certainly has to give me a thumbs up eventually, it just might take 20 years or so.
I no longer concern myself with why asking prices for houses and sites in Ireland are so crazy. They are crazy now for now other reason than they have been crazy in the past. At least they are less crazy now than they used to be. We’ve moving in the right direction. The length of time it takes doesn’t concern me at all.
Call me an optimest but I think that Ireland coming through this madness and hopefully returning to more normal values for property is the best thing that can happen to us as a nation. It means that young people growing up wont or shouldnt suffer the pain now being suffered by people who bought as a result of this bubble.
But if they do suffer and another bubble developes it will be our fault for allowing this to happen, it shouldnt have happened in the past but we let it (and I wont blame the politicians because the people voted them in) and we should learn from this.
What we need to ensure now is that the country cannot be managed in the future for the benefit of the few over the many and that proper regulation from banking to developing to property sales etc etc is put in place by a regulator with teeth.
Seriously though - when the general public feels the pain from this bubble bursting, don’t be surprised when they pick the next government based on their ‘abilities’ to re-inflate this or another bubble - people in general simply don’t seem to believe a bubble is a problem.
The problem in terms of trying to get this country to return to “sane” house prices in the short to medium term are impacted by a no. of issues specific to this Ireland -
i) a protracted period of “growth” leaving many in the house-buying demographic as never knowing anything other than good times and high house prices
ii) an irrational obsession with property which whilst not unique to us, is still expressed here in a totally manic and relatively inexplicable manner
iii) a combination of cheap credit over an extended period during which we moved to the Euro (making everyone feel “richer” as the only country in the Eurozone where people’s wealth in Euro tems was higher than the existing currency equivalent), high wage growth - all combining to mean that a “qtr. of a mill” for a shoebox is seen as a snip - witness the current radio ads. for James’ Walk in D8 for more of the same (Ken’s crew at work again !)
Just to give an idea how warped peoples’ minds are, there’s four of us in a house in Rathfarnham (renting) and we were talking to the handyman fixing the roof who told us that the landlord (a reasonably smart cookie who has been a landlord for over 10 years) thinks the property is valued at 2-2.5 million. There’s a similar house down the road for sale at 1.2 million which is beautifully maintained. Our house on the other hand would need a lot of work to come up to the same standard but the owner thinks it’s worth double the value of the house that’s in perfect nick.
There’s a lot of greed out there. People see what the neighbours get and then add on a few hundred grand to their asking price but the fact remains that prices are effectively made up. This is why a central register of house sales is so important. Where there is ignorance, greed & stupidity will flourish.