What is "the long-term economic value of" Irish property??


#21

News flash: Mistic Meg has being called in to determine the ‘long term economic value’ of property.

We should be okay then.


#22

These graphs might be of some interest to you if you need to figure out long term trends…

oecd.org/dataoecd/41/56/35756053.pdf

Ireland is best described here with two words.
Different. Scale.

I can remember looking at this document on the pin about July 2006,

federalreserve.gov/pubs/ifdp/2005/841/ifdp841.pdf

and in particular the graphs on pgs 43 - 45. The next day, I rang up an estate agent and put my gaff up for sale. Two weeks later I had a buyer for it. Thanks again Pin.

Long term economic value Mr Alan G. Ahearne?


#23

one Alan Aherne is the first name referenced on that document page 29 on a paper about Japan.


#24

Some of you are familiar with the 12x-15x rent valuation method that has often been discussed on the Pin and indeed in this forum .

David McWilliams wrote this in the Independent today . Read all of the article please because the first bit is a polemic on the sillyness of the Greens

independent.ie/opinion/colum … 81179.html

I whole heartedly agree, lets look at it another way , prices and rents should broadly follow each other ( they did from 1990 to around 2001 and then decoupled ) so the entire Rabid Tomcat phase from 2002 onwards was not based on fundamentals, rents simply did not rise over that period of 7 years .

He picks Newbridge County Kildare by way of example and does a Daft check …as all good Pinsters always do :slight_smile:

Anybody thinking of buying should read that article in full and burn it into their noggins . McWilliams is absolutely correct …


#25

Yes McWilliams is correct, but his analysis does not go far enough - his target average price of 159k is still too high because it’s based on a formula that assumes the rent stays fixed over the coming years, but it won’t because as selling prices come down, so too will rents, meaning that the 14 x rent formula will calculate a lower house price.
No doubt there are even more complex mathematical formulae to figure out where the price should settle, but roughly it’s far more likely to be in the 128-138k range than around 159k.


#26

In fairness, I think any listed price must have at least a 20% discount in built… Or maybe 10%…

And inis man is correct aswell, circles we have danced around manys the time here… The other issue being oversupply versus a static population figure aswell…


#27

There would be some more serious ‘recapitalising’ and bolstering up of the banks’ balance sheets needed if their assets were valued at that level. Just pointing it out. Also, that’s not even considering that people would start to default on their loans in droves if their underlying assets fell to that level. But maybe so long as people pay back their loans at the same pace as their assets devalue, then the whole thing doesn’t collapse and the land and banking oligarchy manage to hold onto their gains.


#28

Nationally yes , some places higher and some places lower.

We did all this long ago ,remember but sometimes it helps when a public personae writes about it in the Indo ?

The game is up !


#29

Leaving various valuation methodologies aside, perhaps it is more sensable to adopt a policy that cheap property is the best way forward. The productive element of property is the construction of it. Obviously current prices are way above this value. So are the plots so valuable? I doubt it.

Asset prices that are dependent on credit don’t make sense. It reduces our competitiveness and quality of life. We’d be much better off buying services from each other than repaying debt.

That said, I think one way or another things will revert to mean. It’s possible to delay this, but this causes a longer period below mean. I think even Professori might even agree with this.


#30

If these norms hold true in US for over 100 years why was there a house bubble from 2001-2006 in the US when in places like San Diego, LA, Las Vegas prices went up by over 80%.

Also problem with all the models is that low interest rates/very high interest rates throw the model out of kilter too so we are back to relying on the fiction of bell curves


#31

The answer is interest only jumbo mortgages. In San Francisco they went from less than 10% to 80% plus of all new mortgages during 2001-2006. This is why a house that sold for $250K in 1996 sold for $800k in 2006, and can now be bought in a fore-closure sale for $150K. Of course most sales are still not fore closure sales so the regression to normal is going to be slow and painful. People still looking for $600K for houses that might make $350k in a few years time so not a lot of sales.


#32

The denial of reality is alive and well in Spain,where the banks are buying up all surplus property and selling it off through subsidiaries to prevent falls in house prices,they are in no rush,after all,they know that if it keeps getting worse and the off balance sheet liabilities threaten to make them insolvent(if they’re not already),they know the government via the ECB will bail them out just like in Ireland,England and the US.

The following comment just sums up the arrogance:

bloomberg.com/apps/news?pid=20601109&sid=aXWVn3mlVH4c


#33

I think the difference between those two figures is simply the amount by which selling prices are overinflated. I don’t think you are missing anything at all.

As for why prices remain sticky I’d say a combination of:

Sentiment: sellers simply refusing to accept their houses are no longer worth a million quid and that the prospect of that happening again in their lifetime is gone. I really wouldn’t underestimate the huge effect this has.
Talk of green shoots: Also relating to sentiment, there has been sustained “green shoots” talk since Xmas. This is reinforcing seller intransigence.
Activity in market: Anecdotally there does seem to have been a pick up in sales and viewings in recent months. This is also probably encouraging sellers to hold out. My view is that this activity is just the dead cat bouncing as a few nervous buyers take the plunge rather than a sign of an improving market.
No fire sales: the mortgage moratorium is in effect and in general there seem to be very few forced sales. I don’t know how much longer that can continue.
NAMA and the general drift: The policy of the government and banks to wait-and-see, hope-for-the-best is having a zombiefying effect on the entire economy, and the housing market is effected too. Everything just seems to be hanging in the air. Again, I don’t know how long that can go on before something gives.


#34

Remember, that as a seller yourself you will have to face these same realities…


#35

Where are Spanish banks getting their money from if international credit markets are after drying up?


#36

CAn anyone tell me how the figure of 320,000 empty properties that everyone is talking about is made up. I am currently starting to look at buying and all that seems to be around is apartments… i am looking in the greater dublin area you help would be greatly recieved


#37

Theres lots of houses for sale. Just check daft.


#38

Are people buying them? Is that data ever published?

I’m looking at Dublin and spotting some serious differences in asking prices. Crazy stuff.


#39

It’s extremely frustrating not knowing what the properties are actually selling for. Like asking prices don’t mean a whole lot in this market.


#40

The publication of a Property Price Database was announced recently after years of saying it would be illegal to publish the information, now suddenly it’s not because it now suits them to publish.
Supposed to be in legislation before Christmas.
Thread on it here
viewtopic.php?f=4&t=32161&hilit=property+database
Anyone thinking of buying would be nuts to go ahead before this thing is up and running - it will have a profound effect on asking prices.