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 Post subject: What is "the long-term economic value of" Irish property??
PostPosted: Mon Aug 03, 2009 8:52 pm 
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Neo Landlord

Joined: Oct 2, 2007
Posts: 262
OK, so the proposed NAMA bill has stated that the price paid for the assets being acquired by Irish taxpayers will be based on "the long-term economic value of the property" which it goes on to say:
Quote:
is a reference to the value that the property can reasonably be expected to attain in a stable financial system when current crisis conditions are ameliorated and in which a future price or yield of the asset is consistent with reasonable expectations having regard to the long-term historical average...


I would like to make representations to some of our elected officials with regard to the 'long-term historical average' value of Irish property so that NAMA do not 'accidentally' spend more of my tax money on these assets than their true long-term economic value.

I have seen some graphs here showing the inflation-adjusted value of Irish property but most have been out of date. Can anyone here advise me as to the best way to generate an inflation adjusted graph of average house prices which I can use to demonstrate the historical trend and to calculate the long-term historical average value of the average Irish property?

Failing that, can anyone tell me where can I get my hands on data for annual inflation rates and average house prices in Ireland for say the last 50 years?


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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Mon Aug 03, 2009 9:35 pm 
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Property Magnate

Joined: Oct 2, 2008
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You can't do it... and neither can they. It'll be a shot in the dark and the wrong person will be killed.


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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Mon Aug 03, 2009 9:58 pm 
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Migrant

Joined: Aug 3, 2009
Posts: 4
This graph covers the period from Jan 1978 to Jun 2009. Figures from the Dept of the Environment as well as the ESRI and Daft asking prices are in there. From this, the long term average price in 2006 money is around 100,000 euros.

Image


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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Mon Aug 03, 2009 11:46 pm 
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Of Systemic Importance

Joined: Aug 4, 2007
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Location: Ahernistan
SkepticOne wrote:
This graph covers the period from Jan 1978 to Jun 2009. Figures from the Dept of the Environment as well as the ESRI and Daft asking prices are in there. From this, the long term average price in 2006 money is around 100,000 euros.

Image


Great graph SkepticOne !

The only thing more I'd love to see on it would be a whisker plot of salaries, we'd see then just how out of whack the growth in prices is versus peoples basic ability to pay.

Congrats on 1st post too, welcome to the other side of the looking glass 8DD

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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Mon Aug 03, 2009 11:55 pm 
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Neo Landlord

Joined: Oct 2, 2007
Posts: 262
Thanks SkepticOne. :)

Here's one I did myself based on the DOE's house price data and the CSO's CPI data.

Image

A quick analysis of the inflation-adjusted data tells me that from 1970 to 1995 the annual average house price never deviated by more than 33% from the Euro113,425 average during that 25 year period. House prices in 2006 and 2007 (when the majority of NAMA-relevant loans were arranged) were 206% and 210% (resp.) above this average. If the latest PTSB/ESRI figures are to be believed (!) new house prices are still 130% overvalued (i.e. they are worth 43% of what is being paid for them).

If NAMA takes the years 1970-1995 as representative of the 'long-term historical average' value of new houses then they should pay about 30 Billion for the assets associated with the loans of 90 Billion. :shock:


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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Tue Aug 04, 2009 8:03 am 
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Under CAB Investigation

Joined: Jan 18, 2009
Posts: 2550
Location: NWUK
More useful to look at international comparisons, I'd think.

Interestingly the UK long term price average on HPC here (http://www.housepricecrash.co.uk/graphs ... -price.php) was also about 125k before it rose above trend.

So something like 4/5 of the UK average?

Currently the (still falling) UK average on that graph is about £150k, putting the current value of 'property', on this basis, at about £120k, whatever that is in Euros.
If anyone could find German or other long term comparisons it might shed some more light on the subject.

At any rate the (very rough) UK comparision puts current values about 50% below where they are now.......


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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Tue Aug 04, 2009 8:24 am 
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Too Big to Fail
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Joined: Aug 31, 2007
Posts: 3116
Location: HUNTING FOR BERTIE
Forget about the graph. It is simply 3 and a half times average salary for a particular area.
In Crumlin take the average salary for a person living in a 3 bed. Multiply it by 3.5 and this is the long term mean price.
Do the same for Foxrock.
The only problem you have is allowing for salary deflation.

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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Tue Aug 04, 2009 8:50 am 
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Real Estate Developer

Joined: Nov 17, 2008
Posts: 977
SkepticOne wrote:
This graph covers the period from Jan 1978 to Jun 2009. Figures from the Dept of the Environment as well as the ESRI and Daft asking prices are in there. From this, the long term average price in 2006 money is around 100,000 euros.

Image


Are the figures for 1978 to 80's correct actual figures or am I misreading the graph in some way?
Reason I am asking is that a relative of mine bought a three bed with half acre for £5,000 in 1979 - Greystones.
I also know lots of people who bought houses in Greystones in the mid-eighties for £33,000 approx. Can't recall any houses then being priced up to 100k apart from massive ones.


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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Tue Aug 04, 2009 8:57 am 
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Old Time Landlord

Joined: Dec 4, 2008
Posts: 374
Hi all,

Did some work on this last week myself, it's available here:
http://www.ronanlyons.com/2009/07/31/no ... -i-retire/

Two graphs that I'll throw into the mix are the haircuts that NAMA should make (shown on vertical axis) if it wants to match a particular yield it regards as 'historical average' (from 4% up to 6%), depending on how far rents fall from 2008 peak values (falls from 20% to 50% shown on the axis below):
Image

Because people often think in terms of actual property prices, rather than yields (or even positive/negative equity), a graph show where house prices would be in 2050, based on the yield NAMA chooses and 3% average growth per annum (this latter percentage could obviously be changed) is below:
Image

Either way, the 20% - or even 30% - being mooted in the media seems to fall far short of the 37% bare minimum (and Liam Carroll-esque 75% upper bound shown below).


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 Post subject: Re: What is "the long-term economic value of" Irish property?
PostPosted: Tue Aug 04, 2009 8:59 am 
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Migrant

Joined: Aug 3, 2009
Posts: 4
honeysuckle wrote:
SkepticOne wrote:
Are the figures for 1978 to 80's correct actual figures or am I misreading the graph in some way?
Reason I am asking is that a relative of mine bought a three bed with half acre for £5,000 in 1979 - Greystones.
I also know lots of people who bought houses in Greystones in the mid-eighties for £33,000 approx. Can't recall any houses then being priced up to 100k apart from massive ones.
They are inflation adjusted figures. The prices are in 2006 euros.


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