Irish house prices fall 60%

[FryattFox]

Property prices in Ireland are in freefall, according to housing analysts, whose latest figures show that prices in Dublin have collapsed by 65% in five years and by 60% across the country.

A house price index released by the largest residential sales group – the Sherry Fitzgerald Group – found that the pace of deflation has sped up in Dublin, while prices across the country are now at levels last seen 11 years ago.

The group, which has been surveying a basket of 1,500 weighted properties since 1999, said residential property in Dublin is now worth 64.2% less than it was at the 2006 peak, with a national decline of 58.8%.

Separate surveys by two property websites also found large declines in 2011's asking prices – myhome.ie saying sale prices are down 50% since 2006 while rival website daft.ie is reporting an 8% drop in the last quarter alone, saying it is the largest ever quarterly fall in house prices in Ireland.

"There is no doubt the market is over-correcting," said Marian Finnegan, chief economist at the Sherry Fitzgerald Group, with house prices now making it cheaper to buy than to rent.

"The pace of deflation picked up in the last 12 months, which illustrates a market that is in over-correction or in freefall," said Finnegan.

She said the biggest reason for the freefall was the lack of mortgage finance available from Ireland's bailed-out banks.

In 2011, just €2.3bn (£1.9bn) was available in mortgage finance, according to the Irish Banking Federation, compared with €40bn at the peak of the property market in 2006.

With no signs of mortgage credit returning to the market soon, and unemployment expected to rise in 2012, there are fears that property prices will continue to decline this year.

Finnegan said the biggest shock is the level of deflation in Dublin, which "defied logic to a certain extent" and the new homes market was now "completely non-functional".

The woeful state of the market is in stark contrast to the frenzied buying and selling of the mid-2000s when property in Dublin was achieving higher prices per square foot than Manhattan. One 5,000 sq ft house called Walford, in the embassy belt of Ballsbridge in Dublin 4, was sold in 2005 for a record price of €58m – €23m more than the asking price.

If Sherry Fitzgerald's figures are borne out by other data and the decline continues this year, the crash will exceed the worst-case scenario outlined by the American asset management giant BlackRock Solutions, who conducted the stress tests for the Central Bank of Ireland which led to the fifth bailout of Irish banks in April 2011.

BlackRock's tests were the severest ever applied to banks, and were the first to price in the cost of a new toxic wave of mortgage debt from the residential and buy-to-let market.

They predicted that, at best, house prices in Ireland would drop 55% before they start to recover, and at worst 60%.

Myhome.ie economist Ronan Lyons said the crash was no surprise, as just 13,000 mortgages were issued in 2011 compared with 200,000 in 2006.

"Given that the property market in any developed economy is inextricably linked to the mortgage market, it's no surprise that prices are down 50% or more, if lending is down by over 90%."

He is one of the few who thinks there is an upside to the latest figures: "If you think of the fall in house prices as a necessary correction, whose size is determined by fundamental factors, then it is better for the prices to race to the finishing line than to crawl there."

http://www.guardian.co.uk/business/2012/jan/03/ireland-house-prices-2000-levels?CMP=twt_fd

Ouch.

 

[spionfox]

Ouch.

Prices over there went mad way back didn't they? Maybe this is just the market settling back down to a more realistic state.

 

[Biffa Bacon]

Prices over there went mad way back didn't they? Maybe this is just the market settling back down to a more realistic state.

I had friends in the North who's house prices rose so quickly in the 2000's they were able to buy property in Spain with the profits, it wasn't unheard of for houses to go up 50% in a year as the troubles calmed down.

 

[fitz]

Prices over there went mad way back didn't they? Maybe this is just the market settling back down to a more realistic state.

Ture. Their economy went through a gigantic boom and a lot was invested in property, then it all went shit. Not too different to this country (with respect to the boom) I know one guy who bought an entire street of houses at 10k each and sold them for nearly 80k a few years later.

 

[drew]

The UK is on the same path. Not as bad, but I think a 5-10% drop is likely in 2012

 

[Lako42]

The UK is on the same path. Not as bad, but I think a 5-10% drop is likely in 2012

Which will put the ever increasing rental prices even more out of touch when compared to house prices.

 

[Leesoh]

The UK is on the same path.

Many of my defendants are already in negative equity. :icon_sad:

 

[Darth Vodka]

just bought a house in Leics and prices dropped by about 5%-10% last year

I agree with an Estate Agent from Hinckley who said to me "there are two kinds of people trying to sell houses, those that have knocked a fair bit off and want to sell and those that refuse to lower and haven't"

If and when interest rates go up there will be lots defaulting and prices falling further

 

[FryattFox]

just bought a house in Leics

there will be lots defaulting and prices falling further

Are you hoping to sit it out?

We bought last year as well as with the current interest rate we're paying the same as our rent was. Hoping to sell in a couple of years but **** knows what the market will be like.

 

[drew]

Are you hoping to sit it out?

We bought last year as well as with the current interest rate we're paying the same as our rent was. Hoping to sell in a couple of years but **** knows what the market will be like.

So you're funding the loss in equity instead of the landlord, very generous. The property market is being propped up by low interest rates, as Darth says as soon as they start to rise and the short term fixed raters are looking for new deals the shit will hit the fan.

It will also be interesting to see the numbers of University students over the next 2/3 years, i believe applications are well down? This could potentially mean a drop in the student rental market which might help free up the FTB market a little.

Interesting times.

 

[Biffa Bacon]

So you're funding the loss in equity instead of the landlord, very generous. The property market is being propped up by low interest rates, as Darth says as soon as they start to rise and the short term fixed raters are looking for new deals the shit will hit the fan.

It will also be interesting to see the numbers of University students over the next 2/3 years, i believe applications are well down? This could potentially mean a drop in the student rental market which might help free up the FTB market a little.

Interesting times.

There has been a late rush to apply for university places so they aren't down very much, reported in the press today. If the banks start lending again and rents stay high sales will begin to rise but don't bet your house on them freeing up any finances soon

 

[drew]

There has been a late rush to apply for university places so they aren't down very much, reported in the press today. If the banks start lending again and rents stay high sales will begin to rise but don't bet your house on them freeing up any finances soon

The banks wont have any money to lend as they will be hit by Greece + more defaulting. The BOE and ECB will be forced to recapitalise the banks again via QE.

The Eurozone doesn't have a clue what to do.

I'm very pessimistic for 2012, the politicians have shown over the last 2 years that they don't know what to do.

 

[Mawsley]

I'm very pessimistic for 2012, the politicians have shown over the last 2 years that they don't know what to do.

Eh?

You mean screwing the working person so that ****heads in the City can have ridiculous bonuses isn't a plan for success? Now I'm depressed too.

 

[drew]

If that depressed you a potential war with Iran must have you on the edge.

 

[FryattFox]

So you're funding the loss in equity instead of the landlord, very generous.

I'd rather be paying against a hypothetical loss of equity (which will hopefully only occur if I don't sell in the near future or don't sit tight through any depression) than paying a definite fee to a landlord. But who knows how it will turn out.

The property market is being propped up by low interest rates, as Darth says as soon as they start to rise and the short term fixed raters are looking for new deals the shit will hit the fan.

The truth is that no-one knows what will happen. We can all speculate that when rates will go up, x, y & z will happen, but given the current economic climate it could be a long time still before the rates rise, let-alone what will happen when that does occur. Or we may find ourselves in a similar situation to the Irish.

 

[Darth Vodka]

Are you hoping to sit it out?

I bought a house to live in, not as property speculation, I have greater money worries than the mortgage at the moment

 

[Darth Vodka]

The BOE and ECB will be forced to recapitalise the banks again via QE.

huh?

QE is different to bailing out banks, the central banks don't raise money for themselves to go bailing. QE prints more money, like Mugabe but electronically. Governments bail out banks

 

[Darth Vodka]

Eh?

You mean screwing the working person so that ****heads in the City can have ridiculous bonuses isn't a plan for success? Now I'm depressed too.

if it's any consolation, things are pretty tough in the City at the moment

 

[Real Sharapova]

huh?

I was thinking the same DV.

 

[drew]

http://www.economist.com/blogs/buttonwood/2011/12/euro-zone-crisis-2
http://www.huffingtonpost.co.uk/201...qe-quantitative-easing-bazooka_n_1162472.html