The major question that needs to be asked is - what political steps are being taken by the Irish Government, to ensure housing affordability is restored and the country is not put through another planning induced housing bubble again?

The Annual Demographia Surveys ( http://www.demographia.com ) clearly illustrate that housing bubbles are unnecessary. In this years Survey, we illustrate the massive differences between Sydney and Melbourne in Australia and Atlanta and Dallas Fort Worth on the other.

Political progress is being made in New Zealand (refer writers website http://www.PerformanceUrbanPlanning.org ) to deal with these housing bubble problems. Lets hope we see the same thing happening in Ireland before long.

Hugh Pavletich
Co author - Annual Demographia Survey
http://www.PerformanceUrbanPlanning.org
Christchurch
New Zealand

A good tip to all, if your printer can fit 2 no. word document pages of text onto 1 no. A4 sheet - there is a setting sometimes in the printer settings, that you can make a single word document page, an A5 size, and 2 no. A5’s per A4 - what you get in your print out, is basically, something like a paper back book page. You can fold it in half, and it works just like a book actually, that you can read on bus etc. I find, if I haven’t followed a blow-by-blow development of a thread discussion - the print out method, is the only way to get some overview of what is going on in the discussion.

It is amazing the amounts of arguments, and sub-themes, that one can identify in a thread, if one changes to printed words - stuff that you would rarely even pick up while trying to read the text off the screen, like I am doing at the moment. BOH.

Unfortunately that would reduce the value of said assets.

Assetvalues has been inflated to unsustainable levels. Money is printed to ‘fill’ the value. Unfortunately the money is liquid and leaking out so assetvalues are not inflated up & the ones controlling the liquidity (the banks) are taking a part (too big part for the function they are providing) & hoarding it for themselves.

The way the banks take it and hoard it is that the banks are now making money on getting cheap money from the central banks and lending it out at a profit to the governments. Some say it is easy to make money doing that so paying someone for their supposed skill might not be an accurate description.

Government will be forced to borrow for its spending as long as the economic activity is low & activity will be low as long as asset values are high. Asset values are held high as otherwise the banks will become insolvent. Vicious circle.

Forcing a business to charge more than its customer can pay so that the owner of the asset can pretend to be solvent will not solve anything. The business will still go under and the value of the asset will still fall. It will just take longer.

Too bad many of the assets were bought with borrowed money. Unencumbered assets should easily be able to produce good profits now

& my apologies for going off on a tangent

maybe I should leave it to DE to reply, I can offer some information:

In the bad old days, the asking rent could be lower than the agreed rent as the landlord showed his solidarity to tenants by having bids and accepted the highest. The worst excesses of the boom wasn’t seen in the ads.

Now the renters are repaying the solidarity shown to them and are asking for lower rents every time the rent is up for review or when negotiating a new lease.

In addition there have been and are gifts on offer for quite some time for new tenants in the ads, these are not reflected here & asking rent is again only asking rent.

Not sure if multiple units on offer in the same ad are weighted? Or if they are not, if it would make any difference on the outcome.

With the quality of data available I wouldn’t bother with 1% change in either direction. It can be a blip, it can be a change in trend.

Those who believe it to be a trend, I’d love to hear your explanation to the rise

A couple of thoughts about the desirability of high rents:
Lower rents leads to more money available for spending. On the other hand, the landlords have less to spend. The difference would be:
Tenants spend it, thus increasing economic activity.
Increased rent paid to the landlords leads to more money going into the black holes in the economy known as insolvent banks, thus reducing economic activity. Moneyprinting is then done because there isn’t enough economic activity due to money disappearing into the black holes.

Just to be clear: Black holes are things with intense gravital pull which once caught in, nothing can escape.

High rents good or bad for the economy?

Interesting to note that from the latest daft report that yields have barely budged even with the 40% price falls we have had to date.

Q42007 3.2%
Q42008 3.4%
Q42009 3.5%

So even though we have seen significant prices falls it has almost been matched by rental falls.

A long term yield of 5% to 6% is conservative IMO, NAMA thinks 6% is reasonable.

If you assume a 5% yield then we will need 32% falls to return to equilibrium, if you use 6% then the property prices need to fall another 45%.

And all that assumes that rents have stabilized and I don’t think we have reached that point yet.

“Firstly, rents in Ireland will continue to fall IMO. We have had a pause somewhat in the last few weeks but I think we will see rents fall another 20%+ over 2010 & 2011.”

Now today RTE reports: “Rents show first fise for two years.”

http://www.rte.ie/business/2010/0216/daft.html

As you know infinitely more about the housing market than I do, I will leave it to you to analyse whether this is seasonal, a freak, a blip, a pause, or whether previous forecasts will have to be revised.

All I know is there were plenty or warning signs back through the years when it was obvious inventory was building up but nobody in power wanted to join the dots.

I recall a census a few years ago when it was common knowledge the country was full of empty houses as those distributing the forms couldn’t contact the occupiers….. It was a big enough issue to receive national comment but was quietly ignored.
Back then the thing to do was buy, leave empty and sell… (capital gain outweighed the risk/cost of having to deal with tenants)
Holiday homes would obviously have made up a chunk of that but the thing is holiday homes are also investments; if things get tight, it can be sold or rented.

So it could be 250k, 300k or 350k empties but its a hell of a lot more than 50k.

Hmmm……. anyone ever heard of a similar fall? Clearly sensible that fewer people risk their capital in a depression. Sense at last, in fact. It should continue to fall. Is it a gross figure or net of repayments?

Not a good sign for bad debts in lending institutions nor for dividends. Commercial property may also lose some value. All to the good when considering competitiveness though….. Got to compete with those Chinese factories where the wages are less than 75 Euro a week……

So at least the economists in IBEC will be smiling! A little worried at how long it is taking. Japan is so slow, it would be a bad idea for those who have wasted capital to try to keep values high for more than say two decades.

What happens is the first wave, obtain a huge windfall. That is the good part of these schemes. Yeah, that first trance of ‘wealth’ does disperse amongst the original community, when ownership of developments gradually transfers to middle classes. But then, what happens is the original well-constructed and well-serviced settlement, falls short of gaining the finance it requires to maintain and adequately provide for itself. A vicious kind of cycle of decay, deterioration and neglect sets in after a time. Because the intitial tranche of wealth ‘escaped’ from the new settlement as it were - rather than being retained there, in some form of property taxation - to assist in keeping the services to a level of quality desireable. My point being, here in Ireland too, we do the same thing often. We build fantastic new environments, and for a while, it seems as though they are worth more and more. Then they run into funding difficulties and you are stuck between a rock and a hard place. Even the best kinds of new eco-friendly and sustainable developments are missing this crucial layer. The crucial funding by which the public amenity value can be maintained for future generations of occupiers. We have an opportunity now in Ireland to try and improve this, and get the economic model underlying development fixed - if we really want to. BOH.

See http://irelandafternama.wordpress.com/2010/01/18/an-estimate-of-vacant-housing-in-ireland/ and subsequent posts

bjg

I think you see the magic of NAMA
Properties are being held off the market to keep the value high. Keeps the asset at cost instead of the lower market value. Keeps companies and banks solvent that way. Its like the roadrunner cartoons, he can run on air & doesn’t fall until he looks down and sees there is nothing below. Never look down -> never fall. Works in cartoons, we’ll find out if it works in real life….

Also, in Daft, one entry can be for several units & it is only partially compensated by desperate sellers with multiple entries.

It would be nice to know though

That property pin thread seems to include properties for sale or rent in the NI also. First graph lists almost 85000 properties for sale on Daft at Feb 2010 - when the ROI figure, as I said above, is in fact 59000.

If the UCD report is to be accepted, then it still leaves the question of the other 240,000 properties, which are not currently listed for sale (at least not on Daft). Can they all really be in “cold storage”, waiting for NAMA?

Something smells off to me.

gave u the property pin link as it is a better source of information than the irish times (theres a link to the irish times article at the start), the discussion is basically a report from UCD is showing the number of empties are at over 300k but the information has been common knowledge for a number of years by those following the market.

Or indeed just walk around the new estates. Seriously walk around the north docklands in Dublin. just walk around, during the day have a look at the number of half built apartment blocks, walk around at night, look at the number of empties, built but no sign of life…..

Daft is currently listing a total of 59,670 residential properties for sale in Republic of Ireland. It has 19,676 rentals. Some of these may be the same properties.

Where is the remainder of the 300,000?

(Genuine question btw, not expressing any opinion!)

what is the median income quoted in the Demographia report?

what is the average income according to CSO?

Why is the difference so big?

@Eoin,

I can only speak for myself and the people I know who were/are renting. None of us would pay 400EUR for a single room outside of Dublin City centre. 400 EUR for a double room with ensuite bathroom would be closer to the mark, if it was offered without living with the landlord. Living with the landlord then the offer would be 300EUR and even then I’m not sure if the lower price would be worth it.

People prioritise things differently. If I had been in the situation of your friends I’d have teamed up with one or two of them and using the negotiating strength to get a better deal. Either in the suburb or in the city centre.

You believe your house is worth 360k. An anonymous poster claim it is worth a lot less. In your position I’d doubt as well. You can check yourself by posting ad about renting out one of the single rooms and see how many replies you get.

I think house prices in Ireland are still overvalued.
I am not forecasting that prices will fall by 20% in the short term to below their LTEV.
I am forecasting that prices will fall another 40% from current prices, about 30% to get to LTEV and another 10% of that due to a possible overshoot.

It is all about the over-supply/empties JtO.

Why are you using the 2006 Demographia report in a debate on whether or not house prices in Ireland are overvalued? Fair play to you though for Finfacts being the only media outlet that published and analysed the recent Demographia report, which is the benchmark for comparing house prices in English-speaking countries. The mainstream media ignored it. And no mention of it in any of David McWilliams weekly newspaper columns, although analysing and comparing house prices internationally is supposed to be his forte. So, you’ll be familiar with its findings. What it found was that median house prices in 2009 Q3 as a multiple of median incomes (the key yardstick) were as follows:

Australia 6.8
N. Zealand 5.7
U. Kingdom 5.1
Canada 3.7
Ireland 3.7
U. States 2.9

So, clearly, even by 2009 Q3, house prices in Ireland were quite low compared with other English-speaking countries. In addition, house prices in Ireland have fallen by over 10 per cent since 2009 Q3, while rising in most of the other English-speaking countries. If these trends continue, heaven only know what the next Demographia report, presumably for 2010 Q3, is going to show. House prices in Ireland will probably by then be by far the lowest of any of the English-speaking countries and, quite possibly, no more than half those in the U. Kingdom.

Dublin house prices were the most expensive in Ireland. However, even these were low compared with other large cities.

Vancouver 9.3
Sydney 9.1
London 7.1
Swindon 6.3
Belfast 5.5
Edinburgh 5.3
Dublin 4.7

So, house prices in Dublin are now lower than in Belfast, and even lower than in bl**dy Swindon, a dump if ever there was one, and one-third lower than in London, and almost one-half lower than in Sydney and Vancouver. And that was in 2009 Q3. Since then house prices in Ireland have fallen another 10 per cent, while rising in almost all the other places.

@Dreaded_Estate

We are not primarily forecasting house prices in the short-term on this thread. Your forecast of a further 20 per cent fall may or may not prove accurate. You’ve a good record on this matter, so I’ll take your word for it for now.

Rather, we are simply trying to analyse whether or not house prices in Ireland are any longer overvalued. I say they are not and have given the figures from the recent Demographia report in support. The figures from The Economist that you link to seem to be from around mid 2009. Even then, many countries (Finland, Spain, Sweden, Australia) showed much greater ‘overvaluation based on rents’ than in Ireland. But, as I am sure you’d be the first to point out, house prices in Ireland have fallen by about 15 per cent since since mid 2009, while rising in most of the other countries. So, currently (ie as of Feb 2009) house prices in Ireland are clearly no longer overvalued. That doesn’t mean they can’t fall further in the short-term. If your forecast of a further 20 per cent fall proves accurate, then, by late 2020, they’ll have gone from being ‘no longer overvalued’ to ’severely undervalued’.

The reason for quoting from the Central Bank report is because it is that report that Karl Whelan introduced the thread with.

In other words, we borrow now to relieve problems in critical areas, where it would only cost more in the long run - when things inevitably go bad - and you do get a real wave of default(s) and associated problems. It costs a heck of a lot of money to clean up a Ballymun, or a Moyross, 20 years down the road. I think, it is scandalous to have to spend €1.7 billion in Limerick regeneration. That is a sizeable chunk of pork belly for the construction industry in my opinion. Not subtracting in any way, from the obvious merits of the regeneration project either. BOH.

I believe, there are certain situations, where the bank should take a write-down on its mortgage loans. For instance, where a bank offered a mortgage of say €800k to buy an apartment, on a LUAS line. A sizeable portion of that loan amount, (say €1-200k for arguments sake) was based on the fact the residential unit was convenient to a public transportation network. Paid for by the taxpayer. Much property along LUAS lines was bloated up in price, because the buyers didn’t understand, they were having to pay for the same infrastructure twice - one through taxes and then through mortgages. Not fair to the mortgage holder.

Then there is another case. Liam Carroll paid in the region of €500k for the most decrepit cottages in the Dublin docklands region. For better houses, maybe a bit more. These houses were required, to assemble land together, out of the pieces to make development land, on which new building could occur. Carroll would not go to €1 million for the worst residential properties. Even though, the mortgages were available to buy homes in the docklands area, for that amount. Obviously the banks overheated the residential mortgage market in some areas.

Some entered the residential mortgage market, not for the purpose of buying a home, but to hold developers to ransom. In other words, NAMA I and NAMA II kind of property activity intersect in some points. In that case, I argue, it is not like the property beside the LUAS line. Where the bank should take the write down. In the case of ransom properties in the docklands, the mortgage holder took the risk, and should accept the consequences. BOH.

Property has obviously fallen in value, we are all agreed there.

However there are different classes of property, Commercial land, agricultural land, Residential land etc.

In addition in the section of residential property, there are different classes of houses again. Private residential property at the top of the market has taken a big hit, some are down 50%, you know the type origianally priced at 2.5m, now going for 1.2m etc etc. There are a number of these examples around.

However as one moves closer to the lower price range, say a 3 bed semi in Carlow originally going for 250K in 2007. Does anybody believe that house will drop to 50K (80% drop)? No way. Owners are not going to give away a house for nothing. This example of a house going for 250k at the height of the boom would now be down to about 170K or so. Even if the asking price is 215k you know you can bargain them down. But you are not going to haggle them down to 50K.

Having said that I heard of a builder who was looking for a loan of 300K recently. On going to the bank he was offered 3 properties, each property was originally valued at 300K in Monaghan, but he was getting them for 100K each. Obviously the bank just wanted shot of them. But the builder was in the trade, he would have to sell them on for maybe 140K each etc. There are always unique examples.

So predictions of price drops of 80% is not universally true for all properties, it depends what class of market you are looking at.

The devil is in the detail as they say…

Christians also have a tradition against theft. In the modern context, where debt is not a loan from a permanently rich man to a probably poor man but is rather a loan from one “normal person” to another “normal person” (albeit a rich banker brokers this loan) debt forgiveness is largely equivalent to theft.

Person A put their savings in the bank. Person B borrowed the money to buy a house. Person C sold the house, walked away and put the money in another bank. Person B then doesn’t pay back the loan, but wants to stay in the house that they bought. Debt forgiveness would mean that Person A (in reality lots of A’s) get shafted. Person B would keep the house and Person C would keep the money - apart from the fact that they’re probably also Person A in some other deal.

These three people are all “normal people”. Person A isn’t some Rockefeller able to tolerate having their savings stolen. Now, the rich banker also deserves some criticism in this, but that doesn’t mean there’s no primary moral imperative for Person B to pay back the money or to suffer the type of consequences that debt forgiveness seeks to make Person A suffer instead.

Unfortunately, intellectualism and financial justice are not easy bedfellows. The existential question in finance is simply “Show me the money.”

As for Marx, I hope he’s sufficiently well staked to the floor of his coffin that he’s not able to spin in his grave.

Now, if you want to get all intellectual, go ahead.

Of course, if you want to talk about Kondatrieff waves it might be interesting to read van Gelderen in the original Dutch where some of the anti-Marx remarks come across more directly than in translation…not that I buy everything van Gelderen said either.

thats fair enough. Change the search to €300-500 per month and you get a couple of thousand hits.

(a) i think its fair to call your example an outlier vs mine
(b) i even allowed for the 250 per month example in my maths above.
(c) looking through Daft there are still lots and lots and lots of room costing 400+ outside the city centre.

@ Jesper

of course i agree that the advertised rents are probably easy to negotiate somewhat lower if you’re actually interested in the place. However, like i said, i know lots of people who are paying in the 350-450 range, giving the imputed values of above. I know of no one who is paying in the 200-250 range that would be required for some of the more agressive price-fall forecasts

@ YM

“Eh, he said it was a possibility”

Ah now come on YM. He takes 60% as a given, 70% as a probable and 80% as a “real possibility”. If you’re going to let him away with that as merely “a possibility” then he could suggest all manner of economic forecasts and throw away the ones he got wrong as “possibilities” and keep the ones he gets right as genius forethought. If he wanted to clarify it as a very much outlying forecast he could have done, but he didn’t. He has also repeatedly compared Japan and Irish farmland price falls with our current property problems, both of which had 75-80% falls on some metrics. In the same way that he gets the plaudits for being right so far, he has to take the hits if he ends up being wrong on some counts.

By the by - he looks for housing rental yields of 8-10% - has this ever occurred in this country (ie a country with 65%+ property ownership).

your friend was right to move out:

http://www.daft.ie/searchsharing.daft?scc_id=c1&sa_id=249&smnp=&smxp=&sroom_type=own&refine.x=26&refine.y=17&refine=Refine&search=1&ssearch_type=sharing&sfurn=&srefreshmap=1&search_type=sharing

The advertised rents are lower than what the landlord was asking for.
Given the oversupply (undisputed?) then the relative negotiating strength has changed a lot since 2005. Advertised rents might end up as the agreed rent but most people renting know that they can negotiate it down.

Some examples:
A friend was living in a one bedroom apartment in Temple bar. He paid 1000 EUR rent for that in 2003. More or less the same as the asking rent is now.

Another friend got a one bedroom apartment in the centre of Dublin (across the river from Temple bar), rent he will be paying is 10% lower than advertised rent. In total it is 25% cheaper than the previously mentioned apartment. Haven’t seen it but I suspect it might not be as nice though.

I can’t remember who were using the phrase “living in ivory towers” here on irisheconomy. I’m getting the impression that the majority here are not renting, haven’t been renting for a couple of years and as such might have lost touch with what is happening on the ground.

Renters have the upper hand in negotiating rents. Advertised rents are as reliable as advertised prices for homes. Would anyone here consider paying asking price for a new home?

http://www.irisheconomy.ie/Crisis/KellyCrisis.pdf”
Eh, he said it was a possibility. Speaking in January 2009. Which of the reasons he gives for saying it is a possibility do you agree with?

Trying with the link again. Sharing in Dublin for 250 or less. And this is for your own room in a house or apartment.

There you go! 125 counter examples in Dublin.

on this very site he predicts 70-80% falls in house prices…

http://www.irisheconomy.ie/Crisis/KellyCrisis.pdf

yes, im ignoring voids. My example was a direct response to someone else’s (Stuart’s) very basic example. As i said, if you have different figures, including “standard voids”, please provide them. I still think some of my basic figures will hold up. Also, your link didn’t appear to work (the first offering was 370 per month in D14). As i said, i i wasn’t being particularly aggresive with the 250/300/400 a month examples, i can as easily find places going for 400/500/600 per month less than 1km from my place.

@ Garo

i know a girl, a friend of mine, who was paying 500 per month for a very average room in a random 3 bed semi-d out in killiney (near the N11), and she eventually haggled him down to 400. She subsequently moved out to Loughlinstown where she is now paying 400 per month for an average room in an average house. As i said above, if you have examples, please provide them, as Hugh was good enough to do, but random incredulousness adds very little to the debate.