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Tuesday, 24 January 2012

House Prices Lowest Since 2000...

House prices now under €200k, lowest since 2000...

HOUSE prices in Dublin have fallen below the €200,000 barrier for the first time since the early months of 2000.

Values fell by almost 17pc last year - the fastest annual decline in almost two years, official figures have revealed.

The average cost of a home is now about €165,000 based on prices at the peak of the property boom in February 2007 while in Dublin prices have fallen to €198,260.

The Central Statistics Office (CSO) has reported prices down by 47pc in the last five years.

On top of that huge crash, the record for December shows house prices falling at their fastest rate since February 2010 and a steady increase in the rate of decline all through 2011.

The average price paid for a house nationally in February 2007 was euro €311,078, while in Dublin it was €431,000, according to the accepted report on mortgage drawdowns by Permanent TSB.

Based on those figures and the CSO's rate of decline, average prices in the capital are now just below the €200,000 barrier.

House prices have fallen so much they have now reached affordable levels for thousands on average salaries, a major new study claims.

The first of its kind, the global survey found it now takes the equivalent of little more than three times the average salary to buy a house here.

That compares with 10 times the average salary of €36,000 a year during the boom.

The price plunge puts houses within reach of teachers, nurses, gardai and office workers for the first time in years.

But with the prospect of further price falls and banks refusing mortgages to many applicants, the latest findings are unlikely to spark a major lift in demand.

Nonetheless the comprehensive snapshot of the market provides a critical insight.

The study is part of a major international examination of prices in cities across the globe.

It was carried out by the prestigious Demographia International Housing Affordability Survey.

Its experts looked at 325 cities in English-speaking countries such as Australia, New Zealand, the UK, the United States, Canada, Hong Kong and Ireland.

It found housing in Waterford to be the most affordable followed by Galway, Cork, Dublin and finally Limerick.

Wendell Cox, principal of the Illinois-based Demographia said: "The bubble is over. Prices have continued to decline. We have housing prices back to where they're supposed to be."

The definition of affordable is that houses cost around three times the annual income of people living in the city.

This makes Dublin more affordable than Limerick, despite higher prices in the capital.

Galway and Waterford were the first cities outside North America to be rated affordable in the eight-year history of the Demographia International Housing Affordability Survey.

Assuming an average price of €150,000 and a saved deposit of 20pc (€30,000) a prospective buyer would have to borrow €120,000 which is a little more than three times the average earnings.

The findings may put more pressure on banks to acknowledge the new reality and start giving out more mortgages.

Only €2bn worth of mortgages was given out last year -- compared with €30bn mortgages at the height of the boom.

Auctioneers now estimate that one in three house are sold for cash and do not involve a mortgage.

But moves by Finance Minister Michael Noonan in last month's Budget to hike the amount of mortgage tax relief for first-time buyers taking the plunge this year may help stabilise the mortgage market, experts have said.

Bank of Ireland and AIB have both committed to lending more to new buyers, while Permanent TSB cut its lending rate for new buyers with effect from yesterday. It was the first cut in its new customer lending rate in four years.

Ireland was also the only nation without cities listed in the severely unaffordable category. Waterford, at 2.8 times, was the most affordable city among the five Irish cities surveyed followed by Galway (3), Cork (3.3), Dublin (3.4) and Limerick (also 3.4).

In contrast, the index was 12.6 in Hong Kong, by far the priciest market. And Canada, despite being larger in size than the United States with just one ninth of the population, continues to grow less affordable.

Report by Ed Carty, Thomas Molloy and Charlie Weston - Irish Independent

Thursday, 12 January 2012

6 Reasons Why Market Will Be Slow To Recover...

An oversupply of housing and continued uncertainty are among reasons there is little hope of growth in the residential market...

IN SPITE of last month’s budget measures aimed at stimulating the property market, there are six reasons why the market will remain slow to recover.

The National Institute for Regional and Spatial Analysis (NIRSA) at NUI Maynooth is one of the few bodies which has been consistently researching the housing market with any degree of rigour. It believes that the budget measures aimed at boosting the residential property market won’t work.

Firstly, prices are still falling, or “unwinding”, and most analysis suggests they will continue to fall for up to the next 24 months. No correction can happen until prices stop falling. But even when they do stabilise, there are other issues to take into account.

We have a massive oversupply of housing. CSO figures say 14.7 per cent of the total stock is vacant. My calculations say that excluding second and holiday homes, this is still a 9.65 per cent vacancy rate.
This is 60 per cent more than the Government’s rather generous vacancy base rate of 6 per cent, or some 240 per cent – more than most countries’ natural vacancy rates.

NIRSA holds that the notion that housing supply is running out in some areas is not supported by the data available. Until housing supply and demand align, they say, property prices will not increase.
Demand is, of course, about people wanting the product. Increased emigration coupled with a slowing of household fragmentation (think children moving back into the family home, for example) means that demand is very weak.

No demand means no sales; no sales means no upward price movement.

Buying a house for a home requires an ability to be mobile. According to NIRSA, we currently don’t have a mobile population as many households are locked into their present property through negative equity and simply can’t afford to move.

More than 8 per cent of mortgages are currently more than three months in arrears. Prices will have to rise considerably for people to be able to afford to move once more.

The greater economic picture has also damaged hopes of recovery. More than 14 per cent of Ireland’s working population is unemployed. Many people, employed or not, are severely financially strapped, with whatever reserves they once had considerably depleted. In the short-term, this doesn’t look like improving.
In addition, peoples’ access to credit is limited not only by their personal circumstances but also by the banks’ reluctance to lend. It will take some time for potential purchasers to build up deposits and reserves again.

People are also incredibly cautious and understandably so when they view the work of Nama, ghost estates, developments such as Priory Hall, the failure of local authorities to take developments in charge, and confusion over management of private developments.
Finally, with so much uncertainty surrounding both the property market and the broader economic situation, people have little confidence in both the property market, and according to NIRSA, in the property profession as well.

In my own view, undoubtedly the property profession gained little favour in the residential market over the years, with marketing often masquerading as research.

The profession, the market and society as a whole has, however, also been severely hamstrung by the lack of detailed official statistics: what sold where, for how much, and what size was it? These are basic figures which are found in any functioning market. Their absence undoubtedly contributed to the current situation in which we find ourselves. Stocks and shares are not bought in an information vacuum, yet houses often were.
Facts and figures also help to dispel the role that sentiment has on the market. It is much easier to talk up or down a market in the absence of facts with which to prove or disprove the claims being made for house prices.

The Property Services Regulatory Authority proposes to have a register of house prices by June 2012. This production of facts is good, if long overdue, news.

The problem is it will be using 2010 as a base year, which means we will still be missing data from the boom and especially the bust.

This is important information, so we can recognise similar patterns should they emerge again.

NIRSA’s analysis may not suit everybody. To my reckoning, there is a lot of sense in it. Indeed, maybe what we are currently experiencing is a shakedown of house prices to where they should be for a population our size.

Report by Dr Lorcan Sirr - Irish Times

Thursday, 5 January 2012

Prices 'Down 60%-Plus'

MANY PEOPLE selling their homes are still looking for prices higher than buyers are likely to pay – and the difference between asking and selling prices can be as much as 20 per cent.

For while property website surveys published this week show residential property price falls since the peak of the property boom of between 43 and 52 per cent nationally, estate agents say that actual selling prices are now down by around 60 per cent and more.

The lack of specific information about property sales prices means that buyers and sellers are still largely in the dark about what is actually happening in the property market.

This should change in June, when a property price register detailing recent sales, with addresses and prices, is published by the Property Services Regulatory Authority (PSRA).

The figures published by property websites MyHome and Daft are all based on asking prices.

Meanwhile, the CSO’s most recent residential property price index, published in late December, showed prices paid for property down by 52 per cent from the peak – but its figures are based on mortgage drawdowns and exclude cash transactions, which many agents now say account for one-third and more of their sales.

Sherry FitzGerald puts the fall in selling prices from the peak in 2006 at 62.4 per cent in Dublin, and at 59.8 per cent nationally. Douglas Newman Good’s CEO Keith Lowe puts the fall in greater Dublin at 65 per cent, while Edward Hanafin, a director with Lisney in Cork, says that prices there are off the peak by about 50-60 per cent “and more for apartments”.

Given the continued uncertainty of the market, and the probability that prices will continue to fall in 2012, what should people who still want to buy – or sell– this year do? At what level should buyers pitch an offer, and how can vendors put a realistic price on their home, given the uncertainty?

Sherry FitzGerald director Simon Ensor says that a further fall in prices of 5 to 10 per cent is a definite possibility, so if you’re making an offer on a property, you could pitch it by at least that much below the asking price. As always, of course, it depends on the kind and location of the property.

Ronan O’Driscoll, director of residential at Savills, says: “If you’re looking at an apartment in a rural location you could make a ridiculously lowball offer, and perhaps get a bargain, because there’s such a minute market for them.

“However, there’s little point bidding €150,000 for a three/four-bed semi in an established suburb of Dublin, Cork or Galway which has dropped in price from €700,000 to €350,000 since the peak.”

This is because the kind of property most in demand at the moment, according to most agents, is the solid three/four-bed suburban semi in areas not too far from city centres.

“Further depreciation of good family homes is less likely,” says Ensor, “because the buyer who might have bought a two-bed apartment will now go straight for the three-bed semi.”

Ensor says that there is more happening in the market than people think. “Some people who can buy are doing so. They just want to settle down, knowing they’ll be there for 25 years.”

MyHome managing director Angela Keegan agrees that prices for traditional three-bed semis are likely to stabilise first. But for sellers wondering how to price their property for sale “local information is absolutely critical” she says.

“You need to talk to people who have bought or sold in your area recently, and talk to local agents.”

Ronan O’Driscoll says that buyers who have a house to sell shouldn’t bother making an offer on another property, even if their home is in a good location: “Sell the house first and have a pile of money ready to pounce.”

Frank Conway of Moneycoach points out that sellers – many caught in negative equity – are seeking economic prices that will pay off their mortgage and advises sellers to ask for more than they might get, with a view to bartering.

He, like all pundits, agrees that lack of confidence and lack of credit are the main factors keeping the market subdued, and believes it will stay that way in 2012 until this changes.

Measures in last month’s budget – changes to mortgage interest relief, the capital gains tax incentive, continued low rate of stamp duty – are seen as possible positives for the property market for 2012. The effect of the planned property tax is as yet unknown.

But continued price falls are not necessarily bad, says Daft economist Ronan Lyons in the Daft price survey report. “ . . if the size of the correction in house prices is determined by fundamental factors, then it is better for the prices to race to the finishing line than crawl there”.

Report by FRANCES O'ROURKE - Irish Times