How much will property prices drop by?

[whizzbang]

Medicine for the Irish economy and people

House asking prices to drop 5% to 10% between August 06 and December 06 – some evidence of this already with asking prices coming down. Interest rates up one quarter of a percent by 31st December. Sellers expectations take a hit and trust in estate agents really goes out the window because houses are on market 4 - 6 months with their valuations and still hasn’t shifted with the decrease in asking price. Estate agents start to be conservative in valuing houses which holds prices. Vendors accept this new climate as plenty of stories in the pubs at Christmas about houses on the market for months.

No changes to stamp duty in December budget or other measures in regard to housing and this brings all the fence sitters out and houses start changing hands again. House prices stay flat for a time (6 months max) before returning to <10% growth.

It all sounds good until the last paragraph, whats going to cause it to rise again rather than fall due to investors bailing out?

 

[davidoco]

whats going to cause it to rise again rather than fall due to investors bailing out?

A market going flat doesn't mean that investors are going to pull out.

A major percentage of investors in the market now are opportunists who were trading up and kept their old home or amateur buy to letters who aren't sure about stocks etc and see no problem leaving their money in bricks and mortar as long as they see basic capital growth or prices holding 2006 levels they won't be that bothered about selling.

From speaking to the people I know that have investment properties, firstly they wouldn’t know what to do with any equity, worry about the tax implications, worry about missing out on future growth etc etc and it seems for now ain’t rushing to the market. The only thing that would push them would be interest rates above 6%.

 

[beattie]

I believe people will just defer selling. Supply will drop way off. What has happened to the 70% of houses withdrawn at auction in Dublin last week - It certainly doesn't seem that all of them are back on the market by private treaty. So people will just stay put. It will be classic head in the sand - "Hmmm, I'm not getting the price I want, so I'll just wait. I don't HAVE to move. The price I want is the highest price a house on my road has ever achieved. My buyer is out there somewhere so I'll just ride it out, and in no time at all prices will be back up again. Sure look what happened in 2001." The market will become distorted by a small number of forced sellers, so we'll see a significant drop off in prices, but on low volumes. I've no idea where equilibrium will be restored.

Won't be an option for many I'm afraid. Once investors (those of the species who still have their head in the sand) see that there are no more price rises in the offing and the ECB not doing them any favours they will head for the hills instead of subsidising their tenants (if they have any). I just hope my landlord doesn't cash in his investment which is returning a measly 1.7%.....

 

[whizzbang]

A market going flat doesn't mean that investors are going to pull out.

A major percentage of investors in the market now are opportunists who were trading up and kept their old home or amateur buy to letters who aren't sure about stocks etc and see no problem leaving their money in bricks and mortar as long as they see basic capital growth or prices holding 2006 levels they won't be that bothered about selling.

From speaking to the people I know that have investment properties, firstly they wouldn’t know what to do with any equity, worry about the tax implications, worry about missing out on future growth etc etc and it seems for now ain’t rushing to the market. The only thing that would push them would be interest rates above 6%.

fair enough, that being said, all the investors I know are selling or have sold...

 

[Doris]

How much are rents linked to property prices, I wonder if rent will go down at the same rate as property prices?

 

[beattie]

How much are rents linked to property prices, I wonder if rent will go down at the same rate as property prices?

The huge amount of new build coming on stream will cause rents to drop IMO. I know that landlords exhort that rent rises will have to come after interest rate rises but the market doesn't care what you paid for an asset and people will vote with their feet and move to a new place instead of putting up with rent hikes.

 

[Calina]

I think that ultimately, rents are on the way down due to supply reasons but that an increased number of investment properties going up for sale may temporarily cause a blip in the supply of rental. Once it is clear that selling is going to be difficult, a lot of properties will come [back] on the rental market in an effort to reduce losses to some extent. But I don't know how long that will play out over.

 

[baby_tooth]

A market going flat doesn't mean that investors are going to pull out.

A major percentage of investors in the market now are opportunists who were trading up and kept their old home or amateur buy to letters who aren't sure about stocks etc and see no problem leaving their money in bricks and mortar as long as they see basic capital growth or prices holding 2006 levels they won't be that bothered about selling.

From speaking to the people I know that have investment properties, firstly they wouldn’t know what to do with any equity, worry about the tax implications, worry about missing out on future growth etc etc and it seems for now ain’t rushing to the market. The only thing that would push them would be interest rates above 6%.

delusional, no other word for it.

house prices to contiune rising at less than 10%....

So in 10 years time the real value of the euro will fall or our output will have to increase dramitcally to warrant this "notional" price.

no offence but your talking cobblers.

 

[CCOVICH]

Loads of opinion and speculation here.