Will Irish house prices fall or rise?

Brendan Burgess

Brendan Burgess

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Posting Guidelines for this thread

We do not allow discussion of house prices on askaboutmoney. We have an open invitation for someone to do a balanced summary of the issues, but no one has responded.

Occasionally, posters make implicit forecasts such as "when house prices rise..." or "you are mad to be buying a house now..." and these are difficult to moderate.

We do not want to open the discussion again, but we will allow links to published research on the topic, so that people can do their own research.

Please follow the format of the first few posts: Person; description;date; title

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Please do not discuss the research, other than providing a summary
 
Ronan Lyons
Independent economist ( but consultant for daft.ie )
5 January 2011

2010 marks the end of a single national property market

the underlying conditions in the property market vary so dramatically around the country that we should no longer be talking of a single national property market. Instead we should look at different regions as very distinct markets

Where is the finishing line?

Naturally, no-one knows in advance the exact yield, and therefore the exact fall in house prices, that will bring Ireland’s property market back into balance. However, we do know that we are not there yet, as the market overhang persists and the relationship between rents and house prices remains out of balance. We can also say that whatever the ultimate yield and fall in prices needed, Dublin looks best placed to balance earliest, while those places away from the main cities and from Dublin’s orbit have taken the smallest steps so far towards sustainable prices.


Suppose the yield that will bring the property market back into balance is indeed 6% and therefore that the fall in prices from the peak is between 55% and 60%. If that is the case, while parts of Dublin may be close to completing their adjustment, some parts of the country are perhaps no more than half way through their adjustment process. This important distinction will be hidden if we continue to talk about a national property market.
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Fitch
October 2010

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Rating agency Fitch has said it expects further falls in both residential and commercial property prices in Ireland. It said it has already factored such falls into its analysis of the country’s rating.

The Permanent TSB/ESRI index for the second quarter of this year, suggests that Irish house prices have declined by 35.2% since their peak, but today Fitch said it believes this will likely understate the full decline.


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Morgan Kelly
Professor of Economics, UCD
8 November 2010

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The other crumbling dam against mass mortgage default is house prices. House prices are driven by the size of mortgages that banks give out. That is why, even though Irish banks face long-run funding costs of at least 8 per cent (if they could find anyone to lend to them), they are still giving out mortgages at 5 per cent, to maintain an artificial floor on house prices. Without this trickle of new mortgages, prices would collapse and mass defaults ensue.


However, once Irish banks pass under direct ECB control next year, they will be forced to stop lending in order to shrink their balance sheets back to a level that can be funded from customer deposits. With no new mortgage lending, the housing market will be driven by cash transactions, and prices will collapse accordingly.
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The latest predictions:

http://namawinelake.wordpress.com/2...reasing-rate-nationally-moderating-in-dublin/

predictionshousepriceslatest1.jpg
 
There was an interesting programme on Radio 4 this evening, while it refers to the UK I think it's still relevant. I am posting a link but sometimes I've sent people links to the bbc website & they don't work. The programme was called File on 4, think it's repeated on Sundays at 5.00pm or you can go to www.bbc.co.uk and follow the links

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Again not directly about the Irish property market but the US market seems to be 12-18 months ahead of ours. Case-Shiller (the most respected US house price index) shows US prices may be experiencing a double-dip.
http://tinyurl.com/674addr

International affordability survey showing Irish Metropolitan markets in Jan 2011 "moderately unaffordable" from "seriously unaffordable" in Jan 2010

tvman
 
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