The future of Dublin property

I am currently contemplating on buying my first property in Dublin; I would appreciate everyone’s gut feelings on the current prices. Are they over priced ? Are they value for money ? Is a fall is property prices likely ? I am trying to get a feeling on how property prices in Ireland will develop given the very unpredictable times we live in.

I think at least, Ireland and Europe on a whole could be heading for a serious recession in the coming years. When you think of all the negative knock on effects of the global melt down of the IT sector (possible relocation of these IT companies), reduced tourism to Ireland for obvious reasons, possibility of increased unemployment, influx of cheap eastern European employees to main land Europe, the changes to grants to the agriculture sector, the widening gap between income and property prices and even increased taxes / reduced work force problem etc etc.

I don’t want to sound like a complete pessimistic but the future may not be very rosy and certainly nothing like the prosperous times the Irish had in the past few years.

After saying all of that – will property still increase due to lack of supply ? Is there no possibility of a fall in property prices ? Can prices stay at there levels even if a serious slow down develops ?

Appreciate your thoughts.

house prices

It is in the interest of companies that provide survey figures on the movement of house prices to declare that house prices are continually going up and that the boom will never end. I however truly believe that house prices are coming down (especially second hand houses outside Dublin in last 6 months). Vendors are finding it hard to get anywhere near their asking price figure but the original asking price figure is often quoted in the 'survey' data. I bought a great house for a bargain 3 months ago for 30% less asking price.

house prices

without breaching your own privacy/confidentiality
Can you give us some more info on the 30% reduction,
area?
type house
exceptional conditions,
range,
etc

F

House prices are determined by a few major factors - interest rates, unemployment figures, and supply and demand.

Experts say that interest rates are likely to remain low in the forseeable future. Unemployment, while rising is still very low. And finally, demand for houses is still outstripping supply. These factors would indicate that while house prices may never grow at the rate they did over the past few years prices will remain strong and will continue to grow (in 'best locations) albeit in single figures.

Edited by ClubMan to remove extraneous blank lines.

Hi Paddy - Is your intended purchase a property to live in, or is it purely an investment?

If you're going to live in the property, that I'd suggest you don't get to het up about short-term fluctuations in property prices. The only thing 100% certain about property prices is that NO-ONE can predict the future. They may go up or they may go down, & you can't time the market.

Not sure how relevant this is, but might be of some interest.

I remember reading (a few months ago) an article on a leading UK financial website about the the UK housing market.

It stated that historically (going back over the last 50 years), the average house price in the UK was about 4 times the average pre-tax income.

Sometimes less than 4, sometimes 4 times, sometimes more than 4 times. In the current UK housing market it is much more than 4 times.

The article stated that the further from 4 times income the property market was, the more likely it was to "re-adjust".

It would be interesting the know the average pre-tax Dublin income, and also the average price of a residential property in Dublin; (or just generally in Ireland for that matter).

I wonder how far we are from 4 times income?!

Well the Permanent TSB house price survey from late last year indicated that the average house price in 2002 was over €200,000 (more in Dublin). This would suggest an average salary of €50,000. I have no statistical data on average salaries. Anyone?

London??

If Pixie's theory is correct, we are all in serious trouble, as Irish average incomes per capita are less than €30K per year. If we assume an average earnings figure of €35K for Dublin and €25K for the country, 4 times the Dublin figure is €140K and 4 times the country figure is €100K.

I think that events in London are always a good indicator of Dublin; This tends to be the same if you are talking about employment trends, property, shopping or even fashion and the arts.

Since last November, the Financial Times have been talking about a serious property price slum in London. On last Saturday they had a whole page dedicated to what they see as a serious slump in residential rents. This is turning Buy-to-let into a nightmare for some investors.

London has the same macroeconomic factors as Dublin - 1. a recent economic boom which was fuelled by the success of the tech and financial services sectors

2. up to recently a shortage of rental properties which is now turning into an oversupply

3. low or modest interest rates

If we expect Dublin to follow London this time, then the property market is heading for a tough time.

London??

This is what worries me about buying now; the thing is salaries have not kept abreast with property prices. How can a person or even a couple both earning 30k purchase a house worth 205k or 300k ? if only one earns or one finds themselves unemployed, ill etc. ???

I’m currently on an expat salary (tax free) which would be twice what I would get if I were to return to Ireland, even with this salary it’s difficult to entry the property market – what is it like for the average guy on a salary under 30k……??? Property in Ireland does not add up.

Property Prices

Hasn't Rainyday just put his finger on the button - that NO-ONE can predict the future.
Every second day there is a fresh report on the fate of UK property prices. The latest is Ernst & Young Item Club who believe the UK economy is fundamentally sound and that any moderate falls in house prices will be tempered by 33 year low interest rates. You also have supporting the housing market favourable demographics, inward migration, low unemployment and better financial products than ever before. Surely the pension crisis and doubts about the stock exchange will encourage more to see a second home as the retirement investment.

As mentioned already if someone is happy to go for a home, and has done all the financial stress-testing, then I believe it makes sense to get on the ladder.

Property Prices

Paddy,

when getting involved in this debate, there is always an (understandable) problem with getting unemotional responses.

Anyone without a property is going to say the market is going to fall. Anyone with a property (*especially* if they have purchased anytime recently) is going to say the property market will continue to rise forever.

The market at some point will re-adjust. Markets always do, it cannot rise at a greater rate than income forever. Even if rates are low, it cannot rise forever.

If I remember correctly, when the property market in Japan crashed, weren't the rates extremely low? Something daft like 0.1%, but it didn't stop the market crashing.

I don't know when it will "re-adjust", but I have doubt it will.

As Bogart said, "Maybe not today, and maybe not tomorrow, but soon".

House Prices

Pettu - as a FTB who has been looking seriously in Dublin for the past 6 months, I can say for certain, that house prices are not falling on 2nd hand houses. I find that the selling price is usually 10-15% greater than the original offer price. And at every viewing there are 10-20 other people interested in the property.

I have bid on several properties but so far have not been successful.

As for average wages, is'nt the average industrial wage in Ireland around 25K which would leave houses very over-valued. But thats all relative to demand.I am currently bidding on a south side house near the city which is just under 7 times my salary. How am I getting a mortgage? I am lucky enough to have parents who are in a position to guarantee the mortgage for me. And I will also have to rent out some rooms to pay the mortgage. Otherwise I'd be renting forever or emmigrating.
But in terms of the future of house prices - I cannot see them declining. I know of several friends on well above average salaries who are ready to buy in the next year or so. There are a lot of people on the sidelines ready to purchase if things do slow down,and with interest rates likely to drop again,things are going to remain as are. I thought last year they would slow down so I waited which was a foolish move.
Hope this helps you PaddyIrishMan

Average earnings

I looked up the www.cso.ie website and found the following data for average earnings

Industry (Sep 02) 26,478
Financial Sector (Mar 02) 36,143
Construction (Sep 02) 34,747
Skilled worker in Construction 41,571
Public sector (Mar 02) 36,415

Remember there are only 250,000 workers in Industry, out of approx 1.75m at work, so maybe Average Industrial Earnings are not the best indicator of earning power.

It's a shame the CSO don't publish "Average Earnings" data across all employments.

Contango10

Re: Average earnings

Is the Department of Finance monthly economic bulletin of any more use in this respect?

re

Every person i've ever spoken to considering buying a house asks this very question - are prices going to drop. I can't understand why people are so worried about this when they're buying to occupy. If you own your house, whats the big deal if the value drops from 300K to 250K??. You'll still be living there. Are people worried that they're not going to get the huge increases of previous years?. I bought my house exactly 1 year ago, and it's value has increased by 30K already. I'm certainly glad I didn't less to my propertyless friends who warned me of the inevitable crash that was just around the corner. My advice is if you're paying rent, buy a house and pay your own mortgage rather than somebody elses. Average rent of 1000 euro per month is 60K over 5 years. Worried about the crash?. How does 60K down the pan sound?.

buying now

If property prices do start to crumble or tumble, then the banks will be sure to tighten their lending policies. In that case many first time buyers (particularly if they are heavily borrowed) might find it more difficult then to buy a house compared to now.

Re: buying now

might find it more difficult then to buy a house compared to now.

Click to expand...

But surely any tightening of credit policies would be balanced out by the actual drop in prices, i.e. if prices are lower, then it's easier to buy!

Average earnings

Sorry, don't want to scare anyone, but borrowing 7 times income is, to say the least, not very sensible!!!

If prices are at a level where you have to borrow 7 times your income, then it's far too overinflated. Simple.

I know someone who purchased a terraced house over 30 years ago, and they paid £2000 for it. Do you know how much their pre-tax annual income was at the time? - £2000!

Therefore, they paid 1 times annual income!!!

Once you get to the level of having to pay 7 times income then it's overpriced.

Someone said earlier about Ireland having good demographics, maybe, but what young person wants to remain somewhere where they have to pay 7 times income, have their house full of strangers renting every spare room, and get their *parents* to guarantee their mortgage???!!!

assumption

But surely any tightening of credit policies would be balanced out by the actual drop in prices

Click to expand...

That is an assumption. There is no way of knowing whether it would automatically apply in the event of a downturn.

Ten years ago, many people on good incomes found it hard to raise the £40K or £50K that it took to buy a respectable family home.

For example, most banks and building societies would only lend to people who had established decent savings records with them, or if they were on personal terms with the bank manager.

Because the property market was seen as volatile, banks were paranoid about the possibility of bad debts.

Many people have forgotten that these things ever happened and might occur again.

Question??

Paying 7 TIMES YOUR SALARY for a house is the most ridiculous thing I have ever heard. How exactly do you plan on paying your parents /lender back that amount? With your lotto winnings? What really frustrates me is the fact that these kiddies who are relying on their parents for money & this is probably sustaining these inflated house prices to begin with!

Can anyone tell me, is it the case (as previously stated) that house prices will sell on average for 10 –15% higher than asking price?