What a start to the New Year, we opened the offices to face the first three, yes three, property reports of 2012. While there was some contradictory data, the general trajectory was negative.
To recap, Daft.ie suggests that the asking prices for houses are now 52% below the peak, showing 18% fall in 2011 alone, whereas, Myhome.ie, is suggesting that asking prices are only 43% down. This will no doubt confuse buyers, who read about 50% decreases back in 2010 or apartment owners who are reducing their offering by 70% and are still failing to find a buyer. So what is going on? In addition to looking at the rental market (which is a key indicator of property values) several leading economists have also examined current levels of employment, income, and inflation. All of these findings lean towards further declines of property generally throughout 2012 and some, most notably Ronan Lyons, have been criticized for saying that falling house prices are not necessarily a bad thing as they get house prices back to where they should be based on fundamental economic conditions. The Daft.ie report is definitely the most comprehensive in terms of area and property type breakdowns, however, I always caution buyers that this report, however comprehensive, is based on ‘asking prices’ of Daft.ie users i.e. it does not and can it be used as a definitive database of prices – it is an indicator, at best.
In relation to mortgage information, we can see by the latest CSO report that a mere 13,000 mortgages issued in 2011, this is down almost 95% from peak figures. 2012 is already shaping up to be a better year for mortgaged homebuyers (investors, you may need to wait a little longer or raid the mattress) with €1.5bn of mortgage credit pledged by Bank of Ireland, the laws of competition mean that AIB and PTSB are likely to follow suit if they can. ECB interest rates are currently at 1% levels and the general feeling is that they will remain low for the first half of the year at least.
Despite many false starts, it looks likely that we will have some form of a property price register by June/July 2012. The current government appears to be more responsive to the various groups lobbying for this bill. The bad news is that the register is only going to deal with price ranges for any given address (or possibly averages per area). This is due to a conflict with existing data protection legislation. The most frustrating aspect is that the government has all of the relevant information, it just cannot be shared legally. You would imagine that this is a surmountable problem but it is still on-going. My understanding is that this register will be a work in progress. The initial publication will start at 2009/2010 prices.
Now, for the head-on-the-chopping-block part…
Looking at income, employment, taxes, economic outlooks for Ireland, Europe and the world has economists running scared of property and it continually stumps them that purchases continue. Stale stock leads to off-market buying, lack of credit leads to cash purchases, poor consumer sentiment leads to unexpected buyer trends but surprising interest in distressed property – why is this? Why are Irish buyers not behaving in an expected way? It could be historical or cultural, opportunistic or patriotic, stupidity or genius… you decide. One thing is for sure, the economists cannot understand buyer behaviour in this erratic market. Well done Daft.ie for conducting a survey on the attitudes of buyers, I have recommended that all buyers take part and I look forward to the findings later this month.
In my opinion, quality properties in desirable areas are well into their recovery. For some properties, so-called recovery will not come. As a nation, we built some rubbish and the only way recovery nationwide will happen is when bulldozers take the places of our nation’s repossessed cranes.
Buyers are sick of hearing me say the following mantra but I will continue saying it until we learn – there is an opportunity to buy well in any market. A cheap property can be bought cheaply at any time. The key to buying well is to seek value at prices that are well below market values.
Buyers in 2012 will need to be sure of their requirements, do not get taken in by gimmicks (yes Nama, I am referring to your negative equity mortgage ) and do not get tempted by short-term apartments. The concept of a start home is no more – if you buy it, you must be prepared to live in it for another seven to ten years.