With three entries on here last week dealing with the second Allsop/Space property auction in the Shelbourne Hotel last Thursday, a preview and two analyses of the results (here and here), the subject has been done to death. So this is just a brief entry with two new pieces of information.
Using information from the Irishpropertywatch.com website (“Ireland’s longest running property price archive”), the commenter Dreaded_Estate at Thepropertypin.com has produced a spreadsheet available here showing the “earliest asking price” for property that was eventually sold on Thursday last and compares it with the price achieved on the day at the auction. The histories of some 45 of the 77 properties were located. Irishpropertywatch holds histories from late 2007 which was later than the peak in some parts of the country. The CSO which now produces what is probably the most representative property price series each month shows the peaks as
| National – all |
Sep-07 |
| National – houses |
Sep-07 |
| National – apartments |
Feb-07 |
| Dublin- all |
Feb-07 |
| Dublin- house |
Apr-07 |
| Dublin- apartments |
Feb-07 |
| Non-Dublin – all |
Sep-07 |
| Non-Dublin – houses |
Sep-07 |
In summary the comparison shows an average drop of 68.1% for the 45 properties (total earliest asking price versus total achieved at auction price). The highest are over 80%, with a property at Ballymacarry inCountyDonegaldown a staggering 83.87% from €310,000 to €50,000. Whilst there might be peripheral issues about comparing asking with settled prices and equating “late 2007” with the peak, the analysis is truly sobering.
And secondly Richard Cantwell at autoaddress.ie has produced a helpful map showing the location of each of the properties sold last week, together with useful notes on the maximum reserves and settled prices. The map, available here, is a helpful addition and shows what seems like a deliberate tactic by Bank of Scotland (Ireland) to attain price discovery throughout the country. The bank, through the Certus asset management company, is presently working out some €30bn of loans.
So until the next Allsop/Space auction which is scheduled for 23rd September 2011, again in the Shelbourne Hotel in Dublin, with the catalogue available here from 21st August, 2011, that will be the end for now on here on a focus on the Allsop/Space auction, which is significant in an Irish context because it brought additional price discovery in a market where there is little reliable, open information.
(Graphic above produced by Japlandic.com, with other examples of artwork available here)
NAMA Wine Lake 
Nice piece NWL :)
I would separate out Land and Habitable homes as separate Asset Classes myself.
BOSI and Stepstone ( and Start/Investec too I hear) are in bull headed workout mode..unlike ‘our own’ banks who have €120-150bn of mortgages stinking out their books and which book will have to be written down by €50bn-€70bn on the aggregate over the next few years.
It is now clear from all the analysis that indeed the predicted 80% drop in prices from the peak in 2007 has now occurred in certain areas.Could the dreaded 90-95% reduction be in sight.There is noting to suggest it won’t.With a hint of a structured default in Greece a similar situation could ensue here.It is felt that this will further depress property prices and may lead to people disposing of properties for knock down prices merely because they cannot maintain them especially in view of proposed property tax,water charges etc.etc
[…] can complain about this small sample (though Namawinelake points us to this map, showing a nice geographical mix) and also about extrapolating from the […]
There appears to be a general feeling of euphoria amongst economic commentators when property prices hit what is regarded as another low point in their ongoing decline (like watching a sinking ship). The current “market” (if one were to regard it as such) for property is based on fire sales in an economic environment devoid of available liquidity. As such the attempt to discern a pattern in prices is akin to seeking a semplance of order in the midst of chaos. Undoubtably there is significant downward pressure on prices amongst those institutions that are anxious to sell and exit the market. This pressure also applies to individual investors who are coming under increasing pressure from their bankers to deal with an inability to service borrowings. The results can only lead to further downward pressure on prices as sellers compete for what is a diminishing pool of liquidity. Ultimately we are heading towards a low spike in the market. This is the point where prices diminish to a totally unrealistic level where sale prices are well below bottom line construction costs. The low point of this spike and the duration are very much dependant on the attitude of NAMA and the remaining financial institutions. I.e. Is a strategy of dumping property on the market at whatever price is obtainable against one of a gradual release over time more appropriate? Also will UB/NIB/RABO see the current decline as an indicator to exit the market and take whatever pain is required to do so? We live in “interesting times”!
@Brendan, it will be interesting to see if indeed there is a low spike in the market. Certainly Minister Noonan touted such a phenomenon earlier this year when he suggested “international experience” showed that there was a rapid 20% spike upwards from the bottom when the absolute bottom was reached. Despite efforts, I could not locate the study from which he reached this conclusion, but it was apparently based on research either in, or on, Seattle Washington, USA.
Closer to home, there was a nice little debt/interest rate fuelled property bubble in the UK in the late 1980s and prices peaked at (all sterling to follow) 70,588 in July 1989 and there then followed a drop all the way to 60,196 in Feb 1993 (and remembering the UK was suffering high inflation at the time, the real drop was more pronounced), prices then rebounded 5% (not 20%) to 63,563 in Jul 1994 and then fell back again to 60,638 in Jan 1996 before starting to rise again more consistently but it was April 1998 when prices had reached 120% of the low in Jan 1996.
So I think Minister Noonan is trying to inspire the confidence fairy in the same way that the late Brian Lenihan talked about buying in confidence at realistic prices in April 2010 or high yields indicating the commercial real estate bottom in September 2009.
The source for the UK numbers is the Halifax (now part of Lloyds) and its monthly seasonally unadjusted price indices.
http://www.lloydsbankinggroup.com/media/excel/2011/05_07_2011_Historic_Data.xls
By the way, I don’t think there’s euphoria if prices continue to drop. There might be some for whom the vanity of original forecasts might influence the reaction, but I think in general there is euphoria when we have any price discovery, even if it is a limited sample in an auction setting.
NWL,
One issue with looking at data from the UK recession of the 90s at a national level is that there were significant variations at a regional level in terms of the trough and the path of recovery. Repeat the same analysis at a regional level and you’ll get a different picture
e.g.
Nationwide House Price Index – London
£96,667 – Q2 1989
£66,573 – Q4 1992 (-32%)
£80,433 – Q4 1996 ( 21%)
The path from ’93 – ’96 reflects some volatility but effectively represents 20% compound growth from the trough in three years after spending one year ‘flatlining’ at the trough. The inflation adjusted picture may look quite different again…
Not that I expect an immediate 20% rebound from trough in this instance…
Headford Grove in Meath – down 81%. The dormitory towns and second home locations will be the worst affected. That’s typical in a property bust. Ireland is a unique case though because it’s hard to imagine the market finding a bottom until the uncertainty surrounding the Sovereign is resolved. Likely 2013.
While it might seem callous to some, personally I’m delighted to hear of such massive property drops, and I think a lot of people in my generation (those not on property ladder) will be as well.
The way things are going, people are going to be able to buy houses without mortgages, and for some people that’s something to look forward to. Obviously, for anyone with a house, or in the property industry, this does not seem like much to celebrate about. But I must remind all concerned that they likewise never saw house prices rising into the stratosphere as being something to bemoan, which it certainly was for first time buyers.
The ultimate point I want to make is that the government and the needs to stop pretending that this fall has happened or that it can be reversed. Ireland needs to start seeing the bright side of falling property prices, see it as an economic advantage and begin to exploit it as such. I would go so far as to say that the government should implement policies which will precipitate a further collapse in property prices so that the bottom can be reached sooner and the country can begin to recover.
We should have been at this drop level 18 months ago? Where we are in 18 months time depends on how the government reacts to these figures.
I’m curious why anyone would invest in Irish property at these levels.
You can buy Irish 10 year bonds yielding 12-14%.
If Ireland doesnt default then that will exceed the rental yield on property by a lot.
If Ireland defaults then you might be looking at a capital loss of 30-50% but does anyone think your property wouldnt drop more than 50% in that scenario?
BG If a distressed property such as a 3 bed semi is sold for say €80,000 in an estate then it is reasonable to assume that that price will greatly affect the price expected for a similar property a few doors down in the same estate.This is probably why the greatest relative drop in prices has only happened since the distressed property sales by Allsop.The way they are spreading the sale of properties widely is also probably affecting property prices over a wide area.
Therefore the more distressed successful property sales that take place the more the drop in prices will occur.
Of course this is not a random sample: it is a sample of properties repossessed by one bank chosen according to criteria only known to that bank.
So we cannot conclude much about the reduction in the general market from these auction results compared with their original asking prices. We could speculate, for example, that these properties were repossessed because their owners originally chose such unachievably high asking prices.
You may conclude that liquidity is in short supply and that if a few dozen properties can attract such an anorexic liquidity flow then what is left for the other 60,000 properties on Daft ???
Then again you could stick to your 2006 asking price, it is worth it you know.