September 3, 2018

Dramatic Price Falls In Higher-End Properties

A report from the Sunday Independent. “Back in February, we published a report compiled by the Institute of Professional Auctioneers and Valuers (IPAV) that showed the first signs of a slowdown in house price inflation in Dublin. In August, the CSO’s monthly index of house prices showed increases in the city were cooling off, dropping from 11.4pc last June down to 8.4pc year on year. Now the latest report from IPAV, published yesterday, shows that Dublin house prices in the city’s most expensive areas have not only peaked but fallen dramatically in the first six months of the year.”

“The price drops were recorded in seven of 14 Dublin areas, and were hardest hit in the city’s most exclusive postcodes, such as D4 and D2, but also affected more affordable areas such as D14 and D15. In Dublin 4, for example, the average price drop for a four-bed semi was €150,000, bringing the average cost down from €1,375,000 to €1,225,000.”

“However, a two tier market continues nationwide - with house prices in other areas, including the commuter belt and parts of north and south county Dublin, still rising. Prices in some of the wider commuter belt counties have increased by up to 18pc as they play catch-up with those of the capital, highlighting the distances buyers are prepared to commute to find houses they can afford.”

“‘There has definitely been a correction in different parts of the city,’ comments Pat Davitt, chief executive of IPAV, ‘The market is able to allow for a correction to take place,’ he points out, ‘which a normal working market should actually be able to do.’”

“He suggests that further price corrections may still be going on. ‘I’d say the Dublin market is a market that is working well. I’d say the market in the country is still dysfunctional.’”

“Diving a little deeper into the figures shows that leafy Dublin 4 has been worst hit as prices for four-bed semis dropped by 12.24pc, to an average of €1,225,000, three-beds fell by 2pc to an average price of €967,500. A similar trend is seen in Dublin 2 where the price tag for a four-bed semi fell by 11pc, a drop of €100,000; three-beds also saw prices fall, while two-bed apartments rose slightly by almost 2.5pc. However, Dublin 4, 2 and 6 were still the most expensive parts of the city in which to buy any type of property.”

“Other areas where values have fallen significantly include Dublin 15, where a number of large new developments came to market over the past 18 months, including Hamilton Park and Fairhaven. Here values fell by 10.11pc for four-bed semis to an average of €445,000. Dublin 14, which includes upmarket Churchtown where Hazelbrook Square and Park Developments’ Fernbank apartments launched earlier this year, also saw price drops of an average of €65,000 or 9.49pc, bringing the amount a buyer could expect to pay for a four-bed home to €685,000.”

“Davitt comments that ‘in some of the areas that we see the biggest drops, we see supply coming on the market.’”

“In fact, the latest figures from the CSO show that 14,446 houses were built in 2017, and 7,909 in the first six months of this year. While these figures falls far short of demand, which has been estimated somewhere between 30,000 and 50,000 a year, the arrival of new homes to market is clearly beginning to have an impact on price.”

“It’s likely too that the Central Bank’s tighter lending rules are taking effect, putting a ceiling on the amount that buyers can borrow, and having a knock on effect on prices. According to John McCartney, director of research at Savills, ‘Mortgage finance is taut. My understanding is that a number of banks have exhausted the number of their exemptions already.’ These exemptions typically allow a buyer to access a loan for 4.5 times their income but banks are restricted in the percentage of loans they can allocate to each category of buyer, with only 5pc allocated to first-time buyers, and 20pc of second and subsequent buyers.”

“Despite dramatic price falls in higher-end properties in the city, there is little sign of a property crash. This time round, the Central Bank rules are having a moderating effect, and the outlook is for price stabilisation as more supply arrives. Commenting on the market in general, John McCartney of Savills says: ‘In a sense, there is nothing unexpected happening. Strong house price inflation will slow further in the year, we think it will be at 5-6pc by the time we get to the end of the year. At some point the gap between supply and demand will close and that will bring more moderate price inflation. It’s nothing sinister.’”

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Comment by Ben Jones
2018-09-03 06:52:42



‘The price drops were recorded in seven of 14 Dublin areas, and were hardest hit in the city’s most exclusive postcodes, such as D4 and D2, but also affected more affordable areas such as D14 and D15. In Dublin 4, for example, the average price drop for a four-bed semi was €150,000, bringing the average cost down from €1,375,000 to €1,225,000′

Just like Manhattan, Miami Beach, Vancouver, Toronto and Sydney, the most expensive get whacked first.

Comment by Mr. Banker
2018-09-03 07:50:10

“… the most expensive get whacked first.”

Hmmmm … if one were to think in terms of rent equivalent prices and one finds himself in a speculative market then the most expensive properties are the ones that would experience the greatest disconnect from rents and rent equivalents because these are the properties that would be bought for speculative reasons father than for positive cash flow reasons.

So it makes sense that if the market begins to roll over from being a speculative market and begins to head toward being a value-driven market these most expensive properties would be tbe ones that would take the first hit. And that seems to be what we see happening.

Which means, if what I said is true, the most expensive properties act as a sort of barometer for the entire market - the canary in the coal mine.

Comment by Tim
2018-09-03 08:10:06

I would think that speculation would be highest in the mid to lower ranges because those are the easiest to rent, and few of us can afford expensive second homes, but I have not see the statistics in this regard.

It does make economic sense, however, that as interest rates rise, lending standards get tighter, and there are more limits on foreign investment that compression would collapse the luxury market. There are very few people that can afford $2,000,000+ homes. As the items listed increase, that percentage gets smaller and smaller. At extremes it approaches zero.

Comment by Professor 🐻
2018-09-03 08:52:43

You have to guess that a lot of dirty money from international crime syndicates that was earmarked for laundering in high end luxury properties is going to money heaven about now.

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Comment by b
2018-09-03 08:10:47

For the high tech industry, the Dublin salaries are at least 25% less than the W coast of the US. Other than the small banking sector these would be the best salaries.

How the heck did prices get to Euro 1.3M?

Comment by Boo Randy
2018-09-03 08:17:54

Yellen Bux, Draghi Bux, loose lending, and unchecked speculation.

Fake valuations created by a tsunami of QE fake money.

Comment by Professor 🐻
2018-09-03 08:54:11

Tsunami tide recession promises to be brutal.

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Comment by Boo Randy
2018-09-03 06:53:39

“He suggests that further price corrections may still be going on. ‘I’d say the Dublin market is a market that is working well. I’d say the market in the country is still dysfunctional.’”

Any housing market that exceeds 3X median income is dysfunctional. All hail the Great Reset!

Comment by Ben Jones
2018-09-03 06:55:27

‘14,446 houses were built in 2017, and 7,909 in the first six months of this year. While these figures falls far short of demand, which has been estimated somewhere between 30,000 and 50,000 a year, the arrival of new homes to market is clearly beginning to have an impact on price’

‘It’s likely too that the Central Bank’s tighter lending rules are taking effect, putting a ceiling on the amount that buyers can borrow’

I’m pretty sure it’s the latter that’s ending the party. Hmmm, with all the hand wringing about prices in the US, maybe we should try this too?

This is big from a bubble watchers standpoint. I haven’t had enough time to follow Dublin much, but as you can see from the million euro medians, they’ve got a ginormous bubble.

Comment by Boo Randy
2018-09-03 07:16:48

Right on cue, the usual REIC spinmeisters are out with their “soft landing” nonsense. Next they’ll be assuring would-be knife catchers and FBs that there’s “no reason to panic” and putting out all kinds of happy talk about how these “normal market corrections” mean there’s never been a better time to buy a shack before the inevitable move back up recommences.

Comment by Mortgage Watch
2018-09-03 07:34:33

Potomac Falls, VA Housing Prices Crater 9% YOY As Accelerating Federal Layoffs Drive NoVA/DC Mortgage Defaults To Record High

Comment by Boo Randy
2018-09-03 07:48:44

Oh dear. During last weekend’s Running of the Lemmings in Hong Kong, some buyers plunged over the cliff but others turned away at the last moment. This does not bode well for the supply of Greater Fools and Knife Catchers going forward.

Hong Kong’s developers, who typically sell their residential property on Saturdays and Sundays, reported their first mixed weekend in five years, as a combination of rising mortgage rates and additional supply gave eager homebuyers cause for pause.

Sun Hung Kai Properties (SHKP), the city’s largest developer, sold every one of the 117 flats at its Cullinan West II development in Sham Shui Po for a total of HK$1.9 billion (US$242 million). It was the developer’s second sold-out weekend, after raking in HK$5 billion from 354 apartment units a week earlier.

It was a different story in Sai Wan Ho, where a venture between Lai Sun Group and the city’s Urban Renewal Authority (URA) managed to sell only five of the 80 units of Monti on offer, making it the developer’s worst weekend since 2013.

Comment by 2banana
2018-09-03 07:58:40

Just a few tidbits of buying a house in Ireland.

Highest mortgages rates in the EU - they are still paying for their bank bailout outs from a decade ago!

When buying - you will have to pay up to a 2% Stamp Duty and a 13.5% VAT. On top of the other “usual” fees…

Comment by BubblevilleCA
2018-09-03 08:05:43

Ouch! That’s a sh!t ton of taxes.

Comment by Tim
2018-09-03 08:01:27

“My understanding is that a number of banks have exhausted the number of their exemptions already.’ These exemptions typically allow a buyer to access a loan for 4.5 times their income but banks are restricted in the percentage of loans they can allocate.”

Seems to me that anything above 3.5X is kind of reckless . . . but that would mean that median home in most areas should be less than 300k, and we have 500k starter homes in Denver. I must be doing my math wrong.

Comment by Professor 🐻
2018-09-03 08:58:53

Reckless lending causes 500k starter homes in Denver.

Comment by Mafia Blocks
2018-09-03 09:05:59

“anything above 3.5X”

The long term historical trend is 2x annual income which puts used houses prices just under construction cost ($50/sq ft for lot labor materials and profit).

Comment by BubblevilleCA
2018-09-03 08:04:26

Aside from the posts on HBB I haven’t read much into non US RE. The shortage, higher interest rates, and term “softening”, all remind me of what I’ve previously read here about the US RE. Seems they are lagging right behind us and if they have the same factors we do, they will follow suit. MSM can’t atop the inevitable outcome, guess they can try to delay it.

Comment by 2banana
2018-09-03 08:18:14

Good read.

And when prices fall - they tend to way overshoot the rational valuation too…


When it all went horribly wrong in 2008 ‘The Economist’ was quick to raise questions about the sustainability of our banking system with a famous headline, ‘Reykjavik on the Liffey?’

However, there is no reason to doubt the validity of its assessment of over-valued house prices in Dublin and if markets were rational, then house prices should fall by 25pc. The thing is, house prices in Ireland are anything but rational and they haven’t been rational in about two decades.

So if you are about to buy a home and worried, the simplest advice is often the best. Can you afford it if interest rates rise; what do want the property for and how long do you intend keeping it?

Comment by b
2018-09-03 08:55:12

He was actually partially correct.

Because of the extremely low interest rates by central banks, this has blow all previously acknowledged tests. i.e. like 1:3 income:price ratio etc.

However, what he does not acknowledge is that this has created a gigantic pit that we are heading to.

Comment by Professor 🐻
2018-09-03 09:01:31

“And when prices fall - they tend to way overshoot the rational valuation too…”

Isn’t that when the Fed intervenes to reset prices to the correct valuations?

Comment by GuillotineRenovator
2018-09-03 10:13:37

There’s still a wall of Yellenbucks out there, looking for a place to go die. This is going to take a lot of time.

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Comment by Boo Randy
2018-09-03 08:26:11

Emerging markets look like the next catalyst for the next financial crisis - the one Old Yellen assured us wouldn’t happen during “our” lifetime. Places like Turkey went on speculative building binges funded by hundreds of billions of dollar- and euro-denominated loans from banks that were already shaky, if not insolvent - the extend-and-pretend games in the Eurozone make determining their true financial state anyone’s guess. Now that the Turkish Lira, Argentinian Peso, Indian Rupee, etc. have lost upwards of 40% or more of their value, the companies that went on debt-fueled building binges are now saddled with depreciating properties and loans that they may not have the ability or willingness to repay. The first large-scale default on one of these loans is going to start the dominoes toppling a la 2008.

Comment by azdude
2018-09-03 09:32:30

do low interest rates make people pull money from their savings and spend it?

Comment by BlackSwandive
2018-09-03 12:06:34


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Comment by Carl Morris
2018-09-03 11:23:21

Read Adults In The Room by Yanis Varoufakis. He comes from a lefty perspective but would feel right at home on the HBB. Basically the southern Europeans are being enslaved by the ECB…which will result in fascism before it’s over.

Comment by BlackSwandive
2018-09-03 12:08:03

Draghi looks like the devil incarnate.

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Comment by Boo Randy
2018-09-03 08:29:28

Chinas “bike graveyards” are a testament to bubbles gone awry.

Comment by Anonymous
2018-09-03 10:47:42

Thanks for this. I somehow failed to hear about this bike-sharing craziness in China.

I have seen a few of them in US cities recently. And downtown Austin was actually rather dangerous for pedestrians what with all the bikes and electric scooters zooming around, often on the sidewalk.

Comment by OneAgainstMany
2018-09-03 17:44:57

We’re getting a bunch of those Bird scooters clogging up the streets here. I love the idea of these companies, but they are being put on warning that if they don’t get their act together, their license to operate will be revoked.

Comment by Albuquerquedan
Comment by Boo Randy
2018-09-03 09:17:50

I thought I smelled crow breath. Got some more China happy talk for us this morning? Looks like their genius central planners are running out of ideas to keep their Ponzi markets and asset bubbles levitated.

Comment by azdude
2018-09-03 09:27:33

the goal is to get u to pay more.

Comment by Albuquerquedan
2018-09-03 09:34:54

Boo, I want China to be contained. The Globalists are screaming due to Trump’s proposals to reform NAFTA which restricts the use of Chinese auto parts. However, the people that have crow breath are the people that were predicting China’s imminent collapse three years ago when I was saying there was no imminent collapse on the horizon since China had a lot of levers to use to maintain growth. I imagine you were one of them posting under another name predicting imminent collapse. But here is the deal unless, the Republicans retain the House and Trump stays in office, there is no chance to even contain China never mind cause its imminent collapse. Right now the tariffs are just slowing China but it is still growing rapidly.

Comment by BlackSwandive
2018-09-03 12:10:39

Levers which hide the truth, ie. depression level economic meltdowns.

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Comment by Albuquerquedan
2018-09-03 09:46:47

Even knocking 1% off the growth rate to account for the way China account for inflation, it is still 5.5% growth. Since the Chinese economy is more than twice the size it was ten years ago, that means this growth rate impacts the globe about as much as 11% did ten years ago:

Comment by Albuquerquedan
2018-09-03 10:02:21

For example oil consumption in China:

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Comment by azdude
2018-09-03 10:28:50

how can china get away with printing all this money to keep buying dollars so there exchange rate is favorable and they can lowball US companies?

Comment by Albuquerquedan
2018-09-03 10:52:10

How did the US get away with massive money printing for four decades. As the numbers show China, by the way it calculates GDP, it is expanding by 6.8% a year when its goal is to expand by 6.5%. Consequently, China finds it a good time to deflate its housing bubble. It has been raising interest rates, tightening standards etc, and as recent numbers show it is working. The question for you and any other poster is what makes you think that if the GDP numbers start underperforming the stated goals, it will not reverse course and re-inflate the bubble? With $3 trillion dollars in foreign reserves and a savings rate calculated by the CIA to still be in the high 40s% it still has a lot of latitude to print money and increase debt. Not as much latitude as ten years ago, but not close to imminent collapse.

Comment by OneAgainstMany
2018-09-03 17:48:24

I’ve heard several prominent economists say that you can essentially take China’s growth numbers and chop them in half. The point is that so much of China’s statistics are suspicious. I would take any data coming out of the propaganda organs with a grain of salt.

Comment by Boo Randy
2018-09-03 14:47:45

China’s central planners are losing the plot. With their emphasis on ensuring “stability,” they’ve only made the structural economic imbalances and debt morass much worse, deferring the financial reckoning day, like our own Keynesian fraudsters at the Fed, but ensuring it will be much more devastating when it finally arrives.

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Comment by Boo Randy
2018-09-03 08:58:37

Realtors working with scammers to defraud buyers out of their downpayment?! Why, that’s unethical!

Comment by azdude
2018-09-03 09:08:29

are you guys gonna circle the globe looking for more bad news today?

Comment by Boo Randy
2018-09-03 09:30:35

What you call “bad news” I call inevitable consequences of bad policy, loose lending, speculation run amok, and AWOL regulators and enforcers.

Comment by azdude
2018-09-03 09:43:36

Dont fight the FED!

Comment by Professor 🐻
2018-09-03 09:45:22

Try not to catch yourself a falling knife.

Buy Turkey and Argentina? Emerging Markets Aren’t Bargains They Seem
There are times when a pure contrarian investing approach makes sense, but today is not such a time
By James Mackintosh
Sept. 3, 2018 11:30 a.m. ET

Emerging markets look increasingly chaotic, with plummeting currencies, messy politics and the biggest-ever IMF bailout capturing headlines.

Emerging stocks appear far cheaper than in developed countries, especially compared with the pricey U.S. market. So is now the time to close your eyes to the headlines, ignore the sick feeling in your gut and just buy?

Comment by Mortgage Watch
2018-09-03 09:09:59

Denver, CO Housing Prices Crater 15% YOY On Plunging Consumer Confidence In Housing

*Select price from dropdown menu on first chart

Comment by azdude
2018-09-03 09:30:58

if you keep saying there is no inflation bondholders wont demand higher yields. Its called a snow job.

Comment by Professor 🐻
2018-09-03 09:47:44

Why bother with bonds when stellar risk-free returns in perpetuity are available in the US stock market?

Comment by azdude
2018-09-03 09:53:28

yep thats part of the game too. prop up stocks so bond yields get beat down.

Comment by 2banana
2018-09-03 10:09:20

Going out on that limb to chase yields…

Comment by Professor 🐻
2018-09-03 10:42:49

So long as the limb is propped up with low rates and the Greenspan put, where’s the downside to focusing your portfolio HODLings on stocks?

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Comment by rms
2018-09-03 10:39:16

+1 The central bank stands as an insurer of the equity market.

Comment by Professor 🐻
2018-09-03 10:46:33

When the dust of history settles on the present real estate mania, I expect one of the most amazing aspects visible through the rear view mirror will be how it simultaneously unwound at disparate locations around the planet, as though guided by an invisible hand.

Comment by BlackSwandive
2018-09-03 12:13:52

Bubbles have a way of just popping.

Comment by Professor 🐻
2018-09-03 14:06:57

If there has ever been a previous mania with the global reach and penetration of The Housing Bubble, I would love to hear about it. I’m thinking there probably has not.

Comment by Professor 🐻
2018-09-03 14:16:22

Germany is a good example. Early on in the development of the global mania, their housing prices were stable. But at some point over the past couple of decades, Germany got swept up in the euphoria. Now it seems they face the same perceived shortages and affordability problems as Americans face.

Gimme shelter
Germany aims to ease housing crisis, but measures may fall short
Tougher rent controls and family subsidies may help but filling the gap for affordable housing is a tall order.
By Handelsblatt Staff
Published on
August 30, 2018 4:18 pm
Cranes at building construction site, Berlin, Germany
“Schaffe, schaffe, Häusle baue” more important than ever. Source: Getty

The German government is debating a package of measures to ease the country’s housing shortages, but there are questions about how effective they will be. Proposals such as tightening rent controls, subsidizing home buying for families and perhaps even keeping foreigners from buying real estate all have their problems.

Berlin wants to promote construction of 1.5 million new residences over the four years of the current government’s mandate, but critics question whether this is possible at all, let alone with the planned measures.

Everyone agrees, however, that the issue is pressing. “The lack of affordable housing is one of the most urgent problems for citizens,” Volker Kauder, parliamentary leader for Chancellor Angela Merkel’s conservative alliance, told Handelsblatt.

The head of the German renters’ alliance, Ulrich Ropertz, said, “A million homes are needed in Germany and rents are increasing faster and faster.” It is “the social issue of our time,” he said.

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Comment by OneAgainstMany
2018-09-03 17:50:17

Of course this housing shortage was exacerbated by the massive number of Syrian refugees let in during the past few years.

Comment by Professor 🐻
2018-09-03 14:30:02

So many stories about impending global financial crisis; so little time to pay attention to all of them…

Bloomberg Opinion
These Fake Islands Could Spell Real Economic Trouble
Glitzy property projects and financial crises tend to go hand-in-hand.
By David Fickling
August 31, 2018, 5:00 PM PDT
A glittering city on a pile of sand? Beware the lurking financial crisis.
Photograph: Bloomberg
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Where is it that we’ve seen glittering archipelagos like Malaysia’s Forest City and Melaka Gateway developments before? Those stretches of newly packed white sand, dotted with palm trees, villas, marinas, high-end retail malls and office towers?

Is it Dubai’s World and Palm Jebel Ali developments? Both sit all but deserted a decade after the 2008 financial crisis crashed their dreams of creating exclusive, private-island enclaves for the likes of Michael Schumacher and David and Victoria Beckham.
Or the Bridge of the Horns project, which improbably promised to create megacities on opposite sides of the war-torn, pirate-infested Bab el-Mandeb straits?

Then again, Melaka Gateway’s port and industrial park carry echoes of Kansai International Airport, the Renzo Piano-designed terminal on an artificial island in Osaka Bay. Its construction spanned the peak and collapse of Japan’s 1980s boom, and the project is still saddled with 848 billion yen ($7.6 billion) of net debt more than three decades after work began.

In a similar vein, Jiang Zemin opened Hong Kong’s international airport on reclaimed land in July 1998. At that point, the territory’s economy was contracting by 8.3 percent, and the government had suspended land sales to prop up real-estate prices and avert a banking crisis.

Crazy Rich Asia

Malaysian residential-property prices have surged in recent years, according to a Bank for International Settlements index

Source: Federal Reserve Bank of St. Louis, Bank for International Settlements

Note: 2010=100.

Comment by Professor 🐻
2018-09-03 15:13:22

Better Business
Are the days numbered for foreign property investors? – Hall
by: Chris Hall, head of operations at Mortgage Guardian and mortgage and protection adviser at 1st Call for Mortgages (UK) Ltd
Following the New Zealand government’s decision last month to ban foreign buyers purchasing existing property in the country, YouGov carried out a nationwide survey in the UK.

The aim of the research was to find out if the people of Great Britain are also fed up of being tenants in their own land?

Could the British government follow suit in a bid to tackle the UK housing crisis?

With an estimated 10% of UK housing stock being owned by foreign investors, the problem is far from being out of control, but Land Registry data could indicate otherwise.

According to research using Land Registry data in March by Kings College London senior lecturer Filipa Sa, property prices have risen considerably over the last 15 years partly due to the influx of foreign interest in UK property.

There is a thirst for UK housing stock by foreign investors including those that buy through offshore companies based in well-known tax havens such as the British Virgin Islands, Seychelles and the Cayman Islands.

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