Experts jump the gun with 'undervalued' property call

I was told many years ago not to write about the price of farmland. The reason I was given was that it is a topic so dear to Irish farmers' hearts that any attempt to add a bit of realism to the subject or talk down prices would not be popular.

As usual, I ignored the advice then and am doing so again, prompted by a recent report by the influential Standard & Poor's rating agency on property prices in Europe.

About four years ago I was criticised for suggesting in this column that farmers should consider selling some farmland or buildings and thereby eliminate borrowings.

Farmland in Meath and Kildare was freely making between €20,000 and €30,000 an acre for smaller parcels, and the prospect of netting say €250,000 for 10 acres of maybe an outlying holding seemed too good an opportunity to miss.

Time has proved that me correct, but there is nothing to be gained from moaning about lost opportunities. What happens tomorrow and on into the future is all that counts.

So what have we learnt from the past? Well, we are all now experts on asset bubbles and have learnt to our cost that the higher an asset rises beyond its true value, the further it then falls. Standard & Poor's are suggesting that property in Ireland could now be undervalued and that the price reductions may have been overdone.

Good for them. I wonder, though, why they think this when our prices are still ahead of those in other European countries.

Leaving aside the previously popular places for buying houses and apartments such as Croatia or Spain, let us look at more familiar economies such as France and our close neighbour, Britain. Farm properties in France are selling for a fraction of what they currently fetch here and good farms can be still be bought in Britain for less than in Ireland.

House prices are also, in general, lower in those countries and to my mind this clearly indicates that property here is still overvalued.

This is, of course, only a personal opinion but I have been watching the property markets for nearly half a century and nothing yet suggests to me that things are going to turn around here any time soon.

Now my apologies to all the estate agents, architects and solicitors, many of whom are reputedly out selling pizzas door to door since their livelihoods based on the building trade and property markets vanished. It must be really tough, but perhaps the experience will stand them in good stead in years to come.

Young, recently qualified architects cannot find employment and are either emigrating or trying to retrain for another career. Solicitors all around the country have laid off staff and the smaller estate agents are just hanging in there by their fingernails.

Credit is still hard to obtain and interest rates are predicted to rise soon and keep rising.

Hundreds of thousands of home owners are in trouble meeting mortgage repayments. Renting is increasingly popular among those who would otherwise be looking at purchasing their first home. Rents continue to fall and there is still an oversupply of empty houses. Add all that lot together and you have a recipe for further falls.

There will, of course, come a point when the market turns but I cannot see that we have yet reached it.

I keep thinking of the old saying "fools build houses for wise men to buy" and this has repeatedly proved true at certain points in past economic cycles when houses fetched less than the cost of construction.

Now I am unsure what Standard & Poor's mean when they suggest our houses are undervalued as they also suggest that prices may fall a further 10pc in the coming year. We shall just have to wait and see.

In the meantime we should also look at the benefits we currently enjoy. Our main roads are wonderful and, as a result, travel times are hugely reduced. Because of an oversupply of housing, young people can rent bright new homes at affordable prices. The cost of living has fallen and continues to do so. And even farmers are showing a small bit of optimism regarding the future. But I still think farmland is overpriced.