Richard Curran: Property crash, RIP? It has hit the bottom
THE property crash is not quite over, but it is entering its final phase. Irish house prices have been rumbling along the bottom for just over a year now, with a series of modest rises and modest falls.
This is a classic post-crash property market, stabilising before finding its feet again. Last week's figures from the CSO confirm this and are therefore significant.
There are still risks on the horizon but buy now and you won't get rich in two years, but you won't lose out badly either.
Predicting property prices is a perilous business. Get it wrong and you could end up broke. Get it right, and you may be branded a heretic. The latest figures showing that residential property prices made their first year-on-year increase since 2008, should be welcomed by everybody – investors, families and heretics alike.
Young families thinking of buying should not jump in for the gain, or hold off because they think the market has further to fall. Aside from sought-after properties in parts of Dublin, which are showing steadier rises, this holding pattern could remain for another two years before hopefully then returning to a more normal market of steady but modest price increases.
People interested in buying a home might not plan to remain in it for very long. But they should assume they might, when making their decision.
And for God's sake ignore what the property's price tag was in 2006. That price tells you nothing meaningful about whether it is a bargain or not. They were fantasy prices for a fantasy age.
I am talking about house hunters looking for a place to live, not investors. That's a whole other story now.
What most commentators on the property market forget is that a single collective percentage figure for national house prices is only a rough indicator. The figures show that nationally, prices have fallen by 50 per cent since the peak in 2007. This covers everything from a private island to a tiny bungalow, a mansion in Ballsbridge to an apartment in Ballisodare.
Just last month, the business pages of this newspaper published views of various commentators. Some believed a national house price gain was still years away.
As recently as March 2012 Davy Stockbrokers predicted that prices, having fallen by around 55 per cent from peak at the time, would keep on falling until they were 65 per cent to 70 per cent from their peak levels. If correct it would mean that a house worth €100,000 in 2007 was worth around €45,000 in March 2012. If it ended up 70 per cent below peak prices by the time the crash was over, its value would fall to just €30,000. In other words it still had another 33 per cent of its March 2012 value to lose.
Maybe that is the case. But it doesn't seem likely. Overexuberance in the boom years may have been replaced by excessive pessimism in the darker days.
In October 2006 I started working on a documentary for RTE warning of the risks of a property crash that could see house prices fall by up to 30 per cent. Broadcast in April 2007, it was actually quite tame stuff. Yet, it was criticised for being too pessimistic, not by all, but by many in the media, in the Dail, among estate agents and other vested interests.
In May 2011 I began working on another documentary, broadcast in October 2011. In it I suggested that house prices would hit the bottom in 2012, rumble along with modest falls and rises for two to three years, but that Dublin would recover more quickly. At the time the consensus was forming that Ireland would be another Japan, with 18 years of house price falls. I was criticised for being too optimistic.
One month's statistics do not make a watershed moment in the property market. For some types of property in some areas, the bottom was reached some time ago. For others, they may even fall again, and rise again. The question is where the trend is going and how that should inform people's decisions about buying a home.
Ireland and its property market are not out of the woods yet. The mortgage arrears boil has yet to be lanced. Large-scale repossessions of buy-to-let properties and smaller scale ones for owner occupiers are on the cards. Unemployment remains stubbornly high. The euro crisis has not been solved. Banks aren't profitable and still not lending enough. All of these factors are likely to ensure house prices in general remain subdued for another couple of years.
The carnage of the property crash has been very real and it endures. Hundreds of thousands of people trapped in negative equity might like to see prices rocket so they would get out of it more quickly. But unfortunately a new boom would not be good for anybody.
Equally, many of the negative equity generation are trapped in the wrong kind of property in the wrong place. A boom would just see houses in places they want to live rocket too.
This is a property crash going into its final phase and we will all be much the wiser at the far end.