House prices may have fallen as much as 68% in real terms since the height of the boom, according to a report which suggests the market has finally bottomed out.
Goodbody Stockbrokers’ analysis of the five Allsop/ Space public auctions of distressed properties claims the results show the fall in property prices was even more dramatic than other indices, such as the CSO house price index, have shown.
Using prices achieved at the auctions with rental yield, the analysis indicates that securing a property now at auction prices may mean better long-term value.
While allowing for the fact that the properties sold at auction were more Dublin-concentrated with more apartments than the market in general, Goodbody economist Dermot O’Leary, the author of the report, said the actual fall was probably higher than the CSO residential property price index figure of a 48% drop from that in Sept 2007.
“While it would be our contention that prices are undershooting due to lack of access to credit and a weak domestic economy, this analysis suggests that residential property, at 60%+ from peak, is now transacting for prices very close to or at long-term value.”
The report also said credit availability was “key to recovery”, with mortgage lending last year 93% below that of the peak level during the boom.
Mr O’Leary said many of the properties sold at the auctions had previously been on general sale and had not sold. Similarly, they went for a price at auction that would have been refused on the private market.
For the first time, Bank of Ireland had a stall at the last auction and it is understood to be putting an “auction pack” together for the next event.
Mr O’Leary said: “It would help if we had the banks on board. It is better to have some transactions at a lower price than no transactions at all.”
The official index compiled by the CSO does not pick up on cash sales, according to the Goodbody report.
Over the five Allsop/ Space auctions, a total of 311 residential properties were sold, with another five sold after the auction.
The properties were split evenly between those in Dublin and those in the rest of the country, although the majority of properties sold in the capital were apartments while more houses were sold elsewhere in Ireland.
The study of the auctions sales — which equated to 93% of the 440 properties on offer across the five auctions — found that the average price of a residential property was €145,000.
Almost three quarters of the properties sold were bought with cash, highlighting the difficulty in accessing finance for house buying. Almost 90% of buyers were Irish, and 61% were investors.
Of the 160 apartments sold, two thirds still had tenants, while just one third of the houses sold had tenants.
Goodbody estimates that there is an average rental yield of 8.8% in the auctions, with the highest yield on apartments outside of Dublin.
The report also claimed that the current level of mortgage draw-down was “unsustainably low”, with the 11,000 issues last year equating to just 0.5% of housing stock.
* 60%-plus actual fall in residential property prices since Sept 2007.
* 316 Allsop/Space auction properties sold in five auctions.
* 87% of buyers Irish.
* 61% of buyers were investors.
* 72% bought with cash.
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