Dublin Housing Boom Set To Bust?

– Is Dublin’s property market heading for a soft landing?

– Increasing fears the latest housing boom could foreshadow another slump as reported in the Financial Times

– 68 per cent of prime properties in Dublin 4 and 6 have cut prices

–  “I doubt it will be ‘soft’ … My suspicion is that it’ll hurt like hell…” warned Karl Deeter of Irish Mortgage Brokers

Excerpt via FT:

Over the past five years Ireland has been on something of a tear.

The economy is the fastest growing in Europe, unemployment has fallen below the EU average and house prices rose 11.9 per cent last year, on top of 8.6 per cent growth in 2016, according to rating agency Standard & Poor’s.

In some corners, the devastation wrought by the 2008 financial crash — when house prices dropped 55 per cent — feels a distant memory. But there are fears the latest housing boom could foreshadow another slump — especially among Dublin’s wealthy enclaves.

Since the property market started to recover in May 2013, Ireland’s residential house prices have ballooned by 69.9 per cent, according to the country’s Central Statistics Office. S&P foresees the runaway growth slowing, but its forecast still has Irish house prices rising 9.5 per cent this year, 8 per cent next year and 7 per cent in 2020.

If the agency’s predictions are borne out, house prices will have increased 127.9 per cent between 2013 and 2021.

“There could be a situation where [developers] start to bail into the sector and you eventually reach hyper-supply, and when that becomes apparent you get a reversal in the market,” says Karl Deeter, compliance manager at Irish Mortgage Brokers.

“I doubt it will be ‘soft’, ” he says. “My suspicion is that it’ll hurt like hell.”

In Dublin, there are already signs the prime market is faltering.

In the upmarket areas of Dublin 4 and Dublin 6, high-priced homes are struggling to sell. A report by property portal MyHome.ie shows that 68 per cent of prime properties in Dublin 4 — the most expensive area in the country with an average price of €775,973 — and Dublin 6 have cut their prices.

“For quite a few properties that are on the market for more than €1m, the asking prices are being pushed down,” says Stephen Day, residential director at Lisney estate agents.Day has recently reduced a five-bedroom property in Ranelagh from €2.25m to €1.995m.

“To be blunt,” he says, “agents are putting houses on for too high a price, and so they have been sitting on the market.”

Full article from FT here

Editors Note: The Dublin housing market looks vulnerable to a severe correction and, in the event of a global financial crisis, another crash.

The question that needs to be asked is how far prices will fall and will this be a relatively mild correction, a sharp correction or indeed another property crash?

We have long contended that London house prices would fall sharply and there are increasing signs that this is happening in not just in London (see News today below) but in Sydney, Melbourne, Vancouver and other cities which have seen massive appreciation in their house prices in the last two decades.

A crash in property prices in these major cities will have obvious ramifications for other property markets.

Psychology is a powerful thing and falling prices in leading financial capitals around the world will likely curb property investors enthusiasm for other over valued and frothy property markets including Toronto, Perth, San Francisco, Los Angeles, Amsterdam, Frankfurt, Paris, Dublin and others.

Property investors should consider diversifying into safe haven gold which will again hedge and protect investors in a sharp correction or a crash.

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