Ghost estates

If there is one untold story of the past 12 months, it is that of the housing crash. Why is it untold? I guess because the media find it hard to talk about, or at least when they do talk about, they tend to paint a more bullish picture thanks to the input of vested interests, the property industry, auctioneers, overly bullish economists… the list goes on.

The real story of the Great Irish Property Crash is one that has yet to be told, and in this country you might not read about it until it is near its end, or over. But what does the internet allow? It allows us to get around all the guff and collaborate, and find out what the real situation is.

Personally, I am bear when it comes to Irish property. I believe we are nowhere near the bottom, and if anything, things are going to get much worse in the coming years. That is, worse for all those people who bought at the peak in 2006 and early 2007. Worse for the buy-to-let investors who are sitting on vacant houses or desperately trying to let them out. Oh and rents are falling too.

Did you know that the number or houses listed for sale on Daft.ie was just 16,000 in September 2006? As the ECB began raising rates and people began to dump investment properties that number has soared. As of today there are almost 70,000 houses for sale on Daft. But there are important provisos about that figure.

First, there are many, many houses sitting vacant that are not for sale. That is, many houses that have never even been lived in are sitting idle. Second, in September 2007, realising that houses were not selling, banks began to tell developers to put up their houses for rent rather than try to sell them. This, it was hoped, would allow them to ride out the property bust. The number of houses available to rent soared in September, rising from 6,000 to almost 13,000 today.

Third, is the fact that prices are falling everywhere. Real prices. Real asking prices. See a house for sale for €300,000? It’s not worth it, invariably. In fact any bidders out there are putting low ball bids, in many cases over 10% below asking. So the house is on offer for €300k, you put in an offer for €250k. But even those figures are not low enough.

As the housing stock continues to rise, and the number of buyers dries up, things can only go one way. IMHO the return to normal lending conditions (we were living in a credit bubble since at least 2000), will lead to things getting rather hairy.

When all the main banks ended the 100% mortgages and tightened lending conditions back to normal, it means that not only are first timers affected, but the whole market, developers included. It could take 6 months for these decisions to filter through the market, so as we hit the end of 2008 we could see a real problem: Tens of thousands of houses for sale, buyers unwilling or unable to buy, banks unwilling or unable to lend; developers sitting on massive loans and big tracts of land they bought at inflated prices with unrealistically cheap money and a housing market sitting on a knife edge.

Furthermore, we have the problem of denial. In the current market, prices have fallen to some degree from the highs in late 2006. 10%-15% is the consensus but it is probably more. Prices IMHO will fall much further, as far at 50% from 2006 highs. But vendors, auctioneers and developers are in denial. They don’t believe the value of these assets are falling, and to that end they are failing to reduce asking prices. They are also creating denial in the market through false sale prices published in national papers. Vendors are in denial, failing to understand that the value the property they bought has fallen, and fallen to a greater degree than they are willing to accept.

Vested interests like Liz O’Kane, much to my chagrin, are given free reign on the national broadcaster to tell us all that there’s never really a bad time to buy property, even in a falling market. All of the vested interests are trying to tell us, and have been telling us all the way through the crash, that ‘now’ is a good time to buy. Erm, no, it’s not. In reality prices are still falling, and they are set to fall a hell of a lot more. Nothing the vested interests can say will stop it, they can only try and delay it.

For now though, if you are thinking of buying, read the Pin, install the Property Bee Firefox extension, browse Daft and Property News (MyHome displays prices as graphics, breaking Bee) and watch the prices fall. Be aware that most auctioneers are fibbers, and will try and tell you things are picking up. They are not. Figures speak for themselves.

I think it’s time for something of a reality check. To that end I took a quick drive around some towns and villages in East Cork, on the look out for empty houses. You won’t be surprised to learn that I found lots, none of which are listed individually for sale on Daft.

First off, Mogeely. A tiny village with a Church and a couple of pubs. Gleann Fia is a new development and is listed on Daft here. It does mention that there are a ‘group’ of three and four bed houses for sale. By my reckoning the estate is 80% vacant. I took some photos to show it:

Did the auctioneer get carried away with ‘sold’ signs?

By my count there were about 38 houses. Of which about 6 were occupied. Another 6 had ‘sold’ signs on them, but I can’t see any sign they are occupied at all, or about to be.

On to Ladysbridge, to the estate known as the Maples. While Daft list just a couple of houses for sale, there are in fact at least a dozen vacant houses. That is, they have never been occupied by anyone.

On to Balymacoda, and an almost completely empty development:

This is the main street:

Another development on the other side of the village:

And on to Castlemartyr, where the builder has decided to use one of the vacant houses for his site office:

This row of houses face the main road to Garryvoe, and have been at this stage of construction for at least a year.

Across the road is the entrance to the Castlemarytr Capella Resort, and a development of houses that are still vacant:

In Midleton, Broomfield Village is still under construction, but has been drastically cut back. Many of the existing houses are still vacant:

Another development out the Mill Road:

Do think about buying. But remember, the ball is in your court, not the vendors’. Prices are still falling, and the trend is set to continue.