Ireland’s Housing “Fire-Sell” Phenomenon

15 August 2011 - Which Way to Pay

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Ireland’s Housing “Fire-Sell” Phenomenon

It seems further misery looks set to fall on the shoulders of variable-rate mortgage holders in the near future; the Bank of Ireland and AIB are on solo runs to hike rates, whilst whispers are being echoed of an imminent ECB interest rate U-turn and cuts. In an already static housing market, such news will have adverse impact on a sector down by 50% from the peak, with a forecasted potential to fall to 70%.

However, in a market where there’s little to sell, setting a price point for buyers becomes problematic. This dilemma has been termed the fire-sell phenomenonwhere pricing is somewhat blind, indeed greater emphasis falls on the sale than seller-return in many cases. With most properties being sold in accordance to this manner, the unconventional technique can avoided only in knockdown price auctions which give buyers a realistic price point.

Indeed, Draft.ie economist Ronan Lyons suggests that the so called “fire sales” result in “Dublin prices at 65% below peak and prices elsewhere in the country at 70% below peak".

CSO statistics and official data on asking prices indicate that Dublin housing market has fallen 50% from its peak and 40% in comparison to the rest of the country. Next month sees theoccurrence of theAllsop auction which, should it attract buyers, will give measure to the reported market softness.

However, Lyons suggests that a housing market recovery may be within site for Dublin by 2012; "Cork will follow quite soon after Dublin, in the second half of 2012, and cities like Galway, Waterford and Limerick within 12 months of Dublin” he said.

It is worth mentioning that so-called recovery does not mean prices going back up to where they were, rather that prices move in line with inflation or a little above it. The aimed trajectory is that growth within the housing market is sustained at about 2-3% a year.

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