Wednesday, 8 October 2008

Irish house prices drop but the penny does not

Gombeen Man has always been of the opinion that Ireland’s longest running conflict has been the particularly long war between fantasy and reality - and in any war, the first casualty is truth.

The latest house price report states that the national average house price is EUR 312,500 – down nearly 11% on last year. In GM’s Dublin 15 stomping ground, which has seen massive development in recent years, this figure is well over 20%, according to his observations. And they are still not selling.

UCD economics lecturer Moore McDowell is quoted as saying that while the figures “point to a continuous slide in prices overall” it seems that “sellers are not adjusting their asking prices sufficiently to clear the market. The slow adjustment of expectations to reality is illustrated by the gap that has now emerged between asking prices for houses just put on the market and those for houses that have been on the market for a quarter or more”.

Which brings us to the original point. It seems that vendors want to sell at 2006 prices, and buy for 2008 money. A “logic” firmly grounded in their own unrealistic expectations rather than objective reality.

House prices are falling to real-world levels at last – but the penny has not dropped for some vendors just yet.

See also: Property crash and economic slowdown, Part 2

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