There was a fair bit of media coverage yesterday (see here and here) about an apartment complex in Mullingar where prices start at €69,950 for one-bedroom apartments, €82,450 for two-bedroom units and €98,000 for three-bed units. These prices are 55pc and 63pc of their original prices (roughly in line with Morgan Kelly‘s prediction that property prices will drop by a half to two thirds from the peak). The Mullingar apartments are not unique and there have been a number of such ‘firesales’ around the country where the prices within certain developments, almost certainly built with loans from non-Irish banks and thus ineligible for NAMA, have been slashed once the receivers have been bought in (the Mullingar apartments were funded by National Irish Bank, owned by Danske Bank, who are seeking to recover €2m from the €7.8m owed by the developers). Prices are generally being cut in these kinds of developments by 50-75% as the banks seek to claw back some of the debt owed. One development in Rooskey, on the Roscommon side of the Shannon, has seen prices drop from 399K to offers above 100K.
These kinds of sale are starting to establish a floor in the market. On the negative side, they start to reveal the level to which the whole market could sink to and thus the extent to which present home owners are in negative equity (and just how far the market will have to rise to climb out of that condition). On the positive side, once a floor is established, confidence will start to return to potential buyers who are presently too worried to purchase in fear that they will immediately enter negative equity.
Once the floor is established, how quickly prices will start to rise will be the next big question. It seems likely that prices rises will be relatively modest for quite some time due to: buyer caution because of the present price collapse; the general state of the economy, unemployment and underemployment; the difficulty of securing a mortgage, especially for first time buyers; and the present oversupply in the market enabling buyers to haggle. Morgan Kelly‘s view is that it’s difficult to dismiss the possibility Irish property prices could remain below half their peak value “for the next decade or longer.” It’s difficult not to agree with his analysis. At least we might be starting to find the floor.