Yesterday's auction of distressed properties served as a welcome reality check. While many of the properties on offer sold for considerably more than their asking prices, this was only because those asking prices were so low in the first place.
Ever since UK auctioneers Allsop first began conducting auctions of Irish distressed properties last year, they have provided valuable additional information on the true state of the Irish property market. With the official CSO house price statistics only including properties purchased with a mortgage, cash sales, which now account for over one-third of all transactions in the housing market, are excluded.
This almost certainly means that the official CSO figures are understating the true extent of the fall in Irish house prices. While the CSO figures point to a 50pc fall in house prices nationwide, the Allsop sales point to a drop of somewhere between 60pc and 70pc.
Although this might seem like bad news for sellers, it isn't necessarily the case. Many potential buyers, fearful that prices have further to fall, are holding back from purchasing. This is particularly true outside of Dublin. Why buy a house today if you can buy it more cheaply tomorrow?
If distressed property auctions help to produce more realistic prices in the market, prices that buyers can trust, then the volume of transactions will increase and the housing market will finally bottom out.
Monday, July 9, 2012
Housing market needs some realistic prices - Independent.ie