Ireland, the Housing Market, and the Future

I've been a bit of a keen watcher of the Irish housing market - well - ever since buying an Irish house. Sinking yourself face-deep into negative equity tends to focus your attention like that.

Without having a crystal ball, and setting aside the possibility of a black swan such as a sovereign default, breakup of or expulsion/exit from the Euro, or some sort of economic disaster driven by an IMF package to avoid one of the first two possibilities, here's some random thoughts on what I (as an untrained eye) see happening and coming in the Irish housing market:

• Prices - Achieved prices at the lower end of the Dublin market are probably now about 55% of peak asking prices.
  
  
• Activity - finally, yes. Some sales are starting to go through again at the levels prices have now reached - probably a combination of some stability in prices for the first time in 2 years, and a glut of first time buyers who (a) have been waiting, and (b) can get finance at these prices. The employment situation and continued pricing stability is the only thing that will keep that wheel slowly turning.
  
  
• The commuter towns - asking prices boomed fastest, and achieved prices have probably collapsed hardest in the peripheral counties to Dublin. It's going to be a long road back for equity in the area surrounding the city.
  
  
• The city and the country - rural areas physically removed from Dublin (i.e. once you get beyond commutersville) probably see price changes lagging Dublin timewise. As people move less frequently, less urgently, and in smaller numbers in the country, the fall in house prices has much further to go in the more sparsely populated parts of Ireland. The fall in equity and prices in Dublin will eventually drag the rest of the country into line, but it is going to take time. (If I had a big paid-for house in the country, and wanted to swap it for one in the city, now might not be a bad time to take advantage of this presumably temporary differential)
  
  
• No tradeup market - a lot of people are in negative equity, so anyone who owns a house not in the cheaper part of the market (i.e. not a first-time-buyers house) is going to be waiting a long time for someone able to trade up from below.

So if I had to bet any money, what would it be on?

The most likely scenario to me is a distinct two-tier market. As the housing market hits bottom (and there is always a bottom, though you probably won't know where it was until we're long past it), it will likely fracture into two sections

• Houses in good repair, solidly built, in good locations, together with the best of the apartments, will start to slowly stabilise or recover some value.
  
  
• Houses that are brand new, poorly built, insanely situated, and the vast tracts of apartments in the middle of nowhere (that never made sense), may never recover value.

I'm not sure that fracture has occurred yet, or that it'll even be a distinct event as opposed to a subtle, drawn-out process - but I can't see any other logical conclusion as to what's in our future.