Should we be worried about property bubble re-inflation?

For a real property bubble you need lots of cheap or reasonably cheap credit.

Then take a look at the state of our banking system.
We don't really have a standalone indigenous banking system anymore, two banks have gone, another has been taken over, two are nearly state owned and one is most of the foreign banks have upped and left.
There is collosal amount of personal debt out there so a big chunk of the population cannot buy again so I can't see a bubble reinflation.

What is happening is the state (government and arms of the state like NAMA, the nationalised banks) are hoping there is price growth so that they can recoup some of the losses, offload nationalised banks and up the revenue returns.
They are helping constrict supply so that prices are going up in the more desirable areas.
Reposessions are not happening because it is political unpalatable and even the banks are can kicking hoping prices increase to recoup some of their losses.
If prices dramatically increased the level of repossessions would jump as happend in UK back in early 90s.

A lot of purchases over the last couple of years have been cash and foreign investors taking big sites because yields are good and Ireland looks like a reasonable long term bet.


Then add in all those in negative equity and you have a big tranche of people hoping prices increase.

The only construction work I see in Cork city at the moment is government funded. Many roads have been dug up and changed to reduce the space available to motorists. Bicycle parking spaces also have been put at places where I have never seen somebody leave a bicycle or understand any reason why they would choose to park their bicycle at the designated parking place constructed. There also seems to be a new school being constructed near where I live and only a few hundred metres away from an existing school. The RTE broadcasts about the economy improving here seem very difficult to agree with when I check the wages of jobs advertised.

I would see no property bubble developing here until wages improve. We are a small country on the edge of a European union that seems to have abandoned the idea of assisting countries at a distance from the industrialised core at the centre of the continent. The only thing that has propped up our population with a stagnant economy are the thousands from the eastern periphery of the EU who often do not need to earn enough to buy a place to live here as they only plan to stay a limited time. While house prices have dropped they are still unaffordable now to far too many people living here.

Yes, we should be worried.

Rents in cities are way too high.

I hear talk of 1000 pm for 1-bed apts in Dublin - CRAZY.

I also hear about 1400 pm for 2-bed apts in Ranelagh - UNREAL and obscene.

92% mortgages are still available, even after a massive crisis - they should be banned, max loan should be 80-85%.

35 year mortgages are still available - they should be banned, max duration 25yr.

This would help reduce debts, and help contain house prices.

touts wrote: »

When the Titanic slammed into the seabed it bounced. Prices are artifically low at the moment ...

I disagree. Prices are artificially high. If free market capitalism were allowed to work its magic the defaulters would have been kicked out on the street which would have dumped a lot of houses onto the market. The government bailout of the banks prevented this.

The fact that houses are being kept artificially high is keeping a lot of would be investors out of the market until the prices are allowed to fall to their true value. The courts have prevented evictions and thereby kept properties off the market so that is another hot air balloon keeping house prices high.

Sooner or later, the crash that was supposed to happen in 2008 will happen (with a vengeance). This is unavoidable. Then house prices will fall to about a quarter of their present value. Those who think they have bought at the bottom of the market are mistaken. The EU, US and Japan will all crash together - properly this time and there is nothing anyone can do to stop it. This is why I favor austerity over stimulus, it is better to preempt a disaster than to wait for it to come.

realitykeeper wrote: »

Then house prices will fall to about a quarter of their present value.

I was agreeing with your post up until this point but frankly the above is ridiculous and sounds more like wishful thinking on behalf of somebody hoping to pick up some cheap property.

Local authority levies and the conditions they are placing on developers are acting as a major brake on new house builds at the moment. But there are things that government can do to free up the system and increase the supply of new houses:
http://www.independent.ie/lifestyle/property-homes/ten-steps-to-solving-dublins-housing-crisis-30111454.html

Part of the problem is that government is so stuck in “react mode”, batting off day to day crises, that they seem to have no time to deal with current pressing issues, such as the emerging property bubble in Dublin.

More questions should be asked of Minister, Phil Hogan, as to what he is doing to remove excessive bureaucratic local authority demands on providing infrastructure, etc., which are making the building of new houses an unattractive economic proposition for developers

The alternative is for the local authorities, themselves, to provide the badly needed new housing builds, without which prices will continue to rise in line with growing demand. And we all know that public monies are not available for this approach right now.

The cost of housing has to be linked to peoples’ earnings and ability to pay – otherwise we are destined for more booms and busts for what is a basic human need – affordable housing! It's time for government to exercise the powers we gave them to solve this problem!

emo72 wrote: »

is the property bubble being fueled by buyers from abroad? cant see how anyone can get a mortage here.

Mainly cash, lot of folk retiring with big lump sums who are afraid of the banks doing a Cyprus on them. That would be one segment of the market and with such pitiful stock available, it's shooting fish in a barrel for EA's.

Our Year wrote: »

the rent is too damn high

Agreed!

But, as demand is unlikely to go down, this will continue until there is an increase in supply - basic economics.

Government should be doing more to remove barriers on the supply side - it is doable, but, like anything worth doing, requires a bit of effort (and a bit of courage).

Our Year wrote: »

the rent is too damn high

On what basis?

Currently house prices are about 4 times average earnings. That is pretty much in keeping with long term average.

Rent yields are about 5-5.5% which again is pretty average. Indeed if you believe people like David McWilliams (which I wouldn't) then yields should be 7% which would mean current average rents need to increase by about 25%.

chopper6 wrote: »

So 2000 per month for a two bed in Dublin is about right?

The simple fact is a lot of these Buy To Let cowboys are in arrears with the banks and are determined to gouge the tenenats to make up for thier own stupidity...what we need is the reposession of these properties and a govt rental agency to administer the sector and set maximum rents.

Most of these shysters bough hoping to make a quick buck and know nothing about the needs of tenants or the societal iimplications of sky-high rents and lack of security of tenure.

Landlords beleive the Govt should write off *thier* debts but are quite happy to evict people so they can charge more and more in rent.

What?

Anyway of course the Landlord will get whatever rent they can and if the buy to lets that are in arrears are repossessed I'd be surprised if most of them weren't outside Dublin.

Legislation on maximum increases is fair enough in my opinion but the last thing we need is the government taking control of the rental market who exactly is going to foot the bill for all this?

chopper6 wrote: »

How expensive is it going to be?

Get rid of the buy to lets that owe the banks money...take them into a NAMA-style agency only for rental to be leased at an affordable rate to tenants with governmental supervision....the banks get thier slice,the Govt get thier slice and the tenant at the very least as security of tenure,all else being equal.

The bank and the erstwhile landlord can come to some sort of a deal but celtic-tiger era dummies should not be allowed gouge people while they are in arrears of thousands and are hanging on in the hopes of a writedown.

Well given prices are still half what they were at the peak repossessing them is going to mean the Irish government pumping billions into the banks again to cover the losses.

The banks won't recover their money, the Irish government will lose big money and the renter will still have to pay huge rents to cover the costs of this while we also end up with a new agency which is run by the civil service creating a new cost we didn't have before.

Then the rest of the country will have to pay more tax to pay for what can't be recouped from renters.

Geuze wrote: »

.

92% mortgages are still available, even after a massive crisis - they should be banned, max loan should be 80-85%.

35 year mortgages are still available - they should be banned, max duration 25yr.

This would help reduce debts, and help contain house prices.

and keep the riff-raff in tenanted servitude too!

chopper6 wrote: »

Exactly...no security of tenure...you're at the mercy of greedy people,especially the new breed of amatuers that have entered the market.

Was there ever a time we had anything other than amateurs in our property market?

golfwallah wrote: »

Agreed!

But, as demand is unlikely to go down, this will continue until there is an increase in supply - basic economics.

Government should be doing more to remove barriers on the supply side - it is doable, but, like anything worth doing, requires a bit of effort (and a bit of courage).

It's called Foreclosure Stuffing and has little to do with building rates but rather the puny level of transactions strangling supply to the market.

OMD wrote: »

On what basis?

Currently house prices are about 4 times average earnings. That is pretty much in keeping with long term average.

Rent yields are about 5-5.5% which again is pretty average. Indeed if you believe people like David McWilliams (which I wouldn't) then yields should be 7% which would mean current average rents need to increase by about 25%.

For those missing the reference: