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Housing bubble starting to pop?

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  • 26-07-2006 4:25pm
    #1
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭


    Here in Galway, one of the most expensive places to buy property in Ireland, there are still a lot of real estate agents trying to move 3 bedroom houses at €450,000 or so, but Remax property about a week ago was advertising three bedroom houses in good areas for €320,000, or in a couple of cases, €250,000.

    I've been looking at property around town for the last six months, and I have to say this is the first time I have seen property anywhere under the 300k mark. Now with that said, there are still places going for looney tunes money, a two bedroom penthouse apartment for 1.4 million last week, but thats getting pretty rare (probably why it made the news).

    Can this be the beginning of the end of the property bubble? And does this mean FTB actually have a chance over the coming year? Should first timers wait until the prices bottom out?


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    #2
    Noelie
    Closed Accounts Posts: 999 ✭✭✭Noelie


    I'd say no. With the figures your have quoted your talking about a 35-40%(approx) drop which is quite unlikely at the moment.


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    #3
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    Noelie wrote:
    I'd say no. With the figures your have quoted your talking about a 35-40%(approx) drop which is quite unlikely at the moment.

    Eppure si muove! Some of those listings are a bit out of town, true, but some of the ones in Knocknacarra and Cnoc an óir were going for 420k not so long ago. Four and five bedroom houses, no less. I can't back that last bit up with a link, but you can take my word for it...


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    #4
    coolhandluke
    Registered Users Posts: 249 ✭✭coolhandluke


    SimpleSam06 wrote:
    Here in Galway, one of the most expensive places to buy property in Ireland, there are still a lot of real estate agents trying to move 3 bedroom houses at €450,000 or so, but Remax property about a week ago was advertising three bedroom houses in good areas for €320,000, or in a couple of cases, €250,000.

    I've been looking at property around town for the last six months, and I have to say this is the first time I have seen property anywhere under the 300k mark. Now with that said, there are still places going for looney tunes money, a two bedroom penthouse apartment for 1.4 million last week, but thats getting pretty rare (probably why it made the news).

    Can this be the beginning of the end of the property bubble? And does this mean FTB actually have a chance over the coming year? Should first timers wait until the prices bottom out?

    Your jumping the gun there a bit although we are very close to the bubble popping,it may even have burst already.But it's going to be a long drawn out affair,rather than a sudden drop in prices.
    The irish mentality has been conditioned over the last few years,that property prices never drop so there will be a period of standoff between sellers and buyers,before prices start to fall imho.
    The people who have to sell (can't cover the mortgage on that investment property) will fall first along with a few smart investors who realise the games up and want to get out a few bob up,all the "experts" will tell people to hold their ground (while they get out) at this point the herd will turn and all the cards will fall.


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    #5
    CiaranC
    Closed Accounts Posts: 6,300 ✭✭✭CiaranC


    My experience is the opposite. Prices on ~320k properties have risen approx 50/60k since February in South/South West Dublin.


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    #6
    coolhandluke
    Registered Users Posts: 249 ✭✭coolhandluke


    CiaranC wrote:
    My experience is the opposite. Prices on ~320k properties have risen approx 50/60k since February in South/South West Dublin.

    Prices for the first quarter of 06 rose for their highest levels since 01 i think (can be checked), and you are in the aera of probably most demand in the country.
    The point is it's going to fall from the outside in,not the other way round.
    But everywhere will be affected,just to different degree's


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    #7
    mikemac
    Closed Accounts Posts: 19,986 ✭✭✭✭mikemac


    coolhandluke wrote:
    The point is it's going to fall from the outside in,not the other way round.

    Can you explain this point? Sorry, don't quite understand it


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    #8
    coolhandluke
    Registered Users Posts: 249 ✭✭coolhandluke


    micmclo wrote:
    Can you explain this point? Sorry, don't quite understand it

    When the "for Sale" signs start going up in the commuter towns of Dublin,Cork and Galway you know the bubble has burst.
    40% of the new houses purchased in the first quarter of 06 were bought by investors/speculators/flippers call them what you will.


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    #9
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    coolhandluke wrote:
    When the "for Sale" signs start going up in the commuter towns of Dublin,Cork and Galway you know the bubble has burst.
    40% of the new houses purchased in the first quarter of 06 were bought by investors/speculators/flippers call them what you will.

    Given that those two areas I mentioned pretty much are what passes for a commuter town or area in Galway, I'd say the outward-in topple is in progress... The investors that bought earlier this year won't be divesting just yet, as its a bit too soon, but I'd bet earlier investors are getting the smell of smoke.


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    #10
    Pa ElGrande
    Registered Users Posts: 3,495 ✭✭✭Pa ElGrande


    outside in - here's how it happens.

    Timelines are America's (Housing is already on the way down in the USA in certain areas)

    http://www.itulip.com/housingpriceregionscascade.htm

    Net Zero means we are paying for the destruction of our economy and society in pursuit of an unachievable and pointless policy.



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    #11
    Cantab.
    Closed Accounts Posts: 1,444 ✭✭✭Cantab.


    I think boards.ie business is a bit behind the game (as much as I love boards.ie!).

    Over on askaboutmoney.com in 'Great Financial Debates', you'll find a thread that has over 32,000 hits in 3 weeks and goes in to great depth on the ins and outs of the imminent pop.

    The consensus seems to me to be that things will go pear shaped come the Autumn when builders, estate agents, speculators, developers, etc. come back from their Spanish villas and decide enough is enough. If it doesn't happen this Autumn (high risk period), it will happen prior to the general election next summer (next highest risk period).

    Link to AAM


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    #12
    Pa ElGrande
    Registered Users Posts: 3,495 ✭✭✭Pa ElGrande


    Cantab. wrote:
    I think boards.ie business is a bit behind the game (as much as I love boards.ie!).

    Ex-Taoiseach Albert Reynolds is rumoured to be lining up for the Autumn sale, so expect lots of ramping of the property market come September, and it will look like this summer's 'negativity' is more of the same from the doom mongers who think house prices will crash.
    There are just as many threads if not more on boards, even I made my own call on the housing top (time will tell).

    One thing is certain the decline will not pan out in the manner you or I expect and already people in power are covering themselves to deflect any blame being attached to them. I believe the root of the excess inflation in house prices started with the corruption of the planning process by certain developers, politicians and planners in the '80's and the actions of non-elected groups like An Taisce.
    Anyone remember the Bacon reports?.
    The bubble itself took off in 2001, with a combination of factors, like historically low interest rates, growing population, loosening of lending criteria, tax incentives, cheap energy, collapse of the dot.com bubble, and its been fanned by our own greed and fear.

    The question nobody is asking or answering is what factors are needed to keep the price of property rising in 2007 and beyond?

    Net Zero means we are paying for the destruction of our economy and society in pursuit of an unachievable and pointless policy.



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    #13
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    Pa ElGrande wrote:
    The question nobody is asking or answering is what factors are needed to keep the price of property rising in 2007 and beyond?

    Um, complete reform of the planning permission process, coupled with increased levies on investment / speculation moguls, who leave tens of thousands of usable homes empty to push up prices in order to line their own pockets while first time buyers are priced out of the market, to the detriment of all of society?

    :D

    Just a thought...

    More realistically however, the housing market is much the same as any other market. Its the sale of product, and the price depends on what people are willing to pay for it. If you can sell pencils at a million euros each, then thats the market price for pencils, what the market will bear, what people feel they are worth. God knows the prices aren't due to a lack of usable land, or construction workers or materials.

    Thus the price the market can handle depends largely on consumer sentiment, which is why sites like boards and AAM do have an effect on property prices; not much by themselves, but in conjunction with other media outlets, they can affect market sentiment.

    If people believe there will be a property crash, they will hold on to their money, and not buy that first home. Likewise investors will not only not buy (and remember they were 40% of the purchasers last year), but they will, in fact, try to offload all of their properties at the earliest opportunity.

    The upshot of this is essentially that a crash consists of a glut of properties on the market, combined with a scarcity of buyers, equating to far cheaper houses. Factor in rising interest rates (and they will probably go far higher, at one stage they were over 15% in the not so distant past), and you have the recipe for a serious collapse of the housing market, with its enormous knock-on effects for the Irish economy.

    What gets me most about this whole situation is the protestations of those who who see no end in sight for this boom, backed up with average wages of 30k in the country. 30k is the MEDIAN wage, not the average, which means half of the working population is below that. And even at 30,000 per annum, most houses are prices at ten to fifteen times that. Whats wrong with this picture? Wages aren't going up that fast, 3% or so, barely keeping up with inflation, so further major house price rises are truly unsupportable.

    The party is almost over, I reckon.


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    #14
    kam3qnwvebf4jh
    Closed Accounts Posts: 138 ✭✭kam3qnwvebf4jh


    2 months ago, out of interest, I decided track a particular house type(3-bed semi, no extension) in a particular estate(just off the M50 near Dundrum shopping centre) in South Dublin. On the 16/5 a sample house matching the description above was guiding at 535K. On the 17/7 another house on the same estate with the exact same characteristics was guiding 595K!! Thats an increase of 12% for 2 months !

    Whats the last thing that an engine does before it blows up ? It overheats..


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    #15
    CiaranC
    Closed Accounts Posts: 6,300 ✭✭✭CiaranC


    Ive done the same and seen a 15% increase in 6 months.

    So, what does that mean in real terms?

    Is it insulation against a downturn or does it mean these properties will just lose more value than everything else? Or does the obviously stronger demand for these offset some of any future drop in price?


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    #16
    davidoco
    Registered Users Posts: 656 ✭✭✭davidoco


    The majority of those predicting a crash aren't even on the ladder yet. It reminds me of a queue at a bar, the person just in without any drink shouts the loudest.

    It’s false hope really that property prices will come back down to a level where the FTB can buy within Dublin in particular.


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    #17
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    davidoco wrote:
    The majority of those predicting a crash aren't even on the ladder yet. It reminds me of a queue at a bar, the person just in without any drink shouts the loudest.

    It’s false hope really that property prices will come back down to a level where the FTB can buy within Dublin in particular.

    Feeling a little exposed, are we? 30,000 salary, minus what 8k in taxes, 22k thats all yours. Assuming you spend 10k per annum on the mortgage, that leaves you with 12k, or about 200 quid a week to spend on food, fuel, insurance, and so on. Oh and lets not forget interest on the mortgage, on top of that, with rising interest rates.

    Which means, essentially, that a person earning 30k per annum has zero chance of paying that off over 30 years. And honestly, I don't know a great many people earning 30k or more in any case. And 300k is no kind of house.

    Boom.


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    #18
    CiaranC
    Closed Accounts Posts: 6,300 ✭✭✭CiaranC


    SimpleSam06 wrote:
    Feeling a little exposed, are we? 30,000 salary
    How do you know what he earns? It is strange that a lot of the bears on here seem to be single people on low incomes who want to buy a house.


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    #19
    daveirl
    Closed Accounts Posts: 14,483 ✭✭✭✭daveirl


    This post has been deleted.


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    #20
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    CiaranC wrote:
    How do you know what he earns? It is strange that a lot of the bears on here seem to be single people on low incomes who want to buy a house.

    30k is a low income? Wow, I must be in the wrong business... Maybe I should get into construction or something... :D I neither know nor care what he earns, that 30k example was to back up my previous point. It may come as a surprise to you, but most people, single, married, or otherwise, don't particularily want to trudge through their lives in debt to the hilt in order to fill the bank's coffers.

    Combine that with the other factors I have already mentioned, the market simply cannot bear the current pricing of property, and you have a lot of speculators who will be saddled with odious debt and probable bankruptcy.
    4490722_200X150.jpg


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    #21
    davidoco
    Registered Users Posts: 656 ✭✭✭davidoco


    Why I reply I wonder but I am a house owner since 2000 so am unlikely to have any real exposure to a market crash.

    I really do feel for those people thinking about buying now and having to deal with people saying houses are going to be cheaper crash crash next year etc etc

    The media have been quieter in the past few weeks compared to a bit of frenzy during June on house prices but all the indications I got were for a soft landing with modest price increases over the coming years. Therefore if I were a FTB or wanted a second home I would have no hesitation with buying now and especially now before the autumn rush.


    “property to rise forever at current rates? How is that a good thing”

    the ERSI are talking about 8% to 10% this year. That's say 30k more on the average 3 bed house. Perhaps there is a bit to go still before we reach the top and flatten out. I remember back in early 2001 prices went on a similar jump. As long as people have jobs and have aspirations to live in a bigger better house, house prices are going to rise.


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    #22
    [Deleted User]
    Posts: 3,621 ✭✭✭ [Deleted User]


    CiaranC wrote:
    How do you know what he earns? It is strange that a lot of the bears on here seem to be single people on low incomes who want to buy a house.

    Pretty much every economist is saying the same also.

    The only bulls are those with vested intrests, banks, building societies, the government, home owners and estate agents.


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    #23
    CiaranC
    Closed Accounts Posts: 6,300 ✭✭✭CiaranC


    daveirl wrote:
    This post has been deleted.
    Huh? Why would I want an assest that appreciates phenomenonally year on year forever? Thats a hard one...

    Unfortunately, as you well know, simple economics tells us that it is impossible. Id rather growth return to normal levels, but the more I read, the less likely that seems to be.
    SimpleSam06 wrote:
    30k is a low income? Wow, I must be in the wrong business... Maybe I should get into construction or something...:D
    Its low if you are looking to buy a 3 bedroom house in Galway. Maybe you should get work as a nighttime plumber or something :D


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    #24
    wardwil
    Registered Users Posts: 67 ✭✭wardwil


    A friend of mine works for one of Irelands richest business men (been involved in the financial and construction industries) and at their Xmas party last year he gave a talk on the property market.
    He could not stress enough how fragile the market is and that under no circumstances should they attempt to purchase a property within the next two years.
    This of course is hearsay, however, considering rising interest rates, low salaries, inflation, 25% dearer cars than anywhere in Europe, a deceitful Government, astronomical house prices, constant banking investigations, I have decided to give it two years to see what happens.
    Another aspect is that the construction industry is being fuelled by foreign low paid workers. This leaves the miserable sub contractors to make a fortune... we need to bypass them and employ this foreign workforce directly.
    Even if you sat at the back of the classroom as a kid, you can guess that there is only one way for this economy to go....
    Happy House Hunting!


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    #25
    CiaranC
    Closed Accounts Posts: 6,300 ✭✭✭CiaranC


    My brother was at the same party.


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    #26
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    davidoco wrote:
    Why I reply I wonder but I am a house owner since 2000 so am unlikely to have any real exposure to a market crash.
    Good for you.
    davidoco wrote:
    I really do feel for those people thinking about buying now and having to deal with people saying houses are going to be cheaper crash crash next year etc etc

    Yes, thats why you compared them to a queue at a bar. ;)
    davidoco wrote:
    As long as people have jobs and have aspirations to live in a bigger better house, house prices are going to rise.

    Sure this is Ireland, its different. Don't you know Saint Patrick drove out all the property crashes?


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    #27
    [Deleted User]
    Posts: 3,621 ✭✭✭ [Deleted User]


    davidoco wrote:

    “property to rise forever at current rates? How is that a good thing”

    the ERSI are talking about 8% to 10% this year. That's say 30k more on the average 3 bed house. Perhaps there is a bit to go still before we reach the top and flatten out. I remember back in early 2001 prices went on a similar jump. As long as people have jobs and have aspirations to live in a bigger better house, house prices are going to rise.
    Just to start off I'm 25 and I'm not a home owner. Nor do I plan on it any time soon.

    House prices are not rising because people are trading up.

    House prices are rising because Banks are feeding people's fear of not getting on the property ladder with cheaper and cheaper money. The more money they give out( over long terms and 100%+ mortgauges) the more expensive houses get.

    To add to the mix, we are now producing more houses than we have ever done before. There is no housing shortage to explain such huge disparity between earnings and house prices.

    And to dig out an old chestnut, house prices in Japan have fallen for 14 years in a row. So it can happen.


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    #28
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    CiaranC wrote:
    Huh? Why would I want an assest that appreciates phenomenonally year on year forever? Thats a hard one...

    Unfortunately, as you well know, simple economics tells us that it is impossible. Id rather growth return to normal levels, but the more I read, the less likely that seems to be.
    Actually simple economics is sitting scratching its head, wondering what the hell is going on. Market sentiment has taken the lead here, not hard financial facts. Still, live by the market sentiment, die by the market sentiment.
    CiaranC wrote:
    Its low if you are looking to buy a 3 bedroom house in Galway. Maybe you should get work as a nighttime plumber or something :D
    So you're saying that a place to live, a basic human right, should only be a possibility if you are wealthy? Wow, thats going to go well. Or not. :D


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    #29
    CiaranC
    Closed Accounts Posts: 6,300 ✭✭✭CiaranC


    So you're saying that a place to live, a basic human right, should only be a possibility if you are wealthy? Wow, thats going to go well. Or not.
    You can rent, or get affordable housing. Whats wrong with thinking only wealthier people should have expensive stuff?


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    #30
    Afuera
    Closed Accounts Posts: 619 ✭✭✭Afuera


    davidoco wrote:
    the ERSI are talking about 8% to 10% this year. That's say 30k more on the average 3 bed house. Perhaps there is a bit to go still before we reach the top and flatten out.

    But the prices have already risen by around 10% in the first few months of this year which would suggest that the ERSI is not expecting any more rises for 2006. Their projection for 2007 is only a 3% increase which is roughly in line with inflation. This sounds like it's already flattening out to me.


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    #31
    SimpleSam06
    Closed Accounts Posts: 4,048 ✭✭✭SimpleSam06


    CiaranC wrote:
    You can rent, or get affordable housing. Whats wrong with thinking only wealthier people should have expensive stuff?

    Hahahaha, oh lord, man you win the thread, you really do. Listen, read back over my comments, and note especially the comment about the pricing of pencils. I don't have the time to go repeating myself. Its only expensive stuff as long as people see it as expensive stuff. Thats what the entire property market is based on. Perception in people's minds. Seem a little shaky to you?

    See, now you made me repeat myself.


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