I've been thinking about the property market and it looks to me like it is certain to go down for the following reasons, can anyone think why this might not be the case?
1. Demographics: The bulk of people in ireland are 25 - 30, lots of people in this age bracket are renting so lots of appartments are being built for them to rent. In 10 years time when the bulk of people are 35 - 40 they will mostly be wanting to move out to a house in the suburbs to have kids. Appartments build today are not family friendly and are not suitable for anything other than couples with maybe one kid. This means that in 10 years time there will be way more appartments than there will be people looking to rent them, hence rents fall through the floor and investors sell up. Prices go down.
2. Interest rates: Our interest rates are too low for the economic climate as the are set to speed up the sluggish Euro economy rather than chill the over heating Irish economy. This is all well and good for now but should Europe recover and interest rates go up, Ireland could have a debt crisis where people can't pay their mortgages. So while Ireland spirals down and the banks bad debt rises the interest rates will stay high as most Euro economys are doing fine. This will lead to the reverse situation where the interest rates will be too high for the Irish economic climate.
3. Too many investors: 30% of Irish residential property is owned by investors (ish). This means that should rents go down significantly and house price growth level off there will be no reason for these people to continue holding on to this property. This could lead to 30% of properties going on to the market realativly easily (so long as the tennants can be kicked out at the end of the lease). Should house prices start dropping this gives the investors even more reason to sell as they still have a place to live if they sell their investment property. If more houses were owner occupied then there would be more resistence to a price free fall as people still need a place to live even if their property value is going down!.
4. Too much debt: We currently have the fastest growing debt rates in Europe and are approaching the top of the pile in person debt as well. 60% of people in a recient survey (read in Sunday Business Post there a few weeks back) take out loans to maintain their standard of living, 60% of people are living beyond their means in other words. This is very risky in my opinion.
So those are my reasons for doom and glood, does anyone have any reasons why this won't happen? the only thing I can think of is that immigrents will rent the appartments in town and help maintain their prices but they will only come if the economy has jobs for them...
I'd like to see house prices come down a bit but I sure as hell don't want to see the Irish Economy go down the toilet!
any ideas anyone?