Property Bubble Going to Burst?

Miss Fluff

I know some people have been saying in hushed tones that the property bubble will inevitably burst but what this lady says makes perfect sense. It was an article in last Sunday's Times. http://www.timesonline.co.uk/article/0,,2097-2024737,00.html

I think now, seeing the crazy amounts that are being borrowed, 100% mortgages being given (often symptomatic of an impending crash if banks are giving money away so freely), parents goings as guarantors etc…..all this combined with a potential fall of 30% by end of 2007 means an awful lot of people are going to be royally screw8d if it does happen. What do people think? Can we sustain this or do you think we're heading for a property slump disaster like the UK experienced in the 80s? :eek:

Ireland: Comment: Jill Kerby: Avoid getting caught in house-price bubble

LAST month the amount we spent on credit cards exceeded €1 billion for the first time (€1.05 billion to be exact). Another 152,000 credit cards were issued last year and non-mortgage credit growth, says the central bank, is running at more than 30% a year.
Meanwhile some Dublin house prices are rising by the equivalent of €230 a day, according to the Permanent TSB/ESRI house price index.

Our incomes, which are increasing by just 3%-5% a year, are clearly not picking up this tab, which explains not just the level of debt that people are accumulating but the fact that about a quarter of all mortgages are now for equity release purposes.

These figures are beginning to frighten me. If I were the only one in my family to decide, I would sell our house, bank the money and rent an equally nice one (in a nicer neighbourhood) for less than the interest paid on the proceeds of the sale. It is this yield anomaly that has me convinced there is a big house-price correction on the way.

Two young friends have just bought a small town house on the western edge of Dublin’s M50 for €315,000. They have spread the €290,000 mortgage over 35 years. If mortgage interest rates hit 4% by the end of this year, repayments will rise to €1,400 a month plus €250 a month for insurance, service charges and management fees. The same house next door is renting for €1,200 a month, including refuse charges.

The Permanent TSB/ESRI index is predicting a 10% rise in house prices this year. If we assume this takes place, it will bring the price of this house to more than €346,000. But if we then assume a fall in prices of 30% next year, my friends’ home will be worth about €72,500 less than they paid for it. The guy next door, who decided to rent instead of buy, will not only have saved himself €5,400 in rent and costs over the course of the year, but could now buy his own place for just €242,500, whereas a year ago it would have cost €346,500.

New buyers need to take a step back from the hype and accept that we have been caught up in a global asset bubble that is probably bigger than the dotcom one that exploded in 2001.

joejoem

:rolleyes: suprise suprise. Everyone is an expert when it comes to property. Property is reaching its true value in my opinion. As a small coutry we are majorly affected by supply here, we have a limited amount of land, especially close to the city in Dublin. Prices will climb for another 2 -3 years and then level off with the possibility of a small decline.

connundrum

http://www.boards.ie/vbulletin/forumdisplay.php?f=38 might be a better place to discuss, but seeing as its here already.. It won't burst, but it will plateau in a while. This year will see prices rise at an unreal rate as real estate agents will up prices to 'cope with the foreseeable demand' from the SSIA crowd. It will level out though.

MorningStar

Very simple this "report" does not consider the effect pre-SSIA spending in this country. It doesn't link global property or assets to the irish market other than to mention them in the article.
100% mortgages were based mostly on SSIA money. Spending it prior to maturing in other words. That was the main purpose for 100% mortgages.

A 4% rate rise is highly unlikely in any short space of time. Very miseleading article.

Do not trust the papers unless you check the facts yourself

magpie

The usual scaremongering, with lots of "ifs" going on. People have been saying this for years.

Property is reaching its true value in my opinion. As a small coutry we are majorly affected by supply here, we have a limited amount of land, especially close to the city in Dublin. Prices will climb for another 2 -3 years and then level off with the possibility of a small decline.

Precisely. Our property was majorly undervalued for years, now demand is bringing it in line with other major European cities.

I would sell our house, bank the money and rent an equally nice one (in a nicer neighbourhood) for less than the interest paid on the proceeds of the sale.

Depends on a) how much equity you have in your house and b) how much interest you're getting.

Let's say the rent for a reasonably nice 3 bed house in a nice area is €2000 per month (you could spend double that easily enough). That's €24,000 per annum.

The best interest rate I've been able to find is 18.75% per annum on a 5year+ commitment means that you'd need €153,600 in the bank to draw down €2000 per month (as you have to pay DIRT at 20%). I'm no accountant though, so don't quote me - anyone good at figures please feel free to correct me. Of course, if you're paying out your interest as rent then it means your lump sum is being devalued by inflation so every year you are getting poorer.

Assuming she's right, and you've got equity in your house, then this might be a good option - if she's wrong then you're going to lose out on the opportunity of owning your own house.

Miss Fluff

magpie wrote:

Assuming she's right, and you've got equity in your house, then this might be a good option - if she's wrong then you're going to lose out on the opportunity of owning your own house.

Exactly, and that's why it's so contentious. I'm definitley not an accountant and that's why I'm interested to hear people's opinions. What she says would seem to make good economic sense but they've been saying it for years and surely supply will always meet demand???

Kinetic^

You get nothing at the end of renting for 20 years.

You get a house which is worth something, whether it has appreciated or depreciated, if you pay a mortgage for 20 years.

Why don't people understand that? :mad:

Miss Fluff wrote:

Exactly, and that's why it's so contentious. I'm definitley not an accountant and that's why I'm interested to hear people's opinions. What she says would seem to make good economic sense but they've been saying it for years and surely supply will always meet demand???

AFAIK, supply has only started to meet demand in the last couple of years.

I heard that at the moment they are building more houses than are required.

But they are not always where people want them and from what I've heard there are some housing estates vacant around the country so that the builders can avail of tax benefits.

When you see the "owning to rent" crowd getting burned by the rental market this is a sure sign house prices are set to level off or fall.

MorningStar

Keyser Soze 5 wrote:

You get nothing at the end of renting for 20 years.

You get a house which is worth something, whether it has appreciated or depreciated, if you pay a mortgage for 20 years.

Why don't people understand that? :mad:

Becasue for 20 years they get a service that people who own don't.

Renting is a viable an option as anything else.

I would prefer to own becasue I can afford something nice in a good location but if it meant a 3-4 hour round commute versus 15 minutes while renting I think I might have a different view. 225 minutes @ 5 days @ 50 weeks a year for 20 years is 781 days of commuting plus the cost of running a car doing the extra traveling.

Renting has value why can't people understand that?:mad:

Keyser Soze 5 wrote:

AFAIK, supply has only started to meet demand in the last couple of years.

I heard that at the moment they are building more houses than are required.

But they are not always where people want them and from what I've heard there are some housing estates vacant around the country so that the builders can avail of tax benefits.

SUpply can't really meet demand in Ireland due to population distribution. Dublin demand will always be higher than demand due to limited space.

I think a few statements have said it is possible that we could build more houses than we need. Mostly based on the belief we don't need houses it should be other properties.

Vcant housing estates do exist but they are holiday home estates that used tax breaks

100gSoma

joejoem wrote:

we have a limited amount of land, especially close to the city in Dublin.

Eh.. What country do you live in mate?

RoundyMooney

I agree with all the rebuttals to the OP. That article is grossly misleading and shows a total lack of knowledge of both financial and economical circumstances. The prophets of doom have been harping since 1998 or so, and one would hope that most of them are still filling out their rent books in between bouts of banging their heads off the wall in sheer frustration. Am I glad I bought my first home in 2000 at the age of 23? Effin right I am.

Now, that said. I am very very sympathetic to the up and coming first time buyers. The relative youth of our population has spurred massive demand in property as we all know. The high prices that are out there are a result of cheap finance, that our parents could only dream of, and of course demand. Equality aside, the days of a homemaker (male or female) are long over, and that makes things even more difficult. I hope we're not rearing a generation of latchkey kids (another topic I know).

The villians of the piece are the planners, who through corruption and general incompetence failed to see this coming. People commuting 60 or more miles a day to work is not bloody on. (I am not one of them-although I used to be).

I am firmly of the opinion that Dublin as a city is fooked (I lived there for four years), and may never recover from the total lack of infrastructure, over-pricing in general and lack of cohesive housing strategies. I only mention it as an example, as it seems most of this community has links with the place

Another phenemenon is apartments springing up in the countryside, even in East Cork! I always though that high density housing was a solution for land shortages, not a slightly more economical way on to the ladder. These developments seem to be constructed with no thought for a decent management/maintenance set up and the earlier examples are now turning literally green from neglect, with mucky communal areas and dodgy lifts. Not good.

Good and bad in every slice I suppose.

100gSoma

Immigration is having a huge impact on housing. As long as the eatern euopans continue to stream in (and they will) they will need places to live. The market is not going to "burst". To many vested interests, and too easily controlled by the developers. At best it will level off.

MorningStar

ronoc wrote:

When you see the "owning to rent" crowd getting burned by the rental market this is a sure sign house prices are set to level off or fall.

Actually there are many people whom have gotten stung in the property game through stupidity rather than property market changes. In other words it is a sign of nothing other than humanity.

ronbyrne2005

if anyone thinks irish property isnt wildly overvalued is a fool. rental yields are 3% or less and people are buying purely in expectation of price rises.there were several articles in the irish papers on weekend by normally bullish economists saying the cheap credit is fueling an asset bubble. people talk of interest rates being so low but when rates were 15% inflation was higher than this and reduced the value of the debt in real terms.as for prices being in line with europe,dublin is now dearer than all europe cities by a long stretch.
just because people have been saying that the bubble will burst for years doesnt mean they are wrong,it just means things change in economy to affect timing of market corrections.the fact INFORMED experts/commentators have been saying this for years makes it even MORE likely that the end is near as the speculation and price increases have reached sky high unrealistic levels.
as for rent ,if you pay less in rent than on a mortgage you can invest it in a pension getting tax benefits and a historical 10% per annum average return.
people dont realise that after stripping out inflation and major structural shifts due to women entering workforce ,property has historically yielded a lot less than the stockmarket.

http://www.askaboutmoney.com/showthread.php?t=14317&page=9

p.s prices fell by up to 12% in many parts of uk last year.

Kinetic^

I bet you the f**king arse that wrote the thing has several properties :mad:

She's talking jibber jabber anyway, and I pity the fool

jesus_thats_gre

Yup, myself and 3 mates pay €1600 for a nice 4 bed house in Leopardstown.. I have a 5 minute walk to work and a 25 min trip on the Luas if I want to go into town..

I could buy a house in my home town of Dundalk for €250,000 and easily afford the repayments.. Problem then is the €20 a day commuting by car and about 3 lost hours a day..

House prices as they are, are unsustainable.. Either wages have to stop growing or the foreign multinationals that we depend on are going to start looking elsewhere. The rental market is reaching saturation in Dublin and I recently saw statistics suggesting that 1 in 5 properties in Dunlin are going unrented. Interest rates are growing slowly and analysts seems to think they are going to keep growing. The goverment are already defending their corner by accusing banks of being responsible for current house prices..

People who have bought property to live in will always be fine and won't really suffer too much if the arse does fall out of the market. It is private speculators who have mortgaged themselves to the eyeballs and depend on rental income to cover 4 or 5 different mortgages that will be crippled by houses going unrented, house prices dropping and interest rates go up..

All it will take is one little scare for a large amount of houses to be put on the market. We will see then how sustainable the house market is then I suppose.

RoundyMooney

MorningStar wrote:

Actually there are many people whom have gotten stung in the property game through stupidity rather than property market changes. In other words it is a sign of nothing other than humanity.

Very true. Darwinism will always out. I fail to see the logic in paying say, a grand a month to a lending institution when claiming €800 in rent-and then calling it an investment. If I invested in stock with that kind of return, I'd string up my broker (or myself!)

magpie

Very true. Darwinism will always out. I fail to see the logic in paying say, a grand a month to a lending institution when claiming €800 in rent-and then calling it an investment. If I invested in stock with that kind of return, I'd string up my broker (or myself!)

Presumably when people buy to rent they are not expecting to turn a profit from the renatl income, but rather to pocket a tidy sum after 5-10 years of the property value increasing 10-20% per annum?

ronbyrne2005

100gSoma wrote:

Immigration is having a huge impact on housing. As long as the eatern euopans continue to stream in (and they will) they will need places to live. The market is not going to "burst". To many vested interests, and too easily controlled by the developers. At best it will level off.

from sunday business post.
But this has not happened. Supply has far outstripped demand, by most demographic measures. In fact, supply has expanded so massively that the construction industry now constitutes a bloated 14 per cent of the economy.

In recent months, the future of our housing market and our prosperity has been put on the broad shoulders of our immigrants. The new argument is that, even though domestic supply has caught up with our own demand for housing, the 70,000 new immigrants a year will keep demand - and prices - motoring. So, the more immigrants, the higher house prices.

But the problem with this argument is that all studies of immigration show that at a certain stage, the cost of housing affects the choice to come here or not. A recent study by the ESRI - entitled Rising House Prices in an Open Labour Market, and written by David Duffy, John Fitzgerald and Ide Kearney - suggests that, not only will the rise in our house prices have a significant impact on the amount of new people that will come here but, more interestingly, the high cost of houses will drive the immigrants back home when they reach settling-down age. Let us examine the 120,000 or so Polish workers who are here. Will they all stay? Hardly! Again, new economic studies indicate that the decision to move to another country is now a temporary one.

The young Polish workers are emigrating by text. They are being bombarded by texts from friends and moving as a result.

If they don’t like Ireland, they will go home. If you doubt this, check out Ryanair’s website: 40 per cent of its new routes are to Poland, Slovakia and other central European locations. If you ask Polish workers whether they plan to stay here, the vast majority say no. These patterns are typical. They want to settle in Poland, and now they can. They will take the money they’ve earned here and then find value back home. Unless Poland and its economy revert to communist torpor, opportunities will emerge for them back home and they will go.

This happened here. The Irish emigrants of the 1970s,1980s and early 1990s came home in their tens of thousands - close to a quarter of a million Irish emigrants have returned here since the mid1990s.This pattern is likely to be repeated with Poland, and the price of houses will actually accelerate this process.

So, far from being the underpinning of further price rises, dependency on the ‘‘immigrant factor’’ contains the seeds of its own destruction. When our immigrants tire of living three to a room, ten to a house, they will reassess the Emerald Goldmine. Magda from Krakow will wake up one day after five years here and think: ‘‘Hold on a second, I’m 30, in a serious relationship with a lad from Gdansk and I’ve no prospect of ever affording a house in Mullingar for my family - time to go.” This lifestyle choice will be repeated by thousands all over the country.

But what might pull them home apart from lifestyle choices? There is no reason to believe that the Polish economy will remain in the doldrums forever, tied as it is to the German economy. It seems likely that, as Germany emerges from its post-unification coma, Poland will recover too. If these economies do turn around, Poles will return home. Euro interest rates in Europe will rise in tandem.

Where might that leave us, with our enormous mortgages, investment properties and our massive housing overhang the product of today’s building splurge?

As we have seen with Australia over the past 12months, interest rates do not have to rise enormously to hurt an excessively borrowed population - particularly those at the bottom layer of the pyramid.

MorningStar

RoundyMooney wrote:

The villians of the piece are the planners, who through corruption and general incompetence failed to see this coming. People commuting 60 or more miles a day to work is not bloody on. (I am not one of them-although I used to be).

Actually the assumption that they are responsible for everything is nieve. The politicians decide what parts to plans happen. If the planners actually planned what happened here then sure enough. Guess who the politicians decide to listened to the planners or the people whom vote for them? Guess what the public want well palnned property that suits their needs or a 3 bed semi with a front and back garden?
I suggest you read up on how planning works here and what corruption has been proved after the years of investigation. People way over rate the level of corruption in this country

RoundyMooney wrote:

I am firmly of the opinion that Dublin as a city is fooked (I lived there for four years), and may never recover from the total lack of infrastructure, over-pricing in general and lack of cohesive housing strategies. I only mention it as an example, as it seems most of this community has links with the place

4 whole years was that when you got you civil engineer degree or master on city planning?

DON'T BELIEVE THE MEDIA

ionapaul

You'll probably have your landlords in Leopardstown by the balls in a few years time when it's time to renegotiate the rent - have you seen the numbers of apartments being built down there, sold two years in advance...000s of luxury apartments. It'll take some influx of Polish bricklayers and cleaners to rent out all those plush apartments! Surely luxury apartments arn't the way to go, if the building industry is banking on immigrants to rent out the excess supply!

RoundyMooney

magpie wrote:

Presumably when people buy to rent they are not expecting to turn a profit from the renatl income, but rather to pocket a tidy sum after 5-10 years of the property value increasing 10-20% per annum?

A few years ago maybe, but those days are over IMHO.

ionapaul

magpie wrote:

Presumably when people buy to rent they are not expecting to turn a profit from the renatl income, but rather to pocket a tidy sum after 5-10 years of the property value increasing 10-20% per annum?

This is speculation, not investing. Excessive speculation is one of the signs of a bubble, as is fear and greed overtaking rational analysis of the fundamentals.

ronbyrne2005

magpie wrote:

Presumably when people buy to rent they are not expecting to turn a profit from the renatl income, but rather to pocket a tidy sum after 5-10 years of the property value increasing 10-20% per annum?

if property increased at even 10% for 30 years of mortgage after consumer inflation it would be 17 times what it is now,so average house prices in dublin would be around 5 million euro in todays terms!
wages increase at around 3 % after inflation so in 30 years average wages would be only 75k in todays terms so average house prices would be around 65 times average wage and the mortage would be 300k a year! i hope this demonstrates the unsustainability of the current bubble and fallacious thinking by many irish people.

magpie

I'm not saying I agree with speculation, just explaining the reasoning behind it is not to harvest rental income but to allow you to surf an upward property wave while someone else mainatins the majority of the mortgage payments.

I'm not suggesting for a moment that proces will continue to increase by 10% pa for 30 years, the prices will level off and slow down. I just don't believe that a crash is impending.

MorningStar

ronbyrne2005 wrote:

if anyone thinks irish property isnt wildly overvalued is a fool.

Anybody who thinks their speculative view makes them the smart one and other views the fool must have a problem understanding the nature of sepculation.

Rent yields do not determine house prices demand does and always will. Rent yields may effect demand.

On you beleif that imigration does not effect things HOK are saying in Property view that 32% of their sales are to new imigrants. The governemnet also released figures saying how the people will be staying.

Now play nice or I'll have to point out other issues about how this is all opinion and the only foolish people are those who beleive the media such as SBP

ionapaul

I remember the same arguments used by dotcom bulls a few years ago...'you bears have been saying our stocks are overvalued for five years, and the NASDAQ breaks records every quarter!' 'this is a new economy, the old values are useless' 'Nortel is worth $200/share' etc etc etc. The situation is so similar to the property situation in Ireland it amazes me that others can't see it for themselves. Maybe I am only thinking like this because I believed some of the crap the first time around...however, the fundamentals cannot be ignored indefinitely, either wages and rents are going to skyrocket to match the historic ratio with house prices, or...

RoundyMooney

MorningStar wrote:

Actually the assumption that they are responsible for everything is nieve. The politicians decide what parts to plans happen. If the planners actually planned what happened here then sure enough. Guess who the politicians decide to listened to the planners or the people whom vote for them? Guess what the public want well palnned property that suits their needs or a 3 bed semi with a front and back garden?
I suggest you read up on how planning works here and what corruption has been proved after the years of investigation. People way over rate the level of corruption in this country

I will rephrase-for planning, read planning process. That encompasses both gombeen planners and gombeen politicians, and I assure you, we have had, and continue to have an ample supply of both in this country. We are reaping the benefits of both as a result. To lay the burden of blame at the door of the working man or woman is "nieve" in the extreme, and shifting of blame at best. You appear to suggest that the plain people are happy to buy a "townhouse" in some god forsaken village with no attributes to anyone, bar those who grew up there and call it home, and then to spend four hours or more away from their growing families sitting in cars, just to finance it all. They are not, and such a scenario is not a model of good planning, or in any way desirable. Can these people, who are denied viable public transport (planning/political process again) be assured of even some chance of buying a property in proximity to the city at some future stage? Probably not. Yes, there is a land shortage, but the sheer incompetency of zoning large tracts of land in proximity to the city for *low* density housing, and the city authorities lamentable lack of foresight in the not too distant past has put paid to many of these people's ambition to put an end to their daily grind any time soon. Are these people to be penalised for wanting a decent home for theri family, or shall we go all Japanese and compartmentalise them into little concrete boxes, working to live? I hope that none of them decide to buy widescreen TVs, they won't get them in the fookin' door!

MorningStar wrote:

4 whole years was that when you got you civil engineer degree or master on city planning?

Book smart does not equate to practicality. I'm not about to throw framed certificates at you to prove a point I know to be valid. I thought we were debating a point here, not throwing jibes...

ronbyrne2005

MorningStar wrote:

Anybody who thinks their speculative view makes them the smart one and other views the fool must have a problem understanding the nature of sepculation.

Rent yields do not determine house prices demand does and always will. Rent yields may effect demand.

On you beleif that imigration does not effect things HOK are saying in Property view that 32% of their sales are to new imigrants. The governemnet also released figures saying how the people will be staying.

Now play nice or I'll have to point out other issues about how this is all opinion and the only foolish people are those who beleive the media such as SBP

32% of their sales may be to immigrants but they are only one estate agent selling a few thousand properties a year,the vast vast majorityof immigrants rent in houses with loads of others so theres ten to a house in many cases.

rental yields are an indicator of demand for rental property which is highly relevant if these immigrants are going to be renting.40% of property bought each year is by investors who are renting it,take them out and prices wouldnt rise much.
supply is meeting the demographic demand -the rest is speculation. based on all fundamental economic measures property is overvalued,levels of incomes ,rental yields population densities etc.

RoundyMooney

magpie wrote:

I'm not saying I agree with speculation, just explaining the reasoning behind it is not to harvest rental income but to allow you to surf an upward property wave while someone else mainatins the majority of the mortgage payments.

I'm not suggesting for a moment that proces will continue to increase by 10% pa for 30 years, the prices will level off and slow down. I just don't believe that a crash is impending.

I agree. I was aware of speculative investment, but it may appeared otherwise to someone reading.

MorningStar

ionapaul wrote:

I remember the same arguments used by dotcom bulls a few years ago...'you bears have been saying our stocks are overvalued for five years, and the NASDAQ breaks records every quarter!' 'this is a new economy, the old values are useless' 'Nortel is worth $200/share' etc etc etc. The situation is so similar to the property situation in Ireland it amazes me that others can't see it for themselves. Maybe I am only thinking like this because I believed some of the crap the first time around...however, the fundamentals cannot be ignored indefinitely, either wages and rents are going to skyrocket to match the historic ratio with house prices, or...

One big difference is property has a construction cost and is required to live. Dotcoms were all paper value. Try to get a house built and see how expensive it is. The bricks are expensive and have value. Dotcoms didn't have any assets. THe fundementals you are talking about are cost, supply and demand. People don't have to own there house so maybe what has to give is the belief that people can buy houses rather than a crash so people can buy them. Yours is a view that appears to be based on that it just can't keep going up. Seeing as we have the highest home ownership in the world I am guess that anomily will be the thing that gives first. Everyone I know who does own wants to own. Sounds like a healthy demand there. Do you know anybody who doesn't want a house or property?

RoundyMooney

MorningStar wrote:

Anybody who thinks their speculative view makes them the smart one and other views the fool must have a problem understanding the nature of sepculation.

LOL! Many a man (or woman) has lost the shirt off their back thinking that they could predict the future.

MorningStar wrote:

Rent yields do not determine house prices demand does and always will. Rent yields may effect demand.

Demand is indeed the key, and there seems to be little let up.

MorningStar wrote:

On you beleif that imigration does not effect things HOK are saying in Property view that 32% of their sales are to new imigrants. The governemnet also released figures saying how the people will be staying.

I have to admit, I found this very surprising when I heard it reported. Were I a Polish guy working here, given the value of property back in Cracow or wherever, I wouldn't dream of buying here when I could do five years hard labour and set myself up back home.

MorningStar wrote:

Now play nice or I'll have to point out other issues about how this is all opinion and the only foolish people are those who beleive the media such as SBP

Only a fool would believe everything they read. I remember the Meeja predicting a bust as far back as 99, and we all know what happened then...

ronbyrne2005

MorningStar wrote:

One big difference is property has a construction cost and is required to live. Dotcoms were all paper value. Try to get a house built and see how expensive it is. The bricks are expensive and have value. Dotcoms didn't have any assets. THe fundementals you are talking about are cost, supply and demand. People don't have to own there house so maybe what has to give is the belief that people can buy houses rather than a crash so people can buy them. Yours is a view that appears to be based on that it just can't keep going up. Seeing as we have the highest home ownership in the world I am guess that anomily will be the thing that gives first. Everyone I know who does own wants to own. Sounds like a healthy demand there. Do you know anybody who doesn't want a house or property?

the cost of actually building a house in dublin is only around 20% of the sale price,the of site is 42% taxes are 28% profit for builder is around 20%

Hobbes

- Wages have not changed drastically over the years.

- While we are currently in an up cycle it is expected to decline when Poland and other countries just joined the EU have the infrastructure and workforce of cheap labour to move companies there rather then us paying for them to move here.

- Building materials + labour costs have not risen in line with costs of houses.

- Supply has exceeded demand for the current price.

The house prices at the moment are overpriced. It is only a matter of time before there will be a collapse.

MorningStar

ronbyrne2005 wrote:

32% of their sales may be to immigrants but they are only one estate agent selling a few thousand properties a year,the vast vast majorityof immigrants rent in houses with loads of others so theres ten to a house in many cases.

rental yields are an indicator of demand for rental property which is highly relevant if these immigrants are going to be renting.40% of property bought each year is by investors who are renting it,take them out and prices wouldnt rise much.
supply is meeting the demographic demand -the rest is speculation. based on all fundamental economic measures property is overvalued,levels of incomes ,rental yields population densities etc.

One estate agent saying a raise in one year from less than 5% to 32%. The estate agent speaking specifically about the Dublin market where house prices are the highest. Imigrants are staying is the point not what portion rent.

Rental yield are rental yields house price indicates demand rental yield does not change if a bidding war on house makes it go 50k higher.

Based on your knowledge of the facts and your knowledge of economics you believe it is overpriced. You aren't right untill the house prices crash you just have an opinion that is speculative. In your humble opinion at what point did they become overvalued?
Note 40% of rental property is based on what? Does that include business property?
Supply is not meeting demand other wise people wouldn't drive 4 hoours round trip, what are you basing that on. Your veiw is speculative, you don't know you might think you do but you don't. Even if you are proved right it is still speculation

MorningStar

ronbyrne2005 wrote:

the cost of actually building a house in dublin is only around 20% of the sale price,the of site is 42% taxes are 28% profit for builder is around 20%

20% margin is normal on most goods. Land value based on demand

CiaranC

Hobbes wrote:

The house prices at the moment are overpriced. It is only a matter of time before there will be a collapse.

All of your points, bar the one about Poland (which is yet another "expected" "if") could be applied at any time in the last 15 years.

IvaBigWun

Oh you've done it now, you've caught MorningStar's eye with a "property" thread


*munches on popcorn*

please, continue .....

magpie

As a matter of interest who here among the prophets of doom owns a property, and who among the "status quo" brigade is renting?

I own a property and I don't expect a crash. Natch.

I don't think this is sustainable at all.
Alot of people are over extending themselves 2nd propertys, false payslips..

If Interest rates rise by a few points alot of people are going to be up to their eyes in debt and trying to offload property into a flooded market.

MorningStar

Hobbes wrote:

- Supply has exceeded demand for the current price.

Can you please provide evidence of this as I live in Dublin and I see no case of this in my life or any report etc...

RoundyMooney

Own property, expect a soft landing...

ronbyrne2005

MorningStar wrote:

One estate agent saying a raise in one year from less than 5% to 32%. The estate agent speaking specifically about the Dublin market where house prices are the highest. Imigrants are staying is the point not what portion rent.

Rental yield are rental yields house price indicates demand rental yield does not change if a bidding war on house makes it go 50k higher.

Based on your knowledge of the facts and your knowledge of economics you believe it is overpriced. You aren't right untill the house prices crash you just have an opinion that is speculative. In your humble opinion at what point did they become overvalued?
Note 40% of rental property is based on what? Does that include business property?
Supply is not meeting demand other wise people wouldn't drive 4 hoours round trip, what are you basing that on. Your veiw is speculative, you don't know you might think you do but you don't. Even if you are proved right it is still speculation

i am merely relaying the vast body of evidenc that property overvalued in historical and fundamental levels.economics isnt an exact science but it does give us a general indication of fundamental economic value.obviously irish people place a value on owning a home in excess of fundamental economics but on an economic level this is unsustainable.
david mcwilliams said supply is meeting "demographic demand" ,this doesnt mean actual demand(which include investors/speculators).
40% of residential properties bought each year are not PPR's.so people buying as an investment must be expecting prices to keep going up as the rental yield wouldnt justify a pure investment,when people "invest " purely based on expectation that prices will rise this is speculation,every man and his dog thinks prices can only go up and its a great investment-when this occurs its time to worry unless they are relying on greater fool to buy from them.
property crashes-this is a fact, every county where property has risen so much has had a crash at some stage in 20th century,but maybe "its different this time".

MorningStar

ronbyrne2005 wrote:

i am merely relaying the vast body of evidenc that property overvalued in historical and fundamental levels.economics isnt an exact science but it does give us a general indication of fundamental economic value.obviously irish people place a value on owning a home in excess of fundamental economics but on an economic level this is unsustainable.

No you are giving your opinion based on your understanding. The general indications say that economists get it wrong more than right.

ronbyrne2005 wrote:

david mcwilliams said supply is meeting "demographic demand" ,this doesnt mean actual demand(which include investors/speculators).

Can I point out David McWilliams has been saying that the market is over priced for over 6 years. His opinion has been wrong many times. I only hold his view based on the facts.

ronbyrne2005 wrote:

40% of residential properties bought each year are not PPR's.so people buying as an investment must be expecting prices to keep going up as the rental yield wouldnt justify a pure investment,when people "invest " purely based on expectation that prices will rise this is speculation,every man and his dog thinks prices can only go up and its a great investment-when this occurs its time to worry unless they are relying on greater fool to buy from them.
property crashes-this is a fact, every county where property has risen so much has had a crash at some stage in 20th century,but maybe "its different this time".

Well not every man thinks prices will rise as you think they won't. Actually the UK price crash didn't really effect the capital after 1 year in most cases and only the late joiners were effected.

It is still your opinion and as this has never happened in a country with such a high home ownership and strong family commitments in a post colonical country where the goverenement encourage home ownership. These factors must be considered as part of the equation and if not your opinion is small minded and non scientific. Your view might be wrong but if you keep saying it like David you may eventually be right even a broken clock is right twice a day.

ronbyrne2005

MorningStar wrote:

Can you please provide evidence of this as I live in Dublin and I see no case of this in my life or any report etc...

rents arent rising much,if there was such a demand for housing rents would increase a lot more than it is. a lot of the current demand isnt from people buying to live in the house,its "investors" caught in a speculative bubble. as for my opinion that people are fools if they dont think property is over valued,obviously this is my opinion but its based on a lot of reading /research and is a view held by many many highly informed people.
damien kiberd is a highly regarded economist who writes for sunday times and he is normally very positive on all aspects of irish economy but in his article on sunday he says
"For the moment the mood is euphoric. But anybody who tells you that we are not witnessing a credit bubble — and an associated asset price bubble — is simply wrong. "
but he's simply speculating,hopefully i hear you say.

MorningStar

MorningStar wrote:

It is still your opinion and as this has never happened in a country with such a high home ownership and strong family commitments in a post colonical country where the goverenement encourage home ownership. These factors must be considered as part of the equation and if not your opinion is small minded and non scientific. Your view might be wrong but if you keep saying it like David you may eventually be right even a broken clock is right twice a day.

I'd just like to point out that economics is not an exact science and McWilliams is correct to assume what he assumes based on the evidence drawn from other house price crashes.

There have been many other economists with similar opinions, which I can't seem to dig up here.
Because he has been wrong in the past does not mean anything has changed. As the banks say Past Performance Does Not Guarantee Future Results;)

Mmmm_Lemony

I wouldn't trust anything that comes from that womans mouth, nor into his for that matter .

It's not what you know it's who you know.

ronbyrne2005

MorningStar wrote:

No you are giving your opinion based on your understanding. The general indications say that economists get it wrong more than right.

Can I point out David McWilliams has been saying that the market is over priced for over 6 years. His opinion has been wrong many times. I only hold his view based on the facts.
Well not every man thinks prices will rise as you think they won't. Actually the UK price crash didn't really effect the capital after 1 year in most cases and only the late joiners were effected.

It is still your opinion and as this has never happened in a country with such a high home ownership and strong family commitments in a post colonical country where the goverenement encourage home ownership. These factors must be considered as part of the equation and if not your opinion is small minded and non scientific. Your view might be wrong but if you keep saying it like David you may eventually be right even a broken clock is right twice a day.

if anything the high level of importance people place on owning their own home is a contributor to house price speculation as people arent prepared to rent long term and think if i dont get on "property ladder " now i never will.

japan and america have both had house price crashes and both have high levels of home ownership.

just because david mc williams hasnt been proven right yet doesnt make his analysis of fundamental economic value incorrect. an asset may be fundamentally overvalued but yet stay at a high price for a long time.

ionapaul

The 'if I don't buy now I'll never be able to afford too!!!!!!!!OMG!!!!!!' mentality is a classic manifestation of investor irrationality observed in historic asset bubbles.

Of course, neither side on this argument can really convince the other, so there is no point going on and on! No-one can prove the property market will climb, stabilise or crash over the next five years...the proof of the pudding will be in the eating of it!

constitutionus

one word lads, RECESSION , as soon as america sneezes were fecked and according to some that COULD be as early as next year!

yosser hughes

Interesting looking at some of the predictions on this thread. I hope some of you don't make a living out of giving this sort of "advice" We ain't seen nothing yet. Prices will drop alot further. Some people on here were saying that property was undervalued! How can a one bedroom apartment going for €300,000 be undervalued? What's the average wage again?