Housing bubble starting to pop?

Sponge Bob

Do-more wrote:

As I see it any developer who is committed to building next year will have to have the best label possible on his houses, in a falling, over supplied market they will have to have the best available product on the market or else suffer the consequences.

very true, it will add or detract on the margins .

I have done a little work in the area and the increased cost of insulating and heating systems to attain a good label is about €10K for a semi, but SEI will grant aid a developer by €8K a unit for the first 50 units in a development, so the real cost is tiny.

hmm,did not realise that , thanks.

I can see the entire upgrade cost (from crap to modern insulation) coming off the value of a s/h house in 2008 and 2009 though + a 3k hassle premium on top.

If I _personally_ bought a 60s house I would pump the cavity and dryline the yoke to boot.

D'Peoples Voice

Do-more wrote:

As I see it any developer who is committed to building next year will have to have the best label possible on his houses, in a falling, over supplied market they will have to have the best available product on the market or else suffer the consequences.

The real shakeup will happen in 2 years time when secondhand houses will have to be labelled,

I've spoken on this thread about this issue before.
I DON'T think it will be two years before secondhand houses start to be labelled, and the reason for that is demand.
For example, when people are selling a second hand car, and it's NCT is not due for another 2-3 months, they put the car in for the NCT early so that it's an easier sale.( Not everyone does this i grant you)
A house will be similar. If you want to sell in a market where new houses are also for sale, you must be prepared to provide information about it's U-values if you want to sell.

DonalMcTavish

Personally i dont think energy rating will make the slightest difference to house prices. People buy houses because they want to live in them. They are not too worried about an extra few hundred a year to heat them. If they were you would never see a light on and all fridges and cookers people buy would be a-rated.

I think if rating is to effect house prices it will be like this.

House a is much better insulated, so the price goes up by €5000 in a year.
House B isnt insulated so the price goes up by €3000 in a year.

All it will be is an excuse to put an extra few thousand on a well insulated house.

Supercell

DonalMcTavish wrote:

Personally i dont think energy rating will make the slightest difference to house prices.

<snip>

All it will be is an excuse to put an extra few thousand on a well insulated house.

If it didn't make a difference to anyone why would there be a price differential??!

Long term fossil fuel prices are only going north, well insulated houses will have a definite selling advantage imho.

DonalMcTavish

Longfield wrote:

If it didn't make a difference to anyone why would there be a price differential??!

Long term fossil fuel prices are only going north, well insulated houses will have a definite selling advantage imho.

I thought i used the word 'if'. Oh yes, I did indeed. You snipped it out.

SkepticOne

Growth in House Prices Grinds to a Halt
9th November 2006, Daft.ie Ireland's busiest property website, today released the Daft.ie report for Quarter 3 2006. The report shows that growth in house prices has come to a halt. Average asking prices for residential property did not increase between the 2nd and 3rd quarter of this year. Prices fell slightly over the summer months but recovered somewhat in September. Preliminary figures for October indicate slight growth but all signs point to a levelling off in prices.

While demand may have weakened, supply of houses on the market is at an all time high with more houses for sale advertised on Daft.ie in October than ever before. There are currently over 22,000 second hand houses for sale on Daft and nearly 15,000 new homes and apartment for sale. This is more than double the amount of properties for sale 3 months ago.

Full press release here.

As this is only asking prices, it will take a several months for this to filter through to such as the tsb/ESRI index which is based on mortgage drawdowns. The fact that houses are taking longer to sell means the delay will be longer than normal.

Pat McArdle, chief economist at Ulster Bank suggests that supply should be curtailed in order to keep property prices at close to their currently overvalued (according to the central bank) levels.

"The housing market should experience a soft, rather than a hard landing. A soft landing does not rule out a temporary fall in prices. A hard landing, on the other hand, would be associated with significant and sustained falls in prices." He warned that the way to avoid the latter was to ensure that supply be curtailed as demand eases.

I think curtailing supply would be difficult given the economy's dependence on the construction sector. Any upset to the economy would lead to further deterioration in demand.

miju

SkepticOne wrote:

I think curtailing supply would be difficult given the economy's dependence on the construction sector. Any upset to the economy would lead to further deterioration in demand.

exactly my thoughs skepticOne , i think at this stage we're firmly between a rock and a hard place and no matter what is done the end game isn't going to be pretty

best to hope for IMHO would be a short , sharp correction no matter how ugly or brutal to allow the economy to return to a solid fundamental footing and to grow / strengthen the proper way an economy should

a curtailing of supply or a stand off delays the inevitable and will be a disaster sending us more towards a japan style end game lasting over a decade

speaking of japan i see one of the banks in last thursdays indo suggested the multi-genarational mortgages as the way to increase affordibility, seems we may be going japanese afterall :mad::mad::mad::mad::mad::mad:

Do-more

Did ye read Jim Power's article in the business section of the Sunday Indo?

As a vested interest in talking up the market himself it was limp to say the least!

Quote: "It could, of course, be possible that investors would suddenly decide as a bloc to offload their low-yielding investments, and take their profits. This would result in a serious glut of supply and send prices crashing."

Get a grip Jim, there already is a serious glut of supply and in any case if investors just stop buying new properties, house builders will start dropping prices as there just arn't enough FTB's left to purchase 90,000 next year...

Investors have driven the market up and it will be investors who pull the card that will send the house of cards toppling to the floor!

antoinolachtnai

Many things could be said about Jim Power, but it is hard to see how he has a vested interest in talking up the property market (other than the fact that he might own his own house). What is his interest?

gamer

THERES ABOUT ,240 thousand houses,built in the last 3 years,with hollow blocks, which reduce insulation,value of walls, ie house with those blocks are twice as expensive to heat,as older house with solid walls.the building regs,re insulation levels are way too low, and theres not proper inspection re insulation levels,and levels of sound proofing.Especially in apartments.The builder saves money,time using hollow blocks,and you pay twice as much on your gas/oil bills. duncan stewart says the best built houses are being built by local authority s ,they have high standards of insulation,sound proofing,designed and built for , low energy use.THIS government doesnt care about environment,global warming,if it did it would bring in strict regulations re ,building,level of insulation,and bring in proper inspections as house is being constructed.AFTER house,apartment is built its expensive to put in insulation,and sound proofing.In many houses being built, the low level insulation,is not inspected or tested ,or installed properly.the builder or architect just signs certs,that this building complyswith current regulations.Its like making new cars that only go 20 miles to the gallon of petrol.Proper inspections and mandating ,solid block construction would improve insulation levels by 50percent overnight.Imagine paying 240k for an apartment that doesnt have proper insulation or sound proofing .It,ll get a bad rating ,re cert when it comes time to sell it.

Sponge Bob

hollow blocks are a Dublin thing ...for some peculiar reason.

yer culchie will have solid block with aeroboard in cavity and drylining inside that again .

D'Peoples Voice

gamer wrote:

THERES ABOUT ,240 thousand houses,built in the last 3 years,with hollow blocks, which reduce insulation,value of walls, ie house with those blocks are twice as expensive to heat,as older house with solid walls.

Surely this must be disclosed in the prospectus!
That is, if you are buying a house, surely to god, the deeds of the house etc/ or brochure must disclose details of its insulaiton. NO ?

Do-more

antoinolachtnai wrote:

Many things could be said about Jim Power, but it is hard to see how he has a vested interest in talking up the property market (other than the fact that he might own his own house). What is his interest?

Friends First do endowment mortgage products and Pensions, almost all pension funds have a property element.

DonalMcTavish

Regarding Energy rating.

My girlfriends parents house is a 4 bed detatched house. It has hollow block wall and is not dry lined. No insulation in the walls at all. The attic is insulated with 100mm fiberglass.

Her sisters house is a 4 bed detatched about the same size and has cavity insulation and 200mm fiberglass in the attic.

The heating in her parents house is used during the day also, while its not in her sisters house.

It is cheaper to heat her sisters house but not much.
The difference last year heating those 2 houses (both oil) is less than it costs to feed my cat in a year.

People care more about where they live than what it costs to heat a house. It doesnt cost as much more as you might think.

antoinolachtnai

Do-more wrote:

Friends First do endowment mortgage products and Pensions, almost all pension funds have a property element.

Well, then they're trying to talk down the property market by getting people to invest in other types of long-term investments (which is mostly what they sell).

gurramok

Swiped from indo:
********************************************************
ALMOST 90 per cent of Irish workers cannot afford to buy a house by themselves, according to new figures.

With the average house price hitting €308,000 last month, a single borrower would need a salary of at least €77,000 per year to qualify for a mortgage for the full amount. Latest research from the Revenue Commissioners shows that 1.94 million Paye and self-employed people in Ireland earn less than €70,000 per year.

Buying a property in Dublin is even more unattainable, with an average price touching €420,000 last month. With banks lending mortgages at about four times annual earnings, a buyer would need an annual salary of €105,000 to borrow the full amount by themselves.

This rules out 2.07 million Paye and self-employed workers, who earn under €100,000. The total workforce is about 2.16 million.

Last week the Central Bank warned that bank lending standards had fallen severely, leading to fears that large numbers of recent home buyers could face major difficulties repaying loans if interest rates continue to soar.

Based on current guidelines, a couple would need a combined €160,000 income to be given a loan of the full €420,000 needed to buy a house in Dublin. Just 33,100 single people in the country could afford that.

One in every nine self-employed taxpayers will earn over €100,000 this year. This compares to just one in every 29 Paye workers.
********************************************************

Ok, 1 in 9 people are very wealthy to afford a house nationally and extremely wealthy to afford one in Dublin on their own.
Now, for a FTB couple using 4.5x total income rule as applied by banks, i'd say they need to be earning total at least €60k+ to afford a decent place outside Dublin.
For Dublin, that would not buy them literally anywhere, maybe a 1 bed in a 'bad' area, they would need a huge deposit to make up the difference to even reach €317.5k before stamp duty and as we all know, the only places available at €317.5k in dubland are in 'undesirable' places which makes a mockery of affordability.
To conclude, the body numbers just don't add up to buy all these FTB properties being built unless you target the very wealthy.

Blackjack

Apparently you can get some sort of a foam insulation pumped into hollow or "Breeze Block" walls, in order to give them further insulation.

Do-more

antoinolachtnai wrote:

Well, then they're trying to talk down the property market by getting people to invest in other types of long-term investments (which is mostly what they sell).

To be honest, I thought they were more heavily involved in the mortgage lending side of things than they are, my mistake!:o

CiaranC

Now, for a FTB couple using 4.5x total income rule as applied by banks, i'd say they need to be earning total at least €60k+

Lots of people have been bemoaning the fact that banks are lending way over 4.5x total income.

And why do people think €60k is a lot of money? Two people earning equal amounts on €60k between them would both be under the average industrial wage. Its almost as if the economic boom never happened for some people.

BigEejit

CiaranC wrote:

Lots of people have been bemoaning the fact that banks are lending way over 4.5x total income.

And why do people think €60k is a lot of money? Two people earning equal amounts on €60k between them would both be under the average industrial wage. Its almost as if the economic boom never happened for some people.

I know loads of people who dont earn anything near the average industrial wage, and i am sure that any young family with one or two kids would not be able to afford mortgage + childcare ...

I'm in London now and some of the lenders are offering 5 times wages mortgates which is really stretching it i think ... but no-one is talking about 50 year or longer morgates yet

CiaranC

I know loads of people who dont earn anything near the average industrial wage

Surely its unrealistic for these people to buy property in any first world economy? I mean is it the norm for a single income family below the average wage to buy a three bedroom house in leafy suburbia anywhere?

hmmm

CiaranC wrote:

Surely its unrealistic for these people to buy property in any first world economy? I mean is it the norm for a single income family below the average wage to buy a three bedroom house in leafy suburbia anywhere?

You've hit the nail on the head - large parts of our population are living way beyond their means, and while I'm strong on personal responsibility the banks, our society and the government have to take some of the blame for allowing the financially naive to get into this position. Interest rates will rise further, maybe not in the near term but over the medium term they will. People have been suckered into taking out huge amounts of debt at historically low variable interest rates.

BigEejit

CiaranC wrote:

Surely its unrealistic for these people to buy property in any first world economy? I mean is it the norm for a single income family below the average wage to buy a three bedroom house in leafy suburbia anywhere?

No-one said three bedroom anything, we are talking basic 2 bed flats in the arse end of nowhere here...

but as you mentioned it, 3 years ago my brother bought a 2 bed detached house with a decent front and rear garden with garage within 200 yards of the beach in New Jersey on a single wage (average wage that is) ...

DonalMcTavish

BigEejit wrote:

I know loads of people who dont earn anything near the average industrial wage, and i am sure that any young family with one or two kids would not be able to afford mortgage + childcare ...

So do i, but I know loads of people who earn way above the average industrial wage too. About 50/50.

For the ones below a mortgage is a pipe dream. For those above it their mortgages are peanuts to them.

RTE.ie are having a poll on house prices if you go to their website

D'Peoples Voice

Deleted User wrote:

RTE.ie are having a poll on house prices if you go to their website

Yesterday's book of estimates has confirmed there will be no changes to stamp duty.
Assuming that the government is already runing a deficit this year of EUR €136 million in late Septemer (http://www.finance.gov.ie/viewdoc.asp?DocID=4272&CatID=1&StartDate=1+January+2006&m=n), according to the Dept Of Finance, then increasing spending by another EUR 4 billion as outlined in the Book of Estimates yesterday means two possibilities

the government are expecting hugh growth in future tax revenues to cover the EUR 4 billion increase in spending

the government plan to increase taxes in the budget to pay for the spending

We know the first point is not the case, because our GDP is estimated to slow next year, as the worldwide economy slows. Therefore as I see it, taxes need to rise to cover our expenditure. The chances of reducing stamp duty at a time when we need to increase taxes to cover this EUR 4 billion increase in spending, is on a par with Charlton chance of wining the Barclays premiership this year.

Arithon

There was an article in the Irish Independent this morning at http://www.unison.ie/irish_independent/stories.php3?ca=303&si=1725418&issue_id=14900 (registration required):

PADDY POWER bookmakers are offering generous odds of 6 to 1 to the doom sayers that house prices will rise by less than 3% next year. Such odds also cover those who are willing to bet that prices will fall.

Nice odds... I thought But by the time I found the bet details (about 10:30), the odds were 4 to 1. Factor in some problems with getting my credit card registered with paddypower.ie, and I still hadn't gotten a bet in by 13:00. By then, the odds were 2 to 1, not enough of a payout, I think.

The current details can be seen at http://www.paddypower.com/bet?action=show_type_by_main_market&category=SPECIALS&ev_class_id=45&id=7583&selectvcgrp=40854

Think it shows that property bears ARE stumping up the money for their beliefs

Do-more

Arithon wrote:

There was an article in the Irish Independent this morning at http://www.unison.ie/irish_independent/stories.php3?ca=303&si=1725418&issue_id=14900 (registration required):


Nice odds... I thought But by the time I found the bet details (about 10:30), the odds were 4 to 1. Factor in some problems with getting my credit card registered with paddypower.ie, and I still hadn't gotten a bet in by 13:00. By then, the odds were 2 to 1, not enough of a payout, I think.

The current details can be seen at http://www.paddypower.com/bet?action=show_type_by_main_market&category=SPECIALS&ev_class_id=45&id=7583&selectvcgrp=40854

Think it shows that property bears ARE stumping up the money for their beliefs

I just checked it and it seems like they have closed the book on "less than 3%" damn, I was going to put the house on it!

Sponge Bob

The next logical step was odds on, they did not want to go there

D'Peoples Voice

Sponge Bob wrote:

The next logical step was odds on, they did not want to go there

http://www.businessworld.ie/rankednews2.htm?s=index.html;s2=rankednews2.htm;r=3;a=1568988

'House price fall due to pace of build'

Wednesday, November 22 07:23:50

The recent softening in house price growth is down to the rapid building pace and not an underlying trend, according to IIB Bank economist, Austin Hughes.
IIB Bank's chief economist believes there is little doubt that there has been some softening in the housing market in recent months.

You think Austin!

"However, 'hard' statistical data point to only a marginal slowdown from an exceptionally rapid pace of increase. Arguably, the recent easing in prices testifies more to a surge in supply rather than a softening in demand," Mr Hughes said.

Mr Hughes said that while uncertainties like Government policy on Stamp Duty have clearly weighed on sentiment, the sequence of mortgage rate increases seen through 2006 is the key driver of the emerging slowdown in housing market growth.

Anyone else see any contradiction here with respect to his previous point

Although higher borrowing costs will limit some borrowers access to the market, strong population and employment together with a generous budget and maturing SSIAs will provide a significant offset.

Austin, so these factors will cause an increase in demand in excess of the excess supply you say we have at the minute

Reflecting exceptional demographic influences and a generally healthy economy, we expect house price growth to moderate from around 15pc at present to about 12pc by end 2006 and to around 7pc by late 2007," he said.

so Austin, you see growth slowing to half it's current rates, yet you see the above factors significantly offsetting supply.