Housing Bubble Bursting

ronbyrne2005

El Stuntman wrote:

more anectodal stuff: the house 3 doors down from me is for sale for an asking price of 400k

the last house to go on sale on this road (~4 months ago) was asking 450k

400k is quite close to what we bought for at end 2004 :eek:

And will they even get 400k, I doubt it with the huge amount of houses on the market now.

gurramok

Thought i post this for those that are sceptical on sub-prime market here.

http://i181.photobucket.com/albums/x283/gurra2011/Misc/IrishNinja.jpg

Its exactly the same as what the sub-primers in the states offered especially with the dodgy income limits and bad cred history.

This is only one of the many su-prime companies who operate here, another crowd have a similar full page newspaper ad with a uniformed nurse obviously targetting at that sector.

iguana

El Stuntman wrote:

400k is quite close to what we bought for at end 2004 :eek:

I honestly think anyone who bought in 2004 with 100% mortgage is in negative equity right now. Certainly they are in real terms. I say this because I was sale agreed on a house in August 2004 which needed a lot of work and there are similar houses in fantastic condition with asking prices that aren't a lot higher than we would have been paying. (And they don't appear to be selling) I'm very glad now that we pulled out.

And I've noticed some houses which have lowered their asking prices have dropped them to the type of prices I was seeing when I was looking. And back in 2004 sellers were getting 10-25% above asking.

Yes there are still plenty of sellers out there with their heads in the sand, but I think more people are starting to realise what is happening and the drops will pick up in the next 6 months.

Duckjob

gurramok wrote:

Thought i post this for those that are sceptical on sub-prime market here.

http://i181.photobucket.com/albums/x283/gurra2011/Misc/IrishNinja.jpg

Its exactly the same as what the sub-primers in the states offered especially with the dodgy income limits and bad cred history.

This is only one of the many su-prime companies who operate here, another crowd have a similar full page newspaper ad with a uniformed nurse obviously targetting at that sector.

The last few times I've listened to TodayFM I've noticed seriously heavy advertising for a sub prime lender. Can't remember the name, but it's clearly targeting people who havent been able to get a mortgage with the main banks - "we look at your current ability to pay, past mistakes stay in the past" etc.

They must be spending a fortune on their advertising campaigns because the ads seem to be on every 5 minutes.

digitally-yours

Now one of the most reputed newspapers have Published <changed misspelling> an article on the Irish Property market.

And its not SUN or any tabloids. Its FT.

Property price falls end Irish party

Published: October 8 2007 19:25 | Last updated: October 8 2007 19:25

Ireland has already seen its religious orders selling off land. Now it is the members of some of the country’s exclusive golf clubs who are voting to cash in their greens and fairways to make way for new housing.

Some clubs have pulled off attractive deals with developers, but others may be too late to the party amid signs the Irish property boom has come to an end. Gerard McDonnell of Pembroke McDonnell estate agents believes the reality is rather worse. “Prices are down 10 per cent and that’s if you get it,” he says.

The debate now is whether the country can engineer a soft landing – as most local commentators believe – or be plunged into an economic recession which some outside analysts think will be hard to avoid.

The general economic backdrop is certainly worsening for Ireland, one of the best performing European economies of recent years. Gross domestic product contracted by 1.4 per cent in the second quarter, giving a year-on-year growth rate of 5.4 per cent, compared with 8.1 per cent in the year to June 2006, according to the Central Statistics Office.

Any slowdown in the US economy would have a big impact in Ireland, which relies on the US for 18.5 per cent of its exports, even more than the UK at 17.4 per cent.

Construction activity has been a big part of the growth rate in recent years, and the industry accounts for quarter of those in work.

Figures out last week from the Permanent TSB bank and the Economic and Social Research Institute suggested house prices had fallen 3.3 per cent since the start of the year.

House builders are starting to react, with the pace of completions slowing. The Construction Industry Federation says that while in the medium term the economy requires 65,000 houses, negative sentiment means as few as 25,000 homes will actually be built in the first half of next year. “It is imperative therefore that confidence be restored sooner rather than later so that a serious shortfall in housing completion numbers does not arise,” says Hank Fogarty, president of the federation, which wants cuts in stamp duty in the December budget.

Any listed company with an exposure to the property market has seen shares fall. McInerney, the house builder, is down. Fears about a housing slowdown, and the effect that will have on mortgage business, has resulted in volatility in Irish bank shares. You can understand why banks don't agree with housing market collapse.

The central bank last week cut its forecast for economic growth for next year from 4 per cent to 3.25 per cent, in part due to the slowdown in construction.

But Tom O’Connell, assistant director-general at the bank, broadly welcomed the changes and said house price growth was now at more sustainable levels, and also pointed out the strong 12 per cent growth in rents.

“Rents had fallen for several years. With the fall in house prices, and the rise in interest rates, first-time buyers are probably holding back a little bit, and going into rental accommodation. But it does confirm there is a reasonably strong underlying demand reflected in the rental market,” he says.

Melanie Averall, analyst with Moody’s, the credit rating agency, in London, says: “With the important housing market showing signs of cooling one can also anticipate household spending taking a knock.”

In other markets such as the UK, during times of booming house prices consumers have used equity release – using rising house prices to increase the size of their mortgages – to finance credit-driven spending. Now house prices are falling, one might expect consumer spending to fall in line.

But Vincent Hogan and Pat O’Sullivan in a report for the ESRI published last week, say that “if households have not used household wealth for personal consumption purposes to date then personal consumption would remain unaffected by a fall in house prices. This would imply that the recessionary effects of a decline in house prices would not be as severe as might otherwise be expected”.

One direct impact of slower house sales however is that the government will collect less tax. Figures last week from the department of finance show that tax revenues fell in the first nine months by €490m ($692m, £339m), the bulk of which is explained by the fall in stamp duty on houses.

Brian Cowen, the finance minister, is predicting a small budget deficit of up to €1bn for the year, against a forecast surplus of €500m.

Source
http://www.ft.com/cms/s/0/619d936e-75c9-11dc-b7cb-0000779fd2ac.html

daveirl

This post has been deleted.

miju

i think he means published

gurramok

those guys at esri wrote:

But Vincent Hogan and Pat O’Sullivan in a report for the ESRI published last week, say that “if households have not used household wealth for personal consumption purposes to date then personal consumption would remain unaffected by a fall in house prices. This would imply that the recessionary effects of a decline in house prices would not be as severe as might otherwise be expected”.

Did you notice the word IF?..LOL

They know the private debt is bad and widespread, they don't want to scaremonger with record top-up mortages, releasing equity to finance lavish lifestyles...all called living beyond your means.

Its a pity the likes of the FT didn't give their own analysis of the whole thing instead of getting mostly V.I. views on matters here locally.

Err, Mr Tom O'Connell, rents have declined quite a bit in July and they are hardly going to keep climbing to sky high levels. If they do, there goes another chunk of your consumer spending.This target market of FTB's who are expected to fork out more on mortgages are unlikely to jump in as the house price is still way too expensive in comparison to same location!(not to mention credit crunch)

"Construction activity has been a big part of the growth rate in recent years, and the industry accounts for quarter of those in work"

That one sentence explains why the 'doom-mongers' have facts to back their arguments.

Victor

gurramok wrote:

They know the private debt is bad and widespread, they don't want to scaremonger with record top-up mortages, releasing equity to finance lavish lifestyles...all called living beyond your means.

Private debt isn't "bad". Any debt with no asset to balance it and difficulty matching repayments is bad.

Do-more

digitally-yours wrote:

But Tom O’Connell, assistant director-general at the bank, broadly welcomed the changes and said house price growth was now at more sustainable levels.

ROFL glad to see that the Central bank thinks that falling house prices = house price growth at sustainable levels!

gurramok

Victor wrote:

Private debt isn't "bad". Any debt with no asset to balance it and difficulty matching repayments is bad.

Pedantics Vic. Alot of that debt in this country would have no asset to balance except that overvalued house and depreciating 07 in the driveway.

Credit binge of last few years is very dangerous for the individual, the person with the debt assumes the good times will last for that 5 yr car\personal loan or that 35 yrs mortgage with no possible change in circumstances economic or healthwise.

Heck, even savers are not protected properly here with a measerly 22k deposit protection scheme with not so great interest rates to encourage saving.

The SSIA was the only thing that has been good for us on the plus side!

Western_sean

The Construction Industry Federation says that while in the medium term the economy requires 65,000 houses

Can anyone tell me how they arrive at this bizzare number? I would have guessed that something around 40,000 was a more likely number for household formation in any given year.

Colonel Sanders

The number of empty units is currently in 6 figures. Why do we need ANY new units??

silverharp

Colonel Sanders wrote:

The number of empty units is currently in 6 figures. Why do we need ANY new units??

cos half of them are probably the wrong type of property and the other half are in the wrong place

nesf

silverharp wrote:

cos half of them are probably the wrong type of property and the other half are in the wrong place

Exactly. Not that it'll stop developers throwing up more of it. It should just hopefully become less common.

Dalfiatach

Western_sean wrote:

Can anyone tell me how they arrive at this bizzare number? I would have guessed that something around 40,000 was a more likely number for household formation in any given year.

Somebody recently crunched the numbers (on the Pin, I think) and given the age demographics, the age profile of FTBs, obsolescence, immigration (and assuming immigration continues at 2006 levels!) and all the rest of it - and estimated an actual real need for about 35-44K units a year for the next decade.

Vast numbers of houses have been bought by "investors" especially in the last 3 years. About 40% of all houses bought in 06 were bought by property speculators.

While we have enough empty units to house anyone who needs a house for the next 4 or 5 years, as noted above most of those units are in the wrong place (nowhere near jobs or services), are inappropriate (far too small, or not suitable for families), or are simply poor quality rubbish and will need to be demolished within the decade.

So happy days, the builders will get huge wodges of taxpayers money for years to come - first patching up, then tearing down, then rebuilding in a different place - all the shoddy crap they shoved up in the last 5 years. In the meantime, all the poor fools who rushed out to snap up 5 BTL units off the plans will suddenly find themselves being the Corpo of the 21st century as social housing provision is forcefully privatised onto their shoulders.

Isn't life in the FF Kleptocracy wonderful?

SkepticOne

Dalfiatach wrote:

In the meantime, all the poor fools who rushed out to snap up 5 BTL units off the plans will suddenly find themselves being the Corpo of the 21st century as social housing provision is forcefully privatised onto their shoulders.

If they're lucky...

miju

just thought I'd repost some blindjustice posted over on the pin which I think it very interesting. it seems (anecdotaly at least) that there has a been a complete turnaround in who are the sellers and buyers.

see for yourself

Fig 1 , Fig 2 , Fig 3

gurramok

And Miju, see can you find the one graph that illustrates the incomes of the buyers.
From memory, the majority of buyers in last maybe 3 years had incomes touching 90k and over, mostly rich wealthy speculator types on the whole and not your average couple by a mile.

EDIT:
Here ya go
http://i181.photobucket.com/albums/x283/gurra2011/Misc/Graphs/rangeofincomesofborrowers.jpg

Combined incomes listed.
Notice the jump since 2003?

Considering 67% of the workforce earn under 34k(68k combined), it makes you think about the speculative part of the bubble by wealthy buyers as average wages have NOT skyrocketed since 2003 to keep up

miju

it seems the ECB may be preparing to up the rates again sometime soon if Axel Weber's comments today are anything to go by linky here

Bloomberg.com wrote:

Oct. 11 (Bloomberg) -- European Central Bank governing council member Axel Weber said the bank may need to raise interest rates to a level that restricts economic growth to keep inflation under control.

``If risks to price stability are threatening to materialize, monetary policy can't lose sight of its primary mandate -- even if that means no longer supporting the robust economy or becoming restrictive,'' Weber, who also heads Germany's Bundesbank, said in the text of a speech in Munich today. There may be an ``additional need'' to raise interest rates, given the ``expected acceleration in euro-region inflation over the coming months.''

................

Inflation accelerated beyond the ECB's 2 percent limit for the first time in over a year in September. The bank expects the rate to remain ``significantly'' above 2 percent into next year. [/b[

The_Conductor

Even comments like that are going to cause the Euro to rise even further in comparison with other currencies- possibly helping reduce inflation by making imports cheaper. Perhaps a little reverse psychology on the part of Herr Weber? Perhaps not. The ECB is on record stating that 5% would be considered by the council as "normalisation of interest rates", so God only knows.......

Akrasia

miju wrote: »

it seems the ECB may be preparing to up the rates again sometime soon if Axel Weber's comments today are anything to go by linky here

So much for Comical Austin's claims that the rates are set to fall.

Will that guy ever give up. has he no shame.

miju

in fairness to Austin his job is to spin and spin he does. Only problem is though is that his spins are mostly tripe and hold no basis in reality

ronbyrne2005

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=COVER+STORY-qqqs=property-qqqid=27313-qqqx=1.asp

All the estate agents and vested interests begging for stamp duty to be removed in Sunday Business Post. Only Alan Ahern and another independent economist suggest removal/reduction of stamp duty wont help. As we've said before numerous times on this thread people spend what they can afford/borrow so if the amount they have to spend is increased by reduced stamp duty this will be reflected in the price of a house they are bdding on almost immediately after any stamp duty change. Plus the government willl be looking to raise the lost stamp duty tax elsewhere so they will end up paying for it in future somewhere and somehow. if stamp duty was reduced overnight house prices would rise higher than they otherwise have been and public finances would get reduced and the only benificiaries would be current vendors.

Cantab.

ronbyrne2005 wrote: »

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=COVER+STORY-qqqs=property-qqqid=27313-qqqx=1.asp

All the estate agents and vested interests begging for stamp duty to be removed in Sunday Business Post. Only Alan Ahern and another independent economist suggest removal/reduction of stamp duty wont help. As we've said before numerous times on this thread people spend what they can afford/borrow so if the amount they have to spend is increased by reduced stamp duty this will be reflected in the price of a house they are bdding on almost immediately after any stamp duty change. Plus the government willl be looking to raise the lost stamp duty tax elsewhere so they will end up paying for it in future somewhere and somehow. if stamp duty was reduced overnight house prices would rise higher than they otherwise have been and public finances would get reduced and the only benificiaries would be current vendors.

All this speculation on stamp duty seems like deja vu to me. Is the reason all the buyers are holding off because of yet another bugetary uncertainty?

miju

course it is cantab , sure if all other excuses fail , revert to the first one and hope no-one remembers

nesf

Cantab. wrote: »

All this speculation on stamp duty seems like deja vu to me. Is the reason all the buyers are holding off because of yet another bugetary uncertainty?

It's just a lazy argument that some people make. People are charged twice for houses effectively so they can appeal to the idea that only being charged once would be better. What they normally don't bother mentioning is that the market (by just being a market) will just capture all that cash anyway with a bump up in the market price. The thing is, if you phrase it as "paying twice for one thing" it makes it sound like people are being ripped off in some people's minds (ie there's enough of them around to make it worth printing in papers), when really if we never had stamp duty things wouldn't be much different other than the developers would be richer and the public finances a bit poorer.

Cantab.

nesf wrote: »

It's just a lazy argument that some people make. People are charged twice for houses effectively so they can appeal to the idea that only being charged once would be better. What they normally don't bother mentioning is that the market (by just being a market) will just capture all that cash anyway with a bump up in the market price. The thing is, if you phrase it as "paying twice for one thing" it makes it sound like people are being ripped off in some people's minds (ie there's enough of them around to make it worth printing in papers), when really if we never had stamp duty things wouldn't be much different other than the developers would be richer and the public finances a bit poorer.

not to mention the fact that we've neither rates nor property taxes

nesf

Cantab. wrote: »

not to mention the fact that we've neither rates nor property taxes

Yup, give me stamp duty over rates and property taxes any day to be honest.

digitally-yours

I am a good mother, worker and citizen, but I have no future here'


You do not know me. I am invisible. I am not living in poverty. I am a member of Ireland's new poor middle class. I cannot afford to live in post-Celtic Tiger Ireland anymore.

Let me introduce myself -- my name is Kerry and I am 35 years old. I'm a devoted mother to a beautiful five-year-old daughter, a full-time working professional and a good citizen. My only 'crime' is that I am a single parent with a single income. I have a good and worthwhile job that makes a contribution to the community and my daughter is happily settled in an excellent school. I participate in Ireland economically, intellectually and socially and am not a burden on the State.

Yet this same State has let me and my daughter down. What I give to the economy and to our society is being disregarded.

My main problem is that I don't own a house. I rent and because rents are now rising, my rent in Wicklow has gone up by 17 per cent. Even though I have no debts, I cannot afford to pay my rent anymore. How can anybody afford the rent for even a one-bed apartment which costs €1,200 a month when living costs are excruciatingly high? Some 85 per cent of my salary now goes on rent and utility bills. That leaves very little to pay for food, clothes, petrol and everything else.

There is no State assistance for me because I earn "too much", according to the guidelines set down by the Government. I cannot afford to buy a house and have little hope in the farcical lottery that is Affordable Housing.

I am being squeezed in the current economic climate.

While I get nothing from the State, I am less well off in real terms than many people who are earning less and able to claim government assistance. I am being penalised because I work and try to sustain a quality of life for my daughter by limiting her commuting time and the time she spends in childcare. I have no reserves. I cannot afford to save. If the unexpected were to happen, I would not be able to cope financially.

And so I find myself with three options. I could join the ranks of the unemployed, apply for State benefits, try to get a house or flat on the housing list. I could move house again, uproot my little girl (the fourth such move in her short life), take her away from her school, friends and family, face into increased commute times and even more time apart for both of us.

Or I could emigrate, start again, alone, in another country where I can afford to live. Whichever way I look at it, the prospects for me and my daughter are bleak.

I am not alone in this. There are many people, hidden from society, who are in the same boat. They, like me, are living month to month to keep the roof over their heads, to maintain a basic standard of living. Most are engulfed by spiralling debts. Most struggle to cover the cost of childcare, ever increasing mortgage repayments or rents, food and utility bills in the face of nominal wage or salary increases. They have no options, no flexibility and in many cases, no future in this country.

Are we once more facing into the emigration patterns we saw in Ireland in the Eighties and early Nineties? Is another generation going to be forced to make their future abroad because they cannot afford to be at home -- not because there are no jobs for them, but because the money they earn simply cannot possibly meet their outgoings? Who is driving this modern Ireland? Who is at the forefront of the economic and social policy?

In the UK, the authorities have embarked on a drive to provide housing for all. The belief is that everybody should have the opportunity to have a decent home, whether through renting or ownership. Affordable homes are provided at sub-market prices for those families earning up to stg£60,000 (€87,000).

In Wicklow, the guidelines say that you cannot earn more than €40,000 to qualify for an affordable house. The cut-points in Ireland are archaic and the income cut-off levels unrealistic. Only a handful of houses are available, and only in certain locations.

Our Government urgently needs to change and re-evaluate its cut-off levels. It needs to introduce dramatic and innovative housing initiatives that have been successful in other countries. Initiatives that look at those on incomes from €25,000 to €75,000. Private rented housing is vital to a growing economy and the sector needs support. More homes need to be built for a population that is growing but at a price that they can afford.

On my doorstep, work is to begin on yet another playground for the very wealthy -- the Greystones Marina. In an adjoining village, a €60m centre is due to be completed in 2008. The centre includes a mix of retail and residential as well as a nursing home, medical centre, gym and creche. We of the poor middle class will never have the option to live there because we will not be able to afford to buy or rent even the smallest apartment. Instead, the apartments will be bought by investors who will rent them out at so-called "market rates" -- and people like me will once again be priced out of the market.

I should have the chance to buy a home to gain some security. I know that in 11 months I will have to move again when my rent is once more increased. All I want is to live and raise my daughter in a place that we can be proud of, within a community that is sustainable. Not where I am at the mercy of a landlord's rent increase, where I have to move my daughter year after year to find accommodation we can afford.

The "future" could be such an exciting word. Not in my world. I cannot sustain the standard of living I have. I cannot make any provisions for the future. If it were possible for me to stay in Ireland, I would be looking at a future entirely reliant on State benefit. I have no capacity to save, no chance of engaging in a pension plan. Fast forward a few years and yes, I will be a burden on the State as will thousands of others, thousands who have spent the best part of their lives working -- and for what? Our Government has turned a blind eye -- why? Because a booming economy wins votes at the ballot box.

Bertie came to my daughter's school when he was electioneering. She was so excited to meet him, "the boss of Ireland". Will he go back to her school, hold her hand, look into her twinkling eyes full of hope and explain to her why her mummy is so sad? Why she will have to leave her school friends, her family, and her home?

No, it will be me who will have to explain.

Link here

http://www.independent.ie/business/personal-finance/i-am-a-good-mother-worker-and-citizen-but-i-have-no-future-here-1166575.html