Housing Bubble Bursting

nesf

gurramok wrote: »

Thing is, every other industrialised country has had significant immigration and household size changes(look at divorce rates/singles living alone) including the UK and US.
The UK has had its own bubble with warning that prices will fall today from the very same IMF report http://news.bbc.co.uk/2/hi/business/7049930.stm), but the UK has short supply unlike us with huge oversupply building only twice the number of houses compared to 14 times less the population
http://www.nhbc.co.uk/Newscentre/Library/filedownload,28930,en.pdf (186,000 houses built in uk(2006) compared to 93,000 here(2006)

Think about it

I don't disagree, I'm just saying that it's important to keep certain things in mind when reading the IMF report. The Irish demographic changes are notable though, there was an article by the CSO a few years back (I think) that discussed at length the change in household size and how even with static population numbers the demand for housing would be very strong. We went from an average of 4 or 5 to 2 or something (I'm quoting from memory so I could be off by a bit).

homeOwner

Afuera wrote: »

There's nothing preventing a tenant from negotiating a longer term lease (say for 5 years) in Ireland. To keep the landlord happy, they could suggest that the rent be increased on an annual basis based on the official rate of inflation. Having all of this specified in a lease would superceed the terms laid out in a Part IV tenancy.

There is nothing preventing a tenant from negotiating a longer term lease. They just have to find a landlord will to accept the terms. My experience of renting has been that this is impossible to find. Annual increases even within the context of inflation make renting very difficult for some people. It forced me to move twice in 18 months. Then I bought because I couldnt stand moving around and having no control over the situation. I was lucky to have bought a few years ago but I was paying high rent back then in the city centre and rents fell back a bit after I bought, they have since gone back up a bit and seem to be continuing to rise.

Afuera wrote: »

You need to be careful with blanket statements like that. If you're just about able to afford the repayments on the mortgage but are not able to fund your pension or a comfortable lifestyle then you may end up quite badly off.

I agree and I would not count that situation as being able to afford the mortgage. I meant it to relate to people who can actually afford to pay their mortgage and not worry about small rate increases and still take holidays and live.

homeOwner

Calina wrote: »

The situation is not as simple as you paint, it is not either/or for life. Renting will suit people at different times in their lives, as will buying.

I never said the situation was simple. I am pointing out that the article drawing a comparison between renting a 1M euro house in south dublin is not accurate in stating that the person would be better off renting than buying. That situation does not relate to sinlge people in their 20s who rent city centre apartments.

Calina wrote: »

In other words, telling people that the only right answer is to purchase is shortsighted. If I bought what I could afford five years ago I just wouldn't actually have a life because I'd be spending my life travelling to and from work. I think you need to grow up a little, to be honest because you are not looking at this intelligently. Owning your own house is not the be all and end all of sorting out accommodation. Renting has its merits, even in this country which has possibly the most ridiculous rental set up I've seen anywhere. The costs are not all financial and the benefits are not all financial.

No on is saying that the only right answer is to buy. You are arguing a point no one is making. As for telling me to "grow up a little", I suggest you refrain from personal comments and read posts before replying.

ambro25

homeOwner wrote:

There is nothing preventing a tenant from negotiating a longer term lease. They just have to find a landlord will to accept the terms. My experience of renting has been that this is impossible to find.

Sorry to read that. We do exist, though. But Irish landlords *at large* aren't used to us yet

homeOwner wrote:

Annual increases even within the context of inflation make renting very difficult for some people.

But you see, that's part and parcel of negotiating: for getting a good, reliable, long-term tenant, you have to be ready to forego annual increases or consent to negligible/not-in-line-with-inflation annual increases, to an extent: you can't have your cake (regular income paid on time to allow you to plan financially over extended periods of time, e.g. 3-5 years) and eating it (increase rent as you please, inflation or not).

The value contributed by the good tenant, is how much security over what term does the landlord want/need for the income of the tenure - one in the hand, two in the bush and all that

Anecdotal, but to add a little context

pjbrady1

On property pin there is a good thread on Developers in Mayo (Knock/Westport) renting out small finished developments. The way the housing market is here, once a trend starts, it increases quickly. So now we can be 100% certain of large amounts of new developments for rent from Donegal to Cork. This will ease the bank payments for the developer who gets a tenant, but by the time these developments are all offered for rent (together) both rental supply and returning immigrants will have weakened the rental market.
Clearly small rents won't clear payments on a site, materials and labour. So the last chance saloon is Bertie himself. Spring should bring on plenty of requests to council to come out and look at "top class" apartments with a view to purchase. The real damage is when there is no other alternative but to negotiate with the bank and slash your asking price.
Another thought is that next years theoretical crop of first time buyers/trader uppers/recent sellers will be facing into a market with loads of recently finished top spec houses with low rents. All combined with pay freezes in public service and rising food/energy bills. So early 2008 will bring on massive estate agent/groundworks crews job losses as only millionaire mansions will sell and people who are purchasing due to circumstances (recently married/just had a kid etc).
In conclusion start of the pain is when the rental market significantly weakens (rents down 15%). That is the final nail in developers hopes.
p.s. if ya check on Daftwatch rental supply is rising in all of the baskets cases (Mayo/Roscommon etc..)

Do-more

Desparation has certainly set in for some EA's, in Tesco Mullingar at lunchtime today there was a girl handing out flyers for a development in Rochfordbridge.
Really poor quality off an inkjet printer, had all the looks of a hairbrain scheme hatched over a few pints last night and pressed quickly into action this morning! For anyone crazy enough to be considering looking at a new house in Rochfordbridge, it would certainly have put them off!

EnoughSaid

It seems that some people in those basket case counties still think that the party is going to go on forever:

http://www.daft.ie/discussions.daft?dcn[forum_id]=4&offset=50&limit=10&dcn[discussion_id]=101968&dcn[root_discussion_id]=0&dcn[forum_id]=4

miju

reckon he was trying his best at trolling there, certainly seems like it anyways

Pa ElGrande

EnoughSaid wrote: »

It seems that some people in those basket case counties still think that the party is going to go on forever:

Don't expect too many people to come on and talk about their losses in the same way they talked about their mostly 'paper' gains during the boom.
'Mark to Model' is what you are seeing, people caught on the wrong side of the trade are still trying to talk up value of their investment either to a: exit the market with profit's intact and/or b: find someone to re-assure them that the market value is what they say i.e. mark to model. They are destined to chase the market down holding out for their price, while foregoing other investment opportunities because their capital is tied up in property. If they are undercapitalised they will eventually be forced to sell and take a more substantial loss (even bankruptcy).
Property can be a good investment, but most 'investors' got suckered into the mania and followed the speculative herd without understanding what they were doing. JP Morgan (1905) said it best "Nothing so undermines your judgement as the sight of your neighbour getting rich".

Pa ElGrande

As a follow up from yesterday's post

Crashing property market begins to reveal its casualties

Think about how money is raised from Irish banks to buy property. The most crucial number is the valuation that the potential investor gets on the relevant property. Given that house prices are now falling across the board, it means that every valuation made last year was wrong.

By definition, every valuation, therefore, overvalued the asset. When the market is rising, everyone has an incentive to overvalue the price of the asset: the valuer because he is often the same estate agent who is selling; the broker because he gets a commission; and the bank because it makes money lending cash. Systemically, the entire edifice is geared to making the upswing more dramatic and downturn more precipitous.

Anyone trying to sell a property bought last year will realise the valuation was wrong. Can they sue the valuer now? No: they were fully aware of the game and, in so many cases, the buyer was aware that the valuer was trying to get the value ‘up’, so that the buyer could get as much leverage as possible. Expect more questionable dealing to be revealed in the next few months.

The Archbishop of Dublin was right: the people who will get really burned are those who hang on longest. Very often, they are the ones who were last in and can least afford it.

Victor

the valuer because he is often the same estate agent who is selling

That isn't meant to happen and I doubt the banks would accept it.

conor_mc

Victor wrote: »

That isn't meant to happen and I doubt the banks would accept it.

Yeah, I don't think it does happen.

Having said that, because house prices are set at the margins, every local estate agent is motivated to match their valuation to the selling price. Otherwise they are effectively telling the banks "no, houses aren't worth that much around here" - houses that they themselves are trying to sell on behalf of other clients.

gurramok

Respectable ratings agency Standard & Poor's are now doom mongers, they should do what Bertie had said, and top themselves:)

http://www.rte.ie/business/2007/1022/houses.html

Sums it up what us bears have been saying here:

S&P wrote:

The housing market report, which singles out Ireland, Spain and the UK, warns that prices are estimated to be at least 30% overvalued in these countries, and with the downturn already in evidence, the correction could be drawn out.

whizzbang

Sure they know nothin about nothin.

SimpleSam06

whizzbang wrote: »

Sure they know nothin about nothin.

Well in fairness they've only been in business 147 years, they can't really be expected to know that Ireland is different.

MrVostro

http://www.boards.ie/vbulletin/showpost.php?p=54257332&postcount=103

How are we ever going to get real so things can be fixed in this country

Do-more

From the Sindo...

Overstretched Irish borrowers are already falling victim to the bursting foreign property bubble. One lender who specialises in overseas finance told this paper about a homeowner who raised €700,000 in equity on their Dublin home to buy apartments in Turkey, Budapest and Bradford in England.

"The apartments came with a year's rental guarantee," said the lender, who did not wish to be named. "When the guarantee ran out, he realised there was no rental market in those areas. He's put his home as security for these loans, he has no rental income and meanwhile European interest rates have gone up by 2.5 per cent. By the end of this year, Irish people will be struggling to extricate themselves from some of the investments they've made."

The rest of the article makes grim reading for those who have "released equity" to buy an overseas property to keep up with the rest of the boys down the golf club!

http://www.independent.ie/business/foreign-property-dreams-crash-1200467.html

ambro25

Do-more wrote:

Bradford

Says it all, really :rolleyes:

bugler

The Bradford property probably cost less and has more chance of being rented out

Boo-hoo to be honest. There will always be people who insist on ignoring common-sense and swallowing whatever rubbish is fed to them by sales people.

The 1/2 year guaranteed rental income scam is hardly sophisticated. A cursory, honest look at the rental prospects would have warned this guy off.

ambro25

bugler wrote:

The Bradford property probably cost less and has more chance of being rented out

Dunno - considering UK property market atm (with which I'm very familiar + know the particular area quite well), it could well have turned out to be the most expensive of the 3.

[personal exp/opinion]Bradford is a not-quite-but-damn-as-near-it sh1thole, ex-heavy industry without much restructuring since and not much of a Uni to speak of. Good for a night out and esp. a good curry, and that's about it.[/personal exp/opinion]

If the guy wanted to buy cheap (so 'Up North') for renting, he should have looked to Leeds instead, or another City heavier with Uni infrastructures (e.g. Sheffield/Nottingham/Durham).

€0,02 and all that.

But hear you and other posters all the same, v.valid points

bugler

Yeah, I was being a bit flippant, and was more remarking on the sometimes sky-high price of foreign property in countries like Turkey, Bulgaria etc which are completely at odds with what any local can afford to rent or buy. My knowledge of Bradford's property scene could only be described as lack-lustre.

digitally-yours

Here is some news.

Merrill Lynch has reported $7.9bn (£3.85bn) in write-downs for the third financial quarter of the year leading to its first loss since 2001.

The losses were caused by exposure to bad mortgage-related debt, such as that in the crisis hit US sub-prime sector.

The brokerage giant reported a net loss of $2.3bn from continuing operations, against a $3bn profit a year ago.

The firm is the latest to reveal its exposure to bad debt, with a write-down much larger than initially forecast.

More
http://news.bbc.co.uk/2/hi/business/7059997.stm

Maxwell

Varying a bit from the thread as it is at present, but based on hearsay and observations in work, here is what Im expeirencing, which is a huge change to 12 months ago:

Increased amount of people desperate for the month end for payday and counting down the days (these people are in their 30's, not looking for money for the weekend, but money for bills)

Openly talking about not having the money for certain things (DIY, new things etc)

Mortgage repayments starting to affect going out. A couple of people have mentioned that they are not able to go out for dinner anyway. Everything now too expensive

People bringing in packed lunches - alot of them now seem to be doing this.

Everyone has stories of friends not able to sell houses...at ALL. No-one coming to see the houses etc.

At least 1 person I personally know has now opted for an interest rate only mortgage from the bank, so it can give them breathing space for the next few months (Christmas etc)

2 others have houses up for sale after the 2 year fixed rate stopped and they are now on increased mortgage repayments that is seriously affecting them.

Im posting this, just because of the changearound in sentiment and discussions in the workplace.

People are starting to really feel the pinch and are worried about money, this wasn't an issue last year when people got what people wanted.

ambro25

Two bad things to take from that

Maxwell wrote:

At least 1 person I personally know has now opted for an interest rate only mortgage from the bank, so it can give them breathing space for the next few months (Christmas etc)

If this switch becomes more common, that will mean an increasing portion of buyers only servicing the debt as opposed to progressively writing it off, with matching consequences on negative equity ( i.e. precipitating it).

Maxwell wrote:

People are starting to really feel the pinch and are worried about money, this wasn't an issue last year when people got what people wanted.

That's the worst. People not going out/consuming = seriously malfunctioning economy, and danger of turning a perceived downturn into a reality.

digitally-yours

Maxwell

I think February will be the worst month when people will get their Bills from all
the parties and Xmas pressies

Also first 3 months of the 2008 will be absolutely dead in terms of selling and buying of houses

Thats my opinion.

Yesterday I went walking with my wife through Dublin 13

I saw about atleat 80 signs "For Sale".

Not good situation in Baldoyle and surrounding area I am sure about this as i live there.

indiewindy

digitally-yours wrote: »

Maxwell

I think February will be the worst month when people will get their Bills from all
the parties and Xmas pressies

Also first 3 months of the 2008 will be absolutely dead in terms of selling and buying of houses

Thats my opinion.

Yesterday I went walking with my wife through Dublin 13

I saw about atleat 80 signs "For Sale".

Not good situation in Baldoyle and surrounding area I am sure about this as i live there.

Some leeway will be provided to them by the increased mortgage relief that was signalled at election time which should be available in January, a small help but a help

ronbyrne2005

House for sale near me asking for 795k, similar one sold for close to one million in early 2006. This one has been for sale for 6months and was originally asking for more. The "for sale" sign outside has had a sticker stuck on it recently saying "Price reduced to sell". Never thought i'd see "price reduced to sell" signs on homes in prime Dublin areas!

Cantab.

ronbyrne2005 wrote: »

House for sale near me asking for 795k, similar one sold for close to one million in early 2006. This one has been for sale for 6months and was originally asking for more. The "for sale" sign outside has had a sticker stuck on it recently saying "Price reduced to sell". Never thought i'd see "price reduced to sell" signs on homes in prime Dublin areas!

That's what, 20%? A bit like the ISEQ...

miju

indiewindy wrote: »

Some leeway will be provided to them by the increased mortgage relief that was signalled at election time which should be available in January, a small help but a help

this would be one of the promises that Fianna Fail have already rowed back on. I'd be fairly certain that this will be another promise that will not materialise as FF make "prudent economic decisions to guide us through the downturn" (and yes a senior FF politician did say that )

DonJose

Maxwell wrote: »

Openly talking about not having the money for certain things (DIY, new things etc)

That can be confirmed by offical retail sales figures.

Department store sales were down 3.5% in the month, while electrical goods fell 5.4%. Hardware, paints and glass sales dropped by 3.5%.

Bar sales were up 1.1% in the month :eek: People drinking their sorrows away.

http://www.rte.ie/business/2007/1024/retail.html