Housing Bubble Bursting

johnnyskeleton

Deleted User wrote: »

http://www.thepropertypin.com/viewtopic.php?f=4&t=18637

If this is anything to go by, we're expected to splash out on property.

I've no problem with buying property in principle, it's just that it is so ludicrously priced at the moment. That said, it certainly seems that Tom no longer believes that you can't sell at below cost as he is now saying that it's cheaper to buy than to build.

johnnyskeleton

johnnyskeleton wrote: »

I've no problem with buying property in principle, it's just that it is so ludicrously priced at the moment. That said, it certainly seems that Tom no longer believes that you can't sell at below cost as he is now saying that it's cheaper to buy than to build.

It's fair to say that, excluding the cost of land; it's cheaper to build than to buy. There are a large number of one-off's going up in the local area, built on family land.

Then again, if you excluded the cost of land from the price of some of the empties, there would be some real bargains out there.

321654

Its cheaper to buy than rent where i live.
Its killing me waiting for it to bottom out, while paying more rent than i would if i owned the place. Even with a recent rent reduction.

jesus_thats_gre

321654 wrote: »

Its cheaper to buy than rent where i live.
Its killing me waiting for it to bottom out, while paying more rent than i would if i owned the place. Even with a recent rent reduction.

Where are you living?

Don't forget that interest rates are at (near) a historic low, those cheap mortgage repayments could easily double when rates go back up again.

gurramok

321654 wrote: »

Its cheaper to buy than rent where i live.
Its killing me waiting for it to bottom out, while paying more rent than i would if i owned the place. Even with a recent rent reduction.

Some 1bed/2bed apts in cheaper urban areas(big commuter towns/undesirable areas) is where this might be the case. Asking rents of 1000 pm for a 1bed when that 1bed is under 200k(the likes Balbriggan comes to mind) shows how stupidly high rents can be in some cases.

Duckjob

When it is cheaper to buy a house than to build it you can be sure that you're looking at the bottom or very close to it. However, buyers aren't able to take advantage of this because of a lack of mortgage finance. The irony is that if this isn't addressed fears about bank exposure to property will become self-fulfilling.

Yes, because we all now know, the problems in our economy are all down to people NOT borrowing themselves into oblivion anymore.

Good man yourself Tom.

ionapaul

It is MUCH cheaper to rent than buy where I am (Dublin 6) - I never understand why people rent out in the far suburbs at the same cost as a room / apartment in the city centre.

321654

jesus_thats_gre wrote: »

Where are you living?

Phibsboro. About a mile and a half (if even that) from O'Connell street.

Im Originally from Swords (30 mins on a bus from city center). Was thinking of moving back there again too.
Much cheaper to buy than rent there too.

And thats using a 5% interest rate and allowing for rents to fall even more
Never mind the low interest rates we have now. :eek:

gurramok

Give us an example! Are you renting..
A - by yourself
B - shared
C - an apt/flat
D - house
E - compare sizes of accomodation

I checked Phibsboro there, cheapest without need of refurbishment seems to be a 1bed apt above shops recently reduced to 230k which is around 850 pm repayments which to be fair is near the rent obtainable.
Thats only one gaff though, wth another couple at 250-270k, the majority are well overpriced at 300k and beyond.

321654

gurramok wrote: »

Give us an example! Are you renting..
A - by yourself
B - shared
C - an apt/flat
D - house
E - compare sizes of accomodation

I checked Phibsboro there, cheapest without need of refurbishment seems to be a 1bed apt above shops recently reduced to 230k which is around 850 pm repayments which to be fair is near the rent obtainable.
Thats only one gaff though, wth another couple at 250-270k, the majority are well overpriced at 300k and beyond.

To tell you the truth im sick of rooting through property sites right now. I just get pissed off while im waiting for the market to turn.
Im not going to go rooting through the property sites again to post here. There are hundreds of examples of that you can find of this all over dublin if you look properly on myhome or daft. Its not like they are hidden or anything.

johnnyskeleton

321654 wrote: »

To tell you the truth im sick of rooting through property sites right now. I just get pissed off while im waiting for the market to turn.
Im not going to go rooting through the property sites again to post here. There are hundreds of examples of that you can find of this all over dublin if you look properly on myhome or daft. Its not like they are hidden or anything.

He just wants one example. If you don't want to look for a new example, why don't you point us to an old boards.ie post where you have done a price v. rent comparison?

uncanny

321654 wrote: »

Im not going to go rooting through the property sites again to post here. There are hundreds of examples of that you can find of this all over dublin if you look properly on myhome or daft.

You said it's currently way cheaper to buy than to rent in both Phibsboro and Swords.

You were asked to provide some examples to back up that assertion.

So have you any evidence to back up your claim or do you just like sayin stuff?

Calina

I live in Swords. I'd dispute that idea with the caveat that certain property types are close to cheaper to buy than rent, eg one bedroomed apartments in Holywell. But both rental and purchase are too expensive in my opinion for the location.

spockety

What kind of mortgages are people basing this on though?

If it's more than 25 years, more than 92% LTV, or not stress tested for an increase of at least two percent in interest rates, then it's a worthless comparison.

johnnyskeleton

spockety wrote: »

What kind of mortgages are people basing this on though?

If it's more than 25 years, more than 92% LTV, or not stress tested for an increase of at least two percent in interest rates, then it's a worthless comparison.

I poked my head into one of the developments that are selling for c. €250k for a 2 bed in dublin city centre (just to see), and the buy v rent comparison was based on:

1) a 1 year discount variable rate extended for the whole term
2) 35 year term
3) 92% LTV (so the other €20k just magically appears in your savings account)
4) including TRS
5) compared against a rent of €150 more than one of the apartments as advertised (and not shifting) on www.daft.ie.

They concluded that the difference between buying and renting was €550 cheaper to buy. They didn't warn that this was only in the first few years and that the mortgage would still be hanging over you in 35 years time.

So while there are, based on skewed numbers, some properties that are cheaper to buy than to rent, I would like to see some based on actual figures. When I did my own calculations (based on the same LTV, the lowest available standard variable rate [AIB - 3.3% APR], 20 year term, ex TRS and compared to advertised rent - 100 [which I think is reasonable]) it worked out at €270 dearer to buy as opposed to renting. Given the liklihood of further drops, the potential for TRS to dry up, interest rates to increase over the next few years and the fact that most people don't want to live in an apartment for 35 years, when a prudential mortgage repayment is about €100-200 less than the market rent, then it would be fair to say that it's cheaper to buy than to rent.

321654

There are plenty to be found all over dublin if you go looking on the property websites. Im not wasting my time writing down calculations and doing lookups when anyone can just go look them up and do them yourself with their own figures.

Taking into account mortgage interest relief, rents, 25 year mortgage, stress testing interest rates, 90% mortgage etc you'll easily find them, if you want to do the maths on them yourselves.

And you'll more than likely even buy a house for 10% less than the asking price too.

I still think the gap will get bigger. Thats what im waiting for anyway.

You just have to ask yourself. How much of a deposit do you have? How much disposable income do you have? How much interst do you get on your savings? How long do you want the mortgage for? If you go for longer for safety can you overpay to bring the term down too? Are you a couple and therefore getting double mortgage interest relief? Do you even want to buy or continue renting? How much can you get off the price of a house you are looking at? Too many variables for me to factor in for everyone. We're all different. Some have savings, some have none.

So you'll just have to work it out for your own situations.

johnnyskeleton

321654 wrote: »

There are plenty to be found all over dublin if you go looking on the property websites. Im not wasting my time writing down calculations and doing lookups when anyone can just go look them up and do them yourself with their own figures.

Well I've done the calculations and found that renting is cheaper than buying. It's up to you to show otherwise; it is not for us to prove a negative by showing that renting is cheaper than buying for every property.

If you can't show it, (and really it will only take 5 minutes out of your life to give us an example) then you can't simply state that it is true. I haven't easily found any such properties, so I'm asking you to help me find them.

321654

johnnyskeleton wrote: »

Well I've done the calculations and found that renting is cheaper than buying. It's up to you to show otherwise; it is not for us to prove a negative by showing that renting is cheaper than buying for every property.

If you can't show it, (and really it will only take 5 minutes out of your life to give us an example) then you can't simply state that it is true. I haven't easily found any such properties, so I'm asking you to help me find them.

As I said. Its different for everyones circumstances. Im not going to go through all the permutations for you.

Its not a pissing contest. I dont really care if you believe me or not. Anyone can just run the numbers for their own circumstances (and im hardly going to tell you mine on a public firum). Its not like its hard or anything for them to do it themselves is it.

surely im not the only one who has noticed this trend. I bet if you have the time to search boards you'll find others who have noticed it.

Did a quick search and found this thread. There are some more too.
http://www.boards.ie/vbulletin/showthread.php?t=2055424824

Some worked examples in there alright, but rents have fallen and interest rates have fallen since then. So you would have to do the calculations again.

And johnnyskeleton i see you in there yourself too, so you knew exactly where it was. And i see you tried everything you could to bend the figures a few times and picking worst examples to suit your own argument.

But as i said, circumstances for everyone will be different and you can only work out your own. So everybody should do their own maths on it.

johnnyskeleton

321654 wrote: »

As I said. Its different for everyones circumstances. Im not going to go through all the permutations for you.

It's a simple calculation - find a property where the cost of buying is cheaper than the cost of renting. The only factor that varies with personal circumstances is TRS. I don't think TRS should be included, but if you like you can include it at the rate of double TRS (i.e. the maximum benefit to the purchasing property side).

321654 wrote: »

Its not a pissing contest. I dont really care if you believe me or not. Anyone can just run the numbers for their own circumstances (and im hardly going to tell you mine on a public firum). Its not like its hard or anything for them to do it themselves is it.

surely im not the only one who has noticed this trend. I bet if you have the time to search boards you'll find others who have noticed it.

The fact that I am quite pessimistic about the prospects of purchasing property at the moment does not alter the fact that I try to look at it with an open mind. If you can find a property that is genuinely more affordable to buy than to rent I really would like to see it. I think on basic numbers you probably can make a skewed argument (as above with the new development that I posted about), but if you take all factors into consideration, most house prices need to drop further.

Equally, I don't want this to be a pissing contest, I want it to be a rational debate on house prices. For this, we need to look either at statistics or real world examples. As can be seen below, I don't want to work out the figures because I'll be accused of trying to skew them. Whenever I do work out the figures I am accused of this, and my views are dismissed out of hand. Therefore, the only way we can discuss this rationally is if you provide the example. I am open to saying that I am wrong if it transpires to be the case. If nothing else, it will narrow down the real issues of controversy.

321654 wrote: »

Did a quick search and found this thread. There are some more too.
http://www.boards.ie/vbulletin/showthread.php?t=2055424824

Some worked examples in there alright, but rents have fallen and interest rates have fallen since then. So you would have to do the calculations again.

At the time of that thread, renting made more sense than buying. The only argument for buying ignored the possibility of further price drops.

321654 wrote: »

And johnnyskeleton i see you in there yourself too, so you knew exactly where it was. And i see you tried everything you could to bend the figures a few times and picking worst examples to suit your own argument.

I resent this. Firstly, I asked KhanTheMan to select the property or property type, and when this wasn't forthcoming, I chose a random example. I am now asking you to choose an example and we can look at it. Secondly, just because I refused to use bubble calculations of 35 year terms, indefinately low interest rates, ignoring incidental costs, presuming capital appreciation and ridiculous rents does not mean that I bent the figures. If anything I straightened up the figures. Thirdly, and this is the most important of all, no one who advocates buying seems willing to put up their own analysis. If you do what I did in that thread and show that buying works out cheaper than renting (using realistic mortgages and accounting for all incidental and opportunity costs) I might change my views. But you can't accuse me of being unfair when you refuse to set out your own argument.

For what its worth, I deliberately chose a type of property that would fall into the "average" bracket, have relatively high rents and not be absurdly priced.

321654 wrote: »

But as i said, circumstances for everyone will be different and you can only work out your own. So everybody should do their own maths on it.

Of course I agree with this, and let's be clear - anyone who decides to buy or not to buy based on the views expressed in an anonymous internet forum is acting extremely foolishly. But as this is a public forum, people can come in, see what people have said and make their own minds up. You have made comments that it is cheaper to buy than to rent in many areas. Now I am the last person who would ask you to reveal your own personal circumstances, but I don't think asking you to find an example of what you are talking about in general terms is asking too much. Do you want to even pick a certain type of house, shall we say 3 bed semi in Tallaght? Or 2 bed in city centre? 4 bed period redbrick? The choice is yours.

Blackjack

johnnyskeleton wrote: »

Do you want to even pick a certain type of house, shall we say 3 bed semi in Tallaght? Or 2 bed in city centre? 4 bed period redbrick? The choice is your.

I don't expect you will receive an example to be honest.

gurramok

I remember that thread. When KhanThe Man was challenged to provide examples, all one got was nothing in evidence, surprise surprise

uncanny

321654 wrote: »

There are plenty to be found all over dublin if you go looking on the property websites. Im not wasting my time writing down calculations and doing lookups when anyone can just go look them up and do them yourself with their own figures.

So you have no examples then. Grand.

jmayo

Hey anybody spot this in Indo.

http://www.independent.ie/national-news/farce-as-just-four-apply-for-home-loan-1641170.html

It seems the government FTB Home Loan scheme only had 4 applications.
So much for the bail out the develoeprs scheme.

Also does anyone know if the EU are any closer to slapping the governments wrist for this uncompetitive bailout for developers ?

oceanclub

jmayo wrote: »

Also does anyone know if the EU are any closer to slapping the governments wrist for this uncompetitive bailout for developers ?

The EU received 250 submissions against the bailout - a considerable number from Property Pinners - and are taking it very seriously, according to one MEP.

P.

Sarn

This may help give a rough idea on whether or not it is better to buy or rent. Just adjust accordingly.

Is it better to buy or rent?

bobbiw

Prices are set to tumble. With no real economy and a total dependence on the US, Ireland is in deep trouble.

There is a strong chance that houses in dublin will be sub 100k in the next few years.

There will be no FTB because there will be no jobs,

blast05

There will be no FTB because there will be no jobs,

Why do people make statements like this as if they were facts?
Lets face it, no one knows what will happen just like no one really saw what is after happening. Maybe it will be the worst case scenario and we will have 30% unemployment and a 10 year depression; or maybe the trillions of dollars of cash being pumped into the US economy and throught Europe and elsewhere will have a positive knock-on effect in Ireland whereby while we will have tax rises and will have public sector reform, the money may nonetheless trigger a recovery here by mid next year ........ and maybe even we will find ourselves in the middle of another property bubble in 10 to 15 years time cos we didn't learn the lessons.
Bottom line, no one knows so lets all stop presenting the future scenarios as any other than opinions.

Calina

blast05 wrote: »

Why do people make statements like this as if they were facts?
Lets face it, no one knows what will happen just like no one really saw what is after happening.

I'd like to point out out that a lot of people saw a major problem with the property market in Ireland looming over the past four years. What we might not have seen was the financial markets collapsing.

The issue about FTBs could be nuanced slightly. There are plenty of them around. But they aren't buying. For the past few years it's because they couldnt' afford to. Now it's because they don't desire to even if they can afford to because of uncertainty about both prices and employment stability. They will always exist; the question is whether they will have the money.

We could however plan to avoid another stupid asset bubble - education would be good at school level, for example. Judicious legislation in the rental market would be useful too, and a sliding taxation scale to prevent short term strategies. The most damaging thing for property over the past 4 or 5 years in Ireland has not been the average owner occupier, but the average would be investor. Too many flippers I think and not enough actual investors. If you knew that CGT on a flipped property would be 80% for sale within 5 years of purchase, how many people do you think would be flipping?

I actually think that property is still on a downward trend because it's out of kilter with salary levels and, additionally, an awful lot of it is built in the wrong place or badly. Apartments are virtually unsaleable in a lot of parts of Dublin and I see some of that still to half which is a scary thought since some of it is down a third already. Two bedroom apartments in non-prime locations of Dublin (ie outside D4, Blackrock, D3 and D6, for examples) should not be costing upwards of 10 times average salary but in Swords, in early 2006, one bedroomed apartments cost nearly 300,000E and the two bedroomed apartments had asking prices of up to 360K at one stage also.

In an ideal world, a one bedroomed apartment in north county Dublin could be justifiably two and a half times a slightly below average salary. Affordable to someone on 35,000E...

But they still aren't and until they are I think the dust won't be close to settling. The ECB is not a fan of inflating its way out of trouble in the way the Fed and the Bank of England are trying to do. So we are currently not in a position to do this either.

It remains to be seen what the future holds but it's fairly clear that an influx of FTBs into the market won't be on the cards for another little while yet absent a cliff fall in the price of starter homes.

rockbeer

blast05 wrote: »

just like no one really saw what is after happening.

With respect, many of us who understood both the fundamental contradictions that lie at the heart of the capitalist economic model and the particular economic conditions that have resulted from the recent deregulation of the financial markets did see this coming from a long way out.

As always, it's difficult to say with certainty what lies ahead, but there are certainly strong grounds for believing that the printing of trillions of dollars in cash to pump into the world's major economies is recklessly irresponsible and stands a good chance of making a bad situation worse.