Housing Bubble Bursting

Sponge Bob

miju wrote:

is it just me or does that look suspiciously like an investment property

Tis indeed Miju.

Radar signal #1 . MAGNOLIA PAINT
Radar signal #2 . No pictures on the walls

KingKenny7

miju wrote:

is it just me or does that look suspiciously like an investment property

live 30 seconds from that house btw

Did the move all the furnishings out of teh room before the took the pics???

Read the sales picth and it seems like an add for Havery Normans. I am imagining that whiney Australian voice saying............

The_Conductor

House has been vacant for over a year and was rented out by the owners for several years previously. It was freshly painted 3 weeks ago- and the estate agent advises he pops in to check for post every few days........

I think the owners are running scared......

dochasach

Gurgle wrote:

Of course, but worse now because theres so much noise about it.
Everyones an expert!


Only your pride really, it wouldn't affect your mortgage.

...and your mobility, which in these days of globalisation, immigration and outsourcing is valuable to some of us.

It would also affect your ability to handle financial adversity such as interest rate hikes.

For years the risk for renters was that they would forever miss the bottom rung of the "property ladder." When that bottom rung is already out of reach for the average would-be FTB, this risk really becomes irrelevant. When that bottom rung is stable or falling towards earth, the only risk renters have is rapidly rising rent, which they can negotiate with a long term lease.

Mortgagers, need to recognize that there is also risk in their decision.

dochasach

Iristxo wrote:

I live in a new-ish very sought-after state in Knocklyon, bought three years ago, property has gone up a massive 65% since. Have been monitoring the property market ever since (quite into it) and have never seen so many properties up for sale ever, 37 in Knocklyon of 3 bedrooms and bigger, several of them in my state (normally one or two tops in my state).

I would actually considering cashing it in, renting for two years and see what the story is then... I'd say i could quite easily move to a 4-bedroom then and the interest that the bank would give me for my money would pay for the rent. Quite clever right? If you manage to sell, says he... well, my property is a bit bigger than the others going in the state and completely renovated inside... it's a showhouse actually. Of course there is a chance that we could not sell, I am aware of that. In which case, there would be no harm done really.

Clever yes. Why do you think those with lots of money, actors, rock stars, AIB bank, Barclays bank, Bank of Ireland, choose to rent when they could easily afford to "get on the ladder?" It's because there are times and places when owning doesn't make sense.

Hubbie doesn't want to though...

I'm very fortunate to be in tune with my spouse in this issue. It's easy to be in agreement when it looks like there's no top to the market and I imagine you and your hubbie will again be in agreement when it looks like there's no bottom. The uncertainty now makes it difficult. I don't envy owners. As a renter at least I have mobility, if things continue to go insane on the upside here, I can escape to somewhere where the market is flooded with property whose values have already dropped in double-digit percentages from the peak, and the peak there was a bargain in comparison to what I see here.

Gurgle

Iristxo wrote:

I would actually considering cashing it in, renting for two years and see what the story is then... I'd say i could quite easily move to a 4-bedroom then and the interest that the bank would give me for my money would pay for the rent.

Speculate on the way up, speculate on the way down :rolleyes:

You want to take out the money you made on capital appreciation and make a killing on capital depreciation?

Of course if the housing market stabilises, or worse continues to rise, you find yourself with a slowly dwindling bank account and a choice between renting indefinitely or buying a similar property to the one you have now but paying much more every month on your mortgage.

miju

Gurgle wrote:

Speculate on the way up, speculate on the way down :rolleyes:

and this is exactly what people have been saying will send the whole thing spiralling backwards with herd mentality working in reverse

Sponge Bob

smccarrick wrote:

....been vacant for over a year and was rented out by the owners for several years previously. I think the owners are running scared......

Well it couldn't be rented out becuase the Owners never registered it with the PRTB as ye Fingilissers can see from this list here

It was a case of register or sell, they sold.

KingKenny7

Thats not the case.

There are a lot of rented accomadation not registered in the seagate/citygate area. And they are still being rented out.

Iristxo

Speculate on the way up, speculate on the way down

You want to take out the money you made on capital appreciation and make a killing on capital depreciation?

Of course if the housing market stabilises, or worse continues to rise, you find yourself with a slowly dwindling bank account and a choice between renting indefinitely or buying a similar property to the one you have now but paying much more every month on your mortgage.

Oh, I am aware that it could go either way. At the end of the day it's a gamble, isn't it? And when you gamble you can win and you can loose... and you deserve what you get.

I suppose that's why hubbie doesn't want to take the risk.

alienhead

Iristxo wrote:

Oh, I am aware that it could go either way. At the end of the day it's a gamble, isn't it? And when you gamble you can win and you can loose... and you deserve what you get.

I suppose that's why hubbie doesn't want to take the risk.

a pretty big risk.... you'd really consider selling your house, rent for a few years in the hope that the market crashes and then buy a cheaper house.

maybe your hubbie's looking at your house as a "home" and not just a big casino chip.

miju

KingKenny7 wrote:

Thats not the case.

There are a lot of rented accomadation not registered in the seagate/citygate area. And they are still being rented out.

very true as we're in one of them how and ever that was one that property wasn't rented

CiaranC

alienhead wrote:

maybe your hubbie's looking at your house as a "home" and not just a big casino chip.

God forbid

dochasach

alienhead wrote:

a pretty big risk.... you'd really consider selling your house, rent for a few years in the hope that the market crashes and then buy a cheaper house.

At least the sell up renter has options, should their bet go wrong. Keep renting, geoarbitrage, move to a country where the bubble is smaller or already deflating. What escape clause is there for a 2007 BUYER who loses the bet on infinite appreciation and eternally low interest rates? ?

maybe your hubbie's looking at your house as a "home" and not just a big casino chip.

Shhh! Now you're scaring me if the average punter ever valued houses as homes and not as gambling chips, we'd see a 50% drop in selling price, even as a sellup renter, I'm not looking for financil armegedon!

Iristxo

Well next time I will refrain myself from posting stuff like this seeing as there is so many people ready to jump on their high horses (yep like you would not do it if you thought it was the right move).

I DO actually really apreciate my house and the huge effort we have put in renovating it and believe it or not I do feel a sentimental attachment to it but what's wrong with taking a gamble if I think I know what way the market is going to go and I think I can get out of it with a house, but a better one? Is it a crime these days? Oh yes I might not do it and go out preach like yourselves and that will stop the crash alright. No, hang on, what's better for the common good these days, with the prices like this the FTB can not get in the market so maybe I will SACRIFICE myself and gamble for the common good. What to do, what to do, gamble or not...

The fact of the matter is, I saved VERY HARD, for years, to get into this house and to get rid of some of the outstanding mortgage. If I am ready and willing to gamble all of that and take the consecuences for it I don't see why you guys think it's such a big crime. I might con some poor sod out of his money by selling this house for more than will be worth it in a year time? Maybe it's the other way around... and the poor sod will be the one in the best position in one year's time. No one knows... but I certainly see nothing wrong with trying to take advantage of my hunch, I'm doing nothing illegal or unethical.

dochasach

Iristxo wrote:

Well next time I will refrain myself from posting stuff like this seeing as there is so many people ready to jump on their high horses (yep like you would not do it if you thought it was the right move). ..
wrong with trying to take advantage of my hunch, I'm doing nothing illegal or unethical.

Some of us think cashing out and diversifying to preserve wealth might be a wise move. In fact some of us have already done this. Sorry if my post above implied otherwise.

i A happy renter

Iristxo

maybe your hubbie's looking at your house as a "home" and not just a big casino chip.

Hey. "Hubbie" or just plain husband here. Not big into my wife's idea but at least she has them. I'm grateful to her for always trying to improve our circumstances not for greed or one up manship or for any other ridiculous reason that the above "pearl of wisdom" suggests.

More for the reason of securing a future and making our life easier as we get older and not harder.

One point that you can't deny. If someone offered you a bigger, more modern house you would undeniably up sticks in a heart beat. The attachment to your "home" would vanish as soon as the new key landed in the palm of your hand.

In the absence of any such altruistic offers it only makes sense that one tries to work at achieving these things. And we have worked therefore it is our right to speculate if we wish.

If you are happy stay where you are fine, great good for you. Sincerely. But it is small minded in the extreme to criticise someone with a cheap shot like that just becuase they dare to think and to do something about bettering their family's situation.

PS It is human nature to better oneself. It's a type of evolution if you will. Or hadn't you noticed that the size of houses varies greatly.

On another note, you could have got 8-1 on France to do the grand slam this year. Forgot to stick a tenner on it. Damn!

Iristxo

Some of us think cashing out and diversifying to preserve wealth might be a wise move. In fact some of us have already done this. Sorry if my post above implied otherwise.

Dochasach, it wasn't about your post but thanks for posting that, appreciated! The "casino chip" thing was a bit of a nasty thing to say. That's what my reply was about...

SimpleSam06

Gurgle wrote:

Not rising rapidly != coming down

There have been a few posters, myself included, that pointed out the month on month figures show a decrease in the rate of rises, platforming in November last year. If that trend continues, houses are going to gently decrease in paper value for the coming few years. I'm not sure, but I think someone said there were reports of actual national house price decreases lately, although I didn't catch a link to that. It would however fit in neatly with the curve.

In any case, even if price rises only remain at their current rates, they are far behind inflation, so thats 40% of the demand for houses gone in a blink (investors, speculators). In fact they will flood the market looking to offload their "investments". The reason for this, to labour the point a bit, is that investors are in it purely for profit. Once the profit motive goes, so will they.

Supply goes up. Demand goes down.

However the simple laws of supply and demand don't seem to apply to the demented merry-go-round of the Irish housing market, so lets factor in another element. Where will the money come from to sustain house prices even at their current levels?

How it works is, the banks can only lend out X amount, based on your income. If interest rates rise, the banks can lend less. Banks don't magic money out of thin air, they get it from other places. Even now major financial bodies are getting very leery of giving money to Irish banks, as their exposure and risk increase. And remember we have exactly zero control over the interest rates in our country.

So if banks and lenders won't actually give FTBers the capital to buy a house at the higher prices, where will the money come from?

Simple answer is, it won't.

One way or the other, prices are going to start (continue?) dropping. As long as the ECB keeps ratcheting up the rates, prices must inevitably drop. Once that starts, the rest depends on how panicked specuvestors get. The start of 2008 is when we'll see the pop, I reckon, once the year on year figures show a drop, even the most stubborn bull will wobble for the door.

conor_mc

alienhead wrote:

a pretty big risk.... you'd really consider selling your house, rent for a few years in the hope that the market crashes and then buy a cheaper house.

maybe your hubbie's looking at your house as a "home" and not just a big casino chip.

To be fair, if someone was hoping to trade up anyway (negating the transaction cost of the "gamble" i.e. stamp duty) and had a decent dollop of equity that they could stick on deposit, the potential cost of losing the gamble isn't huge. A little bit painful perhaps, but it's not like they'd end up on the street with a hundred grand or so (or more) in the bank!

Put it this way, house prices simply can't sky-rocket again like they did in 2001 after that lull..... interest rates are going up this time round, not down. So at best, you're talking about price rises in line with inflation. Take a 450k house going up 4% a year. In two years, it'd be up 36 grand, less 10-15 grand interest earned on the cash in the bank so the loss would only be about 20k.

Alternatively, a 10% fall over two years would save them 45k and maybe a grand or so in stamp duty.

As I said, I think it's a reasonable proposition provided you intend to move house anyway, thus negating the "betting tax" of stamp duty.

Gurgle

conor_mc wrote:

Alternatively, a 10% fall over two years would save them 45k and maybe a grand or so in stamp duty.

As I said, I think it's a reasonable proposition provided you intend to move house anyway, thus negating the "betting tax" of stamp duty.

True, if you intend to move house anyway.

But if you were planning (for some bizzare reason) to sell your house, wait two years then buy it again for less than you sold it for, you would need that 10% drop in value just to break even.

dochasach wrote:

At least the sell up renter has options, should their bet go wrong.

Sure, the speculator who has made their money would be wise to take their winnings and run, selling certainly isn't as easy as it used to be.

Iristxo

I was never a speculator, not for lack of will but for lack of resources. If i want to continue in the area that I am, which is safe, and I like, a house at least 400 sq feet bigger than my current one (no point in moving otherwise) will be FOREVER out of my reach (at current prices we're talking about 800k plus stamp duty here). So my little "plot" would probably be our only choice in the short run. The other alternative is to contribute to Ireland's seemingly dwendling native population by having all my offspring in one room, which I forsee might cause hassle for me and for them in the long run in the form of endless fights because they don't have their own room. Not that that's going to kill us mind you, please no-one be nasty enough to step-in and call me little spoilt girl and a decade ago there was 5 children in one room and they were all happy and bla-bla-bla.

Anyway my point here being that I would only be looking for a bigger house for my money, something I can't achieve in the current situation, rather than making a killing profit and taking the money out of the country and running (not that I see anything neccesarily wrong with this).

But enough of my personal situation which I'm sure it's just boring for anyone other than me. To slightly contribute to the discussion I will just say that I know a couple trying to trade-up from an apartment and the bank refused to lend them the money. Their reason for trading up now being that, even though they do believe prices will come down, they think they have more to loose owning an apartment than owning a house, even if the house is of bigger value. Just a small example, not statistics or anything, but illustrates some of the points made but some people before.

pjbrady1

The very fact that there are people considering selling up and renting in the current climate (and from posters here people have already sold up and are renting), would indicate that all it will take is a national Headline of "House prices drop by 5% Nationally in last six months" to lead to it being a common story for people in valuable houses of 400,000+.

If a couple in Cork are living in a house they bought in the late 90's, early 2000's, both of them working in a large multinational who are downsizing.
Then any sane financial advisor would tell them to sell their house and rent.

This way they clear the mortgage and have large savings earning 3%+.

In summary couples in expensive houses who feel the pinch of the mortgage are going to cash in for the big bucks and enjoy a lifestyle requiring alot less income. Sell the house for 350,000.
Put aside 50,000 for rent for next few years.
Earn 3% on 300,000 = 9000 euro a year without setting a foot outside the door.

But here is the catch, when people have the aforementioned thoughts, they will want to sell immediately. If you offered them 310,000 they would snap your hand off, unless they are incredibly foolish.

When you tie it in with a likely ECB rate move by another +.25%, plus food price rises of 10%, (wait till grain rises in Autumn after biofuel plants open, twill be dear bread/pasta then) it all looks likely to pan out this way gradually over the summer. Preventing any soft landing as people cash in their assets in order to meet their monthly bills and to insure their next ten years lifestyle.

pjbrady1

Incredibly foolish of me, obviously subtract the cost of clearing the mortgage to give a couple the profit on their home.
ie sell for 450,000 - (cost to clear mortgage 200,000)
Profit 250,000.
The more valuable the house, the bigger the incentive will be. There are a surprising amount of people on average incomes living in houses worth 500,000+.

joemc99

Then any sane financial advisor would tell them to sell their house and rent.

What? That assumes that house prices are going to fall.....again, I think people would be mad to do this. We are still going to be the fastest growing economy in Europe this year. Why would you do this, potential to lose a load of money! Massive gamble, stakes are very high!

pjbrady1, are you a homeowner, if so, why aren’t you doing this? If not, how could you be experienced to talk on the subject.

And btw, Dublin is not the only world capital that is experienced this phenomenon. It is happening all over the world. Sure, you could say they are all going to fall, but Ireland is in a great shape at the moment, no need to panic yet, possible in a couple of years though!

Again, I hope the market falls by 25%, makes moving easier.

ronbyrne2005

joemc99 wrote:

What? That assumes that house prices are going to fall.....again, I think people would be mad to do this. We are still going to be the fastest growing economy in Europe this year. Why would you do this, potential to lose a load of money! Massive gamble, stakes are very high!

pjbrady1, are you a homeowner, if so, why aren’t you doing this? If not, how could you be experienced to talk on the subject.

And btw, Dublin is not the only world capital that is experienced this phenomenon. It is happening all over the world. Sure, you could say they are all going to fall, but Ireland is in a great shape at the moment, no need to panic yet, possible in a couple of years though!

Again, I hope the market falls by 25%, makes moving easier.

Keep repeating that mantra and everything will be fine!
Exports havent risen in years(in real terms and trade weighted terms) and all the growth is coming from the public sector and construction sector which every economic commentator say we are over dependent on? Theres a rude awakening coming for likes of you.
http://www.finfacts.com/irelandbusinessnews/publish/article_10004162.shtml

joemc99

Theres a rude awakening coming for likes of you.

Not for me, I'm alright Jack.

Public sector, do you mean private sector? Still major inward investment. Predicted growth of 5% a year, still the best in Europe.....

Not saying it wont happen, but it aint happening now.

miju

actually investment did fall last year as an aside the level invested was 0.024% of the total invested by Irish in overseas commercial / residential property

pjbrady1

I am a renter. (I'm only working five years and I believe property is overpriced. I intend to move abroad in three-four years.) But I'v a reasonably intelligent brain and the ability to reason with facts and some fairly conservative predictions.
Joemc99 - Most of your reply is based on hope.
You predict a super economy in a country where the previous number of years employment growth depended very heavily on construction. Ireland will be very fortunate to be classed as the fastest growing economy in Europe this year. If you are basing that on wealth statistics per person, they are useless as value of property is included. If you are basing it on GDP per person it is also pretty much useless as it includes the value of housing constructed, which in Ireland is alot higher than in Germany/France per person.

There is no chance of property falling 25%, then stagnating and allowing you to buy. A 25% drop would gradually build up to National panic even spread over a three-four year time frame.

Are we still debating whether house prices have fallen? So you think asking prices have fallen (as reported by Daft), but 100% of those people are still managing to seal the deal equal or above their asking price.

The most accurate gauge of house prices in this country is Daft.ie.
It lists asking prices, but the final selling price may be three things (a) equal, (b) over, or (c) under the selling price.
In a market where supply is building up, don't you think it will be more common that most houses will be in the (a) (c) category indicating a fall in national house prices.
Even anecdotally I have come across more people in the last three months who have successfully beaten a price down on a house than have had to pay over the asking price.

ronbyrne2005

An economy can grow by 5% by importing 5% more population.GNP growth per capita is what matters and I doubt it is rising by much more than 3%. Also economic growth doesnt equal people being better off. Most people would rather wages stayed the same and have a less stressful life through less commuting less congestion etc. The immigrant driven expansion of the economy places more strain on our already straining public services/infrastructure.