Housing Bubble Bursting

A Random Walk

nesf wrote:

But the program was unbalanced and sensationalist

It was both of those things, but for once it was unbalanced and sensationalist on the other side of the argument to the property VIs - which is why it has come as such a surprise to many people. Eventually we will find a balance - I thought the Prime Time followup was a good example, where we didn't have the usual "debate" between two economists from property companies discussing whether house prices would increase by 10 or 20% the next year.

conor_mc

SkepticOne wrote:

MyHome.ie have a report trends in asking prices. The only sector where asking prices are still rising is new 3 bed semis.

http://www.myhome.ie/advice_news/pdf/barometer_q1_2007.pdf

Looks like the peak in asking prices was about mid 2006. We are beginning to see some of this coming through in the ESRI reports.

They had the CEO of myhome.ie on Newstalk this morning. They introduced the item by saying good news! property has risen over 40% in the last three years..... that smacked of desperation to me. It's a sales pitch to reduce the fear of negative equity and combat the 30% drop scenario outlined in the future shock program.

Anyway, the long and short of it was still a 3% drop in asking prices in Q1 2007.

joemc99

To all the boards experts out there, what is the definition of 'a crash'. 15%, 30%, 50%, 90%? As most of you seem to be FTBers, at what point do you get into the market? Surly, after a certain percentage decline, property becomes attractive again.

Remember, a 30% decline will only leave us back to ~ 2004! As the boom has been happening since mid-1990s, surly you would be mad to get into the market at 30% decline. By your definitions, the best time to get in would be pre-boom time numbers, never going to happen eh. Are you all hanging on for that €60,000 victorian townhouse in Rathmines?

IMO, I can see the market decline 10% (almost there) -> 25% MAX (worst case) over the next couple of years.

SkepticOne

joemc99 wrote:

To all the boards experts out there, what is the definition of 'a crash'. 15%, 30%, 50%, 90%? As most of you seem to be FTBers, at what point do you get into the market? Surly, after a certain percentage decline, property becomes attractive again.

Except in a bubble scenario. In a bubble property is attractive on the way up and unattractive on the way down. People will wait until they feel there is no more downside before getting in. The mere fact that prices are falling will put people off buying, just like the fact that prices were rising (during the first half of) last year meant that people felt under pressure to buy. The same psychological factors are at play, only in reverse.

Zambia

joemc99 wrote:

To all the boards experts out there, what is the definition of 'a crash'. 15%, 30%, 50%, 90%? As most of you seem to be FTBers, at what point do you get into the market? Surly, after a certain percentage decline, property becomes attractive again.

Remember, a 30% decline will only leave us back to ~ 2004! As the boom has been happening since mid-1990s, surly you would be mad to get into the market at 30% decline. By your definitions, the best time to get in would be pre-boom time numbers, never going to happen eh. Are you all hanging on for that €60,000 victorian townhouse in Rathmines?

IMO, I can see the market decline 10% (almost there) -> 25% MAX (worst case) over the next couple of years.

I would say 30% is a crash

Zambia

At this piont i would like to welcome any newbies to this Forum As I did notice a lot of new activity on this thread ( the mother load). And a good few new threads some quite new , like the one where someone wants to know should he puill out of a purchase of an Apartment in Lucan.

As well as the Poll on buying Vs Renting.

A Random Walk

Once rental yields get back to at least 8/9% the market will be in equilibrium (real investors will think about re-entering the market). Whether that happens through drops in prices or stagnant prices for 10 years, that's where my money is going as regards the drop. That would equate to houses being worth 50/60% less in the medium term future.

SkepticOne

conor_mc wrote:

Anyway, the long and short of it was still a 3% drop in asking prices in Q1 2007.

Equating to around 12.5% for the year assuming the trend does not continue to accelerate. As someone pointed out on another forum, asking prices tend to under-represent real prices on the way up, but over-represent on the way down.

daveirl

This post has been deleted.

A Random Walk

A Random Walk wrote:

Once rental yields get back to at least 8/9% the market will be in equilibrium (real investors will think about re-entering the market).

I reckon you have that correct - maybe not as high a yield as 9% (but maybe thats the kind of yield that would be needed to pull us out of the downward spiral)

The market was driven by speculation and not by first time buyers so it would make sense for it to be restarted by investors again.

Raskolnikov

daveirl wrote:

This post has been deleted.

Try Video LAN for Linux, plays windows media files on Linux for me just fine.

nesf

A Random Walk wrote:

It was both of those things, but for once it was unbalanced and sensationalist on the other side of the argument to the property VIs - which is why it has come as such a surprise to many people. Eventually we will find a balance - I thought the Prime Time followup was a good example, where we didn't have the usual "debate" between two economists from property companies discussing whether house prices would increase by 10 or 20% the next year.

I agree, it was a welcome change from the sets of property bulls trying to out do each other's predictions of growth. The Prime Time thing wasn't so much a debate as it was like watching a committed theist and a committed atheist talking to each other, neither seemed to actually respond to the others point rather they talked more about their own position. But again, a welcome change.

Raskolnikov

SkepticOne wrote:

MyHome.ie have a report trends in asking prices. The only sector where asking prices are still rising is new 3 bed semis.

http://www.myhome.ie/advice_news/pdf/barometer_q1_2007.pdf

Looks like the peak in asking prices was about mid 2006. We are beginning to see some of this coming through in the ESRI reports.

The hypocrisy of the guys in that report is incredible! They claim several times that the downturn in the market is due to uncertainty over stamp duty. They then claim that this will be sorted out in hte coming Budget at the end of this year.

Why then, are they telling people to buy now, if prices are going to remain stagnant/negative until the stamp duty issue is resolved in the Budget?

daveirl

This post has been deleted.

soma

seamus wrote:

2 Bed Apartment to rent on Adelaide Road: http://www.daft.ie/24517
€2,175/month

Just around the corner, 2 bed apartment to Buy on Harcourt Green: http://www.daft.ie/119594
~€2,200/month mortgage.

Not only are you not comparing like with like, but you ever so conveniently left out the small matter that, as a first time buyer, in order you qualify for that 2,200/mth mortgage you'd have to have

(a) an 8% deposit of 42k
(b) stamp duty of 31k
(c) and after laying out the 73k in cash above, then you have to sign up to a 35 year mortgage while ECB rates are still low.

But then there's a twist. The "2,200" repayment shown on the daft page is completely misleading. They are quoting you a capital amount of 478k (meaning you paid an 8% deposit) but are calculating the repayment based on a LTV of 80%, but the LTV is only 92% as you've only paid a deposit of 8%.

To really qualify for this LTV rate, you'd have to be laying out a deposit of 104k.

So now that you don't qualify for the 80% LTV, take an average standard variable (no 'teaser' rates please) of roughly 5%, and your 92% mortgage comes in at about €2400/mth before any interest rate fluctuations (altho on the bright side you get to knock off mortgage interest relief).

In your first monthly payment, you will pay aprox €2000 in interest alone (before relief), also known as paying rent to the bank.

Would you like to re-examine your theory that rental & mortgage costs are converging in Dublin?

daveirl

This post has been deleted.

nesf

daveirl wrote:

This post has been deleted.

Tried Xine? http://xinehq.de/

indiewindy

conor_mc wrote:

Funnily enough, I don't see Jim Power as a vested interest - Friends First aren't involved in property.

I don't agree with his opinion, but at least he has tried to quantify his argument (re age demographic, inward immigration etc) with figures.

Unlike others who talk about "strong fundamentals" without telling us exactly what those fundamentals are supposed to be.

Still, it was funny watching Morgan Kelly get so frustrated with the absolute denial on the other side - I've felt like this so many times in pub conversations that I've just had to pin me trap shut before I say something I shouldn't!!!

Jim Power who works for Friends First who make quite a large amount of money out of mortgages each year, I would have thought would be heavily involved in property.

niall2j

indiewindy wrote:

Jim Power who works for Friends First who make quite a large amount of money out of mortgages each year, I would have thought would be heavily involved in property.

Friends First don't do mortgages, at least not residential ones anyway

aphex™

niall2j wrote:

Friends First don't do mortgages, at least not residential ones anyway

They do property investment, including parts of Grafton Street. They have investments in commercial developments around the country, some of which have residential aspects to them.

Not to mention people stop spending as much when in negative equity driving business rental down.

conor_mc

aphex&#8482 wrote:

They do property investment, including parts of Grafton Street. They have investments in commercial developments around the country, some of which have residential aspects to them.

Not to mention people stop spending as much when in negative equity driving business rental down.

Didn't know that, to be honest.

Although I made the point on another forum that they are reliant on Ireland doing well overall, and that since Ireland and the property market are virtually inseperable at the moment they do have an indirect interest in pumping the property market.

niall2j

But, like I said, they don't "do mortgages".

I saw the debate, thought it both interesting and informative, presenting a balanced set of opinions for me to consider. I don't think the argument Mr. Power put forward betrayed him as an industry "cheerleader" any more than I believe a UCD Ecomonics Professor desperately wants the market to bomb.

patrickolee

gurramok wrote:

One thing Morgan has pointed out that was not mentioned in Future Shock, over 200,000 non-holiday home properties lying idle including 60,000 newly built since '02 and nearly 40,000 vacant in Dublin area alone, most of them probably held by speculators.

This one makes me laugh... jumping from the fact that there was nobody registered in a particular house on the night of the census to the fact that the property is vacant. There are lots of reasons why a house may appear empty on the census. For example my next door neighbours house would have been counted as one such. He did not want to be counted for his own welfare reasons and just did not answer the door to the census person. Census person called loads of times and he was in... but didn't answer. So you can reduce that 40,000 to 39,999 anyway! I dare say there were quite a few other false 'empty's.

tHE vAGGABOND

I dare say there were quite a few other false 'empty's

we were out to dinner, form is still at home - so take another one off

The_Conductor

I live in a gated complex. It was only after I was curious as to why I didn't have a form and contacted the CSO that I was given the contact details for the local enumerator. She explained she had not delivered forms to the 23 houses and apartments in here at all, as she couldn't get in. I personally delivered all 23. There are more than 400 such gated units in Lucan alone. I wonder how many of those didn't get counted?

That said- there are 4 vacant properties in here (out of 23)- because the landlords couldn't be arsed renting them out. One of them has just been put on the market (for the third time in 6 months, it failed to sell on the other two occasions). Asking price is now reduced to 289k from 350k (mind you 350k may have been a bit optimistic for a 2 bed in Lucan village, even if the location is good).

One new landlord in here is in trouble with the PRTB over trying to increase the rent to cover interest rate rises.

Fr0g

daveirl wrote:

This post has been deleted.

I have this in mp3 if you want it. Where can I upload?

Zambia

smccarrick wrote:

That said- there are 4 vacant properties in here (out of 23)- because the landlords couldn't be arsed renting them out. One of them has just been put on the market (for the third time in 6 months, it failed to sell on the other two occasions). Asking price is now reduced to 289k from 350k (mind you 350k may have been a bit optimistic for a 2 bed in Lucan village, even if the location is good).

I would say even about 10,000 vacant properties coming on line in a short period off time would lead to a drop in prices. As we have seen on Daft Watch its gone up by 10,000 across the country and as a result there has been price drops in the region of 40,000

aphex™

patrickolee wrote:

I dare say there were quite a few other false 'empty's.

The CSO said in such cases the enumerator would have asked around with the neighbors to see if the house was vacant temporarily or permanently. They stated this in the Independent article ages ago when this issue first came to light. In such a case his home would not have been counted as one of the permanently empty homes.

Do-more

joemc99 wrote:

To all the boards experts out there, what is the definition of 'a crash'. 15%, 30%, 50%, 90%? As most of you seem to be FTBers, at what point do you get into the market? Surly, after a certain percentage decline, property becomes attractive again.

Remember, a 30% decline will only leave us back to ~ 2004! As the boom has been happening since mid-1990s, surly you would be mad to get into the market at 30% decline. By your definitions, the best time to get in would be pre-boom time numbers, never going to happen eh. Are you all hanging on for that €60,000 victorian townhouse in Rathmines?

IMO, I can see the market decline 10% (almost there) -> 25% MAX (worst case) over the next couple of years.

Ask yourself this question, now that prices are shown to have begun falling, do you hear many people saying "great, we're going to jump in here and buy"?

More likely you'll hear, "we are going to wait and see what happens, and if prices start to rise again, we are ready to move quickly"

With everybody sitting on the sidelines and more and more property comes on the market as some speculators try to exit and developers try to finish what they have in the pipeline asap, a dutch auction is going to ensue with prices dropping further and further. Throw in a couple of interest rate rises to put off buyers even more and it's not hard to see a 30% drop as best case scenario.

Start throwing in repossesions (from speculators or poor unfortunates who have been made redundant) being sold at auction with no reserve and things will spiral down further. Remember Davy stockbrokers are already forcasting a large rise in unemployment by the end of this year.

If I look at "highest achieved sale prices" versus "inherant underlying value" (IMO) in properties around me then a 50% drop is certainly possible.

In the case of many of the ghost estates of the North and West Midlands and the West of Ireland it is hard to establish any inherant underlying value at all!

patrickolee

Do-more wrote:

Ask yourself this question, now that prices are shown to have begun falling, do you hear many people saying "great, we're going to jump in here and buy"?

Have you ever seen a herd of sheep as they are chased by a dog? Or a shoal of fish chased by a seal?

Cast your mind back to September 2001. Everybody was saying that it was the end of air travel as we knew it as people opted not to fly on holiday and waited to see if any more terrorist acts happened. Naturally enough. Airplane (and airline) prices plumetted. While all the airline bosses were panicking and cancelling their Boeing orders Michael O'Leary realised that people would still need to fly in the future and people would relax after the initial panic. He negotiated a deal to buy a brand new half price fleet of airplanes!

Moral of the story, if you can keep your head while others lose theirs...everyone will hate you :-)

Do-more wrote:

With everybody sitting on the sidelines and more and more property comes on the market as some speculators try to exit and developers try to finish what they have in the pipeline asap, a dutch auction is going to ensue with prices dropping further and further. Throw in a couple of interest rate rises to put off buyers even more and it's not hard to see a 30% drop as best case scenario.

Start throwing in repossesions (from speculators or poor unfortunates who have been made redundant) being sold at auction with no reserve and things will spiral down further. Remember Davy stockbrokers are already forcasting a large rise in unemployment by the end of this year.

If I look at "highest achieved sale prices" versus "inherant underlying value" (IMO) in properties around me then a 50% drop is certainly possible.

In the case of many of the ghost estates of the North and West Midlands and the West of Ireland it is hard to establish any inherant underlying value at all!

Well you're able to repeat what was in a television programme anyway! Way to go on the memory.