Housing Bubble Bursting

HashSlinging

Zambia232 wrote:

How do you find that out , purely out of interest.

Page 5 of the Property section in the indo.

joemc99

HashSlinging wrote:

Page 5 of the Property section in the indo.

Thats funny, look at page 8 in the main indo pages, 4 out of 6 sold. I think they got it wrong there.

RuggieBear

nesf wrote:

680K? :eek:

Just hope the landlord doesn't see it and try and sell the place from under me

nesf

RuggieBear wrote:

erm...just as a little sidenote:

just checked on myhome.ie and the asking price forone of the neighbours houses (literally exactly the same as the one i'm renting) is 680k not the 500k i reckoned.

Insane!

680K? :eek:

iguana

smccarrick wrote:

I do not think that its a case of pessimism or schadenfreude here on this thread- after all everyone is affected by our run-away economy, whether it registers with them or not. How many people took out capital release mortgage top-ups on their revalued homes in the good times and now have to repay at higher interest rates? Schadenfreude means to happiness or glee at other people's misfortune. Its not other people misfortune though- its all of ours, regardless of whether we own property or not. We are all in the same boat. Perhaps in different situations and circumstances, but by god, we are all in the same boat, and the boat is hitting choppy waters.....

It's not really going to affect me or much of my family and I just feel sad about the whole thing. In fact I welled up a little during the programme, though I'm putting that down to worsening pms.

The equity release issue is a good point and one that isn't being mentioned much. People who should be heading for or enjoying their retirement are going to find themselves owing close to the entire value of their homes and paying higher repayments as interest rises.

And I also believe a lot of people who believe a crash will allow them to finally buy a house aren't looking at the whole picture either. Interest rates will be higher so houses won't necessarily be more affordable. And if employment is badly hit then their jobs may not be safe. Though at least they will be freer to emmigrate than people stuck with negative equity.

chump

nesf wrote:

What kind of response was that? Create a straw man using internet discussion and conveniently ignore print and media discussion about the market in the past decade

Not conveniently ignoring anything. The arguments put forward on the internet forums and sites 6odd months ago are the same arguments that are being put forward belatedly in the print/media at the moment.

nesf wrote:

, make out that you are called a doom monger because you don't tow some party line or another and then put in a bitter little bit at the end about the ungodly profits made by people in the last decade?

Not bitter, just stating a personal opinion. The banks/developers extracted every penny they could out of the public, as is their prerogative. Do you not believe they were full of glee when making these profits?

nesf wrote:

People have been guessing that the market will turn for a good many years, the only reason you've seen an increase in posts online in the past 6-9 months is because interest rates have been climbing and your average punter has slowly been realising that it's possible for the ECB to rise rates.

Rates are the biggest single factor in what is happening at the minute. People were blinkered into believing ultra-low rates were here to stay, and so we have the problem. So people talking about rising rates, lower affordability, and the very real possibility of a price contraction in your book = GUESSING. It may be a simple argument, but that doesn't mean it isn't correct.

nesf wrote:

It doesn't change the fact that predictions of a crash have been around for much longer. It's been the same story with the bulls, if that makes you feel any better. They've been guessing that the market will keep going up for the past decade too, they just won the coin toss.

Again, of course there have been predictions of a crash - there always will be, always are - likewise with a bull-market. The point is, in case you've missed it - there has been a huge increase is bearish sentiment because as predictions/figures/facts/stats have been released the argument towards collapsing prices in being continually vindicated.

People are looking at the facts and concluding.
Of course there is uncertainty and doubt, and their opinions are hardly anything more than that - an opinion.


Perhaps it is a guess insofar as there is not "enough evidence to make a definite judgment". But you can't just dismiss any and every prediction of a future event by calling it a 'guess' - if it was that easy to debate a topic why would any of us bother.

mathie

chump wrote:

Not conveniently ignoring anything.

Not bitter, just stating a personal opinion.

Just an observation but when people lie they tend not to use words like "I am" or "I'm"

They try to distance themselves from the statement by not using those words.

Again JUST an observation!
M

chump

mathie wrote:

Just an observation but when people lie they tend not to use words like "I am" or "I'm"

They try to distance themselves from the statement by not using those words.

Again JUST an observation!
M

An excellent observation too

I need a lie down myself now anyway. The glee is getting to me Later

ixoy

iguana wrote:

And I also believe a lot of people who believe a crash will allow them to finally buy a house aren't looking at the whole picture either. Interest rates will be higher so houses won't necessarily be more affordable. And if employment is badly hit then their jobs may not be safe. Though at least they will be freer to emmigrate than people stuck with negative equity.

True enough. I did a quick test there - a 300K mortgage, over 30 years at 5% interest rate would be €1650.
If the house price fell by 20% but interest rates rose by 2% then the monthly repayment would be €1597 - hardly a great "bargain" post a crash.

Don't know how likey such an interest rate hike would be of course - if I'm to get a place, I'd almost certainly look to get a fix rate for 3-5 yrs.

conor_mc

mathie wrote:

Just an observation but when people lie they tend not to use words like "I am" or "I'm"

M

They use phrases like "sound fundamentals" and "soft landing"......

eirmail

ixoy wrote:

True enough. I did a quick test there - a 300K mortgage, over 30 years at 5% interest rate would be €1650.
If the house price fell by 20% but interest rates rose by 2% then the monthly repayment would be €1597 - hardly a great "bargain" post a crash.

Don't know how likey such an interest rate hike would be of course - if I'm to get a place, I'd almost certainly look to get a fix rate for 3-5 yrs.

"I can't see myself jumping in to buy houses if they drop by 20 percent and if interest rates rise by 2 percent . It will still be cheaper to rent."

What is the knock on effect if EVERYONE thinks like this. ->Nobody buys once prices drop by 20 percent and interest rates rice by 2 percent -> What is the knock on effect of this -> Prices drop by MORE than 20 percent!!

nesf

chump wrote:

Not conveniently ignoring anything. The arguments put forward on the internet forums and sites 6odd months ago are the same arguments that are being put forward belatedly in the print/media at the moment.

I said it already and I’ll repeat myself here again. A multitude of arguments spanning many, many possible futures were put forward on the internet forums and sites for the past 12 months and a small number of them turned out to be “accurate” and are being belatedly put forward by the media at the moment as you put it. If the market turned up at Christmas for some bizarre reason and started to pick up again you could make the exact same statement. By chance some of them will always be accurate.

Look at it this way, read through this thread. You’ll find arguments for 20% crashes, 50% crashes, slow downs, nominal increases but real decreases, soft landings and a bounce back after the election etc. In six or twelve months I could easily come back, pick the ones that were in some way accurate and laud them as prophetic.

chump wrote:

Rates are the biggest single factor in what is happening at the minute. People were blinkered into believing ultra-low rates were here to stay, and so we have the problem. So people talking about rising rates, lower affordability, and the very real possibility of a price contraction in your book = GUESSING. It may be a simple argument, but that doesn't mean it isn't correct.

Again, of course there have been predictions of a crash - there always will be, always are - likewise with a bull-market. The point is, in case you've missed it - there has been a huge increase is bearish sentiment because as predictions/figures/facts/stats have been released the argument towards collapsing prices in being continually vindicated.

Again, see above. Firstly, when I say guessing I don’t mean flipping a coin and picking a side. Educated guesswork is still educated guesswork no matter what way you wish to turn it. Secondly, most of the sentiment is retrospective rather than anything else. This isn’t a bad thing, but the change in mood came with the continued march of interest rates upwards it wasn’t prophetic. No argument was “continually vindicated”, an argument from among many happened to seem to be correct, now people want to attribute it prophetic powers in that it will continue to be correct.

chump wrote:

People are looking at the facts and concluding.
Of course there is uncertainty and doubt, and their opinions are hardly anything more than that - an opinion.

Perhaps it is a guess insofar as there is not "enough evidence to make a definite judgment". But you can't just dismiss any and every prediction of a future event by calling it a 'guess' - if it was that easy to debate a topic why would any of us bother.

See, I don’t dismiss arguments because they are guesses and that’s where you and I differ. I don’t believe in prophesy when it comes to the markets, only good guesswork. The thing is, like poker, just because the odds are stacked on your side doesn’t mean the next card that will fall will be a diamond and unlike poker, the rules of the game, number of cards etc change with every hand.

homah_7ft

mathie wrote:

Why what were they saying?

It was people ringing into Liveline to complain that their houses aren't selling. Most of them were blaming the uncertainty over stamp duty.

jobless

homah_7ft wrote:

It was people ringing into Liveline to complain that their houses aren't selling. Most of them were blaming the uncertainty over stamp duty.

poor Joe will be getting a lot more phonecalls in the coming months when the **** really hits the fan!

Zambia

jobless wrote:

poor Joe will be getting a lot more phonecalls in the coming months when the **** really hits the fan!

I listened to it after the post was not really impressed

but look at this

http://www.rte.ie/business/2007/0420/election.html PD - Stamp Policy

ixoy

Zambia232 wrote:

http://www.rte.ie/business/2007/0420/election.html PD - Stamp Policy

Are most FTBs suddenly rich and able to buy places over 317K? How is it an issue for them?

Is there not a danger also that those people selling at the threshold of 317K, to entice FTBs, will just push their price up when the limit goes higher?

nesf

ixoy wrote:

Are most FTBs suddenly rich and able to buy places over 317K? How is it an issue for them?

Is there not a danger also that those people selling at the threshold of 317K, to entice FTBs, will just push their price up when the limit goes higher?

FG/Lab are offering similar with their 450K limit for FTBs (iirc).


On one side it's not that bad an idea since FTBs tend not to have a whole lot of cash to throw around anyway it'd be highly unlikely that prices would simply increase up to the new limit. On the other side, you're right, all those 317K properties would probably jump by 10 or 20K at the very least.


That said, this could all be electioneering and nothing might be done at all about it (which is probably the most likely scenario, at least in the short term).

Zambia

nesf wrote:

FG/Lab are offering similar with their 450K limit for FTBs (iirc).

So effectivly all Parties are offering this or some carrot in the future so who is going to buy property till after the election.

gurramok

nesf wrote:

FG/Lab are offering similar with their 450K limit for FTBs (iirc).

On one side it's not that bad an idea since FTBs tend not to have a whole lot of cash to throw around anyway it'd be highly unlikely that prices would simply increase up to the new limit. On the other side, you're right, all those 317K properties would probably jump by 10 or 20K at the very least.

Hence its a policy to appease sellers of high priced houses who haven't the sense to know that super high prices are the primary cause of why they can't sell their house.

Solution is not abolishing stamp duty but rein back prices to sensible levels.

This stamp duty argument has nearly zero affect on FTB's as they cannot afford to reach 317k for most of them in the first place.

As FTB's cannot buy in large due to affordability, it feeds up the housing chain, those on the 317k+odd to next duty band at 381k cannot sell their houses to upgrade to next rung in ladder as they cannot sell to FTB's on bottom rung due to super high prices.

Declining prices actually benefits most people, FTB's get more affordable housing sub 300 to suit their needs(not shoeboxes), existing sellers can trade up to next rung as the next rung of houses fall faster in ratio and within reach hence less stamp duty to pay and so on.

Speculators are the losers and rightly so.

Govt revenue will lose out on declining prices so solution there would be to rein back stamp duty levels to where they were in pre '05 so a little affordability comes back for everyone and yet the govt won't lose out that much.

Make sense now?

nesf

gurramok wrote:

Hence its a policy to appease sellers of high priced houses who haven't the sense to know that super high prices are the primary cause of why they can't sell their house.

Solution is not abolishing stamp duty but rein back prices to sensible levels.

This stamp duty argument has nearly zero affect on FTB's as they cannot afford to reach 317k for most of them in the first place.

As FTB's cannot buy in large due to affordability, it feeds up the housing chain, those on the 317k+odd to next duty band at 381k cannot sell their houses to upgrade to next rung in ladder as they cannot sell to FTB's on bottom rung due to super high prices.

Declining prices actually benefits most people, FTB's get more affordable housing sub 300 to suit their needs(not shoeboxes), existing sellers can trade up to next rung as the next rung of houses fall faster in ratio and within reach hence less stamp duty to pay and so on.

Speculators are the losers and rightly so.

Govt revenue will lose out on declining prices so solution there would be to rein back stamp duty levels to where they were in pre '05 so a little affordability comes back for everyone and yet the govt won't lose out that much.

Make sense now?

Hmm, declining house prices could (if they fell too fast) tie people into their homes via negative equity and make the trade up very difficult to achieve? It wouldn't just be speculators that would lose out.

nesf

Zambia232 wrote:

So effectivly all Parties are offering this or some carrot in the future so who is going to buy property till after the election.

The major ones anyway. Whether or not any of them act on it post-election is a different story.

ronbyrne2005

ixoy wrote:

True enough. I did a quick test there - a 300K mortgage, over 30 years at 5% interest rate would be €1650.
If the house price fell by 20% but interest rates rose by 2% then the monthly repayment would be €1597 - hardly a great "bargain" post a crash.

Don't know how likey such an interest rate hike would be of course - if I'm to get a place, I'd almost certainly look to get a fix rate for 3-5 yrs.

Mortgage rates are highly unlikely to go above 5-5.5% over next decade and even over 30 years according to bond markets. In fact you can in other EU countries get 30 year fix rates of around 5% from banks at present. The scenario you pose is highly unlikely, rates rising by so much would wreck this economy and house prices would fall far more than 20%.

gurramok

nesf wrote:

Hmm, declining house prices could (if they fell too fast) tie people into their homes via negative equity and make the trade up very difficult to achieve? It wouldn't just be speculators that would lose out.

Thats true also, i guess it depends on when they bought their house and when they intend to trade up coupled with size of mortgage.

Which it means that those especially in small apts who intend to trade up and bought recently(last 2yr i reckon) will be affected by negative equity more hence they are stuck or else they pay off more dosh to the bank if they sell to 'get out'.

nesf

gurramok wrote:

Thats true also, i guess it depends on when they bought their house and when they intend to trade up coupled with size of mortgage.

Which it means that those especially in small apts who intend to trade up and bought recently(last 2yr i reckon) will be affected by negative equity more hence they are stuck or else they pay off more dosh to the bank if they sell to 'get out'.

I'd say it'd be more widespread than just apartment (i.e. houses without many facilities/services around them would suffer similarly I imagine). No one really knows at the moment tbh, it depends hugely on a number of factors outside of our economy and very much outside of our control.

Duckjob

ixoy wrote:

True enough. I did a quick test there - a 300K mortgage, over 30 years at 5% interest rate would be €1650.
If the house price fell by 20% but interest rates rose by 2% then the monthly repayment would be €1597 - hardly a great "bargain" post a crash.

Interesting point but if you are going to pay say a given amount per month, surely it's preferable if that amount is made up of low principal + high interest than if it's made up of high principal and low interest, no?

The interest rate can always go down (especially if you're near the top of an interest rate cycle), but the principal is fixed at whatever you paid for the property.

Or am I missing something?

nesf

ronbyrne2005 wrote:

Mortgage rates are highly unlikely to go above 5-5.5% over next decade and even over 30 years according to bond markets. In fact you can in other EU countries get 30 year fix rates of around 5% from banks at present. The scenario you pose is highly unlikely, rates rising by so much would wreck this economy and house prices would fall far more than 20%.

While here some fixed 5 year and most fixed 10 year rates break 5%. I agree though, the market at least doesn't seem to think it's likely to exceed 5% any time soon. The performance of France will be a big one though.

conor_mc

ronbyrne2005 wrote:

Mortgage rates are highly unlikely to go above 5-5.5% over next decade and even over 30 years according to bond markets. In fact you can in other EU countries get 30 year fix rates of around 5% from banks at present. The scenario you pose is highly unlikely, rates rising by so much would wreck this economy and house prices would fall far more than 20%.

Surely you mean mortgage rates are unlikely to average above 5-5.5% over the next decade?

That doesn't rule out a swift shot of pain if inflation gets out of hand though. Look at the UK at the moment, they thought they were finished at 5.5 and dropped rates to 5.25 - looks like 6% might be necessary there now, and who knows how much beyond that if the inflation genie does get out of the bottle.

conor_mc

Duckjob wrote:

Interesting point but if you are going to pay say a given amount per month, surely it's preferable if that amount is made up of low principal + high interest than if it's made up of high principal and low interest, no?

The interest rate can always go down (especially if you're near the top of an interest rate cycle), but the principal is fixed at whatever you paid for the property.

Or am I missing something?

Yes, you forgot to add that with lower principal/higher interest, you get more tax relief compared to higher principal/lower interest.

The_Conductor

nesf wrote:

I'd say it'd be more widespread than just apartment (i.e. houses without many facilities/services around them would suffer similarly I imagine). No one really knows at the moment tbh, it depends hugely on a number of factors outside of our economy and very much outside of our control.

I'd agree wholly with you there- I think its far more a problem than people are willing to admit. The biggest problem for those with small apartments, along with negative equity, may be that they are totally unsaleable in any event. Those with houses will not loose as high a percentage of their equity, as quickly- houses are more desireable after all.

As for factors outside our economy and our control- how about all those polish construction workers who are renting 60,000 dwellings nationwide, upping sticks and moving to London where the construction wages are going to eclipse anything we can offer, especially with the Olympics coming up?

How about the dollar continuing to fall (we were at 1.37 briefly earlier this week, its only a matter of time before we hit 1.40 then possibly 1.50, then who knows?)

There are lots of things over which we have no control whatsoever (and not just interest rates)- things that are and will impact massively on our economy.

Think about it- private debt in Ireland now stands at 190% of GDP, the highest percentage of private debt in the world. Thats not healthy now is it.

nesf

smccarrick wrote:

I'd agree wholly with you there- I think its far more a problem than people are willing to admit. The biggest problem for those with small apartments, along with negative equity, may be that they are totally unsaleable in any event. Those with houses will not loose as high a percentage of their equity, as quickly- houses are more desireable after all.

As for factors outside our economy and our control- how about all those polish construction workers who are renting 60,000 dwellings nationwide, upping sticks and moving to London where the construction wages are going to eclipse anything we can offer, especially with the Olympics coming up?

How about the dollar continuing to fall (we were at 1.37 briefly earlier this week, its only a matter of time before we hit 1.40 then possibly 1.50, then who knows?)

There are lots of things over which we have no control whatsoever (and not just interest rates)- things that are and will impact massively on our economy.

Think about it- private debt in Ireland now stands at 190% of GDP, the highest percentage of private debt in the world. Thats not healthy now is it.

Agreed. My only issue is people's blanket predictions for houses/apartments etc. Location will be key. Apartments in the city centers versus apartments in the suburbs, houses in "commuter towns" versus townhouses. The thing is that our fundamentals are fairly strange compared the UK et al (especially the huge and rapid decrease in average household size here, we weren't starting with a healthy supply of houses to begin with).

It's going to be an unusual one. Where the ceiling for interest rates will also prove interesting. This is all fairly uncharted territory at the moment with respect to the eurozone, strengthening east etc. My worry/interest isn't so much in the housing market but the economy in general. We badly need a tightening of the belt budget wise tbh.