Housing Bubble Bursting

ixoy

Good points ronbyrne - it'll be very interesting to see the next batch of results when the concept of a collapse has been far more prominent than in the first.

If nothing else this thread, and others on this forum, have pushed me further towards the "rent for a year" approach. I'm worried somewhat by my reduced ability to borrow if I do hold off but I guess I have to remember that if I can borrow less then everyone else is in the same boat and, the theory goes, prices will have to adjust accordingly if they want to sell.

BTW do people think that the current interest rates are more reflective of normal rates or will a normal rate be somewhat higher again? In some ways it'd be better to be buying close to peak interest rates because, when they drop a bit, you're in a much better position than those who bought at the historically low ones.

Anyone in any doubt about prices here should click on the following links.

http://www.warrenestates.com/C216LFK.htm
http://www.daft.ie/searchsale.daft?id=236346&search=1
http://www.daft.ie/searchsale.daft?id=203397&search=1
http://www.hassett.ie/admin_PropertyBrochure.asp?p=963&n=4

Then see what you would get abroad for the same money.

soma

ixoy wrote:

BTW do people think that the current interest rates are more reflective of normal rates or will a normal rate be somewhat higher again?

Normal/neutral base rates for a central bank would be viewed in many (but not all) quarters as (very) roughly 4-5%. IRs are still low, but they are no longer ultra-low.

ronbyrne2005

ixoy wrote:

BTW do people think that the current interest rates are more reflective of normal rates or will a normal rate be somewhat higher again? In some ways it'd be better to be buying close to peak interest rates because, when they drop a bit, you're in a much better position than those who bought at the historically low ones.

ECB rates are unlikley to go much above or below 4.25% over next decade according to the money markets with an average of about 4%.

P.S Ixoy,I think you were talking about buying in Balbriggan, I read about a whole recently built estate in Balbriggan empty and looking at myhome.ie there seems to be a load of properties for sale. Prices can only go one way with this many properties on the market in that location.
http://www.boards.ie/vbulletin/showthread.php?p=53128572

Rev Hellfire

There's certainly a slump in the property market at the moment, but with the run up to an election and the possible impact on stamp duty (a not inconsiderable cost when factoring a house purchase) many people are naturally holding off. The real test will be after the election when the impact of a possible political change happens.

Zambia

NOOOO not the stamp duty debate again .....

A Random Walk

ixoy wrote:

BTW do people think that the current interest rates are more reflective of normal rates or will a normal rate be somewhat higher again? In some ways it'd be better to be buying close to peak interest rates because, when they drop a bit, you're in a much better position than those who bought at the historically low ones.

Sound reasoning, the property bubble has been built on historic lows.

I'm probably going to frighten you now - to get a view on "normal rates" you should look at Bundesbank historical rates (the ECB is almost an extension).

I hope this graph displays for you. They peaked at 8.75% in 1992, more than double where we are now.

eirmail

Rev Hellfire wrote:

There's certainly a slump in the property market at the moment, but with the run up to an election and the possible impact on stamp duty (a not inconsiderable cost when factoring a house purchase) many people are naturally holding off. The real test will be after the election when the impact of a possible political change happens.

it is an inconsiderable cost if you are a first time buyer asd 85 percent of first time buyers don't pay any stamp duty anyway.

chump

ronbyrne2005 wrote:

ECB rates are unlikley to go much above or below 4.25% over next decade according to the money markets with an average of about 4%.

it's guesswork at best! . also where did you get that figure? Is that the yield on long term bonds ? - if they are thats the return each year, so is an average of the period. So if it's a 30 year bond, perhaps rates will be 8.5% for 10 years, and 2.125 for the next 10 years, then 4.25 for the next 10

Zambia232

Zambia232 wrote:

NOOOO not the stamp duty debate again .....

lol

totally didnt read the last few posts before they posted

STAMP DUTY IS A SMOKESCREEN

ITS NOT AN ISSUE

OVERSUPPLY, PRICES AND AFFORDABILITY ARE

is_that_so

A Random Walk wrote:

They peaked at 8.75% in 1992, more than double where we are now.

And why was that? IMO scary numbers without the context is somewhat irresponsible.

Zambia

Deleted User wrote:

lol

totally didnt read the last few posts before they posted

STAMP DUTY IS A SMOKESCREEN

ITS NOT AN ISSUE

OVERSUPPLY, PRICES AND AFFORDABILITY ARE

This is from another thread but i loved it

http://www.myhome.ie/search/property.asp?id=296958&np=&rt=search&searchlist=

"Pre Election Sale. Special Offer €555,000, Previously €565,000"

Rev Hellfire

eirmail wrote:

it is an inconsiderable cost if you are a first time buyer asd 85 percent of first time buyers don't pay any stamp duty anyway.

You assumption is that firsttime buyers are the main drivers of the housing market, which isn't the case. They represent a large percentage (34% as of 2005 ersi) and as such stamp duty does remain an issue for many people. I did read the previous posts, I think though that assumption here is that only first time buyers matter, maybe I'm wrong I admit I only read the last page or two

My main point is that right now in the fact of uncertainty over housing policies people will be more likely to wait until after an election before making such a large investment.

eirmail

Rev Hellfire wrote:

My main point is that right now in the fact of uncertainty over housing policies people will be more likely to wait until after an election before making such a large investment.

I think people will more likely wait until the crash is over until they make such an investment

Rev Hellfire

eirmail wrote:

I think people will more likely wait until the crash is over until they make such an investment

I remember waiting for the crash 7 years ago

Zambia

Rev Hellfire wrote:

I remember waiting for the crash 7 years ago

Well not long now I would say your delighted...:D

Only joking crash is bad

seamus

Rev Hellfire wrote:

My main point is that right now in the fact of uncertainty over housing policies people will be more likely to wait until after an election before making such a large investment.

I'm not sure if that's not just excuses though.

Those with interests have been attempting to blame "media led uncertainty about stamp duty" as the primary cause of the slow down. However, the market first stalled back in October, well before any publicised hype about stamp duty changes in the Budget. Once the Budget had come and gone, the market stayed slumped, and began to slip. It was still many weeks (mid-February if I recall) before any of the parties started setting out their stance on the matter. Most people I talk to (FTBs and otherwise) don't even mention stamp duty as a significant factor affecting the purchase of property.

I can see this being a long drawn out argument. The opposition get into government, and the deniers will say that people are waiting for the *next* budget before they go and buy a house.

Interest rates and massive supply have crippled the market. Nothing more.

Rew

Ill be closing a 3 bed semi-d in maynooth for 381k shortly and my nerves are shot trying to decide should I pull out... Its a good house in a good location, big garden, very close to the train for comuting but I just dont know if its enough...

I have 2 main worries a) would I get it cheaper down the road b) will i pay 11,300 to the tax man as a FTB only to have stamp duty scraped a few weeks later...

Afuera

seamus wrote:

However, the market first stalled back in October, well before any publicised hype about stamp duty changes in the Budget.

I think there were even earlier indicators from April 2006 showing the beginnings of a slowdown (daft report). Of course this was pooh-poohed by many at the time because "a fall in asking prices doesn't mean anything".

seamus wrote:

Interest rates and massive supply have crippled the market. Nothing more.

Correct. The fundamentals explain exactly what is happening now and if the historical lessons of every other housing boom-bust cycle is to be taken into consideration, we've got another few years of pain to go yet.

Zambia

Rew wrote:

I have 2 main worries
a) would I get it cheaper down the road
b) will i pay 11,300 to the tax man as a FTB only to have stamp duty scraped a few weeks later...

Unless you really love this house , I would pull out however dont you lose your deposit??

jobless

Rew wrote:

Ill be closing a 3 bed semi-d in maynooth for 381k shortly and my nerves are shot trying to decide should I pull out... Its a good house in a good location, big garden, very close to the train for comuting but I just dont know if its enough...

I have 2 main worries a) would I get it cheaper down the road b) will i pay 11,300 to the tax man as a FTB only to have stamp duty scraped a few weeks later...

well i think you should the last report from daft (or it could be the one before)...where it actually listed maynooth as having dropped 8% between june last year and jan this year.... clonee had a similar percentage drop....

IMO i think you could get it cheaper down the road and wont lose out by waiting but at the end of the day its your decision.....make sure you research it anyway

Miss Fluff

Rew wrote:

Ill be closing a 3 bed semi-d in maynooth for 381k shortly and my nerves are shot trying to decide should I pull out... Its a good house in a good location, big garden, very close to the train for comuting but I just dont know if its enough...

I have 2 main worries a) would I get it cheaper down the road b) will i pay 11,300 to the tax man as a FTB only to have stamp duty scraped a few weeks later...

Tbh I think the commuter towns will take the biggest hit.

Rew

Rew wrote:

Ill be closing a 3 bed semi-d in maynooth for 381k shortly and my nerves are shot trying to decide should I pull out

http://www.daft.ie/1233495

http://www.daft.ie/1230203

http://www.daft.ie/1230114

http://www.daft.ie/199221
Date Entered/Last Renewed:
(86 days ago)
http://www.daft.ie/178551
entered 120 days ago!!!!!!!!!!!!!!!!
http://www.daft.ie/145339
Date Entered/Last Renewed:
(120 days ago)
http://www.daft.ie/141093
Date Entered/Last Renewed:
(64 days ago)

Above are all 3 bed roomed in maynooth or celbridge all below 381,000
most below 350,000

Prices are coming down. Either pull out or drop your price 100,000 euros. I am not joking. Soon we will see those houses above drop below the 300,000 mark
watch that space

Zambia

Deleted User wrote:

http://www.daft.ie/1233495
http://www.daft.ie/1230203
http://www.daft.ie/1230114
http://www.daft.ie/199221
http://www.daft.ie/178551
http://www.daft.ie/145339
http://www.daft.ie/141093

Above are all 3 bed roomed in maynooth or celbridge all below 381,000
most below 350,000

Prices are coming down. Either pull out or drop your price 100,000 euros. I am not joking. Soon we will see those houses above drop below the 300,000 mark
watch that space

After reading this I reckon I would feel secure in Pulling out.

http://www.daft.ie/1233495

http://www.daft.ie/1230203

http://www.daft.ie/1230114

http://www.daft.ie/199221
Date Entered/Last Renewed:
(86 days ago)
http://www.daft.ie/178551
entered 120 days ago!!!!!!!!!!!!!!!!
http://www.daft.ie/145339
Date Entered/Last Renewed:
(120 days ago)
http://www.daft.ie/141093
Date Entered/Last Renewed:
(64 days ago)

Above are all 3 bed roomed in maynooth or celbridge all below 381,000
most below 350,000

just did a calculation for a mortgage on the 381,000
over 35 years 100% mortgage
per month €1836.28*

say you have a deposit of 10% (342,900)
per month €1652.65*

* discounted <50% ltv with 3.75% (apr 4.64%) !!!!!!!!!!!!!!!!!!!!!!!!!!!

How much would a 3bed semi in maynooth rent for per month?

Edit - just found out

cheapest 3 bed in maynooth to rent atm is 1000 per month
http://www.daft.ie/25853

dearest is 1,400 pm
http://www.daft.ie/26252

When deciding dont forget to include the 11,300 euros in stamp duty you will pay.
Are you a first time buyer? If so you will benefit from mortgage interest relief.
Renters also benefit from rent relief too though, they also dont have to maintain the house if anything goes wrong/breaks.

Best of luck with your decision.
My advice - pull out now. But would ya believe some stranger on the internet??? You would be crazy to. Go research the facts yourself and im sure you will come to the same conclusion.

miju

Rev Hellfire wrote:

You assumption is that firsttime buyers are the main drivers of the housing market, which isn't the case.

in actuall fact your assumption is the one that is incorrect. who do trader uppers usually sell to??? thats right without FTB's buying the traders uppers homes then these people can't do jack which makes the rot set in form the bottom of the market right up

ronbyrne2005

As we have said ad nauseum if stamp duty was removed prices would simply rise to reflect the extra buying power of buyers across the market. A house costing 450k now with 24k stamp duty costs a buyer 474k, if stamp duty was removed then price of house would rise to around 474k anyway! This would be the case wherever there is more than one bidder on a house due to supply and demand at every given price level.

Rev Hellfire

You're assuming that you must have a first-time buyer in the loop. I admit its quite likely since 1/3rd of the markets consist of them, but that doesn't make the market reliant exclusively on them.

The_Conductor

Deleted User wrote:

How much would a 3bed semi in maynooth rent for per month?

Edit - just found out

cheapest 3 bed in maynooth to rent atm is 1000 per month
http://www.daft.ie/25853

dearest is 1,400 pm
http://www.daft.ie/26252

When deciding dont forget to include the 11,300 euros in stamp duty you will pay.
Are you a first time buyer? If so you will benefit from mortgage interest relief.
Renters also benefit from rent relief too though, they also dont have to maintain the house if anything goes wrong/breaks.

If, and its a big if, fundamentals returned to the market and rent yield was between 5 and 6% (historic norms)- that would indicate the most expensive house in Maynooth (at 1400 per month) would have a guideprice of 305/306k and the house renting for 1000 per month would have a guideprice in the region of about 219/220k......

Assuming rental yields *do not* slump in Maynooth, you could assume that these would be ultimate fallback positions for the properties in question (an assumption that investors would purchase these on a fundamentals basis, were they to fall below these levels).

gurramok

And look what happens today in the ISEQ market, down 133 points.

Breakingnews.ie blame the share slump on key banks and construction companies on the house price fall reported today by PTSB.

http://www.breakingnews.ie/business/?jp=MHAUIDCWOJAU

Not much confidence in the banks & construction companies exposure to the housing market there?