Housing Bubble Bursting

Smoggy

I believe the 14th of May was me and I would have been biging myself up if I was right. I can't moan @ 2 days out thou

whizzbang

Smoggy wrote:

I believe the 14th of May was me and I would have been biging myself up if I was right. I can't moan @ 2 days out thou

ahh, I think I said the 14th over on the property pin.

humbly withdrawn...

gurramok

Was looking IPW price drop report from last week..

Notice this one locally has plummeted, used to be around 300k if memory is correct around xmas time, now flogging for 255k. http://www.myhome.ie/search/property.asp?id=280875

Its in a gated 90's built community but too damn small at 35sqm

joemc99

yeah, we're all sc**wed. Just back from the country, things have been hit hard since the property crash, see image below....:-)

[URL=]http://freepages.genealogy.rootsweb.com/~rosdavies/photos/Irish Famine2eviction.JPG[/URL]

pjbrady1

After breaking 40,000 yesterday Daft sales have rocketed quickly onto 40,328 last count. That means it can reach a 50,000+ figure quicker than just extending straight line would suggest (up to now its been fairly straightline growth). This extra supply will mop up any people who were holding on to purchase till after the election. We might be seeing first day of a big acceleration in supply. Probably some more bad headlines on economy and property on the way as well.
Anyways I know where I can get good value seed potatoes/cabbage.

patrickolee

I dunno, I've been noticing a lot of 'For Sale' signs changing to 'Sale Agreed' signs in my area of late. I presume they won't have to pay the stamp duty if the final 'sold' is after the stamp duty changes?

whizzbang

patrickolee wrote:

I dunno, I've been noticing a lot of 'For Sale' signs changing to 'Sale Agreed' signs in my area of late. I presume they won't have to pay the stamp duty if the final 'sold' is after the stamp duty changes?

Sale agreed doesn't really mean much nowadays. People can (and are) still pull out.

gurramok

pjbrady1 wrote:

After breaking 40,000 yesterday Daft sales have rocketed quickly onto 40,328 last count. That means it can reach a 50,000+ figure quicker than just extending straight line would suggest (up to now its been fairly straightline growth). This extra supply will mop up any people who were holding on to purchase till after the election. We might be seeing first day of a big acceleration in supply. Probably some more bad headlines on economy and property on the way as well.
Anyways I know where I can get good value seed potatoes/cabbage.

Plus the amateur speculator who is convinced by the fake samp duty argument might think the market will be rescued after the election, there just might be a small period of stagnation in this sector until reality hits that affordability is the issue, then floodgates.

A possibility?

pjbrady1

Someone mentioned about the floodgates really opening. I think they would have at this stage if we hadn't had the stamp duty argument. That put out the view across the nation that "everything is kinda okay, just wait till after the election".
There is only a trickle of buying at the moment, as people are actually holding off since the government turned tails and promised to abolish stamp duty.
For floodgates to open your going to need a common consensus that prices have dropped in all areas by 20%. As the people with most access to the media continually deny the market is in trouble then there will be a time lag between this actually being the case and it being common knowledge. So if prices are across the board in trouble by end of July. Then expect floodgates to not open until the start of September. The dead cat bounce after the election will be negated by a flood of selling. So prices should gradually slide till end of July. Expect to see construction unemployment blamed on rain, that will be one that Jim Power will have up his sleeve.

Smoggy

Sorry Whizzbang -

I predicted the 11th on the PropertyPin for the 40k level.

"Without a problem... May the 11th will be the date I have my money on that will be 40K+"

You can take the crown of closest date

davej

Interesting Headline in this evening's Herald

"Our Worries of a House Price Crash"

(see attachment)

davej

Slicknik

http://www.rte.ie/business/2007/0518/ilp.html

Despite a slower residential mortgage market, Irish Life & Permanent, says it expects double digit percentage growth in the bank's overall loan book this year.

Speaking at the group's annual meeting in Dublin today, chairperson Gillian Bowler said the continuing slowdown in the residential market reflects rising interest rates and the uncertainty over stamp duty, but that the market will recover once this is sorted out.

'In our view a speedy resolution of the stamp duty issue - which looks likely following next week's election - will see a recovery in new mortgage lending as the underlying level of demand remains strong', she said.
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She said that depending on the timing and extent of the rebound, the group expects the bank's loan book to grow by 'mid to high teens percent' this year.

CEO David Went formally today stepped down as CEO, as previously announced, at the AGM, after leading the company for a decade.

The chief executive of Permanent TSB, Denis Casey, will take over from Mr Went as group chief executive.

For the year to date the group said that life sales, particularly in pensions and lump sum investments, are very strong and Irish Life Investment Managers continues to win new contracts.

It said Permanent TSB was attracting customers opening 1,250 new accounts every week.

'Against this backdrop we are satisfied that we can deliver the targeted low to mid -teens growth in pre-tax operating profit in our core business for 2007', Ms Bowler said.

Irish Life & Permanent shares were up 53 cent to €19.95 in Dublin this afternoon.

The_Conductor

Wishful thinking tbh.....
The interest rate rise in June will offset any advantage to most buyers of stamp duty reform (and there are further rate increases flagged, particularly after the very strong growth figures released yesterday). First time buyers are not going to be assisted by the stamp duty reform- those who are trying to sell second hand homes will get a temporary respite, as the reduction in stamp duty will underpin the market. In essence- this will benefit the sellers in the short term (before affordability issues negate even this).

Interesting article about concerns in the UK over affordability for FTBs at 3.31 times average income for FTB homes....... Ye gods- wouldn't it be nice to have those levels here......

iguana

smccarrick wrote:

Interesting article about concerns in the UK over affordability for FTBs at 3.31 times average income for FTB homes....... Ye gods- wouldn't it be nice to have those levels here......

On the otherhand we do have a 5.5% base rate which may rise to 6% before the end of the year. As well as no interest relief so credit is far less affordable. And we have 1% stamp duty for properties between £120k (€175k) and £250k (€365k) which is an extra expense Irish FTBs in most of that price bracket don't have.

Eta: I forgot to add council tax and water charges.

Our mortgage is only about 3 times our joint income, but I know that once we come off our fixed rate we would have a really hard time affording it. If we intended staying here we would probably never be able to afford children.

pjbrady1

Just from checking Daftwatch, the last three days have seen a serious take off in the rate of forsales. At current rates 1800+ houses can be added next week. That is alot more available property in every area of the country.
Once supply is in effect 'seriously oversupply', than at that point small scale price reductions are no longer enough to entice in buyers. Sellers will have to be chopping 10% minimum to even get queries.
50,000 is a dangerous figure as neither government social housing, nor FTB's will make much of a dent in it. All the while new builds are getting added on. Lot of new builds coming to market between now and end of July.

Slicknik

smccarrick wrote:

Wishful thinking tbh.....
The interest rate rise in June will offset any advantage to most buyers of stamp duty reform (and there are further rate increases flagged, particularly after the very strong growth figures released yesterday).

Well, their shareholders must agree as well since the share price went up with a couple of percent.

The_Conductor

iguana wrote:

On the otherhand we do have a 5.5% base rate which may rise to 6% before the end of the year. As well as no interest relief so credit is far less affordable. And we have 1% stamp duty for properties between £120k (€175k) and £250k (€365k) which is an extra expense Irish FTBs in most of that price bracket don't have.

Eta: I forgot to add council tax and water charges.

Our mortgage is only about 3 times our joint income, but I know that once we come off our fixed rate we would have a really hard time affording it. If we intended staying here we would probably never be able to afford children.

Swings and roundabouts I guess...... Good luck to anyone trying to afford children over here too. We may not have domestic water-rates or council taxes- but the myriad of indirect taxation here, and the massively high prices for basic commodities such as electricity/heating (which are about 20% higher than the UKs) mean we're all pretty much in the same boat. Re: interest rates- yes, the rates over there are much higher than here- however, the UK does not have the shockingly high levels of personal debt that we have here. I think our levels of personal debt are now 165% of GDP (versus public debt which is lower than 40%- the inverse was true 15 years ago).

In essence we have all been living well beyond our means- the belt tightening is already underway- and its going to get a hell of a lot worse.......

I was listening to a FG strategist puzzle'ing over where the SSIA feel-good-factor was for the government parties. The simple answer is that its already been well spent. Those flat panel TVs that are being discounted now, those stores with their elaborate kitchens that aren't moving- these are all sympthomatic of the reality on the ground. People are copping that we have been living well beyond our means.

That said- a 07-D Ferrari just zoomed past me on Kildare Street...... Must be one of the developers who made a good call and cashed in early.......

gurramok

Warning of housing bust from construction economist http://www.rte.ie/business/2007/0521/property.html

construction economist wrote:

'He says economic growth will be constrained until competitiveness problems in the economy are overcome and that this will have a negative impact on house values.

He is predicting house prices will fall 5% this year and by up to a further 10% in 2008, while house completions will drop to 62,000 per year over the next five years. '

And now what we all know, FTB's have been priced out of the market..

construction economist wrote:

He also notes that thus far, demand for new housing has been dominated by what he terms 'housing insiders' who are either existing house owners or investors, rather than first time buyers

gurramok

Story examined on finfacts with nice graphs!
http://www.finfacts.com/irelandbusinessnews/publish/article_1010132.shtml

Regarding vacant dwellings in cities, (about 40k in dublin alone), he stated the obvious about speculation by speculators.

finfacts wrote:

'He said that the number of vacant houses and flats in Dublin, Cork, Limerick and Galway was running at between 11.5 and 13 per cent of total housing stock and this number was ‘‘too large to be accounted for by casual vacancies in the letting market’’.

The V.I. argument on immigration propping up the market is nuked!

finfacts wrote:

Casey said that first-time buyers only accounted for 27 per cent of new housing demand from 2002-2006, and that new housing demand was not supported by immigration. He pointed out that non-nationals accounted for 10 per cent of the population, but just over 1 per cent of the stock of mortgages.

ronbyrne2005

gurramok wrote:

The V.I. argument on immigration propping up the market is nuked!

Well they are proping up the rental market. If all the immigrants that have arrived since accesion hadnt arrived then rents would be significantly lower I beleive.

gurramok

Yes, what i had meant was the housing 'Sale' market!

They had pedalled the excuse that immigrants were largely buying property when in case they hadn't.

SimpleSam06

ronbyrne2005 wrote:

Well they are proping up the rental market. If all the immigrants that have arrived since accesion hadnt arrived then rents would be significantly lower I beleive.

I think that might be making the same mistake as the VIs, and forgetting the primary reason migrants arrive in Ireland: to make money. They aren't going to live in salubrious apartments if they are trying to reach that goal, they'll get the cheapest accommodation going, and pack in as many people as they can into that. Which is what they are doing, to an extent.

I think the main reason that rents are as high as they are is that there are a fair few investors trying to recoup their loans, so they jack up rents to cover the mortgages, as well as the decreasing amount of rental property actually available, as the other investors try to offload their "portfolios" in a hurry ahead of the looming storm.

Rack renters can be easily priced out of the rental market by longer term (more than 6 or 7 years) landlords, but the question is, will these established landlords increase their rents to match the panicked specuvestors, or be content with a steady reasonable income?

I think they'll keep the rents high until the specuvestors start to despair and pull their properties off the "for sale" market, and try to recoup some of their money by renting. Thats when the market will be flooded with rental properties, I'm betting end 2008 or mid 2009.

patrickolee

Investors will charge as much rent as the market will support. That is likely to increase the more (and longer) people hold off on buying. Investors are in it to make as much money as they can (nothing wrong with that). It has nothing to do with when they bought, or trying to recoup their costs etc. Longer established landlords certainly aren't just charging higher rents because they feel sorry for the poor new investors trying to 'recoup' their loans!

SimpleSam06

patrickolee wrote:

Investors will charge as much rent as the market will support. That is likely to increase the more (and longer) people hold off on buying.

Quite the opposite I'm afraid. Investors, as you point out, are in it to make money. How much money are they making clinging on to a depreciating asset they are still paying full whack plus interest for?

patrickolee wrote:

Investors are in it to make as much money as they can (nothing wrong with that). It has nothing to do with when they bought, or trying to recoup their costs etc.

Actually it has a great deal to do with when they bought. If they bought within the last 3 or 4 years (or "released equity"), they are feeling the pinch of interest rate rises, and will increase rental rates in an attempt to cover that. That is in fact what they have been doing. 5 or 6 years and its 50-50.

patrickolee wrote:

Longer established landlords certainly aren't just charging higher rents because they feel sorry for the poor new investors trying to 'recoup' their loans!

No, but they are seeing their neighbours charging a higher rent than themselves, and increasing their own rents to match. They won't be able to continue doing so when the enormous amount of properties for sale gets pulled off (because they are not selling), the rental market will be flooded, when it will become a buyers market.

This is especially true given the decrease in migrant worker population in the event of a crash, complete with all of its knock on effects.

patrickolee

SimpleSam06 wrote:

Quite the opposite I'm afraid. Investors, as you point out, are in it to make money. How much money are they making clinging on to a depreciating asset they are still paying full whack plus interest for?

As much as they can.... as countless people keep harping on about above, they can't sell at the moment.

SimpleSam06 wrote:

This is especially true given the decrease in migrant worker population in the event of a crash, complete with all of its knock on effects.

[/QUOTE]
Is this before or after Greenland melts into the sea?

SkepticOne

patrickolee wrote:

Investors will charge as much rent as the market will support. That is likely to increase the more (and longer) people hold off on buying.

Unfortunately that is not how it works. If people are holding off buying then they are leaving large numbers of houses to be purchased by investors (for renting out) that those holding out would have otherwise purchased as owner-occupiers. It balances out. It is the overall housing supply that matters. In recent years we have seen huge amounts of supply being created.

What does have an effect, however, is when landlords remove tenants in order to put their property on the market. For the period it is on the market it is unavailable for occupation. We have seen a bit of this in recent months but obviously it is a temporary phenomenon. At some point the house is either sold or is taken off the market and rented out again.

Afuera

SkepticOne wrote:

What does have an effect, however, is when landlords remove tenants in order to put their property on the market. For the period it is on the market it is unavailable for occupation. We have seen a bit of this in recent months but obviously it is a temporary phenomenon. At some point the house is either sold or is taken off the market and rented out again.

It could be argued that we're past that temporary stage already. Looking at daftwatch, the amount of places to rent is now the same as it was back last August. The amount of places for sale continues to soar however. This is probably explained by more new builds appearing on the market and some vacant properties being put up for sale.
http://daftwatch.atspace.com/

Do-more

Interesting piece on land prices in the Farmers Journal

According to a survey exclusively compiled by Savills HOK, Ireland has the most expensive agricultural land in Europe. Not only that, but the average figure for Ireland is almost double the average for the second most expensive country in Europe, namely Luxembourg, indicating that Irish values are streets ahead of its European counterparts.

The figures reveal the stark reality that land in Ireland is five times more expensive than England, 6.5 times more expensive than Germany and Wales, 9.5 times more costly than Scotland, 13 times more expensive than France and a massive 40 times more costly than Poland.

whizzbang

Do-more wrote:

Interesting piece on land prices in the Farmers Journal

indicating that Irish values are streets ahead of its European counterparts.

thats an interesting use of language, it makes it sounds like a good thing! Rather than an indication something is wrong.

Do-more

whizzbang wrote:

thats an interesting use of language, it makes it sounds like a good thing! Rather than an indication something is wrong.

Well I'm sure for the farmers it is a good thing! Especially the ones selling up and buying huge farms abroad. There was a piece in the papers on one such farmer last week, selling the farm which had been in the family for over 200 years and heading to the UK!