Poll: Housing Market Bubble- Yay or Nay

The_Conductor

In conjunction with the "Housing Market Bursting" thread I decided to stick up a poll for people to give their predictions. Obviously it will not cater to every possible choice- but is of interest no doubt.

For arguments sake we will say the timeframe for these happenings is/will be between now and the end of December 2008 (i.e. over the 20 months).

S.

miju

Option 8 - Atari Jaguar

good idea for a poll , how many of the regular bears have already voted in this out of curiousity?

tHE vAGGABOND

Slowly decrease in value at first then more quickly, falling by between 10 & 15%

the production team from that RTE show the other night have voted, clearly

is_that_so

Fall in value by between 15 and 25%

No option there for a "fall followed by a stabilisation/rise".

gurramok

Option 8 - Atari Jaguar

is_that_so wrote:

No option there for a "fall followed by a stabilisation/rise".

Thats called end of the cycle of a fall..thought it would have been obvious

mikemac

Fall in value by between 25 and 50%

OP, just so I'm sure, are the options for the state of the market between now and December 2007?-the end of this year

Isn't entirely clear, thanks

iguana

Option 8 - Atari Jaguar

I voted a fall of 25-50% but would like to clarify that I believe it will be dependant on areas. Dublin's commutersville may easily fall by that much, especially smaller homes and apartments. Whereas family sized houses within 3km of central Dublin I would have thought would see smaller price drops, however as there already appears to be a slight drop on asking prices in these areas then maybe these will fall further than I originally thought.

And I think that the €5m+ houses in D4&6 will fall a lot too. But even a 500% drop on these houses would still keep them out of the average persons reach.

eirmail

Option 8 - Atari Jaguar

gurramok wrote:

Thats called end of the cycle of a fall..thought it would have been obvious

no that is called a "Soft Landing after a crash"

On a serious note , i think prices will come down 40-50 percent across the board.

If they come down say 20 peccent, yields will still be low , confidence will be low - interest rates will still be rising -> that in turn will drive prices down at least 40 percent. It will only hit rock bottom when rentail yields return to a reasonable 5-6 percent.

I can't see any other rock bottom point.

Option 8 - Atari Jaguar

Fundamentals from the pre 2002 house prices rises have been eroded. We will not see the effect of this until the market bottoms and starts rising again. We could see 2000 prices adjusted for inflation in some places - I wouldnt expect it in Dublin or other cities but in some parts of the country it will become virtually impossible to sell a house.

The_Conductor

Option 8 - Atari Jaguar

Deleted User wrote:

I wouldnt expect it in Dublin or other cities but in some parts of the country it will become virtually impossible to sell a house.

I'd qualify the above- while location does play a factor, property type is also a factor. Even in Dublin, I imagine it may well become impossible to resell apartments.

ixoy

Slowly decrease in value at first then more quickly, falling by between 10 & 15%

smccarrick wrote:

I'd qualify the above- while location does play a factor, property type is also a factor. Even in Dublin, I imagine it may well become impossible to resell apartments.

I'd actually be curious to see what areas and housing types people think would be hardest hit.

For example, right now I'm contemplating getting a place in Balbriggan, hoping to cash in on the uncertainty. Now it's a commuter town so, in the broad reports, that's a bad thing. On the offhand it's got a rail connection and at least a modicum of infrastructure with the new shopping centre. Do these qualities make it more or less attractive than other satellite towns?

Additionally, if I bougt there, it'd be either a duplex or a terraced house. Are duplexs a better buy than apartments? Are terraced houses even better again (on average - obviously there are other factors)? Is a garden a good idea if you're ever contemplating a resell in the future? What sort of factors should people be looking for...

this may be a thread in and of itself...

Borzoi

Stall and remain at current levels

miju wrote:

good idea for a poll , how many of the regular bears have already voted in this out of curiousity?

More of an iregular bear, but I went for the ~5%. TBH I think itwill be be in the 2-3% growth.

I'm curious about ther huge vote for 25-50%. My suspicion is that very few people owning proprty chose that!

Fr0g

Option 8 - Atari Jaguar

Borzoi wrote:

More of an iregular bear, but I went for the ~5%. TBH I think itwill be be in the 2-3% growth.

I'm curious about ther huge vote for 25-50%. My suspicion is that very few people owning proprty chose that!

I chose that option and i have two properties including the one i live in. I have read all the threads on here, the propertypin and AAM since this time last year and have been following the market very closely for years. I chose the 25-50% option based on that. I am not an economist but have been very bearish on the property market for a long time. It was really only a question of when not if. And the interest rate rises seem to be the catalyst that pushed it over.

conor_mc

Option 8 - Atari Jaguar

Borzoi wrote:

I'm curious about ther huge vote for 25-50%. My suspicion is that very few people owning proprty chose that!

It's not a vote for what you want to happen.... it's what you think will happen.

What does property ownership have to do with that?

eirmail

Option 8 - Atari Jaguar

Borzoi wrote:

More of an iregular bear, but I went for the ~5%. TBH I think itwill be be in the 2-3% growth.

I'm curious about ther huge vote for 25-50%. My suspicion is that very few people owning proprty chose that!

interest rates will be similar to rental yields after a drop like this . Also it is cheaper to rent now than to buy at the moment and it will take a drop of this magnitute for it to become cheaper or equivalent to buy.

I don't own any property BTW if that really matters.

The_Conductor

Option 8 - Atari Jaguar

eirmail wrote:

interest rates will be similar to rental yields after a drop like this .

Yup- so its a lot safer to put your money on deposit and have the relative safety of knowing, inflation aside, that your asset is not depreciating in value in front of your eyes.

I own my own house. I chose the 25-50% option too.
Yes, its a massive drop. Its pretty much inevitable though- how long it takes is the only thing. The drop could be a lot more than this......

S.

Borzoi

Stall and remain at current levels

conor_mc wrote:

What does property ownership have to do with that?

Because if I believed that, a drop of that magnitude was on the cards I would sell up everything now. Bank the cash for the 20mth of losing property values, then potentially reinvest in the market.

For instance say I've two properties, mine and a rental equal value, total current value €500K. If at the end of 2008, they're worth €375 (the 25% drop) I've lost €125K.

If on the other hand, I sell now (cost of sale 1.5 = €7.5K), wait 20 months to outride the crash then reinvest (cost of rebuy about 9% of the bargain buy price of €375K = €33.75) For the sake of argument, the interest on the equity over 20mth will cover the cost of me renting a small gaffe.

So sell and rebuy costs €40K sit tight costs €125K, so if I believed in this crash and level of crash I would have to be INSANE to hold on to the property

conor_mc

Option 8 - Atari Jaguar

Borzoi wrote:

Because if I believed that, a drop of that magnitude was on the cards I would sell up everything now. Bank the cash for the 20mth of losing property values, then potentially reinvest in the market.

For instance say I've two properties, mine and a rental equal value, total current value €500K. If at the end of 2008, they're worth €375 (the 25% drop) I've lost €125K.

If on the other hand, I sell now (cost of sale 1.5 = €7.5K), wait 20 months to outride the crash then reinvest (cost of rebuy about 9% of the bargain buy price of €375K = €33.75) For the sake of argument, the interest on the equity over 20mth will cover the cost of me renting a small gaffe.

So sell and rebuy costs €40K sit tight costs €125K, so if I believed in this crash and level of crash I would have to be INSANE to hold on to the property

Yes.

eirmail

Option 8 - Atari Jaguar

Borzoi wrote:

Because if I believed that, a drop of that magnitude was on the cards I would sell up everything now. Bank the cash for the 20mth of losing property values, then potentially reinvest in the market.

For instance say I've two properties, mine and a rental equal value, total current value €500K. If at the end of 2008, they're worth €375 (the 25% drop) I've lost €125K.

If on the other hand, I sell now (cost of sale 1.5 = €7.5K), wait 20 months to outride the crash then reinvest (cost of rebuy about 9% of the bargain buy price of €375K = €33.75) For the sake of argument, the interest on the equity over 20mth will cover the cost of me renting a small gaffe.

So sell and rebuy costs €40K sit tight costs €125K, so if I believed in this crash and level of crash I would have to be INSANE to hold on to the property

From my observations the market is allready down 15 percent since last years peak.

I know how much certain properties were selling for at the peak last year and it is possible to get similar properties for 15 percent less now.

The average asking price is not down 15 percent, but who cares about the average I would only buy at the margin.

There is so much inventory on the market and so few buyers the average asking price is irrelevant.

Zambia

Option 8 - Atari Jaguar

Borzoi wrote:

Because if I believed that, a drop of that magnitude was on the cards I would sell up everything now. Bank the cash for the 20mth of losing property values, then potentially reinvest in the market.

For instance say I've two properties, mine and a rental equal value, total current value €500K. If at the end of 2008, they're worth €375 (the 25% drop) I've lost €125K.

If on the other hand, I sell now (cost of sale 1.5 = €7.5K), wait 20 months to outride the crash then reinvest (cost of rebuy about 9% of the bargain buy price of €375K = €33.75) For the sake of argument, the interest on the equity over 20mth will cover the cost of me renting a small gaffe.

So sell and rebuy costs €40K sit tight costs €125K, so if I believed in this crash and level of crash I would have to be INSANE to hold on to the property

Gambling with your own house is always a tad Insane.

The other property well I would think you should just hold on to that, as it will fall but rise again and in a few years you will be sitting pretty. Depending on time of purchase and rental income etc

And try selling it now in a buyers market..

miju

Option 8 - Atari Jaguar

Borzoi wrote:

I'm curious about ther huge vote for 25-50%. My suspicion is that very few people owning proprty chose that!

well if that is the case (and tbh none of us know for sure) then what does that tell you if the majority of respondants who dont own property think its gonna fall by such a large amount?

naturally these potential buyers will shy away making the spiral downwards all that more real of a possibility

eirmail

Option 8 - Atari Jaguar

miju wrote:

well if that is the case (and tbh none of us know for sure) then what does that tell you if the majority of respondants who dont own property think its gonna fall by such a large amount?

naturally these potential buyers will shy away making the spiral downwards all that more real of a possibility

Exactly sentiment will effect the price, but only the sentiment of potential buyers , not people who allready bought. That market will not react psitively if someone who bought a house last year thinks prices are going to rise. This person is no longer in the market. The market will react negatively if a huge amount of people who are looking to buy , but are not buying because the prices are going to drop by a large amount.

Afuera

Option 8 - Atari Jaguar

eirmail wrote:

The market will react negatively if a huge amount of people who are looking to buy , but are not buying because the prices are going to drop by a large amount.

... or can no longer buy at current prices due to increases in interest rates. Either way though it's all pointing towards a drop in prices.

I think that the only chance the government has of digging itself out of this mess is to reintroduce a very large FTB grant and return CGT up to 40% (to try and prevent some of the current investors bolting and flooding the supply further). They also drastically need to overhall the system of planning permission so that only what is really needed will be provided going forward.

It really should never have got this far though. If they'd stuck with Bacon's recommendations I don't think we'd be in this position in the first place.