Prices of houses need to fall to 2005 level - AIB

mastermind2005

"House prices need to retreat to their 2005 levels to restore momentum to the market, according to Ireland's biggest bank.

An AIB Global Treasury market update, published yesterday, says that overall house prices were down 7.3 per cent year-on-year in December, with further drops anticipated"

The pyramid scheme that was the irish property market... has finally lost its momentum and is now falling to pieces, the fun is only starting.

beattie

Well according to the last PTSB/ESRI report prices are now at Jan 06 levels so I imagine that when they publish the figures for January they will have retreated back into 05 territory.

I can't see the market moving unless there are further drops in the region of 10%.

kippy

Falling to pieces?
Please. Get a grip.
As much as some people thrive on the "talking up" of the market, there appears to be a lot out there now who are thriving on the slippage in house values, with the whole "I told ya so" attitude. (If you keep saying something, eventually you'll get it right)

House prices are going down in certain situations and may be going down a lot in a few situations, but as long as people can afford pay their mortgage and dont need to sell their houses in a rush, the majority of buyers from the past few years arent seeing a "market fall to pieces".
Their houses were a good investment for the long term.

punchestown

kippy wrote: »

Falling to pieces?
Please. Get a grip.
As much as some people thrive on the "talking up" of the market, there appears to be a lot out there now who are thriving on the slippage in house values, with the whole "I told ya so" attitude. (If you keep saying something, eventually you'll get it right)

House prices are going down in certain situations and may be going down a lot in a few situations, but as long as people can afford pay their mortgage and dont need to sell their houses in a rush, the majority of buyers from the past few years arent seeing a "market fall to pieces".
Their houses were a good investment for the long term.

What about the 40% of purchases last year that were for investment?

punchestown

punchestown wrote: »

What about the 40% of purchases last year that were for investment?

Yeah that leave us with 300,000+ vacant properties, 250,000 of which are estimated to have been bought with special investor INTEREST ONLY loans?

hmmmm.....


fall to pieces is right

kippy

kippy wrote: »

the majority of buyers from the past few years arent seeing a "market fall to pieces".
Their houses were a good investment for the long term.

A PPR is a home not an investment.

kippy wrote: »

but as long as people can afford pay their mortgage and dont need to sell their houses in a rush

Your right - unless these people believed the hype and bought "starter homes".
Negative equity is now a fact - lets hope these people dont need to trade up.
Unfortunately repossessions are already on an upward trend.

Lets have a look at AIBs report they released this week....


http://www.fxcentre.com/monthly/200801_IrishHousingMarketMonthly.pdf
^^^^ there it is for all to see


hmmmn Bank isnt lending as much money - less buyers


hmmmn prices on a downward trend, steep too



Completions projected for the future.....
See where it drops and picks up again - thats where they are all saying the economy will pick up again. For all intents and purposes its an admission that our economy is CONSTRUCTION.
Now how many builders do you need to build nearly 90,000 houses? and how many you need to build 45,000?

Its not the same is it.
Recession is unavoidable. oh dont be so dramatic I hear you say! Sure all the foreign workers will go back home and the unemployment wont rise, sure it`ll be grand.

Maybe they will go home. But IF thats the case then we WILL lose the consumer spending power of all those people.
Again....recession is unavoidable

kippy

As I said,
People who bought a house as a short term investment may need to push out their investment period in order to actually make money on it. People who bought their houses to live in have little to worry about in the short term, that is for sure.
Negative equity? For the short term in my opinion.

Either way it is funny to see all the posters who've been predicting a "slump" getting back with the "I told you so" type of attitude. Funny.

I predict a rise in property prices.
There I said it....

mastermind2005

Kippy, whats this i hear about good investments in the last few years, wakeup... irish property is shockingly over valued and has been for the last few years.... :eek:

martian1980

kippy wrote: »

As I said,
People who bought a house as a short term investment may need to push out their investment period in order to actually make money on it. People who bought their houses to live in have little to worry about in the short term, that is for sure.
Negative equity? For the short term in my opinion.

Either way it is funny to see all the posters who've been predicting a "slump" getting back with the "I told you so" type of attitude. Funny.

I predict a rise in property prices.
There I said it....

Right. What about the enormous oversupply that has to clear? They're not going to be snapped up in the short to medium term. Over a long enough period of time things will level off and start to rise, but that won't suit people who bought a 1-bed shoebox to "get on the ladder"? Plenty of these sorts have borrowed to the hilt and are now trapped there. They'd better hope they don't get pregnant, that's for sure

kippy

A home is ALWAYS a good investment.
If you've bought a house with the intention to make a profit in the short term then you're in for a nasty surprise. If you can afford to hold onto the property you'll find that you'll eventually make your money on it.
There have been people over the last few years who've made a lot of money on property.
Again, I have a nice chuckle every now and again about the "I told you so" artists.

martian1980

kippy wrote: »

A home is ALWAYS a good investment.
If you've bought a house with the intention to make a profit in the short term then you're in for a nasty surprise. If you can afford to hold onto the property you'll find that you'll eventually make your money on it.

Tell that to the people in Japan who bought in the late '80s. But wait! Ireland is different!

kippy

martian1980 wrote: »

Tell that to the people in Japan who bought in the late '80s. But wait! Ireland is different!

10 years later prices were back up at what they were when the "Bubble" burst. Guess what, they are A LOT more expensive now.
Again if you can afford to pay your mortage back and live in your home, you wont really give a toss about the "negative equity". Long term your home (if you ever decide to sell it) is a good investment.

Not everyone in this country is mortgaged up to their neck in a one bed apt in Dublin city center that they cant get out of.
Very few I would reckon,
Kippy

mastermind2005

Kippy,


Im afraid your talking a load of rubbish...

"if you can afford to pay your mortage back and live in your home, you wont really give a toss about the "negative equity"."

The level of bull$hit your talking should warrant some sort of criminal offence...

kippy

mastermind2005 wrote: »

Kippy,


Im afraid your talking a load of rubbish...

"if you can afford to pay your mortage back and live in your home, you wont really give a toss about the "negative equity"."

The level of bull$hit your talking should warrant some sort of criminal offence...

Sorry my friend, but you'll have to forgive me if I don't agree with the sentiment of the majority on this board.
If you read over my posts in full and stop cherry picking the comments its far easier to see my opinion.
1. Not everyone is up to their necks in debt that they cannot afford.
2. Not everywhere is like Dublin (House prices have remained relatively static on the West coast and in some areas (holiday areas) have gone up in the past 12 months.
3. So long as I didnt buy a property intending to make a profit in the short term then I amn't too bothered to be honest. Most people, I believe would be of this opinion.

I do believe that there are parts of this country where property is and always has been overvalued and built to a poor quality, however that doesnt mean that the people living in these places cant afford to pay for them.
Either way mortage interest rates as still extremely low, as are income tax rates, employment is high and wages are in general good. A far far better situation than we had in this country in the 80's, no matter what anyone says or tries to spin.
Kippy

kippy

kippy wrote: »

A home is ALWAYS a good investment.
.

no a home is NEVER an "investment" good or bad. Its a home.
Any subsequent property can be viewed as an investment.

mastermind2005

No kippy, sorry mate.... property in this country is extortsion...... Period.

And its about time Honest people can reasonably afford a decent home. :mad:

patrickolee

mastermind2005 wrote: »

No kippy, sorry mate.... property in this country is extortsion...... Period.

And its about time Honest people can reasonably afford a decent home. :mad:

No no no, kippy, I have my fingers in my ears and i can't hear...

kippy

So a home isnt an investment? Is it a necessity then?

Lots of honest people in this country have bought decent homes in the past 10-15 years and have benefited from the points I made above about taxes etc.
The few that haven't have been waiting for the prices to drop (never having actually done so till now) and when the price appears to be dropping they probably wont buy anyway as its a "volitile" market. Until the cycle goes round again and they start to rise again....


Okay, so we are getting ripped off for houses.
What is the "Correct" price for a house in your opinion?
Kippy

johnnyskeleton

kippy wrote: »

1. Not everyone is up to their necks in debt that they cannot afford.
2. Not everywhere is like Dublin (House prices have remained relatively static on the West coast and in some areas (holiday areas) have gone up in the past 12 months.
3. So long as I didnt buy a property intending to make a profit in the short term then I amn't too bothered to be honest. Most people, I believe would be of this opinion.

But there are a lot of people who:
1) Borrowed as much as they could afford on two salaries to afford to buy a house (and who could blame them, needing a home)
2) One of them looses their job, gets sick, has a child etc
3) Whereas traditionally people had paid at least 8% as a deposit and who had paid for a few months as well, so even if the price went down a little bit, they could sell up and take the hit.
4) Now, with negative equity if these people have to sell up they take a massive hit.

So while you are right in that not everybody is up to their necks in debt, there are a lot of people who are, and for them there are going to be some very tough times ahead.

In any event, most people with a mortgage on a tight budget i.e. most young working property owners are bothered by the interest hikes and continuously rising prices provided a safety net which has now been taken away.

kippy

johnnyskeleton wrote: »

But there are a lot of people who:
1) Borrowed as much as they could afford on two salaries to afford to buy a house (and who could blame them, needing a home)
2) One of them looses their job, gets sick, has a child etc
3) Whereas traditionally people had paid at least 8% as a deposit and who had paid for a few months as well, so even if the price went down a little bit, they could sell up and take the hit.
4) Now, with negative equity if these people have to sell up they take a massive hit.

So while you are right in that not everybody is up to their necks in debt, there are a lot of people who are, and for them there are going to be some very tough times ahead.

In any event, most people with a mortgage on a tight budget i.e. most young working property owners are bothered by the interest hikes and continuously rising prices provided a safety net which has now been taken away.

Fair enough but I dont think that many people will find themselves in this situation as is being bandied about on threads like this and if they do, they may be able to renegotiate their mortgage and/or employment terms.
The danger has always been there of the situations you speak off that people find themselves in and there is no doubt that some people will struggle, but I tell you one thing, people in this country will never again struggle like the people who have gone before us.
Kippy

Firetrap

It depends what you mean by struggling. In the past, people didn't have jobs and that was a struggle. Now, they're paying horrendous amounts of money just to have a roof over their head. Obviously you have loads of money and paying your mortgage doesn't take out an enormous chunk of your monthly wage.

SimpleSam06

kippy wrote: »

As much as some people thrive on the "talking up" of the market, there appears to be a lot out there now who are thriving on the slippage in house values, with the whole "I told ya so" attitude. (If you keep saying something, eventually you'll get it right)

Enough with this. For years on this board several posters have been saying that property in this country was seriously overvalued, and had to deal with an overwhelming amount of bullish individuals/interests who stood to make money coming in and laughing at them. The Central Bank released a report saying houses were dangerously overvalued back in 2000.

Revisionism about a stopped clock being right twice a day is not welcome. It took longer than it should have, and the resultant damage will be much greater, but now that the market has finally lost momentum from the drop in rates back in 2001, the birds are coming home to roost. It doesn't make the points raised at the time less valid.

kippy wrote: »

Fair enough but I dont think that many people will find themselves in this situation as is being bandied about on threads like this and if they do, they may be able to renegotiate their mortgage and/or employment terms.

Thats one hell of a big "may". When you are stretched to your viable limit you don't have much room to maneuver. Tens of thousands of people (more?) bought in the last two or three years, and every single one of them is in a worse situation than if they had not bought.

True, not everyone is going to be bankrupt or in serious financial difficulty, but its safe to say a significant proportion of the population is going to be spending their evenings in for the foreseeable future, which leads us straight into a recession, not to mention the knock on effects of the job losses in the enormous construction sector and the tax shortfall brought on by the slowdown in housing sales.

kippy

Points taken.
However, of the 10-15 people I know who have bought houses in the past 7 years, I can safely say none of them will be overstretched should the value of their house fall. Why, because they dont intend selling the thing in the short to medium term.
The issue occurs if, as mentioned above, they lose their job.

Now, I am not 100 percent sure on this but I believe that those who were able to get work in the 80's we taxed at rates of circa between 40 and 62% on almost everything they earned and the mortgage interest rates were up over 12%. Surely the fact that we arent paying anywhere near as much tax or anywhere near as much interest on mortgages would in itself lead to use being able to afford dearer houses and as such push house prices to the level that they are at now.

There are still lots of people out there who wont be stretched by house price drops/rate rises (The rates look set to go down again in the short term) and the people who continue to wait for prices to fall will continue to wait.

What you mention about the clock being right twice a day, well thats exactly what I am talking about whether the sentiment is liked or not.

Kippy

EDIT: Right, this is my last post on this thread. Things arent as bad as being made out nor are people worse off than they were in the 80's. We have a better life and in general a better lifestyle than we had they and it would take an awful lot to return to those days. Not as many people will "Struggle" in the market as being hyped by various posters. I'll return to this thread in 7 years or so and we'll review the price of houses/economic climate then and I'll let you know if anyone I know has gone bankrupt or is living on the street.

seamus

martian1980 wrote: »

Tell that to the people in Japan who bought in the late '80s. But wait! Ireland is different!

Ireland isn't different. Japan is. The Japanese situation is a specific set of circumstances. The UK had a crash around the same time as Japan and now property prices are back up way above what they were then. Other countries have boomed and bust and boomed again while Japan has dropped, so you can't exactly point to Japan as what *will* happen, just as an unlikely worst-case scenario.

Again, the 300,000+ empties figure has been trotted out. Can anyone actually give me a link for this figure or is just something that some pundit threw out there unchecked and now all the bears are using it as gospel?

eirmail

I think a house prices crash can be quite serious for a lot of people . I think Kippys attitude is a bit flippant.

A lot of people went backrupt in previous house price crashess , UK and Japan. It even contributed to peoples health through stress and it was enough to push some people over the edge. The stress also contributed to many marriage break ups.These things are serious and should be treated seriously and not just dismissed .


Japanese house prices are not back to the early 1990s level . They have just stopped coming down about a year ago after 14 years.

FergusF

seamus wrote: »

Again, the 300,000+ empties figure has been trotted out. Can anyone actually give me a link for this figure or is just something that some pundit threw out there unchecked and now all the bears are using it as gospel?

The figure is based on CSO figures from the Census 2006 report, released last August.

Some analysis of the report from IrishElection.com.

Hope this helps.

Sligored

have to agree with kippy on this one. There is no doubt house prices are down by 7-10% but anyone who stays in for the long term will not suffer.

The level of gains in prices in the last number of years was unsustainable.

Short term investors who expected to make a quick killing were caught but that is the possibility of the majority of investments.

This downward turn is the best thing that can happen because it will give a lot more people access to the ladder.

A few people got there fingers burnt on a short term basis but anyone who rides out their losses will be rewarded in the long term

Afuera

Sligored wrote: »

This downward turn is the best thing that can happen because it will give a lot more people access to the ladder.

How exactly does the property ladder idea work in a falling or stagnant market though? Surely, in that kind of environment people will be more motivated to wait it out until they can afford something that they are 100% happy with rather than sign up for the first starter property that falls within their reach.

uberwolf

SimpleSam06 wrote: »

Tens of thousands of people (more?) bought in the last two or three years, and every single one of them is in a worse situation than if they had not bought.
QUOTE]

I bought, I'm not worse off.

seamus

FergusF wrote: »

The figure is based on CSO figures from the Census 2006 report, released last August.

Some analysis of the report from IrishElection.com.

Hope this helps.

Thanks, puts it in a much more sensible light. So 266,000 (15% of total stock) dwellings assumed unoccupied. Probably close enough to the actual figure - there would be a certain amount of dwellings where people actively avoided entering census figures and others where people just never encountered the census takers but I doubt that would amount to more than 20,000.

eirmail

seamus wrote: »

Thanks, puts it in a much more sensible light. So 266,000 (15% of total stock) dwellings assumed unoccupied. Probably close enough to the actual figure - there would be a certain amount of dwellings where people actively avoided entering census figures and others where people just never encountered the census takers but I doubt that would amount to more than 20,000.

If my memory serves me correct the census was nearly 2 years ago around april 2006. So you have to add in the empties built since then.

seamus

And deduct the new buildings sold since then as well as the amount of those 266,000 which subsequently became occupied. Simply adding on the number of dwellings built since the census was taken is pointless.

Much like employment, there's no such thing as 100% occupation. Afair (I can be corrected though), "normal" vacancy rates are around 8-12% of the total stock?

punchestown

uberwolf wrote: »

SimpleSam06 wrote: »

Tens of thousands of people (more?) bought in the last two or three years, and every single one of them is in a worse situation than if they had not bought.
QUOTE]

I bought, I'm not worse off.

Bully for you mate! I know of about a dozen friends that have bought in the last 12-18 months (some on an interest only mortgage) and their circumstances have definitely gotten worse as they were wrongly under the impression that house prices could only continue to increase. I know of one couple who are mortgaged for €420k, a house three doors down from them sold last week for €320k. How many years of toil will it take to pay back €100k dead money as that is effictively what that is? This in turn will have a knock effect as to whether they can have children or not. I have used the analogy of a stocks share price in another thread on this subject and as with all these 'markets' there is a right time to buy, a wrong time to buy, a right time to sell and a wrong time to sell and the last 18 months have most definitely been the wrong time to buy.

gurramok

Err Seamus, the UK are at the top of their bubble now and prices over there have begun to fall.
UK and Ireland are nearly in the same cycle timewise, both starting to fall.

How far the prices return to '06 levels here is anyones guess, most bears will say donkeys years, most bulls will say very soon which is clearly wrong

And the banks themselves(was it Austin?) did say 120,000 people here are stretched on bubble purchased property so thats one part of kippys myth destroyed

And prices have fallen(recorded drops) in Galway with rising inventory like everywhere else.

Anyway, did kippy not read the housing bubble thread where all this was discussed?

eirmail

seamus wrote: »

And deduct the new buildings sold since then as well as the amount of those 266,000 which subsequently became occupied. Simply adding on the number of dwellings built since the census was taken is pointless.

Much like employment, there's no such thing as 100% occupation. Afair (I can be corrected though), "normal" vacancy rates are around 8-12% of the total stock?

Exactly what I meant , I just phrased it as "add in the empties built" . Which are the total built minus the ones that were filled.

seamus

punchestown wrote: »

How many years of toil will it take to pay back €100k dead money as that is effictively what that is? This in turn will have a knock effect as to whether they can have children or not. ... a right time to sell and a wrong time to sell and the last 18 months have most definitely been the wrong time to buy.

If and only if they plan on selling now, though. That's the key.
If they plan on holding onto it for another ten years and at that time the house down the road is worth €550k, are they still paying off €100k "dead money"? How does it impact their decision to have children - unless they had planned to move before having kids? The amount they've borrowed hasn't changed, the value of their house doesn't impact how much money they have day-to-day. Somehow this seems to be missed by some commentators and they claim that dropping house prices will somehow bankrupt people.

Err Seamus, the UK are at the top of their bubble now and prices over there have begun to fall.
UK and Ireland are nearly in the same cycle timewise, both starting to fall.

Starting to fall? Have you been asleep for the last 12 months?

eirmail wrote: »

Exactly what I meant , I just phrased it as "add in the empties built" . Which are the total built minus the ones that were filled.

But we don't have those figures do we?

gurramok

seamus wrote: »

If and only if they plan on selling now, though. That's the key.
If they plan on holding onto it for another ten years and at that time the house down the road is worth €550k, are they still paying off €100k "dead money"? How does it impact their decision to have children - unless they had planned to move before having kids? The amount they've borrowed hasn't changed, the value of their house doesn't impact how much money they have day-to-day. Somehow this seems to be missed by some commentators and they claim that dropping house prices will somehow bankrupt people.

Thing is missing here is that it's 'some' people are and will be stretched. That 'some' amount will have an affect on the economy as it's quite big.(still minority of course in general population terms but enough numbers to affect retail(for example) buying sentiment)

seamus wrote: »

Starting to fall? Have you been asleep for the last 12 months?

Pedantics!:rolleyes:...UK last few months, IRL last 18months (yes have proof, its buried in the monster AAM thread(public sentiment) of falls i dug up around Aug'06)

seamus wrote: »

But we don't have those figures do we?

This has been discussed to death before here on boards, do a search for previous threads and even take a look at my previous contributions on the issue!:D.

Just look up urban areas at the census. Alternatively, take a walk around a school night evening and count how many blocks have majority lights out in a particular recently built area.
Or take the word of the IAVI(!:D) who recently said 40,000 apts alone are vacant in Dublin area.

martian1980

seamus wrote: »

Starting to fall? Have you been asleep for the last 12 months?

Both the Nationwide and Halifax reported house price falls last month and predict at best prices to remain flat on average this year with falls in most of the country off-set by small price rises in London.
reference: The Times Newspaper, Feb 6, 2008 http://business.timesonline.co.uk/tol/business/economics/article3317814.ece

Afuera

seamus wrote: »

The amount they've borrowed hasn't changed, the value of their house doesn't impact how much money they have day-to-day. Somehow this seems to be missed by some commentators and they claim that dropping house prices will somehow bankrupt people

Seamus, I think that the danger is that people may be relying on the ability to withdraw equity from their properties to fund their lifestyle. I have seen figures on the number of Irish mortgage "top-ups" before (can not remember where though, maybe someone else has the link to hand?) and it is not an insignificant amount of people who were availing of this until recently. I think it may have been as high as 30% of all issued mortgages in 2006 were classified as mortgage top ups.
In many cases this was used as a method for people to cover their financial debts due to wedding costs, purchasing furniture, fixtures and fittings, cars, holidays etc. When property prices were rising quickly it provided an easy safety net for recent purchasers to deal with unexpected expenses. With house prices in decline, this safety net is removed and they are left with little or no options if they run into financial troubles while they are in negative equity.
Up to now it was no problem if a homeowner fell into financial difficulty as they could just remortgage to get themselves out of it. Since this option no longer exists, I think it is reasonable to assume that the number of bankruptcies will rise. It is not that the falling prices of properties are bankrupting them per se, but the fact that they do not have easily built up equity will cut off a major lifeline.

The_Conductor

seamus wrote: »

Much like employment, there's no such thing as 100% occupation. Afair (I can be corrected though), "normal" vacancy rates are around 8-12% of the total stock?

Its actually considered to be between 4 and 5% (excluding properties which are either holiday homes or otherwise not considered to be normally available for habitation (including those in various degrees of construction or renovation)).

S.

punchestown

seamus wrote: »

If and only if they plan on selling now, though. That's the key.
If they plan on holding onto it for another ten years and at that time the house down the road is worth €550k, are they still paying off €100k "dead money"? How does it impact their decision to have children - unless they had planned to move before having kids? The amount they've borrowed hasn't changed, the value of their house doesn't impact how much money they have day-to-day. Somehow this seems to be missed by some commentators and they claim that dropping house prices will somehow bankrupt people.
Starting to fall? Have you been asleep for the last 12 months?
But we don't have those figures do we?

Seamus, you are ever the optimist and I admire you for that. You like to see the glass as being half full and you are adamant that the current descent is just a blip and punters should not worry as 10 years down the line, house prices will have doubled again. Its the Bertie school of economics and I like it. I am involved in another pyramid scheme of sorts and I get questions from worried investors all the time but I simply tell them to ignore the facts and figures and take it for granted that there will be another level of investor willing to come on board the ladder on the lowest rung and gurrantee the current investor, their windfall.
The reason it impacts their ability to have children is for a number of reasons. Firstly they wrongly assumed that prices could only rise. They wanted to see a rise of €100k over the first five years which they then could re-mortgage for, thus giving them a 6 figured sum to cover the cost of childcare whilst they both continued to work. Secondly a downturn in the economy could easily see one or both of them lose their jobs as well as see a further decline in the value of their home. They bought into the whole step of the ladder ****e hence they thought the short term pain of living in an estate (with a huge population of bleeders (the ones scrounging off the state etc..) was a small price to pay for the long term gain of moving to a nicer, more affleunt part of the city.
You take about the amount they borrowed not having changed. Were you not aware of interest rate rises the last 18 months or was the head buried in the sand like it seems to have been when making some of your other assertions? Quantifying a house purchase over the last 18 months, the way you have, I could apply the same principle to buying a car. I take out a loan for an overpriced neccesity (need the car for work as I need a house to live) I immeadiately drive off the forecourt and the car loses about €1500 (but sure that doesnt matter, the amount Ive borrowed hasnt changed and the value of the car doesnt impact how much money I have day to day) Despite advise from experts in the industry, I remain adamant that the price of the car will return to a value greater than what I paid for it!!:rolleyes:

seamus

punchestown wrote: »

Seamus, you are ever the optimist and I admire you for that. You like to see the glass as being half full and you are adamant that the current descent is just a blip and punters should not worry as 10 years down the line, house prices will have doubled again. Its the Bertie school of economics and I like it. I am involved in another pyramid scheme of sorts and I get questions from worried investors all the time but I simply tell them to ignore the facts and figures and take it for granted that there will be another level of investor willing to come on board the ladder on the lowest rung and gurrantee the current investor, their windfall.

And you seem to be adamant that we're going to go the way of Japan? Sure regardless of inward migration or investment we're never going to need any more housing. We're done, right? I am by no means certain that prices will rise in the long-term, however based on other countries' and Ireland's past performance, it is the most likely scenario. If in ten years time that €320k house is worth less then €320k I'll happily come back here and put my hands up.

As you quite rightly point out, a bubble is a bubble when the prices are propped up by invested borrowings instead of actual new entrants or actual money.
The excess borrowings have dried up. The money and the new entrants (IMO) have only paused temporarily because the market ate itself.

The reason it impacts their ability to have children is for a number of reasons...

Poor planning so as opposed to it being "the markets fault". They gambled and broke even instead of coming out loaded.

You take about the amount they borrowed not having changed. Were you not aware of interest rate rises the last 18 months or was the head buried in the sand like it seems to have been when making some of your other assertions?

Particularly now that we're linked with the ECB, interest rates tend to be cyclical. While they may be paying more in interest next year, the interest rate may drop below what they initially borrowed it at, later on.
Besides, that wasn't my point. The drop in the price of their house has not changed the amount that was borrowed. A drop in a person's house price has no direct effect on their day-to-day spending.

Quantifying a house purchase over the last 18 months, the way you have,

In fact, everyone else has been quantifying it over 18 months. I've been quantifying it long-term. The fact that you'd compare a house purchase to a vehicle purchase demonstrates the short-sightedness with which you're looking at this.

gurramok, I tend to dip in and out of these ones, but I'll try to dig up some of your posts when I get time.

jmayo

I think Kippy potrays his age with the comment about beleiving taxes were very heavy in the 1980s for those lucky ones that were employed.

I believe a lot of the optimists are the younger (God now feel ancient) generation that were born in 1980s or very late 1970s.
During their adult lives they have only known an era where house prices increase, income tax rates decrease or remain steady, cheap credit rates and there is wholesale employment.
The 1970s with it's fuel crisis, the 1980s with vat on kids shoes and emmigration of even the third level educated doesn't exist for them.
Hence the view that life is good and always will be.

The comment that long term property is a good investment, it is only in the short term it may not be, will not be of much comfort to those investors who paid too much in first place, have saddled themselves with huge mortgages and who will experience cash flow problems when rents to not cover their mortgages.
When they are forced to sell at below their original purchase price they will really experience the kick in the ass.

Of course house prices will increase over time, much the same as people's salaries and the cost of living increases over time.
Everytime and everywhere there has ever been a price bubble with huge price increases there was envetiably a correction and often a very severe one.

faceman

I admire seamus and kippy for holding the fort.

Houses are a long term investment be it PPR or otherwise.
With alot of comments and media reports you would think that everyone who bought a house in the past 5 years is up to their eyes with debt. That is simply not the case.

My parents bought their first house 31 years ago for IR£7,000. They struggled to make ends meet and they both worked in government jobs. When i bought my house, i had a very comfortable lifestyle. Swings and roundabouts. its about affordability. Not everyone is mortgaged to the max.

The biggest threat to affordability is job losses. Not everyone who loses their job owns their own home, not everyone working in ireland is an irish national who intends to own their own home in ireland.

Repossessions are on the up. I know the stats for the level of repossessions at present. Most of us probably do. Can anyone however tell me what the level of repossessions were at this time last year? The percentage of house repossessions at present in relation to mortgages out there is almost negligible.

The real question then is if prices continue to drop by a further 30%, whats the immediate impact? Owners are in negative equity if they want to sell. But unless there are huge job losses across the country, the fallout is minimal.

Remember prices cant keep going down for the same reason they cant keep going up. The ECF could possibly cut interest rates by 0.75% this year. If that happens, coupled with falling prices, demand is going to spark off again.

someone mentioned the central bank saying in 2000 that house prices were overvalued in '00. they were wrong simple as. In fact they often are. How often do they revise their economic forecasts? regularly actually.

Demand for houses continued for over 6 years since the CB released that report. A house is worth whatever someone is willing to pay for it. There will always be a demand for houses in areas where there is suitable employment.

anyway roll out the mud slinging. Be nice though, its the weekend.

mastermind2005

faceman wrote: »

Remember prices cant keep going down for the same reason they cant keep going up. The ECF could possibly cut interest rates by 0.75% this year. If that happens, coupled with falling prices, demand is going to spark off again.

amatuer speculation is one thing predicting the future is another....

economic changes happen over years and consist of many different variables, not just interest rates and slightly lower prices than a year before.:rolleyes:

SkepticOne

faceman wrote: »

The real question then is if prices continue to drop by a further 30%, whats the immediate impact? Owners are in negative equity if they want to sell. But unless there are huge job losses across the country, the fallout is minimal.

Ultimately high property prices, like high fuel or other essential prices, are detrimental to the economy. Money is put into property when it would otherwise be invested in productive industry. So in the long run if prices level off at a much lower level there will be a positive impact on the economy. But of course there will be some tough economic medicine that must be taken while the adjustment happens.

Supercell

High property prices are a total social catastrophe in the making.

The arrival of dual income housing as the norm is going to destroy the country in about 25-30 years or so.
Think about it, all these couples with one or none kids - just who is going to buy all these places when we grow old and want to downsize or sell up?, or cash our "investment" properties?

Just who is going to look after us when we grow old, many of us won't have kids to take care of us, our "investment" houses are worth far less than what we thought they would..

Unless prices go back to a level where a single income earner can afford to buy the family home things look very bleak for our seniors.

Unfortunately I believe the mentality that forever rising prices are are great will win and there is going to be genuine hard time for many of us as we enter old age and suddenly find our houses massively devalue as there's not enough ftb kids kids coming onstream to buy them from us and let us sail into the sunset.

Seriously has anyone in this country stopped to think for a second about what houses are built for?....in the end someone has to live there..falling birth rate caused by dual income becoming the norm can only lead to one conclusion and its not pretty.

gurramok

Its the immigrants Longfield

Bulls have this imagination that over 100,000 well paid immigrants will keep arriving here every year until our retirement years, recession or no recession which is lunacy economics.

A population increase in recent years of 100,000 only occurred in '06 and '07(from CSO) do not translate to a 30 yr increase of the same, it goes in cycles .

Then we haven't factored in lower birth rates, our traditional emigration rates(42,000 left our shores here last year) and normal credit reach(ya know no more easy credit of 2% ECB days)

faceman, have a look at who has been buying the houses pre '06 for example.(from CSO) http://i181.photobucket.com/albums/x283/gurra2011/Misc/rangeofincomesofborrowers.jpg

Sanity left after 2003, the wealthy minority were buying them to make a quick buck in alot of cases(speculators and BTL's), alot of fake demand there.

SimpleSam06

faceman wrote: »

I admire seamus and kippy for holding the fort.

Eh what fort is that exactly? The one that priced most individuals out of a home to live in?

faceman wrote: »

Remember prices cant keep going down for the same reason they cant keep going up. The ECF could possibly cut interest rates by 0.75% this year. If that happens, coupled with falling prices, demand is going to spark off again.

Its not that simple, I'd say. First off its fairly unlikely that the ECB is going to drop rates, despite panic dropping by the Fed, and that ignores the interbank rates.

Secondly the prices are falling, which has a momentum of its own. People aren't going to buy in masses like before because there is no pressure on them to do so. Why buy now when you can wait a year or three and pay 100k less? Why buy in three years when you can hold out for 50k more? Investors, excluding a rarefied section of the BTL crowd, are out, so thats 40% of the demand gone right there.

A large part of the market always was public sentiment, and now that vested interests have spent a great deal of time and money forming that into a coherent force in their favour, they are finding that when it turns against them, its every bit as effective.

faceman wrote: »

someone mentioned the central bank saying in 2000 that house prices were overvalued in '00. they were wrong simple as. In fact they often are. How often do they revise their economic forecasts? regularly actually.

They were right at the time, but they did not have in their posession a crystal ball to see the global interest rates slashed in '01.

johnnyskeleton

kippy wrote: »

Fair enough but I dont think that many people will find themselves in this situation as is being bandied about on threads like this and if they do, they may be able to renegotiate their mortgage and/or employment terms.

I disagree. There are thousands of people in these situations, and thousands more who are borderline. While they will make up only a small portion of the total number of homeowners, I believe they will have a disproportionately large effect on the market because a) their stories will scare other people into being more cautious and b) their need to sell quicly means they will drop prices, thus putting downward pressure on the prices of similar houses.

For most of these people, renegotiating their mortgage and/or employment terms is not really an option. They are often mortgaged up to their teeth (and in any event their credit rating may be affected because of their difficulty) and it's not as simple as saying "Hi boss, i can't pay my mortgage, so you have to pay me more", especially if people are out of their jobs due to recession.

kippy wrote: »

The danger has always been there of the situations you speak off that people find themselves in and there is no doubt that some people will struggle, but I tell you one thing, people in this country will never again struggle like the people who have gone before us.
Kippy

The danger of your circumstances changing has always been there, but whereas before people had a safety net in the deposit they had paid and the reasonably stable house prices, now people have taken out mortgages with little or no deposit and have taken loans for much more than the house is worth. So while in the past people could extricate themselves from this situation by selling, and they would usually have some change left afterwards, if someone sells now it might not be enough to pay off what they borrowed in the first place.