Crunch Time (TV3)

Senna

Anyone watch Crunch Time on tv3 last night?
It concentrated on the house market collapse and what fuelled the bubble in the first place.

I was expecting another fluff piece with plenty of VI's predicting we're at the bottom or other such rubbish, but it really didn't hold back. Kelly Morgan predicted that houses selling for €800-€900k in 2006 will be worth no more than €220k, i'd say was an eye opener for alot of people and surprised me. KM's previous predictions have been very accurate and i'd say he's right on this also.
The question is, if houses do drop by 75%+, will the economy be so bad that no one will be able to afford them, even at these prices?

SimpleSam06

Senna wrote: »

The question is, if houses do drop by 75%+, will the economy be so bad that no one will be able to afford them, even at these prices?

Depends on how bad the economy gets, really. If the government continues its myopic fascination with trying to prop up the property market from the taxpayer's pocket, throwing good money after bad, it will probably get pretty rough. If they take the wiser but short term more painful course of promoting real domestic export based industry and cutting the legs off public sector unions, we might get out of this not just intact but in pretty decent nick.

I leave it as an exercise to the reader to decide which is the more likely course of action from the current government.

ravendude

SimpleSam06 wrote: »

Depends on how bad the economy gets, really. If the government continues its myopic fascination with trying to prop up the property market from the taxpayer's pocket, throwing good money after bad, it will probably get pretty rough. If they take the wiser but short term more painful course of promoting real domestic export based industry and cutting the legs off public sector unions, we might get out of this not just intact but in pretty decent nick.

I leave it as an exercise to the reader to decide which is the more likely course of action from the current government.

I think given the dogs dinner budget and general government bungling on almost everything they touch, the answer to SimpleSam's question shouldn't escape all but the most biased vested interests, - actually they probably know the answer too but keep it for discussions behind closed doors.

seamus

Senna wrote: »

Kelly Morgan predicted that houses selling for €800-€900k in 2006 will be worth no more than €220k, i'd say was an eye opener for alot of people and surprised me.

You can stop me here cos I didn't see it, but this very much depends on the circumstances of the property. The scenario above is certainly very likely for properties well away from facilities and the like (large 5-beds built in one-housing estates in the middle of nowhere), but for other places, that kind of drop would be a return to pre-1998 prices, which I think is very unlikely unless the affordability of credit remains well outside of people's reach.

As an example, the house I grew up in was a 5-bed detached house in Dublin 16. We sold it in mid-2000 for IEP£335,000 (€425,000). At the peak of the boom, they were selling for €950,000.

A drop to €250k would mean that the house would be almost half again of the price that it sold for 8 years ago. While I don't think it's impossible, I think it's very unlikely, or only likely for certain types of housing, as I mention above. A drop across the board of 75% would effectively mean that almost everyone who bought a house in the last 10-12 years would be in negative equity.

Sam is right though I think. The current Government thinks that saving the economy means trying to get money back into people's pockets in the short-term.

jetski

One thing to remeber is that wages have increased with house prices....

About 8 years or so ago I remember an electrician i know boasting about his wages being €16200

Having that in mind it would be vertually impossible for house prices to go from 900k to 250k in a small amount of time unless say it folded out over about a 15- 20 year period

ravendude

jetski wrote: »

One thing to remeber is that wages have increased with house prices....

About 8 years or so ago I remember an electrician i know boasting about his wages being €16200

Having that in mind it would be vertually impossible for house prices to go from 900k to 250k in a small amount of time unless say it folded out over about a 15- 20 year period

.....unless said electrician is now unemployed.

Seriously though, I do agree the drops being bandied about on that program were completely sensationalist to the point of tabloid headline. A 900K to 250K drop is unrealistic for houses in good areas of Dublin. Doctors, Surgeons, Barristers and the likes will still be around and still making good money.

SimpleSam06

jetski wrote: »

Having that in mind it would be vertually impossible for house prices to go from 900k to 250k in a small amount of time unless say it folded out over about a 15- 20 year period

Why, it increased by 300% over 7 or 8 years, what makes you think the reverse couldn't happen?

ravendude wrote: »

Doctors, Surgeons, Barristers and the likes will still be around and still making good money.

That doesn't matter, what matters is how much the banks will lend them.

jetski

Because wages have increased also which means the property prices aren’t as dramatic you some perceive. A few people will take pay cuts but the majority wont and that means the with the drops so far there is definitely value out there.

Karmaa

I watched this programme, it was informative to an extent, but to be honest it didn't really tell me anything I didn't already know. I felt so sorry for that woman and her daughter who's house was repossessed and others who had to move out, supposedly temporarily.
I am trying to sell my house, dropped the price etc. I have now resigned myself to forget about it, it will sell when it sells no matter how many years it will take.

veritable

I hate the way everybody is trying to blame somebody: developers, the government, the banks, etc.

developers: they are simply reacting to the demand for homes. Demand for houses = build more. Land prices rocketed meaning that houses built on that land had to be more expensive. Developers didn't artificially inflate prices: second hand homes were equally expensive.

Government:the government is not the smartest tool in the box. Like Ronald Regan said: the best minds work in business; and if they didn't, business would hire them anyway. The government is reactive in every country. The thousand that work in the public sector and civil service are for the most part inefficient and retarded. they only do what they have to. they have no incentive to work hard like the private sector. Don't complain about the gov, etc. because it will always be like this.

Banks: yes, poor lending practices, predatory lending, greed, and manipulation. But nobody forced you to take out such a huge mortgage. nobody said you have to try to buy something you actually cannot afford.

The real culprit: me and you, joe bloggs on the street. we did this to ourselves. we bought overpriced houses and we paid for things that we couldn't really afford.

jetski

veritable wrote: »

the best minds work in business; and if they didn't, business would hire them anyway. The government is reactive in every country. The thousand that work in the public sector and civil service are for the most part inefficient and retarded. they only do what they have to. they have no incentive to work hard like the private sector. Don't complain about the gov, etc. because it will always be like this.

how did you come to that decision? you dont know what your talking about mate.

travellerI

I agree with Karmaa that there was nothing new in this programme. I admire the hard neck of the Vested Interests who put their side of the argument. At this stage they are a totally discredited bunch of individuals.

The first thing people must accept is that a property crash was inevitable in this country due to oversupply of houses and the lack of affordability. It is convenient now for VI's to point to the credit crunch, certain people talking down the economy/housing market as the reason for the current problems.

The key issue seems to be regulation. In this respect the Central Bank and the Financial Regulator so far have been given a clean bill of health. Had these two arms of the State put a stop to the reckless lending activities of financial institutions earlier things may not have gotten to the crisis we are in now.

It was interesting to hear Austin Hughes say that while his predictions may have been a bit rosy he hadn't factored in predictions mistakes the Government would make. Remember Austin and his fellow VI economists all predicted a soft landing. To may knowledge there has never been a property bubble at anytime in history that ended in a soft landing . In 2007 our then Taoiseach was advising people to buy houses - at a time when the buuble had burst but most people just didn't know it.

We are in for several years of pain and the only way the population at large will accept what is coming is for those really responsible for our current predictament to come out with their hands up.

As if that is likely to happen

veritable

jetski wrote: »

how did you come to that decision? you dont know what your talking about mate.

obviously works for civil service...

jetski

No i dont.

joe_chicken

veritable wrote: »

Banks: yes, poor lending practices, predatory lending, greed, and manipulation. But nobody forced you to take out such a huge mortgage. nobody said you have to try to buy something you actually cannot afford.
...

Grandpa Simpson: Banks are not to blame. They may be greedy, poorly regulated, completely to blame, but they're NOT porn stars.

SimpleSam06

jetski wrote: »

Because wages have increased also which means the property prices aren’t as dramatic you some perceive. A few people will take pay cuts but the majority wont and that means the with the drops so far there is definitely value out there.

Please learn the difference between "affordable" and "good value". There is a significant difference.

connundrum

ravendude wrote: »

A 900K to 250K drop is unrealistic for houses in good areas of Dublin.

I don't think he mentioned anything about particular areas to be fair. I know of several areas around county Dublin where 'normal' house prices were advertised at around the 700 - 900k mark, areas like Lusk, Ongar etc. Its possible that these prices could drop by 50 - 60% because they realistically should never have been valued at the initial price.

spockety

I think you will probably see some fixer uppers that could hit these kind of drop levels.

At the height of the madness, it almost didn't matter what condition a property was in, someone would pay mental money for it. Not any more. People buying to live in are looking for practically 100% perfection (and why not, given that supply available), and investors/developers looking to fix up somewhere to sell on will be doing some seemingly ludicrous lowballing.

jetski

If a house is good value and you cant afford it you cant blame a little thing like a bubble

spockety

jetski wrote: »

If a house is good value and you cant afford it you cant blame a little thing like a bubble

I guess it depends on where the house is, and how much you earn.

As I have said here before, I think a single income family on the average national wage of about 36K should be able to buy a modest 3 bed semi in a decent working class area for about 115k.

A single income family pulling in 60-70k should be able to buy a house in a relatively good middle class area (Rathfarnam, knocklyon, etc.) for about 250k.

Dual income power house families with lawyers/doctors at the helm will still be buying in Foxrock, though maybe for more like 500-750k.

€1m+ gaffs will be left for rock stars!

ZYX

spockety wrote: »

I guess it depends on where the house is, and how much you earn.

As I have said here before, I think a single income family on the average national wage of about 36K should be able to buy a modest 3 bed semi in a decent working class area for about 115k.

A single income family pulling in 60-70k should be able to buy a house in a relatively good middle class area (Rathfarnam, knocklyon, etc.) for about 250k.

Dual income power house families with lawyers/doctors at the helm will still be buying in Foxrock, though maybe for more like 500-750k.

€1m+ gaffs will be left for rock stars!

You seem to be assuming everyone is a first time buyer. Most people have equity in their current home if they wanted to sell and buy a bigger house.

SimpleSam06

jetski wrote: »

If a house is good value and you cant afford it you cant blame a little thing like a bubble

And this, folks, is one of the last remnants of the Celtic tiger attitude. Those who had, should have it, those who hadn't, were obviously unworthy and of low blood. The 19th century called, it wants its tired old social darwinism back!

spockety

ZYX wrote: »

You seem to be assuming everyone is a first time buyer. Most people have equity in their current home if they wanted to sell and buy a bigger house.

I don't see how that doesn't fit in with what I've said?

The kinds of prices and social statuses I've listed are basically what was in place around 1999/2000. What's different between now and back then? (Other than a huge oversupply now, a recession, and increasing unemployment? )

ZYX

spockety wrote: »

I don't see how that doesn't fit in with what I've said?

The kinds of prices and social statuses I've listed are basically what was in place around 1999/2000. What's different between now and back then? (Other than a huge oversupply now, a recession, and increasing unemployment? )

Well I can tell you as a doctor in 1999/2000 (of many years experience) I could not have afforded to live in rathfarnham. Foxrock was a total impossibility.

jetski

sprokety - and what would people do with the rest of their money?

spockety

ZYX wrote: »

Well I can tell you as a doctor in 1999/2000 (of many years experience) I could not have afforded to live in rathfarnham. Foxrock was a total impossibility.

In that case, the market was ill even in 1999/2000.

How the hell can a doctor not afford a 3 bed semi in Rathfarnham/Knocklyon?

Are you a witch doctor!?

spockety

jetski wrote: »

sprokety - and what would people do with the rest of their money?

How about spend it elsewhere in the economy so we remove ourselves from the point where 24% of it is construction/development? Or save some of it so we remove ourselves from being so ridiculously reliant on lines of credit?

SimpleSam06

spockety wrote: »

In that case, the market was ill even in 1999/2000.

It was overpriced at that stage, astonishingly enough, according to a CB report released at the time.

ZYX

SimpleSam06 wrote: »

It was overpriced at that stage, astonishingly enough, according to a CB report released at the time.

Nor could I have afforded it in 1990.

The_Conductor

SimpleSam06 wrote: »

It was overpriced at that stage, astonishingly enough, according to a CB report released at the time.

The IMF report on the housing sector in 2000, said prices were up to 20% overvalued at that time- and they subsequently went on the triple in value......... By that reckoning its entirely possible that a house valued at 900k in Q3 2006 could potentially fall to 240-250k bringing us back to what would be realistic figures for 2000.........

?

spockety

ZYX wrote: »

Nor could I have afforded it in 1990.

Either;

a) I am wildly over estimating the earning power of a doctor.

or

b) You are not a medical doctor.

ZYX

smccarrick wrote: »

The IMF report on the housing sector in 2000, said prices were up to 20% overvalued at that time- and they subsequently went on the triple in value......... By that reckoning its entirely possible that a house valued at 900k in Q3 2006 could potentially fall to 240-250k bringing us back to what would be realistic figures for 2000.........

?

Excluding inflation. If you allow for inflation based on this, house prices must have been about 100% overvalued not 20%.

ZYX

spockety wrote: »

Either;

a) I am wildly over estimating the earning power of a doctor.

or

b) You are not a medical doctor.

Perhaps you should find out first how much a house cost in Rathfarnham in 2000. (not how much you think it should have cost but the actual cost) then work your figures from there.

spockety

ZYX wrote: »

Perhaps you should find out first how much a house cost in Rathfarnham in 2000. (not how much you think it should have cost but the actual cost) then work your figures from there.

Jan 2000:

"Rathfarnham, Hillside Park - Spacious home with private west facing rear garden, Accom: Ent Hall, living, dining, kit/breakfast, 3 dbl beds, bath, car port, GFCH, dbl glazed, Price Region £210,000."

"Rathfarnham, Otterbrook Willbrook Rd - New exclusive enclave of 35 town homes built by Collen Construction Ltd .. from £190,000"

"Rathfarnham, Heather Park - Semi Det. Home. Accom: ent hall, living/dining, kit, 3 beds, bath, good sized rear garden with raised patio area, GFCH, mostly double glazed, 890 sq foot, region £175,000"

jetski

And what about the wages and interest rates from the year 2000

seamus

Some quick research suggests that the average Doctor's salary in 2000 was around IEP£30,000 and a standard variable rate was around 6%.

That means that repayment over 25 years on a £150k mortgage would be roughly £970/month. That's nearly 40% of the gross salary.

jetski

and All roughly about 6 times a doctors salary.... thats food for tought.

ZYX

spockety wrote: »

Jan 2000:

"Rathfarnham, Hillside Park - Spacious home with private west facing rear garden, Accom: Ent Hall, living, dining, kit/breakfast, 3 dbl beds, bath, car port, GFCH, dbl glazed, Price Region £210,000."

"Rathfarnham, Otterbrook Willbrook Rd - New exclusive enclave of 35 town homes built by Collen Construction Ltd .. from £190,000"

"Rathfarnham, Heather Park - Semi Det. Home. Accom: ent hall, living/dining, kit, 3 beds, bath, good sized rear garden with raised patio area, GFCH, mostly double glazed, 890 sq foot, region £175,000"

Well an 890Sq foot hardly counts. I had a look for my old P60s and couldn't find one for 2000. For 1998, (the nearest I could find) I earned £25000. So clearly a house even one as small as 890 sq feet was out of my league

ronbyrne2005

ZYX wrote: »

Well an 890Sq foot hardly counts. I had a look for my old P60s and couldn't find one for 2000. For 1998, (the nearest I could find) I earned £25000. So clearly a house even one as small as 890 sq feet was out of my league

I thought most doctors did loads of compulsory overtime and grossed huge amounts?I know the starting salary for a doctor in a hospital is around35k euro nowadays but I read somewhere that most were earning at least double that when OT was factored in.

ZYX

ronbyrne2005 wrote: »

I thought most doctors did loads of compulsory overtime and grossed huge amounts?I know the starting salary for a doctor in a hospital is around35k euro nowadays but I read somewhere that most were earning at least double that when OT was factored in.

However in those days most overtime was not paid. The first 10 hours overtime were paid at time and a quarter. The next 15 at half time (not time and a half) and the rest were unpaid.

spockety

In that case, my bad, it was a), I grossly overestimated a doctor's pay (I assumed 80-100k average).

But again I guess all it is showing us is that the rot had set in even in 2000.

January 1996:

Foxrock - Foxrock Ave - Fine 4 bed , 3 rec. family home. Quiet Cul-de-sac, good gardens... £109,000

And a sprinkling of 3/4 bed semi's in Rathfarnham from 70-95k.

SkepticOne

spockety wrote: »

In that case, the market was ill even in 1999/2000.

How the hell can a doctor not afford a 3 bed semi in Rathfarnham/Knocklyon?

Are you a witch doctor!?

Depends on the type of doctor. A general practitioner in 2000 would have easily been able to afford a house in those areas. Average salary of £72,700 * 2.5 = 181,750 mortgage.

Obviously, junior doctors building experience would have made a lot less.

Note, even in 2000 the 2.5 rule had been largely superceded so our GP could probably afford more expensive properties.

From spockety's post:

"Rathfarnham, Hillside Park - Spacious home with private west facing rear garden, Accom: Ent Hall, living, dining, kit/breakfast, 3 dbl beds, bath, car port, GFCH, dbl glazed, Price Region £210,000."

"Rathfarnham, Otterbrook Willbrook Rd - New exclusive enclave of 35 town homes built by Collen Construction Ltd .. from £190,000"

"Rathfarnham, Heather Park - Semi Det. Home. Accom: ent hall, living/dining, kit, 3 beds, bath, good sized rear garden with raised patio area, GFCH, mostly double glazed, 890 sq foot, region £175,000"

spockety

Well I have to say I was pretty shocked to see him say that the wage for a doctor was only 25k in 2000! You're saying nearly 80 which is what I had thought they earn. Yes obviously there are loads of different levels, but I didn't mean a junior doctor, I meant your average Merc driving family doc.

ronbyrne2005

Shows how bad things got that doctors who had studied for 6 years and worked long hours for a few years could not afford to buy a basic house in a nice area. Tradesmen a couple of years out of school were making more than junior doctors and outbidding them for properties. Things are reverting to normally now thankfully. Our essential public sector workers should be able to afford basic homes near their workplaces and the bubble prevented that.

Senna

spockety, can i ask were you got those house prices from 2000? been looking for old house prices myself.


The realisation that a doctor could not afford a 3 bed semi in 2000, makes me think that Morgan kelly is correct in his 75% drop. From the graft below, prices started to rise faster than the CPI in about 1996. Also from the graft, a 75% drop would be needed for house prices to return to normal.


http://i101.photobucket.com/albums/m50/ctc_celtic/2lng85s.jpg

ZYX

SkepticOne wrote: »

Depends on the type of doctor. A general practitioner in 2000 would have easily been able to afford a house in those areas. Average salary of £72,700 * 2.5 = 181,750 mortgage.



From spockety's post:

?link to this info

gurramok

Just to add to Spockety's stat, I do know anecdotallly through friends who bought a 3bed house in Greenhills/Limekiln area for £180k in 2000 if that helps!

The_Conductor

ZYX wrote: »

?link to this info

You can find it on the HSE's website (it was quoted in a nursing dispute seeking higher salaries for nurses. The case was in 2001- but I'll see if I can dig it out).

SkepticOne

I meant to post this earlier.

Link containing some details of doctors' renumeration.

http://www.dohc.ie/publications/fulltext/quality_and_fairness/part1.html

Pay costs and remuneration

Pay costs account for some 70 per cent of current spending on health and personal social services. For planning purposes, when calculating the full pay costs of health professionals, an average of £40,000 (€50,790) per professional is used. For all health service staff in health boards, the average pay in 2000 was in the region of £24,500 (€31,108). Some examples of average pre-tax pay for selected grades in the health services are set out below.

• A staff nurse at the maximum of the scale with standard premium pay and no overtime pay earned about £31,000 (€39,362).
• The pay of a therapy professional (e.g. physiotherapists, speech and language therapists, occupational therapists) at the mid-point of the scale is £25,218 (about €32,000).
• The average earnings of a basic grade radiographer (inclusive of on-call allowances) are in excess of £35,000 (€44,440).
• The average clerical salary, based on grades III to VII, is £19,402 (€24,635).
• A hospital consultant earns an average of some £100,000 (€126,974) per annum in the public health service, excluding on-call or call-out arrangements which can vary from post to post. This also excludes private earnings for consultants engaged in private practice.
• While the basic pay for a non consultant hospital doctor at senior house officer grade is less than £30,000, (€38,092) the average earnings * including on-call * are in the region of £60,000 (€76,184) per annum. A specialist registrar would earn an average of £80,000 (€101,579) per year.
• The average payment per general practitioner in the General Medical Services (GMS) Scheme in 2000 was £72,700 (€92,310), including allowances.

Ideally you would want salaries around 1996 and corresponding house prices to do a proper comparison. In 2000 the bubble was well underway.

ZYX

SkepticOne wrote: »

I meant to post this earlier.

Link containing some details of doctors' renumeration.

http://www.dohc.ie/publications/fulltext/quality_and_fairness/part1.html

[/list]Ideally you would want salaries around 1996 and corresponding house prices to do a proper comparison. In 2000 the bubble was well underway.

Thanks for reply.
I thought this would be the type of figures you had. On the GP figures. This is a payment to GPs not a salary. It is to run the practice. Out of this comes wages, rent/mortgage, light, heat, insurances etc. The GP gets what is left over.

SimpleSam06

ZYX wrote: »

Thanks for reply.
I thought this would be the type of figures you had. On the GP figures. This is a payment to GPs not a salary. It is to run the practice. Out of this comes wages, rent/mortgage, light, heat, insurances etc. The GP gets what is left over.

What about the money paid to them by their patients? Sorry now but this impoverished doctors nonsense is just that. They are one of the few professions that can still get 100% mortgages for a reason.