Just the facts : Reasons to buy or to wait

mathie

Hi

Would it be possible to have a sticky with what people see as the main reasons to buy or to wait?
I see the question and the reasons come up quite a lot and think it'd be great to have it as a reference.

We could keep is as just the 'cold hard facts' and try to keep away from peoples thoughts or feelings.

Something like ....

Reasons to buy

• Recession is over (http://online.wsj.com/article/SB10001424052748703426004575338433422665358.html?mod=googlenews_wsj)
• Interest rates at record lows of 1% (http://www.finfacts.ie/irishfinancenews/article_1020104.shtml)

Reasons to wait

• PTSB / ESRI House Price Index for Q1 2010 : Average national house prices down 4.8% in first 3 months of 2010 (http://www.esri.ie/irish_economy/permanent_tsbesri_house_p/)
• Unemployment is at record levels (http://www.cso.ie/statistics/sasunemprates.htm)

Obviously a very short list but maybe we can flesh it out?
I understand that something like ECB rate at 1% might be seen as a reason to buy and to wait so we can have some 'facts' on both sides.

Thanks
m

quozl

Please no.

This is a terrible idea.

Both your pros are extremely misleading to the uninformed.

Without detailed explanations of why they're misleading, which we've had elsewhere on this forum, I honestly believe they'll just mislead people.

And if this is stickied, there's a fair chance it's the first, and only, place many will look.

mathie

quozl wrote: »

Please no.

This is a terrible idea.

Both your pros are extremely misleading to the uninformed.

Without detailed explanations of why they're misleading, which we've had elsewhere on this forum, I honestly believe they'll just mislead people.

And if this is stickied, there's a fair chance it's the first, and only, place many will look.

Can you tell me why the pros are misleading?

I'm not looking to mislead people.
I'm looking to collect together all the facts so that people can make their own informed choices.

I see too many posts in this forums saying the market will bottom out in X years.
All I'm trying to do is collect the facts and not opinions.

D3PO

quozl wrote: »

Please no.

This is a terrible idea.

Both your pros are extremely misleading to the uninformed.

Without detailed explanations of why they're misleading, which we've had elsewhere on this forum, I honestly believe they'll just mislead people.

And if this is stickied, there's a fair chance it's the first, and only, place many will look.

here here

quozl

mathie wrote: »

Can you tell me why the pros are misleading?

I'm not looking to mislead people.
I'm looking to collect together all the facts so that people can make their own informed choices.[

The problem is that listing bald facts does not necessarily help people make informed decisions.

Telling someone that the recession is over, while technically true, is going to lead in many peoples mind to believing that the worst is over and we're now in recovery. We're not in recovery, we're still losing jobs. While technically out of recession thanks to pharma exports (and the pharmas are even making people redundant) things are likely to be getting worse.

As to the record low interest rates - I've met many people who think that is a reason to buy now, even if they're not going to fix over a long period of time. That thinking is daft, but seeing the bald fact that interest rates are at a historically low that is the reaction of many people. "Buy now, quick before interest rates rise!"

That's why imo simple statements without any explanation, dissenting or not, can mislead. Especially the type of person who is going to be reading a quick for/against list as their main research, and there are people like that.

D3PO

mathie wrote: »

Can you tell me why the pros are misleading?

I'm not looking to mislead people.
I'm looking to collect together all the facts so that people can make their own informed choices.

I see too many posts in this forums saying the market will bottom out in X years.
All I'm trying to do is collect the facts and not opinions.

anybody can make a "fact" spin to back their argument. A list of facts is a terrible idea.

there is no factual reason to buy or not, its a cumulative affect of lifestyle choice, individual circumstances, financial considerations etc

facts dont tell you anything about any of these

ei.sdraob

mathie wrote: »

Reasons to buy

• Recession is over (http://online.wsj.com/article/SB10001424052748703426004575338433422665358.html?mod=googlenews_wsj)

thats not a reason to buy, thats a reason to be confident that you might not loose your job, but unemployment is still rising and so are taxes therefore the income you might be able to allocate to repayments might either disappearor end up in the pockets of revenue....

mathie

quozl wrote: »

The problem is that listing bald facts does not necessarily help people make informed decisions.

Telling someone that the recession is over, while technically true, is going to lead in many peoples mind to believing that the worst is over and we're now in recovery. We're not in recovery, we're still losing jobs. While technically out of recession thanks to pharma exports (and the pharmas are even making people redundant) things are likely to be getting worse.

Well then the 'fact' that GNP is down and GDP is up is something that people can use to make their own informed decision.

D3PO

mathie wrote: »

Well then the 'fact' that GNP is down and GDP is up is something that people can use to make their own informed decision.

problem is those that need help to make an informed decision probably dont know the difference between GDP & GNP !!

P.S heres just 1 more example why a list is of no use.

You say historically low interest rates is a reason to buy, i would argue the opposite. Making people overlook affordability at normal interest rates in not a good idea.

quozl

mathie wrote: »

Well then the 'fact' that GNP is down and GDP is up is something that people can use to make their own informed decision.

That would be better, but that then needs an explanation to go with it. Someone who understands the difference between GNP and GDP and why one going up and one going down is important isn't the target audience for a quick list of these sort of facts, I think.

I understand you're trying to help but I think if you did something like that you would need explanations to go with each fact. And to be fair you'd probably need dissenting interpretations/explanations because plenty of people won't agree with my interpretations or yours.

mathie

D3PO wrote: »

problem is those that need help to make an informed decision probably dont know the difference between GDP & GNP !!

The reason I wanted to start this thread was to put together some reasons for someone to allow them to make up their own mind if they wanted to buy or not.

I'd been inspired by Calinas excellent post (http://www.boards.ie/vbulletin/showpost.php?p=62366856&postcount=12)

Can no-one see a good reason for a thread like this?
Maybe I've phrased things incorrectly but I think there's some value to it!

mathie

D3PO wrote: »

problem is those that need help to make an informed decision probably dont know the difference between GDP & GNP !!

P.S heres just 1 more example why a list is of no use.

You say historically low interest rates is a reason to buy, i would argue the opposite. Making people overlook affordability at normal interest rates in not a good idea.

And that's why I said in my OP that some 'facts' could be on both sides.

Cookie_Monster

Recession is over

why does that have any bearing what so ever on buying a house?

D3PO

mathie wrote: »

Can no-one see a good reason for a thread like this?
Maybe I've phrased things incorrectly but I think there's some value to it!

a thread perhaps but not a list

mathie

Cookie_Monster wrote: »

why does that have any bearing what so ever on buying a house?

Job security?

mathie

D3PO wrote: »

a thread perhaps but not a list

But I like lists!

D3PO

mathie wrote: »

But I like lists!

and I like giving Ricman a hard time. Doesnt make it the right thing to do though :p

Cookie_Monster

mathie wrote: »

Job security?

I don't think being technically out of recession will have much impact on this.

most big multinationals will re-scale periodically regardless of this.
most PS worker have that regardless
many of the big Irish companies are only just starting to plans cuts: BOI, AIB, Quinn, Eircom.

Treehouse72

mathie wrote: »

Reasons to buy

• Recession is over (http://online.wsj.com/article/SB10001424052748703426004575338433422665358.html?mod=googlenews_wsj)
• Interest rates at record lows of 1% (http://www.finfacts.ie/irishfinancenews/article_1020104.shtml)

Neither of these is a reason to buy. The opposite in fact - the second one is a reason NOT to buy!

One should buy property when at the top of the interest rate cycle, not the bottom, since at that time prices will be at their lowest (prices move in inverse to IR's...as we saw during the bubble time of low rates and high prices). So if you buy when IR's are high, it means prices will be near the bottom. By contrast, if you buy at the bottom of the IR cycle, it means not only that prices are at their highest, but also that with certainty ahead of you lies a period of increasing rates, so your repayments will be rising making planning and budgeting very hard, not to mention that rates might rise more than you anticipate, putting you in a serious bind. And also as those rates rise the value of your property is falling! If you buy when rates are high, the only way is down so none of this is a problem. The opposite in fact - as rates fall your property will increase in value since more people could afford the mortgage to buy it. And if you buy when rates are low it is possible that the larger period of your mortgage will be paid when rates are high.

As for the other reason to buy - the recession being over - this is now becoming THE great lie of the Summer. A rise in GDP is almost entirely accounted for by foreign multinationals' profits increasing due to improving international trading. This means Ireland gets some more corporation tax (which is good)....but that's about it....it brings precious few extra jobs, it does shag-all to reduce or national debt or deficit, which are our big problems and there is hardly any multiplier associated with it to "drag" the rest of the economy up behind it. So while GDP might be stabilising, we still have 500,000 unemployed, a €100b national debt and a €20b deficit. Pulling in some extra corpo tax (which is basically all that rising GDP will do for us) effects none of this a jot. Those things can only be improved by wealth and job creation...the Irish economy is doing neither and shows no signs of doing so for years and years.

mathie wrote: »

Reasons to wait

• PTSB / ESRI House Price Index for Q1 2010 : Average national house prices down 4.8% in first 3 months of 2010 (http://www.esri.ie/irish_economy/permanent_tsbesri_house_p/)
• Unemployment is at record levels (http://www.cso.ie/statistics/sasunemprates.htm)

Both of these are indeed good reasons not to buy. You could add:

• Emigration is continuing, depressing demand for property and thus prices
• The immigration we saw in the 00's is finished, also depressing property demand and prices, especially for the buy-to-let amateur investors who bought into the narrative of perennially buoyant demand
• Taxes are rising, including a coming property tax, putting less money in people's pockets to spend on housing, depressing prices
• At the same time, salaries are still falling, which also hits disposable income and thus affordability
• Credit availability - which is the single most important factor in setting house prices - has contracted enormously and continues to do so. Absent credit, prices will continue to fall. After all, where do people borrow the money to buy the houses? Until credit is freer, prices will continue to fall.
• There are 300,000 empty properties in the country. If for no other reason, this will psychologically dissuade people from buying and depress prices. On a more practical level, something will have to happen to these properties - firesales? Give them over to the homeless? Whatever - the empties help destroy prospects for price growth.
• NAMA is about to start fire-selling properties by the looks of things: http://www.independent.ie/opinion/analysis/emmet-oliver-nama-is-now-the-biggest-danger-to-property-prices-2250388.html. This can only further depress prices.
• The multiplier effect of budget cuts in December will suck more money out of the economy, further depressing prices.
• Sentiment towards prices is negative, just as it was positive during the boom. If you believe that positive sentiment pushed up prices in the bubble (and only a fool would claim otherwise) then the corollary of that is that negative sentiment must push prices down now.
• Rental yields are so low (because prices are so high) that there are almost no investors in the property market. Investors are a key constituency in keeping house prices high or stable. Without these investors, there can be no price stability, only falls.

To make this thread as balanced as possible, we need more contributions suggesting Reasons to Buy. By my calculation we don't have any yet.

mathie

Thanks Treehouse72
I think a better title or angle of approach might be 'Factors that would influence the purchase of a property' and let people make up their minds if they're reasons to buy or not.

Thanks for the input. Much appreciated.

Cookie_Monster

Reason to buy: None
Reason not to buy: property still over valued by at least 50%

ricman

Theres at least 40k job losses coming, banks, construction industry finishing big projects,eg motorways ,we are no where near a recovery .
theres a big deal about some company building motorway rest stops/garages .Thats good , but that just takes business from other shops ,garages in small towns.
YOU buy house x in 2 years it,ll be worth price now minus 20 per cent.IF we have a recovery it,ll be from the export industry ,tourism etc And by being more competitive ,better broadband infrastructure etc

D3PO

ricman wrote: »

Theres at least 40k job losses coming,

and your basis for saying this is ??

ricman

Large construction projects like motorways will be ending in a few years ,and banks and other companys will have more job losses ,eg eircom 2000 job losses predicted.WHEN company a loses 1000 workers it effects shops in the area etc as people reduce spending when they lose their job.I THINK saying every home is 50 per cent overvalued is illogical,
ie is a house in darndale the same as a house in donnybrook ,it makes no sense.Price depends on location, acess to transport,jobs , atmosphere, local crime rates etc thats why theres ghost estates.
reason to buy= tax credits on mortgage ,save on rental payments ,you might find house x at a good price ,eg renovation project if you are good at diy.
IF the government cuts spending by 3billion ,this has to effect government contractors ,eg suppliers.
The government has lots of empty buildings ,they could just sell off , save alot on maintenance ,security.

jetski

Cookie_Monster wrote: »

Reason to buy: None
Reason not to buy: property still over valued by at least 50%

So houses / appartments should be sold for less than it cost to build them?

jetski

Definitly definitly definitly a good idea to have a stickie.

ntlbell

jetski wrote: »

So houses / appartments should be sold for less than it cost to build them?

After all this time, are you really going to ask this question?

D3PO

ricman wrote: »

Large construction projects like motorways will be ending in a few years .

which captial projects are you referring to ? How many peopel do you think will be let go. Have you taken into account new capital projects ?

ricman wrote: »

,and banks and other companys will have more job losses ,eg eircom 2000 job losses predicted.WHEN company a loses 1000 workers it effects shops in the area etc as people reduce spending when they lose their job.

I dont need you to explain the knock on effect, i need you to explain your prediction.

you havent answered my question where does your 40k workers come from ?

You figures contradict those budgeted for by the dept of finance, and those suggested by the ESRI & the OECD.

So explain your numbers or admit you just picked a random figure out of the top of your head.

I expect your response to be the latter

mathie

D3PO wrote: »

you havent answered my question where does your 40k workers come from ?

Perhaps why I should have stipulated we need links to relevant sources for all 'fact's

ricman

Maybe it,ll be 20k job losses ,im not a financial civil servant,its a guess.

D3PO

ricman wrote: »

Maybe it,ll be 20k job losses ,im not a financial civil servant,its a guess.

ok so a you put in a guess for a thread thats titled just the facts.

Classic

:D

Pittens

All figures on predicted job losses would be speculative at this stage. 40K net is a pretty small estimate in my view. Whats the number unemployed - 400k? a ten percent rise on that would take the percentile of unemployed to 15%. Thats hardly radical.

which captial projects are you referring to ? How many peopel do you think will be let go. Have you taken into account new capital projects ?

There are no capital projects coming online of the same magnitude as the present motorway builds ( which remains one of the best things about the Tiger though it came late).

EDIT:

will supply facts in this post later - although guesses of unemployment levels are speculative we can get the future loss of jobs due to the ending of the motorway projects at least.

mathie

which captial projects are you referring to ? How many peopel do you think will be let go. Have you taken into account new capital projects ?

Key road and rail projects axed as money runs out
http://www.independent.ie/national-news/key-road-and-rail-projects-axed-as-money-runs-out-2247169.html

D3PO

Pittens wrote: »

All figures on predicted job losses would be speculative at this stage. 40K net is a pretty small estimate in my view. Whats the number unemployed - 400k? a ten percent rise on that would take the percentile of unemployed to 15%. Thats hardly radical.

which captial projects are you referring to ? How many peopel do you think will be let go. Have you taken into account new capital projects ?

Motorways. everybody working on those projects. There are none.

try closer to 450k

444,900 infact (dont have last weks figures to hand)

http://www.cso.ie/releasespublications/documents/labour_market/current/lreg.pdf

im not saying its not possible, im just saying somebody coming on and throwing out another 40k unemployed when every prediction says its wrong has no place in this thread.

as the poster said it was a "guess" a guess without any basis or logic just a random figure. if its an educated guess fine but it was a random number

Cookie_Monster

D3PO wrote: »

which captial projects are you referring to ? How many peopel do you think will be let go. Have you taken into account new capital projects ?

From a C&T thread.

Also AIB: 3k layoffs
Eircom 2K
BOI: ?1-2k?

Neworder79 wrote: »

The side article lists the exact projects as:

Road Projects Suspended
N2 Ashbourne - Ardee
N4 Sligo Bypass
N5 Scramogue - Ballaghaderreen
N6 Galway Outer Bypass
M7 Naas - Newbridge
N13 Stranolar - Derry
N14 Letterkenny - Lifford
N15 Lifford - Ballybofey
N16 Sligo - Glencar
N16 Glenfarne - Glencar
N22 Macroom - Ballincollig
N23 Castleisland - Farranfore
N24 Mooncoin Bypass
N24 Carrick-on-suir Bypass
N24 Clonmel
N24 Clonmel - Cahir
N24 Cahir - Bansha
N25 New Ross - Wexford
N25 Middelton - Youghal
N28 Ringaskiddy - Cork
N53 Ballynacarry Bridge
N54 Monaghan Town Link
N56 Inver - killybegs
N56 Letterkenny Relief Road
N59 Ballina Relief Road
N59 Crossmolina - Ballina
N59 Westport Relief Road (South)
N60 Castlebar - Claremorris
N61 Roscommon Town Bypass
N61 Boyle Bypass
N62 Roscrea Bypass
N71 Bandon Inishannon
N71 Kenmare Bypass
N72 Lismore - Cappoquin
N76 Tennypark - Brownsbarn
N77 Ballynaslee
N83 Ballyhaunis distributor road
N84 Ballinrobe Bypass
N87 Belturbet - Ballyconnell
M50 Eastern Bypass

Not Going Ahead or Vunerable
Metro West
Luas CherryWood - Bray
Luas Stephens Green - Liffy junction
Luas Lucan -Trinity
WRC Phase 2/3
Second Runway Dublin Airport
Regional Airport Investment
N2 may go ahead as in "Ministers backyard"

Safe
Atlantic Corridore (no breakdown of projects)
Metro North
DART Underground

Of interest: almost all listed roads are in South and West, but many are secondary projects. List may be as significant for the primary projects that aren't mentioned.
Atlantic Corridor "safe" statement is very vague given size, especially as some of the projects listed suspended are part of it.
WRC not going ahead conflicts with what the Minister said last week about delays in Metro creating space in the budget for Navan and WRC2.

Seems to be a lot of confusion about all projects at the moment, it would be good if the Minister came out with a more definitive statement on the state of all NDP/T21 projects.

OMD

Pittens wrote: »

. Whats the number unemployed - 400k? [.

Approx 280,000. A fact most people ignore and use your figure of 400k
http://www.cso.ie/statistics/sasunemprates.htm

Cookie_Monster

jetski wrote: »

So houses / appartments should be sold for less than it cost to build them?

the cost to build them included huge profit margin at every stage of development and massively overinflated costs and were just as mad as the selling prices. Would you rather make a loss of 100k on selling a house or never sell it and effectively lose 350k as a builder?

look at it seriously for a second., How can a house that cost 42,000 IRL in 1982-3 be worth 850k in 2007 and 650k now? It can't, its just insane.

snubbleste

OMD wrote: »

Approx 280,000. A fact most people ignore and use your figure of 400k
http://www.cso.ie/statistics/sasunemprates.htm

How is that?

Live Register says 452,882 people (incl. part-time, seasonal, casual workers)
According to QNHS Jan-Mar 2010, Labour force= 2,132,700 Employed= 1,857,600 Unemployed= 275,000

OMD

snubbleste wrote: »

How is that?

According to QNHS Jan-Mar 2010, Labour force= 2,132,700 Employed= 1,857,600 Unemployed= 275,000

Like you said.

quozl

IIRC the live register includes people who are on reduced hours, such as working 2 or 3 day weeks. The other also does NOT include the unemployed who are on training schemes or gone back to education iirc.

I don't think we can just ignore them, but I agree that it's not the same as being completely unemployed.

Can someone give the exact differences between the two? I can't remember them, but I do remember that there are flaws in taking both numbers at face value.

niallo27

How many people are still signing on and still doing odd jobs for cash in hand, great for people who want stuff done as its cheap, but what percentage of people are on the live register are actually living comfortably, i'd love to know

Pittens

We are trading semantics here. The difference between the live register and the unemployment rate is a valid one - but we should stick with one statistic.

The sum total of all the jobs lost by the banks, the end of the major captial infrastructure spend etc. will easily lead to about 40K more jobs lost - gross. The effects on the live register depends on whether export growth in multinationals can soak up some jobs.

in any case I think the increase in the rate of unemplyment will steady for a while. We need to see what happens when interest rates increase.

Treehouse72

Completely correct Pittens. The number that matters is the number of adults that should be economically productive, but are not. It doesn't matter what its name is or how it's sliced and diced. Of course, allowance must be made for those legitimately in training or otherwise unfit to work, and the fact there will always be people who just don't work (even during periods of "full employment"). But we should all know what we're talking about.

Whatever. The number is as close to 500,000 as not to matter. Hell, call it 400,000 if you like. Either one is still a mind-numbing number, especially when you consider this: where the hell are these people going to get jobs? I would especially like the cheerleaders of the "out of recession/GDP is up" faction to tell us what jobs that's going to create. At the moment MNC's employ c.100,000...GDP rising might add a few more, but it will not even be 10% of the unemployed. Nowhere near in fact. MNC employment would need to rise 50% to take 10% of people off the dole. That is not gonna happen.

What else? Construction? Clearly not. Something off the back of a consumer pick-up (something else the cheerleaders are cheering)? Er, no, because those are non wealth-creating jobs and require money to be made elsewhere in the economy to sustain. Agri? Meh. Tourism? With all those ghost estates littering our beautiful country and our high prices (50% higer than Manchester don't you know!)...no. So...where?

ricman

Theres a lot of people on welfare working 2 days a week. i presume recovery will come from being a more competitive country,lower costs ,the fall in the euro helps exports.The high price of housing pushed wages up ,hopefully lower house prices will help the economy recover in the long run.

Idbatterim

you would think tourism could be one area, where changes could be make quickish. The goverment should talk to the airlines, temporarily scrap the exorbitant taxes. Maybe even pay airlines a fee to get passengers into the country. There was a report in the indo the other day, comparing prices of hotels, car rental, food, drink etc, between ireland and other countries. We are cheap for accomodation and car hire. What really makes us expensive here is the cost of eating and drinking out. Costs in this area should be looked at and tackled. We cant afford to price ourselves out of the market, everyone loses out then!

Idbatterim

Also the talk of being out of recession makes me laugh, billions in savings are going to have to be found in this budget, and the next and the next! Its a pity the money has to come from new taxes, there is so much wastefull expenditure that could be targeted first.

astrofool

We'd need to drop the min wage to reduce the cost of eating out.

mathie

Budget feficit up from 11.5% to 19.75% of economic output

http://www.rte.ie/business/2010/0714/economy.html

Mr Cowen said he was not worried about the Economic and Social Research Institute (ESRI) report published today that predicted the Government’s budget deficit in 2010 to run to almost 20 per cent - the largest in the 27-member EU.

A Taoiseach who is not worried that we've the largest buget deficit in Europe.
Perhaps that should worry us.

hawkwing20101

mathie wrote: »

Budget feficit up from 11.5% to 19.75% of economic output

http://www.rte.ie/business/2010/0714/economy.html



A Taoiseach who is not worried that we've the largest buget deficit in Europe.
Perhaps that should worry us.

This is expected to fall to 10.25 per cent of GDP in 2011 according to the same report.

http://www.finfacts.ie/irishfinancenews/article_1020136.shtml