Will the property crash not, in the end, be a good thing?

hatrickpatrick

Obviously if you're a property investor this won't count. Otherwise:

Apart from the fact that we have to re-stabilize our economy not to be so dependent on construction, won't the crash be a good thing, in the end?
It means that people, particularly young first time buyers, will actually be able to afford somewhere to live.

I know the situation sucks, and obviously it does. But is this not one major silver lining? During the property madness a lot of people on relatively decent wages were cut off almost completely from the property market because of the ridiculously soaring prices, particularly in '05-'06.

Is it not at least one good side effect of this crash that once the wider economy recovers, presuming property doesn't become a bubble again, it will be a lot more affordable?

Permabear

This post has been deleted.

3DataModem

I am hoping that this crash / recession cures Irish people of their irrational obsession with owning their home.

Please jebus let us get a good long term renting framework in place so we can have stable cheaper rents.

RichardAnd

3DataModem wrote: »

I am hoping that this crash / recession cures Irish people of their irrational obsession with owning their home.

Please jebus let us get a good long term renting framework in place so we can have stable cheaper rents.

If anything, I would wager that it will make Irish people MORE obsessed with owning homes and land. Think of a child who is spoiled by its parents having their sweets taken away. Does the child forget about the candies and move on? Hardly, it bawls and moans about what was taken away until he gets it back.

In my opinion, the Irish greed for land is just one of those things that will not go away. Like arrogance in the french, or a good work-ethic in the germans, it's just like one of those things that makes the Irish, Irish.

ei.sdraob

RichardAnd wrote: »

If anything, I would wager that it will make Irish people MORE obsessed with owning homes and land.

Looking at the very very low number of repossessions and various repossession moratoriums then I agree with you.

Even if you owe the bank alot of money and faked your income to get a large mortgage (mind you the banks are no saints either for giving you the loan) you are very unlikely to endup evicted onto the street for non payment,
and ofcourse ending up on the street means getting welfare to pay for your rent as the worst case scenario

danbohan

Permabear wrote: »

This post had been deleted.

that was the situation in early 80s as well and most people i knew then ended up getting mortgages from local authority /county council so maybe that might end up been a part solution if the country can afford it ?.

gigino

3DataModem wrote: »

Please jebus let us get a good long term renting framework in place so we can have stable cheaper rents.

Thats what section 23 and section 50 was supposed to do - increase the quantity and quality of newly built accomodation, built to a certain government standard, which it did.

Unfortunately the investors ( many who were small people who borrowed much of the price of the buy to let, with the hope of paying it off over the years + being left with enough to provide a bit of income in old age or to educate kids etc ) have got badly burnt. The government reneging on the 10 year tax incentive promises it gave - now that it got the big lump of tax up front from the construction of the properties - is not going un-noticed. If the government reneges on written promises given to such investors in the Irish economy, would you trust the Irish government if you were a foreign industrialist considering investing here ?

Moral of the story :
DO NOT INVEST IN IRELAND.

ZYX

3DataModem wrote: »

I am hoping that this crash / recession cures Irish people of their irrational obsession with owning their home.

Please jebus let us get a good long term renting framework in place so we can have stable cheaper rents.

If you have more people renting than buying, surely that will increase rents not decrease them.

ei.sdraob

gigino wrote: »

Moral of the story :
DO NOT INVEST IN IRELAND.

And thats partially why the country is fecked, no one is willing to invest here at several levels be it bonds, companies or housing
the country has been exposed worldwide for what we locals knew it was all along a giant scam.

investors long ago moved to the far east fuelling a bubble there now...

fliball123

Be warry of what you wish for if the market keeps plummeting the amount of people defaulting will be really bad for the country. I mean anyone who bought in the last 5 odds years I think I seen a stat that 75% are in neg equity..The problem is that these lose their house but the state still has to look after them.

gigino

ei.sdraob wrote: »

And thats partially why the country is fecked, no one is willing to invest here at several levels be it bonds, companies or housing

And those who did invest in the Irish economy - whither it be in government encouraged section 23 property or in the "blue chip" Irish bank shares, as regulated by the Irish government Central Bank, have got screwed and not only that , vilified and insulted. Not only that, but the government now is taking back the promised 10 years tax incentives on the section 23 propties, now that its collected the 50% of the property cost through taxes and "investors" are caught. If CIE sold a season pass for ten years would it change its terms + use dramatically after only a few years ?
The government is only increasing the amount of people who will have to default on loans, and it wonders then why the banks will need so much money and why nobody will trust the Irish government again.
Got any money left ? : send it abroad.

gurramok

fliball123 wrote: »

Be warry of what you wish for if the market keeps plummeting the amount of people defaulting will be really bad for the country. I mean anyone who bought in the last 5 odds years I think I seen a stat that 75% are in neg equity..The problem is that these lose their house but the state still has to look after them.

Negative equity does not equal to losing one's house. The majority will still have jobs and paying off their mortgages whether they bought the house as a starter home or as a residence for years.

Cheaper housing is a good thing that has come out of the crash. Less pressure on employers to pay their employees more as accommodation(along with childcare) must be the single biggest cost on one's life. This helps competitiveness, no need for pay rises when accommodation is cheaper!

Tea drinker

yes and no, things like NAMA effectively mean we are paying the boom price for housing anyway. Maybe more.
Property should and will crash further before we see value for what it costs us, but more importantly bond holders will have to be burned.

krd

gigino wrote: »

Thats what section 23 and section 50 was supposed to do - increase the quantity and quality of newly built accomodation, built to a certain government standard, which it did.

Unfortunately the investors ( many who were small people who borrowed much of the price of the buy to let, with the hope of paying it off over the years + being left with enough to provide a bit of income in old age or to educate kids etc ) have got badly burnt. The government reneging on the 10 year tax incentive promises it gave - now that it got the big lump of tax up front from the construction of the properties - is not going un-noticed. If the government reneges on written promises given to such investors in the Irish economy, would you trust the Irish government if you were a foreign industrialist considering investing here ?

Moral of the story :
DO NOT INVEST IN IRELAND.

Gigino, what do you want? Socialism?

To impress foreign investors we have to prove to them Ireland is not a socialistic country.

Would foreign investors be impressed to see themselves being taxed to subsidise business failures like our feckless property speculators.

Gigino, we need to end socialism in Ireland completely. These tax "incentives" are socialism. Gigino, take your crazy Marxism elsewhere. You left wingers think money grows on trees. Always wanting to confiscate the profits of the successful and hand them over to losers and feckless.


LET THE MARKET DECIDE!!!!

gigino

krd wrote: »

Gigino, what do you want? Socialism?

No, thats the last thing I want is a further move towards socialism

krd wrote: »

To impress foreign investors we have to prove to them Ireland is not a socialistic country.

One of the things. Mainly foreign investors are looking for things like low corporation tax rates, return on investment, English speaking people, well educated workforce, easy access to EC markets etc.

krd wrote: »

Would foreign investors be impressed to see themselves being taxed to subsidise business failures like our feckless property speculators.

"feckless property speculators" should not be subsidised

krd wrote: »

Gigino, we need to end socialism in Ireland completely.

krd wrote: »

These tax "incentives" are socialism.

depends on your definition of socialism I suppose.

Remember Bertie Ahern ( I am no fan of his by the way ) say that he was a socialist.

krd wrote: »

Gigino, take your crazy Marxism elsewhere.

I am neither marxist or socialist

krd wrote: »

You left wingers think money grows on trees. Always wanting to confiscate the profits of the successful and hand them over to losers and feckless.

money does not grow on trees

krd wrote: »

LET THE MARKET DECIDE!!!!

Yes, but if someone buys property which is expensive BECAUSE there are 10 year tax breaks associated with it, and after a few years the government takes away the remaining years of the tax breaks, thats just plain unfair. It got the money in advance, in the form of all the tax paid on the property.
It would be like CIE selling 10 year travel passes + then reneiging on them after a few years.

MORAL OF THE STORY : DO NOT INVEST IN IRELAND

Its too late for those who did ( eg in government approved / enticed section 23 /50 property, or in "blue chip" Irish bank shares etc ) , who regret it now.

InigoMontoya

RichardAnd wrote: »

If anything, I would wager that it will make Irish people MORE obsessed with owning homes and land. Think of a child who is spoiled by its parents having their sweets taken away. Does the child forget about the candies and move on? Hardly, it bawls and moans about what was taken away until he gets it back.

Actually, if the parents hold out for a bit, yeah the child usually does move on. :pac:

zig

I dont get why we beat ourselves up for having a culture of wanting to own our own home, its perfectly normal and most of the worlds population want their own home. And given our population/land mass , it is definitely not unreasonable for us to want it.

Now dont get me wrong, theres no need for someone in their early 20s in an unstable job to be jumping on the property ladder and purchasing an overvalued house but its not unreasonable to want your own home in your lifetime. I certainly do. I dont want to be 65 and paying rent to a landlord, no matter how you put it renting in the long long term is dead money.
So I agree that this recession was needed for us all to get back on track, unfortunately it was the catasprophe of the banks that have got us knee deep in ****!

krd

gigino wrote: »

Yes, but if someone buys property which is expensive BECAUSE there are 10 year tax breaks associated with it, and after a few years the government takes away the remaining years of the tax breaks, thats just plain unfair. It got the money in advance, in the form of all the tax paid on the property.
It would be like CIE selling 10 year travel passes + then reneiging on them after a few years.

Well, I heard the argument a long time back, that these tax incentives were essentially a boon to the developers, who factored them into the price and pocketed them. This is usually what happens with a market subsidy. It's taken by the seller and is of no benefit to the buyer. And worse it distorts the market. Giving a false impression of appreciation of the underlying assets. So they buyer is being cheated twice. And now a third time. But Caveat Emptor.


And it's not just a case of the government reneging on their part of the bargain. The banks are turning around to people who borrowed interest only loans and asking them to repay the principle. In many cases the rental income does not cover the interest repayments let alone, principal payments. I am perplexed by some of the borrowing people did.

We'll see what happens. The argument against state interventions in markets is they tend to favour the short term and special interests. So, it nearly always ends in tears. You can only manipulate a market to a certain point until the manipulation loses its' power, then the market kicks back. The only interventions the government should have made would have been to stamp out distortions - but they didn't. They encouraged them - any they had a lot of cheerleaders. So the speculators are guilty for being too greedy. In a much calmer property market they would have still made a profit but a much more modest profit, now many are facing bankruptcy.

gigino

You can argue that there should not have been section 23 and section 50 tax incentives if you want. Thats a different argument. However, the fact is, there was, and some people decided to run with this government incentive, for whatever reasons.

Changing the rules now at this stage , would be like the government changing the rules half way through the SSIA incentive scheme so that investors lost almost everything there too.

Of course the moral of the story is, anyone with any money to invest in a capital project or otherwise in Ireland, get the hell out - while you can - and do not trust the Irish government.

If every there is a signal to withdraw money from the Irish banks / economy, thats it lads.

barrackali

gigino wrote: »

You can argue that there should not have been section 23 and section 50 tax incentives if you want. Thats a different argument. However, the fact is, there was, and some people decided to run with this government incentive, for whatever reasons.

Changing the rules now at this stage , would be like the government changing the rules half way through the SSIA incentive scheme so that investors lost almost everything there too.

Of course the moral of the story is, anyone with any money to invest in a capital project or otherwise in Ireland, get the hell out - while you can - and do not trust the Irish government.

If every there is a signal to withdraw money from the Irish banks / economy, thats it lads.

I can understand you are somewhat unhappy with the situation, but section 23 is gone and won't be coming back.....there is no sympathy out there for property speculators.

gigino

barrackali wrote: »

I can understand you are somewhat unhappy with the situation,

lots are people are very unhappy with the situation in the country, and the way the government done the dirty on those who borrowed or otherwise invested in the country / took part in the section 23 government incentive scheme.

barrackali wrote: »

but section 23 is gone and won't be coming back.

I am glad its gone. It arguably should have been abolished 8 or 10 years ago. However thats different to "doing the dirty" on those who invested - and gave a lot of tax to the government at the time up front - say 2, 4 or 6 years ago.

barrackali wrote: »

....there is no sympathy out there for property speculators.

I agreee, but the small person who perhaps had no other pension, who was encouraged to invest in this government scheme , by buying a "buy to let" apartment and renting it out, done a service to society by increasing the supply of modern, newly built government approved accomodation. He was encouraged to invest in this scheme in order to have funds for his retirement perhaps, or for his kids education, or for future nursing home bills. Not all were the stereotypical Garda with the flat rented out in Rathmines. I would not define him / her as a property speculator. There are a lot of properties rented in other countries ; would you call the landlords there " property speculators" ? That term has a very marxist tone to it.

Do the dirty to the investors in the economy if you want...many are already down 50% or more and are in negative equity so you may as well push them over the edge altogether. Then wonder why bad debts / defaults to banks increase, why people will not trust the Irish government again, why people move their savings to non-Irish banks and why nobody will invest in Ireland for another generation. The last generation got "burnt". Lets hope foreign industrialists who were considering investing in Ireland see how the Irish government backpeddle / reneign on 10 year tax promises once they have your money.

krd

barrackali wrote: »

I can understand you are somewhat unhappy with the situation, but section 23 is gone and won't be coming back.....there is no sympathy out there for property speculators.

My parents, made a windfall in a property deal - just luck. I tried to tell to put the money somewhere safe. But they wouldn't listen and ploughed in back into property. I don't have any sympathy for them. At the same time I am very angry with them. They talked down to me like I was an eejit. And I was proved 100% correct. I do know people who made serious money from property. But they took their chips and walked away from the table as the game was getting out of hand. Only the fools keep at it, upping the ante, putting everything back in the pot.

I've heard terrible stories of people who nearly had the mortgages cleared on their homes, "trading up" and taking on few hundred thousand in a mortgage and then losing everything. Never take a risk you don't need to.

No one really has sympathy for Alison O'Riordan - I have sympathy for her parents. They ponied up her deposit - they're probably helping to pay her mortgage. At some point they'll all have to give up the ghost. 550k for a tiny flat she needs a tenant to help her pay the mortgage on. Luxury? You can't chose your children.

One of the most annoying features of the boom years. People who had had a little bit of luck thinking they were geniuses. An atrocious triumph of the ignorant. People who had taken out a few BTL mortgages telling everyone they were millionaires. And people believing them. I remember one time trying to explain to a dimwit to the point I was in tears, that borrowing a million quid does not make you a millionaire. And he still didn't get it - but what did I know, I didn't have a highly leveraged property portfolio. He just shook his head as if I was insane.

barrackali

gigino wrote: »

lots are people are very unhappy with the situation in the country, and the way the government done the dirty on those who borrowed or otherwise invested in the country / took part in the section 23 government incentive scheme.


I am glad its gone. It arguably should have been abolished 8 or 10 years ago. However thats different to "doing the dirty" on those who invested - and gave a lot of tax to the government at the time up front - say 2, 4 or 6 years ago.



I agreee, but the small person who perhaps had no other pension, who was encouraged to invest in this government scheme , by buying a "buy to let" apartment and renting it out, done a service to society by increasing the supply of modern, newly built government approved accomodation. He was encouraged to invest in this scheme in order to have funds for his retirement perhaps, or for his kids education, or for future nursing home bills. Not all were the stereotypical Garda with the flat rented out in Rathmines. I would not define him / her as a property speculator. There are a lot of properties rented in other countries ; would you call the landlords there " property speculators" ? That term has a very marxist tone to it.

Do the dirty to the investors in the economy if you want...many are already down 50% or more and are in negative equity so you may as well push them over the edge altogether. Then wonder why bad debts / defaults to banks increase, why people will not trust the Irish government again, why people move their savings to non-Irish banks and why nobody will invest in Ireland for another generation. The last generation got "burnt". Lets hope foreign industrialists who were considering investing in Ireland see how the Irish government backpeddle / reneign on 10 year tax promises once they have your money.

Do you remember the Eircom shares? People shouldn't have trusted the government after that debacle. Btw I anything but a marxist...I was just pointing out that those who didn't invest in property have no sympathy towards people with properties beyond the home.

ei.sdraob

gigino wrote: »

I agreee, but the small person who perhaps had no other pension, who was encouraged to invest in this government scheme , by buying a "buy to let" apartment and renting it out, done a service to society by increasing the supply of modern, newly built government approved accomodation. He was encouraged to invest in this scheme in order to have funds for his retirement perhaps, or for his kids education, or for future nursing home bills. Not all were the stereotypical Garda with the flat rented out in Rathmines. I would not define him / her as a property speculator. There are a lot of properties rented in other countries ; would you call the landlords there " property speculators" ? That term has a very marxist tone to it.

its ok the government are now trying to encourage a new type of investor of the Greener shade, wait till that goes tits up

gigino

barrackali wrote: »

Do you remember the Eircom shares? People shouldn't have trusted the government after that debacle.

I disagree there, as the market took its course. The shares initially rose beyond the floatation price + then fell. It was not as if the government enticed people to buy the shares by offering 10 years tax advantages if they invested+ then reneiging on the deal after a few years when they had the money.

barrackali wrote: »

I was just pointing out that those who didn't invest in property have no sympathy towards people with properties beyond the home.

people who "invested" in providing accomodation to those who did not own accomodation, are not looking for sympathy......I would imagine they are more concerned with their financial position.....they merely expected the government to honour the 10 year tax incentives the "investors" paid dearly for.

If there is a huge mortgage default by tens of thousands of property owners, that is bad for the banks and the economy. Newly built houses in some parts of the country can be picked up now for less than a 100k, so thats less than 2 years pay for a lot of people. Property values go in cycles anyway.

Sticky_Fingers

gigino wrote: »

I disagree there, as the market took its course. The shares initially rose beyond the floatation price + then fell. It was not as if the government enticed people to buy the shares by offering 10 years tax advantages if they invested+ then reneiging on the deal after a few years when they had the money.

While I was only a nipper at the time I distinctly remember the flotation of Eircom being accompanied by much hoopla and fanfare by the government of the day. While they didn't force anyone to buy shares they seemed to be egging them on and telling them not to miss the boat (again I was just a young lad so memory may be a bit faulty).

Newly built houses in some parts of the country can be picked up now for less than a 100k, so thats less than 2 years pay for a lot of people. Property values go in cycles anyway.

Perhaps poorly built new houses situated on ghost estates in the middle of nowhere are going for 100k but that is still way overpriced since they probably have no services and have little hope of getting them. Most of those developments will need to be pulled down eventually though we should keep a few as a reminder of our own hubris and stupidity.

Ste.phen

Sticky_Fingers wrote: »

Perhaps poorly built new houses situated on ghost estates in the middle of nowhere are going for 100k but that is still way overpriced since they probably have no services and have little hope of getting them. Most of those developments will need to be pulled down eventually though we should keep a few as a reminder of our own hubris and stupidity.

They were poorly built, in the middle of nowhere and unserviced when people were paying 400k for them too...

Greentopia

zig wrote: »

no matter how you put it renting in the long long term is dead money.

That's a common misconception amongst the Irish. It is not in fact "dead money" because when you rent you agree a payment in return for having a roof over your head, repairs carried out to any broken or worn out utilities, and in some cases the cost of replacing or repairing those utilities borne by the landlord/lady.

People in virtually every other country in Europe- the exception being Ireland and the U.K., understand that and have no such qualms about renting for however long they intend to reside in the property for.

"Dead money" is a misnomer. It would only correctly be called so if you derived no utility or benefit from your money. If you think renting makes bad financial sense because you would prefer to use your money to pay down a mortgage that's different, but whatever you would call that cannot be termed dead money.

When you buy food (something which you've bought, not "rented"), after it's consumed do you see the money you've spent on it as dead money because you've used it up? no, of course not. Same goes for renting a property.
Hope that helps to clarify.