Do house prices need to increase?

Dionysus

No matter what anybody says, the Irish property market is hugely overpriced at the moment; before the bubble a house cost only 2.5 times the first earner's income, and one time the second earner's income. Furthermore, the average mortgage was only for 20 years, not 35 years.

These facts about the current property market are rarely mentioned in the media.

Anyway, interviewee after interviewee on RTÉ's Drivetime this evening was talking about how good it was for the property market and "liquidity" in the property market that NAMA was going to get involved in selling property.

RTÉ didn't have anybody to challenge this view. It's as if the property market deserves a boost, as if house prices should be more expensive than they are, as if house prices have fallen to their pre-boom level. They haven't fallen to that level; they have much more to fall.

I object to this attempt by elements of the media and state bodies to inflate the already inflated prices of property in this state - it's as if they need another property boom to make up for the sheer stupidity which made them lose money in the most recent one.

In April 2011, do you think property prices need to increase or decrease?

Son Of A Vidic

House prices are still way overpriced, many are of shoddy construction quality that were literally flung up during the 'boom'. I'm more concerned with the following question - since we own the banks, why are they allowed to increase mortgage repayments thus pushing many into the abyss?

L'prof

Those in negative equity: Increase
Those in rented accommodation: Decrease

themadchef

House prices should be what people can afford to pay for them, not whatever figure the banks are prepared to lend them.

mikemac

In 20 years a lot of the apartments and houses flung up in the last decade will have serious structural issues.
Built cheaply as possible, definitely not built to last

Short answer 'yes' with an if, long answer 'no' with a but.

SoulTrader

Deleted User wrote: »

Short answer 'yes' with an if, long answer 'no' with a but.

Your answers are both 5 characters long - they're both the same length.

Mike 1972

Corvus Maximus wrote: »

House prices are still way overpriced, many are of shoddy construction quality that were literally flung up during the 'boom'.

I have been in Soviet-era apartment blocks in Poland and the former GDR they looked a damn sight better built than most of the Irish ones Ive seen.

feelingstressed wrote: »

In 20 years a lot of the apartments and houses flung up in the last decade will have serious structural issues.
Built cheaply as possible, definitely not built to last

So basically the expected lifetime of these properties is less than the average mortgage term.

Now tell me again why "Rent is dead money"

Dionysus wrote: »

In April 2011, do you think property prices need to increase or decrease?

When the cost of food, transport, energy, clothing, medicine, essential services etc rises it is generally regarded as a bad thing.

When the cost of putting a roof over ones head rises the almost universal consensus among the media* is that its a good thing

why ?

* Including those media outlets which have a legal obligation to give balanced coverage to public affairs and which the general public are compelled to subscribe to.

AckwelFoley

A house, like anything is only worth what people are willing to give for them.

Foolishly too many people were willing to give money the never had nor will they ever be able to afford to pay.

eco2live

Still 30/40% over priced. 35 year mortgages should be banned. 25 should be the limit. Until houses are reposes-ed and sold on the open market at the new market price then we wont know the real price. 3 times an income sounds about right and minimum of 10% deposit for FTB. House prices won't hit those peak levels again for 15 to 20 years.

AckwelFoley

eco2live wrote: »

Still 30/40% over priced. 35 year mortgages should be banned. 25 should be the limit. Until houses are reposes-ed and sold on the open market at the new market price then we wont know the real price. 3 times an income sounds about right and minimum of 10% deposit for FTB. House prices won't hit those peak levels again for 15 to 20 years.

Theres a reason they dont flood the market with houses that could be sold for very small money.

1. house was 300k in boom is now 180 - that's alot of negative equity, sell 1000's of them that need to be off loaded - the value plummets to perhaps 100k, that leaves the 100 of thousands of people paying their mortgages with even worse negative equity, and an even worse economic situation, because the people paying the mortgages on their houses will stop

2. who buys the houses at 100k? Banks aren't giving loans now, so the first time buyer is still fcuked, the people that will buy the houses are people that can afford it, and in a rather ironic twist of fate - the people that got us into this mess!! Rich gets richer, poor stay poor, and those getting buy - become poorer

Dionysus

snyper wrote: »

Foolishly too many people were willing to give money the never had nor will they ever be able to afford to pay.

True, but this money existed primarily because the banks weren't regulated* and thus they were lending much more money than people could realistically repay and therefore people were competing against each other for houses with borrowed money that no previous generation of Irish people have had. With this bank-created demand, house prices consequently rocketed to prices that also had never been seen.

Short answer: without excusing the abject idiocy of the overly optimistic eejits (I include some of my nearest and dearest in that!) who borrowed during the boom time, banks need to be regulated at every turn; if they were regulated house prices would not have been so high in the first place as the money they would be able to supply would have been considerably less.

* regulated "effectively" if one must be pedantic about such things.

Dionysus

eco2live wrote: »

Still 30/40% over priced. 35 year mortgages should be banned. 25 should be the limit. Until houses are reposes-ed and sold on the open market at the new market price then we wont know the real price. 3 times an income sounds about right and minimum of 10% deposit for FTB. House prices won't hit those peak levels again for 15 to 20 years.

This. Or even 20-year limits, as it was before the boom.

pragmatic1

No they're still too expensive and will fall further. Furthermore their wont be any major increase in house prices for a very long time. Thats what happens when property bubbles burst.

yosser hughes

Irish house prices are still way over-priced.What constantly amazes me is the view that house price rises would be a good thing. The more a person has to spend on accommodation the less they will spend in he economy.Considering our economy is driven hugely by consumer spending the less people have to spend on illiquid non-productive assets the better.The lower the cost of accommodation, be that rental or house sales,the better it is for the economy.Unfortunately the mé feíners in this country can't see that.Alot of people made bad decisions and now cannot take responsibility for their actions.
The country is still in denial I'm afraid.

Captain Darling

themadchef wrote: »

House prices should be what people can afford to pay for them, not whatever figure the banks are prepared to lend them.

This.

COYW

Dionysus wrote: »

True, but this money existed primarily because the banks weren't regulated* and thus they were lending much more money than people could realistically repay

That is true but I worked with plenty of people who were "creative" with their mortgage applications borrowing far more than they could ever afford to repay.

In response to the OP, I believe that the sh1t still has to hit fan in relation to the property market here and prices will really fall over the next few years. The only thing that will prevent this from happening or slow down the rate of the decrease in price, is government intervention in the form of financial support for those in arrears or some sort of moratorium on repossessions.

Dionysus

yosser hughes wrote: »

The more a person has to spend on accommodation the less they will spend in he economy.

Very, very good point. To expand on it, this sort of economic structure largely transfers the wealth of people who buy a single home to a relatively small but wealthy group of people who build and develop property.

And, let's be very clear about it: this state, through NAMA and other state organisations like RTÉ, is promoting this transfer of wealth and thus making Irish society less equal. This is really important for those of us who believe in the ideals of social justice.

In fact, it could be argued that the Irish state has tied its economic growth and prosperity almost entirely to a rise in the property market. It wants its enormous NAMA investment to pay off, and to that end state policy will be designed towards encouraging another property boom. And the Irish government will use the taxes of those of us who are hoping for property prices to drop to a realistic level, to interfere in the property market to keep house prices at unrealistic levels. This priority of the Irish state to encourage another property boom in order to offload its NAMA properties has still to sink in for many people.

dj jarvis

sorry but how is this a AH debate ?

i say blast ya all with piss , and yore ma bla bla bla

Now it feels more like it

continue with your pointless debate

Dionysus

themadchef wrote: »

House prices should be what people can afford to pay for them, not whatever figure the banks are prepared to lend them.

By this logic could we abolish banks and then get houses at genuinely realistic prices?


I think the penny in relation to the true role of banks in the property market has just dropped for me! :P:pac::cool::mad::(:eek::o:rolleyes::D;):p

radioactiveman

continue with your pointless debate

ahhh I was just about to make a boring point about house prices are overvalued if they go over 14 times the annual rental yield (i.e. if you can get 1000 for it a month it would be 12,000 x 14 = 170k or so).
House that rents for 600 squids a month - boom castle or not it's only worth about 100k.

Tough sh1t paddy!

General General

I've noticed this contrast of opinion:

Member of a group that borrowed more than they could afford to buy a house?

Fook you, PAY!

Member of a group that borrowed more than they could afford to bail out their banks?

It's not FAAAAIRRRR... I'm NOT PAYYYYYYinggggg!

Monty Burnz

The price of property increasing is not just undesirable, it's impossible.

The Muppet

snyper wrote: »

A house, like anything is only worth what people are willing to give for them.

Foolishly too many people were willing to give money the never had nor will they ever be able to afford to pay.

And the alternative was ?

Bullseye1

The only people who want property prices to drop are those who cannot afford them. Those who have taken out mortgages on properties certainly don't want them to drop any further and why should they.

Haelium

The Muppet wrote: »

And the alternative was ?

Renting?

Saila

the only reason anyone would be saying they need to go up is they want to sell. They have a LONG way to fall yet about 40%+

Bullseye1

Haelium wrote: »

Renting?

So why don't those who are renting continue to do so?

Dionysus

The Muppet wrote: »

And the alternative was ?

Alternative 1: For the state to rein in the ability to the banks to create money which they never had in the first place, and thus lend people this money which they just created. Had the banks been banned from creating so much money, they could not have lent out the huge amount of money which they did and thus price would have fallen dramatically.

Alternative 2: There is a thing called renting. This is what I did, and continue to do. I object to my taxes going to promote those short-sighted individuals (to be polite) who foolishly followed the crowd and bought property in the boom times.

Haelium

Bullseye1 wrote: »

The only people who want property prices to drop are those who cannot afford them. Those who have taken out mortgages on properties certainly don't want them to drop any further and why should they.

The people who can't afford houses now are the ones who didn't profit during the "boom" years. Falling property prices benefit everybody who isn't responsible for the mess we're in tbh.

Bullseye1

How are your taxes subsidising those who have taken out a mortgage? Your taxes are subsidising those who cannot afford to buy and rely on the state to provide social and affordable housing.

Haelium

Bullseye1 wrote: »

So why don't those who are renting continue to do so?

Because they can finally afford a house and now is a great time to buy?

Bullseye1

Haelium wrote: »

The people who can't afford houses now are the ones who didn't profit during the "boom" years. Falling property prices benefit everybody who isn't responsible for the mess we're in tbh.

Most people who bought during the boom bought one house. How did they profit.

Bullseye1

Haelium wrote: »

Because they can finally afford a house and now is a great time to buy?

So yo think if someone who paid €300,000 at the height should now sell to you for €150,000 and end up with no house and a bill for €150,000?

Mike 1972

Bullseye1 wrote: »

Those who have taken out mortgages on properties certainly don't want them to drop any further and why should they.

Its a bit of an overgeneralisation to state that people who own a property benefit from rising prices.

Some obviously do but others suffer (e.g. those who were hoping to eventually buy somewhere better) but for most it doesnt make the slightest odds either way.

Bullseye1 wrote: »

So yo think if someone who paid €300,000 at the height should now sell to you for €150,000 and end up with no house and a bill for €150,000?

If they want/need to sell and €150,000 is the best offer theyre liable to get anytime soon then why the hell not ?

Bullseye1

Mike 1972 wrote: »

Its a bit of an overgeneralisation to state that people who own a property benefit from rising prices.

Some obviously do but others suffer (e.g. those who were hoping to eventually buy somewhere better) but for most it doesnt make the slightest odds either way.



If they want/need to sell and €150,000 is the best offer theyre liable to get anytime soon then why the hell not ?

Only a madman would sell in this Market or someone who is under pressure from banks.

PeterIanStaker

We need to rid the Irish mentality of the insecurity that feeds the complulsive need to own property at any cost. It'll only lead to bubble after bubble and the accompanying corruption.

Bullseye1

PeterIanStaker wrote: »

We need to rid the Irish mentality of the insecurity that feeds the complulsive need to own property at any cost. It'll only lead to bubble after bubble and the accompanying corruption.

I agree.

Mike 1972

Bullseye1 wrote: »

Only a madman would sell in this Market or someone who is under pressure from banks.

Or someone who is looking to move to another part of the country
or someone who is emigrating
or someone whose family have moved out
or someone who has split with their partner
or someone who wants a bigger house (good time to buy and all that)
or someone who isint delusional enough to think prices are going to rise anythime soon
Or someone who ....(10,000 other reasons)

Saila

Bullseye1 wrote: »

Only a madman would sell in this Market or someone who is under pressure from banks.

only a madman would buy in the boom when they couldn't actually afford it LONG TERM, if you're in the situation of having to sell, you want to do it soon they have a LONG way to fall yet, better to get 1/2 of nothing for it than 1/3 of nothing.

Bullseye1

Saila wrote: »

only a madman would buy in the boom when they couldn't actually afford it LONG TERM, if you're in the situation of having to sell, you want to do it soon they have a LONG way to fall yet, better to get 1/2 of nothing for it than 1/3 of nothing.

Alot of the problem lies with the banks offering 100% and 110% mortgages without proper stress testing. It's inherently breed into Irish people to own your own propery because rent is dead money. Personally i disagree. However the banks should be sharing in the deflation of propery prices. But of course they won't.

If you have to sell then you have to sell and maximise the sale price.

Jesus Wept

In before rent is dead money.
oh noes.

That money is DEAD. It's ****ing dead jim.

Haelium

Bullseye1 wrote: »

So yo think if someone who paid €300,000 at the height should now sell to you for €150,000 and end up with no house and a bill for €150,000?

Yes, that's capitalism baby! They took the risks(Stupidly) and now I have an opportunity to make a good investment unlike they did.

Haelium

Bullseye1 wrote: »

Most people who bought during the boom bought one house. How did they profit.

They had a house, a well paying job and weren't burdened with the debts caused by the previous generation?

Mike 1972

Bullseye1 wrote: »

It's inherently breed into Irish people to own your own propery because rent is dead money

Nope

It's inherently breed into Irish people to own your own propery because in Ireland the alternatives (a largely unregulated and gawdaful private rental sector and a largely unobtainable and brutal local authority sector) are so utterly shyte.

Balmed Out

Bullseye1 wrote: »

Alot of the problem lies with the banks offering 100% and 110% mortgages without proper stress testing. It's inherently breed into Irish people to own your own propery because rent is dead money. Personally i disagree. However the banks should be sharing in the deflation of propery prices. But of course they won't.

If you have to sell then you have to sell and maximise the sale price.

The banks are state owned so what youre really saying is you want people who didnt promote the housing bubble to help those who did.

Anyhow whats the big problem unless emigrating or have lost your job. Others moaning about negative equity ont make too much sense to me.

Youre moving, you sell your house for a lot less then you bought it but the house you buy costs a lot less then it did before too.

If you have to sel,l sell now for an asking price lower then all competitors. That way you will sell now rather then the property sitting on the market for a few years and being eventually sold for far less.

lorsric

No - house prices were over inflated to begin with and as wages were not comparitive, how were people realistically meant to buy €400,000 houses on 2 €25,000 salaries? Does not add up

Saila

Bullseye1 wrote: »

Alot of the problem lies with the banks offering 100% and 110% mortgages without proper stress testing. It's inherently breed into Irish people to own your own propery because rent is dead money. Personally i disagree. However the banks should be sharing in the deflation of propery prices. But of course they won't.

If you have to sell then you have to sell and maximise the sale price.

not sure why you're quoting my post, but the fact is there was no one forcing them to sign the contracts they did. its a bit like saying you use because there are drug dealers in your area [unless you are in marseille and you're gene hackman that is]

Bullseye1

Saila wrote: »

not sure why you're quoting my post, but the fact is there was no one forcing them to sign the contracts they did. its a bit like saying you use because there are drug dealers in your area [unless you are in marseille and you're gene hackman that is]

And no one is forcing people to buy now.

Saila

lorsric wrote: »

No - house prices were over inflated to begin with and as wages were not comparitive, how were people realistically meant to buy €400,000 houses on 2 €25,000 salaries? Does not add up

they were not, thats the whole point

ilovesleep

lorsric wrote: »

No - house prices were over inflated to begin with and as wages were not comparitive, how were people realistically meant to buy €400,000 houses on 2 €25,000 salaries? Does not add up

And nobody forced the banks to lend so much.