Property - down, down; how long until dead-cat bounce?

Pottler

Annual Rent times ten. That is the golden rule of property. If it passes that test and you can afford it, buy it and rent it out. If it doesn't, pass. Regardless of short term trends, if you apply the ten times rent rule you will seldom go wrong buying property. Where it gets scowed is when people shell out €450,000 for a semi that rents for €900 a month..that's just... anyway considering the average house rents for between €650-€1250 a month, that gives you a price of €78000 - €150,000 for your average 3 bed semi. Thats the real price. The rest is hype. Don't believe the hype.:)

gurramok

OfflerCrocGod wrote: »

I'm not saying that prices will be driven ever upwards, I'm saying that writing off house prices due to depopulation is plain silly. It's just not happening.

Prices in Ireland are now more affordable then almost all other English speaking countries except for the US. Given that US house prices will bottom this year and have been falling slower then Irish ones I think Ireland will this year become the most affordable English speaking country in the world. This is a boon to the country and I think will result in a slowdown/bottom within a year (Spring 2013?

Croc, there is a flaw in your argument when comparing to the UK and US.

The UK did not build thousands of homes in the middle of nowhere with no demand, we did.

There are really 3 markets in Ireland, the Dublin market, the urban centres market(small cities\towns) and a market for middle of nowhere estates. The latter which is numerous is distorting the national house price figure of where people want to live.

Plus on immigration. Its not in this census but in 2006, it said that the vast majority of immigrants rent rather than buy, the only abnormality was British immigrants who are split down the middle on renting vs buying here. A plus side, it helps the rental market a bit but the downside to that market is the cut in Rent Supplement.

bnt

Pottler wrote: »

Annual Rent times ten. That is the golden rule of property.

That's one rule - and it assumes a lot, such as the availability of funds or a mortgage. It also assumes that you're buying to let, instead of to live in. Not everyone can be a landlord, or wants to be. Or should be - or else, who's left to do the renting?

Do people really not "get" how the "buy-to-let" boom was the main trigger for the property bubble? It wasn't the people who were buying to live in - the numbers of such people simply did not increase quickly enough to explain what happened. It was the idea that property was an "investment", a vehicle for making money off of other people.

Am I the only one bothered by the ethics of that? Driving up prices, driving up rents, and all at the expense of people like you - the only difference being that you got in there first with the money? I even heard people say "yeah, the renters will pay the mortgage, and I'll still have the house in the end"! And this is supposed to be a "Christian" country? What would "Jesus" say about that? :pac:

OfflerCrocGod

gurramok wrote: »

Croc, there is a flaw in your argument when comparing to the UK and US.

The UK did not build thousands of homes in the middle of nowhere with no demand, we did.

There are really 3 markets in Ireland, the Dublin market, the urban centres market(small cities\towns) and a market for middle of nowhere estates. The latter which is numerous is distorting the national house price figure of where people want to live.

Plus on immigration. Its not in this census but in 2006, it said that the vast majority of immigrants rent rather than buy, the only abnormality was British immigrants who are split down the middle on renting vs buying here. A plus side, it helps the rental market a bit but the downside to that market is the cut in Rent Supplement.

Yes sorry I wasn't clear those dates are my base case for Dublin, I've already mentioned that the rest of the country seems a year or more behind so that would mean a bottoming for it sometime in 2014 but frankly that's total guesswork and also utterly meaningless.

Dublin is by light years the only market that means anything in Ireland. It will lead in and out.

While I think rent supplement being cut is excellent news I don't think it will end up pushing house prices down another ~30% as some people are expecting. That would add up to almost 75% drop from peak which is probably unheard of for a countries primary city. Put that into context you would be buying a house with ~2.2 years of gross household income, that would be phenomenal.

I repeat; it's important for people to ignore asking prices as those are not the prices transactions are closing at.

As for renting instead of buying, that's the same in the UK or the US for immigrants. Someone must own the house they rent though.

I've already mentioned how little the houses that were built in stupid locations matter. They will never sell, no one will ever live in them. They mean nothing and will not be transacted on, they may end up being bulldozed over. As I said cheap houses in Detroit affect house prices in Dublin as much as cheap houses in Sligo.

Anyway we will see, Dublin is our primary city, it has a still growing population and has seen almost no house building for 2 years and this will be the third year. Yet we will see a further 30% price drop on top of the almost 60% drop. Right.

Rabidlamb

Robdude wrote: »

Prices are still way to high for me to consider paying them.

I feel bad for those of you with big mortgages, but not bad enough to take them off your hands

I bought in 2005 but it's not been as painful as some would have you believe.
Because I've a small tracker my mortgage has rarely been above 2%, couple that with increasing TRS & the burden has reduced further.
This year was the 7th on my term which should finished by the time my kids start college.
Economic cycles would suggest an inflation surge once the recovery takes hold & that aids the affordability through increased earnings.
If someone bought my house tomorrow they would pay half what I paid but would be looking at a much higher interest rate.
It would be interesting to compare the total amounts paid at the end of both terms.

Monty Burnz

OfflerCrocGod wrote: »

That would add up to almost 75% drop from peak which is probably unheard of for a countries primary city.

How far did Tokyo fall - where they didn't even need any IMF bailout?

So not unprecedented at all.

OfflerCrocGod

Monty Burnz wrote: »

How far did Tokyo fall - where they didn't even need any IMF bailout?

So not unprecedented at all.

The Japanese have been in deflation for two decades which is why they are a special case, it would be impossible for Ireland to be in deflation for so long as without our own currency we would simply default.

According to the guys who were warning about a giant housing bubble in Ireland prices have no reached fair value and are slightly overshooting. I think the US has bottomed/will bottom this year and if we follow them we need a further 15% drop before our bottom. At the speed prices are falling we could do that in one year.

Again I would urge to ignore Japan as it is an utterly crazy situation which will probably need to be resolved through a sudden large collapse in value of the Yen. Japan is not normal and Ireland is not even remotely like it.

Frankly it seems like Ireland and the US are ahead of the pack and are heading toward much healthier/sane housing markets. Now if we could only fix planning regulation so to prevent this from happening again.

Japan had a capital surplus and was a sovereign issuer of it's currency so it never had the slightest need for the IMF, we on the other hand were using Germany's currency so we needed to be bailed out once the ECB decided to put us to our knees.

It's possible that Spain may get the same treatment later this year if it's banks become too dependent on the ECB...

Robdude

Rabidlamb wrote: »

I bought in 2005 but it's not been as painful as some would have you believe.
Because I've a small tracker my mortgage has rarely been above 2%, couple that with increasing TRS & the burden has reduced further.
This year was the 7th on my term which should finished by the time my kids start college.
Economic cycles would suggest an inflation surge once the recovery takes hold & that aids the affordability through increased earnings.
If someone bought my house tomorrow they would pay half what I paid but would be looking at a much higher interest rate.
It would be interesting to compare the total amounts paid at the end of both terms.

I think there is a lot to what you are saying; a lower interest rate + higher loan can be the same or better than a higher interest rate + a smaller loan.

People like yourself who are intending to buy one house and stay there until it's paid off are probably in good shape. Who cares what the place is worth on paper if you aren't interested in selling?

For someone like me, looking at the current prices and current interest rates; with my own expectations for what I think a house is worth - I still can't fathom buying a place in Dublin for the foreseeable future.

I'll be honest and say that I haven't looked anywhere outside of Dublin, so maybe that is slanting my view.

davet82

subway wrote: »

theres a dead cat bounce coming along in the middle of this year.
we will exit 2012 higher than we started... within 6 months of starting 2013, it will be on the way back down.

cats told me in a dream

Them cats have been eerily right so far...

have they revisited you lately?