Youth unemployments effect on future house prices

Brussels Sprout

Currently in Ireland people in their teens and twenties are finding it a lot more difficult to gain financial independence compared to a similar age profile 10 years ago. Unemployment, emigration, the public sector embargo and schemes such as JobBridge have meant that there is an entire generation in Ireland who have far less savings and disposable income.

Since this is the generation who would ordinarily be entering the housing market in the coming years this is bound to have an effect on the price of houses. How pronounced though would you expect this effect to be?

nesf

You also have to factor in numbers. There were around 50,000 births in 1996, there were around 67,000 births in 1976 (75k in 2008 for those curious). This doesn't sound like a big deal but 17k fewer people (ignoring migration flows) will turn 18 next year compared to 1994 at the start of the boom. Even if economic conditions were good, we'd be seeing lower demand for housing from this crop of teens when they reach home buying age than we did of the teens from 20 years previously.

nokia69

for house prices the only way is down

the government will keep wasting billions to prop up prices but they will fail

jimmycrackcorm

I remember the eighties. This is nothing new.

BostonB

jimmycrackcorm wrote: »

I remember the eighties. This is nothing new.

True. Back then people in their teen and twenties weren't thinking about home ownership either. It was all about where to emigrate to.

After all that has happened (and more yet to happen) you have thought people would be keener to rent than to buy.

gurramok

nesf wrote: »

You also have to factor in numbers. There were around 50,000 births in 1996, there were around 67,000 births in 1976 (75k in 2008 for those curious). This doesn't sound like a big deal but 17k fewer people (ignoring migration flows) will turn 18 next year compared to 1994 at the start of the boom. Even if economic conditions were good, we'd be seeing lower demand for housing from this crop of teens when they reach home buying age than we did of the teens from 20 years previously.

True, that's what bulls on housing forget. The birth rate fell between 1981 and 1995 or thereabouts to about 45,000-50,000 p.a. and flatlined until we had our tiger bubble.

Latest numbers suggest there are 120,000 fewer people between 15-30 since 2006, the majority Irish. http://www.cso.ie/en/media/csoie/releasespublications/documents/population/2012/popmig_2012.pdf

That's a whole chunk of potential first time buyers wiped out.

nesf

gurramok wrote: »

True, that's what bulls on housing forget. The birth rate fell between 1981 and 1995 or thereabouts to about 45,000-50,000 p.a. and flatlined until we had our tiger bubble.

Latest numbers suggest there are 120,000 fewer people between 15-30 since 2006, the majority Irish. http://www.cso.ie/en/media/csoie/releasespublications/documents/population/2012/popmig_2012.pdf

That's a whole chunk of potential first time buyers wiped out.

There's another factor as well. As we moved from the 70s and 80s into the 90s our average household size decreased. This meant even if the population stayed the same we would have had a fairly large increase in housing demand given our existing stock. This is another demographic shift that isn't happening this time around.

gaius c

nesf wrote: »

You also have to factor in numbers. There were around 50,000 births in 1996, there were around 67,000 births in 1976 (75k in 2008 for those curious). This doesn't sound like a big deal but 17k fewer people (ignoring migration flows) will turn 18 next year compared to 1994 at the start of the boom. Even if economic conditions were good, we'd be seeing lower demand for housing from this crop of teens when they reach home buying age than we did of the teens from 20 years previously.

Excellent point. I've just made it on the accom forum where some bulls are trying to make out that newborn babies need houses now when in fact, they'll live in households that are already formed and won't form a new household for another two decades (assuming they are still in the country).

The people who are of age to form households right now are the cohort born in 1993 and there's only 50k of them. They've no jobs, thus no financial independence even if they do stay in the country.

nesf

gaius c wrote: »

Excellent point. I've just made it on the accom forum where some bulls are trying to make out that newborn babies need houses now when in fact, they'll live in households that are already formed and won't form a new household for another two decades (assuming they are still in the country).

The people who are of age to form households right now are the cohort born in 1993 and there's only 50k of them. They've no jobs, thus no financial independence even if they do stay in the country.

Be careful to remember that quite a lot of people born in the early to mid 80s were "priced out" of the market since they were in their late 20s towards the end of the boom and buying a 3 bed semi where they wanted wasn't an option for them. We're definitely seeing some market activity from this group (who have stable jobs) trying to guess the bottom of the market.

This will be a temporary boost to demand though and will fade rather quickly.

gaius c

nesf wrote: »

Be careful to remember that quite a lot of people born in the early to mid 80s were "priced out" of the market since they were in their late 20s towards the end of the boom and buying a 3 bed semi where they wanted wasn't an option for them. We're definitely seeing some market activity from this group (who have stable jobs) trying to guess the bottom of the market.

This will be a temporary boost to demand though and will fade rather quickly.

Numbers renting have gone up by 50% so there's almost certainly a relationship between the two. It's going to take a while for this to play out.

nesf

gaius c wrote: »

Numbers renting have gone up by 50% so there's almost certainly a relationship between the two. It's going to take a while for this to play out.

Part of that increase will be due to people either having lower paid work or more unstable work than their equivalent a decade ago. These people aren't potential buyers until the economy recovers.

Dannyboy83

nesf wrote: »

Be careful to remember that quite a lot of people born in the early to mid 80s were "priced out" of the market since they were in their late 20s towards the end of the boom and buying a 3 bed semi where they wanted wasn't an option for them.
We're definitely seeing some market activity from this group (who have stable jobs) trying to guess the bottom of the market.

This will be a temporary boost to demand though and will fade rather quickly.

Purely anecdotal here, but I'm in the age group referenced and of the people I graduated with, I'm one of very few who has managed to secure a mortgage.

It's not about guessing the bottom of the market. The primary problem is lack of access to credit.

Realistically the drops have flattened out so much that people aren't concerned about drops anymore - I genuinely haven't heard this cited as a reason from any individual in my age range for at least 12 months.

But speaking from recent experience, it was quite difficult to secure a 130k mortgage now, on a better than AIW salary, in a long term permanent IT role, whereas I was approved for 300k several years ago on a whim (which I rejected).

I agree with your analysis tho, I think there will be a bump, but only a temporary one.
Unless credit access changed dramatically, I think rents are going to continue to increase for foreseeable.

Not least because of the generation coming behind my one for whom the prospects of potential home ownership look even more dim, at the moment.

I see foreign people in this situation now, older people from Eastern Europe who lost everything at the end of communism, who are working in minimum wage jobs and trying to keep up with rent and cost of living increases.
I'm not sure how we are going to approach this dilemma - I guess we are going to have to subsidize their rents through pensions?

Home ownership has taken a massive bashing in Ireland, and quite understandably so, but I definitely think the rent situation (rent bubble!) is gradually beginning to return some perspective.

maninasia

Well if NAMA put on the rental market the properties that they are holding off it would certainly help to reduce the 'rent bubble'.

Dannyboy83

maninasia wrote: »

Well if NAMA put on the rental market the properties that they are holding off it would certainly help to reduce the 'rent bubble'.

I be genuinely surprised if that ever happened.

Take "the Elysian" for example - that will probably be sold as one block to a single investor. Serious money to be made renting that out.
Rinse & repeat where possible.

Rents are going to increase year on year from 2012.
2012
2013

gaius c

nesf wrote: »

You also have to factor in numbers. There were around 50,000 births in 1996, there were around 67,000 births in 1976 (75k in 2008 for those curious). This doesn't sound like a big deal but 17k fewer people (ignoring migration flows) will turn 18 next year compared to 1994 at the start of the boom. Even if economic conditions were good, we'd be seeing lower demand for housing from this crop of teens when they reach home buying age than we did of the teens from 20 years previously.

Do your numbers also take account of the fact that nearly 90k people left these shores last year leaving us with minuscule population growth despite a baby boom?

http://cso.ie/en/releasesandpublications/er/pme/populationandmigrationestimatesapril2013/#.Uh8celMpgvk

gurramok

Its got worse in the last year. It was 120,000 fewer people between 15-30 since 2006-2012, todays release which includes 2013 says its 160,000.

And those in their30's has dropped by 6,000. A worrying trend.

nesf

gaius c wrote: »

Do your numbers also take account of the fact that nearly 90k people left these shores last year leaving us with minuscule population growth despite a baby boom?

http://cso.ie/en/releasesandpublications/er/pme/populationandmigrationestimatesapril2013/#.Uh8celMpgvk

Note I said "ignoring migration flows."

maninasia

There'll be the thirties crowd with employment that haven't bought a house yet that will be looking at buying something with some savings stashed away. 20 somethings..forget about it. Cash buying emigrants, they won't bother buying if the price goes up again and there are really only so many who can , afford to buy a house with cash.

Rents are high in Dublin so if you have the money it makes sense to buy, but for the rest of the country, rents would be low and employment may not be stable.

It's all about where the JOBS are, if there are no jobs, there won't be any demand for housing. So expect prices to even drop further in towns and the countryside, but to maintain or go up in Dublin and Galway at least.

starlit

Brussels Sprout wrote: »

Currently in Ireland people in their teens and twenties are finding it a lot more difficult to gain financial independence compared to a similar age profile 10 years ago. Unemployment, emigration, the public sector embargo and schemes such as JobBridge have meant that there is an entire generation in Ireland who have far less savings and disposable income.

Since this is the generation who would ordinarily be entering the housing market in the coming years this is bound to have an effect on the price of houses. How pronounced though would you expect this effect to be?

I agree op. You need a job and have good employment history to even afford a house now as there was once a time you get a loan no bother now its not so easy.

I be in that generation and for me i be lucky to afford rent and is lot harder to find places to rent compared to few years ago.

Are prices likely go up or down? At the moment youve the generation that loose out on sale of a house and those in negative equity making it harder again and imposing of tracker mortgages.

starlit

Blame nama...hope the rent bubble wont burst!? Will rent not go up if people arent buying sure how can they buy if they cant afford it and so many ghost estates as well as little or no building going on.

nesf

doovdela wrote: »

Blame nama...hope the rent bubble wont burst!? Will rent not go up if people arent buying sure how can they buy if they cant afford it and so many ghost estates as well as little or no building going on.

There is unfortunately something of a rent floor with the rent subsidy that the Government gives out. Finding rents under this level in Dublin (other parts of the country as as affected) is tricky.