Property Market 2016

Earleybird

goz83 wrote: »

I personally think that there will be another crash in 2017. If I was a FTB, I would be saving as much as possible to get myself into a position to buy after the crash, but you're talking 2-3 years before the banks will give a mortgage while they are again being bailed out.

Can you tell me what your expert analysis is based on? Are you saying conditions in Ireland are now mirrored to those in 2007/08? You think the banks will require bailout funds in another couple of years?
You'll pardon me from completely ignoring everything from someone who "predicted" the first crash, yet bought anyway.

goz83

Khari Panicky Skunk wrote: »

What do you think will cause the crash this time, since it won't be caused by the same thing which caused the last one?

Many of the same factors are in place. The missing element in my view, is the huge number of people that were employed in the construction industry prior to the last crash. However, the levels are getting high again, due to higher demand for housing, which is pushing up property prices and boiling over the rental prices, which in turn creates more demand to buy. Rules are again getting loose. Memory is short and the same mistakes are being made again.

To answer the question in one word.

GREED

Michael D Not Higgins

goz83, you're missing the point that the rules are limiting the level of lending to 3.5LTI. This is completely different to the 100% LTV 5x LTI mortgages which were the norm around 2006/7.

Prices are high because of lack of supply not because of a bubble. There's no bubble to burst just pent up demand.

goz83

Earleybird wrote: »

Can you tell me what your expert analysis is based on? Are you saying conditions in Ireland are now mirrored to those in 2007/08? You think the banks will require bailout funds in another couple of years?
You'll pardon me from completely ignoring everything from someone who "predicted" the first crash, yet bought anyway.

Where have I claimed to be an expert? Oh...is that sarcasm I detect?

Well, yes, many conditions are mirrored. And I do expect another crash inside the next 12 months. It may take longer, but not much longer. The banks know they will be bailed out, so they will only be careful for as long as they are strangled by the rules and have eyes on them.

Sometimes it's necessary to make a costly decision because circumstances cannot risk further delay. <mod snip>

Michael D Not Higgins

Please take the hostility down a notch.

draiochtanois

This post has been deleted.

jay0109

Michael D Not Higgins wrote: »

Prices are high because of lack of supply not because of a bubble. There's no bubble to burst just pent up demand.

Prices in Dublin are up 63% in 3 years. They grew at 7.3% in the year to Sept.
They're 33% off Feb07 peak and are currently pitched around late 2004/Jan 2005 levels. In hindsight, is that not now considered the bubble period?

q85dw7osi4lebg

Appreciate your thoughts Gotz. It's no harm to view all potential outcomes however the safety net here is the LTI and LTV rates IMO.

I reckon prices will continue to rise for the next 18/24 months, until supply somewhat meets demand, at which point investors will begin to withdraw from the market due to less attractive yields, and prices will steady.

q85dw7osi4lebg

jay0109 wrote: »

Prices in Dublin are up 63% in 3 years. They grew at 7.3% in the year to Sept.
They're 33% off Feb07 peak and are currently pitched around late 2004/Jan 2005 levels. In hindsight, is that not now considered the bubble period?

Looking at specific properties and areas it's difficult to see the 63% increase. In parts of Dublin 3, 5 and 13, bread and butter 3 bed semis are changing hands for 10% less now than they did in 2014.

I'm not saying the figures are wrong but it's easy for things to be taken out of context.

goz83

Michael D Not Higgins wrote: »

goz83, you're missing the point that the rules are limiting the level of lending to 3.5LTI. This is completely different to the 100% LTV 5x LTI mortgages which were the norm around 2006/7.

Prices are high because of lack of supply not because of a bubble. There's no bubble to burst just pent up demand.

The current rules are being relaxed. The next step will be to increase lending to x4 LTI. If it doesn't happen inside the first half of 2017, I will eat my hat.

I understand what you are talking about about the current lending restrictions. I was only pointing out that, in my case, the mortgage repayments are and have always been met. We could have cried poverty and gone in for debt forgiveness/writedown in the height of the downturn, but our sense of responsibility was higher than that and we were/are managing the mortgage, even with the extra additions to the family since then.

The bank, in this case, have essentially declined to move the mortgage to a higher value property, because they say we can't afford it. The mind boggles....because we ARE affording it already. The NE would have been paid off with our own money and there would actually positive equity due to the higher value property. I realise this situation is not common, but it highlights the stupidity in the banking sector. At least that's my opinion.

Earleybird

goz83 wrote: »

Where have I claimed to be an expert? Oh...is that sarcasm I detect?

Well, yes, many conditions are mirrored. And I do expect another crash inside the next 12 months. It may take longer, but not much longer. The banks know they will be bailed out, so they will only be careful for as long as they are strangled by the rules and have eyes on them.

Sometimes it's necessary to make a costly decision because circumstances cannot risk further delay. <mod snip>

I'm glad you haven't claimed to be an expert, well done on that.

I don't know where to start on the points you've made.
You claim construction levels are getting "high again". Yeah, they're not even reaching 50% of levels seen pre bust.
You think the banks will collapse again when "eyes aren't on them". Regulation has moved on quite substantially in the last few years, the balance sheets have been shrunk, and the rules from CBI has meant a restriction on the lending profiles that created problems back in the day.

I think you're confusing big decision with big mistake. You saw a crash coming, yet bought anyway because of circumstances. Do you realise how ridiculous that sounds. I knew I'd lose money but I did it anyway. Bizarre.

Graham

goz83 wrote: »

The banks know they will be bailed out, so they will only be careful for as long as they are strangled by the rules and have eyes on them.

That would make much more sense if a bailout meant the people that owned the bank pre-bailout still owned it afterwards.

Michael D Not Higgins

goz83 wrote: »

The current rules are being relaxed. The next step will be to increase lending to x4 LTI. If it doesn't happen inside the first half of 2017, I will eat my hat.

The CBI have stated they will review the rules annually. These are the changes for the next year. There is no impetus or need for them to change them again before the end of next year. The fact that they have said that the 3.5 is unchanged is a statement from them that it is working as intended.

Michael D Not Higgins

jay0109 wrote: »

Prices in Dublin are up 63% in 3 years. They grew at 7.3% in the year to Sept.
They're 33% off Feb07 peak and are currently pitched around late 2004/Jan 2005 levels. In hindsight, is that not now considered the bubble period?

This is all supply and demand economics. A bubble requires additional credit to drive it. The current situation is driven within prudent lending rules and a deficit in supply.

How do you expect a crash could come?

goz83

Khari Panicky Skunk wrote: »

Appreciate your thoughts Gotz. It's no harm to view all potential outcomes however the safety net here is the LTI and LTV rates IMO.

I reckon prices will continue to rise for the next 18/24 months, until supply somewhat meets demand, at which point investors will begin to withdraw from the market due to less attractive yields, and prices will steady.

That would be a nice outcome and if rules were kept in place, is quite plausable. I would hope this to be the case, but I don't have that sort of faith.

Khari Panicky Skunk wrote: »

Looking at specific properties and areas it's difficult to see the 63% increase. In parts of Dublin 3, 5 and 13, bread and butter 3 bed semis are changing hands for 10% less now than they did in 2014.

I'm not saying the figures are wrong but it's easy for things to be taken out of context.

Being from D13, I have seen unrealistic asking prices come down in the past few months. New Priory apartments would have skewed that figure a little, as they were sold for a relatively low figure and sold out over the open weekend.

Earleybird wrote: »

I'm glad you haven't claimed to be an expert, well done on that.

I don't know where to start on the points you've made.
You claim construction levels are getting "high again". Yeah, they're not even reaching 50% of levels seen pre bust.
You think the banks will collapse again when "eyes aren't on them". Regulation has moved on quite substantially in the last few years, the balance sheets have been shrunk, and the rules from CBI has meant a restriction on the lending profiles that created problems back in the day.

I think you're confusing big decision with big mistake. You saw a crash coming, yet bought anyway because of circumstances. Do you realise how ridiculous that sounds. I knew I'd lose money but I did it anyway. Bizarre.

They haven't reached the higher levels yet, but if you're not blind and you live in a larger city/town in Ireland, look out the window. You might see the number of cranes has increased on the skyline.

Watch the CBI rules get looser. Only a month ago, another poster on the "not heading toward crash" side was pretty adamant that the CB were not going to relax the rules anytime soon. Does a month count?

Yes, I saw a crash coming, but I didn't expect that it would have been so soon. I expected it would be another 2-3 years and I knew that it would take another few years before the banks would lend again. I also hated my job and wanted to work for myself. So, based on my circumstances, even in hindsight, I made the right decision, because we have a home for our family and can afford it. We clearly have different views, because I wouldn't call that a big mistake.

jay0109

Michael D Not Higgins wrote: »

This is all supply and demand economics. A bubble requires additional credit to drive it. The current situation is driven within prudent lending rules and a deficit in supply.

How do you expect a crash could come?

I expect yesterday to be the first move by the CB to water down their rules.
Next up are 2nd time buyers...wait for the hard luck media stories about families stuck in starter apartments, long commutes/lack of family life.

Now that the cost of a deposit for an FTB will equate to that of a 2nd hand car (copyright Colm McCarthy on radio this AM!), bidding wars will push up prices even further.

ECB rates will not stay at these levels forever. When they go up, those that have been swimming naked will be found out!

I fully expect a lot of people to start borrowing from parents,counting bonuses, doctoring P60's etc to get into full swing when the frenzy kicks in over the next couple of years. Anything to get the mortgage.
Any blip to earnings that may come after that and all bets are off

q85dw7osi4lebg

jay0109 wrote: »

I expect yesterday to be the first move by the CB to water down their rules.
Next up are 2nd time buyers...wait for the hard luck media stories about families stuck in starter apartments, long commutes/lack of family life.

Yesterday was the first move for second time buyers. There is now more demand for their properties.

Earleybird

goz83 wrote: »

Yes, I saw a crash coming, but I didn't expect that it would have been so soon. I expected it would be another 2-3 years and I knew that it would take another few years before the banks would lend again. I also hated my job and wanted to work for myself. So, based on my circumstances, even in hindsight, I made the right decision, because we have a home for our family and can afford it. We clearly have different views, because I wouldn't call that a big mistake.

I'm glad it worked out for you, genuinely I am.

But I'm sorry to say your points made on a crash next year as so far from reality. I don't think you understand what caused the last one, the same factors are not in play. The banks have not been recklessly lending, there has not been an unlimited supply of credit for house hunters, there has not been thousands upon thousands of houses built on the presumption of sales and the rolling over of the profits for the next project. I wont even talk about international circumstances. None of these are in play.

What you do have is restrictive lending, a lack of supply, and difficulty on the part of individuals to raise finance to buy houses. All of these factors do not point to bust, they point in the exact opposite direction. People want to buy, but they cannot get finance together for some of the reasons mentioned above. With the changes in rules yesterday this will create room for some more of them, so we have yet more willing buyers in a sellers market. We have some way to go before a crash.

Michael D Not Higgins

jay0109 wrote: »

I expect yesterday to be the first move by the CB to water down their rules.
Next up are 2nd time buyers...wait for the hard luck media stories about families stuck in starter apartments, long commutes/lack of family life.

Now that the cost of a deposit for an FTB will equate to that of a 2nd hand car (copyright Colm McCarthy on radio this AM!), bidding wars will push up prices even further.

ECB rates will not stay at these levels forever. When they go up, those that have been swimming naked will be found out!

I fully expect a lot of people to start borrowing from parents,counting bonuses, doctoring P60's etc to get into full swing when the frenzy kicks in over the next couple of years. Anything to get the mortgage.
Any blip to earnings that may come after that and all bets are off

The FTBs are still limited by the 3.5 LTI. Just because their deposit requirement has dropped a bit doesn't mean it's a free for all. As an example, on a 300k house, a FTB used to have to have a deposit of 38k, now it's 30k. Not a massive difference.

The only real effect here is to those FTBs with high salaries and low deposits. Take the example above. Let's say the FTB has the 38k and could only get the 300k house. That would require a minimum salary of 75k. With the new rules they can afford 380k, but only if their salary is 98k. Under the old system they'd probably qualify for an exemption anyway with such a high salary.

The interest rates in Ireland are already higher than EU average and the banks stress test for 2% above current rates.

Do you have no faith in the underwriting of the banks? You can't doctor P60s when they can see your bank account. Bonuses that are not guaranteed income are not accepted (but may play part of a basis for an exception to the rules). Borrowing from parents is already happening but the bank require a statement from the parents that it's a gift not a loan.

Bob24

jay0109 wrote: »

ECB rates will not stay at these levels forever. When they go up, those that have been swimming naked will be found out!

This is key in my opinion. The Western world is entering a new era and will be moving away from cheap credit. As most people in Ireland are on variable rate this will come and bite borrowers whose borrowing capacity had been evaluated based on very low rates, and if this is combined with a (plausible) economic slowdown this could lead to many defaults again.

With a high number of defaulters, higher rates, and a less favourable economy, price could indeed crash again.
So I am not sure I would still call he current policy prudent or see there is no excessive borrowing.

Bob24

Michael D Not Higgins wrote: »

The interest rates in Ireland are already higher than EU average and the banks stress test for 2% above current rates.

Because they are already higher doesn't mean they won't remain higher. If in a few years time Germany or France have moved from 2 to 5, why would Ireland not have moved from 4 to 7? (the reasons for the higher rate linked to the Irish banking industry and regulations around it and will always cause a differential)
One difference though is that in Ireland variable rates borrower would be presented with the bill in the form of increased monthly repayments whereas in the other 2 countries I mentioned most of them would be on fixed rates and thus wouldn't be mechanically pushed beyond their repayment capacity as would happen here.

jay0109

I simply cannot believe that there are people on here saying we can't have another crash , do you not have faith in the banks systems etc etc!

It's only 9 years since the last crash and house prices at current rates of growth will have reached those levels again in 5 years time.

Now I don't know about all your salaries/wages, but whatever bit mine has gone up in the last 9 years has been more than wiped out by extra tax, cost of living increases etc.

There will be another housing crash in this country in the medium term.

Michael D Not Higgins

jay0109 wrote: »

I simply cannot believe that there are people on here saying we can't have another crash , do you not have faith in the banks systems etc etc!

It's only 9 years since the last crash and house prices at current rates of growth will have reached those levels again in 5 years time.

Now I don't know about all your salaries/wages, but whatever bit mine has gone up in the last 9 years has been more than wiped out by extra tax, cost of living increases etc.

There will be another housing crash in this country in the medium term.

You haven't demonstrated why you think that though. Lending is very restricted but supply is restricted even more. The price can't collapse with a massive demand still in place within prudent lending.

Michael D Not Higgins

Bob24 wrote: »

Because they are already higher doesn't mean they won't remain higher. If in a few years time Germany or France have moved from 2 to 5, why would Ireland not have moved from 4 to 7? (the reasons for the higher rate linked to the Irish banking industry and regulations around it and will always cause a differential)
One difference though is that in Ireland variable rates borrower would be presented with the bill in the form of increased monthly repayment whereas in the other 2 countries I mentioned most of them would be on fixed rates and thus wouldn't be mechanically pushed beyond their repayment capacity as would happen here.

That's true. I'm not sure how the banking sector would respond to that, particularly if it causes further mortgage arrears thereby exacerbating the problem. It's likely they wouldn't be able to pass the full increase on in order to protect themselves.

The question is, when will the interest rate rise again and by how much? People have been saying for years now that it's bound to go up again only for the ECB to cut another quarter % off the rate.

Earleybird

jay0109 wrote: »

I simply cannot believe that there are people on here saying we can't have another crash , do you not have faith in the banks systems etc etc!

It's only 9 years since the last crash and house prices at current rates of growth will have reached those levels again in 5 years time.

There will be another housing crash in this country in the medium term.

Based on what!?!
I can't believe people don't understand what would cause a crash. Do you think a crash is determined based on the value of houses? Do you understand the role a bank would play in facilitating a crash? People seem to have the banks painted as characters waiting for their opportunity to strike down the econony. They sure played their part ten years ago but their role is very much restricted now.

Tell me what evidence suggests a downturn is on the cards. Please. Just a sentence or two.

Bob24

Michael D Not Higgins wrote: »

The question is, when will the interest rate rise again and by how much? People have been saying for years now that it's bound to go up again only for the ECB to cut another quarter % off the rate.

Yes it is both a critical question and a difficult one to answer.

Having said that, I am reading more and more articles saying that the West is entering a new phase which could lead to higher rates.

jay0109

Earleybird wrote: »

Based on what!?!
I can't believe people don't understand what would cause a crash. Do you think a crash is determined based on the value of houses? Do you understand the role a bank would play in facilitating a crash? People seem to have the banks painted as characters waiting for their opportunity to strike down the econony. They sure played their part ten years ago but their role is very much restricted now.

Tell me what evidence suggests a downturn is on the cards. Please. Just a sentence or two.

House prices keep going higher.
Desperate people resort to underhand measures to get the mortgages they need.
Banks go to war with each other to get new business.
Interest rates inevitably go higher.
Govt influences the CB to change it's rules, the banks to relax their rules...especially coming up to election time.
Wallop

And I'm not even bringing the impact of Brexit into this or what effect Trump will have on US multi-nationals here.

seamus

jay0109 wrote: »

I simply cannot believe that there are people on here saying we can't have another crash , do you not have faith in the banks systems etc etc!

It's only 9 years since the last crash and house prices at current rates of growth will have reached those levels again in 5 years time.

Remember that someone who is 25 today looking to buy a new house, was only 16 when the last crash happened. Probably vaguely aware of doom and gloom in the news, but completely disconnected from the economy.

And while the boom was going on - queues at new build viewings, people putting down huge cheques against nothing more than a drawing - these people were between 8 and 15 years old - i.e. completely unaware of what was going on.

They know very little of what went on, and as such don't understand the problems beyond, "the last generation made out like bandits and I want a property and it's all their fault, but now the central bank is trying to help".

Gandalph

jay0109 wrote: »

It's only 9 years since the last crash and house prices at current rates of growth will have reached those levels again in 5 years time.

This is something I hear all too regularly.

What do historical prices have to do with future prices?

When (not if) we hit 2007 price levels I wouldn't be surprised if there was a little burp in the market because of the people most susceptible to fear-mongering.

jay0109

Gandalph wrote: »

This is something I hear all too regularly.

What do historical prices have to do with future prices?

When (not if) we hit 2007 price levels I wouldn't be surprised if there was a little burp in the market because of the people most susceptible to fear-mongering.

The fact that we may hit 2007 prices less than 15 later and you think people shouldn't make a connection with the 2!!!!

Of course we'll eventually hit them again, but so soon???
And in a time frame where we supposedly have had practically no official inflation, where wages have stood still/fallen...