Are we really back to this sh*t again?

xckjoo

sbsquarepants wrote: »

It's not circular reasoning at all. The only true measure of a things value is what it sells for - everything else is just opinion. Some opinions are more realistic than others, some are bat shít crazy - but there's no arguing with a sale price.

I remember looking for a house a few years back and coming across 2 houses 3 or 4 doors apart with one asking for double what the other was. Somebodies valuation was wildly wrong, I don't know whose, but I can guarantee you the sale price could settle that argument without any need for interpretation.

But there is a value to things. Following your logic is what causes bubbles. It's the reason we have regulations and the like.

sbsquarepants

Yourself isit wrote: »

Your logic is circular because you assume value is price and therefore are is effect arguing that price is price.

But value isn't price. Thats why there are analysts who will call a stock over valued or under valued rather than say "that's the price". There are entire industries working this out.



Probably priced not to sell or a residual of the boom. But the valuer should not accept that price - he's supposed to protect the bank (and buyer) from that kind of thing. Otherwise the house is in negative equity immediately.

It's a different scenario entirely when you are buying an investment. You want that to only increase in price.

When you are buying something just to have it - it is worth what you are willing to pay on the day, nothing more nothing less.
If you buy a house and through circumstance you end up in negative equity - it's not really important. What's important is that you got a good deal at the time of purchase. (the only time you have any control whatsoever over the price!)
It's a bit of a pain in the arse you could buy it today, cheaper than last year - but you needed it last year! You can't live life like you have a time machine, if we could we'd all be billionaires!

sbsquarepants

xckjoo wrote: »

But there is a value to things. Following your logic is what causes bubbles. It's the reason we have regulations and the like.

Easy credit is what causes bubbles.

Yourself isit

sbsquarepants wrote: »

So why is it house prices go up and down, if they have some sort of intrinsic value?
What decides this value?

When the valuer says "this house is worth X amount" what he means is "the average house buyer would be both willing & able to pay X amount"
It has nothing to do with actual physical "value"

You've moved the goalposts by saying "what the average house buyer would pay" since the original valuer mentioned at the start of this side discussion asked the specific buyer what he was willing to pay and said "that's the value".

In fact that is not doing his job - if somebody is paying 600k or more for a house that will sell at 400k then it should affect the LTV. That's part of his job - to work that out.

Value isn't the average price the average punter would pay either although that will get a closer approximation (and for a bank valuer it's enough).

With stocks you can actually look at fundamentals (price to earnings and future price to earnings) - housing is harder but price to rent or price to income are good long term metrics. However access to cheap credit distorts all this.

Cina

Glenster wrote: »

If you're sharing and don't want to pay that, pay less. There's nowhere in Ireland that you couldn't find a room for €650.

If your renting, stop moaning there's nothing unreasonable about 900 a month.

If your issue is that you cant afford to live somewhere that you think you deserve to live in then you need to adjust your expectations to your circumstances.

I live in the nicest place I can afford to live in, if its not good enough for me then the problem isn't with the government or society or the market, its with either my expectations or the amount of money I make.

You are right to an extent. I could live in a far more dodgy area of Dublin, or perhaps commute from Leixlip or somewhere, but is that really an acceptable solution?

My point was that the government have let rent reach ludicrous levels in our capital. I'm quite lucky in my profession in that €900 is affordable for me but I have friends who can't do €650 + the cost of commuting to their lower salary jobs. Dublin is no longer affordable for many people and it's largely due to the rent prices. So telling someone to "just go share somewhere cheaper" is hardly the answer.

To give more perspective, my friend found a share with a single bed for €600p/m in Glasnevin, only problem was, so did 37 other people who emailed them, and he didn't get anywhere near it.

Kimbot

And people are now looking for advice on queuing for a house?

http://www.boards.ie/vbulletin/showthread.php?t=2057705635

Yep this country is well beyond screwed now.

xckjoo

sbsquarepants wrote: »

So why is it house prices go up and down, if they have some sort of intrinsic value?
What decides this value?

When the valuer says "this house is worth X amount" what he means is "the average house buyer would be both willing & able to pay X amount"
It has nothing to do with actual physical "value"

The market decides the price. That's the problem. But there's a difference between Market Price and Market Value.
Ideally they'd be the same, but that requires market efficiency, equilibrium and rational expectations. I don't think any of them exist in the housing market

xckjoo

sbsquarepants wrote: »

Easy credit is what causes bubbles.

Not on its own it doesn't. Nobody is applying for credit without a use for it.

sbsquarepants

Yourself isit wrote: »

You've moved the goalposts by saying "what the average house buyer would pay" since the original valuer mentioned at the start of this side discussion asked the specific buyer what he was willing to pay and said "that's the value".
.

Jaysus - I'm not moving anything. I'm just explaining the valuers job - he's not divining some physical property of the building, he's just averaging out the potential buyers and discarding the outliers. Banks like to operate in the big tall section of the bell curve!
It is still the buyers that set the "value" - he just checks the 1 particular buyer the bank is dealing with against the herd, if that buyer broadly agrees, it's fine, if he differs strongly the bank could hit problems should they need another buyer to step in.

Yourself isit

sbsquarepants wrote: »

Jaysus - I'm not moving anything. I'm just explaining the valuers job - he's not divining some physical property of the building, he's just averaging out the potential buyers and discarding the outliers. Banks like to operate in the big tall section of the bell curve!
It is still the buyers that set the "value" - he just checks the 1 particular buyer the bank is dealing with against the herd, if that buyer broadly agrees, it's fine, if he differs strongly the bank could hit problems should they need another buyer to step in.

I hate arguing with people who change their argument when it's lost.

Here's your original post.

"What are you willing to pay?" I said 'Y' he said right well then 'Y' is the market value because you're prepared to pay it.

He was right.

Nothing about averages there. Just the value equals price.

Glenster

Yourself isit wrote: »

You are underestimating the mortgage repayments I'm sure. Closer to 2k. Particularly since you are assuming the lower deposit. And larger capital.

(See how government interference had caused this madness again?).

Edit.

I tried the boi calculator. If you want 440k on a 500k house (they still insist on 10%) then repayments are 1,850 at 3.5% for 35 years. Until you retire.

3.5% isn't their variable rate though, its close to 4.2%. Probably 2,100.

BOI calculator is only for farmers and those in negative equity.

KBC calculator.

sbsquarepants

Yourself isit wrote: »

I hate arguing with people who change their argument when it's lost.

Here's your original post.



Nothing about averages there. Just the value equals price.

Maybe you don't understand the concept of explanations.
If the explanation was only a repeat of the original statement, it wouldn't add a lot now would it?

Yourself isit

Glenster wrote: »

BOI calculator is only for farmers and those in negative equity.

KBC calculator.

You going to work that out for us or keep with the drive by posts of increasing inanity?

It won't be much cheaper. Because the boi calculator defaults to their best rate.

Yourself isit

sbsquarepants wrote: »

Maybe you don't understand the concept of explanations.
If the explanation was only a repeat of the original statement, it wouldn't add a lot now would it?

You think you've explained something?

So do you believe anymore that that valuer was correct?

Glenster

Yourself isit wrote: »

You going to work that out for us or keep with the drive by posts of increasing inanity?

It won't be much cheaper. Because the boi calculator defaults to their best rate.

Its what I said originally.

ScumLord

xckjoo wrote: »

But there is a value to things. Following your logic is what causes bubbles. It's the reason we have regulations and the like.

Things are only worth what people will pay for them. That's how business works. If a business finds out a customer is willing to pay twice as much you can be guaranteed they'll rise the price to match that expectation. There is of course a minimum, where the business just won't bother making something because people won't pay what it will cost to make.

There is a basic minimum from a business point of view. If I pay €10 to make something then that puts a value on it that I want back. But if no one buys it then it doesn't matter what I spent, or what I think it's worth, or what other people agree the parts are worth.

scamalert

first time buyers looking at properties half a mill,only explanation theres no choices on the market,sure what could go wrong its not like banks have backup in these situations when government needs to step in and bail them out,surely it only happened once 8yrs ago not even decade has passed,and some think its gonna be fine,since prices can only go up when buying a house,and jobs are guaranteed for life nowadays.

sbsquarepants

Yourself isit wrote: »

You think you've explained something?

So do you believe anymore that that valuer was correct?

Well it depends.

Where you lying to him when you said you were willing to pay "Y" ?

He could have been a bit more thorough. But to cut a long story short yes, if you were willing and able to pay it, like you said you were, then that was it's value, at that point in time.

Yourself isit

ScumLord wrote: »

Things are only worth what people will pay for them. That's how business works. If a business finds out a customer is willing to pay twice as much you can be guaranteed they'll rise the price to match that expectation. There is of course a minimum, where the business just won't bother making something because people won't pay what it will cost to make.

There is a basic minimum from a business point of view. If I pay €10 to make something then that puts a value on it that I want back. But if no one buys it then it doesn't matter what I spent, or what I think it's worth, or what other people agree the parts are worth.

Value is not price. When you put a price of €10 on something you are setting the price not the value.

The value can be in general objectively worked out, despite what people here think.

ScumLord

Yourself isit wrote: »

Value is not price. When you put a price of €10 on something you are setting the price not the value.

The value can be in general objectively worked out, despite what people here think.

What's the difference between price and value? I don't really understand what you're getting at here. Do you mean in the sense your grannies tea pot may have value to you through familiarity but it's worthless to everybody else?

Yourself isit

sbsquarepants wrote: »

Well it depends.

Where you lying to him when you said you were willing to pay "Y" ?

He could have been a bit more thorough. But to cut a long story short yes, if you were willing and able to pay it, like you said you were, then that was it's value, at that point in time.

You weren't replying go me initially but let's discuss your points.

The valuer (and you) are saying that the price is the value and both are what ever is offered for the house. However if I am looking for a 400k mortgage on a house that I am personally valuing and prepared to pay 600k because it's of sentimental value to me (that word again) but the typical house in the area sells at 400k then the valuer is not doing his job of he agrees with my personal valuation. He's allowing me to get a loan based on false collateral and I'm getting a 100% LTV (effectively the deposit has disappeared) rather than 66%. Which should affect repayments.

His job is to not allow that to happen. The guy you actually replied to said that when he was buying abroad the valuer there valued the house at 20k less than the agreed purchase –which probably isn't enough to stop the loan. The Irish valuer just said "whatever price you pay is the value". That's the sentiment that in part drove the boom

Yourself isit

ScumLord wrote: »

What's the difference between price and value? I don't really understand what you're getting at here. Do you mean in the sense your grannies tea pot may have value to you through familiarity but it's worthless to everybody else?

I've answered that dozens of times in this thread. It's hardly a radical idea either.

xckjoo

ScumLord wrote: »

Things are only worth what people will pay for them. That's how business works. If a business finds out a customer is willing to pay twice as much you can be guaranteed they'll rise the price to match that expectation. There is of course a minimum, where the business just won't bother making something because people won't pay what it will cost to make.

There is a basic minimum from a business point of view. If I pay €10 to make something then that puts a value on it that I want back. But if no one buys it then it doesn't matter what I spent, or what I think it's worth, or what other people agree the parts are worth.

That's far too simplistic an explanation to translate to the real world. Businesses work by trying to maximise their profits, not by trying to maximise the worth of products. Value is relative. There's all kinds of factors that affect how we value things. That's why marketing works and can be seen in cognitive biases such as the Ikea effect.

However, there is an underlying value (called the market value I think) that is inherent and independent of personal biases. Allowing the price to deviate too much from this inherent value is a bubble and recipe for disaster.

gandalf

Saw this story at the weekend and despair that we have learnt nothing as a nation and our Governments have done sweet feck all to address the home shortage issue. Our political parties do not seem to be able to handle proper strategic planning at all.

ScumLord

Underlying value isn't really a thing. It's investor jargon to give a rough minimum estimate to somethings worth. It's not a set thing and it's no guarantee you have a certain amount of money because you have a certain amount of stuff.

If I have a factory with 2 million worth of equipment in it, it's only worth 2 million to me. If the company goes under and I owe the bank €500,000 the bank will sell that stuff at a massive discount to get their money.

Another example is I have a machine that cost €50,000 to make. It's does 1 million worth of work each month, but the machine is useless to everybody else. No one else has a use for it. Even if I sell it as scrap the scrap merchant is going to say he's going to have to break it down, throw away half of it and is only willing to give me €5000 for it. Because that's all it's worth to him.

Nothing has a set worth, gold is just shiny metal, for most people it's only worth is what other people will pay for it.

Yourself isit wrote: »

His job is to not allow that to happen. The guy you actually replied to said that when he was buying abroad the valuer there valued the house at 20k less than the agreed purchase –which probably isn't enough to stop the loan. The Irish valuer just said "whatever price you pay is the value". That's the sentiment that in part drove the boom

The valuer in Spain is going to give he's opinion on what the house is worth, but that doesn't mean a different valuer couldn't come in and give a completely different price, because they are both giving their opinion. At the end of the day the value is still whatever people are willing to pay. They can completely ignore the valuer and pay 10k more because they want it. That doesn't add 10k of value onto the house. Once they go to sell it will be back to the value being whatever people are willing to pay at that time. If the apocalypse happened for instance the value of the house could be 4 ducks and a wheelbarrow. Once the issue is taken out of our own heads ideas like "value" don't exist. It's just a pile of stuff.

valoren

There's a difference between then and now. The article seems to be comparing like with like.

People queued during the celtic tiger years on a wave of optimism. House prices were going to the moon. Queue up to get in on the action. That thought process compelled people to queue in droves.

Here we see the opposite. The overriding thought process is one of worry, anxiety. About lack of supply. About wanting to live in a certain area. That demand will obviously increase the prices.

I am certain none of the people queuing are thinking they're going to be quids in. They just want a home in a desirable area and are willing to make it happen financially.
Assuming the banks have completed the necessary stress tests on the repayments what is the problem with people queuing?
If anything, because people have to queue suggests how disjointed the whole process is.

Essentially, you have people making the biggest financial commitment of their lives and it boils down to "I'll give you 450!", "I'll go to 455!" type nonsense. No formality to it whatsoever. That's why you see sensationalized articles like that.

Yourself isit

ScumLord wrote: »

Underlying value isn't really a thing. It's investor jargon to give a rough minimum estimate to somethings worth. It's not a set thing and it's no guarantee you have a certain amount of money because you have a certain amount of stuff.

If I have a factory with 2 million worth of equipment in it, it's only worth 2 million to me. If the company goes under and I owe the bank €500,000 the bank will sell that stuff at a massive discount to get their money.

Another example is I have a machine that cost €50,000 to make. It's does 1 million worth of work each month, but the machine is useless to everybody else. No one else has a use for it. Even if I sell it as scrap the scrap merchant is going to say he's going to have to break it down, throw away half of it and is only willing to give me €5000 for it. Because that's all it's worth to him.

Nothing has a set worth, gold is just shiny metal, for most people it's only worth is what other people will pay for it.


The valuer in Spain is going to give he's opinion on what the house is worth, but that doesn't mean a different valuer couldn't come in and give a completely different price, because they are both giving their opinion. At the end of the day the value is still whatever people are willing to pay. They can completely ignore the valuer and pay 10k more because they want it. That doesn't add 10k of value onto the house. Once they go to sell it will be back to the value being whatever people are willing to pay at that time. If the apocalypse happened for instance the value of the house could be 4 ducks and a wheelbarrow. Once the issue is taken out of our own heads ideas like "value" don't exist. It's just a pile of stuff.

I don't think you understand the valuers job. He is not working for the purchaser but for the bank. Which is why he won't let you pay 200k more for it than it is worth. So you can't ignore him unless you have all the money and if you did why did you get a mortgage?

The bold bit is your get of jail card. One minute the value of something is the highest price offered, the next it is the average price the average buyer would pay. These are not the same thing.

The valuer should use the latter at the very least but in the case of the Irish valuer he just said the value is the highest price. Which is the price the buyer offered.

Sometimes (as in art) value is indistinguishable from price, but for anything that can generate an income or can be historically comparedit isn't,

There is in fact underlying value that can be determined, if not exactly then enough to tell if an asset is historically overpriced or not.

It's not surprising given these arguments that this country is sleep walking into a another boom and bust.

Elemonator

We deserve another crash. The stupidity of the Irish astounds me sometimes.

mariaalice

Its Portmarnock. it is interesting that here are so many people in a position to take out a 450k mortgage, Thats a about a deposit of 80k alone what would the repayment on a mortgage of 370k be.

youcancallmeal

mariaalice wrote: »

Its Portmarnock. it is interesting that here are so many people in a position to take out a 450k mortgage, Thats a about a deposit of 80k alone what would the repayment on a mortgage of 370k be.

370k mortgage would be about €1650 per month from say KBC for example with 3.5% interest