Will house prices ever stop growing?

LucBetton

Dispiriting as it is, I have begun to wonder whether some stability will ever return to the Irish (especially Dublin) property market. Could they come down in the future? Their growth could slow down? Or is this the beginning of a push onto astronomical prices as demand continues to outstrip supply?

Sorry, this has probably been asked before but I couldn't find it.

NIMAN

Property prices have always historically risen, then fallen, then risen.
Its the nature of the market.

OK so this current situation is grim as there is such a shortage, but there is one thing you can bet on, prices will stop rising and begin to fall at some point.

When that is exactly is hard to predict.

Starkystark

LucBetton wrote: »

Dispiriting as it is, I have begun to wonder whether some stability will ever return to the Irish (especially Dublin) property market. Could they come down in the future? Their growth could slow down? Or is this the beginning of a push onto astronomical prices as demand continues to outstrip supply?

Sorry, this has probably been asked before but I couldn't find it.

And I'd love to know will there ever be greater opportunities for the first time sole buyer who doesn't have any help from family. A friend of mine has just got a place in Kent, England under a half rent - half buy scheme. Wish there was something like this here.

I don't have a choice of moving home to live with my parents as my job is 3 hours away and I don't have the privilege of moving jobs either.

Arthur Daley

Not too long ago - 4/5 years - since people were wondering if prices would ever recover. Living through the last 20 years I really wonder if most people, most public/media comment anyway is operating at the intellectual level of a goldfish.

CeilingFly

According to reports today banks are adhering strictly to central bank lending rules. Add the start of greater supply especially in Dublin and my own opinion is the market will calm down.

I doubt if there'll be any significant drop, but with banks being more cautious it will take the steam out.

NIMAN

There has to come a price when people simply will think "right thats it, Im not paying that for a 3 bed semi".

Many didn't think like this in the middle of the madness back in the 2000 - 2007 period, but I think times are different now.

At least I would like to think they are.

Arthur Daley

Noonan got his high prices, the state needed high prices to get the troika out, and they have got a chunk of aib away now. Any much more from here on and FF/FG are driving the economy over the cliff. yet again. People just can't afford spiralling costs to rent or buy, while incomes are barely growing for many.

NIMAN

Arthur Daley wrote: »

Noonan got his high prices, the state needed high prices to get the troika out, and they have got a chunk of aib away now. Any much more from here on and FF/FG are driving the economy over the cliff. yet again. People just can't afford spiralling costs to rent or buy, while incomes are barely growing for many.

Is that not where supply/demand is meant to kick in?

People stop paying the big money, price rises slow and/or stop?

Arthur Daley

Depends how free the supply is. There are still plenty of empties around (less so in Dublin) and plenty of empty sites even close to Dublin city centre. Landbanks remain mothballed. The market looks very contrived to me anyway. Similar to what Bertie was at 2000-2008.

lawred2

NIMAN wrote: »

There has to come a price when people simply will think "right thats it, Im not paying that for a 3 bed semi".

Many didn't think like this in the middle of the madness back in the 2000 - 2007 period, but I think times are different now.

At least I would like to think they are.

I bet someone said that same thing London 10 years ago..

quadrifoglio verde

lawred2 wrote: »

I bet someone said that same thing London 10 years ago..

Many said the same about Japan in 1991, the UK in 88 and Ireland in 2006. They thought prices would never come down.
They have in all cases and have always recovered. Just most don't know when they'll crash or when they'll boom. When they rise, everyone thinks they'll keep rising. When they fall, everyone things they'll keep falling.
However if you're buying a home does it really matter, once you can afford it?

I for one am quite glad of the central banks rules. It forces safe borrowing levels on people and ensures that their mortgages should always be affordable.

Bob24

NIMAN wrote: »

There has to come a price when people simply will think "right thats it, Im not paying that for a 3 bed semi".

Many didn't think like this in the middle of the madness back in the 2000 - 2007 period, but I think times are different now.

At least I would like to think they are.

In an ideal world (country?) yes, absolutely. Unfortunately experience has proven that there is no such thing in Ireland (at least if you take "people" as a group, individually some will have a more cautious behaviour).

The only thing limiting what people will pay for that 3 bed semi seem to be the maximum mortgage amount banks are ready to give them.

Bob24

And to answer the OP. In the very long run yes they will grow. But I personally have ne doubt in the short to medium term there will be some type of crash, the only question is when.

KyussBeeshop

OP, read up on the number of new house builds that are required to meet demand every year, and then compare that to the number of actual new house builds. House prices will not stop growing, until those numbers are matched.

The private market will not, and has no interest by the looks of it, in even trying to match those two numbers - because it's too lucrative to deliberately keep the number of houses undersupplied.

So, until you see government directly step in and build and enormous number of houses, to make those two numbers match - then house prices will remain on a general upward path.

The government will not, and has no interest by the looks of it, in even trying to match those two numbers...because it's too lucrative for people who have influence over government (and thus for politicians who will revolve into private industry after office), and even for governments own NAMA balance sheets, to deliberately keep the number of houses undersupplied.

So no, don't expect house prices to calm down anytime in the next decade. We're not in a debt-fuelled property bubble now, this time it's all about a massive undersupply.

Graham

KyussBeeshop wrote: »

The private market will not, and has no interest by the looks of it, in even trying to match those two numbers - because it's too lucrative to deliberately keep the number of houses undersupplied.

I don't buy that for a second. All things being equal, if a developer thought they could churn out double or triple the number of houses in the current market and make a reasonable level of profit you can bet your life they would.

KyussBeeshop

What you quote isn't talking about developers, it's talking about the wider private market with an influence over property, as a whole. There's a ton of easy money to be made, by deliberately jacking up the price of houses and thus rents, and milking a distorted market.

Taking the wider private market into consideration, why build enough houses to bring down prices/rents - when you can deliberately undersupply the market, so you can keep the prices/rents high, while still being able to (anaemically) expand the number of properties, selling them slower but at a massively overinflated price?

The money is in extracting consistent rents from the economy, and building/selling slowly but at a hugely inflated price. Not in racing to gain the one-off profits from building, in a way that tanks both your rents and the end-price of your development.

The market is working exactly as it should be, for maximizing profits. Except that goes against the public desire for the housing/rental market, to be about providing an affordable place to live.

Yourself isit

NIMAN wrote: »

There has to come a price when people simply will think "right thats it, Im not paying that for a 3 bed semi".

Many didn't think like this in the middle of the madness back in the 2000 - 2007 period, but I think times are different now.

At least I would like to think they are.

That depends on credit though. You may want to pay 600k but these days the banks won't lend that.

Yourself isit

Graham wrote: »

I don't buy that for a second. All things being equal, if a developer thought they could churn out double or triple the number of houses in the current market and make a reasonable level of profit you can bet your life they would.

That is clearly empirically false.

There's plenty of evidence of land hoarding. One is just across the road from me in fact where the developer had just started to build on property he's owned for a decade.

The idea that developers will build €300k houses at 5% profit when they could wait for 30% margins when prices reach 400k is fanciful.

Graham

Yourself isit wrote: »

That is clearly empirically false.

There's plenty of evidence of land hoarding. One is just across the road from me in fact where the developer had just started to build on property he's owned for a decade.

The idea that developers will build €300k houses at 5% profit when they could wait for 30% margins when prices reach 400k is fanciful.

To suggest there's any single developer big enough to manipulate the market as is being suggested in this thread is what's fanciful.

Developers have always built up land banks. It's an essential part of the process, this has always been the case. Without it a developer wouldn't have a pipeline of projects to work on.

There are other factors that are having a much greater impact on supply than some far fetched large scale conspiracy theory. Tax breaks on the sale of land until 2019 being one of them, the cost of financing projects being another.

myshirt

You are right in terms of where the money is, and that is in extracting a rent. If you were a baby boomer or late gen'x'er in the right place at the right time it's a great country. If you were a public servant, even better.

KyussBeeshop

Graham wrote: »

To suggest there's any single developer big enough to manipulate the market as is being suggested in this thread is what's fanciful.

Developers have always built up land banks. It's an essential part of the process, this has always been the case. Without it a developer wouldn't have a pipeline of projects to work on.

There are other factors that are having a much greater impact on supply than some far fetched large scale conspiracy theory. Tax breaks on the sale of land until 2019 being one of them, the cost of financing projects being another.

Except you're the only person talking about individual developers - the rest of us are noting how the state of the property market, affects wider interests than just individual developers.

Every time a market seeking to maximise profit, does something that goes against the public interest (in this case, against affordable rentals/housing), you always have someone crying 'conspiracy theory' :rolleyes: It's just the market doing what it's set up to do: Maximize profits.

As if it's a big 'conspiracy' for the people most involved in this business/market to recognize, that it's in their best interests to constrain supply, to maximize rents/prices i.e. profits...there doesn't even need to be any conspiring for people to see that.

Graham

Of course the role of a business is to make profits.

They do this by selling more or whatever it is they sell, increasing prices, or producing whatever it is they sell at a lower cost.

One developer acting alone is going to have bugger all difference increasing prices and you've shown nothing that suggest developers are colluding to restrict supply.

Your entire line of argument appears to be supply is constrained so it must be developers trying to drive up prices. Ignoring every other element that is contributing to supply constraints.

Yourself isit

Graham wrote: »

Of course the role of a business is to make profits.

They do this by selling more or whatever it is they sell, increasing prices, or producing whatever it is they sell at a lower cost.

One developer acting alone is going to have bugger all difference increasing prices and you've shown nothing that suggest developers are colluding to restrict supply.

Your entire line of argument appears to be supply is constrained so it must be developers trying to drive up prices. Ignoring every other element that is contributing to supply constraints.

Developers don't have to collude. They just have to individually but en masse come to the same conclusion that not building 100 houses to sell at 300k when they could sell at 400k in two years makes financial sense. This is no different from holding onto shares that you think will continue to appreciate even if you can realise a profit now.

Even right wing economists have suggested a land tax.

However they do formally collude in influencing government - like the developer bung that was the ftb allowance.

Graham

Yourself isit wrote: »

Developers don't have to collude. They just have to individually but en masse come to the same conclusion

It's equally likely this collective psychosis you're suggesting has led developers to conclude they'll sit on land until the tax breaks are over and that financing is no longer constrained/expensive.

I'd agree with the land tax to a limited extent, certainly short term.

I'd also be in favour of bringing forward the dates for special CGT/CAT relief so that the state isn't economically incentivising the postponing of developments.

theboringfox

I think houses will start to peak due to Central Banks which have a cap based on wages multiple. I would say we are close to it. Lot of people finding current market too stretchy. I dont see any material fall off in house prices. For example if houses went up 10% over next 2 years and then dowm 5% it's still higher than today. I don't see this fall off because the mortgage are linked to rules based on LTV and wages. These rules were not there in last bubble bust. There also is no evidence of huge surge in credit being drawndown on banks.

People should buy based on if it suits their needs to buy. If it does you see what your budget is and look to buy based on that. Usual compromise is between house size/qualitt and location.

I think too many people look at what they want and then because they can't afford it want to believe in a market fall because the narrative suits them.

Samuel T. Cogley

While there is inflation prices will continue to rise. It's makes me wince when people say they bought a house for IR£10,000. The rest is cyclical however, I believe there will be a general upward trend. I'm 50/50 on whether we'll beat out the previous bubble, on the one hand the credit availability isn't there but neither is the supply.

Samuel T. Cogley

theboringfox wrote: »

I think too many people look at what they want and then because they can't afford it want to believe in a market fall because the narrative suits them.

I'm not sure it's ever been put that well by anyone - this is a huge issue. It's not that many can't afford a house, it's that they can't afford a 4 bed semi on the Howth Road or in a some leafy SoCo Dublin suburb.

That's not to detract from the people that genuinely can't buy but even semi-skilled workers like myself have options.

4ensic15

If and when interest rates rise (it seems they are about to), prices will fall. That won't help a lot of people because affordability will remain the same for those borrowing. The demographics in most urban areas of ireland point to increasing demand. Supply is not keeping up. Higher interest rates will impact on supply. The only way prices will become affordable is if there is a big increase in supply in high demand areas.

Graham

4ensic15 wrote: »

If and when interest rates rise (it seems they are about to), prices will fall.

That's not a foregone conclusion in the current market. Undoubtedly demand would soften but given there's several years of unmet demand to catch up on it could be some time after any rate increases before we see a corresponding material adjustment in prices. You also have to consider the increased cost of development financing with increased interest rates. This could stifle development activity further contributing to the supply/demand mismatch even in a softening market.

Samuel T. Cogley

Graham wrote: »

That's not a foregone conclusion in the current market. Undoubtedly demand would soften but given there's several years of unmet demand to catch up on it could be some time after any rate increases before we see a corresponding material adjustment in prices. You also have to consider the increased cost of development financing with increased interest rates. This could stifle development activity further contributing to the supply/demand mismatch even in a softening market.

I really do hope that interest rates don't turn out to be the tracker mortgage of the next crash. In that people thought it was grand to spend €500K on a flat because the mortgages were so low. If we see a significant spike in interest rates (which I doubt but a slow gradual increase seems inevitable) we really are going to be fecked.

exaisle

Samuel T. Cogley wrote: »

I really do hope that interest rates don't turn out to be the tracker mortgage of the next crash.

Explain please...

Blacktie.

exaisle wrote: »

Explain please...

Tracker mortages where very low interest rates. If the interest rates now become the what tracker mortgages are viewed as you'd be looking at 6-7% APR :eek:

Graham

Samuel T. Cogley wrote: »

If we see a significant spike in interest rates (which I doubt but a slow gradual increase seems inevitable) we really are going to be fecked.

Unless there's a bump in inflation before any significant interest rate rises, I suspect there would be a few people who's eyes water each month when the mortgage is due.

mloc123

Graham wrote: »

Unless there's a bump in inflation before any significant interest rate rises, I suspect there would be a few people who's eyes water each month when the mortgage is due.

Banks should be stress testing to +2% at the moment.. afaik they have to as part of the ICB rules? Which would be to around 6%.

Samuel T. Cogley

mloc123 wrote: »

Banks should be stress testing to +2% at the moment.. afaik they have to as part of the ICB rules? Which would be to around 6%.

Thankfully were were stress tested to +2%. +2% would be a lifestyle change for us I reckon but doable. +3 or 4% would not be pleasant!

seamus

Incredible how quickly history can repeat itself.

http://www.boards.ie/vbulletin/showthread.php?p=51396734

Also
http://www.boards.ie/vbulletin/showthread.php?p=3532881
http://www.boards.ie/vbulletin/showthread.php?p=2721124
http://www.boards.ie/vbulletin/showthread.php?p=51459086

mloc123

Houses will stop rising and will likely fall again... But banks will also stop lending like the last time.

Is the current rise a bubble? Probably, will it be as severe as the last time? Probably not.

Easy lending was the biggest factor 10 years ago, people argue that banks are lending too easily now.. maybe that is true but it is nowhere near the free for all from 10 years ago.

Graham

I think that sums it up perfectly, most mortgage applicants would have been stress tested recently. Increased interest rates would still make life uncomfortable.

rsynnott

Speaking of rising interest rates, Ulster Bank is to introduce a 4 year fixed product at 2.6%: https://www.thetimes.co.uk/edition/ireland/banks-head-for-mortgage-price-war-pqsvc77pp

That would put it close to the European average. Irish interest rates are still a fair bit higher than European ones; while the ECB rate will presumably rise eventually, there's actually a fair bit of room for current Irish rates to fall.

Samuel T. Cogley

rsynnott wrote: »

Speaking of rising interest rates, Ulster Bank is to introduce a 4 year fixed product at 2.6%: https://www.thetimes.co.uk/edition/ireland/banks-head-for-mortgage-price-war-pqsvc77pp

That would put it close to the European average. Irish interest rates are still a fair bit higher than European ones; while the ECB rate will presumably rise eventually, there's actually a fair bit of room for current Irish rates to fall.

One would hope they would at least 'absorb' part of the increases.

Hang on... Sorry just saw a pig fly past the window.

Graham

Samuel T. Cogley wrote: »

One would hope they would at least 'absorb' part of the increases.

Hang on... Sorry just saw a pig fly past the window.

In the face of political and competitive pressure, I actually do expect the banks would absorb some of the increase. Time will tell I guess.

andekwarhola

Samuel T. Cogley wrote: »

I'm not sure it's ever been put that well by anyone - this is a huge issue. It's not that many can't afford a house, it's that they can't afford a 4 bed semi on the Howth Road or in a some leafy SoCo Dublin suburb.

That's not to detract from the people that genuinely can't buy but even semi-skilled workers like myself have options.

A lot of people in these forums have trouble grasping the fact that houses in the most desirable areas of a capital city are generally always going to be out of reach for all but a few buyers.

But hey, the market will eventually return to 'normality' and two teachers can buy a house in Rathgar.

Funnily enough, they only object to the property market rising, not wages and the economy.

Bob24

andekwarhola wrote: »

But hey, the market will eventually return to 'normality' and two teachers can buy a house in Rathgar.

If you'd said Ballsbridge, Blackrock, or Dalkey I would be with you. But Rathgar?

Not so great public transport and nice but not exactly luxury location. Where do you want to send the teachers? The don't deserve a Southside postcode besides Tallaght? (no offence to Tallaght! And full disclosure: I am not a teacher and don't know any)

Graham

Bob24 wrote: »

If you'd said Ballsbridge, Blackrock, or Dalkey I would be with you. But Rathgar?

Probably safe to say it's out of reach for most average salaries:

http://www.daft.ie/price-register/dublin/rathgar/

mloc123

Graham wrote: »

Probably safe to say it's out of reach for most average salaries:

http://www.daft.ie/price-register/dublin/rathgar/

700k for a basement flat... I assume they are much nicer than the name would imply.

Bob24

Graham wrote: »

Probably safe to say it's out of reach for most average salaries:

http://www.daft.ie/price-register/dublin/rathgar/

What I meant is: I get it that every capital city will have exclusive areas which are out of reach for most people. But while I don't know Rathgar that well, the few times I went there it didn't look that exclusive to me. Just a nice enough average suburb with poor transportation links.

rsynnott

Bob24 wrote: »

If you'd said Ballsbridge, Blackrock, or Dalkey I would be with you. But Rathgar?

Not so great public transport and nice but not exactly luxury location. Where do you want to send the teachers? The don't deserve a Southside postcode besides Tallaght? (no offence to Tallaght! And full disclosure: I am not a teacher and don't know any)

Rathgar is very expensive, I'd have thought in the same range as Blackrock.

andekwarhola

Bob24 wrote: »

If you'd said Ballsbridge, Blackrock, or Dalkey I would be with you. But Rathgar?

Not so great public transport and nice but not exactly luxury location. Where do you want to send the teachers? The don't deserve a Southside postcode besides Tallaght? (no offence to Tallaght! And full disclosure: I am not a teacher and don't know any)

You missed my point completely

punisher5112

Sure it has been mentioned but the crisis isn't helped with so much sold of in batches to investor's and nama offloading for buttons.


Seriously when will our government work for those that put them there.

I have no hope of buying thanks to their rubbish and revenue and rents just rising.

Having property tax on top of all the other crap that they have done is only making it worse.

If one pays €2500 or more they are liable for property tax.

Rent being taxed on LL side just made things even worse as they need to increase to break even or get their return.

Nama should be working with the Irish not all these hedge funds and vulture funds and huge corporate bodies.

Its sad to see so much being lost and this then also means there is less housing stock so prices go one way up up up.

LiamoSail

punisher5112 wrote: »

Sure it has been mentioned but the crisis isn't helped with so much sold of in batches to investor's and nama offloading for buttons.


Seriously when will our government work for those that put them there.

I have no hope of buying thanks to their rubbish and revenue and rents just rising.

Having property tax on top of all the other crap that they have done is only making it worse.

If one pays €2500 or more they are liable for property tax.

Rent being taxed on LL side just made things even worse as they need to increase to break even or get their return.

Nama should be working with the Irish not all these hedge funds and vulture funds and huge corporate bodies.

Its sad to see so much being lost and this then also means there is less housing stock so prices go one way up up up.

NAMA isn't an estate agent or developer. They don't have the resources or expertise to sell to individuals. It's not their purpose

Yourself isit

Bob24 wrote: »

What I meant is: I get it that every capital city will have exclusive areas which are out of reach for most people. But while I don't know Rathgar that well, the few times I went there it didn't look that exclusive to me. Just a nice enough average suburb with poor transportation links.

A lot of supposedly posh Dublin is like that. Not all. Just a name. Conversely killbarrack et al are under estimated.