Housing bubble starting to pop?

25-09-2006 10:25PM

faceman wrote:

Yet another "bear" who is bitter? This thread has really turned into something it shouldnt have.

Sure i might as well join in...

I made €65k after taxes etc on one of my properties which i sold this year. I bought it 2 years ago. How much you "bears" make this year?

bitter? why of course ! Very bitter at how as a country we got rich and wasted it!

I sold up recently made 90k - we got out in time, I am leaving the country, I do love the country and if I come back I hope property has come to a level where people can have a better standard of living.

Sponge Bob · 25-09-2006 10:26PM

shaptakster wrote:

After a quick gander through the thread i see that SimpleSam06, D'Peoples Voice, Pa ElGrande and sponge bob have about 50% of the posts in this thread between them. :eek:

faceman has more than i do

There should be a tool to show how many times a particular person has posted in each thread.

I would not go as far as you just did...about yourself

Now count the whole thread properly willya .

Pa ElGrande · 26-09-2006 12:18AM

shaptakster wrote:

On the contrary i would love nothing more than for house prices to come down.
I was just making the point that the same people are going on and on so much that its like they are obsessed with a crash.

After a quick gander through the thread i see that SimpleSam06, D'Peoples Voice, Pa ElGrande and sponge bob have about 50% of the posts in this thread between them. :eek:

I don't mean to be a Jeremiah, this is not about me wishing for a house price crash, this is about alerting people to the mayhem that's just around the corner in our domestic economy when the credit tap is turned off. Hopefully people reading this will take a rational approach towards purchasing a house, instead of feeling pressured to get on the housing 'ladder' in any location at any cost, to the detriment of their own future prosperity and be able to enjoy a reasonable standard of living as a result.

Despite the sooth saying from the estate agents and mortgage lenders the fundamentals of the Irish property market at this point in time are questionable to say the least.

As if that was not bad enough the US economy is likely to be in recession soon (if its not already)

What I am observing is the relentness nature of the information presented here runs counter to the indoctrination that many people have undergone with regard to the property market. This normally seems to result in an emotional response towards the poster of the information that contradicts a persons beliefs rather than a logical assesment of the infomation or argument put forward by the poster.

I know your goal is to help your daughter and son-in-law find a home and you have put a great deal of effort into researching the market and I wish you good luck with this.

whizzbang · 26-09-2006 12:29PM

Pa ElGrande wrote:

I don't mean to be a Jeremiah,

Thanks Pa ElGrande, this is an excellent post! Very useful to have all the references in one spot!

Sponge Bob · 26-09-2006 01:35PM

http://www.london.gov.uk/news/2002/421-1410a.jsp

3.6% of homes in London were empty in 2002 .

I have no Dublin figure but nationally it was 10-11% or so in 2002 which is typical of Ireland .

Now its 16% . What is it about we Irish that property is best left empty and unused on this scale .......and particularly in recent times where all records have been broken.

The difference between what is NOW empty (16%) and what is NORMALLY empty (10%) is 6% of the national housing stock.

The national housing stock is 1.8m units

6% of that is 108,000

A normal years building averaged over the past 15 years is around 50,000. We have two years worth of supply lying idle over and above the long term empty rate which is enormous anyway .

We have only built that 2 years oversupply within the past 4 years according to my graph.

Despite the recent immigration of east europe * .* we have still not found a use for this gross oversupply.

Who the **** are we fooling here except ourselves ?????????

SimpleSam06 · 26-09-2006 02:50PM

This would be the headline in today's Evening Herald, according to the lads over on AAM. I can't find a link to it however. This would be domino number two falling, and much sooner than I expected.

finnpark · 26-09-2006 03:10PM

http://news.bbc.co.uk/2/hi/business/2077892.stm 2003 story

whizzbang · 26-09-2006 05:43PM

finnpark wrote:

http://news.bbc.co.uk/2/hi/business/2077892.stm 2003 story

yep, thats right, th UK boom ended in 2003
http://www.housepricecrash.co.uk/graphs-average-house-price.php

they have managed to keep it steady since then somehow. That being said there is a suspicion of prices declining there now.

Lucky Brits can adjust their own interest rates to mange the property market... pity we can't

Sponge Bob · 26-09-2006 05:59PM

whizzbang wrote:

yep, thats right, th UK boom ended in 2003
http://www.housepricecrash.co.uk/graphs-average-house-price.php

they have managed to keep it steady since then somehow.

In the UK the national rate of empties is c. 4-5 % with the figure around 5% or more in Wales and Scotland and 3% in SE England

( and some of ye who will not do yeer own research can simply go find some source that tells you otherwise or else accept what I say as gospel

right ??!! )

In Ireland the national rate of empties is 16% .

We have over 3 times more empty properties than they do and this OVERSUPPLY is an OVERHANG on our market .

The UK has not spent the last 4 years overbuilding our national stock as did we and do have a more appropriate interest rate as whizzbang said. Their banks are not as big a pack of muppets either I'll wager .

HTH

conor_mc · 26-09-2006 06:03PM

Interesting comment from that 2003 BBC article...

But even the 70,000 buy-to-let mortgages agreed in 2002 made up only 5% of the total.

Last year in Ireland, BTL's were 40% of the market.

lizzyrocker · 26-09-2006 09:12PM

whizzbang wrote:

Thanks Pa ElGrande, this is an excellent post! Very useful to have all the references in one spot!

Here here, keep up the good work Pa!

whizzbang · 26-09-2006 09:18PM

Sponge Bob wrote:

In the UK the national rate of empties is c. 4-5 % with the figure around 5% or more in Wales and Scotland and 3% in SE England

erm, is this in relation to my post? I agree with everything you say here!

Pa ElGrande · 26-09-2006 09:40PM

I have to fess up, I bought the Herald this evening when I saw the hoarding on O'Connell Street.

Fears grew today that thre house price boom is over. In Dublin, in particular, more houses are being left unsold and auctions are suffering.
<snip>
Evening Herald business expert Dan White said: "What has happened over the past nine months is entirely consistent with the early stages of a downturn in prices."
He said recent interest rate rises had definitely slowed the market down.
He added: "After more than a decade of being scarce as hens' teeth, the market is suddenly awash with second hand houses. The problem is that this creates a sudden increase in supply which triggers the very crash that sellers had been fearing."
<snip>
Buyers were thin on the ground at auctions around the country, but Dublin was particularly hit. Those who did bid were cautious, with the small number of houses selling making little over their advised minimum values.
<snip>
"People are making an informed choice on the properties they are going for," he said. "The market price is defined by the buyer, they are looking to see what is available and are making their decisions on that basis."

more ...

House price boom shudders to a halt
http://www.evening-herald.ie/ [free registration required]

Its essentially a rerun of the Sindo article, Dan White describes everything but stops short of calling the bubble burst.
Thursdays Irish Times could get interesting, to see how they spin the poor auction results, but I'm not going to give myself backache to find out.

Shane™ · 26-09-2006 10:15PM

I missed the Sunday Indo article, but here it is, I'm posting the whole thing as the site requires free reg.

NICK WEBB Sunday Indo wrote:

THE extraordinary glut of houses coming on the market this month has led to widespread falls in the prices being demanded by estate agents.

In one case a red brick house on McMahon Street in Portobello off Dublin's South Circular Road has seen its asking price slashed by 20 per cent. The house was withdrawn from auction in June, with agent Sherry FitzGerald then quoting a price of €1.25m. Last week the property was advertised at just €1m.

Aylesbury, a luxury home on Glenageary's Adelaide Road, was withdrawn from auction before the summer. Agents Sherry FitzGerald were then quoting a price of €8.5m for the home on an acre. Last week, the property was for sale with a guide price of €7.5m. This represents a drop of 12 per cent. A detached redbrick house in Shrewsbury Park in Ballsbridge has had €450,000, or 11 per cent, shaved off its asking price, now €3.45m. Other properties from Blackrock to Ballinteer on the southside have seen thousands of euros shorn from their asking prices.

While the downward trend is most evident across more expensive houses on the prime southside suburbs of Dublin, the Sunday Independent has uncovered significant falls in asking prices in other areas of the city.

On the northside of the city a property at Brompton Grove in Castleknock is on offer at €650,000 almost 4 per cent lower than its pre-summer price. Hamilton Osborne King is selling a three bedroom home in Castilla Park, Clontarf for €795,000, having some months ago offered the property at €825,000.

Price reductions have also been widespread across the country, especially in Dublin's commuter belt counties. Both Douglas Newman Good and Hassett have chopped asking prices for certain homes in Bray and north Wicklow by between 5 per cent to 10 per cent. Auctioneer John Keane is selling a Rosslare house for €725,000, with the property having been advertised at €750,000 before the summer. Smith Harrington has sliced over 6 per cent off a Navan four bed.

Last week, two estate agents, Rathmines based Herman White and the Phibsboro branch of Mason Estates were openly advertising properties as being "reduced to sell" or "reduced price region". The homes in question were a €1.5m Victorian house on Rathgar Avenue in the heart of Dublin 6 and a €495,000 three bed on Danielli Drive in Artane, Dublin 7.

Speaking to the Sunday Independent , Douglas Newman Good economist Paul Murgatroyd said, "There is a more realistic element coming in for vendors."

However he added that DNG figures will soon reveal that average Dublin property prices actually rose 2.4 per between July and September, although the time taken to sell houses has increased.

Since the auction season began again two weeks ago, an unprecedented number of houses have been put up for sale.

edit: Cleaned up code

bounty · 26-09-2006 10:24PM

it's about to happen

SimpleSam06 · 26-09-2006 10:46PM

Pa ElGrande wrote:

Thursdays Irish Times could get interesting

The two pillars of the housing bubble, interest rates and market sentiment, are both starting to fall away. What with reversing trends in economies, China running the risk of overheating, and the general German terror of inflation, I can see rates going as high as 6%, the Fed be damned, which would double the interest portion of mortgage repayments for anyone that has them.

An article like that in a widely read national paper is going to seriously damage market sentiment; those thinking of buying are going to pull out, and those in danger will be trying to sell, which floods the market with even more properties, creating a snowball effect. This is going to get messy. So much for the nouveau riche who really weren't and the amateur investor who thinks he's a professional.

Shane™ · 26-09-2006 11:02PM

I don't thing anyone should get smug, a crash would be very bad for the economy

The only person who could afford to be smug is faceman, your the only person who made good arguments against selling investment properties and all the while you were getting out yourself, I like your style!

faceman wrote:

I made €65k after taxes etc on one of my properties which i sold this year. I bought it 2 years ago. How much you "bears" make this year?

Sponge Bob · 27-09-2006 10:09AM

whizzbang wrote:

erm, is this in relation to my post

You said the uk had managed a 'soft landing' scenario "somehow" My opinion is that the "somehow" in the UK is primarily supply related.

We will not have a soft landing for the reason that we do not have that "somehow" here along with the lack of an interest rate mechanism and the third problem which is that the Financial regulators completely failed to stop the banks from priming the markets with oodles and oodles of cash...until the banks panic that is ...together with the speculators who hold this huge supply of empties funded by these stupid banks between 2002 and 2006

All Textbook muppetry as the economic history books will show by the end of the decade.

This textbook muppetry in our property market and in ludicrous locations like Bulgaria and the Cape Verde islands is what makes we Irish "different" and "special" to a large degree .

You start writing it whizzbang and I will throw in a chapter or two for my % and proof it for you of couse . Make sure its in the shops for christmas 2007 sez this sponge smelling the green

People who enjoy a top financial yarn should read this extremely amusing book about another bubble 25 years ago in which a lethal combination of a commodity bubble and a dip**** expert who made predictions about the commodity 'upside' which were ludicrous and stupid borrowers and very very very stupid bankers all went very close to crashing the US banking system ...and did crash the 13th largest bank at the time.

daveirl · 27-09-2006 11:10AM

This post has been deleted.

D'Peoples Voice · 27-09-2006 01:20PM

Hailee Fat Mushroom wrote:

I wouldn't be surprised to see interest rates peak by the end of the year and drop back a little in the first quarter of 2007.

Please clarify what you mean by drop back a little

hold off on any further increases

reduce interest rates
As I said to Faceman, I see no evidence in the futures markets pricing of any U-turn in the ECB policy for the next 18 months. There are no decreases priced in, only increases. One at the start of October, another at the start of December, another at the start of March and finally again in June. The ECB will then hold off for a long while.
Not sure if you aware, but Germany, Italy and France are still running budget deficits, hence in the absence of a recession, the ECB should be running a deflationary policy. That is why, everytime it meets, it speaks of removing the accomodating factor built into it's present rates, the rates are only accomodating or inflationary because the euro area WAS in recession.
I know the UK increased interest rates at a quick pace, then had to reduce them again for a few months before increasing them again but that is why the ECB is increasing them at a slower pace so it won't have to reduce them.

D'Peoples Voice · 27-09-2006 01:37PM

D'Peoples Voice wrote:

Faceman,
Seeing as how you see yourself as an astute investor, what positive factors do you think have yet to be priced in. All I can see are negative factors and I'm usually an optimist.

Another vaguely possible positive factor for the market might be that many of the 'investors' who are selling their houses now may have children who are looking to buy.
In which case, seeing as rabobank et al deposit rates will rise to at most 5.5% by next year, these investors may wish to instead loan the profits they made from property to their children, at a rate which would be higher than the current rental yield but lower than the mortgage rate offered by banks. Hence we might have new buyers willing to take up the slack provided by all the sellers.
Of course why people who wished to get out of the market would wish to give someone a loan to get back into the market, borders on insanity, there is a slight difference. As investors they owed houses that had would have had a rental yield below the deposit rate offered by Rabobank et al, but through this loan agreement they receive an interest rate greater than the deposit rate and for little risk, assuming their children wish to remain in the house indefinitely. After all we have no reliable figures of how many people are priced out of the market, all we can do is infer form the population statistics collected by the CSO!

faceman · 27-09-2006 07:00PM

yo dudes, have been offline in recent days but the bull is back! (altho im not a bull in strict terms!)

First thanks to those kind comments of respect from those of u who respect my opinions (whether you agree or not!!)

Second, good post by Pa yesterday at 00:18.

However I think its far too early to reckon a crash is on the cards. Heres why i believe so. Actually i commented already on the indo article re high value homes failing to take off so i wont re hash.

What we have at the moment is an atmosphere of fear. Thus people are (rightly so in any investment opportunity) being cautious. This is causing a wobble in demand. This wobble is not being caused by a large drop in those who:

(a) can afford a mortgage
(b) who want to own their own home

this thread, that awful rag the indo and AAM is to some degree fueling negativity and as some of the bears have pointed out, no one is denying this.

This wobble is temporary. Why do i believe this? Well whats the alternative to buying your own property? Renting or living with parents.

OK lets say this wobble impacts price (i cant see any real negative impact to price by more than 5%), and price starts to wobble. Asking prices will start to reflect sale prices more realistically. (in my experience sale price in ireland in the last 2 years is generally 10% higher than asking price) As the prices wobble this could potentially trigger a bigger realisation that its moving towards a buyers market.

This could potentially fuel confidence in the property again and allow the market to level out in the medium term.

Note to my fellow debaters, in any of my posts I do not reflect high value properties. My comments reflect properties in the €1 (lol) to €650k brackett.

The other reason that i feel there is no crash on the cards is this year's budget. With the bertie scandal and election next year, FF need to keep the voters onside. I expect that they will avoid dis-incentivising investors and relaxing stamp duty some more (or increasing mortgage interest relief) for FTB's. Aside from that, the gov gets big returns on the property market. A crash is not in their interest. Particular with the EU is putting pressure in ireland to start funding infrastructure projects a bit more than we currently do.

anyway thats all in my opinion... roll out all you maniacs tearing it to shreds!!

oh and for the record, i still own property that i havent sold and am not planning to sell at the moment.

mad m · 27-09-2006 08:50PM

Well Im going through a stage now,should I or shouldnt I? My house(Terraced) is sale agreed with a very low mortage(Gutted house when we got it,done the usual) But the kids are getting older and my sons room seems to be shrinking.

The house we are after will bring our mortage up to €300,000. I have two people in my head now at moment with all this about the burst coming or already has begun,saying am I mad to move or it will be all worth in years down the road. The house we are bidding on is huge compared to ours and it seems we might get it at this stage but has gone over its asking by €35,000 with us in a bidding war with another buyer.

We would never have negitive equity as Im constantly being told by the wife if the market goes belly up.

Ah I dont know,am I mad or what!!!!

ronbyrne2005 · 27-09-2006 09:41PM

mad m wrote:

Well Im going through a stage now,should I or shouldnt I? My house(Terraced) is sale agreed with a very low mortage(Gutted house when we got it,done the usual) But the kids are getting older and my sons room seems to be shrinking.

The house we are after will bring our mortage up to €300,000. I have two people in my head now at moment with all this about the burst coming or already has begun,saying am I mad to move or it will be all worth in years down the road. The house we are bidding on is huge compared to ours and it seems we might get it at this stage but has gone over its asking by €35,000 with us in a bidding war with another buyer.

We would never have negitive equity as Im constantly being told by the wife if the market goes belly up.

Ah I dont know,am I mad or what!!!!

If you wanna sell and get a bigger place , sell and rent for a year or two and see where market is then. EVen banks are saying prices will barely grow in real terms and may decline in real terms. Rent is cheap and could save you a lot in the future. The market really has changed in dublin in last 6 months and loads and loads of houses arent selling at auction and asking prices are falling in many areas.

faceman · 27-09-2006 09:54PM

ronbyrne2005 wrote:

If you wanna sell and get a bigger place , sell and rent for a year or two and see where market is then. EVen banks are saying prices will barely grow in real terms and may decline in real terms. Rent is cheap and could save you a lot in the future. The market really has changed in dublin in last 6 months and loads and loads of houses arent selling at auction and asking prices are falling in many areas.

houses worth €300k wont drop. If ronbyrne doesnt buy it and prices dont drop substantially then he loses out. The price will rise and the fact he is starting to pay a mortgage in 2 years isnt a pleasant thought.

my advise is buy it. Its not like you're buying it for short term living.

ronbyrne2005 · 27-09-2006 09:59PM

faceman wrote:

houses worth €300k wont drop. If ronbyrne doesnt buy it and prices dont drop substantially then he loses out. The price will rise and the fact he is starting to pay a mortgage in 2 years isnt a pleasant thought.

my advise is buy it. Its not like you're buying it for short term living.

Houses "worth" 400k are dropping in lucan and other places right now. if he rents for 2 years he will pay a lot less in rent than for a mortgage, he can add this saved money to the proceeds from selling current house. When even banks are saying prices will slow to 3% nominal price growth you wont be losing much by selling and renting for two years.

Idleater · 27-09-2006 10:10PM

ronbyrne2005 wrote:

... you wont be losing much by selling and renting for two years.

Apart from the stability and freedom that owning your own house gives you - especially when you have a young family.

Mad M:
Consider the options, if you feel like paying (at worst) for this stability and freedom then and find it worth it, buy.
On the other hand, if you want the luxury of buying time, rent and see what the market does.

Swings and roundabouts. Nobody but you (and your family) can decide this matter, and you should work out rationally the concequences of each option. Factor in the what if it goes belly up, and then make a decision.

Personally, I agree with buying a principle residence. I am more hesitant about "investors" in the Buy to Let category.

L.

mad m · 27-09-2006 10:17PM

I know^^,thanks for the comments/opinions. Its just those voices in head at moment saying will I wont I.

I'll be honest I've never had a big mortage(I'm very lucky I know). But this time I will,to some its the norm but to me its big and I suppose thats whats frightening me.

Never thought about buying the house then renting it out and with money I get from it rent out a place with family,hmmm maybe a bit to much upheaval for the kids.

Sponge Bob · 27-09-2006 10:52PM

If I told you in 1999 what you were earning in the hand today and that you were taking out a €300,000 mortgage (£240000 puntses) just for more space would that scare you (in reverse hindsight) If so, rent for a year or two and pick the moment when the current wobble stops to go back in to the market.

You will only pay €30k rent in that time so you are punting on a 5% drop where you want to live ( I assume you bank 300k deom the sale and spend 300k more .

Any more and you are quids in , how long does it take you to save €30k by the way

ronbyrne2005 · 27-09-2006 11:44PM

mad m wrote:

I know^^,thanks for the comments/opinions. Its just those voices in head at moment saying will I wont I.

I'll be honest I've never had a big mortage(I'm very lucky I know). But this time I will,to some its the norm but to me its big and I suppose thats whats frightening me.

Never thought about buying the house then renting it out and with money I get from it rent out a place with family,hmmm maybe a bit to much upheaval for the kids.

no im saying sell and stick the money from the house you live in now in the bank. then rent a larger house for two years, save as well and build up the balance in the bank.

Housing bubble starting to pop?

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