Housing bubble starting to pop?

bill_ashmount · 10-10-2006 02:51PM

conor_mc wrote:

Really? Didn't foot-and-mouth coincide with a bit of a blip in the housing market in 2001? You could argue that the two were unrelated, but there's a possibility that the outbreak did cause uncertainty which affected sentiment, and therefore the market.

So does it really take the biscuit that a disease which affects humans rather than cattle could change the market? Nah, I'm just being silly now. People will always need that extra house for the pension, y'know!

That's not my point. I could list off a million different world events that could possibly have the potential to effect the Irish housing market. Ranging from wars to disease to terrorism. These have always existed and always will.

I never mentioned anything about "extra houses for pensions", I don't know why you bringing this into it????
My point is there is plenty of valid economic arguments to both sides without having to resort to extreme/ off the wall/ highly unlikely scenarios in order to make your argument seem more valid.

conor_mc · 10-10-2006 04:06PM

bill_ashmount wrote:

My point is there is plenty of valid economic arguments to both sides without having to resort to extreme/ off the wall/ highly unlikely scenarios in order to make your argument seem more valid.

Fair enough.

It was Hailee Fat Mushroom's point initially, and I think he was using the example to make a "never say never" point rather than highlighting a specific threat to the property market.

Gurgle · 10-10-2006 04:22PM

soma wrote:

*LOL* and yet you expect no price declines during an exit, keep 'em coming gurgle, you're hilarious mate

Glad I'm amusing you.

soma wrote:

Who are these "people"?. In dicussion of a market there can be no discusion of 'people' without a context.

These people are, as I described, homeowners who are considering moving.

soma wrote:

I find it hilarious that you are trying to present the illiquid nature of a housing market, as a reason why it will not suffer the same fate as other speculative asset bubbles!

I find it hilarious that you find it hilarious.

soma wrote:

Comps will take a battering when it comes time for the next EA to set the price.

I don't even know what that line means.

soma wrote:

Personally I stay out by choice, I'm fortunate to be in a position where I can still afford Dublin prices as a single person, however I have no inclination to take part in what is simply the latest speculative mania.

Ah there we go!
So either:
a) thirty-something, lives at home with parents
b) thirty-something, has spent enough on rent in the last 10 years to cover any likely drop in a property value anyway

soma wrote:

As for what prices would need to drop by. I fully expect prices to fall over a period of 2-5 years by 50% in many Dublin suburbs. Falls outside Dublin/Cork (where the jobs/salaries are just not there) could be more severe.

And there you demonstrate that you've never even left Dublin

Theres more and better engineering jobs available in Connacht now than in Leinster.

miju · 10-10-2006 06:40PM

love the rationale (or lack of) behind your counter arguments gurgle :rolleyes:

el diablo · 10-10-2006 07:24PM

Gurgle wrote:

Theres more and better engineering jobs available in Connacht now than in Leinster.

I suggest you cut down on thoes mind bending drugs........:rolleyes:

2nz · 10-10-2006 10:24PM

My two cents is that yes it's popping. How far it falls for houses who knows, but apartments are doomed.

I found a number of examples of drops on the site: AskAboutMoney collated here irishhousepricesfalling

miju · 10-10-2006 11:11PM

2nz wrote:

My two cents is that yes it's popping. How far it falls for houses who knows, but apartments are doomed.

I found a number of examples of drops on the site: AskAboutMoney collated here irishhousepricesfalling

aye, that blog was set up by one of the lads on askaboutmoney becuase in that monster thread i started it theres that many posts it's incredibly hard to keep track of new information or price drops so it's all been nicely condensed to that blog

Gurgle · 11-10-2006 09:39AM

miju wrote:

love the rationale (or lack of) behind your counter arguments gurgle :rolleyes:

He didn't make any arguements, hence the lack of counter arguements.

My opinions and rationale are stated in detail in previous posts.

tbh the concept of a bubble starting to pop doesn't even make any sense. Bubbles either pop or they don't.

I would compare the housing market to a baloon which seems to have stopped being inflated. It may be deflating slowly now, but it hasn't burst and there is no reason why it should.

There are loads of people who wish it would, as they would like to own their own homes but aren't willing to give up a spend-happy lifestyle to buy them.
They will always be priced out of the market by their counterparts who are willing to make the required sacrafices.

So, again - barring global recession there will be no sudden catastrophic drop in housing prices.

Sponge Bob · 11-10-2006 09:50AM

Gurgle wrote:

There are loads of people who wish it would, as they would like to own their own homes but aren't willing to give up a spend-happy lifestyle to buy them. They will always be priced out of the market by their counterparts who are willing to make the required sacrafices.

LOL

, is the oul ladder that painful to climb ?????

So, again - barring global recession there will be no sudden catastrophic drop in housing prices.

You have never addressed the uniquely Irish issue of oversupply , let me give you yet another chance to have a carefully composed tilt at reality .

soma · 11-10-2006 11:26AM

Gurgle wrote:

These people are, as I described, homeowners who are considering moving.

Yup, and as I said they will make up a percentage, far from the total, of the players in a speculative asset market.

Gurgle wrote:

I don't even know what that line means.

Apologies if I used U.S.-centric Real Estate terms, it's what I'm used to in my family!

In the states Real Estate agents/investors say 'comps' when they mean the most recent accepted price of 'comparable' property to the one you are currently trying to price. I dunno if If Irish EAs use that term or have their own lingo.

Gurgle wrote:

Ah there we go!
So either:
a) thirty-something, lives at home with parents
b) thirty-something, has spent enough on rent in the last 10 years to cover any likely drop in a property value anyway

Ah here comes the old attack the poster not the post approach - A fav of property bulls the world over!

Nope I'm still in my 20s but yeah that big 3-0 is closing fast (damn you gurgle for reminding me!

). I currently rent my house in D6 for 30% of the equivalent mortagage cost (I *still* cant get over that..) and the cash I'm saving by not buying is doing rather well for me on deposit & in investments thank you very much.

And Gurgle this may be hard for you to understand.... but I actually don't *need* to own a house (shock/horror). Especially not in this rather poor city, which feels less appealing to me each year.

Gurgle wrote:

And there you demonstrate that you've never even left Dublin

Really making assumptions about people on an internet bulletin board is silly? I've lived & worked in the US & Asia.

Gurgle wrote:

Theres more and bett
er engineering jobs available in Connacht now than in Leinster.

Ok that's just officially crazy talk..... I wish that was the case!

jesus_thats_gre · 11-10-2006 01:38PM

Talk about being unlucky in choosing who to make assumptions about..

chump · 11-10-2006 06:08PM

jesus_thats_gre wrote:

Talk about being unlucky in choosing who to make assumptions about..

hah

I just can't believe the amount of people I know/ have come across, who are in their mid 20's or lower and in the last year they've moved or put a deposit on a home. In many cases completely unnessecarily but due to the push factor of 'must get on the ladder'.

It'll be sad to see them get stung, but at the same time the herd mentality and utter unbelieveablness of the sitution of some of the punters is shocking.

Shane™ · 11-10-2006 09:34PM

Gurgle wrote:

People who aren't getting offers at the money they need to move to where they want to go are not going to sell their house.

*snip*

Someone selling their house is still planning to live somewhere. They're either planning to buy somewhere more expensive and increasing their mortgage or buying somewhere less expensive and reducing their cost of living.

If they aren't going to get the money they need for what they want to do, they are going to stay where they are.

Someone selling a house is still planning to live somewhere, and if prices crash that somewhere will also be worth less, e.g. I want to sell my house for 400k to buy the house across the road for 500k - prices drop 50% - I manage to sell my house for 200k, how much more do I need to buy that house across the road?

I don't think movers dictate the market. FTBs, investors and prices of new builds do.

Gurgle wrote:

Even the people waiting for a crash all have different ideas of what prices would have to drop to before they would/could buy. This itself will prevent a crash.

People waiting for a crash are waiting for two reasons

1/ Like Soma they know prices are a joke at the moment.

2/They don't have the money.

In the first case these people clearly have patience. The people in the second case will not find 100% mortgages at 5 times annual income for a house that is going to be worth less in the future. Overall this coupled with less panic, less investors and lower mortgages will set the new base for the market.

This all assumes that confidence in prices drops, then prices start to fall, and a chain reaction begins, but we all know this will never happen

Gurgle · 11-10-2006 09:54PM

Shane&#8482 wrote:

1/ Like Soma they know prices are a joke at the moment.

1.4 million for a 3 bed terraced house is a joke. Thats not the 'Irish housing market' thats stupidity no matter where it is.

300k for a 4 bed on an acre is not going to lose half its value

I know: location, location, location

but still

Shane™ · 11-10-2006 10:32PM

Gurgle wrote:

300k for a 4 bed on an acre is not going to lose half its value

Why?

Gurgle · 12-10-2006 01:17PM

Shane&#8482 wrote:

Why?

Because 300k is a decent price for a decent house.
Its only in Dublin that the price of property has gone insane.

And btw:
in todays news

that there are signs of a slight easing in prices that will reduce the risk of a potential property crash.

BigEejit · 12-10-2006 01:50PM

that there are signs of a slight easing in prices that will reduce the risk of a potential property crash.

or indeed it could be the start of a steady decline ... as for 300k being a decent price for a house..... 100k was a decent price for a house 10 years ago, did peoples wages increase 300% keeping the decent price ratio the same?

(BTW, my brother bought an end of terrace in Dublin 24 in 1996 for £45k ...house in now €280 - 320k ... the mind boggles)

SimpleSam06 · 12-10-2006 08:57PM

Gurgle wrote:

300k for a 4 bed on an acre is not going to lose half its value

Are you sure about that?

Yes I know its in the states, but I wager the Irish graph dosn't look much different. Now does that look natural to you?

jesus_thats_gre · 12-10-2006 10:26PM

Gurgle wrote:

There are loads of people who wish it would, as they would like to own their own homes but aren't willing to give up a spend-happy lifestyle to buy them.

Is this the same spend happy lifestyle that you could attribute to historically cheap credit and the lack of appreciation for the true value of what they buy? Tis somewhat ironic that you singled this out as the significant reason why they cannot buy property.

jimmycrackcorm · 13-10-2006 02:08AM

I'm confused about this. from the post on examples of hous price drops....

Example 6
The Paddocks, Adamstown, Co Dublin
2 bedroom apartments started off last week at €305,000 but have now been dropped to €290,000.Original launch details:http://www.unison.ie/irish_independent/stories.php3?ca=303&si=1701582&issue_id=14736New Price: €290,000http://www.dng.ie/search_result_detail.cfm?ID=101618589

I'm confused because my sister-in-law is on a waiting list for a cancellation on one of these. Given the demand then why a price drop? I asked her but she said that there are actually two styles of apartments and one is still 305k.

Gurgle · 13-10-2006 08:40AM

jesus_thats_gre wrote:

Is this the same spend happy lifestyle that you could attribute to historically cheap credit and the lack of appreciation for the true value of what they buy?

Yep.
You only have to look at the number of '06 cars on the road to see this.

jesus_thats_gre wrote:

Tis somewhat ironic that you singled this out as the significant reason why they cannot buy property.

I'm singling it out as the reason why a lot of people who could buy property choose not to. Its proportionally a much bigger investment than it used to be, and a lot of people are more inclined to spend their income on cars & holidays than property.

This is not a complaint or a criticism, I see no pressing reason to buy a house when you're young, free and single. Might as well enjoy your money instead of signing up to 30 to 40 years of repayments.

(I do see pressing reasons to buy a house when you're married and planning to have children, which eventually happens to most young, free single people.)

There was a period there when you could do both - rental yields were higher than mortgage repayments so you could buy a house for effectively nothing. This is what drove the prices up in Dublin beyond all bounds of common sense, as thousands of people saw their friends buy a house, rent out rooms and have it pay for itself.

Now, as everyone is enthusiastically pointing out, the rental market is flooded and rents have come down. But to point at the Dublin rental market and say Ireland's housing market is doomed is just purile. A housing market where rental vs investment is over 100% was never going to last.

As stated, I expect a soft landing.
People who thought they could get a free retirement policy out of a property investment are starting to feel the pinch of making up the difference to pay the mortgage. I still think most of these people will hold their ground rather than sell at a loss.

Just as potential buyers have a maximum they'll spend, potential sellers have a minimum they'll sell at.

Gurgle · 13-10-2006 08:45AM

SimpleSam06 wrote:

Are you sure about that?

Those are inflationary adjusted values.
When inflation is greater than price rises, you see an effective decrease in property values without anyone actually losing money on their property.

BigEejit · 13-10-2006 12:54PM

It is an American graph and so is only an indication (possibly false) of the market worldwide ... I would estimate that if the same thing was done to the Irish market that spike at the end there would be twice as tall ....

I believe he has taken inflation out the equation to show that house prices have been more or less level (taking in boom and bust times) ... the spike at the end is showing that currently property is way overpriced as it has gone beyond being easily afforded as it was in the past ...

how many multiples of the average industrial wage is a average house in any Irish city now? how many years is the average mortgage for now (ftb's)? Now compare the figures with those of the last 50 years .... :eek:

SimpleSam06 · 13-10-2006 01:21PM

Gurgle wrote:

Those are inflationary adjusted values.
When inflation is greater than price rises, you see an effective decrease in property values without anyone actually losing money on their property.

How on earth can you look at house prices over time without adjusting for inflation? The mind boggles...

Gurgle · 13-10-2006 01:54PM

SimpleSam06 wrote:

How on earth can you look at house prices over time without adjusting for inflation? The mind boggles...

Oh good grief!

We're talking about a housing market crash, negative equity.

Negative equity means you owe more than your house is worth. This means an actual drop in value, not an inflation-compensated net present value equivalent loss compared to what you paid for your house.

The comment on the graph is a drop from 100k(npv) in 1890 to 66k(npv) in 1920. Thats an average of 1.1% per year. Go look up the average inflation figures from 1890 to 1920.
(edit - i looked it up - its 82.88% over those 30 years, averaging to 2.76% pa)

If its more than 1.1% per year(yep), then the actual cost of this average house rose over those 30 years even though the net inflationary adjusted value fell.

The parts of the graph that show a drop correspond with times of extremely high inflation. This shows that house prices did not actually drop, inflation rose.

Gurgle · 13-10-2006 01:58PM

BigEejit wrote:

how many multiples of the average industrial wage is a average house in any Irish city now?

Why does everyone think the leafy suburbs define the nationwide housing market?

The average price paid for a house nationally in August of this year was €306,173.
The average price paid for a house in Dublin and outside Dublin in August 2006 was €412,877 and €264,622 respectively

Average industrial wage is ~30k so the average house price is x10.

conor_mc · 13-10-2006 03:02PM

Gurgle wrote:

Average industrial wage is ~30k so the average house price is x10.

.... which is almost twice the historical norm.

SimpleSam06 · 13-10-2006 03:10PM

Gurgle wrote:

Oh good grief!

We're talking about a housing market crash, negative equity.

Negative equity means you owe more than your house is worth. This means an actual drop in value, not an inflation-compensated net present value equivalent loss compared to what you paid for your house.

With such a fundamental lack of understanding of what inflation means to house prices or the prices of anything, you really shouldn't bandy about terms like "negative equity". Thats like yerman that thought he could hand his keys back to the bank and call it even.

Inflation adjusted prices means the actual, real value of the house in terms of the value of money at the time. If you had €10,000 in 1970, you could buy a lot more with it than if you had €100,000 in 2006. That is inflation. Real value. Still with me? That means inflation adjusted prices are the only way to measure house prices over time. Otherwise you could say your house in ballygobackwards cost you €5000 in 1970, but is worth €500,000 now. You didn't really make a lot of money, since your money isn't worth as much (it can't buy as much of anything).

Any way you spin it, the prices over the last 5 or 6 years are completely off the scale. Bubble. Pop. Therefore I would say without a doubt that negative equity is on the cards for anyone who bought in the last 5 or 6 years, jusdging by inflation adjusted figures for the last century.

Gurgle wrote:

The parts of the graph that show a drop correspond with times of extremely high inflation. This shows that house prices did not actually drop, inflation rose.

Bwahaaaaaahahhaha!! Oh dear oh dear... Are you one of those "property never falls" people? Japan called, it wants its prices from 15 years ago back...

gamer · 13-10-2006 05:41PM

if house in good areas are going up 15percent,EVERY YEAR, thats a reason to buy,cos at some point they will be out of your reach in regards to having any chance of getting mortgage,unless u are happy to rent for the next 50 years.I dont think they are gonna get cheaper in 3 years time.there is not enuff serviced land in dublin to build 3bed houses on ,to meet demand.

whizzbang · 13-10-2006 06:57PM

gamer wrote:

if house in good areas are going up 15percent,EVERY YEAR, thats a reason to buy,cos at some point they will be out of your reach in regards to having any chance of getting mortgage,unless u are happy to rent for the next 50 years.I dont think they are gonna get cheaper in 3 years time.there is not enuff serviced land in dublin to build 3bed houses on ,to meet demand.

What do you make of the rising interest rates and bearish sentiment in some of the papers? Any chance we are going through a slowdown in the housing market?

Housing bubble starting to pop?

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