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Housing Bubble Bursting
Comments
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is_that_so wrote:My issue is not with your use of data all of which speaks for itself aside from one point. 90,000 units from what I can see just refers to units. What proportion was affordable/social housing? If the government is to believed about
Part V of the Planning Act 2000 Housing Targets we can expect to see nearly 50,000 homes under the scheme over the coming years. How can or would you account for this?
If I may speculate in event of a crash its possible the government may tap into the excess inventory under the guise of social housing program, thereby bailing out the developers.is_that_so wrote:I do however question the conclusions you have come to and whether you have taken everything into account. IMO they are not ineluctable truths.is_that_so wrote:Interest rates are increasing
Yes this is true and based on the normal effect of such increases it should help cool the market by making money more expensive, though not necessarily make it crash. Jim Power
This will also affect mortgage equity withdrawal, so existing house owners will have less money to borrow for property in Borneo or Bulgaria, cars or home improvement, so ending the ability to subsidise their lifestyle. There is a higher chance these people will also find themsleves with negative equity should they try to sell in a declining market.is_that_so wrote:Banks tighten their criteria for lending
My impression was that this has started and that credit card debt is to be included in loan evaluations. I don't believe that banks here in general will go beyond that 100% threshold and I would hope that people are not stupid enough to do so.
Against that background the banks risk premium increases and it becomes more expensive to raise capital, so the costs are passed on to the mortgagee. The Fitch report should serve as a red flag in that regard.is_that_so wrote:Unemployment Rises
This is questionable and could be affected by any number of other factors such as higher energy costs,wage inflation or lower cost economies.
Notwithstanding that, the proportion of non-nationals per sector is currently not measured and therefore unknown.
Dan O'Brien Irish Times 06/01/07 Link.
It is believed that there are many EU nationals in the construction industry. Given that many EU migrants are here for economic reasons how increased unemployment might be affect them or what they might do is also unknown. If only Irish nationals were affected then the comment might hold.is_that_so wrote:IMO it is impossible therefore to adduce that the unemployment rate will rise. More workers could lose their jobs but how can we determine what group it will affect most and more importantly how that will translate itself across the various economic sectors ?
The end of the housing boom, will see a downturn in construction employment and is already on the cards as the number of planning permissions granted has decreased 15% in Q3 2006. It is hoped that infrastructure projects will make up the shortfall in employment, but these projects are not as labour intensive as residential building. The multinational sector is largely governed by events elsewhere, however cost pressures, skills shortages and infrastructure deficits in this country are impacting our global competetive position. Future wage inflation cannot be counted on as the trend is towards a global levelling of wages. Dell are already preparing to move some production to Poland, to benefit from government grants, lower labour costs and a central location for distribution in Europe. They will be scaling back production in their Limerick plant. Dell is 4% of expenditure in the Irish economy.is_that_so wrote:Bad debts start to mount as businesses fold
There does not seem to be much evidence of this particularly as last year was the best year for company liquidations in 20 years
, although it does acknowledge that some newer companies in construction have suffered.is_that_so wrote:Investors who are undercapitalised rush to sell else they go bankrupt
This assumes first and foremost that the crash will occur and the two elements above will happen as you state.
What types of investors do you mean? If I as a private investor buy a new house and I am VAT registered I can claim that VAT back. This could be used for kit out and possibly reducing some of my 100% exposure. This does not really strike me as a recipe for bankruptcy.is_that_so wrote:Peoples appetite for extending themselves to get on the ladder evaporates as fears over job security take precedence
When people don't buy they still have to live somewhere. This should then create more demand for rental properties thus negating the previous scenario.
Tenants are generally price sensitive and will find ways to reduce costs by moving back with parents or sharing with someone else, mortgage payers will be more willing to accept lodgers to defray the increased costs of servicing a mortgage. Also people will hold off buying in the expectation of further price falls in another few months, they will also face less competition as the 'specuvestor' exits the market.is_that_so wrote:Government tax revenue nose dives, its costs increase, leading to huge deficits
Again the costs here assume we know what way the unemployment will affect the various sectors.
If you look through the economics of the last 15-20 years you will find frugality - Ruari Quinn
common sense - Mac the Knife and The Tallaght Strategy
crystal ball genius Charlie McCreevy and the SSIA
and financial nous 12.5% corporation tax.
Deficits can usually be resolved by swingeing cuts, tax increases and borrowing. The first two are certainly within the instant control of government.
Wages in the public sector are now on average higher than the private sector And yet members of that sector are priced out of most of the main cities. When revenue falls they will have to cut in order to stay within ECB stability pact guidelines, they will not be able to inflate their way out of the problem like previous governments have before the Euro. The housing boom is already having a destabilising effect on the Government's revenue, albeit a positive one in 2006.is_that_so wrote:Finally how do you factor in the SSIA? Given that it is valued at €15 billion where does that fit into your analysis?is_that_so wrote:In conclusion I don't take the view that there will an economic meltdown as the original article suggests. I find it hard to believe that data as presented.
The original article used Arizona as an example. Arizona like Florida is a recreational state and it would be open to wild speculation. The bubble in the US was localised. Massachussets however is a state that is more similar to Ireland in economy and it might be more representative of what could happen. 12-13% correction is not impossible and that would serve as a warning.
Equally his use of The Netherlands is a poor example as it was already in an economic recession after 9/11 so would not have been a healthy position in 2003.
Economists have never really been here before. They are guessing, digging up models to provide answers to something that keeps going on and on and
that "can't possibly continue".
Ultimately I am with George Lee on this . I neither trust nor believe economists at face value and I am dubious about reports at the best of times. The latest US Jobs data has just reinforced this. Yet again they got it spectacularly wrong -50% out.
As regards those posters looking to jump into the market , it might be best to see what the 1st quarter numbers offer.
The real problem in the United States which will hit their economy this year is the emerging ARM (Adjustable rate mortgages) scandal, as these mortgages reset to higher rates, the lenders will foreclose. Sub prime lenders in the US are also starting to go bust, with more expected to follow. I expect the US Federal Reserve to try and cut interest rates this year as this crisis develops. Contrary to being a localised phenonomen this is widespread as millions of American's used mortgage equity withdrawal to subsidise their standard of living. They have a negative personal savings i.e. they are living beyond their means. Even prices in Manhatten are starting to come down.No doubt some canny Irish investors at todays property expo in the RDS will be buying up the excess inventory on offer. :rolleyes:
I agree with you never trust economists, make up your own mind based on the data available to you.
All the best,
Pa ElGrande.Net Zero means we are paying for the destruction of our economy and society in pursuit of an unachievable and pointless policy.
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Excellent posts Pa Elgrande,very well researched,100%.0
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Pa ElGrande wrote:. The amount spent on rent supplement has increased dramatically since 2000, and has effectively puts a floor on the rental market.
If I may speculate in event of a crash its possible the government may tap into the excess inventory under the guise of social housing program, thereby bailing out the developers.
and the govt is moving to further support rental income for speculators through the Rental Accomadation Scheme.
and some Councils that have refused to enforce Part V have now begun to buy property on the open market e.g a developer in Cork who had difficulty shifting appartments was paid €24,000,000 for 96 of them by the Council.
Another excellent post Pa ElGrande0 -
Cantab. wrote:You are a very nonchalant investor. I wish you luck.
Thank you. The property I'm looking at is near the sea in a very busy tourist resort where the vast number of buyers are just looking for the dream holiday home, willing to pay good money for the address, and not that interested in letting. Hence issues like the numbers of migrant workers not an issue. Might use it for short term summer letting in the meantime.0 -
Deleted User wrote:But for the record, if I come back in 6 months or a year (ideally will flip it quickly, maybe subsale even before the stamp duty falls due) and and say I have made a profit which exceeds all the negative predictions here, you will endorse my 'infinite wisdom'?
of course i will as i've no bother admitting when i'm wrong and i wish you the best of luck with it.
thats providing you can flip it of course to someone else and lets face it a holiday home wouldnt exactly be a flippers first choice of property type , might serve you well to read about all the US property flippers currently facing bankruptcy and paying massive amounts out on mortgages after the market turned and they couldnt flip
granted it's high risk and high returns but whats the point of flipping a property if the price is going to be same by the time the buildings are finished?0 -
miju wrote:thats providing you can flip it of course to someone else and lets face it a holiday home wouldnt exactly be a flippers first choice of property type
The only houses that sell in the area are used as holiday homes. At the moment, evey professional in Cork and Limerick can't get enough of the timber frame 3 bed 1 mile from town estate houses for 350k in the neighbourhood. Looking at a 2 bed old detached cottage in the same area for about 240k on half an acre, Vendor lives abroad and has no auctioneer - sites alone would be worth 140/150k. The only thing I have to factor in is whether I just put on the market and sell on, or hold on and see what planning would give in terms of extra bedrooms. Can't see how it can lose, dire predictions or not, because it will rent for more 400eu a week in the summer anyway - though don't want the hassle of having to clean it every weekend...0 -
Deleted User wrote:The only houses that sell in the area are used as holiday homes. At the moment, evey professional in Cork and Limerick can't get enough of the timber frame 3 bed 1 mile from town estate houses for 350k in the neighbourhood. Looking at a 2 bed old detached cottage in the same area for about 240k on half an acre, Vendor lives abroad and has no auctioneer - sites alone would be worth 140/150k. The only thing I have to factor in is whether I just put on the market and sell on, or hold on and see what planning would give in terms of extra bedrooms. Can't see how it can lose, dire predictions or not, because it will rent for more 400eu a week in the summer anyway - though don't want the hassle of having to clean it every weekend...
Conor74, the best of luck with your investment but can we reserve this topic for a debate and not an analysis of your personal venture.0 -
jmayo wrote:On a lighter note:
Has anybody ever thought this is all academic since buying property near a lowlying coastline, say Sandymount, Cork, Holland, Florida will be underwater in 20 years or so due to global warming, melting icecaps, continues el ninos etc etc.
Now there's a thought ... buy near Roundwood or Johnny Foxs and watch it appreciate long term...
The End of Suburbia - 52 minute documentary discussing effects of peak oil
http://www.youtube.com/watch?v=Q3uvzcY2Xug
The real problem is not global warming, within a few years its going to be lack of energy. The Hubbert peak is not far off, if not already happened, We should be driving the development of ideas like new urbanism, though this might be wishful thinking. Even if we find a way to keep pumping money into the housing market, lack of energy will bring the boom to a halt. Its already a problem today, at our present rate of growth we will soon not be able to supply enough energy to keep the boom going within 5 years. Also the Carbon Emissions Trading is going to cost this country dearly, in that we either pay Russia for this (and our Natural Gas) or economic growth has to stop.Net Zero means we are paying for the destruction of our economy and society in pursuit of an unachievable and pointless policy.
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I used to be extremely bearish on property and convinced that the bubble would burst for certain. Now though, I'm more convinced that things will stay the same for the short to medium term. My reasons for thinking this?
- There is an Irish obsession with property, renting is simply not an option in the long term for the vast majority of us. With this attitude ingrained into us, people will stretch all they can for the sake of owning their own home.
- ECB rates are still historically low, by the looks of things, we would need another 2% at least to dampen enthusiasm for home ownership.
- We still have close to full employment, I think we would need a fairly severe shock to the economy to cause house prices to decrease.
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is_that_so wrote:Ultimately I am with George Lee on this . I neither trust nor believe economists at face value and I am dubious about reports at the best of times. The latest US Jobs data has just reinforced this. Yet again they got it spectacularly wrong -50% out.Deleted User wrote:You're on...will revert with the figures when the engineer tells me how much I need to sink into the place.0
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gearoidmm wrote:Just to point out that the methodology that SF use to calculate their index is laughable. They get their own in-house estate agents to estimate how much they think a certain basket of houses would sell for from quarter to quarter - this is the same basket they have been using for years. It's not based on actual sales, just opinion. It should be taken with a very large pinch of salt.
SF have had estimates of price rises over the last few years which are consistently higher than anyone else probably as a result of this dodgy methodology. The only thing that you can take as significant from their report is that they said that prices dropped - they have so consistently talked up the market for so long that any report of a drop in prices suggests that thing might actually be much worse than anyone thinks.
Didn't know Sinn Fein were in the property racket ....:D0 -
Raskolnikov wrote:I used to be extremely bearish on property and convinced that the bubble would burst for certain. Now though, I'm more convinced that things will stay the same for the short to medium term. My reasons for thinking this?
- There is an Irish obsession with property, renting is simply not an option in the long term for the vast majority of us. With this attitude ingrained into us, people will stretch all they can for the sake of owning their own home.
- ECB rates are still historically low, by the looks of things, we would need another 2% at least to dampen enthusiasm for home ownership.
- We still have close to full employment, I think we would need a fairly severe shock to the economy to cause house prices to decrease.
The stamp duty threshold is realistically the upper limit for the first time buyer market and the higher interest rates will reduce the amount they can borrow further.
Based on the IBF data there are about 39,000 First Time Buyers in the market over a year, 29,000 buying an investment property, and 48,000 people trading up.
On that basis the demand for new properties is roughly 68,000 units. Note we have completed approximately 90,000 units in 2006 & 80,957 in 2005.
I see price falls in the FTB market as a combination of reduced lending terms and oversupply lead to reduced prices.
The big question for 2007 is what are specuvestor's & flippers confidence levels in the property market?Net Zero means we are paying for the destruction of our economy and society in pursuit of an unachievable and pointless policy.
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Pa ElGrande wrote:Based on the IBF data there are about 39,000 First Time Buyers in the market over a year, 29,000 buying an investment property, and 48,000 people trading up.
On that basis the demand for new properties is roughly 68,000 units. Note we have completed approximately 90,000 units in 2006 & 80,957 in 2005.0 -
Victor wrote:Don't forget pent up demand and other factors like people dieing and freeing up units.
Don't forget FREE units either Victor. This graph of mine causes some outrage in the autumn
Since 2002 we Irish have spent a whole year building empty properties, or even longer . This is a shocking misallocation of resources to my mind.
In 2002 there were 175k empty properties but the empties rate was around the long term average of about 10% of the national housing stock. No big deal for we Irish. By 2006 it was 275k, OVER 15% . I would say that there is a historically unique oversupply of 100k in there to help th'oul demand side along.
Anything over 10% is very high in comparative terms although the USA , alone along with us among developed countries, normally manages 10% empty. Other developed countries like the UK have 3% or 4% empty and no region of the UK is over 6% empty with only 1 (Wales ??) over 5% .
Data from census.
Sources 2006
Previous Years 1971-2002 Table 40 -
Sponge Bob wrote:Don't forget FREE units either Victor. This graph of mine causes some outrage in the autumn0
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chump wrote:Conor74, the best of luck with your investment but can we reserve this topic for a debate and not an analysis of your personal venture.
So one is only allowed to discuss other people spending money on developments and how they are certain to lose it and the market is doomed, and someone who thinks the market is fine and is willing to stick money on that prediction is censored...:eek:
I appreciate the sky is falling in stuff is flavour of the month, but it seems a bit strange that one would expect board rules to only promote that version.0 -
Its your money Conor , off with ya. . Last I remember (in November) you were smelling around the general area of Turkey and Belgrade so this IS a surprise.0
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Sponge Bob wrote:Last I remember (in November) you were smelling around the general area of Turkey and Belgrade so this IS a surprise.
Bought in Belgrade in an apartment development. Still waiting for returns, apartments near completion. Won't exactly be making my nest egg there, and will simply stick any monies straight back in to some other place when it sells. Never touched Turkey, and glad for that. Though purchase prices here far higher, so too are the potential profits.0 -
as well as the potential losses0
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sorry Conor74 I still find your cavalier attitude especially giving the current market completely dumbfounding0
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miju wrote:when you buy your investment property you'll be immediatly in negative equity when costs / interest is taken into account , with prices PREDICTED to grow 5% this year and inflation at 6% that's you 1% more in negative equity
Miju, I've seen you quote this statistic a number of times and frankly I'm dumbfounded as to how you can get away with it.
I've already pointed out on another thread that I'm not an expert yet even I can see how ill-informed this quote shows you to be. I was waiting for somebody else to point out the error in your ways but...
It suggests one of two things 1. People here don't understand the most basic concepts of property investment or 2. they do understand it but aren't honest enough to point out the flaw in your argument as they support your general view.
Please note I'm keeping this example very simplistic for explanatory purposes so don't come back quoting voids, real values, banks etc.
In your world an investor with 100k cash goes out and buys a property for 100k cash and waits for the capital gain. If, as you say the value increases by 5% and inflation is 6% then yes, there is negative equity.
However, in the investor-with-half-a-brain's world who has 100k cash, he invests (eg.) 10k as a deposit and gets a 90k mortgage from the bank. At the end of the same year the property has increased by 5% meaning a 5k return on his 10k investment ie. a 50% return. He buys 10 houses in total and each is replicated making him 50k in one year.
That's how clued-in investors make serious money. They make other people's money work for them.0 -
megadodge wrote:That's how clued-in investors make serious money. They make other people's money work for them.0
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It's also how clueless speculators lose everything when a market turns In your example, a mere 5% decrease in a house prices will see a speculator lose 50% of their money.
Agreed, but my whole point was that a 5% gain in house prices when there is 6% inflation does not mean 1% negative equity, as was quoted numerous times by Miju.
Most clued-in investors wouldn't be looking at investing somwhere with only a 5% projected value increase anyway. Plenty of excellent opportunities abroad if you do your homework.0 -
apart from what hmmmm said if you re-read what i saidmiju wrote:when you buy your investment property you'll be immediatly in negative equity when costs / interest is taken into account
you'll see that i didn't say the 5% price rise this year versus 6% inflation (if it materialises) means that your in negative equity
what i said was seeing as how your in negative equity and given price rise / versus inflation you wont see that return and will 1% more in negative equity therefore is an incredibly risky investment strategy
secondly, please point out in your example a property for 100k in Ireland , you'll find the sums altered when you use current prices and therefore to get your return the price growth would have to increase and therefore changes the fundamentals of your whole point which in turn lends more credibility to what i and others have been saying. asking me not to quote real values is quite simply ridiculous since you are asking me to accept you using maths that has no real basis in the current market / price levels to counter a point that i and particularly others have been making quite well using facts and figures very relevant to the current property market
thirdly, it is widely accepted that most investors / specuvestors are using 100% mortgages to purchase their properties which again means the price growth sums in order for further return are lengthened and renders your sums obsolete without further price gains that have previously been seenmegadodge wrote:Plenty of excellent opportunities abroad if you do your homework
thats very true , unfortnately in the context of this thread the irish property gravy train has long left the station and flipping a property these days isn't anywhere as easy as before0 -
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Before I post this I'm going to admit I don't know a lot about property markets so excuse my ignorance if this isn't a valid point but.. I don't own a house in Republic of Ireland and more than likely never will.. so I'm not biased either way.
The way I see this situation is, in order for a 'crash' (which means nationwide house prices taking a significant drop), behind every single one of those houses being sold for a lot lower than they are valued now, is a person or person(s) selling.
So for example if I personally own a house now that I could sell for €350,000 tomorrow, choose to sell the house in a years time but this "crash" has happened which means my house would only sell for, say €250,000 , me personally I would rather just stay put and not sell at all. Rent the house out or something.
What I predict is that there will just be a huge drop in "activity" in the property market, ie. people will just choose not to move, not to sell their house, etc. I can't imagine someone turning around and saying "Ok fair enough I'll sell my house for €100,000 less than what I could have got a year ago". Remember it's sellers who set the price of the house, not buyers. Only people who are really desperate to move will sell for the 'crashed' price.0 -
megadodge wrote:However, in the investor-with-half-a-brain's world who has 100k cash, he invests (eg.) 10k as a deposit and gets a 90k mortgage from the bank. At the end of the same year the property has increased by 5% meaning a 5k return on his 10k investment ie. a 50% return. He buys 10 houses in total and each is replicated making him 50k in one year.
That's how clued-in investors make serious money. They make other people's money work for them.
Yep, and have seen people make a fortune with even less input ie. paying the deposit, not even bothering to sort out that whole mortgage issue but simply subselling the property, not completing the deal, and collecting the difference in the amount for the houses when the development was first advertised and the price they are making on completion of the works. No need to arrange closing funds and no need to pay stamp duty either, and clearing a nice tidy sum. One friend made over 250k out of one particular development, and the only hassle was coming up with the deposit on 5 houses and going back to collect his 50k profit on each. Nothing makes money like money...0 -
BackwardRussia wrote:Before I post this I'm going to admit I don't know a lot about property markets so excuse my ignorance if this isn't a valid point but.. I don't own a house in Republic of Ireland and more than likely never will.. so I'm not biased either way.
The way I see this situation is, in order for a 'crash' (which means nationwide house prices taking a significant drop), behind every single one of those houses being sold for a lot lower than they are valued now, is a person or person(s) selling.
So for example if I personally own a house now that I could sell for €350,000 tomorrow, choose to sell the house in a years time but this "crash" has happened which means my house would only sell for, say €250,000 , me personally I would rather just stay put and not sell at all. Rent the house out or something.
What I predict is that there will just be a huge drop in "activity" in the property market, ie. people will just choose not to move, not to sell their house, etc. I can't imagine someone turning around and saying "Ok fair enough I'll sell my house for €100,000 less than what I could have got a year ago". Remember it's sellers who set the price of the house, not buyers. Only people who are really desperate to move will sell for the 'crashed' price.
That's all very true but I think the general gist of this thread is that a lot of people in Ireland have bought investment property over the last few years. High cost that are quite small properties and would be difficult to re-sell should the bubble burst.
It's these people who would be hit most I think.0 -
blind leading the blind0
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MIJU>
The vodoo economics you are preaching are really quite silly. General (predicted) inflation is not directly connected to house price inflation in the manner you suggest. The cost of purchasing a house does not mean you go into negative equity. A car actually goe into negative equity the minute you drive it off the lot.
It is obvious you have some desire in a price crash. Fair enough but there is no need to make up stories and try and fool people into agreeing with you.
No rich people rent and in the long run you are better off owning. Now may not be the right time to buy but it should always be about affordability. It is possible to rent cheaper than a mortgage so renting is a good idea for some. However if you are older it is not really an option to wait another 5 years to buy. Time is a luxury that not everyone has.0 -
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I think most people here understand the concept of gearing. I think most people here understand how people in Ireland have made a mint on flipping properties, on speculating and by generally making their money work for them.
YAY
The point the 'bears' are making is that this party has ended.
I believe this party has ended and if someone thinks they can buy a property in Ireland today and turn it within 1 year, even 5 years, and make a worthwhile profit I believe they are deluded.
What needs to be taken into account are the 1. entry and exit costs, 2. likely capital growth and 3. yield.
You make up your own mind on these.
PS. I believe many people who have posted here recently have missed the long and protracted discussions on this topic in the last year, both here and on askaboutmoney, to be honest I've given up spending too much time posting on these things as the arguments are circular and repeated every 20 posts.
Oh and rich people do rent in inflated markets.
and I believe there will be quite a few gung-ho investors, the likes of which have posted here, who are about to lose their shirts investing in Ireland and in mnay overseas locations within the next 5 years, or have done within the last year/2.0 -
chump wrote:
Oh and rich people do rent in inflated markets.
and I believe there will be quite a few gung-ho investors, the likes of which have posted here, who are about to lose their shirts investing in Ireland and in mnay overseas locations within the next 5 years, or have done within the last year/2.
Your belief is fine to have but it doesn't make it true and it is just speculation. There are a lot of people here talking about property purely as investment which kind of misses the point of actually buying a home as most people really are talking about.
I have yet to meet a person who doesn't want to own a home at some stage. There are thoses waiting and those who own. Some jump in and out to make money but they all want to own in my experience. If there is a crash everyone will suffer to some extent. Bad property selling at good prices will suffer the most. As I also said your age determines a lot, at 25 you can wait at 30 it changes and by 35 it is radically different. Get married or have a kid it changes some more. It is obvious some people here aren't aware of the difference age can make and will simply refuse to beleive it.0 -
Kipperhell wrote:MIJU>
The vodoo economics you are preaching are really quite silly.
silly in what way , please do post examples / links to prove what i and others have said incorrect , i would love nothing more than a more two sided debate on this threadKipperhell wrote:General (predicted) inflation is not directly connected to house price inflation in the manner you suggest.
oh didnt know that , could you tell me the one main thing pushing up inflation in this country?????? want a hint - PROPERTYKipperhell wrote:The cost of purchasing a house does not mean you go into negative equity. A car actually goe into negative equity the minute you drive it off the lot. It is obvious you have some desire in a price crash. Fair enough but there is no need to make up stories and try and fool people into agreeing with you.
think about that negative equity comment you just made for a while and then come back to me , take all your fee's solicitors , surveying etc add that on top of the price to what you paid without factoring in interest and you have paid more for it than the list price , if the price doesn't rise at least equal to your additional costs thats negative equity - in that you have paid more than what your house is worth granted its not the traditional negative equity but the point i was making still stands.
i do desire a crash and i've said it before the longer the bubble goes on the more the economy will be damaged and the longer it will take to recover , better a economy on solid foundations that one thats up in te sky , you only have to look at Japan and how long it took them to begin to recoverKipperhell wrote:...there is no need to make up stories and try and fool people into agreeing with you....
please elaborate on what stories i have made up??? the way i see it , other posters on this thread and myself have posted links and pretty much backed up / substantiated everyting we've said , i don't see anything from you though other than an off the cuff soundbite and baseless comments0 -
miju wrote:Kipperhell wrote:General (predicted) inflation is not directly connected to house price inflation in the manner you suggest.
Kipperhell is right on that point, inflation of the money supply through debt to fuel a mania, property is merely being used as the collateral. This is the real reason prices are rising globally.Net Zero means we are paying for the destruction of our economy and society in pursuit of an unachievable and pointless policy.
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i stand corrected on that point so0
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Kipperhell,
You wanted the name of a rich person who rents and doesn't own.
About a year ago I heard one of the brothers who own Daft.ie (Eamonn Fallon?) saying that he rents and doesn't own.
He's doing well, making it off the property market and still hasn't invested himself. Could hardly believe it. Maybe he's bought recently though....0 -
Kipperhell wrote:MIJU>No rich people rent and in the long run you are better off owning.
BTW 60 million Germans would disagree with you about rich people not renting. You sound slightly rabid with statements like "no rich people..".
If the cost of paying rent is less than the (cost of paying mortgage - asset value at term end) then you will have saved money by renting. This is just simple maths. I will agree that for a long time renting would have cost you more money than buying ultimately, but right now with housing in Ireland on a PE of 50/1 the point where renting became the most economic choice arrived about 5 years ago.
There's a fundamental problem in any discussion of property prices in Ireland and it's a bit like the discussion on creationism versus evolution. The evolutionists will prove in minute detail with extensive scientific detail as tohow people have evolved, and after proving it will jump up on stage and shout "tadaa!". The creationists will then turn around and proclaim "don't care what you say, I just have faith".0 -
clarkwgriswold wrote:Kipperhell,
You wanted the name of a rich person who rents and doesn't own.
About a year ago I heard one of the brothers who own Daft.ie (Eamonn Fallon?) saying that he rents and doesn't own.
He's doing well, making it off the property market and still hasn't invested himself. Could hardly believe it. Maybe he's bought recently though....
He rents in Ranelagh afaik. However, while Daft is worth something like 8 million euro or something, I don't he is actually making much money from it on a day to day basis going by a recent interview I seen with him.0 -
BackwardRussia wrote:Before I post this I'm going to admit I don't know a lot about property markets so excuse my ignorance if this isn't a valid point but.. I don't own a house in Republic of Ireland and more than likely never will.. so I'm not biased either way.BackwardRussia wrote:The way I see this situation is, in order for a 'crash' (which means nationwide house prices taking a significant drop), behind every single one of those houses being sold for a lot lower than they are valued now, is a person or person(s) selling.BackwardRussia wrote:So for example if I personally own a house now that I could sell for €350,000 tomorrow, choose to sell the house in a years time but this "crash" has happened which means my house would only sell for, say €250,000 , me personally I would rather just stay put and not sell at all. Rent the house out or something.
What I predict is that there will just be a huge drop in "activity" in the property market, ie. people will just choose not to move, not to sell their house, etc. I can't imagine someone turning around and saying "Ok fair enough I'll sell my house for €100,000 less than what I could have got a year ago". Remember it's sellers who set the price of the house, not buyers. Only people who are really desperate to move will sell for the 'crashed' price.
*crash*
Now my house is valued at 250k, but across the road house is now about 321k (going on percent drop), or 350k.
Why shouldn't I sell?0 -
these arguments are all fine for homeowners, what about speculators though, they have no incentive to hold once prices stop going up or any incentive to buy and flip .
Speculators comprise roughly 40% of the market in recent years (the period in which the empties went from 10% to over 15% nationally ) while trader uppers and ladder freaks and first time buyers account for 60% .
That 40% is where the instability and pricing to go will come from not the owner occupying 60% .0 -
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miju wrote:silly in what way , please do post examples / links to prove what i and others have said incorrect , i would love nothing more than a more two sided debate on this thread
in that you have paid more than what your house is worth granted its not the traditional negative equity but the point i was making still stands.
If it is not traditional negative equity it simply isn't correct to call it negative equity. You may have a valid point that it cost more than you can make when selling which means you can lose money but it isn't negative equity.
A simply definition "Negative equity is a term used to mean that the market value of a mortgaged house or flat is less than the amount outstanding on the loan used to purchase it."miju wrote:i do desire a crash and i've said it before the longer the bubble goes on the more the economy will be damaged and the longer it will take to recover , better a economy on solid foundations that one thats up in te sky , you only have to look at Japan and how long it took them to begin to recover
So you desire a crash for the good of us all? How sweet, it isn't becasue you want to buy a place after the market corrects to a level you think is right? I don't believe you as you are too vocal and ready to jump on any excuse to claim your view is right.
On the one point I have picked you up on you have got three things wrong general inflation, inflation causes and negative equity. You then used them together to make a statement to prove how you are right.
I had assumed you actually knew you were wrong but it appears you are just blinkered to belive you are right . I have pointed out one ststement you have made which is obviously wrong and you have yet to retract it. Nobody has support your view from this statement.clarkwgriswold wrote:Kipperhell,
You wanted the name of a rich person who rents and doesn't own.
About a year ago I heard one of the brothers who own Daft.ie (Eamonn Fallon?) saying that he rents and doesn't own etc...hmmm wrote:Sorry, that's just plain wrong. Wrong and easily proven.
BTW 60 million Germans would disagree with you about rich people not renting. You sound slightly rabid with statements like "no rich people..".
60 million Germans are rich leaving only 22 million not rich?:eek: I never said renting is not viable. To take a heavily regulated rental economy from a former socilaist country joined with a communist state that still has huge state controled property and use it to contray my statement is pointless. You haven't proved anything is wrong so it ain't so easy:p
Take the top 10% people of wealth of any western country and I would say it is very close to 100% own property and specifically their home at least. I would say this would probably include Germany but it may not. I didn't make up the statement by the way it is from an economist who was on Oprah I think it was the editor of NY FT
As for simple maths, buying a home for your long term is not simple maths that is the point. If renting became a viable economic choice for your future 5 years ago those renting for the last 5 years would be better off than those who bought. That is not the case and in 20 years I doubt it will be either. Renting in truth is generally cheaper than buying as you rent what you need and not what you may need in the future unlike a home for the future.
As for economists well thought out logic and explanations of what will happen, they appear to me to be wrong as many times as right. It is actually human nature to see patterns in things whether they are there or not. THe one I like is when rents drop it is becasue the market is flooded with property but when the go up again it is becasue all the investors are selling off so there is a shortage. I have heard this a few times over the last 10 years. Now that seems to be more like creationism than evolution. If the economists were right that market would have crash at least 12 times in the last 10 years.
Many people would be financially better off in the short to medium term renting closer to work and commuting less. At 35 a 30 year mortgage means a lot more than at 25. Does anybody want to rent all their life in Ireland? (you can hold back all the "I am leaving" , "once they regulate" etc... and take it as it stands assuming prices will balance out in the long run)0 -
BackwardRussia wrote:What I predict is that there will just be a huge drop in "activity" in the property market, ie. people will just choose not to move, not to sell their house, etc. I can't imagine someone turning around and saying "Ok fair enough I'll sell my house for €100,000 less than what I could have got a year ago". Remember it's sellers who set the price of the house, not buyers. Only people who are really desperate to move will sell for the 'crashed' price.
The scenario you described shows how the idea of the "property ladder" will unravel without rising prices. Many owner-occupiers could end up getting stuck in their starter homes, if they refuse or are unable to sell at anything less than the peak price.
You need to consider investors or speculators also though as they make up a sizeable amount of the market and will find themselves in an altogether more serious situation should capital gains fail to materialize. Depending on their loan-to-value ratio, they may have to take some substantial hits to get rid of some of their property or risk an onging monthly loss.
Also, remember that not all sellers are in the same boat. If somebody bought 4 years ago, then they could still afford to sell at a substantial reduction to todays prices and still make a nice profit on it. Since they represent a bigger precentage of the market compared to recent buyers it stands that these will have a bigger say in dictating the price. If prices began to drop or stagnate, it wouldn't surprise me if a lot of investors will try to lock in profits that they may have gained in the last 4-10 year period.0 -
Afuera wrote:The scenario you described shows how the idea of the "property ladder" will unravel without rising prices. Many owner-occupiers could end up getting stuck in their starter homes, if they refuse or are unable to sell at anything less than the peak price.
and they WILL get stuck in their crumbling slums of post millenial shoeboxes. Many recent FTBs are on interest only mortgage with no real equity and no prospect of equity unless prices rise. As for this ladder BS, I never heard of a "property ladder" until recently, post 2000, when the FTB was being persuaded by the auctioneers and builders to start with their shoebox in outer suburbia or further afield.
An FTB in Dublin 10 years ago or less would have started with a house in Lucan for under £100k , even 10 years ago it was around £60k (€75k) for a house out there , now the same people start with a shoddy shoebox on the outskirts of Kilcock.
In a downturn these shoeboxes in marginal areas will get hit first.0 -
mijuyou'll see that i didn't say the 5% price rise this year versus 6% inflation (if it materialises) means that your in negative equity
what i said was seeing as how your in negative equity and given price rise / versus inflation you wont see that return and will 1% more in negative equity therefore is an incredibly risky investment strategy
I'm still trying to figure that one out.
BTW somebody using the name 'miju' wrote the following on another thread...thing is i don't think even bulls wills disagree annual price growth isn't going to go over the 3% mark (banks and estate agents etc all agree on this)
so this means anyway without any panic when the current inflation figure is factored into the equation the price drops without anyone doing anything ,
Must be an imposter.secondly, please point out in your example a property for 100k in Ireland , you'll find the sums altered when you use current prices and therefore to get your return the price growth would have to increase and therefore changes the fundamentals of your whole point which in turn lends more credibility to what i and others have been saying. asking me not to quote real values is quite simply ridiculous since you are asking me to accept you using maths that has no real basis in the current market / price levels to counter a point that i and particularly others have been making quite well using facts and figures very relevant to the current property market
Maybe you should ask your Maths teacher to explain the concept of percentages to you, as you're just digging youself deeper and deeper with feet full of bullets from your own guns.
But just for those who aren't quite up to speed in the sums department, please read the following very slowly and use a calculator when (not 'if') necessary...
In miju's world an investor with 400k cash buys a house worth 400k using all his cash. If the value of the house rises 5% and inflation hits 6%, then yes he loses money in real terms.
However in any investor-with-half-a-brain's world who has 400k to spare he invests (e.g.)40k as a deposit, gets a 360k mortgage
and at the end of the year when the value rises 5% (now what's 5% of
400k...umm, let me think, where's that Goddamn calculator) there's a 20k profit equalling a 50% return on investment. But hold on, isn't that funny, that's the exact same return I got using the "simplistic for explanatory purposes" example earlier. Obviously wasn't simple enough !!thirdly, it is widely accepted that most investors / specuvestors are using 100% mortgages to purchase their properties which again means the price growth sums in order for further return are lengthened and renders your sums obsolete without further price gains that have previously been seen
Sorry to burst your bubble (couldn't resist) but clued-in investors don't pay these mortgages, their tenants do !! Which means, of course (with no deposit to pay) an even bigger return on investment (assuming values rise).
I can't possibly make it any simpler.0 -
megadodge wrote:clued-in investors don't pay these mortgages, their tenants do !! Which means, of course (with no deposit to pay) an even bigger return on investment (assuming values rise).
I can't possibly make it any simpler.
You could make it much simpler. In the late 1990s the clued in investor got the tenant to pay a 20-25 year repayment mortgage for them which meant that they could pay off the asset and interest and also take appreciation on top of it as well ...once they sold that is .
Nowadays the supposedly 'clued in investor' can only cover the interest portion of the mortgage from the rent implying clearly that their return on investment has disimproved considerably . Property investors do not get repayment mortgages any more .
Only capital appreciation can deliver a profit in this scenario. If the capital appreciation juggernaut stops then the 'investment' simply becomes a chore.
Then what , investors will dump. The smart ones are already out of it and will only return to the market when they can cover a repayment mortgage from rental income just like it always used to be in ireland ....until very recently ???
As for gearing and investment , I would put my 10% of an Irish house or flat into a targeted and diverse property fund instead.0 -
Sponge Bob wrote:Nowadays the supposedly 'clued in investor' can only cover the interest portion of the mortgage from the rent implying clearly that their return on investment has disimproved considerably . Property investors do not get repayment mortgages any more .0
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Sponge Bob wrote:and they WILL get stuck in their crumbling slums of post millenial shoeboxes. Many recent FTBs are on interest only mortgage with no real equity and no prospect of equity unless prices rise. As for this ladder BS, I never heard of a "property ladder" until recently, post 2000, when the FTB was being persuaded by the auctioneers and builders to start with their shoebox in outer suburbia or further afield.
The property ladder practice is however a relatively new to Ireland for the masses. Ireland has changed in many ways and changes to homeownership rates in Ireland should be considered as natural step rather than something that will go away as some people seem to think it is.
You also suggested that the market is made up of 40% investors which isn't true. You are using current/recent purchasing figures (which are next to impossible to be accurate) to state homeownersship figures for the entire market which includes those who bought 60 years ago. Just pointing it out as a possibly flawed assumption you are making
I agree bad property will suffer the most but some things just have to change and the denisty in Ireland is low and house size relatively large in housing stock. 20 years ago Ireland had very low amounts of property to supply single occupancy there is a increase in people remaining single and smaller families. 3+ bed houses may simply to big in the future. I think people are hoping that all these changes will go away if there is a crash but the reality is Ireland's property market is changing in many ways for good as needs are changing.
A crash will not revert the market to the way it was before.0 -
FYI Kipperhell
1 in 5 FTBs took out 100% mortgages totalling €230 million up to June of this year. 13% of Irish Life Permanent was made from 100% mortgages.
Will dig up more detailed / refined figures for you later on once I filter through all the 100% mortgage ads on google0 -
miju wrote:FYI Kipperhell
1 in 5 FTBs took out 100% mortgages totalling €230 million up to June of this year. 13% of Irish Life Permanent was made from 100% mortgages.
Will dig up more detailed / refined figures for you later on once I filter through all the 100% mortgage ads on google
100% mortgage isn't an interest only mortgage and 1 in 5 of FTBs doesn't sound like that large a portion of the overall recent purcahsers. My understanding is not that many people can qualify for a 100% mortgage either. Can you get 100% mortgage and interest only? I thought interest only was primarily only for investors with collatoral but I coud be wrong.
I am still expecting you to at least say your claim on negative equity is questionale if not completely wrong.0 -
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Kipperhell wrote:Can you post up how many you know FTBs are on intrest only mortgages becasue I have heard it said but never seen any evidence.
http://news.bbc.co.uk/1/hi/business/6084096.stm
http://money.guardian.co.uk/weekly/story/0,,1825897,00.html
In Ireland its 20% of the whole market (not the same I know ) in 2006 (source Davy Stockbroker reported in business news ) and the Irish FTB is more significant than the UK FTB as the Irish FTB accounts for a higher % of all homes purchased. Our lenders have not lost track of the situation like them Brits have , of course not .
http://www.businessworld.ie/livenews.htm?a=1466508;s=rollingnews.htm
The Irish FTB is evidently more reliant on appreciation and/or remortgaging as so many of them pay nothing off their loans ....at least initially.Property ladder as a term is nothing new. Whether the term existed for 10 or a 100 years is meaningless either way it has been around as a practice for a long time.The property ladder practice is however a relatively new to Ireland for the masses.You also suggested that the market is made up of 40% investors which isn't true. You are using current/recent purchasing figures (which are next to impossible to be accurate) to state homeownership figures for the entire market which includes those who bought 60 years ago. Just pointing it out as a possibly flawed assumption you are making
Let me clarify then because I was wrong to leave that impression and thanks for pulling me up on it . Historically you are correct of course. 40% of property in Ireland is not owned by investors but some 40% of post 2000 construction is.
I am interested in who owns the excess inventory of empty property in Ireland which has built up since 2000. We have gone from roughly (no census that year) 11% empty in 2000 to roughly 16% empty by now .
It is the post 2000 construction which in my opinion overhangs the market in an ominous way and would account for some 500,000 odd units out of 1,8000,000 units nationally. Thats because so much of it is lying empty, held by speculators who make money doing nothing more than watching it go up.
That 5% increase in excesss inventory from 11% to 16% is the overhang on the market . That overhang will unravel itself . The number of empties increased 100,000 between 2002 and 2006 (census dates) . That 100,000 will come back into use instead of lying empty .The reality is Ireland's property market is changing in many ways for good as needs are changing.
Also very very true but the 3 bed semis tend to be a bit more central and nearer services too. they also come without those other modern appendages, the Management Company and Management Agent.
I would ask myself why, if the 3 bed semi is possibly becoming surplus to society , then why is there demand for the grande mega rancho in East Cavan or in East Mayo??? or these lads 35 miles out of Galway and 35 miles out of Athlone .......or is there ??0
This discussion has been closed.
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