Housing Bubble Bursting

bill_ashmount · 17-04-2008 8:51am

New way of selling down in Cork:

http://www.castlelake.ie/rent_tobuy.html

super_furry · 17-04-2008 8:56am

bill_ashmount wrote: »

New way of selling down in Cork:

http://www.castlelake.ie/rent_tobuy.html

Seems to be a very, good scheme. Anyone know of any potential, aside from the price being fixed, or hidden drawbacks or if it'll be implemented elsewhere? How big a risk is that fixed price?

faceman · 17-04-2008 9:26am

SimpleSam06 wrote: »

Eh? As far as I know the prices in Galway have dropped 10% or so since the start of the year (from the local papers) and anecdotally I know of a few places which likewise have dropped in price, one of them the house I am renting right now. The efforts of the bumbling local authority might have slowed that process to a certain extent, but it seems to have backfired on them.

The link to indo article last week where the Indo had daft.ie figures showed stability followed by increase in galway.

Duckjob · 17-04-2008 9:34am

bill_ashmount wrote: »

New way of selling down in Cork:

http://www.castlelake.ie/rent_tobuy.html

Interesting. My first thought was I would need to understand how they make their money from that model before I'd ever get into it. Still can't quite figure that one out... Anyone?

faceman · 17-04-2008 9:38am

Article in indo today in personal finance.

http://www.independent.ie/business/personal-finance/the-home-front-1348179.html

IMF believe irish house prices are overvalued by 32% (wtf, how did they arrive at 32% instead of 30%???)

wrote:

However, this view was contradicted by the Governor of the Irish Central Bank, John Hurley, who insisted that house prices here were not over-valued.

I dont believe that is what he said at all, i'd like to see his full comment on it

SimpleSam06 · 17-04-2008 9:50am

faceman wrote: »

The link to indo article last week where the Indo had daft.ie figures showed stability followed by increase in galway.

Heh. Well isn't that interesting. It does show a weakness of Daft stats, in that it only shows asking prices, not sale prices.

The MyHome.ie national property price barometer has shown that price drops in Galway's property market are significantly greater than the national average decline of 0.2 per cent.

Asking prices for residential property have dropped by 0.2 per cent nationally over the last quarter, with the total decrease for last year now at 1.7 per cent.

The price of a three-bedroom semi-detached home in Galway has dropped by three per cent, with a 2.3 per cent drop in four bed detached homes in the last quarter of 2007.

However, the biggest drops were recorded in Dublin, with a decrease of 1.4 per cent in the last quarter and a total of 3.4 per cent in the year.

The report also tracks the trends in asking prices against trends in actual sale prices and shows that over the last 12 months the fall in sale prices has consistently exceeded the more modest drop in asking prices.

SimpleSam06 · 17-04-2008 9:55am

bill_ashmount wrote: »

New way of selling down in Cork:

http://www.castlelake.ie/rent_tobuy.html

Also very interesting. The only reason I can see them doing that would be if they believed they would be worse off otherwise. Taking a hit on properties that would be otherwise completely unsaleable? Or just cutting their losses?

Glenbhoy · 17-04-2008 11:02am

DublinDilbert wrote: »

Well the 0.55% increase came form the article quoted a few posts up in the Irish independent.

The rest of my figures were my extrapolation, based on a mortgage with 300K outstanding... my increase was for the first year, it would come down after that.... eg 0.0055 x 300K = 1650 :mad:

I make it €34 per month extra per 100K outstanding over the life of a 30 year mortgage.

Glenbhoy · 17-04-2008 11:05am

Duckjob wrote: »

Interesting. My first thought was I would need to understand how they make their money from that model before I'd ever get into it. Still can't quite figure that one out... Anyone?

Maybe it's less about making money and more about servicing debt.

The_Conductor · 17-04-2008 11:31am

super_furry wrote: »

Seems to be a very, good scheme. Anyone know of any potential, aside from the price being fixed, or hidden drawbacks or if it'll be implemented elsewhere? How big a risk is that fixed price?

One potential risk is the property is no-longer a new property, but a 2-3 year old property. This could have potential stamp duty implications for some buyers.

DublinDilbert · 17-04-2008 12:27pm

smccarrick wrote: »

One potential risk is the property is no-longer a new property, but a 2-3 year old property. This could have potential stamp duty implications for some buyers.

Developers are lobbying to change this at the minute right?

Also people don't need a mortgage initially to get one of these houses... they just need the €1100/month rent.... so i really doubt the builder is going to be too strict about who they sign up for this scheme.... :rolleyes:

The_Conductor · 17-04-2008 12:46pm

DublinDilbert wrote: »

Developers are lobbying to change this at the minute right?

Also people don't need a mortgage initially to get one of these houses... they just need the €1100/month rent.... so i really doubt the builder is going to be too strict about who they sign up for this scheme.... :rolleyes:

They are lobbying to have it changed- yes. The OECD and other observers are very much against this though- as it would be yet another artificial support for the market. Then again, the government don't exactly listen to them very much, even if they did commission them to report on the matter.

jmayo · 17-04-2008 12:54pm

DublinDilbert wrote: »

Developers are lobbying to change this at the minute right?

Also people don't need a mortgage initially to get one of these houses... they just need the €1100/month rent.... so i really doubt the builder is going to be too strict about who they sign up for this scheme.... :rolleyes:

There should be no worry on the stamp duty front, since anything the developers lobby for regarding stamp duty will be provided by our current FF led government. Sure they won't be paying any themselves so that is the only concern.

Will the renter be able to use the portion of the property they have paid for through their rent as collateral when seeking a mortgage after the three years ?
Does their tax credit for rent change to tax relief for mortgage for their past three years payments if they decide to buy ?

BTW will you also get to rent a free volvo car until you decide to buy

astrofool · 17-04-2008 1:11pm

SimpleSam06 wrote: »

Heh. Well isn't that interesting. It does show a weakness of Daft stats, in that it only shows asking prices, not sale prices.

As selling prices are unknown, there is little that can be done about this, however, it was asking prices that were tracked in the bubble, so it's fair enough that they get tracked on the way down.

beeno67 · 17-04-2008 1:28pm

There seems to be a lot of disagreement here on where house prices are going. I feel house prices will fall a total of 20% off peak so about 10% gone already and about 10% to go, and that they will then level out with slow growth after that. This seems to be at the lower end of peoples expectations so can people justify why they feel prices are going to fall so much more. If a house is currently worth €283650 based on latest ESRI/TSB what do people feel is the true worth of the average house?

BigglesMcGee · 17-04-2008 2:42pm

Heres whats going to happen in the property market.

Prices will go down, then they'll go up, then they'll go down again and so on.

Other than that little nugget i must admit that i cant tell the future and therefore any predictions i have on house figures is as useless as the next mans.

I guess i could probably impress someone by saying prices will turn and keep saying every day for a couple of years and then say i was right.

The truth is that economic forces will dictate where property goes and thats it. These are so complex its useless trying to come up with exact directions and percentages and timelines, so why all the arguing and sniping.

SkepticOne · 17-04-2008 3:15pm

BigglesMcGee wrote: »

The truth is that economic forces will dictate where property goes and thats it. These are so complex its useless trying to come up with exact directions and percentages and timelines, so why all the arguing and sniping.

No one can predict with absolute certainty the full extent of price falls. This is true. It is impossible to predict anything with absolute total certainty (even well understood physical systems) since unforeseen events can always intervene. Having said this, I think there's still substantial over valuation in the market as evidenced by the large build up in inventory, low yields, historically high income multiples and international comparisons and the fact that all bubbles eventually burst. There'll be a bit more down for the present. But you are correct in that you can never know anything with total certainty.

The_Conductor · 17-04-2008 3:53pm

Nonsense- prices are precisely 32.43% over valued

Caoimhín · 17-04-2008 3:57pm

32.44
Where did you get your figures from.
Your so wrong.....you don't know as much as I do about economics.....

Gurgle · 17-04-2008 4:29pm

BigglesMcGee wrote: »

These are so complex its useless trying to come up with exact directions and percentages and timelines, so why all the arguing and sniping.

Because its fun :B

SimpleSam06 · 17-04-2008 6:41pm

astrofool wrote: »

As selling prices are unknown, there is little that can be done about this, however, it was asking prices that were tracked in the bubble, so it's fair enough that they get tracked on the way down.

Wouldn't the Revenue Commissioners have very exact information on selling prices, no doubt tracked and graphed neatly over time? Its a bit of a scandal that something so fundamental to the economy must remain shrouded in mystery - I mean surely its public information...

beeno67 wrote:

If a house is currently worth €283650 based on latest ESRI/TSB what do people feel is the true worth of the average house?

Even that figure is a bit misleading, since it probably counts apartments as houses. I do think apartments have a lot further to fall than houses. The figures need to be broken down a bit further.

Supercell · 17-04-2008 7:19pm

Given that apartment lending is going to 80% LTV I'd guess apartments in particular will fall harder than the rest, especially outside the immediate (walking/short cycle distance) city centre locations.
Places like "The Cubes" in Sandyford i'd expect to depreciate pretty sharply in the next few years as they really are outside the city proper.

The_Conductor · 17-04-2008 8:05pm

Supercell wrote: »

Given that apartment lending is going to 80% LTV I'd guess apartments in particular will fall harder than the rest, especially outside the immediate (walking/short cycle distance) city centre locations.
Places like "The Cubes" in Sandyford i'd expect to depreciate pretty sharply in the next few years as they really are outside the city proper.

I'd have to agree 100% with you. Regardless of whether they are on the Luas/DART etc- they are still small formulaic dwellings, with management charges, indifferent standards of construction and questionable suitability for anyone with children or who wants children (particularly given the total lack of planning in many cases). Most people who bought these units aspire to that house with the back garden, their own privacy and the ability to play with their house as they choose- and only bought their apartments "to get on the ladder". Unfortunately for many, they are now discovering the concepts of snakes and ladders, and those dreams of trading up may be forever dealt a blow.

Glenbhoy · 17-04-2008 9:10pm

SimpleSam06 wrote: »

Wouldn't the Revenue Commissioners have very exact information on selling prices, no doubt tracked and graphed neatly over time? Its a bit of a scandal that something so fundamental to the economy must remain shrouded in mystery - I mean surely its public

They do of course, in the UK these figures are publicly available, absolutely no reason why they aren't here - it's important information that should be used to help government make policy, and it's not just for Bears, Bulls and vested interests should all want this information to be publicly available.

Glenbhoy · 17-04-2008 9:22pm

beeno67 wrote: »

People not selling for the most part will not be affected (I accept if they were on fixed rates and they are now ending they may have difficulty getting a good rate on their mortgage, but this is a small amount. ) Anyone moving up the property ladder will benefit as the properrty they are moving to will ahve dropped by more than the one they are selling. Obviously those moving down the property ladder who bought their house in the last 2 years with a 92% mortgage or more will loose out. But like I said these are a small number.
As for asking prices. They are usually decided by looking at what was sold in the area recently and adding 10% or so. Dropping the asking price does not mean the selling price has fallen

People moving up the property ladder will find it harder to get mortgages as lenders see that property is not a one way bet. They will also find it harder to sell their existing property, the whole process will slow down.
Investors will be hit, not just recent investors, but all investors - as construction activity drops, overall economic activity will drop, immigrants may return home, leaving properties empty. Rents will decline as supply increases.
Much of the massive boom in consumer spending has been financed by 'equity releases', this ranges from the flat screen tv through new cars, to the 4 holidays p.a. - with declining values, that won't be possible - we're now looking at job losses tight across the retail economy, each job lost just exacerbates the situation and the economy contracts further.
With this reduction in economic activity comes the hit on the public finances, at that point, it's either cut services (health, education, capital improvements...) or increase taxes, one way or the other, we're all going to take a hit.

orbital83 · 17-04-2008 10:52pm

There should be no worry on the stamp duty front, since anything the developers lobby for regarding stamp duty will be provided by our current FF led government. Sure they won't be paying any themselves so that is the only concern.

Much as FF might like to do this, I would be surprised if it is possible.

If current trends continue the 2008 budget deficit will be €3 billion more than expected.
Unless there is a turnaround in the trend, and I mean now, then this hole will have to be plugged in the next budget.

Green taxes, indirect "stealth" taxes and spending cutbacks should go some way, but we cannot rule out increases in income tax and PRSI if things get even nastier than they are now.
Add in to the already unpleasant mix the fact that capital projects like the N17 in Galway look like they will be shelved.

Against this backdrop, the government bending over yet again for developers may not be particularly popular.

The link to indo article last week where the Indo had daft.ie figures showed stability followed by increase in galway.

Anecdotal evidence suggests this is a strategy pursued when vendors realise buyers are offering well below the asking price.
If you want €350K for your gaff, put it up for €400K, someone might bid 50 below asking price and think they got a great deal.

I've seen the odd rise on Daft, even in midlands villages where the number of houses for sale almost outnumbers the human population at this stage.

johnnyskeleton · 17-04-2008 11:16pm

John J wrote: »

I've seen the odd rise on Daft, even in midlands villages where the number of houses for sale almost outnumbers the human population at this stage.

On a tangent (that is, if you it is possible to have any more tangents on this thread) it seems to me that these houses are sadly never going to sell, in places like Ballymahon, Moate, Ballaghaddereen (with a whopping 205 properties for sale at the moment on daft, from 220k for a 4 bed). During the boom, planning permission was easy, labour was widely available, and grants were a go-go, these places were knocked up - badly constructed, pro-forma housing that in no way reflects the needs of the local population (1 bed apartments in rural co. Roscommon).

To be honest, I don't see these places selling until they drop below cost price.

Glenbhoy · 18-04-2008 12:57am

johnnyskeleton wrote: »

(1 bed apartments in rural co. Roscommon).

Well from looking at local demgraphics and seeing the amount of one person family units, developers and planners realised that maybe this was the way forward.
(Well, we're always hearing about the bachelor farmers of Leitrim)

Firetrap · 18-04-2008 8:50am

Erm....not to be pedantic or anything but bachelor farmers will be living in little farmhouses on their farms

Johnny Skeleton's right about the housing in ludicrous locations though. I wonder will a bulldozer be taken to them in the coming years?

Glenbhoy · 18-04-2008 10:06am

Firetrap wrote: »

Erm....not to be pedantic or anything but bachelor farmers will be living in little farmhouses on their farms

Indeed, but wouldn't an apartment in Carrick overlooking the Shannon make more sense? Easier cleaned, more social interaction (don't have to drink drive to the local, maybe pick up a burd), your problem is you don't have vision......

Firetrap wrote: »

Johnny Skeleton's right about the housing in ludicrous locations though. I wonder will a bulldozer be taken to them in the coming years?

So, you see it's not all bad, public works for years to come....

Housing Bubble Bursting

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