Housing Bubble Bursting

miju · 08-01-2007 2:03pm

sorry Conor74 I still find your cavalier attitude especially giving the current market completely dumbfounding

megadodge · 08-01-2007 4:44pm

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.

hmmm · 08-01-2007 4:57pm

megadodge wrote:

That's how clued-in investors make serious money. They make other people's money work for them.

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.

megadodge · 08-01-2007 5:10pm

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.

miju · 08-01-2007 5:29pm

apart from what hmmmm said if you re-read what i said

miju 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 seen

megadodge 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 before

BackwardRussia · 08-01-2007 5:48pm

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.

08-01-2007 6:24pm

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...

SteM · 08-01-2007 8:19pm

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.

miju · 08-01-2007 8:21pm

blind leading the blind

Kipperhell · 08-01-2007 8:23pm

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.

chump · 08-01-2007 9:54pm

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.

Kipperhell · 08-01-2007 10:23pm

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.

Name one rich person who rents and doesn't own property!
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.

miju · 08-01-2007 11:07pm

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 thread

Kipperhell 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 - PROPERTY

Kipperhell 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 recover

Kipperhell 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 comments

Pa ElGrande · 09-01-2007 12:25am

miju wrote:

Kipperhell 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 - PROPERTY

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.

miju · 09-01-2007 12:43am

i stand corrected on that point so

clarkwgriswold · 09-01-2007 12:50am

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....

hmmm · 09-01-2007 1:04am

Kipperhell wrote:

MIJU>No rich people rent and in the long run you are better off owning.

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..".

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".

jesus_thats_gre · 09-01-2007 1:07am

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.

Shane™ · 09-01-2007 8:04am

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.

Point taken

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.

People selling houses, yes

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.

Right, my house worth 350k, and I want to move across the road to 450k house

*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?

Sponge Bob · 09-01-2007 10:20am

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% .

Kipperhell · 09-01-2007 11:26am

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...

So some guy who your not sure of his name may have said at some point he doesn't own.:rolleyes: To be rich in my eyes you have to have asssets and not just earnings. Is he in the top 10% of wealth in Ireland because that is what I think of as rich.

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)

Afuera · 09-01-2007 11:55am

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.

Sponge Bob · 09-01-2007 12:19pm

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.

megadodge · 09-01-2007 12:35pm

miju

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

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.

Sponge Bob · 09-01-2007 12:49pm

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.

hmmm · 09-01-2007 1:15pm

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 .

It's better than that. Some so called investors are buying properties where the rent doesn't even cover the interest only loan. It'd be a lot less hassle for them if they'd just take the money out of their wallet and throw it away.

Kipperhell · 09-01-2007 1:22pm

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.

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. 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. 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.

miju · 09-01-2007 1:51pm

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

Kipperhell · 09-01-2007 2:03pm

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.

Sponge Bob · 09-01-2007 2:07pm

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.

In the UK the number of FTBs with interest only mortgages has gone from 6% in 2003 to 16% in 2006 , (source BBC ). They also have fewer FTBs as a % of all recent homeowners for demographic reasons. Lenders in the UK admitted they had 'lost track' of the situation to the Guardian .

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.

"Property Ladder" a post millenial marketing term to get young poeple to accept shoeboxes as their first purchase .

The property ladder practice is however a relatively new to Ireland for the masses.

true, most started by buying a house they could live in for 25 years...and often did so . There was a thing called the "Starter Home" in my youth but no "Ladder" as such. Remember the Starter Home anyone ???

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 ??

Housing Bubble Bursting

Comments