Housing bubble starting to pop?

faceman · 27-09-2006 7:00pm

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

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

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

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

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

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

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

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

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

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

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

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

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

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

mad m · 27-09-2006 8:50pm

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

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

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

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

ronbyrne2005 · 27-09-2006 9:41pm

mad m wrote:

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

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

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

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

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

faceman · 27-09-2006 9:54pm

ronbyrne2005 wrote:

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

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

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

ronbyrne2005 · 27-09-2006 9:59pm

faceman wrote:

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

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

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

Idleater · 27-09-2006 10:10pm

ronbyrne2005 wrote:

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

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

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

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

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

L.

mad m · 27-09-2006 10:17pm

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

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

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

Sponge Bob · 27-09-2006 10:52pm

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

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

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

ronbyrne2005 · 27-09-2006 11:44pm

mad m wrote:

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

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

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

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

mad m · 28-09-2006 12:27am

ronbyrne2005 wrote:

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

Oh right sorry for mix up. I heard a horror story from a mate,that he knew someone who did this and they ended up being priced out of the market altogether and at the end they couldnt even afford a house where they used to live in.

ronbyrne2005 · 28-09-2006 1:03am

mad m wrote:

Oh right sorry for mix up. I heard a horror story from a mate,that he knew someone who did this and they ended up being priced out of the market altogether and at the end they couldnt even afford a house where they used to live in.

thats highly unlikely to happen in the current market but there is a small risk but i think theres a bigger risk in taking on 300k in debt now.

Shane™ · 28-09-2006 4:22am

mad m wrote:

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

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

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

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

I can't see how a price crash could make much differance to yourself, if you sell before a crash you have make up the differance, same if you sell after a crash.

I think house prices will drop, I'm guessing as much as %50, but I'm not sure and if I had a house I would not take a chance renting for a year - this would be mad.

BTW you might not get sale agreed during a down turn, so now may be a good time to trade up.

hmmm · 28-09-2006 8:33am

faceman wrote:

The other reason that i feel there is no crash on the cards is this year's budget. With the bertie scandal and election next year, FF need to keep the voters onside. I expect that they will avoid dis-incentivising investors

While you've been away have you bothered reading what the government have been saying about investors and speculators? They're manouvering them into position for a good kicking in the budget. A sliding scale of CGT would be a nice way to do it e.g. 50% CGT if sold within a year, decreasing to 20% if sold over 20 years.

So far I still haven't heard a single bull argument that didn't boil down to "arrah things will be alright"

Pa ElGrande · 28-09-2006 8:58am

Only seven of the 43 houses auctioned yesterday sold either under the hammer or immediately afterwards - an abysmal result that will force estate agents and vendors to reassess prices. Altogether, it's been a washout week in the auction rooms with over 70 per cent of properties failing to sell.
<snip>
Some agents are blaming the failure to sell at auction on a greedy vendor syndrome
<snip>
The view from other agents is that this is a blip, rather than a collapse of the housing market.

more...

70% unsold in washout week for auctions
http://www.ireland.com/newspaper/property/2006/0928/1158591129810.html

Last weeks calmer market has now become a "blip", how long does it take to become a trend, this has been ongoing since the summer.

Have independent newspapers called it right?

House price boom shudders to a halt Evening Herald, Sept 26, 2006
Dublin property prices falling by up to 20 per cent Sunday Independent, Sept 24, 2006
Interest rate hikes put the brakes on house spree Irish Independent, Sept 07, 2006
Property boom 'is over' Irish Independent, August 29, 2006

Pa ElGrande · 28-09-2006 10:45am

hmmm wrote:

While you've been away have you bothered reading what the government have been saying about investors and speculators? They're manouvering them into position for a good kicking in the budget. A sliding scale of CGT would be a nice way to do it e.g. 50% CGT if sold within a year, decreasing to 20% if sold over 20 years.

So far I still haven't heard a single bull argument that didn't boil down to "arrah things will be alright"

Noel Ahern and Michael McDowell may have unintentionally combined to magnify the downturn, one by hinting they would hit the speculators in the budget, causing some of them to rush to offload their property and property flippers to pause (even more supply on the market) and McDowells announcement about eliminating stamp duty has made the first time buyers pause until spring (reducing sellers) this is having a knock on effect breaking 'chains' necessary for existing home owners to trade up.

D'Peoples Voice · 28-09-2006 1:43pm

Mad M wrote:

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

I would wait until after the election, remember that the Labour party have been talking about hurting these property speculators who pay little tax on their investment properties because of reliefs, putting caps on the price of development land, and if they don't do this after they get into power they will be seen as been hypocritical. So if Labour get in, you can guess goodbye to any soft landing, there would be a mass exodus.

Faceman wrote:

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

the problem with a fall off in prices in any sector is that all sectors are highly correlated. For example assume a house in D6 was selling for EUR 1,350,000 and one in D16 was selling for EUR 1,000,000. Now if you are a person trading up, who can only afford EUR 1,000,000, it's a no brainer which one you will go for(ignoring avail schools,transport etc). However if the house in D16 falls in value to EUR 1,000,000, the the person will go for that property. The person in D16 will now have to reduce the selling price of their property to get buyers, however this in turn will have a knock-on effect on house selling for EUR 900,000 in D6W. This trend will continue until all houses reduce.
The problem in Dublin is that we are experiencing demand falling off at BOTH ends of the market. This is not good because it will accelerate the reduction in house prices, because people at the bottom end will have to reduce to find buyers, this in turn causes a reduction in demand for houses in the middle price sector.
Having said that I agree with your point about increasing tax relief for first time buyers (and apply it to current first time buyers also), especially after reading this

First-time buyer couples in Dublin are spending up to 37pc of their joint disposable income on mortgage repayments, monthly EBS/DKM Affordability Index, published by Irish Property Buyer magazine today

http://www.businessworld.ie/livenews.htm?a=1526579
By increasing/indexing first time buyer tax relief they are in fact reversing the effect of higher interest rates, fantastic vote winner in my opinion, and we know how big a percentage these people account for of the voting population.

Sponge Bob · 28-09-2006 2:01pm

D'Peoples Voice wrote:

By increasing/indexing first time buyer tax relief they are in fact reversing the effect of higher interest rates, fantastic vote winner in my opinion, and we know how big a percentage these people account for of the voting population.

Wrong correlation at the end my friend!

The people who vote are not the self centred 25-35 year old FTB demographic. They are too busy golfing and commuting or both .

The people who vote in large numbers are their PARENTS in the 55-75 age group.

If you want to GET votes you bring in tax relief/incentives for these parents who HELP these celtic rateens get on the ladder. EG widen gift threshholds if the gift is to or for an FTB and maybe throw in tax relief for the parent too.

You can give the rateens another 5k and they will simply max out their credit cards some more. Its bloody pointless giving these ingrates anything from the state. Do it indirectly I say.

redspider · 28-09-2006 5:22pm

There is still support in the market, but I see many houses on the market now, even ones that have been bought in recent years (<5) and which are on the market again. There is a situation where people are trying to call the top of the market. That is a dangerous position. There are now so many houses at 1m level it is incredible. I am not taking about mansions. These are 3/4/5 bed family homes semi-detached.

One example I know the people personally. They are selling the family home, cashing in, and the folks are moving into a cheaper apartment, which is closer to shops public transport etc. The family home is on the market for approx 1.3m (AMV). They are getting 1.5m for it. So clearly there is support in the market for these ridiculous prices. The family realise they are sitting on a goldmind, selling out at a good price, and probably get an apt for the parents for 400k, which has better facilities, obviously smaller, etc, but ground floor, front-door access, etc.

To build the same bricks and mortar say in the 'wilds' of Mayo, would cost approx 150k. 200k tops, and that would be to a much better spec. There is no doubt whatsoever that there is a huge property/land bubble where values are way beyond what they are worth.

The market is dumb, and like lemmings that are heading for the cliff, it doesn't have sense, but whether we are heading for a cliff or a nice gentle decline, who knows. All I know is that at this moment in time, things are absolutely crazy out there.

Retirees, sell your homes and cash in on your nest.

Redspider

ionapaul · 28-09-2006 5:25pm

Wow, sentiment has really changed over the past month! Many people (not just the Indo and those good people on AAM) have called the beginning of the crash. Asking prices dropping across Dublin. No interest shown in September auctions. Are the people on the street starting to feel the inevitable has begun?

finnpark · 28-09-2006 5:33pm

How far will they drop is the question and how high will interest rates rise?

I mean , will they go back to 2000 prices or even lower?

Also, when the house price collapse occurs that will obviously mean huge unemployment in the country as 15% of people in this country are employed in that industry. Where will these go. Plasters, tilers, plumbers etc with no work. Surely they will go abroad leading to a further decrease in prices. The drop in house prices could be unreal

Sponge Bob · 28-09-2006 5:52pm

The athlone rental market has collapsed.

Look at this investor dump his 3 houses and others dump all the rest of Willow Park it seems

1 2 3

These long term investors will still make a good profit because they bought in years ago. But there is a glut for sale in Athlone , especially in the Willow Park area.

NCS · 28-09-2006 5:56pm

This is my take on it all...

As you've alluded to, it's possible that when the slide starts, the knock-on economic effects could be dramatic indeed at least in the short to mid-term. A panicky slowdown in construction could throw immigration into reverse... ancilliary industries from the builders merchants to the sandwich vendors taking a huge hit... In fact, even if property values remained high, what impact is the enormous debt taken on by recent FTB and trader-uppers going to have on consumer confidence in the future? The figures are terrifying even at such low interest rates as we currently 'enjoy'.

This, coupled with significant erosion of Ireland's competitiveness versus the EU accession states with which it is competing for manufacturing etc, could ultimately see the Celtic Tiger's head mounted on a wall in the ECB offices as a warning to other nouveau riche economies.

How low could prices go ? On the related AAM thread people have already been pouring scorn on the blithe lunacy with which agents have been pushing what are in effect shoeboxes on an evidently gullible receptive audience. And yet even in the past week or two reality seems to have hit the high and low ends simultaneously. At the moment, to me it seems like the "gains" of early 2006 are currently being wiped out and this just in the past month. What I expect to see now is BTL terror as they sniff budgetary changes to come and this could cause sensational drops at least in some locales. People turned BTL in a naive frenzy, I'd expect them to spook at tabloid headlines and dump properties in a similarly haphazard way. And threatened with depreciation, how many would hold out in the face of sluggish response? Surely better to come away with 80% of your peak paper profit than 60%, better 60% than 40% etc etc.

Personally speaking, I see investment in popcorn as being the next big bubble.

shaptakster · 28-09-2006 6:34pm

daveirl wrote:

This post has been deleted.

Thats cool.
Thanks.
Kind of tells the story of this thread really when you go to that link

Its nothing more than a few people preaching really.

Bring on the crash though. I've been waiting for it for years.

Pa ElGrande · 28-09-2006 8:37pm

OK last post on this thread from me.
There is not much more to add, since the downward turn has begun, I expect this to take at least 5 years to unwind.

Rumour has it though that we may be getting a snap election.

http://www.politics.ie/viewtopic.php?t=14221

Idleater · 28-09-2006 9:25pm

Pa ElGrande wrote:

OK last post on this thread from me... since the downward turn has begun...

You are hopefully not going to stick your head in the ground now are you?

Not that we will ever know because you won't post a reply, but hey.

Wish you all the best, and hopefully we will all be on speaking terms when you return in 5 years.

Unless of course you have made your riches elsewhere and are above the mortal fools that were too consumed by their own greed and lack of foresight to believe a man on the internet...

L.

miju · 28-09-2006 10:52pm

Pa ElGrande wrote:

OK last post on this thread from me.
There is not much more to add, since the downward turn has begun, I expect this to take at least 5 years to unwind.

aye, the wheels have now begun to slowly turn in reverse and will only gather speed as time goes by ,

kick back , feet up and grab the popcorn i say

shaptakster · 28-09-2006 10:56pm

Sponge Bob wrote:

The athlone rental market has collapsed.

Look at this investor dump his 3 houses and others dump all the rest of Willow Park it seems

1 2 3

These long term investors will still make a good profit because they bought in years ago. But there is a glut for sale in Athlone , especially in the Willow Park area.

I wish that was a sign of investors dumping property but

Hardly prime real estate there. I lived very near Willow Park a few years ago.
That would be possibly the worst investor in history who bought house in Willow Park.
Think Moy Ross without the guns, but with the heroin and scumbags and you get the picture.
If i got those all of those houses for €10k i wouldnt buy them.

You're obsessed.
You must have been waiting and searching for months to find those.

Can you not find links to 3 houses beside each other that people might want to buy.

Come on admit it. You put those adds up yourself too

Sponge Bob · 29-09-2006 9:26am

shaptakster wrote:

Come on admit it. You put those adds up yourself too

LOL

No. I fully expected that rental areas would be among the first to show signs of crashing and the willow park example in Athlone is what I meant. There are many long term investors dumping there, yer man with 3 houses and others with 2 houses on the market if you follow the last link , talk about a herd :eek: .

Much of Athlone is not strictly 'des res' by your logic....not just Willow Park but Willow Park is full of investors unlike much of Athlone. They are the ones who will try to lock in their gains by selling , not the FTB type, and they are the ones who will tank the market. Once those houses drop to €80k instead of €180k the council will start to buy them for social housing instead of building. It remains to be seen what floor level the council will start to support but I would expect it to be under €100k.

Once the investors realise that there is no rental market worth having and no more capital appreciation you will see lots more of this dumping going on. There are too many houses and flats in Ireland .

Period.

daveirl · 29-09-2006 11:45am

This post has been deleted.

HashSlinging · 29-09-2006 1:07pm

made a few phone calls this week as im still looking for a house, very very intersting times. I've had two estate agents drop prices on two houses im interested in, one dropped the price from 425k to 381k and the other dropped ..... wait for it...... wait.... for..... it...... from 470k to 381k.... unreal

Housing bubble starting to pop?

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