Anyone watch prime time last night about house prices?

RainyDay

Originally posted by GillyS
RainyDay,

I don't think there is a risk of people not repaying the loans as I think that people will do whatever it takes to hold on to their house , that said I think the lending policies of banks have had a huge impact on house prices, does anyone think we would have house prices at their current level if the banks kept (and rigidly adhered to) their origiinal lending limits of three times salary??? I don't think so.
Gilly

Hi Gilly - You have a point, but let us not forget the importance of personal responsibility. Blaming the banks for lending too much money is like blaming the car manufacturer for speeding. The direct cause of speeding the driver who puts his foot on the pedal. The car manufacturer may be facilitating by supplying a car than can drive at 100 mph, but they are not the direct cause. Likewise, the banks may be facilitating house price increases, but the direct responsibility lies with the individual who makes the decision that they are prepared to pay €xxxk for that specific property.

secret_squirrel

Originally posted by RainyDay
Just look at their consistently high profits. Banks exist to make money, and love em or hate em, they are pretty damn good at doing it. They do NOT give out loans where there is a significant risk that they are not going to be repaid.

I beg to differ I know more ppl that have made fraudulent morgage applications than truthful ones. In the last big UK price crash reposessions went through the roof in part simply because banks and building socs put profits NOW before potential future losses.

The banks have got caught up in this whole house price hysteria as much as anyone else.

RainyDay

Originally posted by secret_squirrel
I beg to differ I know more ppl that have made fraudulent morgage applications than truthful ones.

So the customer lies and you blame the bank! Come on - blame the person who is lying.

Originally posted by secret_squirrel
In the last big UK price crash reposessions went through the roof in part simply because banks and building socs put profits NOW before potential future losses.

I'd like to see some real data on the number of repo's as a percentage of the overall number of houses.

GillyS

Just a general point but I think that the one group of people who really have to worry about house prices are investors , for someone who is living in a house does it really matter whether its worth 200 or 250K? The bottom line is whether you can afford the repayments.

The people who will get stung if there is a drop in prices caused by a rise in interest rates are the first time property investors who have been piling into property , probably after selling their dot bomb shares...

Gilly

De Rebel

Too true Gilly. Thats exactly the point I was making here

There are a lot of people who were happily 7 or 8 years into their 20 year mortgages last year and who were managing quite comfortably. They got swept up by the "leverage your equity to borrow 200k to buy a 2up-2down 750sq.ft town house and rent it out for more than the cost of the mortgage" and they are going to be screwed when the rates go up and the rent tumbles down.

I looked at one last year where the estate agent had a worked example on paper for potential investors. He calculated that the mortgage would be approx 1050 per month and rental income 1100 per month. I saw one of them advertised at 900 last week, and have heard of some of them going for 850. And when the rates move, that gap will widen more. So people who did the 1100-1050=50 = "very nice i'll get the house for free and 50 profit will go towards expenses" will potentially find theemselves in a 800-1300= 500 which is not such a nice place to be.

mollser

Originally posted by De Rebel
Too true Gilly. Thats exactly the point I was making here

And when the rates move, that gap will widen more. So people who did the 1100-1050=50 = "very nice i'll get the house for free and 50 profit will go towards expenses" will potentially find theemselves in a 800-1300= 500 which is not such a nice place to be.

.......and maybe try and sell the house now at a profit, market gets flooded with these properties - and whahayy - maybe not a crash but far better value for money in the market. Deadly!

imho, having read all the posts, there are so many negatives which could POTENTIALLY reak havoc on the market, the only positives being currently low interest rates and relatively stable CURRENT employment, and, IMO, both very wobbly conditions in themselves.

Interesting times ahead.

De Rebel

Originally posted by RainyDay
So the customer lies and you blame the bank! Come on - blame the person who is lying.

I've been wondering about this for some time, and I've come to this conclusion.

In the past, the banks in this country were paternal to a point of being overbearing. More than once I sat in front of a Bank Manager who delighted in making me feel like Oliver asking for MORE. For the average joe in the street getting a £5,000 loan involved weeks of preparation that sometimes came close to having to grovel. And everything had to have security. And security meant lodging life policies etc. etc. And people knew that if they chanced their arms they would be out on their ear. And if they got the loan in all probability they actually could afford it. The bank ensured that.

Now we have banks that are little more than loan/mortgage supermarkets. And guess what, in many cases peoples' thinking hasn't quite caught up. So deep down people still believe that if the bank gives them a loan/mortgage then it implies that they are actually able to afford it. I suspect that the whole personal responsibility thing hasn't quite caught on yet. Nanny State and Mother Church and Father Bank are receding but not quite that far in the past.

But I think a lot of people are in for a rude awakening in the coming years, and will get a dose of "personal responsibility" between the eyes.

spongebob

True,

In the past 3 or 4 years the banks have abandoned the pretence of matching the credit and the borrower in any real way. We have moved in that time from the tyranny of the Bank Manager to the tyranny of the irresponsible and illiquid muppet who is one missed payment away from a domino effect that will cascade their house of cards around them. Consequently the amount of mortgage credit in the economy has doubled since 1999 from about €25 Billion to around €50 Billion.

That €25 Billion increase in credit over the course of 4 years In Itself amounts to about 15% of GDP or thereabouts and has been pumped into the economy in the past 4 year alone giving a multiplier effect of about 3% of GDP compounded annually. Adding 3% to GDP every year is the kind of stuff of dreams in most EU economies but in Ireland that has been blown on a property bubble in 4 years.

D'oul plastic and car loans must be added onto that as well.

Scary stuff.

M

Victor

Originally posted by RainyDay
They do NOT give out loans where there is a significant risk that they are not going to be repaid.

Whatever about significant risk, they do give loans where there is marginal risk - it means they can charge you extra for late payments etc.

The American economy grew by 7.4% in the third quarter (after suppressed growth for quite a while) - if that is sustained, I think you will see interest rates slowly (but surely) rise there and eventually here.

dazberry

I did a property search today and picked 9 (i.e. I wasn't being scientific about this) properties in an expensive north dublin suburb. These were primarily apartments, some new and some secondhand.

I then compared the prices of these 9 properties against the same database that I'm working with (don't ask) that's approximately 3 months old.

2 sold or withdrawn (don't have that info)
2 same price
5 price drop

Of the 5 the price drop ranged from 5K to 80K. The 80K (410 to 330) was probably excessive, but the average I guess was around 15k (head calc) excluding the 80k figure.

As I said this isn't scientific, only one area, and a small sample. All the property prices were below 600k (245-550), so they'd be considered mid-range (FFS) properties. I'm not saying this is indicative of the property market as a whole, but for me it does raise the question as to if prices are starting to slide (sorry adjust) - regardless of demand.

D.

sceptre

Originally posted by dazberry
As I said this isn't scientific, only one area, and a small sample.

Very interesting as a limited sample though, thanks. I'd quite like to see an update in a few months as well if possiblel.

spongebob

I noticed something similar in Galway this year. The properties in question were second hand 3 and 4 bed semis in OK areas, nothing special and nowhere special, lower mid to mid market stuff.

In March at the beginning of the selling season the prices ASKED for were (crudely)

Large 1300Ft2 4 Beds 317-320k
Ordinary 1100Ft2 4 Beds 305-310k
Ordinary 1000Ft2 3 Beds 300-305k

All the local estate agents, acting in concert, were asking in these ranges in the period March-May. They had a plan to get the 4 Bed prices over 300k and the 3 Beds to around 300k

The Outturn for the year was more like

Large 1300Ft2 4 Beds 290k
Ordinary 1100Ft2 4 Beds 280k
Ordinary 1000Ft2 3 Beds 270k

In other words, the prices in the March-May period are a wishlist, the real levels get set around July or so and decline slightly later on. Galway has one "season" (March - Sept)

Dublin allegedly has 2 seasons Mar-July and Aug-Nov

The Motto is not to be put off by the asking prices and to bid what you reckon is sensible, if enough buyers do that the market will adjust to reality over the course of the season.

The buyer only has to be lucky once

M

secret_squirrel

Originally posted by Muck
All the local estate agents, acting in concert, were asking in these ranges in the period March-May. They had a plan to get the 4 Bed prices over 300k and the 3 Beds to around 300k

Really?? Presumably there's no concrete proof of this?
Its one thing for sellers holding out for the best price on their property, but surely estate agents conspiring to drive up the price of houses, is cartel-like behaviour, and is borderline legal at best?
Does that mean the surveyors are in on it too?

Victor

Originally posted by secret_squirrel
Its one thing for sellers holding out for the best price on their property, but surely estate agents conspiring to drive up the price of houses, is cartel-like behaviour, and is borderline legal at best?

I suspec tthey can get away with it because they aren't the sellers and it is quite an open market (albeit almost exclusively controlled by IAVI and Law Society members)

dazberry

Originally posted by secret_squirrel
Its one thing for sellers holding out for the best price on their property, but surely estate agents conspiring to drive up the price of houses, is cartel-like behaviour, and is borderline legal at best?

ES = estate agent(s).

I don't believe there is that level of co-operation by ES, I suspect they just watch the markets to get the maximum price they can (for their %). In essence people look on their property not as a utility (somewhere to live) but as an investment, so they generally want as much for it as they can. Having said that it is in their (ES) interest to move properties quickly, because it gives them better turnover - but that's another story.

The issue that I find borderline legal is the practice of best and final offer. Some estate agencies use this practice.

Just to explain what this is (I'll use really simple figures)...

[1]A house comes to market at 100k.

[2]Say between 7 bidders the price eventually reaches 130k, between offers and counter offers.

[3]You're then asked for your best and final offer.
At this point you are putting in a closed bid against the property (above 130k). So what do you offer. 131k, 135k, 140k, 150k? You could put in 150k and not get the property, or 150k and outbid yourself by 20k. AFAIK, this is not illegal, personally I think it should be.

D.

Victor

Originally posted by dazberry
At this point you are putting in a closed bid against the property (above 130k). So what do you offer. 131k, 135k, 140k, 150k? You could put in 150k and not get the property, or 150k and outbid yourself by 20k. AFAIK, this is not illegal, personally I think it should be.

It's the same as a tender!

spongebob

Originally posted by secret_squirrel
Really?? Presumably there's no concrete proof of this?

Yes there is.

Its one thing for sellers holding out for the best price on their property, but surely estate agents conspiring to drive up the price of houses,

its what they are hired by the vendor to do, 40 years ago the seller paid them not the vendor, that had to change it seems.

is cartel-like behaviour, and is borderline legal at best?

:D Had not one noticed or are we in hibernation?

Does that mean the surveyors are in on it too?

You mean the valuers who work for the banks, how many are NOT estate agents?

M

spongebob

Originally posted by dazberry
]You're then asked for your best and final offer.
At this point you are putting in a closed bid against the property (above 130k). So what do you offer. 131k, 135k, 140k, 150k? You could put in 150k and not get the property, or 150k and outbid yourself by 20k. AFAIK, this is not illegal, personally I think it should be.

No, its the same as any other offer, your FINAL offer can not be your WORST offer if you want it, hence the phrase is yet another ES oxmoron like "spacious residence" = Large Grotty Uninsulated Single Glazed Icebox in plain english .

More ES Speak and Translations

In need of repair = No Roof (maybe a few rafters)
In need of some modernisation = No Indoor Plumbing or heating
In need of decoration = Person who died in there last year had original 1940's drab wallpaper.
Centrally Located = Right on N Road with the bypass scheduled for 2008 or 2010 if there is some slippage.
Near All Amenities = If you have a car you'll be grand.

M

Victor

Originally posted by Muck
its what they are hired by the vendor to do, 40 years ago the seller paid them not the vendor, that had to change it seems.

The seller is the vendor!

secret_squirrel

Originally posted by Muck
Yes there is.

Ya gonna post it here then?

spongebob

Ya mean ME scan the Galway Advertiser Property Pages.........Arse.

Estate Agents, Acting In COLLUSION, had common asking price brackets in the spring season in Galway. This has broken down somewhat with a modern 4 Bed (probably ex rental) semi currently on the market at an asking of €254k .

There were no modern 4 bed semis on the market with an asking of €254k in the spring season in Galway, that would have been €300k more like.

M

dazberry

Originally posted by Victor
It's the same as a tender!

Yes - but the properties are for sale by private treaty not tender.

Originally posted by Muck
No, its the same as any other offer, your FINAL offer can not be your WORST offer if you want it

True, but you've already made your offer / counter offers. You may have offered the best price. So in essence you're then asked to supply a closed bid effectively against your own price. Maybe I'm just cynical, but I just see it as squeezing the last few notes out of ppl.

D.

flangeman

so a quarter percent increase in interest rates here in England, and the Euro zone stays the same.

How long will this last?

Victor

Originally posted by flangeman
the Euro zone stays the same. How long will this last?

Until unemployment starts dropping rapidly in Germany or inflation starts rising.

RainyDay

Originally posted by Muck
Originally posted by secret_squirrel
Really?? Presumably there's no concrete proof of this?


Yes there is.

If you have specific evidence of collusion between estate agents, please pass it onto the Competition Authority. Such actions would be illegal - in breach of competitions legislation.

growler

i guess it's more sensible to focus more on affordability and potential value than to fear what you cannot accurately predict.

Over the long term most property will appreciate in value. If you rent a property, that money is just dissappearing into someone else's pension fund , so if you buy something you can afford and that will meet your accomodation needs in the medium term you would be better off acquiring that asset that sitting on your money in the bank at a paltry savings rate.

Even if the value falls you still have the asset, as with the Notting Hill prices , in the UK's case at least in the last 30 years has been a rollercoaster for sure but the value has eventaully come back, may go again and will probably return again.

Another potential contributor to a crash is the crash hype that is everywhere at present , except notably banks and builders, the media is full of it, and it could well prove a self fulfilling prophesy!

secret_squirrel

Originally posted by growler
Over the long term most property will appreciate in value.

Its worth noting that this is not always the case - its only true if a number of conditions stay true :

1. Population is growing.
2. Taxation is favourable towards house owners

etc etc Im sure you can think of more.

Did I see someone mention there was a huge crash in Japan a good few years ago from which prices have never recovered, a few pages ago on this thread???


Its also worth noting that on a lot of the continent renting is the norm - house ownership is much less common. I did read an interesting article a while ago on the (Long term) advantages of renting vs the advantages of Buying, based on a comparison of the housing markets here and in the UK versus Continental Europe, I will see if I can dig it out again.

growler

an interesting take on this subject in the Observer yesterday...

http://observer.guardian.co.uk/business/story/0,6903,1080710,00.html

which stressed the importance of changing demographics to the UK market such as immigration and single parent families driving demand. Surprised to read that 'Census data suggest that one-third to one-half of new household formations in recent years result directly from immigration,'. It would be interesting to see what a similar figure was for Ireland and what it might be in the coming years. Will divorces and immigration become major factors in the Irish market ? I can't see them having a massive effect in the short or medium term myself, but you never know.

secret_squirrel

hmm that article suggests it would be very optimistic too rely on immigration and single parent families increasing demand in the housing market.

In fact over all the message seems quite pessimistic.

There's also mention of a 10 year fall in prices in Japan.

Victor

Originally posted by growler
Will divorces and immigration become major factors in the Irish market ? I can't see them having a massive effect in the short or medium term myself, but you never know.

They have actually been a major driving force in the last ten years, lead only by the surge in 20-somethings. In the future, I wouldn't necessarily **rely** on either in calculating overall housing demand, but they will affect what is demanded (more one and two beds, less 3- and 4-beds).