Boycott Of The Housing Market

faceman

miju wrote:

so when you sold for 250k you bought another for 270k

you didnt technicaly make 250k-70k cos the house prices everywhere else in the market rose at the same levels

If i sold the appt and kept the cash then yes, i would have made 270-70. However i invested it in new property. But when buying property its all relative like you have kinda pointed out. No one makes money until you actually sell a ranch for cash.

ronbyrne2005

Dont worry folks ,house price inflation will slow to below inflation within next 24 months so not long to wait for evidence.as for 1996 ,you could get a 7%+ rental yield on your property if you rented it out and relative to incomes it was much cheaper, we are close to the peak of this current cycle by all fundamental indicators,sure economics isnt an exact science but we all know whats coming ,its just a matter of timing

DublinWriter

ronbyrne2005 wrote:

Dont worry folks ,house price inflation will slow to below inflation within next 24 months

Kewl...let the rest of us in on where you bought your crystal ball.

ronbyrne2005

DublinWriter wrote:

Kewl...let the rest of us in on where you bought your crystal ball.

Dont need a crystal ball. i just read the reports from the banks who lend the money,they are saying prices will slow to 3% in 2007 (both beggs of aib and mclaughlin of bank of ireland have said this) .todays debt figures further reinforce this,plus when interest rates have risen to 3.5% by end year banks will have to stress test by +2% which will significantly further reduce the amount people can borrow as illustrated by article in sunday business post a few weeks age.the percentage of peoples incomes spent on mortgages is reaching the level where no more extra can be borrowed by the average couple and this reduces growth in property market. dont worry dublin writer im sure you'll be fine despite your ferverent belief that prices cant fall

Pa ElGrande

Price Run-Up not the Result of Macroeconomic Factors: Macroeconomic factors, especially low interests rates, have been often cited as the reason for the extraordinary housing price increases. However, if macroeconomics were a major factor, then similar price escalation would have occurred in all markets. However, they have not. There are both significant Median Multiple variations among the markets. Virtually all of the differences are of recent vintage. For example, from 2000 to 2005, fast growing Atlanta experienced a 0.6 point increase in the Median Multiple, while slower growing San Diego experienced a 6.6 point increase.

Regional Variations Explained by Regional Land Use Regulation Differences: These regional variations can only be explained by regional factors. A growing body of university and international research indicates that the proximate cause of the extraordinary house price escalation in the unaffordable markets is government policies that create land scarcity. These policies, which range from so-called “smart growth” policies that prohibit housing on large swaths of land to government
land hoarding, are found throughout the markets rated as “severely unaffordable.” At the same time, much lighter land regulation is typical of the “affordable” markets.

Smaller House and Lot Sizes in Ireland and the United Kingdom: Ireland and the United Kingdom are building houses far smaller than in the other four nations. Moreover, the UK and Ireland are crowding three or more houses on the same land that would be used for a single house in Australia and six or more compared to the United States. The Median Multiple, as presented, is not adjusted for differences in house or lot (block or section) size.

A Case of Negative Externalities: The unprecedented housing affordability crisis appears attributable to the negative effects (negative externalities) of land regulation, rather than natural market forces. The main cause seems to be excessive land use regulation that strangles housing markets and drives prices upward at rates far higher than can be attributed to conventional economic trends.

The Prospect: Diminished Economic Growth: Simply stated, scarcity raises prices, including the price of land and houses. The loss of affordability is so immense that policies such as affordability quotas, first home buyer grants, workforce housing or tax relief programs cannot possibly make a material difference, despite their rhetorical attractiveness in some circles. Instead, governments should seek to emulate the conditions that have made housing affordability sustainable in so many markets and in most markets historically.

The rewards could be substantial. Already, economic research is showing that metropolitan areas with stronger land use regulation pay a price in diminished economic growth.

2nd Annual Demographia International Housing Affordability Survey: 2006
Ratings for All Major Urban Markets Australia º Canada º Republic of Ireland º New Zealand º United Kingdom º United States
http://www.demographia.com/dhi-ix2005q3.pdf

This is one of the interesting reports on the house price inflation mania, I also hate the destructive effects of this inflation because it will (and has) ruined more lives than most people can imagine. Its the pyramid scheme on a grand scale fully sanctioned and encouraged by a corrupt and tired government.

ronbyrne2005

http://www.sbpost.ie/post/pages/p/wholestory.aspx-qqqt=DAVID%20MACWILLAMS-qqqs=commentandanalysis-qqqsectionid=3-qqqc=5.2.0.0-qqqn=1-qqqx=1.asp

chump

DublinWriter wrote:

I will if the annual growth in the property prices becomes less than annual inflation.

What will you eat if it doesn't? How about a nice big steaming slice o' humble pie?

I certainly will, let's look at where we are in say a year or two's time...

DublinWriter wrote:

There's only one good time to buy property, and that's right now.

And we'll timestamp this nugget of wisdom.

chump

ronbyrne2005 wrote:

http://www.sbpost.ie/post/pages/p/wholestory.aspx-qqqt=DAVID%20MACWILLAMS-qqqs=commentandanalysis-qqqsectionid=3-qqqc=5.2.0.0-qqqn=1-qqqx=1.asp

In the Tribune today there was 2 typical examples of new mortgage owners, 39year and 40years mortgages respectively. Is that not just ridiculous.

The big man, DublinWriter, himself said

...Because residential house prices are always indirectly linked to inflation.

So we can ask him - why is it double earning couples are taking out mortgages for 40odd years when just ten years ago most people were taking out 20 or 25 year mortgages?

Are their earnings not enough to take the mortgage out over the historically more normal time-frame? In which case wage inflation is not matching house price inflation.

Or... ?

Pa ElGrande

THE runaway property market is finally beginning to cool and some homes are even seeing a drop in prices for the first time in more than a decade.
Estate agents said yesterday they had seen the first evidence of a "soft landing" after years of astounding growth.
But the Irish Auctioneers and Valuers Institute insisted there was no prospect of a property crash.
Its chief executive Alan Cooke said: "The soft landing seems to be happening. It won't happen across the entire market in one fell swoop and it won't hit geographically at the same time."

End of road for soaring property market
http://www.unison.ie/irish_independent/sto...&issue_id=14300 [free subscription required]

Shhhsh everything is ok, don't panic the sheeple, It will all be OK, a nice soft landing (just as soon as the insider's offload their investment properties)

DublinWriter

chump wrote:

In the Tribune today there was 2 typical examples of new mortgage owners, 39year and 40years mortgages respectively. Is that not just ridiculous.

The big man, DublinWriter, himself said...

I know I've been getting a little portly of late, but don't rub it in!

Maybe I should have qualified the point I was trying to make a little better.

House price growth *at minimum* is linked to inflation.

i.e., the worst case scenario would be that the current crazy growth in housing slows down to the annual rate of inflation. A soft landing in other words.

Having said all that, I think we're in for total global economic collapse around five years after the world hits the 'peak oil' situation.

Current estimates put peak oil down as happening somewhere between 2009 and 2014.

JimmySmith

faceman wrote:

If i sold the appt and kept the cash then yes, i would have made 270-70. However i invested it in new property. But when buying property its all relative like you have kinda pointed out. No one makes money until you actually sell a ranch for cash.

I dont know how much the new house you bought was so i'll just pick €400K for example.

Would i be right in saying that you shelled out €70K adn sold for €270K making €200K equity.

You then buy a house for €400K and add €200K to your €200K equity which means you have shelled out €270K for your new home (plus Stamp duty and other costs for both.)

So in the end you paid €270K or thereabouts for a house that
an FTB would have to pay €400K (+ costs) for?

In fact you have shelled out, in total, for a bigger house, more or less the same amount that the FTB has shelled out for yourr apartment.

And even if property prices remained static (which they did for a while in 2001) since you bought your second house that you are still in the winning corner.

In fact you would be still winning even if there was a crash of around 40% tomorrow.

Also, though you've been paying your mortgage, you havent been paying rent in that time either.

Arent you glad you didnt listen to this same stuff about crashes back when you bought both your apartment and when you traded up.

And people will take any length mortgage to reduce their payments just because they can, not because its the only term they can afford. Most people could afford to pay back a car loan over 3 years but the vast majority do it over 5 just because then can.

Just today in the Indo there is another report that the housing boom is over. There is also another report in the same paper today that there is a crisis in supply of new homes.

People will never agree on whether property will go up or down or remain static in the future.

Those who have some equity and are happily sitting in their houses will, in the main be unaffected by any scenario bar a national recession where they lose their jobs and their house is reposessed (a rare occurance).
Those who dont own property or cant afford it are hopeful of a crash by enough to allow them to buy a house.

The housing market is much the same as it always was. Almost everyone since, as far back as i can remember (the 70's) has had to scrape down to their last penny to afford their first house. Even when a house only cost £5000 people had to scrimp and scrape to afford it. Houses are expensive and not everyone can afford them. But some can and they are the ones who buy them. They are who drive the market, not the people sitting waiting.

miju

personally i think that this thread kinda sums up the situation that alot of current buyers could find themselves in over the next 2 years or so

Bluehair

miju wrote:

personally i think that this thread kinda sums up the situation that alot of current buyers could find themselves in over the next 2 years or so

Very interesting thread, i'd imagine a lot of amateur speculators here will face that predicament before the end of this year.

D'Peoples Voice

Bluehair wrote:

Very interesting thread, i'd imagine a lot of amateur speculators here will face that predicament before the end of this year.

I'm already beginning to see the amount of formerly rented houses up for sale soar in Flatland (aka Ranelgh/Rathmines). This has me getting concerned that the availability of rental properties will soon be restricted to Section 23 properties or De northside.

Also, note in this thread when people start comparing owning your own house as opposed to renting, they never try to cost commuting times associated with owning your own house in the sticks as opposed to renting in the city! Watch out for it! Cost of fuel? Opportunity cost of your social life?

miju

Bluehair wrote:

Very interesting thread, i'd imagine a lot of amateur speculators here will face that predicament before the end of this year.

and god knows there's a hell of alot of them in this country , i'd imagine like this guy they'll hold on for as long as possible trying to keep their heads above water until they finally have no choice but to bail (the potentially interesting question here is what if alot of them have to bail at around the same time over a period of about 2 months or so)

faceman

JimmySmith wrote:

In fact you would be still winning even if there was a crash of around 40% tomorrow.

Also, though you've been paying your mortgage, you havent been paying rent in that time either.

Just today in the Indo there is another report that the housing boom is over. There is also another report in the same paper today that there is a crisis in supply of new homes.

You hit on some good points. Even if there is a crash tomorrow i dont care, i have the house that ive always wanted. All you renters? What you got? And if there is a crash (which i would bet money on there never being) so what, its not like i will panic and sell. I still need a house to live in!

As for the indo, its nothing more than a tabloid. Their article was very slanted (as usual) Eh hello its the summer. There are no auctions during the summer. Its the quietest time during the year for property transactions. FACT. Also the boom isnt over. (See rte news site with the same stats that indo has with a more positive (economic) article. Second hand home price increases are at approx 7.5%. So it dipped 2.5% at the quietest Quarter of the year. Its still 7.5% growth. no alarms bells there.

At the end of the day, if you are happy to pay rent for your life than best of luck. If however you want to own your own home, that in your later years will be of massive financial benefit to you (this past decade people seem to have forgotten that best return is on property as a long term investment).

Anyway thats my tupence. Have grown tired of people saying a bubble is going to burst. Current property prices are reflecting demand. Live with it.

Oh yeah and a the growth in our property sector is reflect an excellent irish economy. Those of you waiting for a crash, are waiting for an economic recession which is good for no one - home owners or otherwise.

asdasd

faceman wrote:

Anyway thats my tupence. Have grown tired of people saying a bubble is going to burst. Current property prices are reflecting demand. Live with it.

Oh yeah and a the growth in our property sector is reflect an excellent irish economy. Those of you waiting for a crash, are waiting for an economic recession which is good for no one - home owners or otherwise.

I think I could live with it as I dont think an internal Irish property market crash would affect my IT job which sells worldwide (of course) and if it reduces the unearned wealth of the "intelligentsia" who havr "equity" in their property I would be delighted. Bring it on.

Here arre the facts to refute some of your unintelligent horsepoo.

1) Property does not "always track inflation". Utter unscientific bollocks. All countries with bubbles in housing markets crash. Japan, Hong Kong, US regions, The UK back in the day. And on. And on.

2) Interest rates do not have to grow to 20%. More nonsense. It is the percentage increase ( on the percentage ) that counts. An increase to 14% from 7% has the same effect on affordability as an increase from 2% to 4% ( the most obvious example is on interest only loans but it is the same - in relative terms for all loans).

3) Over the 40 year loan period we can expect interest rates to get way past 4%. The higest postwar rate for the bundesbank ( in reality, the percursor of the ECB) was 9.5% considerably less than 40 years ago( 1992). The Germans do not like inflation, for historical reasons.

4) Interest rates will keep rising, therefore, until the money supply increase ( m3) is back to range ( down from 8% to 4%), and particularly if Germany gets to grow economically - as it will after the world cup, the rate of increases will accelerate.The fed has increased - since 2001 - to 5.5% from 1.5%.

5) Irish wages cannot grow at the present rate of inflation for much longer. Germany is growing at 2% wage growth per year. We either get paid less or we lose jobs faster than we are now losing them in manufacturing. In that scenario house prices would - if not now overvalued - come down to less than 2% a year, even by your empirically refutable theory thathouse prices ALWAYS match inflation ( which is still bollocks).

6) If house prices are growing by 10% a year they would double in 7 years. Even without increases in the proce of money 800K houses would be affordable to people earning 120K+ only, with an increase in the price of money to only 4% the median house price* would be available to only the top 1% of workers, say 200K. Or less.

And so on. I could talk about the "sustainabilty" of the 30% a year increase in private debt, but that would blow your mind.

* To the continuously stupid poser - JimmySmith - who thinks he can argue that Mick and Mary are not the same as Jill and Joan ( or whomever the feck) some simple statistical notes:

1) The average industrial wage is actually the median industrial wage. That should answer your question on how many people earn less than 32K a year. Thats right Einstein. One million, Out of 2 Million. Lots.
2) The median house price tends to track the median wage for obvious reasons, however higher interest rates can reduce the spread, and lower interest rates increase it. In another blow to the "house prices always follow inflation" theory Irish house prices declined in real terms in the Eighties as interest rates rose.

( Just like Japan in the nineties, except they had systemic deflation, so house prices had to fall in nominal, and not just real, prices which just seems more *obvious* a fall, but isn't).

whizzbang

faceman wrote:

At the end of the day, if you are happy to pay rent for your life than best of luck. If however you want to own your own home, that in your later years will be of massive financial benefit to you (this past decade people seem to have forgotten that best return is on property as a long term investment).

This is interesting, do you believe that prices will keep going up? or that they will settle at a price that most of us renters can't afford so we are setting ourselves up for a lifetime of rent?

Do you believe this is a stable environment for house prices? that most people can't afford them?

TheBigLebowski

whizzbang wrote:

This is interesting, do you believe that prices will keep going up? or that they will settle at a price that most of us renters can't afford so we are setting ourselves up for a lifetime of rent?

Do you believe this is a stable environment for house prices? that most people can't afford them?

How do you figure that "most people can't afford them". Properties are being snapped up all over the country so surely most people can afford them. Some people may not be able to buy the dream house in D4 but I believe most people could afford some type of property if they were willing to compromise, which we all have to do.

Afuera

TheBigLebowski wrote:

How do you figure that "most people can't afford them". Properties are being snapped up all over the country so surely most people can afford them. Some people may not be able to buy the dream house in D4 but I believe most people could afford some type of property if they were willing to compromise, which we all have to do.

If they could really afford it we wouldn't be seeing a 30% increase in debt this year.

If properties are being snapped up all over the country, as you say, then why did the estate agents come out with an announcement yesterday saying that they are experiencing a slowdown in the market?

People are only willing to compromise so much. If a young twenty-odd year old is expected to subscribe to a lifetime of debt so that they can own their own home (which may not be in an area they are happy to live in) then that might be a compromise too far.

whizzbang

TheBigLebowski wrote:

How do you figure that "most people can't afford them". Properties are being snapped up all over the country so surely most people can afford them. Some people may not be able to buy the dream house in D4 but I believe most people could afford some type of property if they were willing to compromise, which we all have to do.

you would see the same if there were a few wealthy people using the equity in their existing properties to buy more....

and as for compromise, buying a place an hour and a half from where i work is not a compromise I'm willing to make right now I'm more concerned about quality of life than getting on the ladder to be honest! I'll buy a house when they are cheaper or leave the country if they don't drop in price. Simple really!

CiaranC

whizzbang wrote:

Do you believe this is a stable environment for house prices? that most people can't afford them?

What are you basing this on? If most people cant afford them, then why is demand still strong and prices still rising, as per the RTE article?

http://www.rte.ie/business/2006/0703/houses.html

DublinWriter

CiaranC wrote:

What are you basing this on? If most people cant afford them, then why is demand still strong and prices still rising, as per the RTE article?

First time buyers usually can't stretch to it, however don't forget that there's still a lot of 'trading-up' going on.

CiaranC

FTBs made up nearly 40% of the market up to this quarter.

Clearly they can 'stretch' to it.

miju

the figure is actually 41% ciaran and has been falling year on year for quite some time so clearly many FTB's have been "stretched" beyond breaking point

shoegirl

I would suggest changing "most" to "a lot of people cannot afford them."

Basically think of it this way. The people who live on the same street as my parents in Dublin paid up to about 60k for their houses if they bought before 1990. This wasn't cheap even then. Now a lot of the younger ones are in their early 50s and on good incomes (we'll say a combined income of 70k+ upwards). They would probably have good savings as well as 20-36k worth of an SSIA and the houses on that street could easily reach 520k if not more.

Now add to that as well that many may also be inheriting the proceeds of the sales of elderly parents homes - six figures sums, but lets be modest and say that Mr Murphy's elderly Mum in Donneycarney has just kicked the bucket and his share of the house is 100k after everything is paid for. He and his wife have good jobs paying them 40k and 30k respectively. His older daughter is living in a flat in town and the younger one (who works weekends in the local B&Q/Woodies/Atlantic) is nearly finished college. So no big expenses on the horizon. They have combined SSIAs worth 38k plus a few smaller savings schemes totalling 15k. Mrs M took redundancy from her job in Aer Lingus/Gateway/Motorola/whereever and got 35k which was invested in an investment plan thats netted her another 5k so far. So they have the value of their home plus cash of up to 190k plus the value of their home. Thats over 700k and they are only in their early 50s so could afford a 10 year mortage to give them another 100k to play with. They can well afford to pay 800k for a house.

Its rather like buying your first car. It costs you more because you've no equity in it to trade up. Once you have one paid for you can then use its existing value to trade up. With 10 years of hyperinflation in the housing market there still may be apparent equity in most homes to upgrade to the next "tier." The only losers are those buying at the peak of the market and those who don't own (and in many cases realistically cannot afford) a home.

Yes, there are people who cannot afford to buy, even with "affordable" housing programmes. If you have no savings, are single, don't have wealthy parents and earn less than 30k, lenders will not realistically lend you enough to buy anything in a lot of places in Ireland. The affordablity schemes do expect a pattern of savings and often ties to the area which will eliminate some potential buyers.

CiaranC

miju wrote:

the figure is actually 41% ciaran and has been falling year on year for quite some time so clearly many FTB's have been "stretched" beyond breaking point

Interesting point miju, got a source for that figure?

Shoegirl wrote:

Yes, there are people who cannot afford to buy, even with "affordable" housing programmes. If you have no savings, are single, don't have wealthy parents and earn less than 30k, lenders will not realistically lend you enough to buy anything in a lot of places in Ireland.

The trouble is, there seems to be the perception out there that people have some kind of right to buy into the market at what they can afford.

The housing market seems to me to be coming into line with other first world economies. The change from low-density to high-density housing for one. People (or those who frequent these sort of boards anyway) are appalled at the idea of living in an apartment for some reason, even when they are in their twenties, even though it is the norm in just about every other European city.

People want the same as their parents had, a huge big house near the city centre on a single income. Those days are gone forever, and no amount of willing an economic disaster upon the country will bring them back.

miju

CiaranC wrote:

Interesting point miju, got a source for that figure?

I posted a link to it earlier on in this thread have a look back and you'll see it, but how and ever if you see the report at the bottom of this post , you'll see that this figure seems to have now dropped from 40% to 36% so far this year (so less FTB's to buy houses so people can "trade up" which kind of stalls the whole market IMHO as the FTB's have more sway in the market than anyone else )

also it's interesting to note that this same sherry fitzgerald has noted that 40% of house this year have so far been bought by investors and off those 40% sold 30% were sold by other investors

i would be very confident in wagering that the great savvy investor (with vest interests) sell-off has already well gotten underway and the people buying now are "speculators" who will get trampled and hit the worst when the mass rush for the exits from the property market begins

it's prob why the EA's stated yesterday in the indo the "soft landing" as begun , they're high net clients / investors are out / nearlly out so they're perfectly happy for the onslaught to begin , anecdotal i know but just thought i'd put that up there in the interests of discussion

the report by the way is here

ps: have a look at the link in my siggie , only 18 votes so far but DEFINITELY interesting

chump

According to that Sherry Fitz article 41% of houses bought in 1st quarter (correct me if wrong) were 'investment' properties - now if we were to look at these figures over a prolonged period, taking into account the assertion of EA's that a high propeortion of these investments are funded by IO loans, and that these properties are bought for capital appreciation - what do we have?

We have a bunch of amateur investors jumping on the bandwagon (at the same time the big boys ditch property) and expecting to clean up with capital appreciation.

What do they do when the market flattens (or falls), and with interest rates climbing their investments will begin to hurt their pockets.

miju

usually (if all of historys bubble are anything to go by) they'll try hold on hoping for the situation to get better but the more it becomes obivous it's not going to improve then more rush to find an exit and then the "soft landing" idea disapears quite rapidly as people realise they're caught in the middle of a massive correction