Boycott Of The Housing Market

ionapaul

One thing that many of the property bulls have right, wishing or hoping for a property crash is not a very good thing - I believe that the Irish economy as a whole will greatly suffer when the property market crashes. Forget correction, I am very doom and gloom about it all (too much time at askaboutmoney!) and see a very tough time for many people in Ireland for a considerable number of years in the near future.

One of the only good things that may come out of it all is that I hope our Fianna Fail / Fine Gael system of primary parties will be swept away by voter anger. In particular I think FF will be a shadow of their current strength when many people, young and old, are stuck with massive negative equity and unable to trade up out of their city-living apartment that was built in Swords or Blanchardstown for some reason, rather than in the city centre!

D'Peoples Voice

ionapaul wrote:

One thing that many of the property bulls have right, wishing or hoping for a property crash is not a very good thing - I believe that the Irish economy as a whole will greatly suffer when the property market crashes.

On the contrary for people who own their house and intend to remain living in it, it makes little or no difference to them, unless they wanted to re-mortgage.
For investors however, they would get hurt, but is that a bad thing, they will have made enough anyway.
For the country, well for one, the cost of renting will come down if houses are cheaper to buy. this has a knock on effect to the budget of the Social Welfare who pay rent allowance for thousands and thousands of Irish people. Also the pressure on retirement homes would reduce because people would not be as eager to push their ould dears into retirement homes and would be willing to allow them living in the house they grew up in. This in turn would also save the Government money.
Less investor interest may reduce the output of hosues which will be mean less construciton work and less pollution, so the government saves on Kyoto payments.
Finally many of the foreigners working in the construction industry would move on to Germany to help their property market or indeed just move home, thus removing any risk of Ireland have a large amount of construction workers drawing the dole here.
there are of course some negatives, but I like to only look at the positives in life:D

Gurgle

miju wrote:

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

What history are you referring to?

shoegirl

D'Peoples Voice wrote:

For the country, well for one, the cost of renting will come down if houses are cheaper to buy. this has a knock on effect to the budget of the Social Welfare who pay rent allowance for thousands and thousands of Irish people. Also the pressure on retirement homes would reduce because people would not be as eager to push their ould dears into retirement homes and would be willing to allow them living in the house they grew up in. This in turn would also save the Government money.
Less investor interest may reduce the output of hosues which will be mean less construciton work and less pollution, so the government saves on Kyoto payments.

Some interesting points. I believe the Health Board pays out 4 billion a year in rent allowance - with no assets accruing to the state. Thats 4 billion that could have been spent on hospitals, training more GPs etc. In fact its becoming increasingly obvious that it would be cheaper in even the medium term to build more social housing than it is to subsidise a families rent for more than a few years. I suspect, however, that vested interests in government make sure that this doesn't change as it is a vital lifeline for many landlords (at least 30% of the entire private rented sector is subsidised by rent allowance and its rapidly growing).

Gurgle

shoegirl wrote:

In fact its becoming increasingly obvious that it would be cheaper in even the medium term to build more social housing than it is to subsidise a families rent for more than a few years.

Please don't say that out loud.
It was that thinking that led to social disasters like the Ballymun towers and the 'projects' in the US.

At least having 'disadvantaged' families live in housing estates with the rest of us means their kids will grow up with the kids of everyone from bank managers to farmers and the social disadvantages can be bred out in a couple of generations.

I know the 'better' class of Dubs has been loudest in resisting having the criminal element moved in beside them, but it is slowly working in the rest of the country.

miju

Gurgle wrote:

What history are you referring to?

every investor bubble that's ever existed from tulips , to exploration right through to dot.com and japanese property

daveirl

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CiaranC

D'Peoples Voice wrote:

On the contrary for people who own their house and intend to remain living in it, it makes little or no difference to them, unless they wanted to re-mortgage.

1 in 8 people in this country are directly employed by the construction industry, not to mention how many are indirectly earning a living from the housing boom.

If there is a property crash of any kind of significance, it will topple the economy into recession. People can comfort themselves with how much their house is worth when they are queueing up to collect the dole.

Gurgle

miju wrote:

every investor bubble that's ever existed from tulips , to exploration right through to dot.com and japanese property

I can't claim much knowledge of the times when everyone went nuts investing into tulips, exploration led to empires which lasted for centuries.

As for the Japanese property bubble, it was exactly that: a bubble:
Here you go

Wood reports the case of a house occupied by former prime minister Kiichi Miyazawa. The house was owned by political supporters of Miyazawa. The property occupied about one sixth of an acre. Its estimated value in 1991 was 2.7 billion Yen, or roughly $22 million. This was a very high value for a residential house but it was used to borrow 13.2 billion Yen from seven banks in 1989. This was roughly $96 million. This begins to qualify for the term "astronomical." In November of 1991 the Ministry of Construction reported that houses and apartments in metropolitan Tokyo had in the preceding year lost 37 percent of their value and plots of land in the suburb of Saitama had lost 41 percent. The bubble in property values would not have been significant except for the fact that the use of land as collateral for loans and the fact that the taxing authorities tend to use those peak prices in valuing property subject to the inheritance tax.

Fair enough, houses are pricey here but thats just insane.

faceman

asdasd wrote:

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.

You seem to have issues, why anyone would wish such gloom is beyond me. Your colourful language echo's your poor thought out response

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.

Where did i say property tracks inflation? Can you demontrate how much of a bubble (if any) the irish property market is effected by? I think not. YOu cannot compare bubbles in each country like for like. Different factors effect peaks and troughs.

2) Interest rates do not have to grow to 20%. More nonsense.

Where did you get 20% from? I dont see the relevence of your argument.

3) Over the 40 year loan period we can expect interest rates to get way past 4%.

We can also expect interest rates to flucuate. Interest rates are not guaranteed to stay at any rate but ECB policy will not allow such unpredicatable high rates we have seen before.

...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.

Agree somewhat.

The fed has increased - since 2001 - to 5.5% from 1.5%.

Yep, property prices have fluctuated in the US but it has varied in different states.

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).

Again in your infinite wisdow, point out where i said house prices 'always match' inflation.

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.

Longer term mortgages, joint motgage holders... need i go on? 10-15 years ago how many mortgages were granted to single income couples?

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

Maybe you should, i fail to see what point you are making or even trying to make.

ionapaul

IF we have a huge property crash - and even more importantly, if new builds stop (goodbye construction jobs) and people do not sell their homes because of negative equity and perpetuate the idea of the property ladder, so dear to EA hearts (goodbye the huge budget surpluses the Irish revenue have enjoyed, thanks in large part to stamp duty increasing year on year), then yes, Ireland will probably slide into a pretty nasty recession.

miju

Gurgle wrote:

, exploration led to empires which lasted for centuries.

sorry gurgle sould have been a bit more precise , i was talking about the south sea bubble

Pa ElGrande

Senator Shane Ross (Business editor, Sunday Independent)
Richard Curran (Deputy business editor, Sunday Business Post)
Moore McDowell (Senior Lecturer Economics, UCD)

The interview starts at 35 minutes 30 seconds and lasts 15 minutes.

Newstalk Eamon Dunphy Breakfast Show, July 4, 2006
http://www.newstalk.ie/podcasts/library/breakfast/ed0407.mp3

Pa ElGrande

The continuing Irish housing boom may boost Government finances by at least €800 million this year, resulting in total revenue receipts of up to €9 billion - equivalent to 18.6% of planned current and capital spending in 2006.

The Construction Industry Federation (CIF) says that up to 86,000 new homes will be constructed in the State this year, up 6,000 on last year's numbers.

The Government collects about €100,000 from the cost of each housing unit built in the State via VAT, development levies, stamp duty, income tax, PRSI and corporation tax. To the house buyer, they are the greatest stealth taxes of all.
<snip>
The average price paid for a house in Dublin and outside Dublin in May 2006 was €394,795 and €256,418 respectively. The equivalent prices at the start of 2006 were €368,576 and €240,201. The average price paid for a new house in May 2006 was €291,380.

The average sales price of a new US house in May was $294,300

read on...

Irish housing boom may boost Government finances to €9bn this year; Government collects average of €100,000 in taxes from the cost of every new housing unit built in State
http://www.finfacts.com/irelandbusinessnew..._10006434.shtml

At today's exchange rate $294,300 equals €230,047.
Keep buying houses everyone, all the political parties in this country need you to borrow more money to keep their election promises, and to think we laugh at the two years guaranteed rental income estate agents use to entice property investors to buy abroad.

miju

the poll i started in accom / property (in my siggie there) is yielding some interesting results out of the 46 votes so far:

I own property and am bullish - 19.57%
I own a property and am bearish - 23.91%
I do not own property and am bullish - 13.04%
I do not own property and am bearish - 43.48%

hoping to get as many people as possible to vote in this poll as boards is good for getting a quick snapshot of the current irish psyche (or at least has been in the past)

Gurgle

miju wrote:

sorry gurgle sould have been a bit more precise , i was talking about the south sea bubble

New one on me, I'm certainly not a financial historian.

Sounds a lot like dot.com though - selling rights to something that didn't really exist in the first place.

I would stick to my arguement that this doesn't apply to land/housing. There are few investments that have a more solid product. The site my house is on, being what costs all the money, is quite a bit inland and likely to be there for several million more years.

Again, I'm not saying there can never be a crash. I just don't think the prices we're at now are approaching those kind of heights. I think we'll see the soft landing as prices reach a plateau, generally matching most of the developed world.

btw - what do you mean by bullish and bearish?

faceman

miju wrote:

the poll i started in accom / property (in my siggie there) is yielding some interesting results out of the 46 votes so far:

I own property and am bullish - 19.57%
I own a property and am bearish - 23.91%
I do not own property and am bullish - 13.04%
I do not own property and am bearish - 43.48%

hoping to get as many people as possible to vote in this poll as boards is good for getting a quick snapshot of the current irish psyche (or at least has been in the past)

dude, your poll is flawed as you dont specify what period you are asking people to speculate over. therefore your poll is going to be slanted.

FillSpectre

miju wrote:

the poll i started in accom / property (in my siggie there) is yielding some interesting results out of the 46 votes so far:

I own property and am bullish - 19.57%
I own a property and am bearish - 23.91%
I do not own property and am bullish - 13.04%
I do not own property and am bearish - 43.48%

hoping to get as many people as possible to vote in this poll as boards is good for getting a quick snapshot of the current irish psyche (or at least has been in the past)

It will be well destorted. THe people on boards only represent a very small section of the population. It is obvious there are very few pensioners here and a limited number people over 35 i'd guess too.
I would think the majority of people on boards are also college educated.

I still think direct price comparisons of houses and goods in general is nonsense. Ecoonimies are swings and roundabouts, you gain one place you lose somewhere else. Poverty in the US is very differentt to poverty here and I 'd rather live here.

daveirl

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Gurgle

daveirl wrote:

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No, south dublin is more expensive than idaho.
It is not more expensive than Paris/New York/ London.

The Irish countryside is similar to the French countryside, the German countryside, The English countryside.

daveirl wrote:

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Bubbles pop.
Investments in largely mythical commodoties are bubbles.
Houses are not mythical.

For most, houses are not an investment.
You need somewhere to live. You don't need exclusive trade rights with south america. You don't need some amateur software hack to make you a static web page.

daveirl wrote:

This post has been deleted.

Once things start to slow down, more people will find themselves in a position to buy a home. If mortgage repayments are less, or not much more, than rent then those people will take the plunge.
Many 2nd home owners who might have been considering selling will hold off to see if prices recover. Most 2nd home owners didn't make their investment entirely on the basis of the quick buck from price rises, they're in it for the long haul.

Prices will stabilise.

dunkamania

Gurgle wrote:

btw - what do you mean by bullish and bearish?

A bull market is a prolonged period of time when prices are rising in a financial market faster than their historical average, in contrast to a bear market which is a prolonged period of time when prices are falling.~Wikipedia

FillSpectre

daveirl wrote:

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It is only an asset bubble if it pops. If it it doesn't pop that just means the market was stabalising. The first problem is assuming it is a bubble and before you point to indicators the burst has to happen to make it a bubble otherwise it is just a rapidly increasing market.
Claims of being the most expensive property in the world are really really over blown.

shnaek

Gurgle wrote:

No, south dublin is more expensive than idaho.
It is not more expensive than Paris/New York/ London.

Paris, London and New York have populations more than twice that of the entire population of Ireland. Compare Dublin to cities of a similar size eg. Strasbourg, Hamburg, Liverpool - then you will get a more accurate measurement. Also, in fairness and with no disrespect to Dublin, Paris, New York and London are the great cities of the world and have been for centuries.

Gurgle wrote:

For most, houses are not an investment.
You need somewhere to live.

That is not supported by the stats. Nor is it supported by sentiment. A lot of house purchases in Ireland over the past 5 years has been by investors. Even those who have traded up in houses have held on to their first house as an 'investment'. People talk about houses as their pension. A place to live cannot be your pension, so it must be something else. What do you think is going to happen when we stop building 85,000 houses a year? Even if there is no collapse in prices, there will be a collapse in tax revenue.

Gurgle wrote:

If mortgage repayments are less, or not much more, than rent then those people will take the plunge.

People are taking the plunge now even though renting is a fair bit cheaper than buying.

Gurgle wrote:

Many 2nd home owners who might have been considering selling will hold off to see if prices recover. Most 2nd home owners didn't make their investment entirely on the basis of the quick buck from price rises, they're in it for the long haul.

They will hold off as long as they can afford to. But canny investors always have a level at which to get out. If prices drop that far then they will get out, no matter what.

Gurgle wrote:

Prices will stabilise.

In similar circumstances internationally prices have never stablised. But Ireland is different. We all know that!

miju

oh for gods sake spectre , if it looks like a bubble , acts like a bubble it's a bubble and it will sure enough pop , just because it hasn't popped yet doesn't mean it's not a bubble

i suppose you'll tell me next a tyre isn't a tyre until it's been inflated LOL

CiaranC

shnaek wrote:

Paris, London and New York have populations more than twice that of the entire population of Ireland. Compare Dublin to cities of a similar size eg. Strasbourg, Hamburg, Liverpool - then you will get a more accurate measurement. Also, in fairness and with no disrespect to Dublin, Paris, New York and London are the great cities of the world and have been for centuries.

The size of the city or its cultural achievements arent really relevant. Dublin is the capital city of a successful western ecomony with a strong demand for housing.

miju wrote:

just because it hasn't popped yet doesn't mean it's not a bubble

Huh? By definition, its only a bubble if it pops. If the market sustains, then it wasnt a bubble after all...

whizzbang

CiaranC wrote:

The size of the city or its cultural achievements arent really relevant. Dublin is the capital city of a successful western ecomony with a strong demand for housing.

It is a strong demand for housing or a strong demand for invetment properties? In my book housing means people want to live there, investment properties may or may not have people living in them.

The demand for investment properties can dry up overnight, while the demand for housing on the otherhand is a much slower mover (up or down).

CiaranC

There is a strong demand for both. Apparantly FTBs are being gradually priced out of the market. When investment wanes, prices will slow down or go backwards, allowing the rental sector and the FTB to take up some of the slack.

If Im not mistaken, you yourself posted on AAM about how excited you were at this prospect, because it would enable you to purchase property

Gurgle

miju wrote:

oh for gods sake spectre , if it looks like a bubble , acts like a bubble it's a bubble and it will sure enough pop , just because it hasn't popped yet doesn't mean it's not a bubble

Gurgle wrote:

Its estimated value in 1991 was 2.7 billion Yen, or roughly $22 million. This was a very high value for a residential house but it was used to borrow 13.2 billion Yen from seven banks in 1989. This was roughly $96 million.

^^ Thats a bubble, $96 million borrowed on a house already massively overvalued at $22 million.

What we have is a strong market, possibly overvalued but nothing on that kind of scale.

Nothing that won't be corrected by a few years of static prices.

whizzbang

CiaranC wrote:

If Im not mistaken, you yourself posted on AAM about how excited you were at this prospect, because it would enable you to purchase property

yep! I do plan to buy after the drop, but not until prices start to rise again. I think the issue here is that people are assuming FTB will buy houses in a falling market as soon as the prices reach a level they can afford.

If prices start to fall I think alot of FTBs will hold out until prices will level off rather than jumping on a falling market as soon as properties come into their price range.

I could be wrong though, people do strange things.

whizzbang

Gurgle wrote:

Nothing that won't be corrected by a few years of static prices.

Please cite one example of where prices have risen as fast as ours and then gone static. I can't find one! I know that this doesn't mean it can't happen, but I think it is very unlikely!