what will happen if house prices become too dear?

homeOwner

If prices keep rising, even modestly there will come a point in a few years where the cheapest 3 bed semi in Dublin will be too expensive.

Take for example a 3 bed semi. Suppose there are none to be found in any part of dublin for less than 450K which cant be too far off. I would say typically its new comers to the market that buy at the lower end. But if the cheapest property for sale in Dublin is out of reach for all the new comers who buys it?

Wont there come a point where the price becomes just to high to find any buyers? Houses with prices higher than that in a better area or with more space or with a bigger backgarden will sell due to people trading up but those people will already have a house comparable to the 3 bed semi on sale for 450K so will gain no benefit from buying it.

Will there eventually be a time where 3 bed semis at the lower end of the price bracket will not be sold?

Idleater

homeOwner wrote:

Will there eventually be a time where 3 bed semis at the lower end of the price bracket will not be sold?

Interesting theory. But since there is always a "lower end" of the market, no matter how high the cost is, does it mean that the houses will not be sold?

I would have thought that there would be 2 possible outcomes:

1) The house is not being sold (for eg. €450k) but the owners need to sell so they lower the price.
or
2) The house is sold but not to a first time buyer - but to someone who decided that they want to buy _that_ particular house for _that_ specific price.

My personal opinion is that there is _always_ a market for first time buyers. One of the problems with the current market is that people are not trying to get "on" to the property ladder, but they are trying to start some way up it (i.e. 3 bed SD for 1 person) rather than starting at the bottom and making their way up.

L.

gerire

Cant see that coming for a while, people who cant afford in Dublin will move to a commuter town from parents home say. And those who moved to commuter towns a few years back and are fed up commuting will move into these Dublin homes with their profit from their country home.

Following on from that the banks will start to extend mortgage periods up towards 40-50 year terms, this I reckon is a while off yet

whizzbang

It will be interesting to see how people react to the suspected interest rate increase next month. If they pop it up .5% that could start to hurt investors with interest only mortages. The could lead to more properties for sale and who knows after that?

FillSpectre

I think your view of what the lower end of the market is the problem. A 3 bed house is a good bit up the ladder. AN increase in rental property in the city is likely or at least use of all the rentals closer to the city. Investors could be proved right. If they actually limited the number of property avilable to buy inside the M50 and traffic gets worse they may be able to make good rental income.
Doesn't sound great

homeOwner

I take your point about a 3 bed semi not being at the lower end of the property ladder. But for people with a family a 3 bed terraced or semi-d is about the smallest house size people want....well in ireland. I know in the rest of the world some families live in apartments but I cant see that becoming the norm here for a while anyway.

I'm just not sure where the price ceiling is for houses, have we hit it yet? Strangly enough two friends of mine who are renting in seperate places both have had their rent increased this year. Are landlords passing on interest increases to their tennants?

whizzbang

homeOwner wrote:

Strangly enough two friends of mine who are renting in seperate places both have had their rent increased this year. Are landlords passing on interest increases to their tennants?

Technically they cannot do that, they are only allow to increase rent if local rent rates increase. I guess most people don't know that and just accept the land lord saying "Pay up or get out".

I'm in the middle of a rent review right now, she wants to raise it by 50 a month. To be honest we are paying under the local rate but it turns my stomach to give in knowing how much they have made on capital gains on teh place while we "were minding it for them"*!


*this is blatent spin.

Sponge Bob

what goes up must come down !

whizzbang

Sponge Bob wrote:

what goes up must come down !

but property prices can only go up can't they?! aren't we different in Ireland so that they can't go down like every other property boom in history?! won't all the immigrants earning minimum wages keep buying up all the 500k 3 bed bed demi Ds?! sure the banks and estate agents keep saying it can only go up! and they wouldn't lie to us would they?

/sarcasim (it might be the lowest form of wit, but that rant sure felt good!;) )

FillSpectre

homeOwner wrote:

I take your point about a 3 bed semi not being at the lower end of the property ladder. But for people with a family a 3 bed terraced or semi-d is about the smallest house size people want....well in ireland. I know in the rest of the world some families live in apartments but I cant see that becoming the norm here for a while anyway.

Something has to give it is just as likely the type of home people can expect may change as a price will drop. Homeownership, price and type of home are all just as likely to change. Most likley all will to some extent.

whizzbang wrote:

Technically they cannot do that, they are only allow to increase rent if local rent rates increase. I guess most people don't know that and just accept the land lord saying "Pay up or get out".

Technically they can do this. The rules is they can't put the rent up excessively above the local market. Using your logic nobody would never be able to change rent as everybody would be frozzen from putting up price. THe idea I assumed wsa so the rent can't continuey rise i.e. every year

whizzbang wrote:

I'm in the middle of a rent review right now, she wants to raise it by 50 a month. To be honest we are paying under the local rate but it turns my stomach to give in knowing how much they have made on capital gains on teh place while we "were minding it for them"*!

Is that begrudgery? :rolleyes: You are paying market rates for a service. AS people have pointed out capital gains is not money. If a crash happens they have to cover themselves.

whizzbang

FillSpectre wrote:

Technically they can do this. The rules is they can't put the rent up excessively above the local market. Using your logic nobody would never be able to change rent as everybody would be frozzen from putting up price. THe idea I assumed wsa so the rent can't continuey rise i.e. every year

you are right it makes no sense, but I think it is still what is inferred by the law, from the prtb.ie web site

"Market Rents
The maximum rent payable by a tenant may not be greater than the open market rent, which is defined as the rent that a willing tenant would give and a willing landlord would take for vacant possession having regard to the tenancy terms and the letting values of dwellings of a similar size, type and character and located in a similar area."

FillSpectre wrote:

Is that begrudgery? :rolleyes: You are paying market rates for a service. AS people have pointed out capital gains is not money. If a crash happens they have to cover themselves.

Yes, yes it is begrudgery, and possibly a dash of jealousy. That being said, if I can keep my rent down I'm going to do everything in my power to!

I do feel however that there are alot of people you there who think a lot like this characature and that is very dangerous! These people will most likely the worst hit if a turn in the market comes as their unquestioning faith in the property market might keep them in longer than they should stay.

homeOwner

I assume for a mortgage the ordinary Joe who isnt earning a fortune wouldn't get themselves into payments of more than €1500 per month at the absolute max. So if renting a 3 bed costs around that doesnt it make more sense to buy and pay the mortgage? I guess thats why people are still buying houses. If rent was to reduced dramatically the incentive to buy would be reduced.

FillSpectre

homeOwner wrote:

I assume for a mortgage the ordinary Joe who isnt earning a fortune wouldn't get themselves into payments of more than €1500 per month at the absolute max. So if renting a 3 bed costs around that doesnt it make more sense to buy and pay the mortgage? I guess thats why people are still buying houses. If rent was to reduced dramatically the incentive to buy would be reduced.

Rent is now cheaper if starting a fresh. Your average joe doesn't need a 3 bed house is the issue. People expecting more than is reasonable and from my experience it is a lot more than our European neighbours. I don't think your average single Joe in the rest of Euope is trying to buy a family home for himself on an average salary or even a slightly higher salary. Lack of housing chioce is part of the issue but the other is lack of imagiation and willingness to change from buyers is the other.

Cantab.

gerire wrote:

Following on from that the banks will start to extend mortgage periods up towards 40-50 year terms, this I reckon is a while off yet

Do you actually realise how much interest you pay on a 50 year mortgage? Now what bank would give a 50 year mortgage to a 20 year-old who would have to still be working at 70 to pay back all they owe?

whizzbang

Cantab. wrote:

Do you actually realise how much interest you pay on a 50 year mortgage? Now what bank would give a 50 year mortgage to a 20 year-old who would have to still be working at 70 to pay back all they owe?

Yep, they had 70 year mutli generational mortgages in Japan and 100 year mortgages were introduced in the UK just before the 80s crash.

The banks would love us to have lifetime mortgages! Big money for them! but will the regulator allow it?

lomb

whizzbang wrote:

but will the regulator allow it?

if u dont know the answer to that u dont know the political regime in ireland.

FillSpectre

lomb wrote:

if u dont know the answer to that u dont know the political regime in ireland.

THat is one of those silly unfounded beliefs in Ireland that people love to say. Everything is corrupt becasue it is Ireland. I am sure yo can produce "evidence" of corruption but how relevant will it be to how the banks and the government are hand in hand trying to make people slaves to the banks. \THe EU is keeping a close eye on this stuff now so it is near impossible for what you are suggesting.

ambro25

homeOwner wrote:

Will there eventually be a time where 3 bed semis at the lower end of the price bracket will not be sold?

To someone trading up from a 1- or 2-bedroom city centre appartment and now in a family way, a 3 bed semi is no "lower end" (price or market-wise) but a needed/desired progression.

So, irrespective of what the general price bracket for 3 bed semis in/around Dublin is, they will always be a "middle-to-higher-end of the market" proposition for someone.

Ergo, for the same reason such houses may have traded for €200k 10 years ago (I'm picking a number out of thin air, there) and are now trading healthily for €500k, they will probably trade (healthily) for €600-€700k in 3 to 4 years' time. That's with a lot of assumptions - the main ones being that (i) no 'readjustment' happens in the intervening period (that's totally unknown) and (ii) spending power of the relevant households more-or-less tracks the increase on the up (that's not as unknown, but probably not very likely).

There is one certain variable in the mix, however: 'newcomers' (as pointed out by FillSpectre - note that I'd class 'newcomers' in the context of this thread as people moving to Dublin from wherever and needing this type of property) are already priced out for that bracket/type of property, so that's that much more potential buyers taken out on the demand side of the equation already - this may have an effect on the rate at which prices rise, but it would be difficult to quantify (and verify).

Gurgle

homeOwner wrote:

Take for example a 3 bed semi. Suppose there are none to be found in any part of dublin for less than 450K which cant be too far off. I would say typically its new comers to the market that buy at the lower end. But if the cheapest property for sale in Dublin is out of reach for all the new comers who buys it?

Bottom line is you can still rent a property you wouldn't get a loan to buy.
This is still a huge factor in Ireland's property market. So many properties are priced beyond the reach of the people living there.
If there was any desire in government to stabilise the property market, the first step would be to go after the 'second-home' tax evaders. If they weren't making so much on rent, there wouldn't be the same competition to buy houses as cash-cows/investments and the prices would better reflect the means of owner/occupiers.

ambro25

Gurgle wrote:

If they weren't making so much on rent, there wouldn't be the same competition to buy houses as cash-cows/investments and the prices would better reflect the means of owner/occupiers.

I don't think that happens much these days (unless 'they' bought the second home before the boom). A 3 bed semi bought for €500k today -even with a maxed out rental potential of €24k pa- is hardly a cash cow: it's actually costing you €s to keep tenants in!

By way of example, see the following (from the 'Will the bubble burst' thread) -

Of buying to let and real numbers of same

Of [URL="http://www.finfacts.com/irelandbusinessnews/publish/article_10002284.shtml] bubbles, contrasts with other countries and what if scenarios[/url]

I honestly don't think the price of 3 bed semis in Dublin is that much influenced by buy-to-let investors. It's probably still very much a pure supply and demand affair (pure as in - most prospective buyers for 3 bed semis would be of the "buy to live" type).

Borzoi

ambro25 wrote:

I
By way of example, see the following (from the 'Will the bubble burst' thread) -

Of buying to let and real numbers of same
.

No real surprise there considering the report was by Davy Stockbrokers, a vested interest in moving money away from property into equities. Also consider the properties they used - the cheapest was a €500K docklans dwelling - I think more common investor properties would be the 1 - 3 bedrooms type costing under €400K

ambro25

Borzoi wrote:

Also consider the properties they used - the cheapest was a €500K docklans dwelling - I think more common investor properties would be the 1 - 3 bedrooms type costing under €400K

Which is exactly my point, in my previous post.

Still - wouldn't have been a worthy 'house prices' thread without the auld 'vested interest' comment, would it?