How long have you been waiting or expecting a crash?

FillSpectre

AS it is obvious some people are actively waiting for a crash I became curious to how long people have waited or did wait.

utopian

FillSpectre wrote:

AS it is obvious some people are actively waiting for a crash I became curious to how long people have waited or did wait.

This isn't clear. Do you mean expecting a crash, or actively refusing to buy until there is a crash?

I have been expecting a crash since about 2000, but bought four years ago.

FillSpectre

utopian wrote:

This isn't clear. Do you mean expecting a crash, or actively refusing to buy until there is a crash?

I have been expecting a crash since about 2000, but bought four years ago.

Waited or waiting.

I was looking at the view of those buying. You waited 2 years. If you were still waiting it would be 6. No element of refusing to buy

Gurgle

I expect a crash when it goes out of fashion to live indoors and people start living in trees again.

Of course theres not enough trees anymore, so the focus will really just shift from construction to forestry, and the tree prices will rise to compensate the economy for the crash in house prices.

Then the government will step in making it impossible to plant a single tree on its own, so you can only buy a tree planted in an existing forest.

For those of you waiting years for a crash, when do you intend to admit you were wrong?

aniascor

I have been expecting a crash for about three years - but it was only three years agowhen I first became aware of how high the yearly increases in price were. A friend of mine had bought her house for 120,000 and sold it just two years later for 180,000 approx. I didn't think that that type of growth was sustainable.

However, this year, I have become a FTB. If I had had the money a few years ago I would have bought then - but I didn't. I still think that the growth is unsustainable - but that's not to say it will stop in the next couple of years. Friends of mine who have bought or are buying (many of them in Limerick where prices have already dipped and then recovered a little, but seem to be generally stagnant for the past 6 months or more) laughed at me when I suggested that prices can come down. With so many people possessing this kind of attitude, and so many people jumping into property with little or no research, it will take a while for things to slow down. But I do feel (and this is pure speculation on my part - I am guessing at this just as much as most people) that when thing turns, the crash will be hard. Not this soft landing the media often predict.

garred

Not really expecting a crash (although my interpretation of crash might be different from others). Although I do think that apartment prices might take a hit within the next 18 months.

PS : there should really be a sticky thread debating the property burst/bubble as they come up in threads every second day at the moment.
Any chance Victor?

miju

have been expecting a correction / large devaluation for about 6 months now, and given the media attention (and the finance people on these radio programs / articles) to unaffordiability / interest rises / rental yields being low etc etc, i wouldn't imagine it'd be another 2 years before we talk ourselves into decreasing prices as the herd turns

aniascor

But since we cannot predict the future, we can't say for sure. If Sept. 11th hadn't happened, stocks may not have taken such a hit, and people may not have been so wary of them in the past few years. I think the fact that people have been so wary of the stock market has fueled the property market - and who knows what else may happen in the future to spur it on even more, or to bring it crashing down.

ambro25

I am not waiting for it, as I am not "in the market" - but should there be a vote option for I have an opinion but a crash will/would be irrelevant ?

Put me down for 2 months, I suppose

Rev Hellfire

I remember 6 years ago when we bought our house everyone was saying how the crash was right around the corner and how first-time buyers couldn't afford to buy. History has as they say proven them wrong.

I'm not sure we're going to see a crash anytime soon either. While it may be true that many first time buyers cann't afford to buy a home in the locality they wish its not exactly like new houses are sitting around unsold.

hmmm

The experience of Ireland and other economies is that in the long run, house prices will average around 4 or 5 times the average wage. Considering that is about 30k in Ireland, house prices have been overvalued for about 5 years now. When the crash happens depends on when speculators lose their nerve.

flangeman

I agree with Hmmm, all it takes is for people to lose their nerve, I still believe that a house you can afford will always be a good investment because you have to live somewhere, but taking on a second investment property is always a risk, and because this investment op has been opened to so many non-typical investors, it won't exactly follow any rules.

The pop may come when all the bad press (and there has been a helluva lot of it recently) gets to most people and they want out because a crash 'might' come, or the pop won't happen because people can't afford to get out and must stay in for the long term (negative equity etc..).

But I think one thing is for sure, this country will find out what negative equity means, for how long is anybody's guess, and a guess is what it truly is.

My two pence (I'm in the UK).

Supercell

Once the supply meets demand and the construction industry starts laying off workers..then watch total collapse..not only of prices but the irish economy.

All those migrant workers/renters will simply move somewhere else like they did before..there is not going to be any soft landing, people thinking this are just cloud cuckoo land...
The Irish property market reminds me of famous picture of a heard of Bison on the move, the front ones just jump over the cliff into oblivian while behind them others are rushing to do the same..for every boom there is a bust and this boom has been logaritmic..well..the other side of that is....
I reckon the bison will start running out of steam close to when the last SSIA's mature..till then watch the ever increasing speed..soon to be followed by the ever harder impact for those at the front..

DublinWriter

Rev Hellfire wrote:

I remember 6 years ago when we bought our house everyone was saying how the crash was right around the corner and how first-time buyers couldn't afford to buy. History has as they say proven them wrong.

Indeedy. I came back to Ireland in 2002, and people were having the same conversation as today. I held back, hoping for the then new Euro-currency to go through a dive and Interest rates to be jacked up (as with the Sterling crises in 1990).

It never happened and I waited two years before caving in and buying a lurvely modern 4-bed semi-D outside Asbourne for buttons in 2004, and now it's worth buttons + €160K.

I was very, very, very lucky, but I shouldn't have been a mug and should have bought earlier, even when I was living in London.

I think that there's scope for an extra 10% - 20% in the current market, after that we'll see a leveling off with prices tracking inflation.

Even if there is a crash, it will quickly be disapated by people with a max of €250K - €300K to spend quickly jumping in and proping up the market.

miju

DublinWriter wrote:

Even if there is a crash, it will quickly be disapated by people with a max of €250K - €300K to spend quickly jumping in and proping up the market.

as i've said elsewhere i reckon what your going to get is people operating in herd mentality in complete reverse and people will hold off buying to see how far prices will drop

DublinWriter

miju wrote:

as i've said elsewhere i reckon what your going to get is people operating in herd mentality in complete reverse and people will hold off buying to see how far prices will drop

Well the poor auld renters need to have something to cling onto.

The_Conductor

Garred- yes, predictions of an impending bubble burst are coming up in here with increasing frequency. There appear to be two distinct camps- the buy property at any cost brigade (the arguments here have driven me up the wall) and the naysayers of impending doom (who have largely been decimated by their extended wait for armaggedon). There are a few others such as myself who while I do think property has peaked and will fall (perhaps not collapse) I would temper my prediction to circumstances rather than to a time scale. One of the main circumstances I would have to think is the rise and threat of continued rises in interest rates. Tomorrow will be a very interesting day for us all......

Ps- thread stickied as requested. It probably makes sense to keep this particular topic from sprawling all over the place.

ambro25

DublinWriter wrote:

Well the poor auld renters need to have something to cling onto.

Coming from a committed home buyer, that's rich - considering the reverse is just as true...

...just as put by smccarrick, quite eloquently as ever.

miju

DublinWriter wrote:

Well the poor auld renters need to have something to cling onto.

a: as already been discussed alot of renters are much better off when you take alot of things into consideration than home owners

b: did you even consider what i'm saying is entirely plausible given the herd mentality of "getting on the property ladder" as present, do you think people are going to just buy when prices turn or wait and see how far they turn, sure if they wait for them to start rising again they may end up paying an extra 10k or so but they'll still have a cheaper property than they would have before they turn , well worth a gamble in anyones book

here's a potentially unnevering thought for you DublinWriter, what if the renters who are "clinging" to this as you so arrogantly put it are already actively waiting for prices to turn, I myself know 3 couples who are waiting for a turn (all of them can afford a mortgage and one couple even pulled out of a sale half way through has they decided it just wasn't worth the money and to wait) , my parnet and i are waiting as we're priced out of the market (i know of others who are similiarly priced out of the market already) the banks are starting to get concerned about affordability (hence this new affordability index they've come up with)

Indeed DublinWriter you may find yourself clinging to hold onto your capital appreciation on your property which in reality the profit you'll make from it is negligible as other house prices are rising in line with your property as well, fundementally the property market can't take much more and more importantly neither can FTB with 33% of most FTB wages going directly on mortage payments and then when factoring in bills, cars, food etc , it wont take more than a full 1-2% rise in interest rates before things potentially get very nasty for alot of people

your not as snug as you might think DublinWriter at the end of the day every market is cyclical (correct me if i'm wrong but there's no market in history which has proved otherwise) and the property market is nearing the end of it's current cycle

miju

just read this post on AAM and i think it pretty much sums up what the property market is facing over the next 2 years

2Pac on AskAboutMoney.com wrote:

Look at the differentials between a 20 year mortgage and a 35 year mortgage....most of the higher risk recent borrowers had to get a long mortgage to 'balance' the books with the bank.

€250k loan.
Todays mortgage interest rate (say) 3.5%.
5% by end 2006 early 2007.
6% by the top of tightening cycle in 2007/2008 (maybe more)

date from

http://www.jeacle.ie/mortgage/ie

20 Year . Tightening implications

€1449 @ 3.5%
€1650 @ 5.0%
€1791 @ 6.0%

A €342 Rise in Monthly repayments and 23.5% higher payments at the end of the tightening cycle

35 Year . Tightening implications

€1033 @ 3.5%
€1261 @ 5.0%
€1425 @ 6.0%

A €392 Rise in Monthly repayments and 38% higher payments at the end of the tightening cycle

One can surmise quite easily that those who can least afford it will take a greater marginal hit.

and i suppose that will be when the **** will really start to hit the fan

DublinWriter

miju wrote:

here's a potentially unnevering thought for you DublinWriter, what if the renters who are "clinging" to this as you so arrogantly put it are already actively waiting for prices to turn,

That's exactly my point. In the occassion of a sudden price drop, people like you and your friends will jump on board and prop up a failing market.

miju

i dont think your understanding what im trying to say though DublinWriter

do you think people waiting for the turn are going to buy the minute the prices drop OR what i intend to and probably others as well of seeing how low they go before they start to rise again before buying, so it'll drop a good bit before being "propped" up and to be honest i personally think the property will need an awful lot of propping up when the turn comes


on a side note I see Bank Of Ireland have just agreed a sale and leaseback agreement on 30 of their branches so that's two major banks (the first being AIB ) to do such a thing, of course they say it's a them giving the vote of confidence to the property market,

personally i'd say do what they do rather than what they say, sure if they had confidence in the market they wouldn't have sold up yet surely they'd hang about a bit longer to free up more equity

or maybe they're bearing the subject of http://www.boards.ie/vbulletin/showpost.php?do=post&p=51504341 in mind and see the writing potentially on the wall????????

iguana

miju wrote:

I myself know 3 couples who are waiting for a turn (all of them can afford a mortgage and one couple even pulled out of a sale half way through has they decided it just wasn't worth the money and to wait) , my parnet and i are waiting as we're priced out of the market (i know of others who are similiarly priced out of the market already) the banks are starting to get concerned about affordability (hence this new affordability index they've come up with)

And where are you living while you wait. With your parents or are you paying rent? A couple choosing to rent together (in Dublin) for 3 and a half years would pay, at a rent average of €900pm, €36,000 on rent in that time.

In that time house prices rise by an average of 13% a year. So a house priced a £300k when they started paying rent, would have jumped to €450,000.

Do you really think that a house priced a €450k today is going to drop in value by €186,000. Prices would have to drop by more than 40% to even break even in that situation. They would have to drop by 50% to make the financial benefit worth over 3 years of paying someone elses mortgage and not having your own home.

There may be a price drop in Ireland in the coming years but it won't be by that much. Especially not in central-ish Dublin, where barring a plague that wipes out 2/3's of the population, demand will always outstrip supply.

And bearing in mind that over 30 years the interest on the extra €150k the house costs, at 3.7%, will come to €94k. And the stamp duty, which was around €10k on that house 3 years ago is now €27k. Waiting 3 and a half years to buy a house has cost that couple £297k on a house priced €300k.

Imo, someone who can buy, and wants to buy, but thinks it is cheaper to wait needs to do their sums again.

garred

smccarrick wrote:

Ps- thread stickied as requested. It probably makes sense to keep this particular topic from sprawling all over the place.

You have an old man very happy

I was just wondering what people feel will bring along this crash and the effects on house prices it will have. Hight interest rates? - but if interest rates increase do you not think the rents would also go up. Supply meeting demand? - but would we not just have a price plateau. Just interested to see what people feel will cause this crash. Also a lot of people have suggested that the SSIA are sustaining the market but you have to remember that when it is done and dusted these people will have an extra 255 a month at their disposal.

Although personally I think that if supply meets demand appartment prices might take a hit. Thats just personal opinion.

utopian

iguana wrote:

And where are you living while you wait. With your parents or are you paying rent? A couple choosing to rent together (in Dublin) for 3 and a half years would pay, at a rent average of €900pm, €36,000 on rent in that time.

You would need to factor in the c. €500 p.m. they would be saving over a mortgage or €300 @ 3.7%

iguana wrote:

In that time house prices rise by an average of 13% a year. So a house priced a £300k when they started paying rent, would have jumped to €450,000.

Surely this is a question-begging argument? Someone who chooses to rent rather than buy is making a bet that house prices are not going up by 13% p.a. for the next three years.

iguana wrote:

Imo, someone who can buy, and wants to buy, but thinks it is cheaper to wait needs to do their sums again.

Can I suggest that all of your sums are contingent on the 13% p.a. rise in prices? The question of whether it is better to buy than rent can not be solved by mathematics, unless one knows the future.

utopian

garred wrote:

I was just wondering what people feel will bring along this crash and the effects on house prices it will have.

A lot of people seem to think that the market is a bubble i.e. price rises are based on the expectation of future price rises. If that is the case, a change in sentiment, rather than any particular event, could cause a drop in prices.

As far as reaching a plateau at current prices goes, there is an argument that such a plateau would be out of line with historic price/rent and price/income ratios, which I think is why so many people predict a crash to bring us back to these ratios.

Afuera

iguana wrote:

And where are you living while you wait. With your parents or are you paying rent? A couple choosing to rent together (in Dublin) for 3 and a half years would pay, at a rent average of €900pm, €36,000 on rent in that time.

In that time house prices rise by an average of 13% a year. So a house priced a £300k when they started paying rent, would have jumped to €450,000.

Do you really think that a house priced a €450k today is going to drop in value by €186,000. Prices would have to drop by more than 40% to even break even in that situation. They would have to drop by 50% to make the financial benefit worth over 3 years of paying someone elses mortgage and not having your own home.

There may be a price drop in Ireland in the coming years but it won't be by that much. Especially not in central-ish Dublin, where barring a plague that wipes out 2/3's of the population, demand will always outstrip supply.

And bearing in mind that over 30 years the interest on the extra €150k the house costs, at 3.7%, will come to €94k. And the stamp duty, which was around €10k on that house 3 years ago is now €27k. Waiting 3 and a half years to buy a house has cost that couple £297k on a house priced €300k.

Imo, someone who can buy, and wants to buy, but thinks it is cheaper to wait needs to do their sums again.

You've failed to take in to account the amount it would cost the buyer to service the interest portion of their mortgage to the bank. This would amount to nearly 34k over 3 years. So the only real advantage the buyer has obtained is through capital appreciation (150k).

Hindsight makes it easy to look back and see what happened in previous years but that does not mean it will hold true for the future. Do you think that annual increases of the order of 13% will continue for the next 3 years? This would mean that the house that now costs 450k would be valued at nearly 650k after those 3 years. Without wage inflation to match, this is pure fantasy.

The banks have already stated that they expect price growth to slow to about 3-4% (more or less in line with inflation) in 2007. If they are correct in their predictions then the renter is not losing anything by staying on the sideline to wait things out.

If previous generations were taking out 20 year mortgages on a single salary then why should this generation have to settle for 40 year mortgages that need to be supported by two?

Afuera

garred wrote:

I was just wondering what people feel will bring along this crash and the effects on house prices it will have.

I would agree with utopian that sentiment is more important to the current housing market than anything. The numbers haven't added up for quite a few years now yet people continue to buy without questioning things too much.

A slow squeeze on interest rates is likely to cool things gradually but things could go sour before there is any great movement on the rates. The fact that the banks (both AIB and BoI) have been recently selling off their properties to leaseback and that there are 20% less starts on building houses this year would suggest that things may already be turning.

The banks and builders are more informed than most. If you ask the average Joe on the street, they will still throw out the usual mantras; "you can't go wrong with houses", "rent is dead money" etc. When the average Joe starts getting word of others that can't sell their house or hear of people buying property at discounts that's when it'll really tumble. The media knows how obsessed the Irish are about property so a story of someone getting burnt in the market will sell millions of papers, but it'll also cause millions to feel exposed and possibly panic.

[Addition] I just noticed this quote today from John Beggs, the AIB chief economist, which sounds quite ominous...
"With the expected rise in interest rates, the sharp rise in house prices relative to incomes which has clearly led to a deterioration in affordability, coupled with this information on commencements, suggests that we're not far from the top."

ambro25

The fact of the matter is that in a diving market like in an overheated market, 'power' lies with the renters more than ever:

(i) in a diving market, it's easy enough to pressure the landlord into favourable terms for them to ensure the place stays occupied long-term and that they'll still be able to offset some of the second mortgage with rent money and minimise their exposure to negative equity.

(ii) in a boiling market, oversupply does the job anyway.

Don't imagine for one minute that anyone as a "mortgaged landlord" will be able to pass on the additional cost of increased interest rates: they would try no doubt, and after a few months' of vacancy, they'll just line up with the rental market (which has different dynamics from the property market, let it be said).

Re. increase in interest rates - just thought I'd state the obvious, after noticing the exchange of example figures earlier:
* increase in interest rates from the property buyer point of view, means more and longer to repay.
* increase in interest rates from the renter/saver point of view, means saving more and faster.

iguana

utopian wrote:

Can I suggest that all of your sums are contingent on the 13% p.a. rise in prices? The question of whether it is better to buy than rent can not be solved by mathematics, unless one knows the future.

My example was of a couple who chose to wait for the last three years, not the next three. We don't know what the future holds, but I doubt that houses will drop so much that they become cheaper than they were three years ago. Not anywhere around central Dublin anyway, it's harder to know in the rest of the country as the supply and demand ratios aren't the same.

And it's all very well to advise to keep on renting indefinitely, but one of my dad's aunts has rented privately all her life and is now approaching 80. She pays €750pm on a little bungalow. She has to move if the landlord decides to sell up or move back in, which happened to her a few years ago. Her rent goes up in line with inflation and will continue to do so for the rest of her life. A HUGE chunk of her state and private pension is eaten by her rent leaving her with very little for anything else.

On the other hand my grandmother who has only a state pension, has no accomodation costs (and hasn't in decades), has a much higher disposable income. So she can afford holidays and days out. And much more importantly she has the security of owning her own home, and knowing that nobody can ring up and give her a few months notice to move. And if she decides to downsize she gets a big chunk of cash.

It is all very well thinking of the here and now, but most of us have a future. I'm happier paying higher mortgage repayments than rent right now. So that when I have kids my repayments will be lower and I won't have to work. And that by the time my partner and I are in our mid-fifties we won't ever have to pay again.

You make sacrifices when you can, to take care of yourself in the future. It's how life works.

miju

again as said earlier i really dont thin anyone here is advocating renting for life, i think the consensus if more it's better to rent in the current market