Housing bubble starting to pop?

redspider

One aspect to remember when thinking about the housing market is that it is not uniform. So some places will keep on rising while others stall, hiccup, etc. In fact, its difficult to get the real feel of the marketplace since the information of every transaction is not put into the public domain. It probably should be so that people can actually know whats going on in the market. As such, there are several surveys and even though they use 1000's of houses in their samples the surveys never agree.

The other thing to consider is that when prices are softening (I see that the Sherry Fitzgerald economist has already said that they are), the surveys published will lag reality and also mask lack of demand. House price market rises and drops tend to jitter and are stoichastic (I think), rather than being sinusoidal curves so the current market feeling can only be anecdotal. And we all have different perceptions of what it is depending on what we see being sold and bought in the marketplace.

ionapaul wrote:

Not sure about that, still a whole lot of people around who firmly believe 'you can't lose money on property', 'property always goes up' and 'i own 3 investment properties but don't know what yield means'! Lots of people are still in the euphoria stage, dreaming of becoming millionaires without having to work, just by borrowing money from the bank and buying house after house... It is truly going to be horrible on the way down for many, many people.

It could be horrible, but only for a minority of people. However, due to multiplier effects and sentiment who knows what it will do to confidence and the economy. Currently there is over-confidence as in those 'property cant lose' opinions, but whether we will ever get to major under-confidence is another story. And such a change wont happen quickly.

25% of the Irish economy is now tied up with property. 15% of Irish conversation is tied up in it! It affects us all no matter what.

My advice to people is dont over-extend yourself. Better play safer and rue the chance of a missed 50k or so upside on an investment than be left with 50k in negative equity and a rental 'income' which is less than your mortgage costs. Lives in previous generations and places have been forever affected by similar scenarios, such as in the UK and Japan. It can happen here, so be aware and make your decisions accordingly.

As to whether the market is now dropping - not yet according to the survey's, and the anecdotal evidence I had of a sale last week was that for that particuar house it wasn't. AMV of 1.3m and sold for 1.5m. Others have mentioned Willow Park in Athlone, but that is like Beruit in its bad days so is not a true reflection of the market per se. There are a lot of houses on the market though it has to be said. I think myhome.ie was sold to the Irish Times at the right time, AIB sold their HQ at the right time, etc.

Redspider

finnpark

RTE Six One news are carrying the story this evening. And they mention the "bubble"

finnpark

Eddie Hobbs is also covering it next Monday night.

He will amke the comparison between Viagra and the Irish property market.

The Irish property amrket is on Viagra but it will pop soon and come down very rapidly.:o

soma

finnpark wrote:

Eddie Hobbs is also covering it next Monday night.

Won't the programme be weeks/months out of date.? It's not live is it..? I just think sentiment has taken a bit of a battering especially since the first few weeks of sept.

SimpleSam06

redspider wrote:

It could be horrible, but only for a minority of people... 25% of the Irish economy is now tied up with property.

Just for comparison, the GDP of the United States had dropped by 31% during the great depression, before it started to turn around. Unemployment was at 23.6%, and 40% of banks closed...

D'Peoples Voice

Deleted User wrote:

i think alot of property outside of dublin and its large commuter zones peaked last spring

Someone I know is seeling their 3-bed semi-detached in Dublin 24, about a 10-15min walk from Tallaght hospital, the Sqaure, the luas,library, the school is not far away either etc. Anyway they had reached sale agreed in Late August, but the buyer has since pulled out.
Get this, the auctioneer/estate agent is now telling them that they won't get the same price if they try to re-sell, that the market has turned. This is from an estate agent who proclaim themselves to be one of irelands biggest.
Now if houses in well services areas of Dublin 24 are finding it hard to keep their value, what about Clonee in County Meath? Are their prices going to fall???
The house fell just under the Stamp duty bracket of EUR 381,000.

whizzbang

D'Peoples Voice wrote:

Someone I know is seeling their 3-bed semi-detached in Dublin 24, about a 10-15min walk from Tallaght hospital, the Sqaure, the luas,library, the school is not far away either etc. Anyway they had reached sale agreed in Late August, but the buyer has since pulled out.
Get this, the auctioneer/estate agent is now telling them that they won't get the same price if they try to re-sell, that the market has turned. This is from an estate agent who proclaim themselves to be one of irelands biggest.
Now if houses in well services areas of Dublin 24 are finding it hard to keep their value, what about Clonee in County Meath? Are their prices going to fall???
The house fell just under the Stamp duty bracket of EUR 381,000.

a lot of estate agents are explaining this as the property market is "correctng itself" this is the exact same term used during the first few weeks of the dot com bust in 2000!

the question is how big a decline is a correction? and how big is a crash?

Sponge Bob

FTB Activity is evaporating so if you are an FTB looking to buy in the next year then AIB have announced a €2000 cash bonus if you sign up with them

http://www.aib.ie/servlet/ContentServer?pagename=AIB_PressOffice/AIB_Press_Releas/aib_po_d_press_releases-0&cid=1141323113151&poSection=HP&poSubSection=null&position=first&rank=top

In an exclusive offer which will run until the end of the year, AIB is offering a EUR2,000 cash bonus to first time buyers who apply for an AIB mortgage and receive a letter of offer between 9th October 2006 and the end of the year. The mortgage must be drawn down before 31st December 2007.

Roy Was Right

I am astounded by this thread.
Never have so many hoped for so much despair.

All the predictions of doom are, as of yet baseless. But keep it up lads, if ye wish hard enough it might come true. And if it does then its a disturbing prospect for us all - homeowners or not.

It reminds me of desperate gambler who keeps saying " this race wiil be the one - I am due it". If you say the words crash and bubble often enough it will happen. Maybe not this month, next month or even next year... but then ( if it happens - something I am not at all convinced of) the smug post rationalisation will be unbareable.

Why do so many people here seem to be urging the " crash" on? Do you not realise the imapct on the economy? I assume most of ye have jobs. The effect of an asset crash will effect nearly sectors of indusrty.

As the saying goes.... Economists have predicted 7 out of the last 4 recessions. I think some people here have an equally as good record in predicting the housing " crash"

CiaranC

Sponge Bob, I can hardly believe my eyes reading that link. What next?

ionapaul

Some good points Roy, but many of us recognise that, despite the huge problems and pain that the bubble bursting will bring, in the long term (you know, for my children and your children and their children) Ireland NEEDS to get past this financial anomaly. It is a cancer that we have ignored for too long.

Yes, the chemotheraphy will nearly kill many of us

CiaranC

Roy Was Right wrote:

Never have so many hoped for so much despair.

I know there are few here who earn buttons and think the world owes them a house at their particular price point, and that a crash is going to magically deliver this, but to be fair most people recognise what a disaster it would actually be.

A lot of people are just interested in the topic.

ionapaul wrote:

Some good points Roy, but many of us recognise that, despite the huge problems and pain that the bubble bursting will bring, in the long term (you know, for my children and your children and their children) Ireland NEEDS to get past this financial anomaly.

Funny that most people that think Ireland needs a crash wont be the ones most drastically affected by it

Roy Was Right

Roy Was Right wrote:

I am astounded by this thread.
Never have so many hoped for so much despair.

All the predictions of doom are, as of yet baseless. But keep it up lads, if ye wish hard enough it might come true. And if it does then its a disturbing prospect for us all - homeowners or not.

It reminds me of desperate gambler who keeps saying " this race wiil be the one - I am due it". If you say the words crash and bubble often enough it will happen. Maybe not this month, next month or even next year... but then ( if it happens - something I am not at all convinced of) the smug post rationalisation will be unbareable.

Why do so many people here seem to be urging the " crash" on? Do you not realise the imapct on the economy? I assume most of ye have jobs. The effect of an asset crash will effect nearly sectors of indusrty.

As the saying goes.... Economists have predicted 7 out of the last 4 recessions. I think some people here have an equally as good record in predicting the housing " crash"

yes a crash will destroy the economy and there is plenty of HARD EVIDENCE to support the case for a crash. you said careful what you wish for - I certainly do not wish a continuation (impossible) of what has been going on i.e. a generation being robbed continuously each month for 30 - 40 years

there are always people who believe a crash would be in their interest
yes people have been tried to predict a crash several times the past few years but this one has happened already the ball is rolling.

And the average couple should be able to afford an average house - it makes sense

how are you "astounded" !!!!!!!!

seriously - the census figures on empty houses and 92,000 houses due to be completed this year!
and people have been told all along that the prices have gone up because of a SHORTAGE - its because of PURE GREED a quick buck - thats gonna RUIN the economy
it should have ended a long time ago then it wouldnt have had the impact its going to have

the madness of it all

ronbyrne2005

Roy Was Right wrote:

I am astounded by this thread.
Never have so many hoped for so much despair.

All the predictions of doom are, as of yet baseless. But keep it up lads, if ye wish hard enough it might come true. And if it does then its a disturbing prospect for us all - homeowners or not.

It reminds me of desperate gambler who keeps saying " this race wiil be the one - I am due it". If you say the words crash and bubble often enough it will happen. Maybe not this month, next month or even next year... but then ( if it happens - something I am not at all convinced of) the smug post rationalisation will be unbareable.

Why do so many people here seem to be urging the " crash" on? Do you not realise the imapct on the economy? I assume most of ye have jobs. The effect of an asset crash will effect nearly sectors of indusrty.

As the saying goes.... Economists have predicted 7 out of the last 4 recessions. I think some people here have an equally as good record in predicting the housing " crash"

oh get over yourself.

Sponge Bob

Roy Was Right wrote:

I am astounded by this thread.
Never have so many hoped for so much despair.

All the predictions of doom are, as of yet baseless.

God that was long winded Roy, the simple answer is

"Every Bubble Bursts"

OK with that ??

shoegirl

redspider wrote:

One aspect to remember when thinking about the housing market is that it is not uniform. So some places will keep on rising while others stall, hiccup, etc. In fact, its difficult to get the real feel of the marketplace since the information of every transaction is not put into the public domain. It probably should be so that people can actually know whats going on in the market. As such, there are several surveys and even though they use 1000's of houses in their samples the surveys never agree.

The other thing to consider is that when prices are softening (I see that the Sherry Fitzgerald economist has already said that they are), the surveys published will lag reality and also mask lack of demand. House price market rises and drops tend to jitter and are stoichastic (I think), rather than being sinusoidal curves so the current market feeling can only be anecdotal. And we all have different perceptions of what it is depending on what we see being sold and bought in the marketplace.

I have to agree here. But from what I can see the big problem right now is that any potential FTBs who were in a position to buy have already bought. What this is leaving is a vast army of people on "average" to low incomes who cannot even consider buying, even on a combined wage, and also a load of people with impaired credit who could afford to buy, but won't get a mortgage (there seems to be dozens of these every day on boards and AAM).

The thing is - I know a lot of you pundits will turn around and say - but aren't these people the tenants who will make rented property profitable for others? No, because somebody who cannot afford a 1000 a month mortgage simply isn't going to be able to afford the 1200 a month in rent that the landlord is likely to demand for his property. The guy who takes home under 2000 euros a month isn't going to be renting your apartment for 800 euros - he's going to be looking for a room for 300-450 a month. This is driving the rented market down as "posh" tenants are few and far between - most of that potential group have already bought houses themselves!

Secondly also, and this is a point sometimes made but rarely with vigour. The runaway property market, consumer spending and SSIAs etc have masked the turndown in the industial sector, where something like 30,000 jobs have vanished since 2000 - are more are likely to disappear. I'd see this as hitting outside Dublin more aggressively, as Dublin lost its industrial base in the 70s and 80s. Places like Cork, Shannon and Clonmel are in for a rude awakening.

The reason I think the market is stalling is that prices have hit a threshold of unaffordability for the majority of potential FTBs. What it might do is keep prices steady for a year or two, but the very fact that there are ads in the Evening Herald every night looking to buy off hard-to-let properties is a sign of things to come.

Gurgle

Sponge Bob wrote:

"Every Bubble Bursts"

Balloons, on the other hand, can hold their shape indefinitely or deflate slowly.

Heres a prediction for ya:

House prices will continue to rise for the next few years, then slow down and in some places decrease a bit, though probably not as far as today's prices.

All the doom & gloomers in the last 918 posts will immedietly say 'see, told you so'.:rolleyes:

Shane™

Gurgle wrote:

Heres a prediction for ya:

House prices will continue to rise for the next few years, then slow down and in some places decrease a bit, though probably not as far as today's prices.

I think this post was true a few years ago, it has risen and is currently in a slow down, you might argue this won't result in a crash - but it is a slow down

conor_mc

Roy Was Right wrote:

I am astounded by this thread.
Never have so many hoped for so much despair.

All the predictions of doom are, as of yet baseless. But keep it up lads, if ye wish hard enough it might come true. And if it does then its a disturbing prospect for us all - homeowners or not.

To quote a regular askaboutmoney contributor...

"You're right, I wouldn't wish a speculative property bubble on anyone!".

This is the nub of it, that the bulls just don't get. The crash isn't the problem, it's the bubble that's the problem. Without it, there'd be no crash on the horizon (for which there are masses of indicators...!) and there'd be 20/25-year mortgages instead of 35/40-year mortgages. There'd be plenty of housing for everyone (soft rental market indicates sufficient housing stock, just imbalance in the ownership of that stock due to speculation). Average house price would be 5/6 times the average wage, not 10/12 times it.

Falling national exports would be a cause of concern, discussed and debated by our public representatives, who might try something to spur some growth in this essential sector, instead it's glossed over because of headline figures of "6% growth" where that growth is in the construction bubble and not where the rudimentary health of an economy is based - it's balance of trade with the outside world.

20% of our workforce are employed in sectors associated with construction - is that healthy? Yet without contruction-fuelled wage inflation and its erosion of competitiveness, perhaps these people could have been employed in a manufacturing sector that actually exports real things, real items, bringing real money into the economy instead of credit, credit and more credit.

Gurgle

Shane&#8482 wrote:

I think this post was true a few years ago, it has risen and is currently in a slow down, you might argue this won't result in a crash - but it is a slow down

A crash is something that happens at speed.
Slowing down avoids a crash.

*wanders off to motoring forum

mox54

this topic has been going on for some time now and still the economy is racing forward - we have years of development still ahead of us before we even begin to compete properly with the UK, France, Germany etc etc, even Spain is years ahead of us so I wouldn't worry too much because once the housing market goes we still have roads, factories, roundabouts and on and on.....it'll be grand:D ...stop talking us into recession and doom and gloom, enjoy it while we have it.

:cool:

whizzbang

mox54 wrote:

this topic has been going on for some time now and still the economy is racing forward - we have years of development still ahead of us before we even begin to compete properly with the UK, France, Germany etc etc, even Spain is years ahead of us so I wouldn't worry too much because once the housing market goes we still have roads, factories, roundabouts and on and on.....it'll be grand:D ...stop talking us into recession and doom and gloom, enjoy it while we have it.

:cool:

Have we not prices outselves out of the manufacturing market with wage inflation? So I'm not sure there will be that many factories to build.

miju

Gurgle wrote:

Heres a prediction for ya:

House prices will continue to rise for the next few years, then slow down and in some places decrease a bit, though probably not as far as today's prices.

would you care to perhaps expand on your reasoning for this prediction with a rational well based argument or is it just a case of you wishing that will be the case?

Sponge Bob

miju wrote:

would you care to perhaps expand on your reasoning for this prediction with a rational well based argument

LOL

Here is one.

The IT property supplement, no less, has a breakdown on page 8 re: the 9 out of 96 properties that actually sold at auction this week ( and the 15 of 96 that allegedly sold afterwards.....allegedly) .

If you look at the small article on the top right of that page which is an unattributed commentary on the week you will notice strange language used by the peoperty journos about the prices set by the auctioneers generally .

The auctioneering industry, according to the IT, is apparently showing "delusional behaviour " at present. And there was me thinking it was only the public and the banks who were delusional while the auctioneers were ratoinally setting them ever higher price targets .

Its so strange being on a conveyor belt when it judders to a halt !!

soma

Gurgle wrote:

A crash is something that happens at speed.
Slowing down avoids a crash.

*wanders off to motoring forum

Utter tosh, would you tell the japanese that they didnt have a property crash cos their house prices fell for 15 years..?

Assets like houses are 'sticky' on the way down due to the length of time involved in transactions, plus emotional attachment will always cause plenty of people to ship huge carrying costs (e.g. the imbeciles "topping up their pension" by subsiding their tenants' rent) until they eat them alive.

soma

D'Peoples Voice wrote:

Someone I know is seeling their 3-bed semi-detached in Dublin 24
..
..
..
The house fell just under the Stamp duty bracket of EUR 381,000.

In many years, when the story of this rampant asset speculation (that's ALL it is people, be it tulips or houses) is written, it will all seem so simple to people to spot the irrational exuberance.

Look at the ludicruous situation depicted above. A house in tallaght (and I'm from West Dublin myself) has been reduced to what is essentially half a million US Dollars.

If anyone can put their hand on their heart & say that a house in one of the worst suburbs can command that kind of money - then you are officially stark raving mad.

conor_mc

mox54 wrote:

this topic has been going on for some time now and still the economy is racing forward - we have years of development still ahead of us before we even begin to compete properly with the UK, France, Germany etc etc, even Spain is years ahead of us so I wouldn't worry too much because once the housing market goes we still have roads, factories, roundabouts and on and on.....it'll be grand:D ...stop talking us into recession and doom and gloom, enjoy it while we have it.

:cool:

The economy is not racing ahead - construction and construction-related activity is racing ahead, creating nice comfort-blanket headlines about 6% growth etc.

But the reality is that the rest of the economy, the part that actually sells stuff to people other than ourselves, is on the brink of recession.

Go look at the balance of trade if you don't believe me and tell me which way it's going.... cos it sure as heck ain't heading north at a rate of knots!

conor_mc

soma wrote:

Utter tosh, would you tell the japanese that they didnt have a property crash cos their house prices fell for 15 years..?

Assets like houses are 'sticky' on the way down due to the length of time involved in transactions, plus emotional attachment will always cause plenty of people to ship huge carrying costs (e.g. the imbeciles "topping up their pension" by subsiding their tenants' rent) until they eat them alive.

In fairness, I think Gurgle was probably referring to halt in nominal house prices, thus allowing inflation to eat away at the over-pricing over a number of years.... that's my opinion on what a slowdown is anyway, even though I can't see it happening like that.

Japan was an out-and-out crash for 15 years.... as in falling property prices almost the whole time.

SimpleSam06

mox54 wrote:

once the housing market goes we still have roads, factories, roundabouts and on and on.....it'll be grand:D ...stop talking us into recession and doom and gloom, enjoy it while we have it.

Have you seen the roads lately? And even that much was done with handouts from the EU. Most of those factories aren't ours, they are owned by multinationals, who can and will hit the road whenever it suits them. As for enjoying it while we have it, we don't have it. We mortgaged it out for the next 35 years. In 35 years we will have it, assuming something else doesn't come along in the meantime to cause further damage.

Now you are right in that its not all doom and gloom, the medical equipment industries are investing more in Ireland, not less, and we have a young and vigorous population with more than half a brain in their heads. Mid term, the outlook isn't too bad, if we can get some decent management in the place to further indigenous industries and put taxes into infrastructure, instead of a nigh on useless civil service.

That, however, is the big if. What politician has the vision and clarity of thought to achieve that? We're stuck with the hangover of king Haughey's cronies and their lackeys forming the next wave. Bah.

soma wrote:

A house in tallaght (and I'm from West Dublin myself) has been reduced to what is essentially half a million US Dollars.

If anyone can put their hand on their heart & say that a house in one of the worst suburbs can command that kind of money - then you are officially stark raving mad.

Nyahahahah, I may make that my new signature. Succinctly put, sir.