Housing bubble starting to pop?

BigEejit

that there are signs of a slight easing in prices that will reduce the risk of a potential property crash.

or indeed it could be the start of a steady decline ... as for 300k being a decent price for a house..... 100k was a decent price for a house 10 years ago, did peoples wages increase 300% keeping the decent price ratio the same?

(BTW, my brother bought an end of terrace in Dublin 24 in 1996 for £45k ...house in now €280 - 320k ... the mind boggles)

SimpleSam06

Gurgle wrote:

300k for a 4 bed on an acre is not going to lose half its value

Are you sure about that?



Yes I know its in the states, but I wager the Irish graph dosn't look much different. Now does that look natural to you?

jesus_thats_gre

Gurgle wrote:

There are loads of people who wish it would, as they would like to own their own homes but aren't willing to give up a spend-happy lifestyle to buy them.

Is this the same spend happy lifestyle that you could attribute to historically cheap credit and the lack of appreciation for the true value of what they buy? Tis somewhat ironic that you singled this out as the significant reason why they cannot buy property.

jimmycrackcorm

I'm confused about this. from the post on examples of hous price drops....

Example 6
The Paddocks, Adamstown, Co Dublin
2 bedroom apartments started off last week at €305,000 but have now been dropped to €290,000.Original launch details:http://www.unison.ie/irish_independent/stories.php3?ca=303&si=1701582&issue_id=14736New Price: €290,000http://www.dng.ie/search_result_detail.cfm?ID=101618589


I'm confused because my sister-in-law is on a waiting list for a cancellation on one of these. Given the demand then why a price drop? I asked her but she said that there are actually two styles of apartments and one is still 305k.

Gurgle

jesus_thats_gre wrote:

Is this the same spend happy lifestyle that you could attribute to historically cheap credit and the lack of appreciation for the true value of what they buy?

Yep.
You only have to look at the number of '06 cars on the road to see this.

jesus_thats_gre wrote:

Tis somewhat ironic that you singled this out as the significant reason why they cannot buy property.

I'm singling it out as the reason why a lot of people who could buy property choose not to. Its proportionally a much bigger investment than it used to be, and a lot of people are more inclined to spend their income on cars & holidays than property.

This is not a complaint or a criticism, I see no pressing reason to buy a house when you're young, free and single. Might as well enjoy your money instead of signing up to 30 to 40 years of repayments.

(I do see pressing reasons to buy a house when you're married and planning to have children, which eventually happens to most young, free single people.)

There was a period there when you could do both - rental yields were higher than mortgage repayments so you could buy a house for effectively nothing. This is what drove the prices up in Dublin beyond all bounds of common sense, as thousands of people saw their friends buy a house, rent out rooms and have it pay for itself.

Now, as everyone is enthusiastically pointing out, the rental market is flooded and rents have come down. But to point at the Dublin rental market and say Ireland's housing market is doomed is just purile. A housing market where rental vs investment is over 100% was never going to last.

As stated, I expect a soft landing.
People who thought they could get a free retirement policy out of a property investment are starting to feel the pinch of making up the difference to pay the mortgage. I still think most of these people will hold their ground rather than sell at a loss.

Just as potential buyers have a maximum they'll spend, potential sellers have a minimum they'll sell at.

Gurgle

SimpleSam06 wrote:

Are you sure about that?

Those are inflationary adjusted values.
When inflation is greater than price rises, you see an effective decrease in property values without anyone actually losing money on their property.

BigEejit

It is an American graph and so is only an indication (possibly false) of the market worldwide ... I would estimate that if the same thing was done to the Irish market that spike at the end there would be twice as tall ....

I believe he has taken inflation out the equation to show that house prices have been more or less level (taking in boom and bust times) ... the spike at the end is showing that currently property is way overpriced as it has gone beyond being easily afforded as it was in the past ...

how many multiples of the average industrial wage is a average house in any Irish city now? how many years is the average mortgage for now (ftb's)? Now compare the figures with those of the last 50 years .... :eek:

SimpleSam06

Gurgle wrote:

Those are inflationary adjusted values.
When inflation is greater than price rises, you see an effective decrease in property values without anyone actually losing money on their property.

How on earth can you look at house prices over time without adjusting for inflation? The mind boggles...

Gurgle

SimpleSam06 wrote:

How on earth can you look at house prices over time without adjusting for inflation? The mind boggles...

Oh good grief!

We're talking about a housing market crash, negative equity.

Negative equity means you owe more than your house is worth. This means an actual drop in value, not an inflation-compensated net present value equivalent loss compared to what you paid for your house.

The comment on the graph is a drop from 100k(npv) in 1890 to 66k(npv) in 1920. Thats an average of 1.1% per year. Go look up the average inflation figures from 1890 to 1920.
(edit - i looked it up - its 82.88% over those 30 years, averaging to 2.76% pa)

If its more than 1.1% per year(yep), then the actual cost of this average house rose over those 30 years even though the net inflationary adjusted value fell.

The parts of the graph that show a drop correspond with times of extremely high inflation. This shows that house prices did not actually drop, inflation rose.

Gurgle

BigEejit wrote:

how many multiples of the average industrial wage is a average house in any Irish city now?

Why does everyone think the leafy suburbs define the nationwide housing market?

The average price paid for a house nationally in August of this year was €306,173.
The average price paid for a house in Dublin and outside Dublin in August 2006 was €412,877 and €264,622 respectively

Average industrial wage is ~30k so the average house price is x10.

conor_mc

Gurgle wrote:

Average industrial wage is ~30k so the average house price is x10.

.... which is almost twice the historical norm.

SimpleSam06

Gurgle wrote:

Oh good grief!

We're talking about a housing market crash, negative equity.

Negative equity means you owe more than your house is worth. This means an actual drop in value, not an inflation-compensated net present value equivalent loss compared to what you paid for your house.

With such a fundamental lack of understanding of what inflation means to house prices or the prices of anything, you really shouldn't bandy about terms like "negative equity". Thats like yerman that thought he could hand his keys back to the bank and call it even.

Inflation adjusted prices means the actual, real value of the house in terms of the value of money at the time. If you had €10,000 in 1970, you could buy a lot more with it than if you had €100,000 in 2006. That is inflation. Real value. Still with me? That means inflation adjusted prices are the only way to measure house prices over time. Otherwise you could say your house in ballygobackwards cost you €5000 in 1970, but is worth €500,000 now. You didn't really make a lot of money, since your money isn't worth as much (it can't buy as much of anything).

Any way you spin it, the prices over the last 5 or 6 years are completely off the scale. Bubble. Pop. Therefore I would say without a doubt that negative equity is on the cards for anyone who bought in the last 5 or 6 years, jusdging by inflation adjusted figures for the last century.

Gurgle wrote:

The parts of the graph that show a drop correspond with times of extremely high inflation. This shows that house prices did not actually drop, inflation rose.

Bwahaaaaaahahhaha!! Oh dear oh dear... Are you one of those "property never falls" people? Japan called, it wants its prices from 15 years ago back...

gamer

if house in good areas are going up 15percent,EVERY YEAR, thats a reason to buy,cos at some point they will be out of your reach in regards to having any chance of getting mortgage,unless u are happy to rent for the next 50 years.I dont think they are gonna get cheaper in 3 years time.there is not enuff serviced land in dublin to build 3bed houses on ,to meet demand.

whizzbang

gamer wrote:

if house in good areas are going up 15percent,EVERY YEAR, thats a reason to buy,cos at some point they will be out of your reach in regards to having any chance of getting mortgage,unless u are happy to rent for the next 50 years.I dont think they are gonna get cheaper in 3 years time.there is not enuff serviced land in dublin to build 3bed houses on ,to meet demand.

What do you make of the rising interest rates and bearish sentiment in some of the papers? Any chance we are going through a slowdown in the housing market?

miju

gamer wrote:

.....I dont think they are gonna get cheaper in 3 years time......

you know gamer your 100% correct they won't get cheaper in 3 years time.....why???????

because they are becoming cheaper TODAY

Cantab.

gamer wrote:

if house in good areas are going up 15percent,EVERY YEAR, thats a reason to buy,cos at some point they will be out of your reach in regards to having any chance of getting mortgage,unless u are happy to rent for the next 50 years.I dont think they are gonna get cheaper in 3 years time.there is not enuff serviced land in dublin to build 3bed houses on ,to meet demand.

Well if houses in good areas are going up 15% ever year, and rents are staying the same, then the argument for buying over renting falls apart the longer this goes on.

For example. I live in a house in D6: my rent payments are 25% of an equivalent mortgage repayment. For me to buy a crap house in commuter-ville, I would have to increase what I pay in rent in D6 by 50%. It just doesn't make any logical sense!!! The benefits of ownership (i.e. inherent Irish inferiority complex) just aren't worth this kind of money.

[side note: I had the misfortune of having to travel to "Blanchardstown Town Center" last weekend. There was a sign on one of the housing developments at the side of some roundabout saying "if you lived here you'd be home by now" (I think it was called the pheonix racecourse or something) - I nearly crashed the car with laughter!]

NCS

Shhhh... No-one tell him/her... I need people like that about until my PPR is sold...

Contrarian

Heres another ridiculous graph for ye. Housing as a % of GDP is reaching absurd levels.

mad m

Seen one house not to far from me drop its asking by €40K...So from €635k to €595k and its not been up long.

Gurgle

SimpleSam06 wrote:

If you had €10,000 in 1970, you could buy a lot more with it than if you had €100,000 in 2006. That is inflation. Real value. Still with me?

Did you actually read any of my posts or just click 'quote' where you saw a point of view different to your own?

SimpleSam06 wrote:

Bwahaaaaaahahhaha!! Oh dear oh dear... Are you one of those "property never falls" people?

Nope. Thats stupid.

SimpleSam06 wrote:

Japan called, it wants its prices from 15 years ago back...

It has requested its economy back too.

mad m wrote:

Seen one house not to far from me drop its asking by €40K...So from €635k to €595k and its not been up long.

Oh well that just proves it then :rolleyes:

I saw a car in the buy and sell that was €500 cheaper than it was advertised 2 weeks before - OMG THE PRICE OF SECOND HAND CARS IS ABOUT TO DROP TO NOTHING, EVERYBODY SELL YOURS NOW, QUICK BEFORE ITS TOO LATE!!!!!

gurramok

Gurgle wrote:

Oh well that just proves it then :rolleyes:

I saw a car in the buy and sell that was €500 cheaper than it was advertised 2 weeks before - OMG THE PRICE OF SECOND HAND CARS IS ABOUT TO DROP TO NOTHING, EVERYBODY SELL YOURS NOW, QUICK BEFORE ITS TOO LATE!!!!!

Can you find a property...errr rephrase (as we know 1 example is not good enough) 'a few properties' that have actually gone up in price in last couple months or so?
Would be interested to see them, i've only found ones that have either stayed the same price or gone down in price, maybe i'm looking in wrong places:rolleyes:

Dr. Octagon

The joy of all this is that commuting, dido/coldplay listening, rat racing fools will cushion the blow of buying a house for my generation when their hyperinflated properties devalue. The fat cats will be fine, they'll get out on time but their departure will be the catalyst for a rapid downward spiral. I can't wait!

Dr. Octagon

CiaranC wrote:

Speaking of not thinking things all the way through, I cant help be amused at the people (usually single people on the avg national wage) coming on here and rubbing their hands together at the prospect of a property crash.

They seem to think that a property crash will mean that house prices will fall to exactly where they can become a property owner themselves (presumably they will buy exactly where prices go back up because they are so clever) without the impact on the wider ecomony affecting them in any way whatsoever.

These people are as delusional as the supposed sheep who 'think prices can rise at their current rates forever'. (Where are these people anyway, they dont seem to post on the internet)

Hello there your excellence.

Two questions..Be honest...Do you have many property investments? By any chance are you trying to maintain the all important market perception of which you perorate?

SimpleSam06

Gurgle wrote:

Did you actually read any of my posts or just click 'quote' where you saw a point of view different to your own?

Eh, you were the one making out that inflation had nothing to do with the price of a house. Negative equity is important only when you want to sell your house. Likewise with inflation. It doesn't matter if you sell it for €10,000 more than you bought it for, when that sale can't buy anything more than the original price of the house+10k. Is the connection being made yet? So your blithe dismissal of that graph earlier doesn't really put you in any kind of authoritative position there.

Gurgle wrote:

It has requested its economy back too.

wut

Sponge Bob

poor Gurgle is also studiously avoiding the BIG issue of the 275k empties nationally and the sudden and historically unique bloat in the national empty ratio betwen 2002 and 2006 from 11% to 16% .

You emm , uhhhhm, eh ! 'Thoughts' Gurgle please. I'm sick of asking for them now.

Gurgle

gurramok wrote:

Can you find a property...errr rephrase (as we know 1 example is not good enough) 'a few properties' that have actually gone up in price in last couple months or so?

Ok, you're asking me to point at a property where it didn't sell at the original asking price so the seller increased the asking price?
Thats generally not the best way to speed up a sale.

SimpleSam06 wrote:

Eh, you were the one making out that inflation had nothing to do with the price of a house.

No, I'm not. I'm saying that inflation is the mechanism by which large fluctuations can occur in the value of the housing market without large fluctuations in the actual prices.

SimpleSam06 wrote:

So your blithe dismissal of that graph earlier doesn't really put you in any kind of authoritative position there.

I'm not blithely dismissing the graph, I'm saying that it shows how a crash is not required for an inflated housing market to come back into line. It actually backs my point up if you look at the inflation figures.

Sponge Bob wrote:

poor Gurgle is also studiously avoiding the BIG issue of the 275k empties nationally and the sudden and historically unique bloat in the national empty ratio betwen 2002 and 2006 from 11% to 16%

Poor Sponge Bob didn't actually read anything past the headlines on this historic national empty ratio:rolleyes:
Let me summarise it for you:
Holiday homes - technically unoccupied
Section 23 properties - Tenants are purely optional, saves the owner from paying income tax on his other earnings
Houses on the market - often empty for showing purposes

Here, let me waste my time and provide a link you're not going to read:
Holiday homes

Sponge Bob

Gurgle wrote:

Poor Sponge Bob didn't actually read anything past the headlines on this historic national empty ratio:rolleyes:
Let me summarise it for you:
Holiday homes - technically unoccupied
Section 23 properties - Tenants are purely optional, saves the owner from paying income tax on his other earnings
Houses on the market - often empty for showing purposes

Here, let me waste my time and provide a link you're not going to read:
Holiday homes

Holiday homes are held for the same reason as any other property, property prices never fall you see

But the sum total of the rural renewal and seaside resort scheme properties is only about 25000 out of 275000 properties nationally that are empty. As 16% of the national housing stock is empty they explain 1.6% of it . Even assuming they are off market for this reason we are still running an empty rate of 14.4% which is still historically very high.

For my purposes I assume that 100,000 of the 275,000 _could_ hit the market once the capital appreciation juggernaut stops and that 175,000 will not or will continue to be held by their owners. Thats as much as we build in two normal post 1990 years.

The rest of the empties do not come with tax subsidies and anyway the tax subsidies will start to run out for the seaside resort properties in 2 or 3 years at which point they will overhang the market unlike now.

Only 10% of these empties, nationally, are tax break properties.

Other tax break schemes like section 50 require that you let ( to students) in order to get any tax break. They have distorted the private rental market in cities and towns where there are private rented accomodation .....eg Athlone .

In London the empty rate is 3% , in Dublin its 6% , how peculiar.

Gurgle

Sponge Bob wrote:

Holiday homes are held for the same reason as any other property, property prices never fall you see

Not because people want a place to go at the weekends etc to get away from the city?

Sponge Bob wrote:

For my purposes I assume that 100,000 of the 275,000 _could_ hit the market once the capital appreciation juggernaut stops and that 175,000 will not or will continue to be held by their owners

The capital appreciation juggernaut appears to be slowing to a stop now.
You think people are waiting for prices to crash to put their second home on the market?
Have you thought that one through?

Sponge Bob

Gurgle wrote:

Not because people want a place to go at the weekends etc to get away from the city?

they can rent can they not ?

You think people are waiting for prices to crash to put their second home on the market?
Have you thought that one through?

why should anyone hold onto an asset whose worth is evaporating (save for tax reasons) and they are not waiting for anything , prices can only go up (repeat as a mantra ) ??

What exactly makes this crazy level of vacant property sustainable in any sense ???

16% of all property empty at the time of our highest ever population growth with half of Poland here in the past 2 years means we have a massive oversupply in the market despite the historically high demand .

The market mechanism will remove that oversupply as it always does and will reduce it to the normal 10% ish level that we appear to maintain as our base. While thats still high it appears to be what we maintain historically.

Strangely enough the Poles mainly came here to build and many will go home once there , basically , is no building work as will happen within a year or so .

On the reasonable assumption that there are 50,000 housing units nationwide let to migrant construction personnel that 50,000 empties will join the 100,000 surplus right about the same time thereby pushing the vacant rate up around 20% for a time I should think.

Gurgle

Sponge Bob wrote:

prices can only go up (repeat as a mantra ) ??

Find one place I said that please.

Sponge Bob wrote:

The market mechanism will remove that oversupply as it always does

Please explain how the market mechanism will remove the alleged oversupply of houses.

Sponge Bob wrote:

Strangely enough the Poles mainly came here to build and many will go home once there , basically , is no building work as will happen within a year or so .

On the reasonable assumption that there are 50,000 housing units nationwide let to migrant construction personnel that 50,000 empties will join the 100,000 surplus right about the same time thereby pushing the vacant rate up around 20% for a time I should think.

And then what?
The owners will sell them all off for 60k? Back to the pre-'bubble' prices?

You and others predict the future with no actual reasoning beyond 'houses cost too much mkay!'.

And as that future persistently doesn't happen, you carry on regardless. Is it all just based on the theory that if you predict something for long enough you will eventually be right?

-edit-
hehe - a quick trawl through old threads gave me this gem from June 2003:

spongebob wrote:

There now appears to be a soggy overhang on the market which indicates that the AVERAGE 4 bed semi is available in the 270-280k bracket. I think it could fall below 270k by next month.

This is still a lot more than the same house cost a year or two ago but I feel that prices have now stopped rising .

Was that a different spongebob?
Or were you just -em- wrong?