Housing bubble starting to pop?

chump

JimmySmith wrote:

I'm sorry but i'm still laughing at those figures you put up

I see that the only rational way that people are argueing that a couple with over €30k to spend after tax and mortgage is to bring the fact that they may have kids into it.
Hands up here who rents and wants to be still renting if they are married and have kids?

Jimmy (and perhaps anyone else who shares his sentiment) why don't you go to the trouble of demonstrating how fiscally solvent the average €65k couple who've just purchased a €350k home in Dublin by sharing what you believe to be the correct figures for davidoco's list of items

Outgoings - yearly for a couple
__________________________________
Food/Utilities/Entertainment (pw)
Life Assurance Dual Life
VHI
Car Insurance
Car Tax
Car Mainteance
Holiday
Dental
Optician
Petrol (pw)
Car rapayment
Bank Charges duty etc
Savings (pw)
TV Licence
Clothing
__________________________________
Total

CiaranC

davidoco wrote:

People are of course buying houses but not in the area which they would like and I'm not talking about South County Dubiln. They are being forced into areas where they have no family and or no connections. I like you know of plenty of people buying houses but not one who bought a house (3 bed semi) within 30 miles of where they grew up (west Dublin 13).

I see your point. Maybe Im skewed by the fact that Ive spent some time in Europe staying in friends apartments, but the notion of buying a first property as a 3 bed semi with in 25km of the city centre anywhere seems nuts. It doesnt happen anywhere, and its not going to happen here ever again, crash or no.

Housing has changed to higher density - apts, duplex units etc.

chump wrote:

Of course by providing one example of how a relatively well-off couple can afford to buy a home at well below the average price for the region Jimmy has put forward irrefutable evidence to suggest that there is no 'bubble'.

He isnt looking to prove that there is no bubble with that point, he is pointing out, correctly, that there is still affordability in the FTB market.

*edit* The couple he used as an example are not well off, they only earn 65k...
FTBs dont buy properties at 500k, they buy 300k properties, of which there are a glut, which is one of the main arguments of why the market is going to collapse, remember...

JimmySmith

chump wrote:

I'm pretty sure the discussion was on 'Housing bubble starting to pop'. Hehheh.

Of course by providing one example of how a relatively well-off couple can afford to buy a home at well below the average price for the region Jimmy has put forward irrefutable evidence to suggest that there is no 'bubble'.

Hoho

Affordability has an impact on a potential crash dont you think.

I thought we had established that couple on 65k could also buy a house for €455k and still have €30k a year to spend on whatever the like after payments.

You're the one thats giving them extra cars and children in order to make them not be able to afford it. I'm sure most people buying might consider Salary protection or something like that if they are worried about losing their jobs. Up to them.

You keep bringing up couples on 50k - take home 3647 a month.

They buy a house where the mortgage costs €1500 and get tax relief i would think they would have about €2200k a month or about €26K a year after tax and mortgage without any raises, bonuses, overtime they may get over the years ahead.

I think thats enough to live comfortably on, dont you. And dont go giving them new cars again

Why dont you put your figures on those outgoing first? and then i'm sure some of us will put real figures on it for you?

At the end of the day you buy what you can afford and i think people can afford more than you think they can.

chump

CiaranC wrote:

He isnt looking to prove that there is no bubble with that point, he is pointing out, correctly, that there is still affordability in the FTB market.

Of course there's affordability.
The market needs FTB's. Affordability has been maintained by:

Lending
The banks have been continuously loosening their lending criteria. 20-25year mortgages have become 30-35year, increasingly more being 40year. 100% mortgages have taken off.

Where next?

Home types
Also home sizes have been decreasing. Apartments are popping up everywhere. Less and less semi-D's are being produced.

Land
Homes are now being built further and further away from amenties, places of work, transport links. Cheaper location, cheaper home, greater affordability.

The market has continuously adapted to cater for FTB's.

JimmySmith

chump wrote:

The market has continuously adapted to cater for FTB's.

And will continue to do so.

There seems to be a belief among people that FTBs cant afford homes.
By definition FTBs have bought a home. ANy i know are not having the problems people are saying FTBs are having at all.
Remember, You're not an FTB until you buy a home. There will always be those who cant and will have to rent , and those who can afford to buy and choose to rent - always.

chump

JimmySmith wrote:

Affordability has an impact on a potential crash dont you think.

I thought we had established that couple on 65k could also buy a house for €455k and still have €30k a year to spend on whatever the like after payments.

You're the one thats giving them extra cars and children in order to make them not be able to afford it. I'm sure most people buying might consider Salary protection or something like that if they are worried about losing their jobs. Up to them.

You keep bringing up couples on 50k - take home 3647 a month.

They buy a house where the mortgage costs €1500 and get tax relief i would think they would have about €2200k a month or about €26K a year after tax and mortgage without any raises, bonuses, overtime they may get over the years ahead.

I think thats enough to live comfortably on, dont you. And dont go giving them new cars again

Why dont you put your figures on those outgoing first? and then i'm sure some of us will put real figures on it for you?

At the end of the day you buy what you can afford and i think people can afford more than you think they can.

Jimmy, my point is this:
You do not get much for your money
In either historical terms or by comparison.

As demonstrated by your example there are affordable homes.
Your brother could probably have gotten something even more affordable by heading out of the city to a new suburb.

Another point of mine is that, under certain market conditions it is cheaper and an all-round wiser decision to rent and invest prudently.
I believe a combination of factors, inlcuding rising interest rates, a stalling economy, over-reliance on construction, a transient immigrant population, decreasing competitiveness, over-supply, a misled BTL brigade, (and some more no doubt) ... will lead to a decline in house prices within the next few years.

I also believe that the next wave of house building after our 80k+ house-building era has subsided will be better quality, better integrated, and largely superior quality projects than the quicky jobs of the last 5 years.

I don't believe your argument about affordability stands up, as it's a reduction in value that is the issue. I would regard homes with 1->2hour each way commute in a poorly designed and managed location to be of extremely poor value with their current price tags. I can see these decline the quickest.

chump

CiaranC wrote:

*edit* The couple he used as an example are not well off, they only earn 65k...
FTBs dont buy properties at 500k, they buy 300k properties, of which there are a glut, which is one of the main arguments of why the market is going to collapse, remember...

Ciaran if a young couple earning €65k a year are not relatively well-off, then who are?

Your reference to FTB's buying €300k apartments is?

I also do remember quite a few of the arguments supporting the theory of a market collapse, and over-supply is certainly one of them. But I believe more importantly is the issue of an over-stretched poorly-informed BTL (or even not-to-let) brigade banking on capital appreciation.

Raskolnikov

chump wrote:

Ciaran if a young couple earning €65k a year are not relatively well-off, then who are?

I wouldn't see a couple on €65K as being well off at all. Especially if they have a mortgage and two cars to run. Unless they can expect a significant hike in their wages, children is certainly out of the running.

chump

Raskolnikov wrote:

I wouldn't see a couple on €65K as being well off at all. Especially if they have a mortgage and two cars to run. Unless they can expect a significant hike in their wages, children is certainly out of the running.

Well even if you don't consider them to be relatively well-off. What you can't deny is that average wage is ~ 30k, and that wages are generally higher for older people, so therefore they are earning quite a bit higher than average for people of their age.

And surely JimmySmiths argument about how much left-over cash they have would show them to be relatively well-off, no?

JimmySmith

chump wrote:

Well even if you don't consider them to be relatively well-off. What you can't deny is that average wage is ~ 30k, and that wages are generally higher for older people, so therefore they are earning quite a bit higher than average for people of their age.

The only people i know that earn less than €30k who are 30 or older are complete wasters. And there are very few wasters that i know.

Come to think of it. I know of very few older than 25 who earn less than €30K.

chump

JimmySmith wrote:

The only people i know that earn less than €30k who are 30 or older are complete wasters. And there are very few wasters that i know.

Come to think of it. I know of very few older than 25 who earn less than €30K.

What's the point of all this?
You've been saying yourself how they have plenty excess cash. I'd regard this as being relatively well-off. That's my interpretation of it. You either disagree or agree, but it doesn't really have any impact on this discussion anyway.

JimmySmith

chump wrote:

Well even if you don't consider them to be relatively well-off. What you can't deny is that average wage is ~ 30k, and that wages are generally higher for older people, so therefore they are earning quite a bit higher than average for people of their age.

And surely JimmySmiths argument about how much left-over cash they have would show them to be relatively well-off, no?

Here is the point. They are a relatively average 30 year old couple. The sort buying homes as FTBs now. I would they are relatively well off, as are almost all of the FTBs that people here have been writing off as broke after they bought their homes.

People will always buy houses if they can afford them and i think we've demonstrated here that FTBs are not so poor as they are made out to be. Therefore affordability (one of the favourite topics of the Crash prediction crew) is not an issue at all in arguments for a crash. Quite the opposite in fact. Its a very big factor counting against a crash.
Would you agree with this?

chump

JimmySmith wrote:

People will always buy houses if they can afford them and i think we've demonstrated here that FTBs are not so poor as they are made out to be.
Would you agree with this?

I would agree.

What I'm saying is that many FTB's are only able to afford low-grade smallish housing miles from where they wish to live in mostly newly built suburbia.

Alas, some FTB's have stretched themselves because they want MORE THAN what they can afford (unlike your brother). They are buying more expensive homes with bumper sized mortgages and help from family/friends etc.

We also have the dominant force in the market where trouble is going to stem from - the investors/speculators.

Would you agree with
1. Some FTB's are stretching themselves to get a bigger better home even if they can't 'afford' it?
2. There are many speculators in the market who are going to get stung?

JimmySmith

chump wrote:

I would agree.

What I'm saying is that many FTB's are only able to afford low-grade smallish housing miles from where they wish to live in mostly newly built suburbia.

Alas, some FTB's have stretched themselves because they want MORE THAN what they can afford (unlike your brother). They are buying more expensive homes with bumper sized mortgages and help from family/friends etc.

We also have the dominant force in the market where trouble is going to stem from - the investors/speculators.

Would you agree with
1. Some FTB's are stretching themselves to get a bigger better home even if they can't 'afford' it?
2. There are many speculators in the market who are going to get stung?

1. I would agree with you. In fact i would go so far as to say that 99% of FTBs stretch themselves to the limit. The hardest part of getting a mortgage is saving for the deposit, stamp duty, furniture etc. Its been like this even since your grandad was born. Nothing new at all. Once they have the mortgage its their disposable income after mortgage that counts towards their quality of life. Plenty of that. And so what, if someone decides they want to live in a bigger home further out and commute for an hour, its their choice. You dont think people buy a home without knowing what their commute will be do you? They are well aware of the trade off. Oh and another common assumtion on here is that everyone lives, works and buys homes in Dublin. Not true.


2. Speculators may indeed get burnt if there is a crash. IF. But only those most recently in i would think. I know several 'speculators' who have bought a mix of section 23 properties and non section 23. They play the tax game with the aid of financial advisors (dont ask me how, i havent got a cclue when they try to explain it to me.). Some have gone interest only purposely, not because they have no choice, and put the remaining portion of what they would have paid into their pensions (best tax relief you'll ever get.). The vast majority or 'Speculators' arent thick. Though there are some exceptions.


In fact the thickest thing you can do is ASSUME that their will or wont be a crash. And there is plenty of that here.
Best thing to do is whats right for yourself and make sure you can live with it whatever way property goes.

indiewindy

Going interest only is only good if prices keep rising, otherwise your fcuked. Section 23 properties are all fine and well but there is always a massive premium built into their price because of their tax benefits only rich people can make a go of them anyway as they have the rental income to write off against them. Of course no-one on this forum knows what is going to happen to property prices we are only speculating. For the past 5 years David McWilliams has talked of the impending poping of the bubble but we are still waitng . And what more ingenious ways will the banks find to give out bigger and bigger mortgages, as so much of their profits come from mortgages their share prices will tank if they dont keep up thier mega growth rates.

SimpleSam06

JimmySmith wrote:

2. Speculators may indeed get burnt if there is a crash. IF.

In fact the thickest thing you can do is ASSUME that their will or wont be a crash. And there is plenty of that here.
Best thing to do is whats right for yourself and make sure you can live with it whatever way property goes.

You are trying to deal with macroeconomics on a microscopic scale. How much have house prices risen in the last 5 years? Quite a lot, in all areas. Now, what are the reasons for this?

1. Massive sudden expansion in population?
2. A giant brush fire that ravaged all of Ireland and rendered hundreds of thousands of people homeless?
3. Lots and lots of easy credit brought on by incredibly low interest rates as a result of 9-11?

If you picked option number 3, you might just be right. The only and I mean one and only reason prices are rising is market sentiment, not due to the solid economic principles of supply and demand. A large amount of speculators have bought second homes on these low interest rates, when they rise by 3% without a concomitant rise in capital appreciation, those speculators are going to offload their properties in an awful hurry.

There are 275,000 homes sitting empty at the moment, and another 100,000 built this year. 10% of our population is transient immigrants (and thats a 20 to 30 year old 10%), and they sure aren't getting involved in Irish property unless its to build it. Supply is not short, but demand is getting shorter, and will continue to do so as interest rates rise to more normal levels.

Therefore, anecdotal evidence notwithstanding, the Irish property market is going to collapse. If you want to buy, buy for a home to live, but I pity you if you can't wait another two years. The only reason there ever was a property boom is because the banks extended far too much credit, albeit for their own considerable financial betterment. Thats coming to an end.

JimmySmith

SimpleSam06 wrote:

You are trying to deal with macroeconomics on a microscopic scale. How much have house prices risen in the last 5 years? Quite a lot, in all areas. Now, what are the reasons for this?

1. Massive sudden expansion in population?
2. A giant brush fire that ravaged all of Ireland and rendered hundreds of thousands of people homeless?
3. Lots and lots of easy credit brought on by incredibly low interest rates as a result of 9-11?

If you picked option number 3, you might just be right. The only and I mean one and only reason prices are rising is market sentiment, not due to the solid economic principles of supply and demand. A large amount of speculators have bought second homes on these low interest rates, when they rise by 3% without a concomitant rise in capital appreciation, those speculators are going to offload their properties in an awful hurry.

There are 275,000 homes sitting empty at the moment, and another 100,000 built this year. 10% of our population is transient immigrants (and thats a 20 to 30 year old 10%), and they sure aren't getting involved in Irish property unless its to build it. Supply is not short, but demand is getting shorter, and will continue to do so as interest rates rise to more normal levels.

Therefore, anecdotal evidence notwithstanding, the Irish property market is going to collapse. If you want to buy, buy for a home to live, but I pity you if you can't wait another two years. The only reason there ever was a property boom is because the banks extended far too much credit, albeit for their own considerable financial betterment. Thats coming to an end.

Nothing there i havent heard at least once a week for the last 6 or 7 years though.
And yet people are still buying houses. Fancy that.

SimpleSam06

JimmySmith wrote:

Nothing there i havent heard at least once a week for the last 6 or 7 years though.
And yet people are still buying houses. Fancy that.

And the party goes on...

I'm talking to myself here. Did you just not understand what I said or something? People are buying houses because the banks are still extending them insane amounts of credit. End of story. That bears repeating. PEOPLE ARE GOING TO BE PAYING THESE THINGS OFF FOR 30 YEARS TO ENRICH THE BANKS. No other reason. Now interest rates are rising again therefore people won't get easy credit because the banks will be terrified of bad debts, and those already on these gargantuan mortgages are going to be unable to afford the interest rate rises. Therefore house prices are going to collapse and come back in line with more normal historical values.

If you see a flaw in my reasoning feel free to point it out with something besides a personal anecdote.

gurramok

JimmySmith wrote:

Nothing there i havent heard at least once a week for the last 6 or 7 years though.
And yet people are still buying houses. Fancy that.

Have a look at interest rates in last 6 years, historically lowest interest rates happened in 2002 if my memory is correct resulting in super cheap credit.
Now they are 4% retail, its not worth a speculators effort to buy now.

Investors who bought in last year who rent out will feel squeeze and ftb will be tightening belts.
Less money to borrow means less money to buy houses will result in either static or falling prices.

JimmySmith

SimpleSam06 wrote:

And the party goes on...

I'm talking to myself here. Did you just not understand what I said or something? People are buying houses because the banks are still extending them insane amounts of credit. End of story. That bears repeating. PEOPLE ARE GOING TO BE PAYING THESE THINGS OFF FOR 30 YEARS TO ENRICH THE BANKS. No other reason. Now interest rates are rising again therefore people won't get easy credit because the banks will be terrified of bad debts, and those already on these gargantuan mortgages are going to be unable to afford the interest rate rises. Therefore house prices are going to collapse and come back in line with more normal historical values.

If you see a flaw in my reasoning feel free to point it out with something besides a personal anecdote.

I heard it the first 50,000 times its been said.
Your reasoning is not based on anything real. Its based on your perception of what FTBs can afford. Not what they really can afford.
People have always paid mortgages. People have always paid mortgages early. People can afford the payments on mortgages. Interest rates rise and fall and always have done. It would take a huge interest rate increase to seriously hurt buyers pockets. And just because someone takes out a 30 year mortgage does not mean they will have that mortgage for 30 years.
I was reading posts last year proclaiming doom and gloom when rates rise by 1%. Look around you. Still the property market is not crumbling. If the same happens again next year its still not going to crumble.
Despite what the doom mongers KEEP saying, FTBs are well capable of making payments on their mortgages. And the banks are still lending. Why? Because despite what you might like to believe banks are interested in loaning only when the borrower is able to repay easily. There is a huge amount of room to manouver for the banks yet. Look around you. Life is still good for the average homeowner.

SimpleSam06

JimmySmith wrote:

I heard it the first 50,000 times its been said.
Your reasoning is not based on anything real... And the banks are still lending. Why? Because despite what you might like to believe banks are interested in loaning only when the borrower is able to repay easily. There is a huge amount of room to manouver for the banks yet. Look around you. Life is still good for the average homeowner.

So if my reasoning is not based on anything real, maybe you might point out to me where it is unrealistic?

I honestly don't care how often you have heard it. I wasn't saying it back then, because there was not sufficient reason to say it. Now I am saying it, because there are an overwhelming number of reasons to say it.

There is no reason for the house price increases over the last 5 years except that the banks have been extending credit, he says for the third time. If you can give me another reason for the house price increases, please do. Has there been a shortage in concrete? Did half the island sink under the sea when I wasn't looking? Did all the construction workers emigrate in a fit of pique, or were maybe abducted by chronically underhoused foreign states?

Banks have fathomed that they can keep increasing loan amounts because they realise how important home ownership is to the Irish market, combined with historically low interest rates. And they are making out like bandits.

Your position, in its entirety, is that the sun is at noon, it will always be this bright. You're in for some landing.

CiaranC

Sam wrote:

There is no reason for the house price increases over the last 5 years except that the banks have been extending credit

Thats some crazy circular logic youve got going on there

JimmySmith

SimpleSam06 wrote:

There is no reason for the house price increases over the last 5 years except that the banks have been extending credit, he says for the third time. If you can give me another reason for the house price increases, please do.

Of course there are others reasons.
If i give you another like you asked then will you change the record.

Higher wages.
Land value has increased.
Tighter construction regulations.
Raw materials are more expensive.
Inflation.
The list goes on.


And of course credit rates have been increasing. They have been increasing since credit began. If you think credit rates are not going to keep increasing you have your head in the sand.

CiaranC

There are 1 million more people in full time employment in Ireland today than there were 20 years ago. Theres a little contribution. Of course these people dont constitute actual demand, causing price rises, rather they were dragged in off the street and forced into mortgages at gunpoint.

SimpleSam06

CiaranC wrote:

Thats some crazy circular logic youve got going on there

I do not think that word means what you think it means...

SimpleSam06

JimmySmith wrote:

Of course there are others reasons.
If i give you another like you asked then will you change the record.

Higher wages.
Land value has increased.
Tighter construction regulations.
Raw materials are more expensive.
Inflation.
The list goes on.

Eh so where are the increases in all other sectors of the market? If what you say is true, in particular about these magic materials, everything else should be rocketing up at the same rate. Except of course for the land value issue, which of course goes directly back to the market perception value which leads straight back to what I was saying in the first place. And are you going to tell me that tighter construction regulations are adding hundreds of thousands of euros to the value of property?

JimmySmith wrote:

And of course credit rates have been increasing. They have been increasing since credit began. If you think credit rates are not going to keep increasing you have your head in the sand.

What exactly is a credit rate, I've never heard of that... You mean interest rates? Why no, they have decreased by large amounts in recent years. Now they are increasing, which is the problem. Or possibly the solution. Have you got any more great reasons for massive property price increases?

SimpleSam06

CiaranC wrote:

There are 1 million more people in full time employment in Ireland today than there were 20 years ago. Theres a little contribution. Of course these people dont constitute actual demand, causing price rises, rather they were dragged in off the street and forced into mortgages at gunpoint.

Right well when you find a discussion about property prices over the last 20 years, you can contribute that bit of information. Here we are talking about the property bubble over the last 5 years.

Sizzler

IMHO there should be a bit of a bite in the market over the next 6-9 mths if the interest rates go up the other .5% as predicted. Even the last rise knocked approx 50K of buying power from the average earning couple so its quite simple, if punters dont have the lids to buy there wont be as much activity in the market...at least you would think so...

Then again there might be a huge increase in the "commuter" house market, eg Kildare,Laois,Cavan etc when people realise the bank are only going to give them 300k which lets face it, wont buy you a shed in Dublin.

SimpleSam06

Also the property bulls might want to argue with the International Monetary Fund...

THE Irish property market faces an “abrupt” downturn at the end of next year and not the soft landing predicted by the Government, the International Monetary Fund (IMF) warned yesterday.

And the European Central Bank...

Aug. 7 (Bloomberg) -- European Central Bank council member Klaus Liebscher said the bank is ready to raise interest rates further to keep faster economic growth and near-record oil prices from spurring inflation.


Head in the sand indeed...

JimmySmith

SimpleSam06 wrote:

in particular about these magic materials, everything else should be rocketing up at the same rate.

Take a trip down to your local builders providers and see for yourself the difference in materials.

Did i say materials on their own? Did i not mention several other reasons? I did you know, some even more costly than materials. read it again. Did CiaranC not mention supply and demand. And there are many more reasons, but whats the point in listing them if you ignore the ones that dont suit you. Its a waste of time even answering you anymore. Talk about a blinkered view and throwing out arguments to suit your own point of view. And anyone here can find articles from all sorts both for and against a crash.

Now you're just talking bollox. You asked for reasons. I gave you some, CiaranC gave you a whopper of a reason and now your picking on bad grammer (take out the word 'rates') and definitions (a sure sign your full of it).