Housing Bubble Bursting

here is a quote from it:

From the constitution:

DIRECTIVE PRINCIPLES OF SOCIAL POLICY
Article 45

The principles of social policy set forth in this Article are intended for the general guidance of the Oireachtas. The application of those principles in the making of laws shall be the care of the Oireachtas exclusively, and shall not be cognisable by any Court under any of the provisions of this Constitution.

1. The State shall strive to promote the welfare of the whole people by securing and protecting as effectively as it may a social order in which justice and charity shall inform all the institutions of the national life.

2. The State shall, in particular, direct its policy towards securing:

i. That the citizens (all of whom, men and women equally, have the right to an adequate means of livelihood) may through their occupations find the means of making reasonable provision for their domestic needs.

ii. That the ownership and control of the material resources of the community may be so distributed amongst private individuals and the various classes as best to subserve the common good.

iii. That, especially, the operation of free competition shall not be allowed so to develop as to result in the concentration of the ownership or control of essential commodities in a few individuals to the common detriment

aphex™

Meh, the current HC/SC judges don't like to rule against of the state if its going to cost it money.

true but it would get alot of publicity and maybe start a debate on whether houses should be bought and left idle en masse? should this be allowed? would it have prevented the bubble?
I am not keen on state interference in free markets as I believe in competition and prices always correct themselves naturally in such a market but now the property bubble threatens our economic prosperity
What do you people think?

Do you believe it should be a case of live and let learn or do you think we need protection?

double post oops

SimpleSam06

Principles for the general guidance of the Oireachtas... Sadly thats in no way binding. I think it might become an article of law in about five years however!

Smoggy

A mate said that on the Pat Kenny show he mentioned about proposed new building regs that say all new builds have to be a minimum of 720 sq feet. Has anyone heard of this ?

Pa ElGrande

Smoggy wrote:

A mate said that on the Pat Kenny show he mentioned about proposed new building regs that say all new builds have to be a minimum of 720 sq feet. Has anyone heard of this ?

The minister has been getting many complaints about shoebox apartments and there is an election coming, so as a get out measure they have published some draft guidelines, that won't take effect for a few years, but in the meantime the minister can point the finger of blame at the county councils.

http://www.environ.ie/DOEI/DOEIPub.nsf/6fb57b90102ce64c80256d12003a7a0d/54696ff3431463c48025725e0051fa32?OpenDocument

Shoebox apartments have developed because of height restrictions on apartments (thank you, An Taisce) that has forced developers to cram as many rooms into an area as space will allow in order to make the maximum return.

Gurgle

Pa ElGrande wrote:

Shoebox apartments have developed because of height restrictions on apartments (thank you, An Taisce) that has forced developers to cram as many rooms into an area as space will allow in order to make the maximum return.

Shoebox apartments have developed because thats all some people can afford to rent or buy.

I lived in one 12 years ago, before the housing market went crazy, the whole thing would fit in my kitchen.

Calina

Gurgle wrote:

Shoebox apartments have developed because thats all some people can afford to rent or buy.

Not strictly speaking true, I would say. Shoebox apartments developed because developers could get away with building them. People wouldn't have been able to afford to rent or buy them if they never existed in the first place.

They allowed developers to maximise short term profits (all they are interested in) rather than concentrating on thelong term utility values of same.

SimpleSam06

Pa ElGrande wrote:

Shoebox apartments have developed because of height restrictions on apartments (thank you, An Taisce) that has forced developers to cram as many rooms into an area as space will allow in order to make the maximum return.

You could build the apartments as high as you like and they'd still try to pack in as many as they could.

Sponge Bob

The modern shoebox was a tax avoidance scheme in Dublin and Galway that started in the late 1980s and finished a few years back .

1. They were built to write off tax for the owner ...eg the stuff around christchurch and on the quays.
2. they were a bit better than the bedsits they replaced to a degree.
3. They were not designed for owner occupation or long term living and were not intended for such

aphex™

IIB Bank predicts 5% house price rise in 2007 (LINK)

IIB wrote:

prices will continue to go up in 2007, despite predictions of further interest rate increases in March and June

Don't follow that line of thinking, myself.

pjbrady1

Anyone read yesterdays peace in Independent by Brendan O'Connor. He was pleading basically for people to "Think of the 'just boughts". The bare faced cheek of people to offer people selling houses low offers for their prized assets! He praised the "entrepreneurial" spirit and attitude of the "just boughts". Funny, I never associated holding onto a permanent job like a crab and getting approved for a mortgage for a long commute house as being entrepreneurial.
In his final sum up he encouraged people to band together and not sellup, just so that we can get past this temporary blip. I reckon he must have bought a 2nd investment property last year, why else would a single home owning well paid journalist care about prices stagnating or falling slightly on his residence where he lives.
A thousand years of Declan Lynch's would never print something so conservative, non based on reasoning and essentially brewed in the blind property school of journalism on sale at a new lower price in Woodies DIY.

Another interesting point from yesterdays Sunday Independent, any property related article in the paper tried to make the connection that Brian Cowen not reforming stamp duty caused the drop/slowdown in house prices. Even in an article about Sean Dunne moving to Paris in the Social pages.

This is a tactic the paper has done before (blanket view on an issue by journalists), on one particular Sunday everyone of it's Political journalists taking a stand against Mary McAleese the week after she was elected. Some free press.

whizzbang

Brendan OConnor sounded scared in that article didn't he? I wonder has he just taken on a nice big mortgage for himself!

I loved his suggestion for people not to sell but to hold on for a year. I'd love to meet someone who refused to sell even though their neighbours were getting less and less for their houses because "yer man in the paper said". Who'se he trying to kid?

I also loved the fact they said the stamp duty rumours cased the prices to stagnate and then in the next breath call for stamp duty to be an election issue. Somehow talk of reducing stamp duty as an upcoming election issue will have a different effect to talk of it being scrapped in an upcoming budget?

pjbrady1

They are trying to turn Brian Cowens hand to reform stamp duty before the election. They are trying to achieve this by convincing the voting populace that their houses have stagnated in price and dropped because stamp duty rules have remained the same.
All of this despite their Poll which showed
"Would stamp duty reform influence your decision to buy a house"
55% - No
45% - Yes

They had another poll showing 67% of people thought house prices would rise this year. Wonder what would have been figure if a decent headling had reached nationwide on price drops of last four months.

Wonder is that Paddy Power bet still open. There ain't going to be any possibility of rises this year, bar Brian Cowen buying up thousands of social housing and getting rid of stamp duty. But then that could happen whithin the timespan of penning a rash ill informed policy, only takes Brendan O'Connor 6 days for that!!

whizzbang

Could any reforms to stamp duty be made outside of the budget? Or would it have to wait for next year's budget?

The_Conductor

whizzbang wrote:

Could any reforms to stamp duty be made outside of the budget? Or would it have to wait for next year's budget?

Certain considerations could be made in the 2007 Finance Bill (due to shortly meander its way through the houses of the Oireachtas). It would be virtually unheard of, for measures such as reform of Stamp Duty to be brushed in by this back door though.

People have to accept that rising house prices is an economic result reflecting an imbalance in supply and demand. That imbalance has now been satisfactorily countered- and no longer exists. Therefore the premium associated with that asset in constraint, housing, is no longer justified, and it will sink to an equilibrium level once again.

What I would guess, as so many others have stated here, is that there are a glut of apartments that no-one much wants longterm. There is a shortage of freehold housing stock- thus apartments in particular will loose a lot of their value whereas decent housing stock should hold its own.

Wouldn't it be nice to have a magic crystal ball?

SimpleSam06

smccarrick wrote:

People have to accept that rising house prices is an economic result reflecting an imbalance in supply and demand.

There were many reasons for the housing bubble, supply and demand were only one of them, and not a very strong one. Also I don't see how a rising supply leads to rising prices, unless the demand is from "investors", and even that doesn't make a lot of sense. The fundamentals of the housing market in Ireland are all backwards. The primary reason for the bubble was the historically low interest rates leading to a glut of easy money flooding the market, as well as irresponsible lending practices by banks, IMHO.

Zambia

pjbrady1 wrote:

Anyone read yesterdays peace in Independent by Brendan O'Connor. He was pleading basically for people to "Think of the 'just boughts". The bare faced cheek of people to offer people selling houses low offers for their prized assets!

Maud_Flanders wrote:

Will somebody please think of the children!!!

Every FTB I know is holding on for a year like circling Hyenas watching the housing market slip down to there slavering jaws.

As for the cause I would say it was McDowells rumour mongering that stopped the property gold rush. Then the ensuing weeks till Cowen said no way made all nervous.

miju

in all fairness the market was in full flowing decline about 4 months before Mc Dowell even opened his mouth , trouble his though that his comment may well have made people lift their heads from the feeding trough for a second and survey the mayhem around them

Calina

Zambia232 wrote:

Every FTB I know is holding on for a year like circling Hyenas watching the housing market slip down to there slavering jaws.

As for the cause I would say it was McDowells rumour mongering that stopped the property gold rush. Then the ensuing weeks till Cowen said no way made all nervous.

No, FTBs are holding on because frankly an increasing number of them can't afford the prices of starter homes and apartments today. Also, the few of them that are left have a lot to look at in terms if the ones who went before and they are starting to ask serious questions like 1) is it worth spending 3 hours driving every day just to have a home of my own and 2) would I be better off in New Zealand or Australia.

The cause wasn't McDowell's failure to keep his mouth shut - although he would have been wiser to do so. There is a direct link between falling house price growth and interest rate rises at the moment. In short, the cost of finance is having an impact.

Zambia

Well if an FTB is holding for reasons of they cant buy or they dont wont to at current price levels they are still waiting for the price to fall.

Unless as you put it they want to immigrate. Which is another kettle of fish all together.

I doubt the cost of a house would be the only factor there...

As for Mcdowell I will give you that the market was sliding two months (not 4 maybe in somne remote areas) before he opened his mouth. But when he did he killed it. September was a terrible month for Estate agents.

SimpleSam06

Zambia232 wrote:

As for Mcdowell I will give you that the market was sliding two months (not 4 maybe in somne remote areas) before he opened his mouth. But when he did he killed it. September was a terrible month for Estate agents.

You have to remember hes primarily a politician, so he'll do what politicians do - look out for his own best interests first. When he said that he knew what he was doing, but he was also sending a clear message to his political opponents, don't mess around with me or I'll rock your boat.

Its fairly typical of the man really, he was talking about making proactive home defence legal after the Nally case. I respect his convictions, but he does indulge in a bit of knee jerk reactionism too.

Looking at the decline in property prices I think the largest single decline in the rate of price increases was in November 2006, well after he made his statement. All the caterwauling by the REAs is really just looking to pin the blame on someone for their bad fortune, the real effect of his comments wasn't nearly as far reaching as they make out.

pjbrady1

Looks like we will all be supporting the property market over next seven years. Government announced today 21 billion package for social and affordable housing. Along with other plans they said would be affordable as long as economy grows at 4%. Thats last few pound gone now. Invest in spam its on the way back

Zambia

pjbrady1 wrote:

Looks like we will all be supporting the property market over next seven years. Government announced today 21 billion package for social and affordable housing. Along with other plans they said would be affordable as long as economy grows at 4%. Thats last few pound gone now. Invest in spam its on the way back

Hi have you a link to this mate , not that i dont believe you I just cant believe them!!!

Does anyone here think a move like this is simply to remove a lot of the stock of the market which in turn should increase demand , pumping air back into the bubble??

whizzbang

€21bn housing fund in new development plan
http://www.rte.ie/news/2007/0123/ndp.html

there you go.

eirmail

This £21 Billion will hit the market too late to prevent a crash.

Sponge Bob

The €21bn will generally be used to mop up houses at the bottom of the market for feck all. It will not result in new houses being built.

Here is an example.

a) waiting list for houses in Roscommon

500 in 2002

http://www.roscommoncoco.ie/services/housing/LA_Accom.html

b) property for sale in Roscommon

http://daftwatch.atspace.com/daftcounty_21.html

1150 units

Basically there are enough houses on the market in Roscommon today to

1. Double the council housing stock overnight
2. Clear the waiting list in full, overnight

TWICE OVER !

Once the council can buy a decent house at around €100k they will step in to underpin the market at that level.

THERE WILL BE NO NEW BUILDS IN ROSCOMMON

or anywhere else in the midlands. The housing is already there and will be transferred to the public sector in time albeit in a disorderly manner where the state will be the purchaser of last resort in a collapsed market .

The support level where the councils will actually step in will be decided in the department of Finance, in time , but in the midlands there will be no new building required at all.

miju

to be honest if thats their plan i'm well for it , i'd much prefer the government to spend €21 billion to clear housing lists all over the country than it be used to bail out silly investors caught in the hype in some stupid tax scheme are something similiar , at least this way the country gets something of fundamental worth

I would rather they used OUR money to build infrastructure instead of giving it away when really some people wouldnt even be on a waiting list if prices were correct.