Housing Bubble Bursting

Victor

RuggieBear wrote: »

That actually cheers me up as my landlord had had the house for at least 10 years....So I'm thinking I won't be at the whim of the desperation to cover the mortgage as some other tenants might be.

Indeed, his mortgage is perhaps 30-40% of a mortgage a new landlord of what would be looking at, put him and you in a much more comfortable position.

miju

Victor wrote: »

Buy to let investors were always going to stay 5-10 years, flippers are another matter.

have to say the very distinct difference between an actual investor , speculator or flipper is often blurred in the media and on this thread as well sometimes

faceman

I believe this Sunday's Business Post is doing a large piece on property

domania

faceman wrote: »

I believe this Sunday's Business Post is doing a large piece on property

They are always doing a large piece on something or other and it's always crap. I've been suckered by their ads a few times and generally find them lacking overall.

Or maybe I expect too much.

faceman

the Sunday Business post is one newspaper i respect i have to say. Surprised to hear you say that but each to their own i guess.

ionapaul

I like the paper too but after dealing with it for a company I worked for in the past it is well known in business circles that if you advertise with them, you are gauranteed favourable editorial space as a result. Most of the papers are guilty of this of course! In the Irish Times property section (at least back when the market was going well), if there was a full page ad for a new property development, there would always be a corresponding 'review' of the homes somewhere else in the section, and always extremely positive. If the Property Pin paid for advertising in the papers, then we'd see some more bearish articles, believe me!

Well I have NEVER read a review of a property where it was given a thumbs down !!

Why? They do it for cds and dvds, books, cars etc

iguana

Deleted User wrote: »

Well I have NEVER read a review of a property where it was given a thumbs down !!

Why? They do it for cds and dvds, books, cars etc

Because if they dare publish anything negative they get emails with the likes of this in them.

Ken McDonald wrote:

"As far as the future is concerned between us it is clear to see that the Tribune do not value or respect the relationship in any meaningful way."

SimpleSam06

smccarrick wrote: »

This is evidenced by the fact that the outrageous rent rises are actually servicing mortgages again in a lot of inner city locations, given the property price falls. It doesn't necessarily mean that there is any inherrent value or sustainable pricing associated with said units, simply that BTL purchasers can cover their costs (again). I'm depressed.

If rents are too high in an area, people will just go elsewhere. If renters see a place half the price of a place in the middle of town, thirty minutes bus ride away from the centre of town, thats where they will go. They'd be mad not to. And with the surplus of new rental properties cropping up, thats exactly what they will do. Crazy rent rises are not sustainable in this market, especially in the event of a recession.

gurramok

Speaking of recession, news today that Cowen has €4bn short to play with. Party's over.
http://www.rte.ie/news/2007/1201/economy.html?rss

rte wrote:

Next year looks even tighter, according to the Department, with taxes receipts expected to grow at just 3%, the slowest rate since 1989.

hey gurramok - RTE must be wrong - sure Cowan and the boys had plenty of money to give themselves payrises

Couldnt be all that bad!

MrVostro

SimpleSam06 wrote: »

If rents are too high in an area, people will just go elsewhere. If renters see a place half the price of a place in the middle of town, thirty minutes bus ride away from the centre of town, thats where they will go. They'd be mad not to. And with the surplus of new rental properties cropping up, thats exactly what they will do. Crazy rent rises are not sustainable in this market, especially in the event of a recession.

And they could probably buy a house out there for what their rent would have been in the city center.

Ooops. Here we go again. people moving out form the city to buy

Do-more

David McWilliams puts another couple of hundred EA's on the dole!

David McWilliams wrote:

You would be mad to buy a house now. In recent days the Irish housing lobby - which has hijacked the economic debate in this country and made an absolute fortune in the process - has started to spin the line that ‘‘now is a good time to buy’’.

First-time buyers, the most hard-pressed financial subgroup in the country, are being urged by banks and estate agents to take the plunge. Do not be tempted, because you will only be the lemming-like suckers who bail out developers in trouble. Hold onto your cash. Guard it zealously, because prices are headed lower - not just here, but all around the world.

link

SimpleSam06

MrVostro wrote: »

And they could probably buy a house out there for what their rent would have been in the city center.

You're assuming that a) they want to be chained to a 35 year mortgage in a poor area and b) they could be bothered buying until it becomes clear to all that housing prices have bottomed out.

Edit: Also as an aside, I expect with record numbers of people renting, much stronger tenant protection legislation will be coming into force before too long.

The_Conductor

Do-more wrote:

David McWilliams puts another couple of hundred EA's on the dole!

Phew, someone willing to call it as it really is......

Firetrap

I find it hard to feel any sympathy for EAs. They made enough money screwing people during the property bubble

BendiBus

And from the same paper

Ladies and gentlemen, we’ve already crashed

Tom McGurk wrote:

Of course, rampant house price inflation had to come to an end and the experts were promising a soft landing. I’m afraid they were wrong. The market has crashed and I suspect that, in the early weeks of 2008, the truth will finally start to be acknowledged.

blast05

Edit: Also as an aside, I expect with record numbers of people renting, much stronger tenant protection legislation will be coming into force before too long.

Could you elaborate ?
What in addition to what is covered in the PRTB is required ?
I ask as a landlord wondering what else to expect .... and bring it on, if the PRTB does not bring us more into line with Europe then it should be updated to do so.

Afuera

blast05 wrote: »

Could you elaborate ?
What in addition to what is covered in the PRTB is required ?
I ask as a landlord wondering what else to expect .... and bring it on, if the PRTB does not bring us more into line with Europe then it should be updated to do so.

I'm assuming that SimpleSam06 is mainly refering to the lack of security of tenure that exists for renters in Ireland. It's unreasonable to expect a family (or anyone for that matter) to have to move out with minimal notice just because the landlord decides they want to refurbish their property, put the property up for sale or let a relative move into the property. In most of Europe, the landlord has to buy the tenant's lease out if they want to break it. Unless we do the same, we are not going to get anyone willing to rent long term in Ireland. And without long term renters, it's only a short matter of time before the demographics play against the market and we find ourselves with an oversupply of rental property. The system we have in place at the moment is neither good for tenants or professional landlords in the long term.
Also, I've a feeling that the pricing controls we have in place will need to be looked at again as it has the potential to really pull the rug out of the market if it hits a bad patch. As it stands, landlords can not set the rent at more than the market rate and they can only vary it once every 12 months. This is all fine and dandy when the market rate is rising or stagnant, but if it falls, then it can really turn the screw on some landlords.
Imagine the scenario where Landlord A, who bought his investment property 10 years ago, has to lower the price to get some new tenants in. Landlord B, who bought his property last year, might be surprised to get a request from his tenants (who have been there for a year already) to review the rent. Since the market rate has gone down, Landlord B will be obliged to lower the rent down to the new rate, even if it means they are making a loss. Since it's no hassle for tenants to do this (unlike the situation where they would have to source a new rental and move out to take advantage of a drop in the market rate), this has the potential to crucify some recent landlords.

robd

Afuera wrote: »

Imagine the scenario where Landlord A, who bought his investment property 10 years ago, has to lower the price to get some new tenants in. Landlord B, who bought his property last year, might be surprised to get a request from his tenants (who have been there for a year already) to review the rent. Since the market rate has gone down, Landlord B will be obliged to lower the rent down to the new rate, even if it means they are making a loss. Since it's no hassle for tenants to do this (unlike the situation where they would have to source a new rental and move out to take advantage of a drop in the market rate), this has the potential to crucify some recent landlords.

The tenant could just give notice and move to another place, leaving the landlord to find another tenant; rent would have to be at market rate to attract one. That pretty much pulls the rug from the argument anyway. Also, Ireland has a small open free market economy; the market decides the fare rate. Legislation should only be there to take account that this is the home of the tenant and protect tenancy. There most definitely should not be legislation to protect landlords earnings; that would completely go against both socialist and free market policies.

Afuera

robd wrote: »

The tenant could just give notice and move to another place, leaving the landlord to find another tenant; rent would have to be at market rate to attract one. That pretty much pulls the rug from the argument anyway.

As it stands, nobody has to move anywhere yet the rent can get pulled up or down by huge percentages (if that is deemed to be the market rate). I don't think this is good for either the tenant or the landlord. The price should be kept more in line with what was originally signed for (maybe allowing for inflation) to avoid any big shocks to either party.

robd wrote: »

Legislation should only be there to take account that this is the home of the tenant and protect tenancy. There most definitely should not be legislation to protect landlords earnings; that would completely go against both socialist and free market policies.

Leaving a tenant to face huge hikes in their rent is in no way protecting their tenancy. I'm not advocating protecting landlords earnings, but I'm saying that the system in place at the moment does not lead to a stable market.

Kipperhell

Afuera wrote: »

Leaving a tenant to face huge hikes in their rent is in no way protecting their tenancy. I'm not advocating protecting landlords earnings, but I'm saying that the system in place at the moment does not lead to a stable market.

By that logic it would be equally unfair to leave a landlord with the potential of his mortgage rising 4 times a year. If the landlords aren't kept stable then the tenants can't be. If it were to become a risk like that rent would go up as the landlords would dry up. If you think that would be good with only large corporations owning rental property good for you . I don't think this would be good idea.
Rents don't really shoot up that much in Ireland and the recent hikes have not been much out of whack with property price increases

Afuera

Kipperhell wrote: »

By that logic it would be equally unfair to leave a landlord with the potential of his mortgage rising 4 times a year.

The landlord can always fix their mortgage if they are worried about not being able to pay any more interest. The tenant does not have that luxury.

Kipperhell

Afuera wrote: »

The landlord can always fix their mortgage if they are worried about not being able to pay any more interest. The tenant does not have that luxury.

This would also force up rent as fixed rates are a lot higher than variable rates. You are also just postponing the rent increase in theory if rates rise during the fixed time.

You just have a bias against landlord and are not looking at the big picture.

Afuera

Kipperhell wrote: »

This would also force up rent as fixed rates are a lot higher than variable rates. You are also just postponing the rent increase in theory if rates rise during the fixed time.

If you look at historical data you'll find that the correlation between achievable rents and mortgages is not so rigid.

Kipperhell wrote: »

You just have a bias against landlord and are not looking at the big picture.

Huh? I'm proposing something that would be beneficial to both landlords and tenants, and hopefully allow for a more stable market... and that makes me anti-landlord?

daveirl

This post has been deleted.

Murt10

robd wrote: »

Also, Ireland has a small open free market economy; the market decides the fare rate.

I disagree. In many instances, the HSE sets the rate for an area by what they are prepared to pay for Rent Allowance for social welfare receipients. That sets the base price for rent for all the houses in that area.

The person on Rent Allowance doesn't care what the rent is ie E1,000 E1,250E1,500. Why should he? Its all the same to him. He pays a fixed amount (which is tiny fraction of the rent and the HSE pays the balance). It doesn't matter how much the rent increases, he continues to pay the same amount.

Why should he care what the landlord is charging? It's no skin off his nose.

If, on the other hand, you are a private renter, paying say E1,250 pm and your landlord wants to increase the rent to E1,500 pm. That's an extra 60 odd euros a week that you are going to have to find from your after tax income. What will you do? Probably you will look at other houses maybe in the same area and hopefully find one cheaper, and you move on.

Maybe if you are lucky, and if you have been a good tenant, your landlord will withdraw the proposed increase, or reduce the size of the increase, just to keep you, once he realises that you are serious about moving. The last thing he wants are new tenants about who he knows nothing. They may be good, but equally they may be bad, but he knows your history regarding how good and regular you are with your rent, and the care you take of his property. Also he doesn't want voids.

That aside, he is in it for the money. If he knows that the HSE is prepared to pay most of the E1,500 rent that he is looking for (with the tenant to pay the balance) he may well decide to allow you to leave.

Kipperhell

Afuera wrote: »

If you look at historical data you'll find that the correlation between achievable rents and mortgages is not so rigid.

I never said it was rigid . I am pointing out that in order for a change in policy their would need to be a correction in the market which would be rent moving upward in the current market.

Afuera wrote: »

Huh? I'm proposing something that would be beneficial to both landlords and tenants, and hopefully allow for a more stable market... and that makes me anti-landlord?

I your eyes it is beneficial yet you have disregard the actual current real world effect it would have on landlords in favour of the tenants. It is also obvious from your numerous posts that you believe the fundamentally the market is unfair and that you feel landlords should get some kind of retribution. If you don't think the market will do it you want the government to do it.

daveirl wrote: »

This post has been deleted.

Using that logic all the countries that don't have such laws can function so their is no need to bring in such laws! You must look at our market and how it is made up. Not many countries have such a large number of small time landlords. You can bring in such restrictive rules when dealing with larger organisations but not with so many small investors.

daveirl wrote: »

This post has been deleted.

The suggestion was you would fix rent but no control on fixing the landlords' costs. This would effectively mean any rate increases would have to be absorbed by the landlord until some date in the future where rent may increase to a reasonable level for the tenant. So effectively the idea would be squeeze the landlord into selling.
In a free market the margin between mortgage and rent has remained relatively stable but if you fix one end by legislation it would be a disaster for those current landlords who bought in the last 5 years. That is why it is unreasonable.

Rent control is not a fundamentally bad idea it just needs to be brought in correctly. The current legislation is pretty effective in what it was meant to do, which was to stop people being kicked out of the property by a landlord doubling rent.

gbh

The builders, developers, and auctioneers as well as the government have only themselves to blame for this mess.

It was greedy auctioneers who contributed to over inflated prices, specifically a new brand of young auctioneer. They put ridiculous prices on houses to encourage people to sell and give them business so they could enrich themselves. I have no doubt that many auctioneers have become millionaires out of the property boom, so its hard to feel any sympathy with them and because of the way they shaft first time buyers.

Likewise developers many of whom were rubbing shoulders with FF in the tent in Galway.

If the rise in house prices was gradual, and in line with inflation, say 5% a year then it would have been manageable, there would have been a consistent year on year demand for houses and property, everyone would have been happy including the first time buyer. Unfortunately with every year that passes more people are priced out of the market thus leading to a contraction in demand. This is what is happening now.

So irresponsible auctioneers and developers out to make a quick profit killed the goose that laid the golden egg. It is clear that the prices they put on houses were artificially high. It now only remains to be seen how long prices will keep falling. But the market always finds it's level in the end as any economist will tell you so I suspect prices have a good bit to fall yet before there is any value again.

It's sentiment more than anything which determines these things. And at the moment sentiment is bad in America, and because this government prefers us to be closer to Boston than Berlin, sentiment will be as bad here in the coming months and even years.

Afuera

Kipperhell wrote: »

It is also obvious from your numerous posts that you believe the fundamentally the market is unfair and that you feel landlords should get some kind of retribution. If you don't think the market will do it you want the government to do it.

You're dead wrong on your assumptions here. I simply think that our landlord-tenancy laws are ill thought out and will cause big problems in the future, unless its deficiencies are addressed. For the record, I don't think it serves either landlords or tenants very well at the moment.

Kipperhell wrote: »

You can bring in such restrictive rules when dealing with larger organisations but not with so many small investors.

You're argument does not hold true at all. Spain is a market made up of small time landlords, yet it still happens to have protection in place for both the tenants and the landlords.

Kipperhell wrote: »

The suggestion was you would fix rent but no control on fixing the landlords' costs. This would effectively mean any rate increases would have to be absorbed by the landlord until some date in the future where rent may increase to a reasonable level for the tenant. So effectively the idea would be squeeze the landlord into selling.

Em, did you not read my post where I said the landlord could fix their mortgages? Are you purposely trying to ignore the fact that landlords can fix their costs if they want to?

Kipperhell wrote: »

In a free market the margin between mortgage and rent has remained relatively stable ...

You're wrong again I'm afraid... Mortgages and rents do not track each other. Even a cursory glance at historical figures will make that obvious to you.

Kipperhell wrote: »

The current legislation is pretty effective in what it was meant to do, which was to stop people being kicked out of the property by a landlord doubling rent.

Can you explain to me how it actually prevents that? If the market rate of an area doubles, after a year, what is to stop the landlord doubling the rent? The flip side of this is if the market rate falls to half its level over the year, what is to prevent the tenant from demanding their rent to come down to that level?