Housing Bubble Bursting

Do-more

For anyone, thinking of purchasing a house right now, there is an added factor to consider.

I was talking to a guy who had purchased a house in a new estate and he told me that the developer has subsequently gone bust. The local County Council has now purchased the remainder of the unsold houses (most of the estate) from the liquidator for social housing. He reckons it's wiped out a considerable chunk of the value of the house. To add insult to injury his tenant has just given him notice to quit as he has received one of the other houses from the council!

punchestown

Do-more wrote: »

For anyone, thinking of purchasing a house right now, there is an added factor to consider.

I was talking to a guy who had purchased a house in a new estate and he told me that the developer has subsequently gone bust. The local County Council has now purchased the remainder of the unsold houses (most of the estate) from the liquidator for social housing. He reckons it's wiped out a considerable chunk of the value of the house. To add insult to injury his tenant has just given him notice to quit as he has received one of the other houses from the council!

Domore, could you give a rough idea as to the area this development is in please?

Firetrap

That sounds a bit like what a friend of mine told me. She's not as bearish as I am and is hoping to buy a house soon. She recently visited the showhouse of a new estate and was very tempted by the reasonable cost of a semi-detached house. The snag, she soon learned, was that the local council has bought a large chunk of the rest of the estate to use as social housing. I'd prefer not to say where but it is a commuter town outside Dublin.

Do-more

punchestown wrote: »

Domore, could you give a rough idea as to the area this development is in please?

North Midlands. But It could happen anywhere and as Firetrap says it may just be a partial sell-off of the estate to the council by a developer.

I'm aware of another developer trying to sell an entire estate to the council, but in that case no units have been sold to private persons.

NP14

SkepticOne wrote: »

Other forms of delusion are taking over.

Whaddya' mean by that Skeptic?

SkepticOne

NP14 wrote: »

Whaddya' mean by that Skeptic?

I think the main one at the moment is the belief that rents are shooting up at the moment as a consequence of people holding off buying. There have been several pieces of VI spin put out in the last few weeks to this effect and I have heard it reflected privately in conversation.

It is one of those things that seems to make sense when first mentioned. If people don't buy, the reasoning goes, they must rent and this increased demand will force up rents.

In reality, the increased supply of properties will lead to reductions of both property prices and rents in the long run. There may, of course, be a lag of rent reductions behind price reductions.

I think people must imagine two fixed pools of supply: one of property for sale and the other to rent whereas in fact for the most part they are the same pool. At present, we are seeing many builders letting apartments that they would previously have sold.

Another thing I've come across is the idea that landlords can simply pass on interest rate increases to tenants. Although there will be many stories of landlords actually doing this, these stories never account for the risk of tenants moving to lower priced accommodation. Not all landlords are burdened with interest rate increases to the same extent and the massive increase in properties to rent recently means that competition is greater than ever.

It is possible that rents in the short term will rise, but it will be for other reasons than these. Currently there's a vast amount of properties on the market for sale. Many of these will be empty and would otherwise be providing accomodation. This lack of supply may have a short term impact on rents.

Cantab.

Do-more wrote: »

I'm aware of another developer trying to sell an entire estate to the council, but in that case no units have been sold to private persons.

Lol. There goes the councils 'social integration' policy out the window. The whole social and affordable housing scheme is a farce.

Cantab.

Do-more wrote: »

North Midlands.

Why don't you just say where it is? It's not like it's illegal to name this estate.

BendiBus

AIB is upping it's standard variable rate on it's mortgages. Presumably reflecting the cost of borrowing in the current market. How soon will the others follow?

http://www.rte.ie/business/2007/1220/aib.html

daveirl

This post has been deleted.

Fr0g

BendiBus wrote: »

AIB is upping it's standard variable rate on it's mortgages. Presumably reflecting the cost of borrowing in the current market. How soon will the others follow?

http://www.rte.ie/business/2007/1220/aib.html

I got a letter last friday from my mortgage lender increasing the rate by 0.10%

Anyone else?

BendiBus

And not only are interest rates on the up, house values are continuing down at a scary pace, averaging a €1,500 drop every month this year.

http://www.rte.ie/business/2007/1220/houses.html

SkepticOne

BendiBus wrote: »

And not only are interest rates on the up, house values are continuing down at a scary pace, averaging a €1,500 drop every month this year.

http://www.rte.ie/business/2007/1220/houses.html

Interestingly, in today's Irish Times we have:

The ESRI has also reiterated its belief that, when final data is available, average house prices in December 2007 will be shown to be 15 per cent lower than a year earlier.

[link (via the PropertyPin)]

I heard Batt O'Keefe on Newstalk a couple of days ago saying that second hand properties were down 17% when he was complaining about builders not reducing their prices.

Do-more

Cantab. wrote: »

Why don't you just say where it is? It's not like it's illegal to name this estate.

Because I have only one persons word that the story is correct, I have no reason to believe that it is incorrect, but without third party verification it would be grossly unfair if I were to name the wrong estate...

My post was to warn people of the risk rather than anything else...

Cantab.

Do-more wrote: »

Because I have only one persons word that the story is correct, I have no reason to believe that it is incorrect, but without third party verification it would be grossly unfair if I were to name the wrong estate...

My post was to warn people of the risk rather than anything else...

This isn't the Irish Times ('the' paper of record) you know.

BobbyD10

In the news it mentioned that AIB had increased it's standard variable rate by .10% and wondered when other banks would folow. I believe at least one bank has already raised this rate even before AIB.

Do-more

A very Merry Christmas to all the regulars on the thread and may all your wishes come through in 2008, (Just be careful what you wish for!:D;)).

SkepticOne

LOL, can't imagine there'll be a huge amount of building over the next couple of years.

Irish Times: Gormley to limit new homes in villages and towns

Strict new planning rules to be introduced next year by the Department of the Environment and Local Government will cut sharply the number of new houses that can be built in Irish towns and villages.


Under the guidelines from the Minister, John Gormley, who is concerned at the explosive growth of many towns and villages in recent years, developers will only be able to build between 10 to 12 extra houses in villages that have fewer than 400 people.Planning permission for greater numbers would "usually be difficult or inappropriate due to an absence of a sufficiently developed urban structure to cater for the development and should therefore be discouraged".


Meanwhile, planning authorities will be told not to increase the number of houses in towns of up to 5,000 people by more than 10-15 per cent over the lifetime of a seven-year development plan, for the same reason.

SkepticOne

SkepticOne wrote: »

LOL, can't imagine there'll be a huge amount of building over the next couple of years.

Irish Times: Gormley to limit new homes in villages and towns

GREAT - so were stuck with the crap they threw up the past few years.
what a fix.
so this becomes a multi generational problem - I kept a slight hope it wouldn't but dammit anyway. It was inevitable i suppose.
The country grows less and less appealing

Cantab.

Deleted User wrote: »

GREAT - so were stuck with the crap they threw up the past few years.
what a fix.
so this becomes a multi generational problem - I kept a slight hope it wouldn't but dammit anyway. It was inevitable i suppose.
The country grows less and less appealing

That whole Gormley story looks like a political move to me: lead Gormley up the garden path by pandering to his new-found-power and 'green agenda', then once the agreement has gone through, release the story, butter it up to offend the masses laying the groundwork for this government's downfall. And it won't be due to FF mismanagement/corruption/gombeenism I can tell you: rather, the downfall will come from the tragic hero that is the 'people's man' at the tribunals, Green party incompetence and those unforeseen 'external economic factors' (e.g. the credit crunch, tsunami, terror attack, <insert SkyNews headline of choice>).

Depending on the public appetite for more of this crap from our leaders, I wouldn't be surprised if this government were out of office very shortly.

SimpleSam06

Cantab. wrote: »

Depending on the public appetite for more of this crap from our leaders, I wouldn't be surprised if this government were out of office very shortly.

I would be surprised. I mean Bertie did the equivalent of phoning in a bomb scare to cover the fact that he was robbing the till with his whole provisional licence/pay raise fiasco, and no one batted an eyelid.

LegacyUser

.

Pa ElGrande

2008: Don't be afraid of the new market conditions

The rental market
Niall Clarke, Lowe & Associates, Rathmines
What's the outlook for 2008?

The rental market has softened somewhat in the last six weeks resulting in rents decreasing slightly. This is perhaps the result of an increase in supply, partly due to new developments not selling and being released exclusively 'to let'.
Will more investors return to the market? Investors may return in the more central areas due to stamp-duty reforms and current price levels. However, this would only apply to central locations and modern apartments as the rental return is not viable for units over a certain level.
What type of properties make good investments? Generally, modern properties which are in central areas, in good condition and well-served by transport links. Rathmines and Ranelagh are still very strong letting areas. There is also strong demand for the city centre and areas on the Luas line, like Dundrum.

Any advice for landlords?
React to market changes when they occur and adjust the rent accordingly; remember, a good tenant is an asset; invest time and money in the presentation of a property as tenants now have higher expectations.

The estate agents now freely admit that demand has fallen and so have prices in 2007 (no surprise to anyone following this thread), but I suppose they have to make a living too, so price discovery will continue in a downward direction for 2008. Also the agent confirms what we already have seem on daftwatch that rental supply is increasing, looks like its heading over 10,000 soon, this is a marked contrast to this time last year when you had to compete for rental properties.

EnoughSaid

You can see the increase in supply of rental properties on the graphs at:


http://daftwatch.atspace.com/

There are seperate graphs for each county too.

This will probably increase further as more and more developers try to rent out the properties that they cannot sell.

Tom123

Pa ElGrande wrote: »

The estate agents now freely admit that demand has fallen and so have prices in 2007 (no surprise to anyone following this thread), but I suppose they have to make a living too, so price discovery will continue in a downward direction for 2008. Also the agent confirms what we already have seem on daftwatch that rental supply is increasing, looks like its heading over 10,000 soon, this is a marked contrast to this time last year when you had to compete for rental properties.

They don't mention the fact even after the price reductions. Places still aren't selling.

According to the latest report from IPW 35% of properties have been on the market for more than 6 months
http://irishpropertywatch.wordpress.com/2008/01/05/daft-report-6-324-drops/

gurramok

Thought i'd add this i found in After hours above all places from a Polish poster who seems to think that migration from that part of the world will be reversing in the coming year.

http://www.boards.ie/vbulletin/showpost.php?p=54797048&postcount=77

poster wrote:

Many of us will go back to Poland soon, maybe in one year. The price of polish currency is getting higher, euro is getting lower in Poland. Unemploymend is very low in Poland now. Many people in Poland have almost the same salary as in Ireland. Food, drink, accomodation is much more cheaper.
it seems like Ireland will say good bye to polish community and will be forced to deal with Romanians Bulgarians and others. I hope You like them.

To sum up, there disappears a huge amount of tenants from the Irish rental market if its true.

seamus

gurramok wrote: »

Thought i'd add this i found in After hours above all places from a Polish poster who seems to think that migration from that part of the world will be reversing in the coming year.

http://www.boards.ie/vbulletin/showpost.php?p=54797048&postcount=77



To sum up, there disappears a huge amount of tenants from the Irish rental market if its true.

If the unions were to be believed though there are thousands displaced Irish waiting to retake their juurrrbbs!

We will have to start adjusting ourselves though to sit as one of the wealthier countries in the EU now. The next ten years will see the likes of Poland experience growth rates similar (though probably not as high) to what we had between 1990 and 2005 as EU money pours in. It's your standard cycle. The construction industry fuelled most of the increase in costs in this country (directly and indirectly) over the past ten years, so now that it's frozen, we should see ourselves dropping to costs more inline and competitive over the next ten.

D'Peoples Voice

EnoughSaid wrote: »

You can see the increase in supply of rental properties on the graphs at:


http://daftwatch.atspace.com/

There are seperate graphs for each county too.

This will probably increase further as more and more developers try to rent out the properties that they cannot sell.

Cork is still looking a great place to invest:D
nooooo, it doesn't have too much rental inventory relative to this time in 2005, nor too much houses for sale!
Just compare the numbers on Daftwatch for the county of Cork to the numbers for Kildare, Louth, Meath and Wicklow combined!
It's an eye opener!:)

JupiterKid

Interesting to see that even the most deluded VIs are now admitting that a decline in house prices is taking place.

In my opinion, 2006 was the peak of the property bubble, 2007 was the year it all went wrong for the Irish property market and 2008 will be a bloodbath year in therms of house price falls.

seamus

2008 could go either way I think. If builders have halted their plans as much as it appears, then that may very well be the safety net required. Late 2008/early 2009 would then see the trough of the price drops as the excess in new homes is sold off. Of course if the builders have failed to react correctly then 2008 could well be the first solid year that everyone knows prices are going to drop and expects the worst.