Housing Bubble Bursting

johnnyskeleton

JupiterKid wrote: »

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.

From on top of my shinebox, it seems to me that, if, for example, prices were to drop for the next 5 years, year 4 will see the worst drops. As in, 2007 being year 1 saw a shakey market, 2008 might see bigger drops, 2009 will see serious problems, 2010 will see the biggest drops as prices reach more realistic levels and 2011 will see prices drop, but in a more stable way.

seamus

johnnyskeleton wrote: »

From on top of my shinebox, it seems to me that, if, for example, prices were to drop for the next 5 years, year 4 will see the worst drops. As in, 2007 being year 1 saw a shakey market, 2008 might see bigger drops, 2009 will see serious problems, 2010 will see the biggest drops as prices reach more realistic levels and 2011 will see prices drop, but in a more stable way.

5 years of drops would require one of the following to take place:

1. Construction to continue at 2004-2006 levels
2. Full Economic Depression in Ireland
3. Worldwide Economic Depression

2 is the most possible but none are likely IMO.

ionapaul

seamus wrote: »

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.

If the builders half the numbers of housing units being built (as some have suggested, 80k+ in 2007 and less than 40k in 2008), Ireland Inc is going into recession, led by huge job losses in the construction sector!!!! All of the very, very many sectors in this country that have expanded greatly over the past 10 years and that rely on the residential construction sector then get hit - all of our many DIY stores / furniture stores / tile stores / carpet stores / etc etc etc ad nauseum.

This is what happens when the 'strong foundation' of the Irish success story is us borrowing money from the Germans to build houses and sell them to each other, building more and more houses each year to drive the economy!

johnnyskeleton

seamus wrote: »

5 years of drops would require one of the following to take place:

1. Construction to continue at 2004-2006 levels
2. Full Economic Depression in Ireland
3. Worldwide Economic Depression

2 is the most possible but none are likely IMO.

I don't think so because of
1) the level of over-valuation in the Irish market
2) the fact that it will take a long time for this to become really apparent
3) the length of time it takes for the cycle of a) people defaulting b) being proceeded against in court c) eventual sale of property
4) the length of time it takes for shifts in population to impact on demand for sales of houses
5) the number of part finished properties which will still have to be built
6) the length of time it will take for purchasers(and more importantly banks) to regain confidence in house prices.

ionapaul

Also, reducing or throttling supply can only be effective if it demand stays constant (which it hasn't) and if the massive pink herbivore with the trunk sitting in the corner of the room is ignored - a residential property overhang of tens of thousands of empty homes! The builders would be better off stopping new builds entirely (we will probably see this from the bigger builders before too long, sad for their workers obviously), 40k units completed in 2008 is too many.

tibor

ionapaul wrote: »

a residential property overhang of tens of thousands of empty homes! .

HUNDREDS OF THOUSANDS, as of 2006 census.

SkepticOne

I think the theory that builders are cutting output (as has been suggested) in order to maintain prices is flawed. Why would it be in their interest to operate in this way? Their primary business is shifting units for whatever they can get for them. If they've built far too many (I think most people will agree they have) then they have to reduce output. But once the overhang is cleared then they will start producing and selling at whatever price people will pay and allows them to make some profit. Land costs will be lower as will labour costs. It is not in builders' interest to have high prices if no one is buying at those prices. lt is not in their interest to have this overhang persist year after year.

AngryHippie

seamus wrote: »

5 years of drops would require one of the following to take place:

1. Construction to continue at 2004-2006 levels
2. Full Economic Depression in Ireland
3. Worldwide Economic Depression

2 is the most possible but none are likely IMO.

All are very possible the largest reason for each as below
1. Do you seriously think property developers are going to sacrifice profit for long term sustainability
2. Fianna Fail/Green coalition
3. OIL

3 being inevitable IMO:eek:

SimpleSam06

seamus wrote: »

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.

I don't think supply and demand were ever the primary drivers behind the bubble, so I can't see them having much of a mitigating effect on the collapse.

seamus

1) the level of over-valuation in the Irish market

It's not as massive as people would hope to believe. If a 60sqm one bed apartment can be bought in Dublin City Centre for €300k, then the market is approaching "normal" pricing. Of course, pricing isn't uniform. Homes, particularly those with 3 beds or more suffered the greatest overvaluing.

2) the fact that it will take a long time for this to become really apparent

I would have tended to agree, but we managed to get from a point of delerious optimism to a total acceptance of a crash* in about 18 months. Everyone knew the market was overpriced already and by how much, but were willing to ignore so long as it could continue to be overpriced.

3) the length of time it takes for the cycle of a) people defaulting b) being proceeded against in court c) eventual sale of property

I feel that the level of defaulting won't really have any significant effect on the economy or the housing market. We're not going to see people taken to court right, left and centre. Our level of "sub-prime" lending managed to stay fairly low. The main concern is our exposure to American sub-prime lending.

6) the length of time it will take for purchasers(and more importantly banks) to regain confidence in house prices.

I hate to try and say that there's anything different about the Irish, but there is still a lot of demand for homes out there. Irish people want to own their own homes. Perhaps that's something we exported to the US. Many people I've spoken to still feel that they'd be happy to buy a property now and lose money on it in the short-term, purely because they're happy to stay there long-term so long as it suits their needs.

*Of course debate rages about what caused the crash, despite it being obvious, but there's no-one now who would deny that it's happening

How Strange

seamus...I hate to try and say that there's anything different about the Irish, but there is still a lot of demand for homes out there. Irish people want to own their own homes.

Yes but what happens if the pscyhe of the house buying public changes? What happens if they realise 'hey, this property is really only worth €275k so I'm not paying €350k'?

I think that there has been a fundamental shift in our thinking in the last year with regards to property prices and this factor could spell the end of the heady, giddy days of over inflated prices and profits for developers.

If I were going to look at a property now and I saw the price was €350k, I would offer 20% less and if it was rejected I'd walk away and wait. That wouldn't have happened before; people were caught up in the mania and frenzy so they were outbidding each other and driving up prices.

Calina

seamus wrote: »

It's not as massive as people would hope to believe. If a 60sqm one bed apartment can be bought in Dublin City Centre for €300k, then the market is approaching "normal" pricing. Of course, pricing isn't uniform. Homes, particularly those with 3 beds or more suffered the greatest overvaluing.

On what grounds do you claim that?

seamus

Calina wrote: »

On what grounds do you claim that?

Random-ish figure. It's just less than 9 times the average industrial wage, which from a quick search seems to be fairly typical for a place in a first-world capital city.

Like it or not, everyone's going to have to accept that prices within the cities aren't going to completely collapse. Unless our economy goes completely down the crapper, property in Dublin City centre will remain out of reach for most FTBs and many even on the average wage.
The overall economic growth over the past fifteen years has altered our demographics and attitudes quite drastically. The property market is not going to end up as it was in 1990 or anything even remotely approaching that, because the same demographic/economic conditions don't exist and cannot exist. We don't really have any model on which to base our particular situation.

The_Conductor

seamus wrote: »

5 years of drops would require one of the following to take place:

1. Construction to continue at 2004-2006 levels
2. Full Economic Depression in Ireland
3. Worldwide Economic Depression

2 is the most possible but none are likely IMO.

Personally I would be borderline on 3. given that some of the commentators (such as Merrill Lynch are already calling a recession in the US link here) The indicators are all pointing in the one direction- and Ireland is one of the most open economies in the world. The IDA lost more jobs last year, than it attracted- despite their happy nonsense in the news yesterday. The writing really is on the wall......

gurramok

seamus wrote: »

It's not as massive as people would hope to believe. If a 60sqm one bed apartment can be bought in Dublin City Centre for €300k, then the market is approaching "normal" pricing. Of course, pricing isn't uniform. Homes, particularly those with 3 beds or more suffered the greatest overvaluing.

Ah here Seamus, i'm surprised you said this!
A 300k 1-bed apt is aimed at single people. All 1bed apts in the city centre are around 300k at the mo give or take.
What that means, they are aimed at very high earners(60k+), not the general joe public, that is undeniable at those prices. Demand is woeful at the mo because simply put, there are not enough 60k+ earners around to buy them or willing to buy them.

If you try to say that a 1bed is suitable for 2 people, your seriously wrong there. Vast majority of 60sqm 1 bed apts if they exist are top of the range penthouses, 2 people living in a shoebox is not doable!

And thats not even mentioning that 300k apt in a sh1tty area where no-one wants to live

seamus wrote: »

I would have tended to agree, but we managed to get from a point of delerious optimism to a total acceptance of a crash* in about 18 months. Everyone knew the market was overpriced already and by how much, but were willing to ignore so long as it could continue to be overpriced.
I feel that the level of defaulting won't really have any significant effect on the economy or the housing market. We're not going to see people taken to court right, left and centre. Our level of "sub-prime" lending managed to stay fairly low. The main concern is our exposure to American sub-prime lending.
I hate to try and say that there's anything different about the Irish, but there is still a lot of demand for homes out there. Irish people want to own their own homes. Perhaps that's something we exported to the US. Many people I've spoken to still feel that they'd be happy to buy a property now and lose money on it in the short-term, purely because they're happy to stay there long-term so long as it suits their needs.

You've missed something here. In the herd mentality of the boom, many people took about 3% fixed mortgages for 2-5yrs, alot of these are resetting at double rates as we speak.
Thing is, the ones who have these mortgages are the very ones who are active and young(sub aged 35yrs), these people become cash strapped on new rates.
According to the VI themselves, 80,000 couples out there were suffering with high mortgages alone last year.
These were aiken to sub-prime, i haven't even started to mention the overstretched 100% mortgage types!

Irish people may want homes en masse, that don't mean they will buy en masse, there is a thing called affordability.

SimpleSam06

seamus wrote: »

Random-ish figure. It's just less than 9 times the average industrial wage, which from a quick search seems to be fairly typical for a place in a first-world capital city.

Did you run a comparison on the size of first world capital cities as opposed to Dublin, or the comparitive prices in cities the size of Dublin?

jmayo

ionapaul wrote: »

If the builders half the numbers of housing units being built (as some have suggested, 80k+ in 2007 and less than 40k in 2008), Ireland Inc is going into recession, led by huge job losses in the construction sector!!!! All of the very, very many sectors in this country that have expanded greatly over the past 10 years and that rely on the residential construction sector then get hit - all of our many DIY stores / furniture stores / tile stores / carpet stores / etc etc etc ad nauseum.

This is what happens when the 'strong foundation' of the Irish success story is us borrowing money from the Germans to build houses and sell them to each other, building more and more houses each year to drive the economy!

I have been singing from this hymn sheet for a few years now and I have heard more David McWilliams comparisons to last me a lifetime.
We have become too dependent on residential construction that was funded by the availability of cheap credit.
While that cheap credit was available we were able to hide the underlying cracks with stamp duty receipts, VAT receipts from construction, PAYE contributions from builders and increased consumer spending.
Has nobody noticed the haemorragging of industrial and indeed service jobs out of economy.

Some of our towns (e.g Carlow) have lost the industrial jobs that once kept the towns alive during the bad old days.
When residential construction drops to realistic levels where will the money come from to keep all the new furniture shops, interior design shops and fitted kitchen sellers in business?
Consumer spending is going to take a hammering resulting in loss of jobs in retail sector.

The other worry is two of the major IT corporations operating out of Ireland are investing heavily in production facilities in cheaper overseas locations.
If either was to go it would result in thousands of lost direct jobs and thousands more indirect jobs.

We will not have the same level of immigration, in fact we will find we will have emigration as a lot of our builders make their way home to their own increasingly competitive countries.
Then where will all the property investors find tenants to help pay the mortgage?
Any way you look at it, there is going to be increased unemployment and a major knockon affect on housing prices as sellers try and jump ship and the few buyers play a wait and see game.

EDIT: Who is to say what normal pricing for apartment in Dublin city centre is?
What are you comparing the apartment to and where ?
I think it is time we stop comparing Dublin to Tokoyo, London or Paris and get more realistic.

RuggieBear

RuggieBear wrote: »

erm...just as a little sidenote:

just checked on myhome.ie and the asking price forone of the neighbours houses (literally exactly the same as the one i'm renting) is 680k not the 500k i reckoned.

Insane!

Posted this in April

House is still on market. Now looking for.....













€560K

patrickolee

SkepticOne wrote: »

I think the theory that builders are cutting output (as has been suggested) in order to maintain prices is flawed. Why would it be in their interest to operate in this way?

Because they don't want to get stuck with a large number of depreciating assets?

Gurgle

jmayo wrote: »

We have become too dependent on residential construction

Not true.

http://www.cso.ie/statistics/empandunempilo.htm

jmayo wrote:

Has nobody noticed the haemorragging of industrial and indeed service jobs out of economy.

Well, they haven't noticed in the CSO.

jmayo wrote:

where will the money come from to keep all the new furniture shops, interior design shops and fitted kitchen sellers in business?

Same place most of the money comes from now, people redecorating.

jmayo wrote:

Consumer spending is going to take a hammering resulting in loss of jobs in retail sector.

Or if housing prices come down, consumers will have more disposable income to spend on other stuff.

jmayo wrote:

The other worry is two of the major IT corporations operating out of Ireland are investing heavily in production facilities in cheaper overseas locations.

To supply the emerging markets in those cheaper overseas locations.

seamus

gurramok wrote: »

If you try to say that a 1bed is suitable for 2 people, your seriously wrong there. Vast majority of 60sqm 1 bed apts if they exist are top of the range penthouses, 2 people living in a shoebox is not doable!

Well, what I really meant is a decent-sized one bed apartment. As you say, most of the shoeboxes at the moment are €300k or less, it's not until the decent stock comes down that level will affordability return. The only people who (should) buy 1-bed apartments in any city are wealthy young single professionals, and they should be able to afford them at around €50k.

Irish people may want homes en masse, that don't mean they will buy en masse, there is a thing called affordability.

Well this is the thing. We saw the market freeze, literally stop dead once affordability got sucked out of the market. Who's to say that the first headline next year saying, "Average asking price now at €280k" won't have FTBs rushing out to chat to their mortgage broker? What struck me about our situation is that we priced the buyer's out of the market, we didn't sell them out of the market. The buyers stopped looking for homes because their ability to buy was suddenly killed, but they're still there. The increase in interest rates and tightening of lending criteria will require prices to drop to an affordable point. At that stage, the buyers will return to the market but the prices may still continue to drop - sellers will be relieved to see some interest and will probably let their property go to the first offer. Once the surplus is cleared then, growth will return at normal levels.

jmayo wrote: »

EDIT: Who is to say what normal pricing for apartment in Dublin city centre is?
What are you comparing the apartment to and where ?
I think it is time we stop comparing Dublin to Tokoyo, London or Paris and get more realistic.

As I say, I really picked a randomish figure. More mature capitals have average costs more like 12 & 13 times the average wage (based on *very* quick googling), so I went a little lower and also with what I personally thought was a reasonable figure - what most people would be prepared to pay if they were in the market for such an apartment.

patrickolee wrote: »

Because they don't want to get stuck with a large number of depreciating assets?

I'm not sure that depreciation's a big deal for them. For most of the boom, builders increased the cost of their new builds far faster than their actual costs ever increased. This was a primary cause of the whole thing and they've pumped in so much hot air now that I wouldn't be surprised if 40% or more of the asking price for a new place is pure profit for the builder. So they can easily sit on these places for twenty years, rent them out, then sell them on at an insane profit.

The builders' main need to "get rid" is that they'll have massive financial backing relying on the income from the sale. So by pausing any unstarted projects, they can rely on the trickle of demand to chip away at their existing stocks until the bank is sorted. Then they can go back to small-scale "exclusive" developments that have high costs but more guaranteed returns.

DublinDilbert

Gurgle wrote: »

Or if housing prices come down, consumers will have more disposable income to spend on other stuff.

This only applies to people entering the market, which is a very small % of the total market. If people are struggling to the pay their mortgage + bills now, it will make no difference what the market does, their only worry is interest rates.

From what i've seen lots of people were pushed into buying apartments, which they didn't really want, in a place they didn't want to live in, for fear of "never being able to buy some where". These people now want to buy some where to live and find they can't, they are in effect trapped, and could be for many years to come.

A large amount of people bought apartments in the 2001 --> 2004 years, they now want to move up the so called ladder, hence they need another wave of people behind them to buy their places, the problem is there isn't that next wave of people.

dodgyme

Gurgle wrote: »

Or if housing prices come down, consumers will have more disposable income to spend on other stuff.

.

not if they have no job

jmayo

Gurgle wrote: »

Not true.

http://www.cso.ie/statistics/empandunempilo.htm


Same place most of the money comes from now, people redecorating.

Or if housing prices come down, consumers will have more disposable income to spend on other stuff.

To supply the emerging markets in those cheaper overseas locations.

To quote someone "There are three kinds of lies: lies, damn lies and statistics"

I seem to remember from one of your old posts you reckon we have a stable economy and there is nothing to worry about ?
Optimisitic seen as there are more people employed in construction than in industrial production.
Yeah we are going to start exporting those unused housing units soon.
Afterall some of our apartments now arrive on the back of a truck so we might as well just send them to some other country.

Oh yes when I am an unemployed plasterer or blocklayer I will have loads of disposable income to get an interior designer to redecorate my negative equity property for me :rolleyes:
Just because house prices come down does not necessarily mean I will have more dispoable income. Interest rate increases may be gobbling up my income. My salary might not keep pace with inflation because I haven't had an increase for number of years as my employer is threatening to move production to Poland.

Yep those multinationals are going to continue production in Ireland and pay considerably more to their employees, the state monopolies and make much less of a margin on their products :rolleyes:
Why won't they supply our plants' markets from the new plant in China or the one in Poland at half the production costs ?

Keep the old head in the sand and clutch at straws.
BTW did you grow up during the eighties or was it the nineties ?

Glenbhoy

Gurgle wrote: »

Originally Posted by jmayo
Consumer spending is going to take a hammering resulting in loss of jobs in retail sector.

Or if housing prices come down, consumers will have more disposable income to spend on other stuff.

Neglecting that a huge amount of consumer spending has been financed via 'equity releases'.

Well, what I really meant is a decent-sized one bed apartment. As you say, most of the shoeboxes at the moment are €300k or less, it's not until the decent stock comes down that level will affordability return. The only people who (should) buy 1-bed apartments in any city are wealthy young single professionals, and they should be able to afford them at around €50k.

300K mortgage over 30yrs at 5.1% is €1629 p.a, approx 1450 after tax, net income for someone earning 50K is approx 3K per month.
Tight, very tight.

gurramok

Glenbhoy wrote: »

300K mortgage over 30yrs at 5.1% is €1629 p.a, approx 1450 after tax, net income for someone earning 50K is approx 3K per month.
Tight, very tight.

Yes, it indeed is.

Lets talk about apts....Thing is, a 1bed or even a 2bed apt is marketed as that 'starter home'.

Lets face it, couples who want to live in a 2bed apt(i talk about the vast majority of apts which are tiny sub 50sqm) are in the small minority and content with it, the rest want that house or bigger apt(these are extremely scarce and pricy)

I mentioned content for the past buyers, not want, a big difference as mentioned by DublinDilbert.

For single buyers, they expect everyone to be on 50kpa, news is people on this salary who WANT to buy are in the tiny minority, we know that a median and average salaries are sub 32k.(have a look at the last budget website)

Now we haven't even mentioned
-300k apts are primarily in not so desirable areas at the mo(hardly attractive to highly paid professionals)
-the credit crunch
-those that have outstanding loans(that flashy car) & lack of savings that reduces their max mortgage loan
-the appalling quality of many of the apts themselves plus the noise issues
-transient nature of occupants, apts tend to attract tenants more than houses...all it takes is for a few bad tenants to make life hell for eveyone else
-mgt fees which can be exhorbant and is another unwelcome bill in a recession
-lack of mgt legislation...still hasn't been passed into law
-investors/speculators are not buying, no capital appreciation plus too many apts in rental market hence only live-in buyers left

It doesnt take a mathmatician to know that the 'high-earning demand' out there that wish to buy an apt of asking price 300k in Dublin city and suburbs woefully do not match the huge numbers of apts that are for sale at any given time.

johnnyskeleton

seamus wrote: »

It's not as massive as people would hope to believe. If a 60sqm one bed apartment can be bought in Dublin City Centre for €300k, then the market is approaching "normal" pricing. Of course, pricing isn't uniform. Homes, particularly those with 3 beds or more suffered the greatest overvaluing.

I would say that 9x industrial wage is still too high. It seems to me that people borrow what they can afford based on 1) how much the bank will give them and 2) how much they can repay each month, and further that 3) people's standards are rising.

The banks are now giving a lot less in 1) than they were even last year; 100% mortgages have been really tightened up, there is a lot less "cooking the books", the banks (being conservative creatures) will always have a close eye on the arrears mortgages, especially when negative equity rears its ugly head. So effectively, although the banks have paid lip service to the 4:1 or 5:1 ratio of loan:earnings up to now, they are going to be enforcing it a lot more.

2) As interest rates are heading towards double what they were a few years ago (e.g. approx 3% in 2005 to potetially 6% in 2008), people whose repayment is predominantly interest will see their monthly expenditure on housing jump to maybe 75% more than they were when they took out the loan (and their earning capacity was assessed).

3) During the boom, everyone wanted to get their hands on property, even if it was a crappy 1 bed apt between a couple. I expect that in the next few years people will want higher standards and this will effectively mean they want the same quality apartment for the price of a cheaper one which they would have bought during the boom.

While there are many reasons for house prices becoming over valued in the first place, I believe these three factors will have the greatest deflationary effect in the next few years.

seamus wrote:

I would have tended to agree, but we managed to get from a point of delerious optimism to a total acceptance of a crash* in about 18 months. Everyone knew the market was overpriced already and by how

As Ruggie Bear points out (or at least as can be inferred from his example) people are unwilling to accept major drops in prices. So if I were to say to his neighbour that the house is only worth 450k, the neighbour wouldn't sell to me. It could well work out that the neighbour hangs on to the house for another year or two before finally accepting that it's not worth what they expect. It's one thing to say that every shoe shine boy knows that house prices are going to crash, but it's competely different when it comes to people with houses to sell. They are often unwilling to accept any drop in the price.

seamus wrote:

I feel that the level of defaulting won't really have any significant effect on the economy or the housing market.

By contrast, I think the two main factors which will drive prices down are:
1) as others have stated better than me, the massive oversupply of new builds
2) people seeing their neighbours going into arrears, being brought to court, and ultimately being evicted.

I believe 2) will have a significant impact, not just because there will (in fact are) a lot of desparate people in arrears trying to sell (and therefore prepared to take a hit), but also because sellers (who are not in arrears) will begin to realise their own fallability and become anxious to sell, even at a lower price, rather than face arrears or repossession (and the consequent shame, increased expense and potential bankrupsy), banks will see these repossession cases and become even more cautious, and purchasors will loose any dillusions that property is a safe bet.

seamus wrote:

I hate to try and say that there's anything different about the Irish, but there is still a lot of demand for homes out there. Irish people want to own their own homes. Perhaps that's something we exported to the US. Many people I've spoken to still feel that they'd be happy to buy a property now and lose money on it in the short-term, purely because they're happy to stay there long-term so long as it suits their needs.

I don't doubt the demand is still there (otherwise we would be in serious trouble) but the question isn't demand, it's demand at what price? Obviously I want my own home, but if the bank will only lend me €150k then my demand doesn't matter. My demand will only activate, so to speak, when there is a realistic possibility of purchasing safely.

To my mind, we will see house prices drop by up to 10% for the next 2 years; it might go into double digits the following year or two as all the part built houses are completed and the insecure borrowers of today finally sell or get repossessed, and then maybe a year or two of minor decreases / stagnation before house prices being to rise again (hopefully, at a very modest rate this time).

johnnyskeleton

seamus wrote: »

Well this is the thing. We saw the market freeze, literally stop dead once affordability got sucked out of the market. Who's to say that the first headline next year saying, "Average asking price now at €280k" won't have FTBs rushing out to chat to their mortgage broker? What struck me about our situation is that we priced the buyer's out of the market, we didn't sell them out of the market. The buyers stopped looking for homes because their ability to buy was suddenly killed, but they're still there. The increase in interest rates and tightening of lending criteria will require prices to drop to an affordable point. At that stage, the buyers will return to the market but the prices may still continue to drop - sellers will be relieved to see some interest and will probably let their property go to the first offer. Once the surplus is cleared then, growth will return at normal levels.

Hopefully with one major difference - buyers will now listen to sound financial advice and banks will give it. This means no more 100% mortgages, no more 40 year mortgages, no more borrowing in excess of 5x your income, no more paying more than half your monthly paycheque into your mortgage, no more ignoring the possibility of interest rates going up, no more ignoring the possibility that you might break up with your partner, loose your job, get sick or otherwise be temporarily unable to pay your mortgage, and, most importantly, no more buying rubbish properties as a "first step on the ladder".

SkepticOne

seamus wrote: »

I'm not sure that depreciation's a big deal for them. For most of the boom, builders increased the cost of their new builds far faster than their actual costs ever increased. This was a primary cause of the whole thing and they've pumped in so much hot air now that I wouldn't be surprised if 40% or more of the asking price for a new place is pure profit for the builder. So they can easily sit on these places for twenty years, rent them out, then sell them on at an insane profit.

The builders' main need to "get rid" is that they'll have massive financial backing relying on the income from the sale. So by pausing any unstarted projects, they can rely on the trickle of demand to chip away at their existing stocks until the bank is sorted. Then they can go back to small-scale "exclusive" developments that have high costs but more guaranteed returns.

Builders are in the business of building. If they were in the business of property investment/speculation as you suggest they would not have allowed a massive glut to appear in the first place.

As soon as they can make a profit building they are going to start building.

Unfortunately, that is the way it is.

johnnyskeleton

jmayo wrote: »

Optimisitic seen as there are more people employed in construction than in industrial production.

So? Most developed nations show a trend away from manufacturing / agriculture and towards services

jmayo wrote:

Oh yes when I am an unemployed plasterer or blocklayer I will have loads of disposable income to get an interior designer to redecorate my negative equity property for me :rolleyes:

His point was that you won't be unemployed as a plasterer or blocklayer because people are constantly renovating/redecorating. During the boom, for example, it was very hard to get builders to build an extension to your house, as they could make more money putting up vast housing estates. When the jobs in these housing estates dry up, many builders will go back to these other areas.

jmayo wrote:

Yep those multinationals are going to continue production in Ireland and pay considerably more to their employees, the state monopolies and make much less of a margin on their products :rolleyes:
Why won't they supply our plants' markets from the new plant in China or the one in Poland at half the production costs ?

In today's global economy, we do not need production to be located an area for that area to become rich. How many factories are in Manhattan, for example? Besides, for many sectors of the manufacturing industry in Ireland, it was the highly educated workforce that brought companies in, not cheap labour. So pharmaceutical plants will remain here in the short - medium term.

Ultimately, your argument is flawed because it is focused on construction and manufacturing as the only real means of weath creation. It is not.