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Housing Bubble Bursting
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^^ Thats not bullish, as he is referring to non inflation-adjusted prices.
I am glad to hear you are so bullish.astrofool wrote:I guarantee that in 10 years time, Property prices will be higher than they are today, (not inflation adjusted ), and we'll probably be gearing up for the next bubble.
If we average 4% inflation over the next 10 years and prices stay exactly the same, thats a 48% decline in inflation-adjusted prices.
Predicting a 48% decline in real property values over 10 years is actually very bearish.
(Its also the mechanism of a soft landing btw.)
pointing out the mind-numbingly apparent to the apathetic since 19760 -
In principle, I agree with most of what you are saying faceman.
With respect to the banks flinging money at assets which may depreciate, I think there are a couple of ways of looking at it.
1) sales targets. Ultimately once the mortgage sale is made, the mortgage seller doesn't really have to worry about it.
2) the bank's key interest is in the debt being serviced. So long as a debt is being serviced, they may not be so concerned about the value of the asset behind it in the short to medium term. The risk of default in Ireland is relatively low for a number of reasons a) onerous bankruptcy legislation b) the historical imperative to own your own land so as to speak and c) public shame.
For me, the issue with (2) in Ireland - and in Dublin especially - is that the profile of properties sold in the last 5 years almost demands trading up for a lot of people. If you're living in a house that you've no plans to dispose of for something better, you'll probably cope with a few years of negative equity. If you're living in a one bed shoebox you may go totally mad and leave the country. So I don't know for sure how that is going to play out.
Although I am not a great fan of hers, Polly Toynbee made an interesting point in an article in teh Guardian about two years ago where she suggested that there was plenty of housing around for everyone, just not enough for everyone to have two houses. Given that 40% of the new sales market went to investors in 2006 and anecdotally, a lot of trader uppers were encouraged not to sell their first houses, I suspect that a lot of the problem in Ireland is linked to some people owning more houses than they need - and not renting them out at the same time - and some people suffering from the land imperative. We have not actually been short of property per se for the last three or four years, just property to buy until around 2006.
With respect to how things will look in 10 years. I think it's naive to guarantee any position. No one could have said in 2001 that we would arrive at this point now but we did. What matters in truth is the situation now which is not hugely encouraging: we have a lot of recent buyers who are heavily endebted and we are facing into a possible world recession. Also, a lot our jobs growth in the past two or three years has been in non-export driven sectors. So they are not actually generating income for the country.
Property has a primary function and that primary function is not "cash cow". Unfortunately, it has been seen as a get rich scheme - "easy money" if you like for a few years yet and while this has undoubtedly been true for some lucky people, it is not really sustainable. We would never have reached this situation if house prices had risen in line with inflation which - over the very long term - is what they generally do anyway.
Property slowly started to dip as interest rates started to rise in this country, so it's closely linked to the cost of credit. I would be reluctant to argue that it's credit crunch driven if only because I don't - realistically - feel that "credit crunch" is really anything other than the banks admitting on a global scale that they made a booboo.
I'm not sure that uncertainty about property pricings is really the issue at the moment. I think there are a couple of key things:
1) interest rates are tending up rather than down making the cost of credit high
2) there is a certain amount of concern about jobs
3) there is a lot of certainty that prices are going to come down further. This keeps buyers out of the market.
4) prices are relatively too high.
My main fury has not been directed towards 100% mortgages - they weren't prudent anyway but in the grand scheme of things, the problem is less the LTV and more the high principle. That's very often been on a basis of a salary multiple. Put simply, for the most part, 100% of 3 times your salary is generally less than 92% of 5 times your salary. So the rot had set in far in advance of the 100% mortgage.
I don't know what the banks will do in the future. In part I feel the issues are linked to the need to create short term profits with less importance being attached to long term planning. I strongly believe that this is why there was a subprime crisis in the US. If you look at what happened with Bear Stearns, there is a shocking lack of management accountability.
With respect to long term economic threats, I see you mention Asia. I think this is not necessarily wrong in theory. It's just that reality tends to whack theory into the stratosphere on a regular basis and what did for us this time was 9/11 which you couldn't foresee.
Most large scale civilisations wind up collapsing at some stage for various reasons, either due to corruption, civil unrest linked with food shortages (for example), linked to environmental factors. In the grand scheme of things, some things are just out of our control.0 -
I'm not sure that there was simply a lack of demand; not so long ago people were queueing up overnight to buy properties off the plans. I think it was more the problem that a lot of the demand was purely speculative and had the potential to simply disappear overnight (with hindsight it seems to be exactly what happened).The main reason that house prices fell is simply that supply of new houses exceeded demand. There were more properties than people to buy them.
Coming up to 2006, 40% of new builds were being bought by investors, and lots of FTBers were jumping in to get anything, no matter how unsuitable for their needs, simply so they could get on the ladder before they couldn't afford anything. Once the affordability wall was hit, the market stagnated and this gave buyers time to think. With this time there were no longer rushed FTBers grabbing the first thing they could afford and since investors could no longer count on capital appreciation many just decided it was no longer the right time to buy property (yields had been pretty much non existant for a long time before).
I think the government had a big part to play in encouraging this speculative demand due to the large number of tax breaks that were put in place for investors. Banks also did everything they could to accomodate and encourage investors as well; often people trading up were given the suggestion of keeping their old home as an investment.
The people that really got caught with there pants down seem to be the developers. They started rolling out increasingly impressive plans to capitalize on the demand that they saw out there; people were litterly chomping at the bit to buy up all the property they were building at the peak. There simply wasn't such a great need for property as everyone was led to believe.0 -
^^ Thats not bullish, as he is referring to non inflation-adjusted prices.
If we average 4% inflation over the next 10 years and prices stay exactly the same, thats a 48% decline in inflation-adjusted prices.
Predicting a 48% decline in real property values over 10 years is actually very bearish.
(Its also the mechanism of a soft landing btw.)
pointing out the mind-numbingly apparent to the apathetic since 1976
Full marks there Gurgle, well spotted.
I will have to remember the "not/non" in future.
It must be the oLd age and bad eye sight catching up with me :mad:
BTW do you believe in soft landings ?I am not allowed discuss …
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It's a good point, it seemed to happen all at the same time that everyone had the brainwave that property was the way to go and led to that spike in demand (both real and speculative). The idea that everyone in the country could retire on the back of their property portfolios is very absurd when you consider our unique fundamentals; we have a country where 80% ofthe population own their own home. Regardless of whether this is due to tradition or the lack of adequate tenancy laws, the fact remains that the size of the rental market is no greater than about 300,000 properties.Although I am not a great fan of hers, Polly Toynbee made an interesting point in an article in teh Guardian about two years ago where she suggested that there was plenty of housing around for everyone, just not enough for everyone to have two houses. Given that 40% of the new sales market went to investors in 2006 and anecdotally, a lot of trader uppers were encouraged not to sell their first houses, I suspect that a lot of the problem in Ireland is linked to some people owning more houses than they need - and not renting them out at the same time - and some people suffering from the land imperative. We have not actually been short of property per se for the last three or four years, just property to buy until around 2006.0 -
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I expect rental to be problematic for the next two or three years with some see sawing going on.
what exactly would be the problem? More people holding off buyin which will just lead to more renting, if banks start tightening up their belts instead of dishing out money, it will be harder to get mortgages, therefore more people renting
The rich will always get richer, simple as0 -
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Both. One of the key issues leading to an increase in rents at the start of last year was that property was pulled from the rental market and put on the sales market leading to a rental supply bottleneck.
Many recent landlords can't cover their costs and now with no capital appreciation to write off their running costs, they will be taking a greater interest in yield. I think you will see houses moving to and from the rental market as landlords try to either cash in before the losses get too big or get some income before they go bankrupt from having to pay mortgages on properties that have no tenants.
If we have a situation where property is being shifted from rental to sales and back, then there will be a yo yo effect, rental supply will be up and down with a corresponding mess in terms of agreed rents. Of course, this wouldn't happen if property sale was not permitted as a Part VI lease breaker.
So landlords are going to be cash strapped and tenants will have an unreliable supply of property. Anecdotally there are already properties that are on rental and sales market simultaneously.
Most people looking for somewhere to live are looking for stability. They will not want to hear six months down the line that the landlord is looking to sell because he/she has a negative cashflow situation with a depreciating property.
The perception out there at the moment is that rents are rising so I suspect rental supply will continue to stay strong for the moment. However, anecdotally, the number of immigrants arriving is falling and the level of emigration of Irish natives is increasing. Supply of tenants could well be problematic for a while too, leading to rents falling, and people trying to sell up again because they can't keep the highly leveraged investment train on the tracks.0 -
To a certain extent there is a two-way relationship between banks and financial manias. They both cause, and are effected by bubbles. The impression I get is that in Ireland, banks are a fairly conservative institution in terms of lending in normal times. In the early years of the current boom, lending rules were fairly strict but people learned how to circumvent them (e.g. borrowing the deposit from the credit union). It was only in the latter years that such things as 100% mortgages were introduced as a reflection of what people were doing anyway. Bankers are no different really than anyone else. Eventually they too are effected by the mania and then they start effecting the market.Re the credit crunch in the US, if anything, the loans being given were the "bubble" in my opinion. Sub prime lending got out of control and literally anyone was being given a loan. All it took was one bank to suffer to have a knock on effect on the whole market. Scary when you think of it.
I wonder if even during future good times (and lets be honest, there will be a point yet to be determined where things will pick up again) if 100% mortgages will be introduced. If anything worldwide financial regulation is getting tighter year on year and governments will not want to see a repeat of current crisis.
I view the banks as merely large players in the bubble both contributing to the bubble as well as being influenced by it. In the case of Ireland though, it looks to me that the bubble started off in the minds of ordinary people.
The situation here is complicated by the US (now international) credit crunch but we would have seen eventually the Irish banks pull back on lending for apartments simply because the market value is depreciating.0 -
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Calina, I hadn't thought of it in those terms before.
If a continual shift from one market to the other was to happen, I'm thinking that the pool of potential buyers would probably reduce everytime there was an increase in the supply of property for sale (assuming that some of the prices were adjusted downwards to ensure that sales go through). This would then remove some demand in the rental market (assuming they some of those that bought were renting before they bought).
I'm under the impression that with each shift the remaining sellers/landlords would be chasing a diminishing pool. The high supply of both property for rent and property for sale out there at the moment suggests that there simply isn't enough need for all the property in either market, so it probably wouldn't take too many shifts (from rental to sales, and vice versa) to reach a more stable market. Very hard to know how it will pan out though really.
Regarding the lack of stability with renting, I thought that fixed term leases (typically having a length of a year) can not be broken unless the tenant is not adhering to the agreements in the lease or is parttaking in antisocial behaviour? I suppose it's not much stability but it would at least prevent fast shifts from rentals to sales if I'm right.
If the rental market weakens, maybe tenants will be in a stronger position to demand longer term leases, and landlords will be happier to have more stable tenants? Who knows, we're kind of getting into very speculative territory here, I guess.0 -
Calina, I hadn't thought of it in those terms before.
If a continual shift from one market to the other was to happen, I'm thinking that the pool of potential buyers would probably reduce everytime there was an increase in the supply of property for sale (assuming that some of the prices were adjusted downwards to ensure that sales go through). This would then remove some demand in the rental market (assuming they some of those that bought were renting before they bought).
I'm under the impression that with each shift the remaining sellers/landlords would be chasing a diminishing pool. The high supply of both property for rent and property for sale out there at the moment suggests that there simply isn't enough need for all the property in either market, so it probably wouldn't take too many shifts (from rental to sales, and vice versa) to reach a more stable market. Very hard to know how it will pan out though really.
Regarding the lack of stability with renting, I thought that fixed term leases (typically having a length of a year) can not be broken unless the tenant is not adhering to the agreements in the lease or is parttaking in antisocial behaviour? I suppose it's not much stability but it would at least prevent fast shifts from rentals to sales if I'm right.
If the rental market weakens, maybe tenants will be in a stronger position to demand longer term leases, and landlords will be happier to have more stable tenants? Who knows, we're kind of getting into very speculative territory here, I guess.
The issue with the fixed term leases is that any sane tenant will have a break clause in so that if they do buy they can get out themselves. I have it myself. Additionally, there is some dispute as to whether provisions in current legislation override provisions in leases. IANAL but there's this concept that you cannot sign away rights you have under prevailing legislation.
Although this is vaguely off topic, it's linked to a severe lack of trust in the rental market. At its simplest, tenants don't trust their landlords to return deposits, and landlords don't trust their tenants not to trash the place.
Under normal circumstances I'd expect each swing of the rental/sales thing to get more people buying and removing them from the rental pool. However, we don't have normal circumstances now because credit is less available and more expensive. Someone somewhere suggested we'd see people moving back in with parents. I think this is possible for some people but because of increased urbanisation, the proportion is not likely to be that high, per se.
There are things I'd like to see changed in this country with respect to both tenancy and property purchase.
In terms of property purchase, I think that stamp duty has to be reformed to a flatrate transaction taxed which is not linked to the value of the property changing hands. This should have been done 10 years ago but...well it wasn't.
I also think that we need to sort out property registration such that some agency - preferably the Revenue Commissioners know whether every property is a) owner occupied b) rental occupied c) holiday home or d) unoccupied. For property which is unoccupied I think that a wealth tax needs to be applied. Unused property has distorted both rental and sales over previous years.
Long term rental is becoming reality for more people. I've rented in this country for 9 years now. I would not have expected it when I got here 9 years, but there you have it. I despise how things are done here. I get a furnished apartment where if I want to hang pictures I can't, everything is to someone else's taste and frankly I know this is not my home. In other countries I've lived in, I could have rented the same property my entire life and decorate it as I wish. I don't think you can deal with this legislatively; it requires a culture change. also, the profile of rental property here is largely screwy and depends on a large rent share culture. I could afford to rent alone (just about) at this stage, but I couldn't possibly hope to save any money then.
One of my mates in France has a lease which can be ended with three months notice by either party, and is subject to a rental review every 12 months. We are not good at this because there's a short term aspect to business in this country whereby - although it saddens me to admit it - there's a tendency to try and fleece people.
In any case, the net problem - as I see it - is that fixes to the market are long term issues; in the short term there's going to be some carnage on either side. What irritates me more than anything is that 5 years ago, it was obvious what was going to happen but too many people thought they were on a gravy train...and this situation was allowed to develop.
In the future, you could avoid this by the CB forcing the banks to hold higher deposits with the lender of last resort; by the CB actually doing some regulating of the banks.
What I think is going to be interesting is how the Revenue Commissioners approach the property gala. I suspect that they are interested in people who have paid incorrect stamp duty rates, who have not declared income for tax, who are subject to CGT for various reasons. I think there is a lot of screaming to come from the landed class, and that will almost certainly engender some pain for the rental market.0 -
If cheap and easy money ever became the norm again, price rises would be a consequence. Of course the landscape has changed somewhat now, there is a downwards momentum, so even if credit issues were resolved today, it would take a year or so for prices to rise again. The problem with this idea is that the low cost credit model was broken by default, and so cannot be held to represent the norm.Is this not a bit of false logic? Does this mean that if the credit problems sort themselves out, that house prices are going to begin to rise again in line with what the banks are lending?
This is how it works: the bank gets loans at very low interest rates from other banks, and so feels safe to loan more money at a higher risk, especially since the loan repayments are front loaded so the bank makes its money in the first years of loan repayment. Hence the multiples of income change, and the banks loan much more money to people than they should have.
Now the rate at which the banks can get loans has changed much more quickly than they had anticipated, making them much more expensive to service, so the number of people who cannot repay their loans grows, leaving the banks with an unknown amount of bad loans. This has enormous knock on effects since many of the loans were repackaged and securitised (which by the way caused the banks to hold the mistaken belief that they were yet more secure), and moved into other parts of the financial system.
The result of which is that the banks have to reduce the maximum amount of euros they can lend to people, in order to make a realistic risk assesment. If the cash bluntly isn't there, the prices of properties will fall to match that.
Only the massive injection of capital into the banking system by governments in recent weeks has prevented a much more serious situation arising, and frankly that is not sustainable in my opinion. Things have a long way to fall yet.
Given that the credit situation will take years to disentangle itself, I can't see prices stabilising for another three to five years at least, and steady drops all the way through.SkepticOne wrote: »If anything the causal relationship is the other way round, i.e, the bursting of the bubble causes credit to be tightened.
Yes it did, the same as it is contributing to the drop in prices of property in the US and UK, and the full blown economic meltdown of Iceland. Dissocciating the credit crunch from the collapse of the property boom indicates a profound lack of understanding of the market, tbh. Irresponsible lending practices combined with the perception of easy money led to this situation.Bare in mind that the "credit crunch" as it is being fondly referred to didnt cause a drop in house prices in ireland.
This is almost certain to happen at some stage. Its called a dead cat bounce.The EA's will have a good quarter and this could great a false sense that a boom is back.0 -
Regarding the lack of stability with renting, I thought that fixed term leases (typically having a length of a year) can not be broken unless the tenant is not adhering to the agreements in the lease or is parttaking in antisocial behaviour? I suppose it's not much stability but it would at least prevent fast shifts from rentals to sales if I'm right.
AFAIK if the landlord decides to sell, all bets are off and the lease is terminated. Short-term rental leases really are pretty useless documents.
Regarding the banks and their lending policies, I'd agree with Faceman, when salaries are largely dependent on short term figures such as sales, it's unusual for these to coincide with good decisions.
Re 100% mortgages, they're not (imo) the universal evil that many here seem to think. Like most financial products, there's a time and a place, and I'd say nothing's surer than that they'll be back again next time (they are still available to certain professions anyway).
Re the whole situation, govt have a helluva lot to answer for (though both sides would probably have played it the same here).0 -
SimpleSam06 wrote: »
Yes it did, the same as it is contributing to the drop in prices of property in the US and UK, and the full blown economic meltdown of Iceland. Dissocciating the credit crunch from the collapse of the property boom indicates a profound lack of understanding of the market, tbh. Irresponsible lending practices combined with the perception of easy money led to this situation.
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The credit crunch did not cause property price falls in Ireland much as you may wush it did (although it has added fuel to the fire). For many years in this country people complained about high prices of houses and said the government "Must do something". What the government did was greatly increase the amount of house completions. Obviously as supply greatly exceeded demand prices were bound to fall. The fall has been predicted for the past 4 years at least, long before the credit crunch. Indeed this thread was started before the credit crunch. Saying the very recent credit crunch caused the collapse of the property boom indicates a profound lack of understanding of the market, tbh.0 -
It is certainly causing price drops now. I don't think anyone is denying that. I would dispute that tightening credit is the primary cause of the bursting of the bubble here.SimpleSam06 wrote: »Yes it [the credit crunch] did [cause price drops], the same as it is contributing to the drop in prices of property in the US and UK, and the full blown economic meltdown of Iceland. Dissocciating the credit crunch from the collapse of the property boom indicates a profound lack of understanding of the market, tbh. Irresponsible lending practices combined with the perception of easy money led to this situation.
I would also dispute that loose credit was the sole cause of the start of the bubble here. You can see the roots of the current bubble stretching back to the 90's in Ireland when people learned to circumvent lending policies of the banks.0 -
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SimpleSam06 wrote: »Yes it did, the same as it is contributing to the drop in prices of property in the US and UK, and the full blown economic meltdown of Iceland. Dissocciating the credit crunch from the collapse of the property boom indicates a profound lack of understanding of the market, tbh. Irresponsible lending practices combined with the perception of easy money led to this situation.
I'll ignore your smart comment.
The credit crunch did NOT cause house price deflation in Ireland. It happened after prices were in decline.0 -
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The perception out there at the moment is that rents are rising so I suspect rental supply will continue to stay strong for the moment. However, anecdotally, the number of immigrants arriving is falling and the level of emigration of Irish natives is increasing. Supply of tenants could well be problematic for a while too, leading to rents falling, and people trying to sell up again because they can't keep the highly leveraged investment train on the tracks.
Demand for rented accommodation has always been high CBD's in ireland. While i cant comment on ballygobackwards, dublin in particular has always been in high demand despite the general desire for property ownership in the country.
Rents are increasing quite dramatically in more attractive locations. I put the rent up by €350 recently in one of mine to bring it in line with rents in the area.
there is strong population growth in the country so i cant see the demand going away unless ireland heads back to where it was in the 70's/80's.0 -
However, interest rates had already started rising at that point, and in fact, the amount of available credit was falling plus it was getting more expensive. If you like, it was the normalisation of interest rates started to cause problems prior to the credit crunch becoming a buzz word.
However, it is more than likely than instead of people looking at how collectively we drove prices up (with less than rational decisions), they will just blame the credit crunch so as to feel better about themselves.
with respect to rental: availability is comparatively high at the moment. That usually has a downward pressure on prices. YOu may have anecdotal experience of being able to push the rent up - as I suspect my landlord will shortly try to do - but I cannot see the current situation being a long term one unless we find some way of generating high value jobs soon. One of the things I have noticed is that there is a decreasing proportion of immigrants doing service jobs in Dublin - they are more frequently filled by young Irish people now than 12 months ago - but this trend has not started outside Dublin. I suspect rental is pricing people in comparatively low paid jobs out of Dublin.0 -
Demand for rented accommodation has always been high CBD's in ireland. While i cant comment on ballygobackwards, dublin in particular has always been in high demand despite the general desire for property ownership in the country.
Rents are increasing quite dramatically in more attractive locations. I put the rent up by €350 recently in one of mine to bring it in line with rents in the area.
there is strong population growth in the country so i cant see the demand going away unless ireland heads back to where it was in the 70's/80's.
Rents did increase dramatically, but since October of last year this trend has been reversed and now they're falling, your property was probably out of sync, but I don't think you'll get with such a dramatic increase for a long time again (if 350 was dramatic in percentage terms that is). There has been strong population gowth, but there's no guarantee that that will continue, one would suspect we'll see a decline in population over the next decade as temporary immigrants return home and unemployment rises, given that we've currently got huge oversupply (admittedly much of it in the wrong places - thanks Bertie for keeping those tax breaks in place), that may just lead to further drops, but who knows....0 -
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Rents did increase dramatically, but since October of last year this trend has been reversed and now they're falling, your property was probably out of sync, but I don't think you'll get with such a dramatic increase for a long time again (if 350 was dramatic in percentage terms that is). There has been strong population gowth, but there's no guarantee that that will continue, one would suspect we'll see a decline in population over the next decade as temporary immigrants return home and unemployment rises, given that we've currently got huge oversupply (admittedly much of it in the wrong places - thanks Bertie for keeping those tax breaks in place), that may just lead to further drops, but who knows....
People keep on saying emmigration is rising but no one can back it up with anything beyond personal opinion. I can see no evidence of this emigration. However lets assume 200,000 people emigrate from this country in next three years (as someone put foward yesterday). Given an average occupancy rate of 3 per household this would represent 65,000 households or so, either for sale or up for rent or 22,000 per year. When you consider that 88,000 new properties were completed in 2006 alone it is difficult to see this massive emigration having the dramatic effect on house prices that people predict.
Add to this the fact that there are about 600,000 people between the ages of 15 and 24 a large percentage of whom will enter the housing market in the next few years.
I should of course add to this that between 1981 and 1991 when we had massive emmigration from this country, when almost every family had some member leave the country, the population still rose by 100,000.0 -
Er I don't wish anything. I gave you my reasons for this assertion, its up to yourself to dispute those reasons or not.The credit crunch did not cause property price falls in Ireland much as you may wush it did (although it has added fuel to the fire).
Ha? Was there a massive government sponsored house construction program I missed?What the government did was greatly increase the amount of house completions.
Heh. The credit crunch has also been long predicted. I wouldn't expect you to know that though.Saying the very recent credit crunch caused the collapse of the property boom indicates a profound lack of understanding of the market, tbh.
Yes but that was petering out around 2000 / 2001. The massively extended version of the bubble we have been witness to was purely cheap credit.SkepticOne wrote: »I would also dispute that loose credit was the sole cause of the start of the bubble here. You can see the roots of the current bubble stretching back to the 90's in Ireland when people learned to circumvent lending policies of the banks.
Actually, in so far as I recall, prices nationally were still edging upwards right to the end of 2007. Which puts the fall in prices bang on the time the credit crunch started.The credit crunch did NOT cause house price deflation in Ireland. It happened after prices were in decline.0 -
SimpleSam06 wrote: »
Ha? Was there a massive government sponsored house construction program I missed?
Actually, in so far as I recall, prices nationally were still edging upwards right to the end of 2007. Which puts the fall in prices bang on the time the credit crunch started.
oh really SimpleSamo6. Obviously I meant government policy led to more properties being constructed. I didn't think you needed it spelled out.
Also prices started falling around May 2007 but had flattened out in Oct 2006. Which puts it right bang 1 year early for the credit crunch start0 -
Don't forget the attempt to implement the Bacon recommendations in 2000 which briefly drove investors out of the market and temporarily brought down prices. When the measures were reversed things carried on upwards as before.SimpleSam06 wrote: »Yes but that was petering out around 200 / 2001. The massively extended version of the bubble we have been witness to was purely cheap credit.
I don't think it is worth getting into a big argument about the precise causes of the bubble and the subsequent bursting because so much depends on how you look at things. Everyone has their own perspective.
I put the peak some time in 2006. Inventory started to rise around then and reports of failures at auction started to appear in the papers. The ESRI/PTSB index first started showing falls in early 2007 but the actual falls probably occurred the previous year.Actually, in so far as I recall, prices nationally were still edging upwards right to the end of 2007. Which puts the fall in prices bang on the time the credit crunch started.
It looks like asking prices held up reasonably well at least on Daft through 2007 though the massive rise in inventory suggests that sellers are still overvaluing the properties they are trying to sell.0 -
Add to this the fact that there are about 600,000 people between the ages of 15 and 24 a large percentage of whom will enter the housing market in the next few years.
Well it depends on several things such as a) do they have jobs and b) can they afford to buy and c) will they stay in the country.
smcarrick posted emigration figures for Ireland not too long ago. I think there was a net outflow of 2500 for Irish born people which was more than offset at the time by the immigration.
The problem for using this to forecast rental rates is that at the period of highest immigration into the country rents were effectively falling. So even with a monumental inflow of people, plus much unoccupied property, we still had adequate housing for the people here.
That's the first thing.
Second thing is interest rates had started to rise around the time that you see a flattening out and starting to fall of prices which I raised already and which you have commented on. Tightening credit is a key issue here; it's just the credit crunch in world terms is a little later.
I would also say that government non-policy had a lot to do with the building because to be blunt about it, we built rather poorly designed unfit for purpose investorboxes over the past few years and that was more on a laissez-faire basis than on a policy driven basis.0 -
SimpleSam06 wrote: »Actually, in so far as I recall, prices nationally were still edging upwards right to the end of 2007. Which puts the fall in prices bang on the time the credit crunch started.
You recall incorrectly. The end of 2007 is only three or four months ago, trouble was starting to appear well before that and prior to that again, the market stopped effectively for a while because of an impasse between buyers and sellers.0 -
Well it depends on several things such as a) do they have jobs and b) can they afford to buy and c) will they stay in the country.
smcarrick posted emigration figures for Ireland not too long ago. I think there was a net outflow of 2500 for Irish born people which was more than offset at the time by the immigration.
The problem for using this to forecast rental rates is that at the period of highest immigration into the country rents were effectively falling. So even with a monumental inflow of people, plus much unoccupied property, we still had adequate housing for the people here.
That's the first thing.
Second thing is interest rates had started to rise around the time that you see a flattening out and starting to fall of prices which I raised already and which you have commented on. Tightening credit is a key issue here; it's just the credit crunch in world terms is a little later.
I would also say that government non-policy had a lot to do with the building because to be blunt about it, we built rather poorly designed unfit for purpose investorboxes over the past few years and that was more on a laissez-faire basis than on a policy driven basis.
I didn't mean that a proportion would buy, I meant rent or buy, thus affecting the housing market. As obviously emmigrants leaving did not all own property
I am happy to see any figures on migration anyone has but as far as I know smccarrick did not have any beyond anectdote or personal opinion0 -
I didn't mean that a proportion would buy, I meant rent or buy, thus affecting the housing market. As obviously emmigrants leaving did not all own property
I am happy to see any figures on migration anyone has but as far as I know smccarrick did not have any beyond anectdote or personal opinion
That being said, at the far end, others are leaving the housing market through a) death and b) nursing homes. As the birthrate has been dropping for quite some time now and is below replacement rates, the numbers dying off will be higher than the numbers coming into the housing market.0 -
Even without that the central bank released a report that houses were overvalued back in 2000.SkepticOne wrote: »Don't forget the attempt to implement the Bacon recommendations in 2000 which briefly drove investors out of the market and temporarily brought down prices. When the measures were reversed things carried on upwards as before.
That must be where I got it from so. In any case interest rates were rising throughout the period, which does represent a tightening of credit, whether or not commenters on here like it. The more spectacular recent collapses are what jimmy o'specuvestor sees in the newspaper, and thinks its all some new thing, as Calina pointed out.SkepticOne wrote: »It looks like asking prices held up reasonably well at least on Daft through 2007 though the massive rise in inventory suggests that sellers are still overvaluing the properties they are trying to sell.
I would be very interested to see a chart of interest rates rises and interbank rises versus property prices in this country.0 -
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That being said, at the far end, others are leaving the housing market through a) death and b) nursing homes. As the birthrate has been dropping for quite some time now and is below replacement rates, the numbers dying off will be higher than the numbers coming into the housing market.
Sorry Calina. Births have been constantly rising for the last 15 years and deaths have been falling for a similar length of time. There are currently 35,000 more births than deaths every year0
This discussion has been closed.
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