Housing Bubble Bursting

bangersandmash

This evening's High Court decision may have considerable implications for NAMA and the market in general.

The court found that in order to persuade it that the companies have a reasonable prospect of survival “it is perfectly obvious that the some evidence of likely improvement in the property market is absolutely essential”.

The court found that neither Mr Carroll or the independent accountant report on which the group’s survival plan was based “makes any attempt to supply this deficiency”.

http://www.irishtimes.com/newspaper/breaking/2009/0811/breaking6.htm

Godge

oceanclub wrote: »

Actually Fianna Fail don't even want to get re-elected, I imagine. They want to bail out their developer friends knowing that, even if they ditched at the next election, they'll still have someone to fund them for the election after that, knowing that by then the fickle public will forget whoever got the country into trouble in the first place and, with a few paid-for Sunday Independent editorials, will vote FF in again.

P.

so Irish, so tragic but regrettably so possible.

bangersandmash

Meanwhile the banking federation say that things are looking up in the property market. Rather ironic given the statements in the report from the supreme court yesterday.

IBF says property market is close to bottoming out

The Irish Banking Federation says the crash in the Irish property market appears to be close to bottoming out. The federation says the number mortgages drawn down in the second quarter of this year was up 15% compared to the previous three months. However, it says this is a consistent seasonal pattern and the figures are still down 64% compared to last year.

http://www.independent.ie/breaking-news/national-news/business/ibf-says-property-market-is-close-to-bottoming-out-1857921.html

London Irish

bangersandmash wrote: »

Meanwhile the banking federation say that things are looking up in the property market. Rather ironic given the statements in the report from the supreme court yesterday.


http://www.independent.ie/breaking-news/national-news/business/ibf-says-property-market-is-close-to-bottoming-out-1857921.html

12 months ago, was it up 15% compared to the previous 3 months in 2008?

24 months ago, was it up 15% in July 2007 compared to the 3 previous months that year?

Serious analysis in financial markets focuses on quarter for quarter numbers, 12 months apart....

What are the actual specific numbers?

Tech3

Average rents down 17% in past year

Average rents for private homes and apartments in Ireland have fallen by 17% in the past year, according to the latest figures from Daft.ie.

The property website says rents were down by 5% in the second quarter of this year alone, with urban areas experiencing the largest falls.

Average rents in Dublin were down around 7% in the three-month period.

Daft.ie says the main reason why rents are falling is a huge increase in the supply of vacant properties.

Two years ago, there were 6,200 properties available to rent, while the figure currently stands at around 23,400

http://www.independent.ie/breaking-news/national-news/average-rents-down-17-in-past-year-1862384.html

faceman

bangersandmash wrote: »

Meanwhile the banking federation say that things are looking up in the property market. Rather ironic given the statements in the report from the supreme court yesterday.


http://www.independent.ie/breaking-news/national-news/business/ibf-says-property-market-is-close-to-bottoming-out-1857921.html

Consumer confidence is zero (or negative), unemployment is on the rise at extorionate rates and employment is negligible. Who is buying houses that is causing the market to bottom out???

bangersandmash

faceman wrote: »

Consumer confidence is zero (or negative), unemployment is on the rise at extorionate rates and employment is negligible. Who is buying houses that is causing the market to bottom out???

I agree. It was interesting that the Indo were so selective in their reporting that day. Contrast with summary of the IBF report in the IT

Irish mortgage lending dropped 71 per cent in the second quarter as falling house prices, stricter lending rules and rising unemployment deterred buyers.

The value of lending fell to €2.17 billion in the three months through June from €7.57 billion a year earlier, the Irish Banking Federation said in a report today.

The volume of home loans dropped 64 per cent.

faceman

bangersandmash wrote: »

I agree. It was interesting that the Indo were so selective in their reporting that day. Contrast with summary of the IBF report in the IT

Ironically the Indo were hailing the impending doom for a long time, often putting one sided stories in their articles. I cant stand that newspaper.

BobbyD10

With the NAMA ticket now under way, what I am trying to figure out now is, that the Government have a huge stake it the property market and thus are now a vested interest on a large scale.

With the incentive and probable pressure to ensure NAMA works, will the government try and stimulate the bursting bubble, probably not immediately, but they will need to see the prices to start turning on an upward curve to see a profit on their investment.

With so many factors continuing to drag prices down, this will become a hard task. Like most things we can only wait and see how it plays out, as time reveals all.

digitalninja

NAMA is going to bankrupt the country for the next 10 years.
FF will sit back and let another crowd take the blame for the **** years.

Euroland

digitalninja wrote: »

NAMA is going to bankrupt the country for the next 10 years.

IMHO, NAMA would set up the protective flooring and act as a benchmark for stabilising property prices. There is no room for further property prices fall as in many countries of the world the property markets begin to recover and prices start rising up again. Now (in the next 0-12 months) is a very good time for picking up bargains in Ireland.

Euroland

faceman wrote: »

unemployment is on the rise

Not anymore

oceanclub

Euroland wrote: »

IMHO, NAMA would set up the protective flooring and act as a benchmark for stabilising property prices.

So you think that remaining uncompetitive is a good thing? Or do you think we should continue to slash wages while house prices remain static?

I get the impression that many people think that 12% unemployment is fine as long as it doesn't affect their house price.

P.

Euroland

oceanclub wrote: »

So you think that remaining uncompetitive is a good thing? Or do you think we should continue to slash wages while house prices remain static?

I get the impression that many people think that 12% unemployment is fine as long as it doesn't affect their house price.

P.

What do you mean by saying "uncompetitive" in relation to NAMA's flooring?

As regards to salaries, I believe that in public sector they should be reduced by 1-40%, but case by case.

The residential property prices aren't static, over the last 3 years they have fallen by 30-60%, so now it's time to stabilise the prices and help them growing againg, but this time at reasonable levels (with growth of 3-10% per annum).

oceanclub

Euroland wrote: »

What do you mean by saying "uncompetitive" in relation to NAMA's flooring?

As regards to salaries, I believe that in public sector they should be reduced by 1-40%, but case by case.

The residential property prices aren't static, over the last 3 years they have fallen by 30-60%, so now it's time to stabilise the prices and help them growing againg, but this time at reasonable levels (with growth of 3-10% per annum).

By putting an artificial floor on property prices - rather than letting the market decide - you also put an artificial floor on wages.

As for the reference to the public sector, do you not think that private sector wages are too high then? In that case, why are big multinationals not expanding here and in most cases, beginning to wind down? The idea that if we cut public sector salaries, everything will be hunky dory, is just fantasy.

(I'm in the private sector myself.)

Property prices haven't fallen by 60%, though that would be a good thing.

Here's what NAMA - and you - appear to want:

http://farm3.static.flickr.com/2533/3907988497_e05e1bedb4.jpg

The green line is your fantasy. The red line is reality. The idea that 10% growth per annum is "reasonable" (I assume you're considering that inflation would be 10% per annum as well) shows that you're still in the bubble mentality. Shame.

P.

RobAMerc

Euroland wrote: »

Not anymore

Seriously - do you believe that only 600 people lost their jobs in September ? Or is it more likely the case that alot of the people who joined the dole were put into FAS schemes etc in order to mask the rising numbers? Returning college students ? Year on Year September figures always show a drop in numbers - this year is no different. Even if the economy is to pick up early next year, the jobless figures will continue to rise here for 12 months after - they are very much a lagging indicator.

Euroland wrote: »

What do you mean by saying "uncompetitive" in relation to NAMA's flooring?

As regards to salaries, I believe that in public sector they should be reduced by 1-40%, but case by case.

The residential property prices aren't static, over the last 3 years they have fallen by 30-60%, so now it's time to stabilise the prices and help them growing againg, but this time at reasonable levels (with growth of 3-10% per annum).

This is very much a "everybody but me" statement.
As long as your house stays at its current value and your wages aren't cut !

This economy is totally overpriced - expensive housing = high wage costs = uncompetitive = no inward investment.

Houses need to get to avg about 135k here - wages need to drop significantly, public and private sector - private so we get inward investment - public, so we can afford to pay for it.

Fr0g

Euroland wrote: »

IMHO, NAMA would set up the protective flooring and act as a benchmark for stabilising property prices. There is no room for further property prices fall as in many countries of the world the property markets begin to recover and prices start rising up again. Now (in the next 0-12 months) is a very good time for picking up bargains in Ireland.

I think I'll just quote that for future reference. In case it gets deleted.

I might need a good laugh a year from now.

Blackjack

oceanclub wrote: »

Property prices haven't fallen by 60%, though that would be a good thing.

Here's what NAMA - and you - appear to want:

http://farm3.static.flickr.com/2533/3907988497_e05e1bedb4.jpg

The green line is your fantasy. The red line is reality. The idea that 10% growth per annum is "reasonable" (I assume you're considering that inflation would be 10% per annum as well) shows that you're still in the bubble mentality. Shame.

P.

Interesting Chart- do you have the source (website, or something?)

trafada

Euroland wrote: »

IMHO, NAMA would set up the protective flooring and act as a benchmark for stabilising property prices. There is no room for further property prices fall as in many countries of the world the property markets begin to recover and prices start rising up again. Now (in the next 0-12 months) is a very good time for picking up bargains in Ireland.

Sorry that reminds me of this
http://www.independent.ie/opinion/analysis/the-smart-ballsy-guys-are-buying-up-property-right-now-1047118.html

ParkRunner

oceanclub wrote: »

By putting an artificial floor on property prices - rather than letting the market decide - you also put an artificial floor on wages.

As for the reference to the public sector, do you not think that private sector wages are too high then? In that case, why are big multinationals not expanding here and in most cases, beginning to wind down? The idea that if we cut public sector salaries, everything will be hunky dory, is just fantasy.

(I'm in the private sector myself.)

Property prices haven't fallen by 60%, though that would be a good thing.

Here's what NAMA - and you - appear to want:

http://farm3.static.flickr.com/2533/3907988497_e05e1bedb4.jpg

The green line is your fantasy. The red line is reality. The idea that 10% growth per annum is "reasonable" (I assume you're considering that inflation would be 10% per annum as well) shows that you're still in the bubble mentality. Shame.

P.

Does the growth not only have to be 1% per annum for 10 years for things to breakeven or am I mistaken?

gosplan

trafada wrote: »

Sorry that reminds me of this
http://www.independent.ie/opinion/analysis/the-smart-ballsy-guys-are-buying-up-property-right-now-1047118.html

Dear Sweet Jesus Christ! Hopefully, now that we don't have the distraction of a booming economy and property market, people can pay attention to other things ... like EDITING!!!

Brendan O'Connor wrote:

Most people who bought property bought it recently, in a seller's market, for top dollar. Which makes no sense when you think about it. When you think about it, it makes sense to buy property now. Though of course some people say it always makes sense to buy property. There is no such thing as a good or a bad time to buy. It's always a good time to buy.

Seriously. I had little respect for the Independent as it is but this proves their copyediting system is a spellcheck and a quick scan for the old their/they're/there error.

ronbyrne2005

EF wrote: »

Does the growth not only have to be 1% per annum for 10 years for things to breakeven or am I mistaken?

But this 1% ignores financing costs and assumes no further falls in prices. Amount of growth per year will need to be much more than 1%

Gurgle

ronbyrne2005 wrote: »

But this 1% ignores financing costs

Only if you assume that the land/property repossessed is just going to sit untouched and unused until its value recovers and it is sold.

ronbyrne2005 wrote: »

and assumes no further falls in prices

Not necessarily.
The trick is not to sell them when they're down

This government-run bank is the only institution in the country that can hold such a massive volume of illiquid assets for a decade or two. Economies go up and down, there will be a time in the future when the assets held by NAMA will be worth more than was paid for them.

NAMA could actually work out profitable if its run by honest and ethical management.

So: Not a hope, it'll be another cash-cow for the FF shareholders.

I'm betting they decide to 'cut our losses' in the next 3-4 years and sell the assets back to the very same people that defaulted on the loans in the first place - at bottom dollar.

And worse, It'll be pimped as a success - after all the talk of €90billion, this great stupid voter pool will think we got away light with a loss of ~€10billion.

Euroland

oceanclub wrote: »

Property prices haven't fallen by 60%, though that would be a good thing.

As I said before they have fallen around 30-60% (depending on the area and particular development). Here is an example: in early 2006 the 1-bed apartments in the new Priorsgate development in Tallaght were selling at 320K, now they are advertised at 149K, which constitutes the fall of 53.44%. Now this apartment price looks very attractive relatively to the similar apartments in other countries (especially if we judge it on the income affordability ratio (property price/average annual salary).

oceanclub

Euroland wrote: »

As I said before they have fallen around 30-60% (depending on the area and particular development). Here is an example: in early 2006 the 1-bed apartments in the new Priorsgate development in Tallaght were selling at 320K, now they are advertised at 149K, which constitutes the fall of 53.44%. Now this apartment price looks very attractive relatively to the similar apartments in other countries (especially if we judge it on the income affordability ratio (property price/average annual salary).

We need a 60% drop overall, not just in the 1-bed-in-Tallaght market.

Considering we haven't yet seem the decimation of public sector jobs that will happen soon, I still think that over 4 times the average industrial salary for a 1-bed there, and especially considering advertised rents are around €700. 1-bed apartments are toxic; if you're buying one to live in for the next 2 decades, grand, but who buys a 1-bed apartment for any reason other than trading up or an investment property?

P.

Euroland

oceanclub wrote: »

We need a 60% drop overall, not just in the 1-bed-in-Tallaght market.

Considering we haven't yet seem the decimation of public sector jobs that will happen soon, I still think that over 4 times the average industrial salary for a 1-bed there, and especially considering advertised rents are around €700. 1-bed apartments are toxic; if you're buying one to live in for the next 2 decades, grand, but who buys a 1-bed apartment for any reason other than trading up or an investment property?

P.

If you read local newspapers (i.e. Metro, etc) or monitor property websites (Daft, etc), you would find plenty of examples where the property prices went down by 30-60% (from the peak level).

As regards to 1-bed apartments, I agree with you that it mainly should be seen either as an investment or as a potential trade-up property. However, due to high un-affordability of 2-bed+ properties in many countries around the world, studios or 1-beds became an accommodation of necessity for long-term living, even for the families with 3-6 people. So Ireland might follow this route.

oceanclub

Euroland wrote: »

However, due to high un-affordability of 2-bed+ properties in many countries around the world, studios or 1-beds became an accommodation of necessity for long-term living, even for the families with 3-6 people. So Ireland might follow this route.[/FONT][/COLOR]

I'm genuinely curious to know which countries this happens which are (a) as sparsely populated as Ireland and (b) have such a glut of available housing.

P.

Calina

Euroland wrote: »

As regards to 1-bed apartments, I agree with you that it mainly should be seen either as an investment or as a potential trade-up property. However, due to high un-affordability of 2-bed+ properties in many countries around the world, studios or 1-beds became an accommodation of necessity for long-term living, even for the families with 3-6 people. So Ireland might follow this route.

Ireland would be better off having a price crash than supporting property prices such that 3-6 people wind up living in the tiny little 1 bed apartments that we have in Dublin.

It's inhumane to suggest that just because other places do it out of necessity we should accept it here too.

Tech3

Euroland wrote: »

If you read local newspapers (i.e. Metro, etc) or monitor property websites (Daft, etc), you would find plenty of examples where the property prices went down by 30-60% (from the peak level)

If you look at this site you will see that a decline of over 30% from peak prices is rare.

Euroland

tech2 wrote: »

If you look at this site you will see that a decline of over 30% from peak prices is rare.

It is reflective only a small quantity of price changes whereas every property in Ireland (either new or second-hand) had a price decrease, many above 30%. Most of the Dublin newly-built apartments already had prices decreases within 30-60% range. We shouldn’t disregard further segmentation depending on the type of property, location, age, vicinity, etc. Some properties would loose only 20-30% whereas the other ones would get 50-60%+.