Housing Bubble Bursting

MarchDub

OMD wrote: »

You may well have been able to get a house for that but we are talking average prices. According to the CSO average price in the country in 1973 was €9,009. Interestingly average interest rate was 10% so as a % of take home pay they were a hell of a lot more expensive then than now.
http://eumatters.ie/getmedia/a6fbe03e-a168-4ac7-a6f9-f0903845761f/CSO-Ireland-and-EU-Doc.aspx

Although further down you can see wages in 1973 were higher than I quoted previously. They were €1,991 so prices in 1973 were 4.5 times average wage

That's what I'm questioning - the given average price by the CSO. I'm not talking about being able to get a particular house - the average was closer to 4,000 pounds. I was there. There were new estates going up in quite a few places. I personally know of homes that were bought around that time for that price which were going for 650,000 Euro at the height of the boom. Crazy. New three bedroom homes in Portmarnock, Malahide, Sutton, Swords, Ballinteer, Dundrum were all around the 4,000 mark in the early 1970s for 3 bed semis. For 5,000 pounds you got a four bed detached. Some of my friends married at that time and bought. A few years previously to that they had been around 3,000 pounds for a 3 bed semi in 1969.

It was very hard to get a mortgage. The marker was 2 and half times the husband's income and only a half that of the wife. Wives were not expected to remain in their job long after marriage.

London was three times Dublin - I lived near London around that time and came back and forth to Dublin.

MuffinsDa

MarchDub wrote: »

That's what I'm questioning - the given average price by the CSO. I'm not talking about being able to get a particular house - the average was closer to 4,000 pounds. I was there.

<sarcasm>
I am sure your anecdotal or limited impression of the areas you knew is way more valid than CSO's figures. After all CSO are just a shower of eejits that extract those numbers from ACTUAL figures and data. Who needs that when you can just rely on memory, anecdotes and the likes.
</sarcasm>

Caoimhín

MuffinsDa wrote: »

<sarcasm>
I am sure your anecdotal or limited impression of the areas you knew is way more valid than CSO's figures. After all CSO are just a shower of eejits that extract those numbers from ACTUAL figures and data. Who needs that when you can just rely on memory, anecdotes and the likes.
</sarcasm>

No call for that buddy, play the ball not the man.

MuffinsDa

I am playing the ball though, nothing against you personally! Between anecdotal evidence and distant memory of 1973 and hard facts from CSO I know which one I would choose!

ronan45

Irish house prices 'now down 55.2%' from peak

Read more: http://www.breakingnews.ie/ireland/irish-house-prices-now-down-552-from-peak-510978.html#ixzz1Ql2pEqxT

The average price of a second-hand property in Dublin fell by 6.2% in the second quarter of the year, according to the latest house price survey by Sherry Fitzgerald.

This brings the total drop in Dublin prices in the 12 months to end June to minus 15.9%.

Nationwide, the average price of a second-hand house fell by 5.1% during the same period, bringing the total drop in prices to minus 15.3% during the 12 months to end June.

The Cork market saw prices fall by 3.4% in the first three months, bringing the results for the year to minus 13.1%.

"From the peak of the market in 2006, Dublin house prices have fallen in real terms by 60.2%, while the national market has corrected by 55.2%," Sherry Fitzgerald said.

The survey also reveals that 88% of second hand homes bought were purchased by owner-occupiers, while first-time buyers remain the most active section in the market.

Read more: http://www.breakingnews.ie/ireland/irish-house-prices-now-down-552-from-peak-510978.html#ixzz1Ql8wYY45

Spiritofthekop

ronan45 wrote: »

Irish house prices 'now down 55.2%' from peak

Read more: http://www.breakingnews.ie/ireland/irish-house-prices-now-down-552-from-peak-510978.html#ixzz1Ql2pEqxT

The average price of a second-hand property in Dublin fell by 6.2% in the second quarter of the year, according to the latest house price survey by Sherry Fitzgerald.

This brings the total drop in Dublin prices in the 12 months to end June to minus 15.9%.

Nationwide, the average price of a second-hand house fell by 5.1% during the same period, bringing the total drop in prices to minus 15.3% during the 12 months to end June.

The Cork market saw prices fall by 3.4% in the first three months, bringing the results for the year to minus 13.1%.

"From the peak of the market in 2006, Dublin house prices have fallen in real terms by 60.2%, while the national market has corrected by 55.2%," Sherry Fitzgerald said.

The survey also reveals that 88% of second hand homes bought were purchased by owner-occupiers, while first-time buyers remain the most active section in the market.

Read more: http://www.breakingnews.ie/ireland/irish-house-prices-now-down-552-from-peak-510978.html#ixzz1Ql8wYY45

Yeah I just heard it on the news and they expect house prices to keep falling in Dublin.

So much for the "house prices on the rise again in Dublin comment"

ronan45

Spirit just to be clear my previous comment "Dublin House prices on the rise" I was being Sarcastic. Hence the "brush off the your property ladders"
Of course they will keep falling

MarchDub

MuffinsDa wrote: »

I am playing the ball though, nothing against you personally! Between anecdotal evidence and distant memory of 1973 and hard facts from CSO I know which one I would choose!

Nothing personal taken but let me explain.

As you likely know there are 'lies, damned lies and statistics'. I am just giving the raw price figures as they stood on the day. The CSO figures are, I presume, the result of a number of adjustments for one, the change out of sterling in the late 1970s and then again the change to Euro. Are they also adjusted to what is termed 'today's money' i.e. for inflation? I would like to see the statistical model used to arrive at the final figure.

In addition, the chart did not give a source - so is the wage price given also an adjustment or a raw figure? If both are not from the same original source, using the same statistical model, then the figures will be off and meaningless to each other.

Tea drinker

Spiritofthekop wrote: »

Yeah I just heard it on the news and they expect house prices to keep falling in Dublin.

So much for the "house prices on the rise again in Dublin comment"

Re: house price rise - I heard that we are in for a soft landing too.
No bailout needed
Cheapest bailout in the world.
Ireland is not greece

It's like that scene in Airplane when the guy hears George Bush Snr - "Read my lips: No New Taxes!"

Caoimhín

Tea drinker wrote: »

No bailout needed
Cheapest bailout in the world.
Ireland is not greece
!"

And,

Never been a better time to buy.
Get your first step on the ladder
Ireland is different,
De fundamentals,
Affordability.

And this gem,
Donie Cassidy, Fianna Fail leader of the Senate and property speculator/idiot developer.
Seanad speech, 10 April 2008:

"Now is the right time to buy. We have a duty to tell first-time house buyers, young couples with no previous experience, that there is unbelievable value in the marketplace today. It will not last forever. It is never the wrong time to do the right thing. I offer the House the benefit of my experience and my opinion which is all any Member can do. I will remind the House, perhaps in 12 or 18 months, when prices have again increased by 25% or 30%, that they were told this by the Leader of the House on this historic day, the tenth anniversary of the Good Friday Agreement."

unknownlegend

Caoimhín wrote: »

Originally Posted by : "Now is the right time to buy. We have a duty to tell first-time house buyers, young couples with no previous experience, that there is unbelievable value in the marketplace today. It will not last forever. It is never the wrong time to do the right thing. I offer the House the benefit of my experience and my opinion which is all any Member can do. I will remind the House, perhaps in 12 or 18 months, when prices have again increased by 25% or 30%, that they were told this by the Leader of the House on this historic day, the tenth anniversary of the Good Friday Agreement."

What unadulterated, absolute balderdash. How can a vested interest get away with such crap.

Interest hike on the way next month, more downward pressure...

Caoimhín

unknownlegend wrote: »

What unadulterated, absolute balderdash. How can a vested interest get away with such crap.
.

Donie or me?

highgiant1985

Caoimhín wrote: »

Donie or me?

Both

unknownlegend

Caoimhín wrote: »

Donie or me?

Donnie of course

Anyone know if there's any news on the national database for sale prices? I haven't heard anything on that for a while...

unknownlegend

unknownlegend wrote: »

What unadulterated, absolute balderdash. How can a vested interest get away with such crap.

Interest hike on the way next month, more downward pressure...

What Donnie said would have been sufficient to have had him charged with professional misconduct had he had been paid by a client for that advice.

jmayo

Caoimhín wrote: »

And,

Never been a better time to buy.
Get your first step on the ladder
Ireland is different,
De fundamentals,
Affordability.

And this gem,
Donie Cassidy, Fianna Fail leader of the Senate and property speculator/idiot developer.
Seanad speech, 10 April 2008:

Shure wasn't his party colleague frank "40 gaffs" fahey also telling FTBs that it was the right time to buy.
Then he famously appeared on radio telling marian finucane or some other RTE overpaid mouth that NAMA would make a profit and would actually bring money into the country. :rolleyes:

Speaking of media favourites spouting garbage was brendan burgess on the Frontline program the other night ?
Just remember folks when you hear him issue financial advice, he also advised in 2008 that bank shares were great value and the best investment one could make. :rolleyes:

BTW how could anybody take anything said by the man seriously when he proffered the idea that we could change the side of the road we drive on (possibly county by county) and have different speed limit for non naitonals ?

OMD

MarchDub wrote: »

Nothing personal taken but let me explain.

As you likely know there are 'lies, damned lies and statistics'. I am just giving the raw price figures as they stood on the day. The CSO figures are, I presume, the result of a number of adjustments for one, the change out of sterling in the late 1970s and then again the change to Euro. Are they also adjusted to what is termed 'today's money' i.e. for inflation? I would like to see the statistical model used to arrive at the final figure.

In addition, the chart did not give a source - so is the wage price given also an adjustment or a raw figure? If both are not from the same original source, using the same statistical model, then the figures will be off and meaningless to each other.

The only statistic needed for the figures is to multiply the pound figure by 1.27 to get the Euro figure. Of course they are not adjusted to "todays money". I think that is obvious without being stated. Also there is no need to make a change after leaving the sterling peg. What kind of adjustment do you think is needed?
You say you are giving "the raw price figures as they stood on the day" but of course you are not. You are giving your memory of prices, for a particular type of house in one relatively small area of Dublin at that time. Not to mention that in 1973 those places were considered almost in the country in those days, long before the DART was even started. The population of Portmarnock & Malahide alone have quadrupled since 1973 when they made up only a tiny proportion of the population of Dublin. You are then comparing your memory of those prices to the county as a whole, for all house types.

Treehouse72

A few days ago I went and looked for raw data to corroborate OMD's chart and was able to do so (using DoE figures below) going back to 1996, including allowing for the £ > € conversion (using calculator below). I couldn't see stats for before 1996, but the fact the other numbers were in line made me think the chart was solid.

http://www.environ.ie/en/Publications/StatisticsandRegularPublications/HousingStatistics/
http://www.anthonykelly.com/inflation.html

But I would still be disinclined to ignore MarchDub's anecdote. That is the kind of stuff you remember. On top of which, I am utterly non-plussed as to how a salary multiple of at least 6x between 1978 to 1982 was average. 1978 - 1982 FFS!!!! The absolute economic pits of the nation's history! Huh??

This seems so off to me that I am inclined to believe that there is something else going on in those figures. Not least of which, the possibility that property has been sucking up too much of our national wealth for 40 years! That in itself might explain why we're such a basket case. Maybe the stats are telling us that if you lend at 5x and 6x you destroy wealth and end up being run by the IMF. "Look, we used to lend at 6x in 1979!" might not actually be much of an argument.

There are other possible explanations too, perhaps to do with misreporting of salaries or lies from the banks themselves. And maybe demographics and things like household size and stock size come into it too.

Another factor to consider, would be the fact that many of the lower paid simply didn't buy houses - only those with above average incomes did, for them the houses would have been 3 x income.

OMD

People seem to be assuming if mortgage lenders give mortgages at 3.5 times income that means house prices should be 3.5 times average wage. That of course is flawed logic. There are a few issues to consider:
1. People don't buy houses immediately they start working. Most first time buyers don't buy until they are working 5-10 years. Average wage of people who have been working 10 years is a hell of a lot higher than overall average
2. As dolanbaker says the average wage of the average home buyer is higher than the average wage of everyone.
3. You are ignoring the effects of deposits. This would be 10-20% for first time buyers and a hell of a lot higher for people buying their second or subsequent house. Please don't tell me there was some mythitical time when everyone only bought 1 house. That is simply untrue. My own parents bought 3 houses and a number of my childhood friends (in 70s) bought more than 1 house.
4. The first time buyers grant of £1000-£3,000 may not seem like much now, but if you were buying a house for £10,000-£30,000 this meant an additional 10% was paid off for you.
5. Also everyone assumes women all quit work in the 70s & 80s. They certainly did in the 50s but even in Ireland in 70s & 80s huge amounts of women continued working and their salaries were taken into account at 1.25-1.5 times income when assessing mortgage amount

Blackjack

OMD wrote: »

People seem to be assuming if mortgage lenders give mortgages at 3.5 times income that means house prices should be 3.5 times average wage. That of course is flawed logic. There are a few issues to consider:
1. People don't buy houses immediately they start working. Most first time buyers don't buy until they are working 5-10 years. Average wage of people who have been working 10 years is a hell of a lot higher than overall average
2. As dolanbaker says the average wage of the average home buyer is higher than the average wage of everyone.
3. You are ignoring the effects of deposits. This would be 10-20% for first time buyers and a hell of a lot higher for people buying their second or subsequent house. Please don't tell me there was some mythitical time when everyone only bought 1 house. That is simply untrue. My own parents bought 3 houses and a number of my childhood friends (in 70s) bought more than 1 house.
4. The first time buyers grant of £1000-£3,000 may not seem like much now, but if you were buying a house for £10,000-£30,000 this meant an additional 10% was paid off for you.
5. Also everyone assumes women all quit work in the 70s & 80s. They certainly did in the 50s but even in Ireland in 70s & 80s huge amounts of women continued working and their salaries were taken into account at 1.25-1.5 times income when assessing mortgage amount

When did the FTB grant start, and was it always 3K?.

Spiritofthekop

http://www.daft.ie/report/Daft-House-Price-Report-Q2-2011.pdf

OMD

Spiritofthekop wrote: »

http://www.daft.ie/report/Daft-House-Price-Report-Q2-2011.pdf

I discussed this on another thread but looking at what Gurgdiev says it seems he pretty much agrees with what I was saying the we are very close to "normal" house prices based on historic norms of multiples of income. He refers to household income rather than average industrial wage. I would agree that household income is a better basis than average industrial wage but he doesn't explain why he uses a multiple of 2.8.

antiskeptic

OMD wrote: »

I discussed this on another thread but looking at what Gurgdiev says it seems he pretty much agrees with what I was saying the we are very close to "normal" house prices based on historic norms of multiples of income. He refers to household income rather than average industrial wage. I would agree that household income is a better basis than average industrial wage but he doesn't explain why he uses a multiple of 2.8.

What is the significance of our being close to 'normal' house prices if the factors that go into determining house prices are anything but normal?

antiskeptic

antiskeptic wrote: »

What is the significance of our being close to 'normal' house prices if the factors that go into determining house prices are anything but normal?

That would be an ecumenical matter!

The problem we have is "what is normal", the world as we know it has changed, we have become conditioned into expecting infinite growth in a finite world that is now having its limits tested.

The "new normal" may be a steady state or declining affordability rather than growth.

Treehouse72

OMD wrote: »

I discussed this on another thread but looking at what Gurgdiev says it seems he pretty much agrees with what I was saying the we are very close to "normal" house prices based on historic norms of multiples of income. He refers to household income rather than average industrial wage. I would agree that household income is a better basis than average industrial wage but he doesn't explain why he uses a multiple of 2.8.

OMD, you agree with CG's conclusion, but not the 2.8 multiple. At the same time, Ronan Lyons also mentions a long-term lending multiple in a commentary on the Daft report:

Figures on incomes only go back to 1988, but for the 1988-1995 period, the typical house price-to-income ratio was a pretty steady 3.6.

http://www.ronanlyons.com/2011/07/05/are-we-nearly-there-yet-finding-the-new-floor-for-property-prices/

Lyons' 3.6 and CG's 2.8 are significantly below the multiples on your chart from a few days ago.

I'm not saying that to be confrontational, merely to complete the record. There is something fishy about that table for sure.

OMD

Treehouse72 wrote: »

OMD, you agree with CG's conclusion, but not the 2.8 multiple. At the same time, Ronan Lyons also mentions a long-term lending multiple in a commentary on the Daft report:

http://www.ronanlyons.com/2011/07/05/are-we-nearly-there-yet-finding-the-new-floor-for-property-prices/

Lyons' 3.6 and CG's 2.8 are significantly below the multiples on your chart from a few days ago.

I'm not saying that to be confrontational, merely to complete the record. There is something fishy about that table for sure.

The difference is the chart I gave (as I said it was not my chart but I got it from the propertypin) used "average industrial wage". Ronan Lyons & CG use average household income which is a lot higher than average industrial wage.

I didn't say I had a problem with CG's 2.8 times average household income just that I have no idea how he got it.

Spiritofthekop

http://www.auction.co.uk/irish/LotDetails.asp?A=738&MP=24&ID=738000010&S=L&O=A

Sold today for 280,000. This is only the start of it now. Good realistic price for 2011 imo.

Spend 80/100,000 on it and you have a lovely potential 5 bedroom house in a smashing location.

I had a look at it. Very big inside, Great location, beside Luas.

This house in good nick would of got 850,000/900,000 3/4 years ago no problem.

Treehouse72

OMD wrote: »

The difference is the chart I gave (as I said it was not my chart but I got it from the propertypin) used "average industrial wage". Ronan Lyons & CG use average household income which is a lot higher than average industrial wage.

I didn't say I had a problem with CG's 2.8 times average household income just that I have no idea how he got it.

If we can settle on a neutral range being between 2.8x and 4x that would be good point of agreement, because one can then look to see just how many households can afford a €300,000 home. There would need to be a hell of a lot of them on close to €100k to justify the majority of family home prices in Dublin.

Tea drinker

Treehouse72 wrote: »

If we can settle on a neutral range being between 2.8x and 4x that would be good point of agreement, because one can then look to see just how many households can afford a €300,000 home. There would need to be a hell of a lot of them on close to €100k to justify the majority of family home prices in Dublin.

Assuming 25 year mortgage they must be in a 15 year age bracket maximum 25-40. Don't see many sub 25 yo on 50 grand.

Isn't Irelands population starting to grow older?, though in another 5 years I think we have a good few young ones hitting the streets looking for work or dole.