Housing Bubble Bursting

Spiritofthekop

rarnes1 wrote: »

Read more: http://www.breakingnews.ie/ireland/house-price-fall-accelerated-in-june-cso-514397.html#ixzz1TIsOaJct

And long may they fall more.

Dublin house prices have been a joke for a decade & a half

RATM

I saw that report on RTE News at 1 - funnily enough it was buried inside a larger report about how the housing authorities have just shelled out an average price of €171k for 50 odd luxury apartments in Beacon Quarter in Sandyford which had gone into examinership.

Not only are house prices in freefall (2.1% in a month-unbelieveable!) but also the State is buying up property at inflated prices using taxpayers money.

Banana Republic springs to mind.

Bobeagleburger

Because the prices of houses was so ridiculous during the boom the bottom(whenever that may be) could be > 60% decrease from peak prices.

Or more hopefully

RATM

RATM wrote: »

I saw that report on RTE News at 1 - funnily enough it was buried inside a larger report about how the housing authorities have just shelled out an average price of €171k for 50 odd luxury apartments in Beacon Quarter in Sandyford which had gone into examinership.

Got to feel for the poor saps who paid full price for those flats, now they are about to be surrounded by people who get to live in the places for effectively nothing because they'll be on benefits of some sorts.

Treehouse72

So just to be 100% clear: the property crash is getting deeper. It is speeding up. It is still getting "worse".

There are no green shoots. We have not turned any corners. Things are not bottoming out.

And:

> Rent allowance will be hit if Joan Burton is to be believed yesterday
> Emigration continues apace
> Interest rates rising
> All that NAMA stock sitting there
> All those other empties (I have no idea how many, but a lot)
> Budgets 2011 and 2012 will reduce incomes yet more, as we saw with the "property" tax announced yesterday

My opinion is that there is still an average 25% to come off property prices, but to be honest considering the above that is now looking a conservative bearish position as of today.

Firetrap

Proof yet again that you should never believe the talking heads who say we've reached the bottom and prices can't fall any further :rolleyes:

ronan45

Remember when my Parents even my Grand Dad used to say those infamous words "NEVER GO WRONG WITH BRICKS AND MORTAR SON"
Thats grand I just bought a small Crib. I Dont see prices recovering in the next 5-8 years.
Will they ever reach the heights of the peak from 06/07 Hmmm With the battering the economy took. Our Huge Debts. I think Maybe in about 20 years. Cant see how they could recover in the next decade anyway. God im Miserable today

antiskeptic

Firetrap wrote: »

Proof yet again that you should never believe the talking heads who say we've reached the bottom and prices can't fall any further :rolleyes:

Morgan Kellys 80% peak > trough prediction of a year or so ago is looking more and more like prophecy fulfilled. I wonder what his latest estimation would be?

AshAdele

The National Asset Management Agency (Nama) is drawing up plans to introduce a new initiative to help kickstart activity in the property market - by assisting home buyers.

Nama is proposing a Deferred Payment Scheme on 20% of the value of a house or apartment that was acquired by the agency.

The outstanding amount will only be paid if the value of the property is maintained or increases over the following five years, in an effort to ease purchaser fears of negative equity.

Nama has stressed that that no mortgage finance would be provided by the agency, however.

"We're not getting into the market in a huge way, what we're talking about is a fairly modest intervention with the objective of actually getting something moving there," said Nama chairman Frank Daly.

So a person gets mortgage approval of say 140k, they have a deposit of 20k so they are looking at houses for 160k.
they see a house in NAMA 200k and go for it, NAMA with-holes the the 20% or 40,000 for 5 years. in 5 years time if the house has STAYED THE SAME VALUE OR INCREASED they pay the 40k back.

will anyone really go for this, have an extra 40k hanging over thire heads for 5 years. The banks have decided to offer them 140k based on there income and ability to pay back not 180k.

the banks are finally seeing sence and trying to lend properly with property prices coming down to match the affordable mortgages and NAMA try to through more credit at a person so they can prop up the property bubble for a little while longer!!

if the average industrial wage is 35k then the person can afford 140k mortgage (4 times salary) plus thire 20k savings. therefor the house that person should be looking at is 160k not 200k.

If the property bubble has thought us anything it is that you dont know what could happen in 5 years time. so why gamble on it

NAMA should sell the property for its value, not the value they hope it could be. Put the properties on the market if people buy at those prices great, if they dont slowly lower the prices till they do sell. this is the only way we will see what the true value of the market is and only then will we hit the bottom.

antiskeptic

AshAdele wrote: »

if the average industrial wage is 35k then the person can afford 140k mortgage (4 times salary) plus thire 20k savings. therefor the house that person should be looking at is 160k not 200k.

Someone else raised the point that the average industrial wage isn't really a good figure to be utilizing in figuring out what the average price of a house should be.

Rather, it's the 'average industrial wage of people old enough to be considering buying their first house' that tells us what the average price of a starter home should be. Price of houses upwards of that would be based on this 'floor' home

Typically (traditionally) this will involve people settling down with a view to starting a family so you're looking at age profiles in the late 20's. Their average wage is going to be something higher than the average industrial wage.

-

I'd imagine the -20% carrot is aimed at people who know which way the property market is going and who are pretty sure they won't have to fork out much, if any, of that 20% in the future. Given the rate of price decline at present + the fact that there is nothing on the horizon indicating anything but a dropping/flatlined housing market, I wouldn't see it as taking much of a risk.

Personally, the plan strikes me as a little bit feeble in the face of the pressures downwards. I'd be betting on greater than 20% drops over the next 5 years

jmayo

RATM wrote: »

I saw that report on RTE News at 1 - funnily enough it was buried inside a larger report about how the housing authorities have just shelled out an average price of €171k for 50 odd luxury apartments in Beacon Quarter in Sandyford which had gone into examinership.
...

Somewhere way back amongst my posts I predicted Sandyford Industrial Estate, oops I mean Beacon Sth Quarter, etc would turn into a cr**hole because it would end up with loads of social housing.
BTW 171k a piece is way too much.

Deleted User wrote: »

Got to feel for the poor saps who paid full price for those flats, now they are about to be surrounded by people who get to live in the places for effectively nothing because they'll be on benefits of some sorts.

No you really don't have to have pity for the poor saps, since those "saps" were often bragging to everyone how wonderful their John Roca designed interior or exterior in the The Cubes or The Edges was and how they had views of the mountains and the sea. :rolleyes:
They bragged how much they paid.
Anyway a lot of them were bought by "investors" and the tenants have been Eastern European or Asian.

ronan45 wrote: »

Remember when my Parents even my Grand Dad used to say those infamous words "NEVER GO WRONG WITH BRICKS AND MORTAR SON"
Thats grand I just bought a small Crib. I Dont see prices recovering in the next 5-8 years.

5 to 8 years ??
Good luck with 15 to 20.
Again I will draw down the example of Japan.
Property bubble bursts circa 91/92 and still hasn't recovered nearly two decades and two world bubbles (including worldwide property bubble) later.

ronan45 wrote: »

Will they ever reach the heights of the peak from 06/07 Hmmm With the battering the economy took. Our Huge Debts. I think Maybe in about 20 years. Cant see how they could recover in the next decade anyway. God im Miserable today

Why would you want them to reach the heights of 06/07 ?
They were totally unrealistic with no foundation in any economic reality.

Those over inflated prices led to collapse of entire indigenous banking system, internal economy, massive unemployment and long term hardship for the taxpayers who have to carry the can. :mad:

lomb

Yes but its not a static thing, money. Inflation exists in paper money as there is always more and more of it being created. Say 4% compound inflation over 20 years( would be considered very stable inflation actually and may not be achievable even due to globalism and a rise of the East) a 100 grand item becomes 219 grand. So if peak to trough is 70% which I think it will be (is looking at the recent auctions) then it will take somewhere around 25 years to recover, but in real terms relative to incomes of the day of course they never will as no bank will lend at the levels lent before as they were unsustainable.

The property collapse and banking bailout could be solved with the stroke of a pen. The 50 euro notes we value so much could just be printed out of thin air and indeed they are as we speak. Just politically we are told one thing when behind the scenes the ECB is in full control of the situation.
Witness the interest rate reduction Ireland was quietly given. Why have charged an unsustainable rate to begin with? Germany had to talk tough at the time as they had voters at home expressing disquiet.

Treehouse72

lomb wrote: »

Yes but its not a static thing, money. Inflation exists in paper money as there is always more and more of it being created. Say 4% compound inflation over 20 years( would be considered very stable inflation actually and may not be achievable even due to globalism and a rise of the East) a 100 grand item becomes 219 grand. So if peak to trough is 70% which I think it will be (is looking at the recent auctions) then it will take somewhere around 25 years to recover, but in real terms relative to incomes of the day of course they never will as no bank will lend at the levels lent before as they were unsustainable.

The problem with the inflation argument - that it will eventually even things out - is that traditionally inflation is both price AND wage inflation. That is why debt gets eaten away. But that is not the kind of inflationary period we're entering into now. Today, it seems we have rising prices/money supply and falling wages.

I am not an economist so can't pick the bones out of that, but it seems a very different scenario to me than in the past.

lomb

Wages will pick up in due course, of course in Ireland they will deflate relative to say Germany as they are probably too high but eventually say in 25 years current owners will be bailed out. Hey we might even have another boom then too forgetting past lessons;)

jobeenfitz

does anybody know why rent is not dropping anything like house prices. I was paying 600 rent in county Galway a couple of years ago and still paying 600 for same place. Will rent come down?

jobeenfitz

jobeenfitz wrote: »

does anybody know why rent is not dropping anything like house prices. I was paying 600 rent in county Galway a couple of years ago and still paying 600 for same place. Will rent come down?

Quite simply because fewer are buying and more are renting!

Edit: and what not even wrong said below.

not even wrong

jobeenfitz wrote: »

does anybody know why rent is not dropping anything like house prices. I was paying 600 rent in county Galway a couple of years ago and still paying 600 for same place. Will rent come down?

http://www.welfare.ie/EN/Schemes/SupplementaryWelfareAllowance/Pages/RentSupplement.aspx

Galway €255 €260 €468 €550 €700 €750 €760

Monty Burnz

jobeenfitz wrote: »

does anybody know why rent is not dropping anything like house prices. I was paying 600 rent in county Galway a couple of years ago and still paying 600 for same place. Will rent come down?

Rent is propped up artificially by the state with Rent Supplement, or 'the landlord's dole' as it's also known. Rent can't fall below the amount the government pays.

So the government pays 800 euros a month to couples with no children in Dublin renting a place, which basically means that this is the floor for two bedroom apartments.

Rent supplement needs to be cut if you want to see rents falling in line with property prices: as it is, it just means that everybody who is renting pays extra, and the taxpayer is paying more money than they should to landlords.

jobeenfitz

ye dat would make sense, rip off Ireland again. so basically higher rents untill social protection stop inflating de market. How did we do such a terrific job fu**ing up the country? pay is sh*t for ordinary workers and everything is over-priced.

Zamboni

jobeenfitz wrote: »

How did we do such a terrific job fu**ing up the country?

Democracy always seems like a great idea until the realisation that the majority of the populace are morons kicks in.

SecurityGuy

jobeenfitz wrote: »

does anybody know why rent is not dropping anything like house prices. I was paying 600 rent in county Galway a couple of years ago and still paying 600 for same place. Will rent come down?

In real prices your rent came down. A few years ago 600 was worth more that it is today because of inflation. It's just rent is not going down as quickly as house prices because rent market is more regulated and there is more non-house factors in the rent price.

OMD

SecurityGuy wrote: »

jobeenfitz wrote: »

does anybody know why rent is not dropping anything like house prices. I was paying 600 rent in county Galway a couple of years ago and still paying 600 for same place. Will rent come down?

In real prices your rent came down. A few years ago 600 was worth more that it is today because of inflation. It's just rent is not going down as quickly as house prices because rent market is more regulated and there is more non-house factors in the rent price.

Isn't it the opposite. Over the last couple of years we have had deflation. So in real terms his rent went up (by a very small amount).

SecurityGuy

Official interest rates close to zero don't mean deflation.
It all depends on how we measure inflation, I mean what we put into the price reference basket. If we put a meal in restaurant (I've noticed you can eat cheaper in the restaurant now than 3 years ago) or housing price into the basket then we can actually say: deflation.
But most of the goods are more expensive now: fuel, food and most important gold which is the real money.
If we reference other prices to gold we can observe we've had 20% inflation per year over last 3 years. And i think that gold is proper reference to measure inflation because we should expect it's real value should be stable.

On the other hand food and industry products normally should get cheaper because we should benefit from advances in technology, so it is not a good idea to put them in inflation basket as we will get bogus result.

SecurityGuy

OMD wrote: »

Isn't it the opposite. Over the last couple of years we have had deflation. So in real terms his rent went up (by a very small amount).

Let's don't get fooled by the official talks about deflation. Look at the food and fuel prices.

Monty Burnz

OMD wrote: »

Isn't it the opposite. Over the last couple of years we have had deflation. So in real terms his rent went up (by a very small amount).

We haven't had deflation - just a short blip that didn't even last 4 quarters*. And if deflation does kick in in earnest, the property debt monkeys will get further and further underwater.

Edit: correction: actually it seems it did last more than 4 quarters, but inflation has made a comeback for the last year...

OMD

SecurityGuy wrote: »

Let's don't get fooled by the official talks about deflation. Look at the food and fuel prices.

Deflation is deflation. It doesn't mean everything comes down. It means an average basket of goods has reduced in price.
http://www.tradingeconomics.com/ireland/inflation-cpi

SecurityGuy

OMD wrote: »

Deflation is deflation. It doesn't mean everything comes down. It means an average basket of goods has reduced in price.
http://www.tradingeconomics.com/ireland/inflation-cpi

OK I agree, there was a short time I could feel that my basket was cheaper - maybe at the end of 2009. What I'm trying to say is that by commons sense deflation should be a natural state and should happen all the time because the goods are easier to produce thanks to advances in technology and work organization.

ShadowHearth

Just a quick one so lads. Is there still room for property to go down? Surely normal house in normal non ghost estate cam go lower them 100k?

Merch

ShadowHearth wrote: »

Just a quick one so lads. Is there still room for property to go down? Surely normal house in normal non ghost estate cam go lower them 100k?

cant imagine why not, depends where i suppose, there might be other cons to buying in a ghost estate

Monty Burnz

ShadowHearth wrote: »

Just a quick one so lads. Is there still room for property to go down? Surely normal house in normal non ghost estate cam go lower them 100k?

Values can fall past zero. They probably won't for most properties in Ireland, but the idea that they can't fall below 100k is just silly. Here's a 2 bed house asking 85k (will presumably accept less) 2 miles from the centre of Dublin in a decent area.

http://www.myhome.ie/residential/brochure/123-killala-road-cabra/1356219

I can see houses on ghost estates being given away for nothing, with certain assurances required from the 'buyer' about upkeep.