Housing Bubble Bursting

miju

miju wrote:

it's the people who bought in the last 2-3 years who will be i trouble.

I bought 18 months ago with a 92% per cent mortgage. I've just had my home valued again and it's gone below the 80% loan-to-value ratio already. Happy days!:D

miju

look yonder slave looks like clouds

btw: anyone seen the papers in the last few days about the revised expected ECB rates to be now at least 4.5% by very early 2008 anyone wanna do the maths on how much that will knock off the maximum mortgage a couple on the average of 30k each can get ?????

also , as people have said on this and other threads year on year the retail sector is down €51 million and this is being attributed as a direct result of the countries gloomy outlook on jobs , property etc. like i and others have said it now seems that the bubble has begun to operate in complete reverse

happy days indeed

Pa ElGrande

miju wrote:

also , as people have said on this and other threads year on year the retail sector is down €51 million and this is being attributed as a direct result of the countries gloomy outlook on jobs , property etc. like i and others have said it now seems that the bubble has begun to operate in complete reverse

happy days indeed

As you say consumer confidence is down, and as Jill Kerby noted in today's Sunday Times "Sub-prime lenders in Ireland are quick to defend their loose lending practices by saying they give money only to those whose credit ratings are barely tarnished or who cannot produce just a couple of years audited accounts. That may be the case now, but it won;t take long for five or six companies to skim the cream off the top of the Irish sub-prime lending market, which they claim could amount to 10% of all mortgage borrowing. I expect they'll be hitting skimmed milk sooner, rather than later given that property prices are turning downwards and interest rates are on the rise."

Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. Deflation involves a substantial amount of involuntary debt liquidation because almost no one expects deflation before it starts...

The expansion of credit ends when the desire or ability to sustain the trend can no longer be maintained. As confidence and productivity decrease, the supply of credit contracts.

The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation . As creditors become more conservative, they slow their lending. As debtors and potential debtors become more conservative, they borrow less or not at all. As producers become more conservative, they reduce expansion plans. As consumers become more conservative, they save more and spend less. These behaviors reduce the "velocity of money," i.e., the speed with which (money) circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend...

http://www.marketoracle.co.uk/Article704.html

chump

What I find remarkable is that the banks are now extending the borrowing limits using the increased mortgage interest relief that came into affect after the budget. The chaps at propertypin.com have discussed this and when I read it in the S.Times today - I thought, here we go again.

Completely ridiculous and goes to show you that any effort the government make to lessen the burden will in turn lead to an increase in 'affordability' which historically have lead to an increase in prices.

What's the point in the government introducing these measures if the benefits ultimately fall to the banks. Frikkin sham.

iguana

As some people here will know I bought a house in London last year, but will most likely look to move back to Dublin in a few years. Because of this every so often I do a search on myhome.ie to see the what kind of house I could buy if I moved now. (Mainly when London is getting me down:( ).

6 months ago there was absolutely nothing within my price range in Dublin, trying to swap my London house for anything similar in Dublin was about 4 times the price. 4 months ago houses in Lucan and Santry had so obviously dropped in price enough that not only were they in my price range but low enough to make a fairly big reduction to my mortgage payments.

This week I took a look and was surprised to see a variety of houses in Crumlin, Kimmage, Rialto, Stoneybatter and Glasnevin affordable to me at either similar or reduced mortgage repayments. That is even taking into account that I estimated a mortgage on a sale price €20k above the asking. There was even one in Harold's Cross that was very nearly in my price range.

I am actually surprised to see price drops in these areas. Places like Lucan and Santry are no surprise as commuter areas will always become less desirable and see the worst losses when prices drop. But if areas within 2/3k of the city centre are already seeing reductions then it suggests that price drops in Dublin could be pretty severe.

ixoy

Speaking as a potential FTB this year, it's elating thinking about the freedom I might finally get and at times horrifying reading the doom-and-gloom apocalyptic forecasts here.

I don't think all FTBs here are now looking to just stay in a place short term. Certainly, the way we're approaching it, is that we'd have to be in the area for a minimum of 5 years (and probably more). I'd check the monthly repayments and ensure we could pay up to 2% more interest rates (with a bit of tough going) at our current wage rates.
I'd look at the infrastructure of the area and realise that it's got a key component that we require - rail transport and think that's worth paying something for rather than areas that are connected only by road (and thus gridlock).

I think, perhaps, that there's a key question that people should be asking themselves now when they're buying. If they're really just looking for a consistently appreciating asset alone, with living a distant second, then they'd be insane in the current market conditions.
But I am of a mind that if it's right for people, if they're buying it for somewhere to settle down currently, and they've judged the potential pitfalls and factored them in, then it's not really a bad thing to do. It may not be the most ideal financial investment around, but I'd hope that there's more than just that when buying a home. Emphasis on a home and not just a savings a/c formed by bricks and mortar.

ronbyrne2005

ixoy wrote:

Speaking as a potential FTB this year, it's elating thinking about the freedom I might finally get and at times horrifying reading the doom-and-gloom apocalyptic forecasts here.

I don't think all FTBs here are now looking to just stay in a place short term. Certainly, the way we're approaching it, is that we'd have to be in the area for a minimum of 5 years (and probably more). I'd check the monthly repayments and ensure we could pay up to 2% more interest rates (with a bit of tough going) at our current wage rates.
I'd look at the infrastructure of the area and realise that it's got a key component that we require - rail transport and think that's worth paying something for rather than areas that are connected only by road (and thus gridlock).

I think, perhaps, that there's a key question that people should be asking themselves now when they're buying. If they're really just looking for a consistently appreciating asset alone, with living a distant second, then they'd be insane in the current market conditions.
But I am of a mind that if it's right for people, if they're buying it for somewhere to settle down currently, and they've judged the potential pitfalls and factored them in, then it's not really a bad thing to do. It may not be the most ideal financial investment around, but I'd hope that there's more than just that when buying a home. Emphasis on a home and not just a savings a/c formed by bricks and mortar.

Resist the urge to buy. Rent somewhere nice with your partner for next few years. If you bought now you are likely to see better homes and better areas for sale for same price you paid for lesser homes/areas in years to come.

ixoy

ronbyrne2005 wrote:

Resist the urge to buy. Rent somewhere nice with your partner for next few years. If you bought now you are likely to see better homes and better areas for sale for same price you paid for lesser homes/areas in years to come.

Potentially of course. Potentially also that many of the current properties that are investments are let out to rent for longer, as the renting market seems quite buoyant.

I understand your reasoning but I'm also aware of other issues. It all depends on how much you'd save renting and buying in 2 years time (or some such) or buying now and fixing your interest rate repayments for a set period of 3-5 years against the chance they could be higher in 2. As renting currently stands, we'd be paying the same almost as a mortgage repayment for a place.

Still nowt is decided yet and the coming few weeks will see more head scratching I'm sure by me and 1000s of others.

pjbrady1

The person in charge of the Paddy Power house price drop bet, she was quoted as saying she was working this all out on her computer model using various economic data.
There is no computer model that can accurately predict the type of pessimism that will set in across the entire country if two the following things happen.
(1) ECB rises rates by .25% in June. Decreasing the amount borrowers can borrow. It will also decrease the potential income from renting a property even though I will admit rents are strong at the moment.
Another negative aspect is that it will encourage people to save. Right now there is a price war on the % that banks offer to savers of large sums of money. All of the banks will be raising their interest rates in the above case. So on the one hand you have a difficult euro to be made in the property market with huge risk on the other you sell up your assets and make even more % income .... risk free. I wonder what an experienced income investor would choose later in the year.
(2) Property prices get even more coverage as having fallen coming near the election. We have already had an estate agents reporting house price drops. I imagine they would have reported house price increases if they could have. But that would leave themselves open to being sued by someone who bought on the premise that prices were rising. There isn't any possibility they can find data in this country in any area that prices have rising so far this year.
Hence why the estate agents use a "basket" of properties. Far more reliable is a cursory glance across Daft.ie noting the falls in asking price and the build up in supply. Especially in rural towns. Look at Foxford in Mayo. 112 properties listed with everyone trying to exit the market. Apartments are competing against each other with price drops.

So in effect you are getting a 5/2 bet on the ECB raising rates in June and/or house prices nationally being reported as falling.
There are a myriad of other factors on the negative. Rising oil prices causing a rise in outgoings. Rise in unemployment particularly jobs earning 35k+. Number of people locking away their SSIA in savings rather than on a deposit. Zero probability of a "back on track" price correction as caution is gradually slipping into peoples outlook. We're having a slow "unreported"/mispriced property correction and it is only now slowly dawning on the nation. Developers have also used up their last trick with the mortgage payments and free furniture lark so few months will shake that out of the market.

massplanck

pjbrady1 wrote:

Look at Foxford in Mayo. 112 properties listed with everyone trying to exit the market.

:eek:

Foxford has a population of 900 people.

pjbrady1

Just noticed there with FOxford, do a search on properties over 400k.
You will see the same property listed twice, near top Foxford lodge nine bedroom is listed as Region 650,000. Further down the old ad still appears looking for 750,000.
I'd say yer hand would be snapped off if ya said 580,000. Still isn't worth it thought. No rental market left in that town.

conor_mc

pjbrady1 wrote:

The person in charge of the Paddy Power house price drop bet, she was quoted as saying she was working this all out on her computer model using various economic data.
There is no computer model that can accurately predict the type of pessimism that will set in across the entire country if two the following things happen.

There is no computer model - bookmaking is a numbers game, fullstop. You set the prices at the start, then you adjust depending on what amounts are being placed on each available selection.

Too much money on one side of the equation = price comes in. Not enough money on the other side = price drifts out to make it more attractive.

miju

miju wrote:

look yonder slave looks like clouds

Certainly is happy days! I've knocked a chunk off the mortgage in 18 months and got a reduced interest rate which will save me thousands.
Have no intention of moving, so yes, happy days!

miju

pre tell , how exactly did you knock a chunk off your mortgage if your still living there and haven't sold the house????

you said yourself that you have no intention of moving so you will never actually physically release the cash in your home to "knock a chunk off your mortgage" unless you do something like equity release which only adds to your mortgage

miju

miju wrote:

pre tell , how exactly did you knock a chunk off your mortgage if your still living there and haven't sold the house????

you said yourself that you have no intention of moving so you will never actually physically release the cash in your home to "knock a chunk off your mortgage" unless you do something like equity release which only adds to your mortgage

Er, because the amount I owe the lender has decreased by quite a lot in a shorter space of time than I had anticipated.
The house isn't the mortgage, the loan is the mortgage.
So I comfortably 'overpay' every month. Ergo, I've knocked a chunk off what I owe the bank. And when Mr Slave moves in, we can whack a few hundred more off the mortgage.

Yes, I've no intention of moving at the moment. A three-bed semi in Dublin is more than adequate for me right now. As for five or six years down the line, who knows where we'll all be.
Well, I've a fair idea of your perspective on where we'll all be, but I prefer to look on the sunny side of life

whizzbang

Here's a question, you know those reduced mortgage rates you get for having a certain percentage of equity in your house? What happened when the value of the houses go down? Will the mortgage providers bump you up to a higher rate as your loan to value ratio drops from 60% to 70%?

Could this end up being a nasty surprise for people who feel they will not be effected by house price declines?

whizzbang

whizzbang wrote:

Here's a question, you know those reduced mortgage rates you get for having a certain percentage of equity in your house? What happened when the value of the houses go down? Will the mortgage providers bump you up to a higher rate as your loan to value ratio drops from 60% to 70%?

Could this end up being a nasty surprise for people who feel they will not be effected by house price declines?

I have no idea. Must put it to the lender.
Although I know when the arse fell out of the property market in the 1980s and you couldn't sell a house my parents didn't have to pay a higher rate. Interest rates were bananas enough back then!

whizzbang

Deleted User wrote:

I have no idea. Must put it to the lender.
Although I know when the arse fell out of the property market in the 1980s and you couldn't sell a house my parents didn't have to pay a higher rate. Interest rates were bananas enough back then!

were they able to get a special rate back then for having a good loan to value ratio? It might be a new invention of the banks.

johnnyskeleton

Does anybody know why a lot of lenders are offering a fixed rate that is lower than their standard variable? (e.g. PTSB)

A couple of years ago, it seemed to be the case that a fixed rate was usually just a cut above the standard variable rate if the ECB rate was expected to rise, and just a cut below if it was expected to fall.

Is it just a promotion? Surely they don't expect interest rates to fall?

hi5

Do-more wrote:

Just heard of a development in Carlow where trenchs had been dug for foundations for a new phase and last week they were backfilling the trenchs and closing the site down. One developer with a bit of cop-on!;)

Lots of archaeology digs going on in the Carlow /Kilkenny area at the moment for the M9 motorway,look exactly like foundation digs then filled in straight away.

arctictree

RTE are airing a program next Monday night at 9:30 called 'Price Crash'.

The beginning of the end I'd say. The secret will be out....

whizzbang

arctictree wrote:

RTE are airing a program next Monday night at 9:30 called 'Price Crash'.

The beginning of the end I'd say. The secret will be out....

Looks like it will be an interesting show, but will one program cause that much trouble? I think a lot of people won't believe prices can go down until they personally know someone who has "lost 150k on property". George Lee's show in June and Dave McWilliams Pope's Children didn't seem to have that great an effect?

gurramok

Did anyone see the advert in the Herald to 'win a 1-bed apt worth 300k' in Marsfield, Congriffin, North Dublin?

A bit of misleading in it that the same apt is 285k on myhome.ie !

arctictree

whizzbang wrote:

Looks like it will be an interesting show, but will one program cause that much trouble? I think a lot of people won't believe prices can go down until they personally know someone who has "lost 150k on property". George Lee's show in June and Dave McWilliams Pope's Children didn't seem to have that great an effect?

Ah yes - but this time its actually happening, stoking the fire I would say....

pjbrady1

What this programme will do will probably stir up alot of the lunchtime/watercooler debate about a weak property market.
I'd imagine there is plenty potential for them to question the minimal price drops that have been reported by all of the vested interests so far.
Also about time someone came out and mentioned about the supply factor.
An economist got paid good money at the weekend to write an article for the Sunday business post. He had a quote something like "its a pity you cant get any data on the % of new homes that are unsold."
Now unless he has been too long with his head looking at Forex exchange curves - it would hadly be a taxing evenings work to use Daft.ie to at least get some grasp of the level of builds from last year still up for sale.

Right now economists expect us to believe that peoples logic will be "Jese the rent has gone up 6% prices fallen 4%, aah sure time to buy rent is going up"
It's nott going to happen, people will stand on the sidelines paying higher rent and watch while prices fall.
The lunchtime talk of price rises, will turn to price falls, further cementing people onto the ditches.

whizzbang

pjbrady1 wrote:

Right now economists expect us to believe that peoples logic will be "Jese the rent has gone up 6% prices fallen 4%, aah sure time to buy rent is going up"
It's nott going to happen, people will stand on the sidelines paying higher rent and watch while prices fall.
The lunchtime talk of price rises, will turn to price falls, further cementing people onto the ditches.

Good point, as long as my rent is a bit less than the equivalent mortgage interest is makes sense to rent. Currently the mortgage on my apartment would be over twice the rent I'm paying!:eek:

warrenaldo

i nearly bought a 2 bed appartment in dub - in sept of last year. it was 320k and i was stretching my limits for it. but luckily the bank pulled out at the last minute due to intrest rates. Now with the price drops - and the staic nature of the property market since november really - i thought i would be able to get a better place. or at least get the same place - but now i can only get mortgage for 240k - whereas in sept it was 280k.

So maybe the prices are falling but from my experience - its only due to Interest rate hikes. and the affordability of places is still rising.

Zambia

warrenaldo wrote:

i nearly bought a 2 bed appartment in dub - in sept of last year. it was 320k and i was stretching my limits for it. but luckily the bank pulled out at the last minute due to intrest rates. Now with the price drops - and the staic nature of the property market since november really - i thought i would be able to get a better place. or at least get the same place - but now i can only get mortgage for 240k - whereas in sept it was 280k.

So maybe the prices are falling but from my experience - its only due to Interest rate hikes. and the affordability of places is still rising.

Excellent Piont , if the banks dont lend as much anymore than surely prices fall.

And its another piont to consider for all those looking at falling prices being the silver lining. As property falls to you the banks rip the step ladder they promised you last year.

whizzbang

Zambia232 wrote:

Excellent Piont , if the banks dont lend as much anymore than surely prices fall.

And its another piont to consider for all those looking at falling prices being the silver lining. As property falls to you the banks rip the step ladder they promised you last year.

If you can't afford it you can't afford it, they are not doing you or themselves a favour if they put you into a debt you can't pay.

Zambia

As much as it is the banks duty not to lend you over your head its your look out to not go over your head but in the last 10 years that seemed to leave peoples heads.