Housing Bubble Bursting

squarecon

Yeah, property has gone up too much in recent years but what was on last night was one journalist attempting to throw us back to the bad days when we were to wear the hair shirts and with the amount of new posts on daft he half succeeded. We are a much more mature country now and yes there may be a correction on the horizon but I think we can take it on the chin. Sit up everybody and think.
Build an extension in the mean time!!!
You would never guess what I do for a living!!:D

Zambia

Granted it was one sided but I wont go as far as Crap , not everyone in Ireland is as savy as yourselves. Sometimes you need a TV programme spelling out that there are a few things that might happen.

People do have to realise signing up to 2000 / 1700 Euor a month payments on top of ESB, GAS, Fuel bills. They also have to take interest rates in mind as that professor said there is little you can do but put the info out there , and give people there heads. If they still stick them in the Sand there is little you can do.

The programme may hammer home a few pionts

1: A rise in interest rates has to be factored in to your calculations
2: A rise in your Property is not cast in stone.
3: You cant go wrong with property is a lie
4: Just because you have never seen a down turn in work it does not mean we are immune. (granted you may get a job in MacDonalds)
5: Over stretching is not just a gym term.

Those two nurses looking at a 430,000 house was stupid they expecting quads or what? They can live in the suburbs for 380,000 easy.

The one bed for 315 on the outskirts, is a result of ignoring some of the above pionts.

conor_mc

Tristrame wrote:

I thought it was crap.
Why?
Because it was one sided.
The makers must have a lot of appartments to let.

It was as good in my opinion as that programme "The great global warming swindle"...

Pat McArdle, Niall O'Grady - raging bears that pair!

But seriously, is there a cogent argument on the other side? I hear about wishy-washy things about ill-defined fundamentals being good, and immigration rising indefinitely.

On the other side, we have a census-proven overhang of vacant supply, evidence of rising inventory (albeit not officially collated), rising interest rates underpinned by strong German performance, a worrying situation with regard to US deficits and a falling balance of trade.

But most importantly, we have to cut housing output from 88k units to 50-60k units per year = inevitable job losses. There is no getting away from this point. Outside of construction and services, we are not creating enough new jobs. When construction inevitably dips, it will drag consumer confidence with it, meaning losses in the service sector (breakfast rolls!) also.

So where is the other side of the argument? Does it even exist?

nesf

Zambia232 wrote:

Granted it was one sided but I wont go as far as Crap , not everyone in Ireland is as savy as yourselves. Sometimes you need a TV programme spelling out that there are a few things that might happen.

People do have to realise signing up to 2000 / 1700 Euor a month payments on top of ESB, GAS, Fuel bills. They also have to take interest rates in mind as that professor said there is little you can do but put the info out there , and give people there heads. If they still stick them in the Sand there is little you can do.

The programme may hammer home a few pionts

1: A rise in interest rates has to be factored in to your calculations
2: A rise in your Property is not cast in stone.
3: You cant go wrong with property is a lie
4: Just because you have never seen a down turn in work it does not mean we are immune. (granted you may get a job in MacDonalds)
5: Over stretching is not just a gym term.

Those two nurses looking at a 430,000 house was stupid they expecting quads or what? They can live in the suburbs for 380,000 easy.

The one bed for 315 on the outskirts, is a result of ignoring some of the above pionts.

Broadly I would agree with the sentiment of your post but I don't agree that that program was balanced enough in order to have merit as an Eddie Hobbs style "economics for the masses" type thing. The first half hour of it was worthwhile enough with some substance to it, but the last half hour made Prime Time look like "The Week in Politics".

squarecon

I agree that tv is an excellent media to get a message across to the masses but too many people believe what is on tv as gospel. Has their been an economic model the same as Irelands on which to base comparsions? The UK in the 80's was a market based economy all the way back to the californian gold rush which was gold based. Our economic growth model is unique and predicting its path is a job for nostradamus not an economist never mind a journalist

Zambia

I went to an Eddie Hobbs talk and he made some sense at the time.

His attitude to your house was that your house is your house you decide what you can afford per month and go with that.

I had college lecturer who never stopped about all this , especially the fact that your house value is not linked to your personnal wealth unless you move country (to somewhere cheaper) or live on the street.

However I assume Squarecon there will be more than enough Attic Conversations to keep you in Beer during the years ahead.

conor_mc

Zambia232 wrote:

However I assume Squarecon there will be more than enough Attic Conversations to keep you in Beer during the years ahead.

Are you sure there are enough attics...?!?!?

Raskolnikov

Zambia232 wrote:

Those two nurses looking at a 430,000 house was stupid they expecting quads or what? They can live in the suburbs for 380,000 easy.

Firstly, those two were only trainees. What business a trainee nurse/doctor/accountant/anything has buying a house is beyond me.

daveirl

This post has been deleted.

squarecon

I had been working in the commerical construction sector for the last 11 years and that is more influnced by international factors. There has been a few scares in the commerical sector. But put it in perspective, 200 houses are worth a sale value of approx 70m. On the same site you could generate twice that commerically. The UK has a huge amount of construction work at the moment and the Irish sector is still rolling on. The company which I worked for, still cannot get skilled labour.
So as I said before sit back and enjoy the ride:eek:

daveirl

This post has been deleted.

squarecon

I beg to differ daveirl, I posted 2 properties on daft for rent and my phone nearly exploded with the amount of calls. Its a lot better than 2 years ago.
And its extensions I prefer, the attic conversions are too hard to compete against cowboys who think that you can use the ceiling of the first floor in your house as the floor of the attic conversion. Very few houses produced in the last few years are suitable for conversions because of trussed roof construction. (Sorry I had to get that off my chest!!)

MG

The point I was making was that he programme failed to take a balanced approach, preferring to shock and give a doomsday scenarios without exploring the mitigating factors. The economy is far more robust than the programme implied. There is a serious wealth of knowledge in this country built up over the past decade or two and combined with other factors like low CT, reasonable tax authorities, business friendly government, flexible workforce etc, there are still many reasons to do business in Ireland. Although we are losing some jobs in Multinationals, others are also still coming here. There is certainly some pain ahead for the Irish economy but without some balance to the programme it can only be described as scaremongering.

seamus

daveirl wrote:

This post has been deleted.

Not in Dublin though. The cost of renting a 2 bed apartment is quickly approaching the cost of the mortgage on same.

2 Bed Apartment to rent on Adelaide Road: http://www.daft.ie/24517
€2,175/month

Just around the corner, 2 bed apartment to Buy on Harcourt Green: http://www.daft.ie/119594
~€2,200/month mortgage.

Granted, these are at the mid-high end of the Dublin market, but you'll find similar in other parts. As speculators dispose of property, rental availability plummets. I'd be surprised if the same wasn't happing in other parts of the country.

squarecon

You're quite correct MG. We didn't get the tag of the island of Saints and Scholars for nothing! Maybe a few less Saints around now but you are correct the younger work force are alot more adaptable than the work force from years ago when factories and farms were the main stay of this island.

A Random Walk

A couple of points
1. Rents have increased dramatically recently. Those of us who predicted that house prices would fall and are being proved correct, at the time also predicted that we would see a short term upsurge in rents as investors all tried to pile out of the market. This is also proving correct. Rents in my opinion will start falling once sellers can no longer cope with carrying houses that aren't rented and cannot be sold.
2. #1 should not come as a surprise, it happened in the US last year. If you want to know where Ireland is going, we are about 6-12 months behind the US in terms of our property bubble.
3. Who do you think is more independent - an Economics professor whose reputation is based on whether or not his predictions are accurate, or an EA and head of marketing for a bank whose salary is based on the most houses they turn over.
4.25% of this economy is directly reliant on construction. The myth of our economy being robust is dependent on Irish people (including the government) borrowing to pay wages to ourselves building property.

seamus

seamus wrote:

Not in Dublin though. The cost of renting a 2 bed apartment is quickly approaching the cost of the mortgage on same.

Take a look at this youtube video for a view if how skewed rent v mortgage is in some parts
****************http://www.youtube.com/watch?v=cHfq40rhgBY ***********

jmayo

MG Squarecon, dream on.
No matter how flexible your workforce is, it cannot compete with a workforce that is willing to work for a lot less.
At the end of the day the only flexibility that the likes of Dell or Intel undertstand is flexibility in labour costs.
Motorola understood this and there are a few hundred very high technically skilled jobs gone in Cork. Where are they being replaced?
We are uncompetive, our once favourable position on tax is being underminded by other countries offering similiar rates, our ancilliary costs are much higher and the famous mantra of how we have a huge pool of young educated workers that no one else has is a myth.
Look at how fast India and China are pumping out graduates.

nesf

seamus wrote:

Not in Dublin though. The cost of renting a 2 bed apartment is quickly approaching the cost of the mortgage on same.

2 Bed Apartment to rent on Adelaide Road: http://www.daft.ie/24517
€2,175/month

Just around the corner, 2 bed apartment to Buy on Harcourt Green: http://www.daft.ie/119594
~€2,200/month mortgage.

Granted, these are at the mid-high end of the Dublin market, but you'll find similar in other parts. As speculators dispose of property, rental availability plummets. I'd be surprised if the same wasn't happing in other parts of the country.

Well it's similar in Cork city centre (which is the area I'm interested in tbh). A married couple would pay roughly the same for a mortgage and renting for a new 2 bed apartment around here atm (circa 1200 or thereabouts per month) once you take mortgage interest relief into account.

conor_mc

nesf wrote:

Well it's similar in Cork city centre (which is the area I'm interested in tbh). A married couple would pay roughly the same for a mortgage and renting for a new 2 bed apartment around here atm (circa 1200 or thereabouts per month) once you take mortgage interest relief into account.

What duration is the mortgage though?

niall2j

conor_mc wrote:

What duration is the mortgage though?

While the term of the mortgage is not irrelevant, a fair comparison would be to compare the interest on the mortgage (plus maybe management fees less tax relief) with the equivalent rent. The loan term then dictates how quickly your debt is repaid (quicker the better obviously but not so comparable with rent)

There is often talk of fundamentals... is that not a positive fundamental in terms of the 'buy' argument in nesf's case? An equivalent negative fundamental could then be potential interest rate rises eroding the advantage. He hasn't mentioned the level of apparent supply/demand in that area.

nesf

conor_mc wrote:

What duration is the mortgage though?

30 - 35 year seems about standard for young people from the people I've talked to anyway. Very few people in their 20s could afford a shorter term one tbh.

Mrs_Doyle

Christ, I wish that fecking bubble would burst once and for all, and then, maybe then, I will actually be able to afford to buy something remotely fecking decent!!!!!!!!!!!!!!!!!!!!!!!!!


(Apologies - I am extremely frustrated with property shopping on a shoe string budget!)

nesf

niall2j wrote:

There is often talk of fundamentals... is that not a positive fundamental in terms of the 'buy' argument in nesf's case? An equivalent negative fundamental could then be potential interest rate rises eroding the advantage. He hasn't mentioned the level of apparent supply/demand in that area.

If I had access to decent figures for supply and demand for the cork city apartment market I'd talk about them, but I don't unfortunately. I was only remarking along with seamus that the gap between renting and mortgage repayments isn't that large in some areas at the moment.

It was, and I thought I this would be pretty obvious, anecdotal rather than an indepth study of the market or anything.


Edit: I wasn't making a buy argument anyway, I was just disagreeing with the idea that rents are very cheap at the moment. They aren't really. It's cheaper to rent but not by a large margin.

dodgyme

Raskolnikov wrote:

Firstly, those two were only trainees. What business a trainee nurse/doctor/accountant/anything has buying a house is beyond me.

Ya exactly, when I was there age the one thing I didnt want to do was buy a house, they should want to get drunk and fight alot and smoke 'things; etc. anyhow enough from me! :eek:

niall2j

nesf wrote:

If I had access to decent figures for supply and demand for the cork city apartment market I'd talk about them, but I don't unfortunately. I was only remarking along with seamus that the gap between renting and mortgage repayments isn't that large in some areas at the moment.

It was, and I thought I this would be pretty obvious, anecdotal rather than an indepth study of the market or anything.


Edit: I wasn't making a buy argument anyway, I was just disagreeing with the idea that rents are very cheap at the moment. They aren't really. It's cheaper to rent but not by a large margin.

Fair enough, and I'm not trying to lump you down as being bullish or bearish, I'm just of a similar opinion to you on the above. It just seems to me there are examples out there of prices not having lost touch with underpinning factors. I don't think anyone needs reminding that there are also examples of the opposite!

nesf

Actually, out of interest niall2j, what way do you think the present rising inflation rate has when we're looking at rent rates versus mortgage repayments? We have to discuss interest rate hikes with regard to inflation rates rather than in isolation tbh.

niall2j

nesf wrote:

Actually, out of interest niall2j, what way do you think the present rising inflation rate has when we're looking at rent rates versus mortgage repayments? We have to discuss interest rate hikes with regard to inflation rates rather than in isolation tbh.

Tbh I'm not sure I understand the question mate. When I mention rising interest rates, I did so in the context of it raising a mortgage interest repayment by x amount, while the rent may stay the same for an equivalent place (at least for the lease duration). All I know is that factors that are really beyond Ireland's control dictate IR changes.

nesf

niall2j wrote:

Tbh I'm not sure I understand the question mate. When I mention rising interest rates, I did so in the context of it raising a mortgage interest repayment by x amount, while the rent may stay the same for an equivalent place (at least for the lease duration). All I know is that factors that are really beyond Ireland's control dictate IR changes.

I was thinking along these lines: Presently we've an inflation rate of above 5% and mortgage interest rates of (on average) 4.8/4.9% depending on how you do it. So borrowing money for a mortgage is still cheap(ish). If we're in a situation where our interest rates are less than our inflation rates we are still in a good position. If there is an interest rate hike (and there almost definitely will be some) but the interest rate doesn't exceed the inflation rate by too much then borrowers aren't in a bad position from that perspective.

Raskolnikov

A Random Walk wrote:

A couple of points
1. Rents have increased dramatically recently. Those of us who predicted that house prices would fall and are being proved correct, at the time also predicted that we would see a short term upsurge in rents as investors all tried to pile out of the market. This is also proving correct. Rents in my opinion will start falling once sellers can no longer cope with carrying houses that aren't rented and cannot be sold.

The rental market for 1-bedroomed apartments in Dublin is insane. Only a couple of weeks ago, there was almost nothing in Dublin under €1,000 a month. Now there's a rake of properties coming onto the market for far cheaper, eg Malahide for €750.

I really do hope that his continues, my lease is coming up soon and I'd love to be able to find a place for €700-€800