Housing Bubble Bursting

daveirl

This post has been deleted.

iguana

daveirl wrote:

This post has been deleted.

To me that explains areas like D4 and D6, not boring suburbs.

VoidStarNull wrote:

n defence of Mount Merrion: it's on top of a hill, beautiful views over
Dublin bay, it's entirely suburban (no horrible shopping centres and pub-life),
and the houses look of good quality build. Excellent schools in the area.

The Stillorgan shopping centre is only a few minutes from that house and that's a pretty ugly shopping centre. You don't actually get the nice views from most of the houses, you just get views of other houses. There aren't many decent cafe's or restauraunts in walking distance of most the houses. The area has no real hub/heart or village centre area with the exception of the shopping centre. And a lot of the roads have had to be blocked off as a few years ago the area was quite a magnet for joy-riders.

VoidStarNull

iguana wrote:

To me that explains areas like D4 and D6, not boring suburbs.



The Stillorgan shopping centre is only a few minutes from that house and that's a pretty ugly shopping centre. You don't actually get the nice views from most of the houses, you just get views of other houses. There aren't many decent cafe's or restauraunts in walking distance of most the houses. The area has no real hub/heart or village centre area with the exception of the shopping centre. And a lot of the roads have had to be blocked off as a few years ago the area was quite a magnet for joy-riders.

You ruined my pitch
Seriously though, mount merrion is a nice area that is over-priced.
You wouldn't notice Stillorgan shopping centre if the houses were about half
the price
High prices have made a lot of Dublin look ugly.

chump

Gurgle wrote:

lol
that is all

Bank of England raised their base rate to 5.5% today - that'd be a mortgage of ~6.5% to the average joe. I could not even begin to imagine how much trouble this country would be in if these rates were to creep up on us. It's unthinkable

VoidStarNull

If we believe Morgan Kelly's estimates (which are not intended to be precise,
but are perhaps the best we've got), then nominal house prices will drop by
5% pa for the next 8 years or so.

The 875k house will be worth 580k.

However, if we assume that inflation will continue at 5% pa, then the present value
of 580k in 8 years time is less than 400k.

So you could both be right

Zambia

chump wrote:

Bank of England raised their base rate to 5.5% today - that'd be a mortgage of ~6.5% to the average joe. I could not even begin to imagine how much trouble this country would be in if these rates were to creep up on us. It's unthinkable

Its even got to the extent that some banks are withdrawing fixed mortgages in the UK.

super_furry

daveirl wrote:

This post has been deleted.

YATTA! YATTA!

Kipperhell

Afuera wrote:

Very low likelihood of home ownership rates varying dramatically in Ireland IMHO.

Your opinion differs from mine but at least I pointed out why which actually makes it deductive logic. The Irish homeownsership rate has already begun to drop and there has been an increase it the age people leave home too.

Afuera wrote:

As ronbyrne2005 quite rightly pointed out, you have to compare the current value of the property with it's current return, to determine its yield. I'm surprised that there are still people so blinkered out there that they can't see that it makes NO financial sense to hold onto the property under the current climate. Remember that you could lose a lot more than 20% of the value of a depreciating asset in a falling market! I made no projections on the long term performance of the money in the bank, but at least it would be a lot more liquid and easier to diversify than having it stuck in bricks and morter.

You do not have to know current house prices to work out personal rental yield. Market rental yield requires you do. It is laughable that you refered to blinkered views when you have the blinkered view that there is NO financil sense to hold onto a property.
There are many finacial reason to beleive property will make more profit in the long term. Expectation of new emplyment or transport in a region make really good finacial concepts to retain property.
What ever you want to think will happen may happen but you are ignoring facts to suit your opinion.:rolleyes:

Afuera

Kipperhell wrote:

Your opinion differs from mine but at least I pointed out why which actually makes it deductive logic.

You seem to have conveniently ignored the reaons I put forward. I stated that tenancy laws are a barrier to creating a viable long term rental market in Ireland and that home ownership rates are very much a cultural thing (i.e. not so easy to change). Do you agree/disagree and have any facts to support your argument either way?

Kipperhell wrote:

The Irish homeownsership rate has already begun to drop and there has been an increase it the age people leave home too.

Could the drop in home ownership rates have anything to do with the temporary influx of Eastern Europeans? Could there be affordability issues affecting the age that people leave home? This tidbit of data on its own needs to be viewed in context, otherwise it's meaningless.

Kipperhell wrote:

You do not have to know current house prices to work out personal rental yield. Market rental yield requires you do.

Personal rental yield is of no use as it ignores the opportunity cost.

Kipperhell wrote:

It is laughable that you refered to blinkered views when you have the blinkered view that there is NO financil sense to hold onto a property.

At this moment in time, it simply doesn't make any financial sense to hold onto an investment property in Ireland. That's not a blinkered view. Do the maths and see for yourself.

Kipperhell wrote:

There are many finacial reason to beleive property will make more profit in the long term. Expectation of new emplyment or transport in a region make really good finacial concepts to retain property.

But will it outperform other investments? If it doesn't and it holds higher risks then you're a fool to think it makes financial sense.

Kipperhell wrote:

What ever you want to think will happen may happen but you are ignoring facts to suit your opinion.:rolleyes:

What facts have I ignored? How do you know that my opinion wasn't formed after looking at all the facts?

Do-more

I can't remember if this has been posted before, 16 page paper by Prof. Morgan Kelly, On the likely extent of falls in Irish house prices Basically the long version of the article that starts this thread!

SimpleSam06

VoidStarNull wrote:

I suggest the "logical" solution is for the government to pay the unemployed former denizens of the property sector to demolish the empty houses.

After all, most of them are pretty ugly and they could damage our tourist industry.

Hahah, sorry I've been lurking this thread for a while now but jaysus. Talk about your property developers wet dream. Yes, lets actually reduce supply at a time when no one can afford a house.

VoidStarNull wrote:

* House prices in the long term can be expected to rise in line with household incomes (because households compete to buy/rent houses)

House prices can be expected to do no such thing. Property prices reflect what the market will pay for them, no more, no less. A case in point was the recent boom, historically low interest rates=loads of cheap money flowing around=higher property prices. Also your book there ignores that every property developer is in competition with every other property developer, which in turn depresses prices.

VoidStarNull wrote:

* Household incomes increase a couple of percentage points faster per
year than inflation (that's why we can buy more stuff now than our
parents could in the past)

Not to mention the enormous influx of cheap goods from the far east, which our parents had no access to. Household incomes increase or decrease depending on the household. Your average private sector home for example (the majority) is now falling behind inflation, while your public sector employees are slightly ahead of the curve. Lets not forget the difference between household incomes and disposable incomes, in particular with regards to children.

This is almost as good as yerman earlier saying that two is the new one. As for renting becoming the norm, why on earth would that be the case in a situation with a massive oversupply of houses, in a country with only what, 4% urbanisation?

And rental returns + inflation in terms of investment is a good point, but it ignores the facts that in many new builds it is literally impossible to rent, due to poor location and no facilities, and also that if there were a load of new houses built, bought and rented, the rental market becomes flooded and prices plummet. Even in prime locations, landlords factor in a minimum of two months empty per annum.

pjbrady1

I heard at the weekend (and it was verified by several locals) that the countries second or third largest window manufacturer (used to have 400 employees) has laid off 100 people, and most of the rest of employees are on a three day week. Likely to be alot more reports of similar from large construction production companies such as in concrete, block, windows, doors, slate etc. This was not word of mouth but confirmed by radio reports and employees.
Expect a big flood of buying for around six weeks after the election, but eventually a large amount of sellers will tank the market looking to get out if they think buying season is back in after the election.

Zambia

pjbrady1 wrote:

This was not word of mouth but confirmed by radio reports and employees.

Cant find sight nor sound of this on the net which I would expect if a large firm downsizes by 25%

VoidStarNull

SimpleSam06 wrote:

Hahah, sorry I've been lurking this thread for a while now but jaysus. Talk about your property developers wet dream. Yes, lets actually reduce supply at a time when no one can afford a house.

That post was meant to be humorous, but I forgot the smiley (and I guess
nobody thought it was funny )

House prices can be expected to do no such thing. Property prices reflect what the market will pay for them, no more, no less. A case in point was the recent boom, historically low interest rates=loads of cheap money flowing around=higher property prices. Also your book there ignores that every property developer is in competition with every other property developer, which in turn depresses prices.

No-one doubts that the market is highly volatile based on population
changes, supply/demand, etc. But the long-term trend over decades is
for house prices to follow household incomes. If they consistently grew
faster then no-one could or would live in a house. If they grew slower, then
we'd have toilet cleaners living in D4 red-bricks.
Over the short-term there can be wild swings either way, and that's what
investors are mainly interested in.

Not to mention the enormous influx of cheap goods from the far east, which our parents had no access to. Household incomes increase or decrease depending on the household. Your average private sector home for example (the majority) is now falling behind inflation, while your public sector employees are slightly ahead of the curve. Lets not forget the difference between household incomes and disposable incomes, in particular with regards to children.

Again, it's the difference between short and long term.

And rental returns + inflation in terms of investment is a good point, but it ignores the facts that in many new builds it is literally impossible to rent, due to poor location and no facilities, and also that if there were a load of new houses built, bought and rented, the rental market becomes flooded and prices plummet. Even in prime locations, landlords factor in a minimum of two months empty per annum.

Good point. The fact is that renting a house is not risk-free. Therefore
investors should look for a yield that is significantly higher than the risk-free
rate, to compensate them for the risk.

Anyway, since prices are volatile, a patient (and long-lived) investor who
buys and sells at the right times can beat the long-term trend significantly.
While impatient, panicky investors can lose a fortune. That I guess is why
investors always pay more attention to the short term trends than to the
long-term.

SimpleSam06

VoidStarNull wrote:

That post was meant to be humorous, but I forgot the smiley (and I guess nobody thought it was funny )

Well I laughed, in fairness!

VoidStarNull wrote:

But the long-term trend over decades is
for house prices to follow household incomes.

But that completely discounts interest rates, which define how much a bank is willing to lend, which in turn is the maximum amount a house will be sold for - since thats all the money thats there. Case in point, property boom, where amounts far greater than incomes were loaned. Not to mention supply and demand.

Rents, now rents follow income pretty closely.

VoidStarNull wrote:

Again, it's the difference between short and long term.

Actually I'd expand on what I said earlier, since average incomes often follow the long tail effect. More than half of the country is on lower than average wage (not median wage), since the top few push it up considerably.

VoidStarNull wrote:

Good point. The fact is that renting a house is not risk-free. Therefore investors should look for a yield that is significantly higher than the risk-free rate, to compensate them for the risk.

I'd very much agree with that, in fact someone else a few pages back said they wanted to know if rent covers mortgages anywhere in the country. It was pointed out to me on page 20 or 30 or so that single beds in Swords actually fit that description. Not by enough of a margin to be comfortable, but still, there it is, amazing as it seems.

VoidStarNull wrote:

Anyway, since prices are volatile, a patient (and long-lived) investor who buys and sells at the right times can beat the long-term trend significantly. While impatient, panicky investors can lose a fortune. That I guess is why investors always pay more attention to the short term trends than to the long-term.

Speculators look at the short term, investors look at both long and short term. Frankly, had I invested in property in Ireland in the last four years or so, I'd be seeking the exit in an awful hurry.

gurramok

Todays CSO figures are interesting! http://www.rte.ie/news/2007/0515/cso.html?rss

'the construction industry accounted for three-quarters of all new jobs for men.'

That figure is alarmist and disturbing for future emplyment prospects imho.

Pat McArdle(Ulster bank) had offically indicated this blip in employment as an indicator that builders want projects finished asap rather than a general pickup in business on new projects.
Unemployment creeping up from 4.1% to 4.4% from last quarter '06 to first quarter '07

the country is f*****

gurramok

RTE just created a new page since i posted that in more detail about the 12 months to February '07!

http://www.rte.ie/news/2007/0515/jobs.html?rss

Its very disturbing picture, of course RTE paint it as 'economy still creating jobs'

So if your a bloke looking for a job, 73% of jobs are in cocnstruction, another unknown chunk is in public service, the rest in private sector
If your a woman looking for a job, 60% is available in public service, another chunk in health & service, another chunk as factory workers etc

Well paid private sector jobs are a tiny minority of the creation, what the stats don't tell us that most of the jobs last year were probably in low paid industries, some high paid in unsustainable construction...its very bad.

And then they wonder why people cannot afford overpriced houses!!

RTE wrote:

'Specifically a whopping 73% of all the new jobs for men were in the construction sector, while 60% of the new jobs for women were in the public sector dominated areas of health, education, public administration, and defence.

Non-Irish nationals filled 45,000 of the new jobs overall, or 60% of the total, and they now account for 30% of workers in hotels and restaurants, 13.5% of workers in construction, and 13.4% of our factory workers.'

chump

gurramok wrote:

RTE just created a new page since i posted that in more detail about the 12 months to February '07!

http://www.rte.ie/news/2007/0515/jobs.html?rss

Its very disturbing picture, of course RTE paint it as 'economy still creating jobs'

So if your a bloke looking for a job, 73% of jobs are in cocnstruction, another unknown chunk is in public service, the rest in private sector
If your a woman looking for a job, 60% is available in public service, another chunk in health & service, another chunk as factory workers etc

Well paid private sector jobs are a tiny minority of the creation, what the stats don't tell us that most of the jobs last year were probably in low paid industries, some high paid in unsustainable construction...its very bad.

And then they wonder why people cannot afford overpriced houses!!

nasty, rte -fair play to them- can spin any story into a positive!

The_Conductor

Well- its not the Public service creating jobs for anyone at the moment. The public service has approximately 64% women, over 45% are over the age of 50 and particular segments are noted as the least likely group of employees on average to survive to draw their pensions (civil servants).

Give it 2 or 3 months and then I guess the Polish contractors will be let go, followed by redundancies for the Irish permanent staff. The idea that reform of stamp duty is going to do anything for anyone is the biggest joke I have ever heard. Do you know whats genuinely funny though- economists are now warning that the UK property market is about to dive too..... At least we can all be gloomy together.

pjbrady1

I would guess that most of the 'new' jobs created in last two year are either in unsustainable construction or low paid Hotel, Catering, Pub or Retail work.

How many new jobs outside of construction and public service with a salary of 35,000 plus have been created. That is the kind of salary needed to be comfortable with the Irish cost of living.

Also in rural areas there has been a big scale down in owner operated pubs, shops and retail. These jobs have been replaced by low paid labour in multinationals in larger towns. The jobs crisis will work its way from Mayo to Meath this summer. Just wait till first phase of construction lay offs start at the end of next month. Blocklayers, plasterers, roofers will soon find it tight.

"particular segments are noted as the least likely group of employees on average to survive to draw their pensions (civil servants)."

I have heard this too from a medical insurance company. I tried to see if there was any research into it but couldnt find any (not suprising for such a small country) - do you know where I could find any statistics?

Zambia

Cant see a slide in the UK just yet , supply is not as plentiful. There is not the same markers as ireland had this time last year. I will say that parts of the UK may slide NI wont as there is drastic under supply here.

Supercell

Jesus how anyone can put a positive spin on those cso figures today is totally beyond me.

Ireland is fúcked, simple as, this country is going tits up in the next few years.

Do-more

gurramok wrote:

Pat McArdle(Ulster bank) had offically indicated this blip in employment as an indicator that builders want projects finished asap rather than a general pickup in business on new projects.

If you care to read back a couple of hundred pages I seem to remember posting that developers in the Midlands were flat out in the first few months of the year trying to get units finished and on the market before it really tanked. Now that reality is dawning, at least in the form of near zero sales, developers are cutting back big time. The biggest developer in my area has just shed 25% of his workforce and there are sites closing in a number of towns and villages around me.

A couple of days back I posted a link to a Paper by Morgan Kelly, in his conclusions he refers to another economist's assertian (which is in itself unrelated to house prices per se) that the only way for uncompetitive Eurozone economies to regain their competitiveness is through prolonged periods of high unemployment!

On top of all this the polls for the General election show all the main parties are neck and neck, this for me means we are doomed to a weak Government no matter what way the chips fall! So just at a time when we will need strong leadership we are doomed to the weakest government in 20 years!

Jaysus if only I could sell my house I'd fcuk off out of here!!!:eek:

Pa ElGrande

Longfield wrote:

Jesus how anyone can put a positive spin on those cso figures today is totally beyond me.

Ireland is fúcked, simple as, this country is going tits up in the next few years.

There is an election ongoing and semi-state and government bodies will be putting a positive spin on news and bad news will be supressed, after all their bread is buttered on one side. Exactly the the same situation happened during the previous election campaign in the post .com fallout. The admission that not all is rosy will start from September onwards just like last time.

I would not go so far as to say the country is f*****, for sure we can't avoid a serious recession, so knowing that why not plan ahead?

babytooth

Pa ElGrande wrote:

There is an election ongoing and semi-state and government bodies will be putting a positive spin on news and bad news will be supressed, after all their bread is buttered on one side. Exactly the the same situation happened during the previous election campaign in the post .com fallout. The admission that not all is rosy will start from September onwards just like last time.

I would not go so far as to say the country is f*****, for sure we can't avoid a serious recession, so knowing that why not plan ahead?

i don't know why ppl are calling the end of the world, yes, ireland is fu$ked and is going down into long dark days for a period of time, perhaps up to 10 years. but this is only natural...

its like nature, every so often, we need to perform a cull, shake the froth off the top of the market, this happens in all markets...

On average, over the long term average, everything averages out.....inflation, returns, variance, its all going to be fine over the next 40 years...but not for the next 5 at least.

SimpleSam06

Pa ElGrande wrote:

I would not go so far as to say the country is f*****

Ah no, it is really. Thats what you get when you have a political layer composed largely of Charlie's angels from the last generation, who honestly couldn't lead their way out of a wet paper bag. Decent leadership won't emerge until the weather gets really heavy for a few years.

pjbrady1

The really sticky issue after the property market starts to get tankier, is how we can prevent the public service from bankrupting the country. Two years of lower tax returns, when combined with two years of benchmarked wages will be disastrous.
The possibility is looming large that in three years time a much smaller fraction of people in this country will earn more than 40,000 euro. Yet under benchmarking a large proportion of the public service will be gone well beyond that. Three years wages alone will rocket our national debt thats what I reckon.
I see daft is going to exceed 40,000 for sales today. Someone a few weeks ago mentioned May 14th. You will see it go to 50,000 despite the election sales coming up. I reckon a slow dip for a few weeks then as sales are noticed sellers will flood the market again.

whizzbang

pjbrady1 wrote:

I see daft is going to exceed 40,000 for sales today. Someone a few weeks ago mentioned May 14th.

two days out damn it.