Housing Bubble Bursting

pjbrady1

The most at risk group for repossessions will be young couples who bought a property in the last year, getting married this summer and borrowing for the wedding. Have two cars. Husband works in construction as general labourer and the wife earns a small wage as unskilled factory worker. There is bound to be good few people close to or in this exact situation especially in West of Ireland and midlands.
Highly borrowed couple, with main income from low skill construction and a lifestyle that will get more expensive if child arrives. Most will manage but anybody who has a spendthrift habit in the areas of holidays, clothes, nights out over the last few years will have little savings to cushion any unemployment. I think some parents might be a bit put out by their children borrowing to service mortgages from their parents.

Zambia

pjbrady1 wrote:

The most at risk group for repossessions will be young couples who bought a property in the last year, getting married this summer and borrowing for the wedding. Have two cars. Husband works in construction as general labourer and the wife earns a small wage as unskilled factory worker. There is bound to be good few people close to or in this exact situation especially in West of Ireland and midlands.
Highly borrowed couple, with main income from low skill construction and a lifestyle that will get more expensive if child arrives. Most will manage but anybody who has a spendthrift habit in the areas of holidays, clothes, nights out over the last few years will have little savings to cushion any unemployment. I think some parents might be a bit put out by their children borrowing to service mortgages from their parents.

If you lose your job you stay home and watch TV , and daytime TV ads are full of great Ideas on how to beat debt :rolleyes:

I reckon their could be a demand soon for a personnal finance Forum. Yes i do believe the above is true. Anyone buying in July of this year lets say an average house , average area. 375,000 would get the house, they would have paid stamp and various solicitors + moving fees. Now that house is sitting at that price and falling. Ergo this year they have not re-covered even the stamp + costs they paid. So effectivly they are stuck in the house unless they want to write off that stamp.

If interest rates keep rising in Europe as they have just done here (Thanks BOE :mad: ) then the payments will get prohibitive. They may make it if they dont spend like pjbrady1 says they will but it will be tight.

Plus if they are already mortgaged to the hilt and want to re-mortgage if the value of the house has fallen what happens??

pjbrady1

Just checked growth in properties for sale in Roscommon on Daft.
It has grown from 876 on 25th November to 1112 on 11th November. A 20% jump in less than 50 days! Now at Christmas wouldn't people be more concerned with festivities than selling property. My prediction is for 1300 properties for sale in Roscommon by end of month with a serious price fall kicking in around the unsustainable 1500 mark in February.
At the same time properties for rent has gone from 38 to 19. Would seem to indicate people are not even bothering to rent out places and just have them up for sale.

Rats damn.

I was confident of investing and making a profit as outlined above. Seems like another bidder is €10k even more confident than I am...

Victor

miju wrote:

must dig out that link i found before when someone said only 3 houses are repossesed a year when it's alot more and also show that repossesions are rising again on average over the course of the last ten year.

Thats because the banks are using other methods of dealing with people who can't pay their mortgages, like putting them on interest only (IO) mortgages for a year or just quietly having the person sell the house themselves. In a rising market formal repossessions don't happen a whole lot.

pjbrady1

I think there is a significant chance you will look back in one month and be glad you missed that apartment in Kerry.
It looks like it is hard to sell or rent a house or apartment in Kerry these days from these graphs.
http://daftwatch.atspace.com/daftcounty_14.html

All of those counties are getting excess property for sale and we have no bad news such as "ECB rates rise again" or "House prices fall 3% in last six months".
A lot of investors seen the headlines of property rises "15% in 2006". This headline hid the fact that if you bought in September you now are sitting on a loss. As a nation our buyers have not cottoned on fully yet either. The proper tactic for buying a 3-bed semi in Kildare at the moment should be to meet as many sellers as possible and offer them at least 15% below what they are asking and tell them you are moving fast. You only need one person to accept your offer. Friend of mine picked up an asking price 3-bed semi in Leixlip for 380,000 that was quoted at 410,000. The seller did get a 390,000 offer but the deal had been done and fair play to the seller he honoured the verbal agreement. Must check what 3-bed semis are for now in Leixlip.

Zambia

pjbrady1 wrote:

Friend of mine picked up an asking price 3-bed semi in Leixlip for 380,000 that was quoted at 410,000. The seller did get a 390,000 offer but the deal had been done and fair play to the seller he honoured the verbal agreement. Must check what 3-bed semis are for now in Leixlip.

I still think thats a bit steep its got a good bit to fall , anyone else agree ? My last post outlines why..

Sponge Bob

pjbrady1 wrote:

Would seem to indicate people are not even bothering to rent out places and just have them up for sale.

Local Roscommon Councillor Luke Flanagan (remember Ming the Merciless in Galway anyone ) had the following to say about Ballinlough near the Mayo border a few days back . He was called out there over some shoddy unfinished estate developed as a section 23 tax scam .

The majority of the 18 houses in the relatively new housing estate are investor-owned and it is estimated that half of them remain unoccupied. “This estate, which was built in the last four years Kipperhell , was put there for the benefit of investors rather the benefit of the poor unfortunate people who live there. I am no expert on the building trade but the least one could expect is that houses built in the last four years should not be falling down around peoples ears after such a short time,” Cllr Flanagan said following the meeting with tenants of the estate

he then described cracks and structural problems he found

One particular house that I looked at is starting to resemble the leaning tower of Pisa, only that the architecture is the other end of the spectrum. On the gable end there is a crack, which you could put your hand into. There are visible signs on the wall where somebody attempted to glue it back together.

On the area in general he commented.

Cllr Flanagan claimed that it was a case of the “absentee landlord” being back in business and he questioned the “true value” of the Rural Renewal Scheme given the number of vacant houses. Anecdotal evidence, he said, suggested that as many as 80% of houses in the village remained unoccupied

finally he said

“The question has to be asked as to why all these houses are being built if nobody is there to occupy them,” he said.

“Even more baffling is the fact that there is another estate being built beside it and for that matter another one behind it. It appears that the tax incentive is so strong that it makes financial sense to buy a house and leave it empty.

So that kinda explains leitrim and north roscommon and south sligo then but not that rest of the un tax designated midlands.

pjbrady1

Another problem with Roscommon is its low population. It has more properties for sale than Meath, a county with not far off three times Roscommons population. There are a couple of hundred one off houses for sale in Roscommon without Section 23 at 200,000 +. Those houses will still be there in three months time, no-one is going to buy them.

pjbrady1

pjbrady1 wrote:

I think there is a significant chance you will look back in one month and be glad you missed that apartment in Kerry.

I haven't, it's still there! The location is great though. Had moved away as was looking at a house in a tourist area, but looks like the bidding for that is heating up. Now it's back on the horizon, hence my 'explain section 23' thread elsewhere.

Incidentally, every year in this part of Kerry (South) there is a big rush to sell property before the end of summer, or put it up for sale at the turn of the year to get a few bids before the summer. Dafts graphs wouldn't surprise me at all, everyone around here is advised to stick their house on the market in the winter and spring to sell to some tourist looking for a holiday house in the summer. The long term rental market around here was always limited anyway.

Pa ElGrande

pjbrady1 wrote:

Spot on with East Mayo. All of the towns in that area have experienced heavy development, yet you could count on one hand the number of companies that employ more than 150 people.
There is also alot of property going to come on the market handed down from older generation to a younger generation who will not decide to live in Mayo.
One other factor I'v noticed is the lack of people in their late 20's who live in the area. National school class size has plummeted in the towns.
Similarily I have heard of developments being rented out by the developer.
Foxford looks oversupplied in that region.

I suspect Mayo is not unique in that regard, and other rural areas away from the eastern seaboard have a similar level of construction activity. My dad works in building, the project he's currently on has about 100 houses completed, 5 of the houses on this site are 4 to 5 bedroom houses, that have not sold. Of the rest 3 bed/2 bed, only 7 have been bought by first time buyers, the rest have been bought by investors and most are rented out. Approximately one third of the houses on this estate are rented to foreign nationals, the majority of whoom work in construction. Most of those I've met from Eastern Europe & South America are here on a 5 year plan, to save as much money as possible, go back and set themselves up at home, we could start to see a levelling off of immigration circa 2009, especially if the economy dips.

Sponge Bob

sounds like its an estate in Tuam Pa what with that demographic profile

Pa ElGrande

Sponge Bob wrote:

sounds like its an estate in Tuam Pa what with that demographic profile

North Cork

Sponge Bob

and most of them commuting daily to work in Cork city as Tuam people do and it sounds like it has a meat factory too.

I wonder how many more outlying commuter towns rely on immigrant commuters to pay the rent for the investors ???

pjbrady1

Interesting point raised about immigrants going home.
Lets surmise that property starts to slow down. We would see an inevitable slow down in construction jobs and layoffs. As a result a significant amount of Irish population would psychologically slowdown their spending. This would impact hotels, pubs, hardware, restaurants.
All areas where a lot of immigrants work. At the same time the home countries of immigrants Poland, Lithuania, Latvia are starting to reduce unemployment and wages are starting to rise. An immigrant with staff management experience in hotel trade who has saved 10,000 euro will up sticks and go straight home if laid off in Ireland. Skilled constructions workers and civil engineers are already in decent demand in Poland. One company in Wroclaw came to Dublin and offered Polish engineers the same money as they were being paid here to work on a site in Wroclaw.
In rural towns the only significant renters are immigrants. So whithin three years you could see rental market take a hit and investors have zero income and 100% expenses on a property that is losing capital value. An investor who bought pre 2003 will accept any reasonable bid in the above scenario. That investor can afford to floor their price to sell ahead of their fellow investor who bought after 2005.

It all depends on the margin between unemployment/wages in Ireland and Poland. Poland at moment is somewhere around 18% unemployment, if that dropped to 13% and Ireland rose to 8 (how can it not if construction slows down) and similarily wages in Poland went up by 40%+ (very possible in skilled employment). You have less of a draw to work in a country like Ireland where you most likely have only a chance of working at bottom rungs of your industry.

In conclusion the really severe property collapse will occur when you get pre 2003 investors looking to offload rental property in Rural Ireland at any reasonable price as soon as possible, to get sold before their neighbours who they know are selling as well. Resulting unemployment and nationwide fear will leave a famine of buyers resulting in the largest yearly drops Europe has seen in years.

Sponge Bob

pjbrady1 wrote:

Interesting point raised about immigrants going home.
Lets surmise that property starts to slow down. We would see an inevitable slow down in construction jobs and layoffs. As a result a significant amount of Irish population would psychologically slowdown their spending. This would impact hotels, pubs, hardware, restaurants.
All areas where a lot of immigrants work. At the same time the home countries of immigrants Poland, Lithuania, Latvia are starting to reduce unemployment and wages are starting to rise.

I am glad that somebody noticed ALL of this. Riga and Wroclaw are doing quite nicely these days and there IS work in Slovakia and Latvia and Poland (dunno about Lithaunia) which is where most of our recent immigrants came from. There IS something to go back to in many cases albeit not in rural areas in those countries. Then again a a lot of rural Irish who moved back in the 1990s from UK/US ended up in the cities in Ireland not in their home rural areas. No difference at all then ???

In conclusion the really severe property collapse will occur when you get pre 2003 investors looking to offload rental property in Rural Ireland at any reasonable price as soon as possible, to get sold before their neighbours who they know are selling as well.

or post 2003 investors, but investors of some sort yes. They will offload in their droves in certain areas and that will create a wave that washes in towards the larger towns. They will hold out longer owing to better rental prospects and schtudents

Afuera

pjbrady1 wrote:

It all depends on the margin between unemployment/wages in Ireland and Poland. Poland at moment is somewhere around 18% unemployment, if that dropped to 13% and Ireland rose to 8 (how can it not if construction slows down) and similarily wages in Poland went up by 40%+ (very possible in skilled employment). You have less of a draw to work in a country like Ireland where you most likely have only a chance of working at bottom rungs of your industry.

You also need to consider how immigration to Ireland will be affected by the opening up of other economies to foreign nationals. Once Germany allows the recent EU members to work there, then that gives many Poles and Eastern Europeans the option of getting very good wages and still being able to drive home for the weekend.

pjbrady1

If the scenario we are talking about occurs, and it is commonly accepted it has a greater than 1/4 chance of happening. Wouldn't Stamp duty plummet by billions a year. Income tax on Construction/Hotel/Hardware/Estate Agent/Building service would plummet.
The higher value properties are set to fall most %wise in value. This will have a huge affect on stamp duty as these buildings had the higher rate applied, even allowing for the fact that they are a smaller % of national housing stock.

At the same time we are paying people 40,000+ to file folders in cabinets in the civil service (will probably be 45,000 by then). We have a 31 billion transport21 plan. A health service that costs billions to run every year. Wouldn't it be easily possible for the country to be bankrupt, I mean 1980's bankrupt whithin two short years. Raising taxes would have no effect, unemployment would rise significantly with higher taxes. If lower band rose from 20 - 35% and higher band from 40 - 50% people would not be inclined to spend much of their money. Finally putting paid to alot of rural businesses that were just ticking over pubs/shops/beauticians/florists.

That leaves entire nation solely relying on IT/Multinational manufacturing/agriculture/pharma chemicals. Financial services is a myth. Read in papers that it is only about 1% of economy and agriculture contributes multiples of Financial services benefit to economy. The only one of those industries Id leave my coat on would be agriculture as food supply will soon be an issue in Europe.

Zambia

Yes the return to Poland dream I have heard the Poles speak of is a reality however. If anyone really belived this then surely the thing to do now if you have a rental property in ireland is sell the thing now and buy 2 in Poland.

Once the polish economy starts to boom which it will it 2009 with all these Poles returning all cashed up to the hilt with all our construction money. Then you are surely set to be quids in. It will push up their housing market, and in doing so make them have worked hard over here for 5 years for half the return.

But hey thats life.

miju

just throwing this up here for general debate.....as theres no-where we could even get an indication of the potential figure BUT

what if the immigrants don't want to go home???? what percentage do you think would be willing to go home rather than staying here where they've been living for 5-10 years and have set themselves up???

can anyone show , highlight a previous countries experience in respect to building asset bubble , construction boom , immigration rising , bubble bursting and post bubble the immigrants then moving on / returning home

Zambia

miju wrote:

what if the immigrants don't want to go home???? what percentage do you think would be willing to go home rather than staying here where they've been living for 5-10 years and have set themselves up???

can anyone show , highlight a previous countries experience in respect to building asset bubble , construction boom , immigration rising , bubble bursting and post bubble the immigrants then moving on / returning home

Its a good theory , but I reckon the lure of friends and family and greater return on their money will bring them home.

jdivision

A number of Irish labourers moved from Britain to Germany and the Netherlands after the property collapse in Britain in the 1980s. Have no stats on it though

soma

Deleted User wrote:

Rats damn.

I was confident of investing and making a profit as outlined above. Seems like another bidder is €10k even more confident than I am...

Assuming the 'bidder' actually exists..

Sponge Bob

pjbrady1 wrote:

If the scenario we are talking about occurs, and it is commonly accepted it has a greater than 1/4 chance of happening.

The scenario I am talking about is that we have been building homes (15% of which are empty) to "meet demand" . Much of that demand was speculation in appreciation or speculation to write tax off and not real demand for homes to use.

That demand, such as it exists, is mainly met by importing immigrants to build MORE homes and is additionally met by leaving the damn things empty to 'bank' capital appreciation .

Once construction stalls and slows then demand for already constructed homes also drops as those who are living in them are here to construct and will go home BECAUSE there is nothing for them to do. Those homes, once empty and untenanted , will supplement the already huge empty inventory .Equally we cannot keep building simply to leave them empty ... a la Roscommon today .

I can see the following scenario whereby 20% of all homes in Ireland are empty by this time in 2009 and where the government has to change the entire basis of its property taxation to incentivise their use as nobody is building anywhere save in a few urban areas where the population is still growing. It will pretend to be ' green ' of course

No developed country in history has ever had to carry 20% of its usable housing stock sitting idle. Thats completely new territory for us and its all our own bloody fault, we, our banks, our central bank and regulator and government in no particular order.

soma

soma wrote:

Assuming the 'bidder' actually exists..

Oh he does. Know the other bidder personally and we were both dealing directly with the Vendor. You never know where you stand with auctioneers...

HashSlinging

Once the constuction industry kicks off in Germany we can wave goodbye to all the people who have come to our shores to get jobs and with them any hope of keeping house prices at the current level.

The German economy for the first time in years is now on the up and employment there is also rising, once the germans start spending it will be bye bye to our housing boom.

HashSlinging

HashSlinging wrote:

The German economy for the first time in years is now on the up and employment there is also rising, once the germans start spending it will be bye bye to our housing boom.

Or look at it another way, it's 'Hellooooooooooooooooo Germany, ich bin ein Berliner' time. As soon as one bubble bursts, another door opens for the person seeking the quick buck. Aint life great...

HashSlinging

would be a good time to buy over there right now alright.

Sponge Bob

except that these 'good deals' in Berlin are generally where the Gemans themselves refuse to live and are sold with magic 'guaranteed rental ' attached

pjbrady1

I reckon all of Eastern Europe, Malta, Germany are all set for a building boom.
Most of rest of Europe is set for a property fall off, with Ireland being the worst affected by a long margin given its % of population who work and service construction directly and indirectly. So anyone ideas how to make money in a property downturn, without setting up a repossession company. That would be too cruel.