Housing Bubble Bursting

miju

Sponge Bob wrote:

Todays Tribune has an article about the impending demise of the commuter belt which is based on a report to be issued next week by a UCD Planning Ecomonmist Brendan Williams . It seems there is a large pipeline of development to come on stream , especially in N County Dublin, over next year. These homes will be at Kildare and Meath prices but without the commute duration .

That will affect Kildare and Meath prices and that in turn will cause mayhem further out in the Midlands. Lets see.

that's exactly the kind of thing that one could call a trigger and start people panic selling causing prices to tumble inwards towards Dublin , especially given the very nervous climate at the moment

ronbyrne2005

ronbyrne2005 wrote:

i think this is a ploy to bail out investors when their investment properties in middle of nowhere collapse in value. Governement will buy these houses(through councils) at above free market rate to reduce the impact of oversupply and falling prices.

:eek:


REVOLT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


I hope people see the truth behind all of this . . . . and everything gets shaken up. . . . . the civil service all the political parties even the media
Maybe the crush will open people eyes to all the corruption

Gurgle

Sponge Bob wrote:

These homes will be at Kildare and Meath prices but without the commute duration .

That will affect Kildare and Meath prices and that in turn will cause mayhem further out in the Midlands. Lets see.

Prices in Kildare and meath reflect the fact that commuting to Dublin is horrible. If commuting from Navan was as easy as from Clonee, house prices in Navan would be the same as Clonee.

I expect these new homes will be at Dublin prices, as they are in Dublin.

Pa ElGrande

Deleted User wrote:

:eek:


REVOLT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


I hope people see the truth behind all of this . . . . and everything gets shaken up. . . . . the civil service all the political parties even the media
Maybe the crush will open people eyes to all the corruption

The truth about corruption is already in plain sight and yet most people choose to ignore it! We on the whole have bought into the system of patronage when we expect government to bail us out in the event of a crash. The reality of the bubble bursting is too frightening for most people to contemplate, people make promises to themselves that the government or banks would never let a crash happen, this is why the soft landing myth is such a marketing success for the property sellers and money lenders.

Don't get obsessed by the impending crash in property URL="http://en.wikipedia.org/wiki/Sic"]sic[/URL, we know its going to happen just like every other bubble implosion before, anyone who chooses to educate themselves and reduce their exposure will be allright. Property is still affordable as you can rent a good house/apartment and raise your family, build your savings and wealth, all without ever lugging a millstone [mortgage] around your neck for the next 30 years.

+ Infrastructure is going to be the big investment area in Ireland over the next few years. There will be opportunities for those of us with the right experience and skills.
+ The only way to get better wage deals is by husseling, changing jobs and managing your career. Standing still and not training is a recipe for disaster.
+ If you are toying with the idea of emmigrating to avoid the downturn, now is the time to do it and set yourself up before the crowd gets the same idea.
+ Clear any unnecesary debt and build yourself a years buffer, to cover yourself in event of job loss, injury or other unexpected event. It's really hard to think straight when you have no job and creditors on your back.
+ Property as an investment has mostly had it's day in the sun, every Tom, Paddy & Mick is in on the racket, there are few oppertunities for yield or value to be found. Find something else to invest in if you have the money.
+ Look after your health, a key part of this is your diet and lifestyle.
+ Maintain a good relationship with your family and friends, the old 1980's its not what you know its who you know can tip the balance when employment is tight.

Sorry Mods, for going off topic maybe we should start a thread elsewhere on boards about becoming financially independent & more healthy

Pa ElGrande

Pa ElGrande wrote:

The truth about corruption is already in plain sight and yet most people choose to ignore it!QUOTE]


Thats true, BUT, When things are put in black and white people are outraged.
We all knew what the craic was with the Estate agents etc but when Prime time "exposed" (what we already knew) there was an awful fuss!

Same goes for Eddie Hobbs and his rip off republic - people got annoyed when he priced some things - seems people need things on display in BLACK AND WHITE.

Maybe the crash or the CRUSH as I like to now call it will display all the corruption

but Im being too optimistic !

SimpleSam06

Eh I posted this elsewhere, I'll just drop it in here...

Taken on a month by month basis, house prices are in fact dropping outside of Dublin, according to this finfacts article. Here are a few interesting quotes from the article:

Looking specifically at November the price of houses nationally rose by 0.1% during the month, down from the rate of 0.6% recorded in October this year and the 0.7%, 1.0%, 1.1%, 1.2% & 1.6% recorded in September, August, July, June & May respectively. The index also reveals that over the last twelve months (i.e.: from November 2005 to November 2006 inclusive) the growth in national prices was 13.1%. This is down significantly from the rate of growth to October ‘06 (14.2%).

House prices in Dublin grew by 0.8%, while prices Outside Dublin fell by 0.1%. In October 2006 the relative price increases were 0.9% and 0.2%.

The average price for 3 bed semi-detached house showed no growth in November, down slightly from the rate in October 2006 (0.1%) while in November last year growth of 0.8% was registered.

Is this the first official note of house prices dropping in Ireland? If we extrapolate that trend a bit further, back of the envelope calculations here, the rate of price increases has dropped by about 1.5% from May to November, discarding that the rate of droppage is increasing, which gives us about 0.2% per month.

Given a baseline of 0.1% increases, at this rate the price of housing will have dropped by 2.4% by this time next year. If the trend in November is the pattern, housing will have dropped by about 6% by November 2007. So given this, it should take about ten years for property to reach what I would call its "true value", around 50% to 60% of what it is now.

External influences will affect this one way or the other, inflation, interest rate rises or decreases, public sentiment, build rates and so on. Of course this is fairly speculative, but there it is, for what its worth. If someone better at maths than me wants to take a crack at it, please do! The curve is most definetely turning, however.

Oh and just as an addition to the 275,000 empty homes meme, from the recently updated wikipedia "Irish property bubble" entry

Economic commentators give a figure of approximately 230,000 vacant properties. Of these up to 115,000 or so may be holiday homes.

Figures exist for completions because the ESB provides information on the number of properties newly connected to the electricity network and from data supplied by Local Authorities and from The Dept of the Environment and the CSO.

SimpleSam06

A few more points for your consideration, keep in mind that property prices need to increase at least 0.4% month on month in order to retain their value relative to inflation, which was at 4.9% per year last time I checked. This makes property a pretty shoddy investment most of the time, except in a boom climate, foreign investors take note.

Therefore even if house prices only drop 1% per annum for the next ten years, in real terms they will have dropped 40% to 50%, factoring in inflation. Even if they stay flat, investors are going to have to bail out in their droves to cut their losses. Flippers are essentially dead, with a few localised exceptions.

The turn in the market won't shake most of them for a while, until even the most stubborn see the year on year results for the end of 2007 coming back with a net loss. Thats when we'll see the panic selling, and that 40% of stock sold coming back in a hurry.

Edit: Of course investors that got in earlier can wait it out until prices drop near to where they bought...

Victor

SimpleSam06 wrote:

Given a baseline of 0.1% increases, at this rate the price of housing will have dropped by 2.4% by this time next year. If the trend in November is the pattern, housing will have dropped by about 6% by November 2007.

And pray tell how you work that out?

So given this, it should take about ten years for property to reach what I would call its "true value", around 50% to 60% of what it is now.

It doesn't happen like that. It will be a roller coaster, not a gentle decline. Other than financial products, nothing declines in a straight line.

Gurgle

SimpleSam06 wrote:

Therefore even if house prices only drop 1% per annum for the next ten years, in real terms they will have dropped 40% to 50%, factoring in inflation.

a.k.a soft landing

And if they don't rise or fall at all for the next 10 years, then thats an inflation adjusted drop of 20%-30%.

Ba-da-bing ba-da-boom; prices corrected, no negative equity.

Victor

OK, if we 'know' houses are going to be worth X in 10 years, then people won't want to pay now the same as 10 years time, they will want to pay substantially less => no soft landing. Roller coaster maybe, but no soft landing.

Gurgle

Victor wrote:

OK, if we 'know' houses are going to be worth X in 10 years

We don't know, we're all just guessing.

Victor wrote:

then people won't want to pay now the same as 10 years time

huh?
why?

Capital appreciation investors/gamblers would abandon the market, but prospective home owners would be queueing up.

Zambia

I would not be so sure of the roller coaster aspect of the decline. While I agree there will be a drop off in property values I dont see the decimation of the market. True there will be a increase in property on the market both myself and Lex have already admitted off loading Property in 2006.

Since we where all little its been drilled into us in an almost Mass like repeated chant

Rent = Dead Money
&
Must --- get --- on ---property ladder.

Plus people will always need somewhere to live so as property drops there will still be a people prepared to actually buy. Same way as there are people buying flash cars in the sure knowledge they will de-value.

These buyers would be like speed bumps in a falling market.

Unless interest rates went really high (1.5% this year) I dont see a spiralling market downwards.

Oh and Avensis's (Toyotas last for life, why trade after three years).

miju

Gurgle wrote:

but prospective home owners would be queueing up.

why do you think that out of curiousity?

pjbrady1

If any of us ever required it (never know what can happen to someones circumstances) I'm sure we would be glad of the opportunity of social housing.
However I seen the headline in SBP yesterday and first thing I thought was that the figure was very high. 100,000 social houses, at only 2 people per house that is 200,000 people. I'm not sure we will have an extra 200,000 people over the age of 18 in desperate need of social housing.
It might not be pleasant but surely in circumstances of economic downturn some people would be able to move in with parents, rent in cheaper locations. Not saying that those options are all that nice to deal with, but it's the reality for alot of population.
The amounts involved were huge as well, multiples of ten billion.

One other point, how well bargained for are the social houses that are bought around the country. It was reported in a previous post, (have to take word) that a developer in Cork who was having difficulty selling all of a group of apartments sold 96 apartments for 24 million. That is over 250,000 per apartment. Surmising that it would have mainly comprised 1, 2 bed apartments that represents at least 15% poor value given that the developer was getting out cash upfront risk free. Is the government using it's cash upfront purchasing power to lower the prices of apartments it buys. The idea is forming in alot of developers heads these days that if the local small town rural market lets them down they might be able to turn to the govermnet for a guaranteed price and a healthy profit margin. Most of that healthy margin representing wasted taxpayers money.

aphex™

Guys on the point of people having to keep working instead of having babies- the tax credits of one partner will transfer to the other who IS working. This will allow them to pay the mortgage AND have babies.

Know people who are on average wages doing this right now and find the mortgage easily payable having bought 2 years ago. AND one works 4 days a week.

Really think this is a non issue.

Afuera

Gurgle wrote:

prospective home owners would be queueing up.

Why would they be queueing up if the annual output of new property is currently about twice as high as the demographics can actually support?

Zambia232 wrote:

people will always need somewhere to live so as property drops there will still be a people prepared to actually buy.

This argument falls apart when the amount of houses in the market exceeds the amount of people that require a dwelling.

While in desirable areas, there will probably always be a certain amount of people prepared to buy (but maybe not at the prices being demanded), in other areas it's possible that there will actually be no prospective buyers. Anyone who bought there to get their foot on the ladder will have a property that is unsellable... unless, you guessed it, they drop the price! Depending on when they bought, they'll be able to take this hit or not.

Afuera

aphex&#8482 wrote:

Guys on the point of people having to keep working instead of having babies- the tax credits of one partner will transfer to the other who IS working. This will allow them to pay the mortgage AND have babies.

Know people who are on average wages doing this right now and find the mortgage easily payable having bought 2 years ago. AND one works 4 days a week.

Really think this is a non issue.

Personal tax credits for an individual amounts to about 1,700 euros per annum. That amounts to only 150 euros a month.

Getting this instead of a full wage is certainly going to lead to a big drop off in income. If they are already on a tight budget clearly they could not afford to do this.

Zambia

Afuera wrote:

This argument falls apart when the amount of houses in the market exceeds the amount of people that require a dwelling.

While in desirable areas, there will probably always be a certain amount of people prepared to buy (but maybe not at the prices being demanded), in other areas it's possible that there will actually be no prospective buyers. Anyone who bought there to get their foot on the ladder will have a property that is unsellable... unless, you guessed it, they drop the price! Depending on when they bought, they'll be able to take this hit or not.

Now now it does not fall apart, There will be people prepared to buy there will just not be as many of them. Property prices in this scenario still fall but do not free fall.
If no one is prepared to buy then the market will free - fall. As Investors will consistantly drop prices in a bid to offload losing assets. So they can re-invest in Spain , Poland etc.

Zambia

And I just dont think there will be no body prepared to buy. In fact I think there will be a sustainible figure but not enough to stop the slide. Just slow it.

gurramok

Zambia232 wrote:

And I just dont think there will be no body prepared to buy. In fact I think there will be a sustainible figure but not enough to stop the slide. Just slow it.

Yes there will be people prepared to buy, not many of them and majority of them cannot afford a minimum house/apt in a bad area so prices will have to slide a good bit to get these people on board to buy a decent place.
But then again, like as when the prices where rising, why buy when they are falling, the smarter ones will wait till the bottom is reached before jumping in.

Maybe the mexican standoff is over and the slide is becoming public now
http://www.rte.ie/business/2007/0115/construction.html
'The bank's economist Pat McArdle said December was the second month in a row in which housing activity fell. He said it was likely that there was an outright fall in house prices in the month - the first time this has happened since late 2001.'

Afaik, a soft landing has never been acheived anywhere in the world once a bubble bursts.

miju

gurramok wrote:

why buy when they are falling, the smarter ones will wait till the bottom is reached before jumping in.

that wouldnt happen though in ireland the land where being a "cute hoor" is celebrated

Afuera

Zambia232 wrote:

And I just dont think there will be no body prepared to buy. In fact I think there will be a sustainible figure but not enough to stop the slide. Just slow it.

Fair enough, you're entitled to your opinion... I personally think that a lot more potential buyers will dry up in a falling market though.

Many FTBers in recent years have been buying starter houses out of the fear that if they don't buy now they may never be able to afford to buy (a lot of those expect to be in their first home for only a few years before moving up the "property ladder"). Recent investors have generally been buying with the expectation of capital appreciation and have been happy to subsidise tenants so long as the value of their assets rise.

These two groups alone account for over half of the market! I don't think it's possible to half the demand, and still retain the fabled "soft-landing" scenario that has been put forward by the vested interests.

BTW: When I said that there would be nobody prepared to buy, I was only refering to certain areas. So while some areas would have no demand, others would still have some demand (albeit diminished).

SimpleSam06

Zambia232 wrote:

And I just dont think there will be no body prepared to buy. In fact I think there will be a sustainible figure but not enough to stop the slide. Just slow it.

The slide is already in full swing. Look at those month on month figures I posted above for the last year, and remember, if your house value isn't matching inflation, you're losing money.

If you draw a line between the price rise percentages from May to November last year, you have a line that is dropping, and fairly steeply. In November price rises were at 0.1%; normally thats a boom period for house sales.

If you continue drawing that line into 2007 and 2008, you get negative growth = negative equity = property crash, especially when you factor in inflation. In fact combining that line with inflation gives you property values at about half what they are today in around 4 or 5 years.

We're already in the middle of a crash, have been since May.

Of course there will always be a percentage willing to buy, the same economics that you apply to house prices you can also apply to debt; even if you pay interest only for 10 years, the amount you owe will be effectively halved (4.9% inflation x 10 years), while your wages are going up. Theres a bullish argument if ever I've heard one! The thing is, that completely wipes out investors and flippers, not that I'd miss them.

The problem most people seem to have is that they don't feel like labouring for a decade to fill the coffers of johnny-got-lucky and his dancing partner, the banking salesman. We hit the top of the amount the banks are able to lend back in May, thats the most an average person can afford to pay for a house. With interest rate rises, that amount will continue to decrease, combined with the ever fickle public sentiment. People can simply decide not to buy.

So really, if you can pay your mortgage for about ten years and have no intention of moving from where you are, you're fine. Everyone else is in a spot of bother.

miju

SimpleSam06 wrote:

People can simply decide not to buy.

it's more a case of people not being able to afford to buy which further excaberates the situation more than people not wanting to buy

SimpleSam06

miju wrote:

it's more a case of people not being able to afford to buy which further excaberates the situation more than people not wanting to buy

Yes, but I mean even the people who can afford to buy won't dip their toes in the water, especially in an increasingly bearish media environment. The press has got a scent of blood now, they'll keep piling it on until the dead horse is well and truly flogged. Public sentiment is a vital component in the boom-bust cycle.

Zambia

Ok all pionts have portrayed valid scenarios.

At this piont several posts in I would have to ask what % of a drop in the market do you all see by this time in 2008 in the Irish housing market. As it seems very few are of the opinion its not dropping. We all know its falling its seems to be just a case of how far how fast.

I predict a decline of 10%- 14% in the market in Dublin this year. Based on Q4 2006 , more predicted interest rises(.5%) and my gut.

I would see that as a slow down and anything over 20% as a crash. Anyone care to estimate as well ?

SimpleSam06

Zambia232 wrote:

I predict a decline of 10%- 14% in the market in Dublin this year. Based on Q4 2006 , more predicted interest rises(.5%) and my gut.

I would see that as a slow down and anything over 20% as a crash. Anyone care to estimate as well ?

20% is more of a total collapse than a crash! Nationwide, a 4% drop would be a lot, but if you carry on current trends, thats what it's looking like. Factoring in inflation, thats 8 to 10% of a drop. The smart money has already cashed out, those with common sense should be cashing out in a hurry, as for the rest, we'll see the stampede in Q4 2007 / Q1 2008.

Zambia

SimpleSam06 wrote:

20% is more of a total collapse than a crash! Nationwide, a 4% drop would be a lot, but if you carry on current trends, thats what it's looking like. Factoring in inflation, thats 8 to 10% of a drop. The smart money has already cashed out, those with common sense should be cashing out in a hurry, as for the rest, we'll see the stampede in Q4 2007 / Q1 2008.

My prediction is a lot simpler than that. Merely stating A house worth 380 today this time next year (Jan) will be worth 310,000 approx. So granted for some people that will be a disaster. If they purchased in the last two years on mostly borrowed funds.

Not to dwell on wether its a crash , collapse , slide etc I just see thats where it will go to.

miju

an evntual return to prices circa 2000 - 2001 so somehwhere in the 150k region ,

going on price drops already well documented i reckon we'll be looking at somewhere around the 15-20% mark this time next year with the slow but disturbingloy steady decline coming for at least another 3-4 years after that

pjbrady1

Just seen this on Unison. The countries two biggest employers Dell and Intel are now in the process of building large plants in Poland and China respectively. So the odds of both companies reducing their workforce by at least 25%+ in Ireland whithin a few short years of each other are seriously shortened. That could have the most serious impact on a housing crash speeding it up rapidly. From steady to free fall. Especially when Dell employees in Limerick were reportedly asked were they interested in training staff in Poland. So Limerick knowledge would be in Poland at 1/4 the price. Makes sense to close here.

---

INTEL, the world's top chip manufacturer, plans to invest in a major new plant in China to make leading-edge chips, its biggest investment in the country to date, according to Reuters sources.

The plant will make 65-nanometer multi-core processors, the sources told Reuters. This would make it Intel's first such manufacturing facility in Asia.

Intel, which has invested about $1bn in China to date, already has major test and assembly plants in Shanghai and the city of Chengdu.

In Ireland, Intel employs about 5,500 people, between its chip manufacturing site in Leixlip, Co Kildare, and a centre in Shannon. It is considered one of the top multinational investors here.

One source said the investment in the new plant would total a "couple of billion" dollars. Both sources declined to give further details of the project, such as the location and timing, although one said the investment could be announced in coming months.

Chip sophistication is measured by how small individual circuits are, with 65-nanometer considered one of the most advanced technologies in mass production today.