Housing Bubble Bursting

luckat

luckat wrote:

I remember meeting a couple with two good professional wages, and they couldn't afford to have kids. Her wage paid the mortgage, and his paid for food, transport and clothing. That was it. No wiggle room. Always wondered what happened to them afterwards.

If you buy a house today for €400,000 and your repayments are €1,500 a month, say, and then interest goes up and up and you find you're paying €3,000 a month, it's very easy to find that you just can't pay it.

I remember in the early ninties (after the crash & before the recovery) that a number of companies set up in the UK that promised to "help you afford to remain in your home".

What they offered was to purchase a large share in the house (at below market rate) and rent it back to you while you continued to pay the mortgage on the remaining part. You could buy back this share at any time (probably at an inflated value), with current UK prices I wonder if anyone ever bought back?

This practice certainly reduced the number of repossessions.
I'm certain similar companies will appear here in a year or so, wait for the free-fall in prices to start levelling out & another hike in interest rates to take effect and start forcing people into arrears.

Colonel Sanders

patrickolee wrote:

Variable Owner Occupier 5.10%
1 Year Fixed Rate (new business) 5.24%
1 Year Fixed Rate (existing business) 5.47%
2 Year Fixed Rate 5.65%
3 Year Fixed Rate 5.70%
4 Year Fixed Rate 5.80%
5 Year Fixed Rate 5.82%
6 Year Fixed Rate 5.84%
7 Year Fixed Rate 5.86%
8 Year Fixed Rate 5.93%
9 Year Fixed Rate 5.98%
10 Year Fixed Rate 6.00%

Just wondering how do these rates (taking into account the lenders margin above ECB) compare to zero coupon bond yields available in the financial markets?

The_Conductor

Abolition of stamp duty fails to boost market

Monday July 16 2007


THE Government's bid to kickstart the property market has failed.


Estate agents have said the abolition of stamp duty for first-time buyers (FTBs) has had "no impact whatsoever". They have privately expressed fears that the market is stagnant at best - and at worst, we can expect to see price falls of up to 10pc this year.

It is also estimated that up to 10,000 FTBs who purchased over the past year are facing negative equity after taking 100pc mortgages, while thousands of construction workers face layoffs. Homeowners also face the prospect of more interest rate hikes.

Property industry sources said the abolition of stamp duty for FTBs had done nothing to kickstart the market

Last night, opposition parties said the Government had failed ordinary workers, many of whom are now saddled with huge mortgages.

Fine Gael finance spokesman Richard Bruton said the stamp duty measures were just a "token gesture" during the election campaign. "Unfortunately, Fianna Fail, the Green Party and the PDs are more interested in protecting developers and their profits than helping young families buy family homes."

He said the Fine Gael-Labour proposal to "fundamentally reform" stamp duty would have helped FTBs as well as those trading up and down.

Property industry sources said the abolition of stamp duty for FTBs had done nothing to kickstart the market.

"At the end of the day, the market is very weak and sales are almost non-existent," said a source who wished not to be named. "The abolition of stamp duty was helpful to a small number of people. But they were only paying small sums anyway." He said FTBs were waiting to see what happened, and investors were "not confident".

Others in the industry were more upbeat. Geoff Tucker, economist with Hooke and MacDonald, said that sales of new homes on their books had been "reasonably good".

"A segment of buyers are still holding back because of confidence issues, but sales are relatively good for what is typically a quiet period.

Stability

"We're not expecting things to go back to the days when people were queueing out the door. The market is finding more stability now."

Paul Murgatroyd of Douglas Newman Good (DNG) said viewings and sales had picked up recently. But the firm's figures showed prices have fallen by an average of about 5pc in the first six months of this year.

"We're expecting soft prices for the rest of the year, probably going down another 2pc to 5pc."

Ronan O'Driscoll of Douglas Newman Good (DNG) said buyers were fearful of further interest rate rises. "The mortgage interest relief is really where the issue is at. To increase it would be a great thing because it goes straight into the buyer's pocket and would nullify any more interest rate increases."

Meanwhile, thousands of construction workers are facing dole queues after the summer holidays. The Building and Allied Trade Union (BATU) and Construction Industry Federation (CIF) have confirmed that layoffs are looming and builders will be notified when they take their holidays in two weeks.

Bricklayers and general workers operatives of the 280,000 strong construction workforce are expected to bear the brunt, with many given only a week's notice.

- Edel Kennedy and Michael Brennan

Colonel Sanders

is anyone actually surpsied by this? Only something like 40% (if even) of FTBs pay stamp duty so this was never gonna make a huge difference. All it was was a FF election gimmick when there was a lot of opposition talk of stamp duty reform.

nesf

smccarrick wrote:

Abolition of stamp duty fails to boost market

Monday July 16 2007


THE Government's bid to kickstart the property market has failed.


Estate agents have said the abolition of stamp duty for first-time buyers (FTBs) has had "no impact whatsoever". They have privately expressed fears that the market is stagnant at best - and at worst, we can expect to see price falls of up to 10pc this year.

It is also estimated that up to 10,000 FTBs who purchased over the past year are facing negative equity after taking 100pc mortgages, while thousands of construction workers face layoffs. Homeowners also face the prospect of more interest rate hikes.

Property industry sources said the abolition of stamp duty for FTBs had done nothing to kickstart the market

Last night, opposition parties said the Government had failed ordinary workers, many of whom are now saddled with huge mortgages.

Fine Gael finance spokesman Richard Bruton said the stamp duty measures were just a "token gesture" during the election campaign. "Unfortunately, Fianna Fail, the Green Party and the PDs are more interested in protecting developers and their profits than helping young families buy family homes."

He said the Fine Gael-Labour proposal to "fundamentally reform" stamp duty would have helped FTBs as well as those trading up and down.

Property industry sources said the abolition of stamp duty for FTBs had done nothing to kickstart the market.

"At the end of the day, the market is very weak and sales are almost non-existent," said a source who wished not to be named. "The abolition of stamp duty was helpful to a small number of people. But they were only paying small sums anyway." He said FTBs were waiting to see what happened, and investors were "not confident".

Others in the industry were more upbeat. Geoff Tucker, economist with Hooke and MacDonald, said that sales of new homes on their books had been "reasonably good".

"A segment of buyers are still holding back because of confidence issues, but sales are relatively good for what is typically a quiet period.

Stability

"We're not expecting things to go back to the days when people were queueing out the door. The market is finding more stability now."

Paul Murgatroyd of Douglas Newman Good (DNG) said viewings and sales had picked up recently. But the firm's figures showed prices have fallen by an average of about 5pc in the first six months of this year.

"We're expecting soft prices for the rest of the year, probably going down another 2pc to 5pc."

Ronan O'Driscoll of Douglas Newman Good (DNG) said buyers were fearful of further interest rate rises. "The mortgage interest relief is really where the issue is at. To increase it would be a great thing because it goes straight into the buyer's pocket and would nullify any more interest rate increases."

Meanwhile, thousands of construction workers are facing dole queues after the summer holidays. The Building and Allied Trade Union (BATU) and Construction Industry Federation (CIF) have confirmed that layoffs are looming and builders will be notified when they take their holidays in two weeks.

Bricklayers and general workers operatives of the 280,000 strong construction workforce are expected to bear the brunt, with many given only a week's notice.

- Edel Kennedy and Michael Brennan

Source?

Colonel Sanders wrote:

is anyone actually surpsied by this? Only something like 40% (if even) of FTBs pay stamp duty so this was never gonna make a huge difference. All it was was a FF election gimmick when there was a lot of opposition talk of stamp duty reform.

Surprised? No. But then do we really want the Government (regardless of party) to be tinkering a lot with the property market?

miju

nesf wrote:

Source?

big assed article in todays Irish Independent

ixoy

Colonel Sanders wrote:

is anyone actually surpsied by this? Only something like 40% (if even) of FTBs pay stamp duty so this was never gonna make a huge difference. All it was was a FF election gimmick when there was a lot of opposition talk of stamp duty reform.

Exactly. As is being increasingly reported by papers (now that they're becoming more resigned to smaller property supplements), most FTBs wouldn't have approached the threshold. Additionally those that might have a short while ago, are no longer able to with the interest rate rises. Non-issue.

gurramok

nesf wrote:

Source?
Surprised? No. But then do we really want the Government (regardless of party) to be tinkering a lot with the property market?

Source - http://www.independent.ie/national-news/abolition-of-stamp-duty-fails-to-boost-market-1038189.html

More like 2000-3000 were affected by the FTB stamp duty abolition out of 36,000 in 2006
(my source is somewhere posted by myself earlier in this thread when it came out, not going back dozens of pages for it to post it again )!

This measure affected roughly 8% of buyers, a joke really.

Duckjob

"We're expecting soft prices for the rest of the year"

You've got to love VI economist speak. Sure they're only "soft prices", they don't hurt anyone....

nesf

miju wrote:

big assed article in todays Irish Independent

Cheers thank you.

nesf

gurramok wrote:

Source - http://www.independent.ie/national-news/abolition-of-stamp-duty-fails-to-boost-market-1038189.html

More like 2000-3000 were affected by the FTB stamp duty abolition out of 36,000 in 2006
(my source is somewhere posted by myself earlier in this thread when it came out, not going back dozens of pages for it to post it again )!

This measure affected roughly 8% of buyers, a joke really.

Well, arguably the stamp duty situation was a factor that was holding people back. The mistake that was made in some analyses in my opinion was that they assumed that it was the only factor. Anyone who was in a tight enough spot to delay based on the stamp duty question would most likely be someone who would also be keeping a very close eye on reports on interest rate projections etc among other factors.

duffarama

Interesting article here http://www.irishelection.com/07/soft-landings-irish-property-style/ although I don't know where he got his figures from...

miju

heres one for you all. according to this from the Dept Of Enviroment which is based on actual mortgage drawdowns rather than asking prices etc.

Dublin house prices fell 4.6% in the last quarter of 2006 alone........Theres actually a good bit of interesting info in their for regions etc.

Kudos to Eirmail for this btw

davej

It seems things are starting to pick up, at least according to The Real Estate Alliance.

http://www.meathchronicle.ie/property/properties-backlog-beginning-to-clear-conference-hears-1039447.html

[There has been] an upsurge in enquiries from purchasers in recent weeks and particularly since the Government’s announcement of changes in relation stamp duty.

Nice bit of spin - labelling people who have made enquiries as "purchasers". It remains to be seen how much of this translates into actual sales at current asking prices.

Also the article mentions the tougher conditions estate agents are under. Presumably there will be an amount of natural selection occuring over the coming year..

davej

Colonel Sanders

gonna sound like a broken record but never believe whats said by a group with a vested interest in what they are talking about.

pjbrady1

I just noticed on Daftwatch that Dublin added on something like 250 houses in one day. Factors at play here could be:
- New build coming onstream before builders holidays
- Buyers have made there purchases after the election so no more purchases
- Extra negativity affecting potential sellers

Noticed another thing when walking the leafy streets. It is extremly common now to see foreign crews doing up old Georgian red bricks, between Adelaide Road (near eye and ear Hospital) all the way over to the American embassy. This belt of houses contains alot of owners who have cottoned on a little too late that they should have taken care of that renovation. (Some of them need full interior so must never have been rented out)
All of these are just waiting for their for sale sign. The difference now being that high value houses need giant discounts. I expect to see this well located, prestigious market turn into a Dutch auction over the summer as these renovations complete.
The viewpoint that has been expressed here so often about "Well located, near schools, public transport" does not actually hold true. These valuable houses were/are clearly way overpriced as well, so they still have the capability to fall 30%+.

Another point I'v often considered, just how many exclusive areas can there genuinely be in a downturn economy. Right now, all of Dalkey, Howth, Blackrock, Dun Laoighaire, Ballsbridge, Adelaide - Leeson, Donnybrook, Rathgar, Castleknock, Blackrock, Stephens Green - Merrion, Parts Stillorgan, are priced in the millions. Surely that is a little too large a % of the housing in Dublin. A downturn would have a bad effect on all except Dalkey/Howth.

nesf

pjbrady1 wrote:

The viewpoint that has been expressed here so often about "Well located, near schools, public transport" does not actually hold true.

It holds true in that such houses are worth more than houses that aren't well located etc in that they are generally in more demand. If other house prices drop, these generally will as well. They just would (usually) remain more expensive.

iguana

pjbrady1 wrote:

A downturn would have a bad effect on all except Dalkey/Howth.

Why would Dalkey/Howth have more immunity than the D4+6 areas you mentioned? Plenty of people prize walking distance to town above sea views.

pjbrady1

I agree with both points above. Well located will remain more expensive, but some people had being suggesting that this meant well located would only drop by 10% max.

On the last point, they will all drop by roughly similar percentages. Howth, Dalkey, Ballsbridge will be the only ones remaining with plenty of 4million euro+ houses.

jimmycrackcorm

Colonel Sanders wrote:

gonna sound like a broken record but never believe whats said by a group with a vested interest in what they are talking about.

I've noticed on the bus over the last few weeks quite a lot of houses with sale agreed that were only for sale for good while. The house across the road from me went up for sale in Late May and ihas been sale agreed for the last two weeks. Something is happening.

paulie.walnuts

sale agreed means absoltutely nothing and can and commonly does fall through at the drop of a hat. daft.ie just broke through 47k properties for sale with 1000 added in about a week!!!

mathie

paulie.walnuts wrote:

sale agreed means absoltutely nothing and can and commonly does fall through at the drop of a hat.

Any source for this?

BTW I've noticed a similar increase in sale agreeds in Malahide and Bray.
M

conor_mc

mathie wrote:

Any source for this?

BTW I've noticed a similar increase in sale agreeds in Malahide and Bray.
M

Why do you need a source, its only an opinion.

Sale Agreed is like walking into a shop, looking at something and telling them you'll be back after lunch to buy it.

Doesn't necessarily mean you will be back to buy it........

gazzer

I have noticed a lot more Sale Agreed signs out my way as well over the last few weeks.

gurramok

gazzer wrote:

I have noticed a lot more Sale Agreed signs out my way as well over the last few weeks.

I've noticed some as well, we just don't know what is happening as there are feck all up to date stats being released.
It could be very well that some buyers are having below asking prices being accepted in some cases but/and some fall through and the houses are back on the market.

digitally-yours

If the houses are selling and the things have picked up back again

why do these curves not reflect this thing ?

http://daftwatch.atspace.com/

Ok i know it can take a bit of time for the market to reflect the change.
But more houses are being built everyday and there are more properties comming on the market everyday.
IMO supply still way more than demand.

Downward trend expected to continue in next 6 months thats for sure.

MicraBoy

Sale Agreed is like walking into a shop, looking at something and telling them you'll be back after lunch to buy it.

Not quite. You would also have left a few bob behind the counter. Chances of you coming back are high (even if you are only collecting your deposit). More importantly it indicates that you are serious about buying. You might change your mind and buy somewhere else, but I'd say it's rare that some one goes sale agreed on one place and then withdraws and decides to stay out of the market altogether.

conor_mc

MicraBoy wrote:

Not quite. You would also have left a few bob behind the counter. Chances of you coming back are high (even if you are only collecting your deposit). More importantly it indicates that you are serious about buying. You might change your mind and buy somewhere else, but I'd say it's rare that some one goes sale agreed on one place and then withdraws and decides to stay out of the market altogether.

Unless an interest rate rise comes along before you sign contracts and oops, there goes their mortgage approval.

So while they might not stay out of the market, every three months or so we're seeing a certain number of people drop out of a particular market segment into a lower segment, one which they may not be happy to buy in for personal reasons.

I think it's clear enough that we've lost the investor demand, but now alot of home-buyers are keeping their powder dry (if their personal circumstances permit) while they wait and see what happens next.

digitally-yours

MicraBoy wrote:

Not quite. You would also have left a few bob behind the counter. Chances of you coming back are high (even if you are only collecting your deposit). More importantly it indicates that you are serious about buying. You might change your mind and buy somewhere else, but I'd say it's rare that some one goes sale agreed on one place and then withdraws and decides to stay out of the market altogether.

have a read here.
the difference between house price and affordability is going to get wider and wider.So as a house owner if i was to sell my house i know what i will do.

Makes sense why there are soo many houses on the market.People expect it to get worse.

Here

SkepticOne

digitally-yours wrote:

Makes sense why there are soo many houses on the market.People expect it to get worse.

I would tend to agree with this. I think at present the crash is manifesting itself as a massive build up in inventory. Although there have been some drops in price the real drops are yet to come.