Housing Bubble Bursting

SimpleSam06

Victor wrote:

Yes, one has to be aware of false bottoms, but there is some sense in that particular point. Waiting beyond the final bottom means waiting until prices are rising. You are then in a bidding war.

Depends what you're buying. If anyone wants a nice big house in the country, the EU has just declared the "locality" laws grossly prejuidical (ie you have to be from the locality or have strong connections to build there), so thats much, much easier now. You won't be able to throw away most apartments for the next ten years. If you plan to live in a nice area of town, in a nice house, then yes you might encounter some competition, but equilibrium in prices will be restored regardless.

paulie.walnuts

DIdn't make it as a comedian and guess what, he ain't making it as a "journalist" either. What exactly can this guy do?

jmayo

The one question I have to ask is how does BOC get away with it?
He is on TV judging people's singing talent. Where did he get the experience or knowledge to do that?
He has been for a while now commenting on economic issues and property speculation in the sunday broadsheet rag.
Where did he get the knowledge to advise people on property?

I and indeed a few of my friends used to buy it for the sports journalists but have given up as the paper is now pure trash dressed up in a broadsheet format.

As regard market bottoming out, I think most people believe we are only at the beginning.
Wait for another couple of interest rate hikes and wait for the inevitable job losses in the whole property and construction industry area.
Then we will see some real drops in prices.

SkepticOne

Short news item on Newstalk:

Irish houses are the sixth most overvalued in the world. That's according to a report from international credit rating agency, Fitch. The report looked at all of the major developed economies in the world.

Anyone hear anything more about this. Does not surprise me really, but by how much are houses overvalued here? What are the other markets even more overvalued? Could not find the info on the Fitch website.

smdweb

There is a definite slowdown in Ireland over the past few months, and personally I think this will continue for residential properties. Houses are definitely overvalued in Ireland. In 1992, new developments in Naas were about €70K now this is €300K+ ... surely inflation in the past 15 years is not that much ?

stevedublin

SkepticOne wrote:

Short news item on Newstalk:Anyone hear anything more about this. Does not surprise me really, but by how much are houses overvalued here? What are the other markets even more overvalued? Could not find the info on the Fitch website.

http://www.ft.com/cms/s/c927f8ae-3e00-11dc-8f6a-0000779fd2ac.html

Denmark, UK and New Zealand most susceptible to house price falls, Ireland is ninth most susceptible and US in tenth.

bugler

I fear Ireland is going to turn that list on its head...

nesf

SkepticOne wrote:

Short news item on Newstalk:Anyone hear anything more about this. Does not surprise me really, but by how much are houses overvalued here? What are the other markets even more overvalued? Could not find the info on the Fitch website.

Could it be that we didn't have a "mature" housing market to begin with before the price rises began?

Akrasia

Akrasia wrote:

It may well be, but it's the first article I have seen in any establishment newspaper that isn't full to the brim with bullsh1t by estate agents and 'economists' saying 'there's nothing to worry about, everything will be fine, prices are expected to rise in x number of months'

I'll give you a tip.
When you decide to buy a home to live in(which is the majority of the housing market)you're supposed to do so only when you can afford the home in question or the loan on it if you are borrowing.
You are not supposed to be looking at what you would make if that house were to go on the market every other day.You are supposed to be having it as a roof over your head, a nice pad etc.

What you should be looking at instead, is your mortgage and if thats going down and if you can still afford it.

Law of averages with a 30 year timespan on that mortgage,your house value will race ahead of the mortgage value and fall behind at certain stages in its term.
The latter is always more likely in the early period especially with the amount of housing being built here (way ahead of the UK per capita) and the demand meeting supply.
Thats capitalism-deal with it

Colonel Sanders

Must say found this (http://www.nationwide.co.uk/hpi/downloads/UK_house_price_since_1952.xls graph the 'all houses' index in excel) very, very interesting. The slowdown in the UK lasted approx 6 years but over the next 4 years those losses were wiped out with massive growth there after.

ixoy

Herald AM is leading with a story this morning about increasing number of people getting into debt with recent interest rates spikes (coupled with the astronomical house prices in the first place). Basically saying people are forking out 40% of their income on a house.

Now correct me if I'm wrong, but with many entry-level apartments, etc. in Dublin hovering above 330k for a 2-bed then a double-income family, where both are on the average industrial wage, will still be paying near 35%/40% of their dual incomes on a new 2-bed in a place that's many miles outside of town? Especially when predicted interest rates are phased in.

D'Peoples Voice

Colonel Sanders wrote:

Must say found this (http://www.nationwide.co.uk/hpi/downloads/UK_house_price_since_1952.xls graph the 'all houses' index in excel) very, very interesting. The slowdown in the UK lasted approx 6 years but over the next 4 years those losses were wiped out with massive growth there after.

Prescisely and thats why Ireland could be so shagged.
In the late 80's and early nineties, the UK had to increase it's interest rates to stem the flow of hot money out of sterling and into Deutschmarks. I won't dwell too much into this, enough to say the British can blame the fall of communism. In the mid-nineties as the German economy slowed down, it's interest rates fell, and this allowed ALL of the surrounding countries to reduce their interest rates without fear of money leaving their country for the Deutschmark. It was these low interest rates coupled with relatively low prices that caused the surge in the property market.
To explain, paying a high interest rate mortgage on a cheap house can be the same as paying a low interest rate mortgage on an expensive house.

In ireland, we have had low interest rates and high prices, it would therefore follow as interest rates rise prices must fall.

chump

Tristrame wrote:

I'll give you a tip.
When you decide to buy a home to live in(which is the majority of the housing market)you're supposed to do so only when you can afford the home in question or the loan on it if you are borrowing.

And what percentage of purchasers in the last 5 years have been purchasing a home to live in if you don't mind me asking?

patrickolee

78.3%

uberwolf

question.

Historically house price bubbles have been controlled by rising interest rates - like we're seeing at the moment.

This is the first time that such a local market, on the european scale, has experienced this?

Does it follow then that because ECB are so unconcerned about Ireland in isolation, that all historical data is less useful because rates could begin to to drop next year due to germany experiencing x,y, z or of course germany could strike oil, and we've ten years of far higher rates to deal with. A local central bank would have looked after this earlier or would be able to nurse us through this far quicker than is now the case?
What does this mean for us?

Are

SimpleSam06

patrickolee wrote:

78.3%

Where did you pull that one out of? 40% of purchasers in the last year alone were investors.

karen3212

uberwolf wrote:

question.

Historically house price bubbles have been controlled by rising interest rates - like we're seeing at the moment.

This is the first time that such a local market, on the european scale, has experienced this?

Does it follow then that because ECB are so unconcerned about Ireland in isolation, that all historical data is less useful because rates could begin to to drop next year due to germany experiencing x,y, z or of course germany could strike oil, and we've ten years of far higher rates to deal with. A local central bank would have looked after this earlier or would be able to nurse us through this far quicker than is now the case?
What does this mean for us?

Are

There are other ways of constricting or releasing money into the economy. The Gov could have raised taxes to collect from us, and could spend during a downturn, they could start all sort of projects here if roadworkers and builders become cheaper etc

Calina

uberwolf wrote:

q....A local central bank would have looked after this earlier or would be able to nurse us through this far quicker than is now the case?
What does this mean for us?

One of the big issues is that banks massively relaxed their lending criteria. The flow of money onto the market is not just caused by low interest rates, but by laxer lending criteria. While the CB was unable to control interest rates, they could have done something about the fact that in that time, salary lending multiples went from three times salary to up to 8 times anecdotally by enforcing some regulation on the lenders or by refusing to allow 100% mortgage offers, for example. They could also have raised the deposits that they compel the banks to hold with them.

As a result, whilst there is some scope to cry foul at our economy being slightly out of whack with the rest of Europe and unsuitable interest rates etc, the truth is the tools were there, we just didn't use them. The CB was forecasting housing growth until very, very recently. They don't appear to have noticed that it was their job to constrict irrational growth caused by over enthusiastic lending practices on the parts of the banks which they have some hand in regulating.

maniac101

Calina wrote:

While the CB was unable to control interest rates, they could have done something about the fact that in that time, salary lending multiples went from three times salary to up to 8 times anecdotally by enforcing some regulation on the lenders or by refusing to allow 100% mortgage offers, for example. They could also have raised the deposits that they compel the banks to hold with them. .

But the central bank has been saying for years and years that house prices were too high. See here.
If they could have done something, then why didn't they? Just wondering.

Afuera

maniac101 wrote:

But the central bank has been saying for years and years that house prices were too high. See here.
If they could have done something, then why didn't they? Just wondering.

I think that there were too many vested interests in Ireland trying to keep the party going these past years. The only people that were inconvenienced with ever rising house prices were the younger generation or returning emigrants, while all other parties benefited hugely. Also, it did provide plenty of work for the younger generation (albeit in an unsustainable fashion), so many of these were not that unhappy with how things were going anyway.

For the Central Bank to step in and become the party poopers it is very likely that they would end up becoming the sole scapegoats for the slowdown or crash. Just like the government was worried that it would be held reponsible for pulling the market down after it implimented some of the recommendations in the Bacon report (and quickly backtracked on them). Talk is cheap so the CB chose this method to cover its back as the crises developed rather than really step in and effectively stamp it out.

As it currently stands I think that the scapegoat will be the "global economy" or the "subprime crises in the US". In reality heads should be rolling in the government (dept. of finance, dept. of housing especially) as well as the central bank for letting this develop. I think that apathy in Ireland is too high though to realistically see blood on the streets any time soon.

digitally-yours

More intrest rate rise on the way as expected

European Central Bank expected to signal interest rate hike to 4.25% in September

http://www.finfacts.com/irelandbusinessnews/publish/article_1010729.shtml

That will finish off any slightest signs of recovery which you can see in the short term !

House prices are to fall in the short to medium term and that for sure

This "correction" word is a spin same like "isolated incident"
if you understand "masking":D you know what it means

D'Peoples Voice

digitally-yours wrote:

House prices are to fall in the short to medium term and that for sure

House prices may fall, but will the value of ideal projects such as this one for OVER a QUARTER OF A MILLION fall?
http://www.daft.ie/searchsale.daft?daftID=6d475e4a33e8e27432af3a54713d912d&search=1&s%5bcc_id%5d=&s%5bsearch_type%5d=sale&s%5brefreshmap%5d=1&limit=10&search_type=sale&id=275987

digitally-yours

D'Peoples Voice wrote:

House prices may fall, but will the value of ideal projects such as this one for OVER a QUARTER OF A MILLION fall?
http://www.daft.ie/searchsale.daft?daftID=6d475e4a33e8e27432af3a54713d912d&search=1&s%5bcc_id%5d=&s%5bsearch_type%5d=sale&s%5brefreshmap%5d=1&limit=10&search_type=sale&id=275987

Well i see this as land

The development on it does not hold any value in my opinion

Infact its scrappage expense !

It depends what you want to do with it. The price quoted on the webiste
is asking price = the price the sellers expects to get maximum knowingly that he will not get it ! this includes a bargain buffer

Also depends on how much the seller is in a hurry.

I dont think you will see que of people to buy that property so buyer definately has advantage in that senario

chump

patrickolee wrote:

78.3%

I thought it was more like 19.1234%

But I've been known to pluck figures out of my ars*e

Kipperhell

Afuera wrote:

I think that there were too many vested interests in Ireland trying to keep the party going these past years etc...

I think this kind of logic is more the problem. Basically you are saying that there is vast conspiracy that is able to control so much that they can play around with everything to get the outcome they want. I guess it could be possible but unlikely .
It is more likely that predictive beliefs on highly complex variables is rarely correct as has been proven time and time again. Global freezing never happen, nuclear war never broke out house prices did not crash in Ireland every year for the last ten as predicted by so many.
People still want to own and so many are just waiting for the market to appear stable again before they jump in. The crash has not happened. If you can point out any author that correctly predicted the market over the last ten years I'd love to see it. I doubt there was a single person close

Supercell

Kipperhell wrote:

The crash has not happened.

Correct, its currently happening.

gurramok

Kipperhell wrote:

The crash has not happened. If you can point out any author that correctly predicted the market over the last ten years I'd love to see it.

If you had read the thread ..they were right in that it will happen, they were wrong in its timing, it was a matter of when and not if.

miju

Kipperhell wrote:

If you can point out any author that correctly predicted the market over the last ten years I'd love to see it. I doubt there was a single person close

As the poster above as already stated they are correct in that it would / is happening the timing was wrong is all.

Also, I love when bulls post up this argument because the response to it is ultimately even the bullish commentators on the economy and housing market have been wrong with their predictions over the same time

Do-more

UK Home repossessions 'rise by 30%'

machiavellianme

digitally-yours wrote:

Well i see this as land

The development on it does not hold any value in my opinion

Infact its scrappage expense !

It may be scrappage expense but it's scrappage expense for a previous building, and as such, should make it a good deal easier when it comes to applying for planning permission. Without such buidlings to be demolished on land, quite a few homes around the countryside might not have gotten planning permission in recent years.