when did the irish housing boom officially start?

fret_wimp

Im wondering when did the housing boom start, and thus get an estimate as to how long it has been going for. How does this duration compare to other countries? it may be an indication as to when/if we get a crash.

I really dont understand how people can keep buying houses at the ever increasing prices. myself and my girlfriend are on quite decent combined salary and still cannot afford anything more than a glorified shoebox with no parking, and even then we are pushing out the boat.this is what prevents me buying. There are many many more in my position, therefore,as more and more people put off buying, will this not increase the chance of a crash? Im not an economist so im sure im drastically oversimplifying, but i still dont see how this can continue for the next 10 years. any thoughts?

arctictree

fret_wimp wrote:

Im wondering when did the housing boom start, and thus get an estimate as to how long it has been going for. How does this duration compare to other countries? it may be an indication as to when/if we get a crash.

I really dont understand how people can keep buying houses at the ever increasing prices. myself and my girlfriend are on quite decent combined salary and still cannot afford anything more than a glorified shoebox with no parking, and even then we are pushing out the boat.this is what prevents me buying. There are many many more in my position, therefore,as more and more people put off buying, will this not increase the chance of a crash? Im not an economist so im sure im drastically oversimplifying, but i still dont see how this can continue for the next 10 years. any thoughts?

IMO - The ability to purchase your own home has always been very difficult for the average person/couple. Things havn't really changed. In the 80's, houses were very cheap but unemployment was high and interest rates where high. The hard fact of economics is that the more money there is available, the dearer houses will be and vice versa.

On the positive side, the only other things that could affect price are supply and negative sentiment - both of which are in abundance at the moment. Maybe just wait a few months/years??

In fact, I'm increasingly of the view that Eddie Hobbs is right - we, collectively need to be better consumers and bargain those auctioneers down, just like they bargained us up in the last few years. Tell them you are looking at other properties and they only have X days to accept your offer or your going lower etc etc....

gurramok

fret_wimp wrote:

Im wondering when did the housing boom start, and thus get an estimate as to how long it has been going for. How does this duration compare to other countries? it may be an indication as to when/if we get a crash.

I really dont understand how people can keep buying houses at the ever increasing prices. myself and my girlfriend are on quite decent combined salary and still cannot afford anything more than a glorified shoebox with no parking, and even then we are pushing out the boat.this is what prevents me buying. There are many many more in my position, therefore,as more and more people put off buying, will this not increase the chance of a crash? Im not an economist so im sure im drastically oversimplifying, but i still dont see how this can continue for the next 10 years. any thoughts?

Err, the housing bubble thread should give you an idea of what happened and is likely to happen.
Its probably the longest boom ever in world history, think it started in 96/97 and prices rose 270%, the highest the world has seen in a bubble.

Cheap credit days are over, oversupply has arrived, negative sentiment is there hence its going downhill since maybe summer '06 and rightly so for the good of the younger generation nevermind the country.

Dalfiatach

It started around 1997, and happened in 2 phases. Arguably, the 1997-2001 gains were justified as the economy was expanding rapidly built on solid foundations of exports and vastly increased employment after the very poor economic performance from about 1975-91 (ish).

But then came the Great Global Liquidity Splurge, courtesy of Mr Greenspan. Ultra-low real negative interest rates and massively relaxed credit standards by all the banks created a pure speculative bubble and herd panic to "get on the ladder before it's too late!"

You are right of course that house prices just can't keep increasing rapidly year after year forever. In Ireland, prices became unaffordable for ordinary working couples a good few years back, hence the banks relaxing credit criteria even more to frankly insane levels. 100% 40-year mortgages at 10 times combined income are an obscenity that should be illegal. You alwats know when a housing bubble has hit silly levels and will shortly burst when the banks start that kind of carry on. Happened in Britain and Japan in 1989, happens in every housing bubble ever.

The bubble peaked around May/June 2006. The Irish bubble is possibly the greatest, longest, and silliest housing bubble in world history, rivaling even the great Japanese bubble of the late 80s.

House prices will do one of two things now: fall rapidly until they are affordable again, leaving loads of people stuck in negative equity; or drift slowly down a little over the next couple of years and then stagnate for a decade or more until wages increase enough to make them affordable again.

The first is probably better for the country as a whole in the long run, though very painful indeed for anyone who got caught up in the bubble panic and bought at the top. The second, a long slow Japanese-style deflation, would be a disaster for everybody and could wreck our economy for another 15-20 years.

silverharp

arctictree wrote:

IMO - The ability to purchase your own home has always been very difficult for the average person/couple. Things havn't really changed. In the 80's, houses were very cheap but unemployment was high and interest rates where high. The hard fact of economics is that the more money there is available, the dearer houses will be and vice versa.

in reality buying a house should be somewhat difficult as it is a 30 year commitment. in the 60's and 70's you had to know your bank manager and he would lend you the money if he thought you were of good character. You would save for years before hand as you needed a 10-20% deposit. On the plus side alot of people were able to buy a house on one salary which is a dream for many now. and they didn't have to buy houses in Wexford if they work in Dublin (alot of people are going/are regretting that choice.

Victor

The Celtic Tiger can be traced back to the Devaluation of the Irish Pound in January 1993. From then until perhaps 1997, we were in the smart money phase. 1997 was the peak year for percentage growth in the construction industy (must of it was in the commercial sector, not housing). In the lead up to the euro introduction in 1999, interest rates started to drop and this is when the industry started getting into it big time. Between 1999 and the 2001(?) Budget, things grew strongly. Investors were put out of the market for a year as they weren't allowed offset interest against income. Things stalled for a while and the relief was restored the following year after the insecurity caused by the American recession of mid 2001 and the events of September 11. Interest rates dropped sharply. Things got really silly as the government tried to douse the flames with inflammable bigger mortgage interest relief. Gradually people started getting wary as interest rates rose and by 2006 this wariness became public. Prices dropped in 2007.

Lex Luthor

I bought my house in summer 96 and up until then, houses were typically only jumping a few grand a year. I think we started to notice a huge price hike somewhere in early 98 when we priced houses in the next phase that had gone from £65k up to £80k, so I would agree with others it started in 97

Then I think in mid 2000, a few of the neighbours were finding it hard to shift their houses and some of them that were selling up had to drop by a good few grand.

The following summer however, same houses had gone up by about 40k and continued to do so ever since

jdivision

That was 2001 - global economic slowdown that was starting to happen even before 9/11

fret_wimp

we have had this discussion today at lunch, and the majority think that prices wont go down, just stagnate a bit and when wages start catching up, they prices will go through teh roof again. im afraid to say that as much as i dont like this scenario, it sounds like it could happen.

Victor

fret_wimp wrote:

we have had this discussion today at lunch, and the majority think that prices wont go down, just stagnate a bit and when wages start catching up, they prices will go through teh roof again. im afraid to say that as much as i dont like this scenario, it sounds like it could happen.

Prices have already fallen and are likely to fall further. They can't go 'through teh roof again' as they are already on the roof ..... unless you mean they are going to fall through the roof.

fret_wimp

sorry for not being clearer, what i meant was that i cant see one bedroom apartments in sandyford/dundrum area comming down to 150-180k , which is the most i would ever pay for a one bedroom apartment. im just taking sandyford/dundrum area as an example in this case

Dalfiatach

There will be a 'bull trap', probably in the Spring. Happens in every bubble. Also known as the 'dead cat bounce'.

Basically the falls will slow, stop for a month, and all the bulls will pile in to this "great buying opportunity" which may cause prices to inch upwards for 1-3 months. And then the arse will finally fall out of the whole scam altogether because the increase in prices however small will lead to every single investor dumping their inventory on the market at once.

This happens at the end of every single housing bubble in every single country they have ever happened in. Only the sheer duration and scale marks the Irish bubble out as special, and tbh that is probably mostly down to us joining the Euro and the Greenspan Liquidity Splurge of 2001 both happening at more or less the same time near the natural peak of the original boom in prices.

In effect, the first 1997-2001 bubble was not permitted to naturally unwind itself, and a second bubble with entirely different causes sprung up on top of the first.