Are You Hoping For a HUGE property price drop?

Uuuh Patsy

iguana wrote: »

Right, so we have a situation where couples on decent salaries have to borrow 6 times their combined gross salaries on a 100%, io, 35-40 year mortgages to buy a horrible little houses off the plans a 3 hour round trip from their jobs. The majority bought when borrowing was cheap and now that it is no longer cheap their budgets have stretched to the point where they can't afford to have children. (Not can't afford to have one parent stay home to raise their child - actually can not afford to pay for childcare must remain childless.)

Do you honestly think that is better than a situation where people can afford to buy a property relatively local to their work and families on a 25 year, 90% repayment mortgage, which can be serviced by one salary or at least allow two working parents to afford childcare?

A property crash isn't the solution to this. Controls over the lending practices of the banks is the solution to this. This situation was always going to occur and can never go back due to the fact that we now have working couples being assessed. Back in the day when my father bought our house, his mortgage was assessed on his salary only. So no matter what happens, single earners are never going to compete with joint earners. Stop joint assessment now and make the property market family friendly. No hope. Money talks and greed is always going to win out

iguana

Uuuh Patsy wrote: »

A property crash isn't the solution to this. Controls over the lending practices of the banks is the solution to this.

And what do you think would have happened if tighter controls had been implemented in the first place? Prices would never have risen like they did. The average buyer isn't massively overstretching themselves to buy a D6 mansion. They are buying the cheapest thing they can afford. And the prices of nondescript 3-bed semis in Mullingar are so high because the banks were lending so much money.

Now that the banks are lending less money property prices are coming down. That's not much good to the people who have bought over-priced houses, but hopefully we will have a better situation for future buyers.

Uuuh Patsy

iguana wrote: »

Now that the banks are lending less money property prices are coming down. That's not much good to the people who have bought over-priced houses, but hopefully we will have a better situation for future buyers.

Because they haven't changed the practice, its only a matter of time before they start dishing it back out, and when property drops by a certain level, the rental market will become that bit more attractive again and the investors will come back again. Either way, theres no going back. Its a lull, might last a few years but, a lull all the same.

The_Conductor

Uuuh Patsy wrote:

when property drops by a certain level, the rental market will become that bit more attractive again and the investors will come back again.

Property will have to drop by 30-35% or rents increase by ~60% before investors will consider it a viable investment. Rents are not going to increase that much- but a 30-35% decrease in property prices is very possible.

S.

miju

Uuuh Patsy wrote: »

I'm not sure I understand why anybody who is planning on living in this country for the rest of the life's, and not just investing would prefer to pay their landlords mortgage rather than their own. Is it more of a commitment issue than financial one. Either way theres no cheap way of putting a roof over your head.

If things do drop and you find yourself in trouble, hand back the keys and tell them to send the solicitor letters to "no 1 no fixed abode way"

This post explempifies your naiveity a good bit. First off, in Ireland you cannot simply hand back the keys.

Secondly, despite the mantra of "rent is dead money" that permeates through this country its actually not. Fact of the matter is that it's currently a hell of alot cheaper to rent than to buy. We saved our deposit in just under 3 years while renting and we're both pretty much on the average wage. If we bought we wouldn't be able to save as much as that in 5 years let alone 3.

Fact of the matter is the interest on todays mortgages is much more a waste of money than renting.

miju

Uuuh Patsy wrote: »

This situation was always going to occur and can never go back due to the fact that we now have working couples being assessed.

I actually beg to differ. the situation could have been avoided and as for can't go back. Well I think you'll find that they can and quite drastically too. There are many previous property bubbles which explempify this but most current is the US housing price crash.

Also, interesting to note during this that employment is remaining somewhat "steady". Like I said before prices coming down aint the end of the world

Electric

smccarrick wrote: »

First of all- under Towards 2016, the pay rises accorded to the Civil Service and the Public sector are actually considerably below the rate of inflation- so not only will those civil servants not be able to buy- they will be poorer in real terms than they are now. The numbers of civil servants has fallen by almost 20% in the last 12 years, and most government departments continue to reduce in size (mostly through non-replacement policies for people who die or retire). So- I think your hypothesis about civil servants buying homes is a bit odd. Note: the public sector is a very different animal from the civil service (particularly when you factor in the 210,000 workers in the HSE........)

SMcCarrick is right just because you work in the public/civil service doesn't mean that you are sitting on wads of cash and able to afford a house at the drop of a hat.

I work in the public service and certainly can't. Now don't get me wrong I'm not saying that I am underpaid or anything. I have a comfortable wage but not so comfortable that I could afford to buy a house.

I have tried mortgage approval and what I would be approved for wouldn't buy anything anywhere!

So yeah would love to see a huge price crash but not so much that it would see repossessions and people being evicted because their repayments have become ginormous

Uuuh Patsy

smccarrick wrote: »

Property will have to drop by 30-35% or rents increase by ~60% before investors will consider it a viable investment. Rents are not going to increase that much- but a 30-35% decrease in property prices is very possible.

S.

Well if I know old school Irish people with money, I know one thing. When push comes to shove they'd rather buy land or property where they can see it. Maybe even hang onto it forever. Its genetic. Beat into us by the Brits. I'd rather own a house then bung into Northern Rock

Uuuh Patsy

miju wrote: »

I actually beg to differ. the situation could have been avoided and as for can't go back. Well I think you'll find that they can and quite drastically too. There are many previous property bubbles which explempify this but most current is the US housing price crash.

Also, interesting to note during this that employment is remaining somewhat "steady". Like I said before prices coming down aint the end of the world

Well I think fluctuations will occur in much the same way as the stock markets as property is now being traded in much the same way as stocks and shares. But I think property will always win out as the safest bet. And the US is a big place. There are economies in different states bigger than ours. So its not comparable to compare the US with Ireland without being specific.

miju

I am being specific all across the US house prices are slipping.

bobzi

Paulw wrote: »

A lot of people who want prices to crash are those who can't afford a mortgage. They're jealous of those who did have sense to buy before it peaked.

Plenty of people who had the sense to buy before it peaked are now or will soon be in negative equity as house prices continue to fall. The smart ones are the people who sold before the peak.

Im glad the inevitable crash is happenning now as Im only a couple of years out of college so didnt have a chance to buy before the boom. I feel sorry for ordinary people who bought in the last few years believing all the BS from the banks / property industry that prices would keep increasing

Pa ElGrande

Paulw wrote: »

It's interesting really. Many people want house prices to crash, but fail to realise that if that happens then the whole economy will be hit too.

Construction is not the whole Irish economy, there is the part of the economy that serves the export markets. However, you are likely to be correct, the boom has largely been a result of loose credit conditions that fed a global property boom so most of the markets we export to will likely experience reduced demand for credit. A global recession (or at least Anglo-American) is a real possibility, since debt can't be expanded beyond the productive capacity of an economy forever.

Paulw wrote: »

I bought a while ago, and the value of what I bought has certainly gone up. I can certainly see prices dropping a bit, maybe 5-15% in the next 5 years, and that is fine with me.

Prices have already dropped 20% in some areas.

Paulw wrote: »

Those who bought and live in their place can't keep thinking about things. You live there so no matter what the value of the place you still have to pay the mortgage.

Absolutely, as long as you can service the debt, does it matter if house prices go down? Well yes it does, if your income is being squeezed to the extent you are unable to build up savings. A mortgage is a bet on your future earnings, which may rise or fall depending on conditions in your chosen profession. But with so much of your and many others future income tied up in their houses how are we going to fund the next generation enterprises? Are you really prepared to take a loss on your house if a new job offer comes up on the other side of the country.

Paulw wrote: »

A lot of people who want prices to crash are those who can't afford a mortgage. They're jealous of those who did have sense to buy before it peaked.

Why Jealous? They are simply priced out, they have resigned themselves to sit on the sidelines or take on crippling debt. These people are looking for security in their lives to start families and be part of a stable community, the rental sector is on the whole not stable enough to enable any long term planning much to the detriment of both investors and tenants. In years to come the post 2000 housing boom will be seen as the greatest mistake we as a nation ever made, most of our future earnings are essentially 'dead money' in that we have eaten tomorrow's bread today.
One door closes and another opens, house prices falling to an affordable level is good for the country's future, its good for families future's, its good for our global competitiveness and it should be welcomed in that spirit.

Firetrap

Paulw wrote: »

A lot of people who want prices to crash are those who can't afford a mortgage. They're jealous of those who did have sense to buy before it peaked.

That's a bit harsh, is it not? Prices have been rising so quickly that a lot of people were priced out of the market. If I had been on my current salary five years ago, I'd have a really nice house now and I wouldn't give a toss about prices going up or down because I'd be planning on living there for years and wouldn't be stretched too badly with mortgage repayment. Unfortunately, this isn't the case now and I would love for prices to come back down. Ordinary people have been priced out of the market. You can call us bitter or jealous or whatever. I think we've been badly let down. By whom exactly I'm not sure but the bottom line is, there are a lot of us out there on good money who can't afford to buy our own places. That's what houses are for, are they not?

Paulw

Unfortunately, a lot of our economy is linked to construction. If house prices fall, building slows down, then our whole economy will be hit. Then wages will fall, unemployment will increase, house prices will then crash.

This will not be good for anyone - even those hoping house prices crash, since if that happens, your salary will still not be enough to afford a mortgage.

The best thing would be for the govt to assist with mortgage interest relief, rather than lowering/removing stamp duty.

I have no real idea what my property is worth. I don't care as I have no plans selling any time soon. I am paying off my mortgage, and I can manage. I am not scraping the bottom of the barrell, nor am I living the high life. But, no matter what happens to the value of my place - I live there, so I must continue to pay the mortgage.

Many people held off buying for the first year or two when prices started to increase because they believed prices would drop. But over 5+ years prices increased and increased. If I had bought at the start (which I could have if I really tried) then I would be laughing. But, I waited and waited. I did buy well before things peaked though, because I could see prices rising further.

People really do need to see that a property value crash will not simply lower prices, but it will have a very major impact on the rest of the Irish economy and our whole way of life.

Pa ElGrande

Paulw wrote: »

Unfortunately, a lot of our economy is linked to construction. If house prices fall, building slows down, then our whole economy will be hit. Then wages will fall, unemployment will increase, house prices will then crash.

Present tense - House prices are falling now, building output is falling, our domestic economy is being hit, the number of hours worked by construction workers is falling, so are their wages, unemployment is increasing, house prices are crashing.

Paulw wrote: »

This will not be good for anyone - even those hoping house prices crash, since if that happens, your salary will still not be enough to afford a mortgage.
The best thing would be for the govt to assist with mortgage interest relief, rather than lowering/removing stamp duty.

People should be careful what they ask for, remove stamp duty and there are other property taxes such as rates that can be introduced.
Increasing mortgage interest relief simply allows the banks to lend more money that they would have been able to due to interest rate rises. Government has little scope to cut taxes for the next few years and its actions will only draw out the problem.

Paulw wrote: »

I have no real idea what my property is worth. I don't care as I have no plans selling any time soon. I am paying off my mortgage, and I can manage. I am not scraping the bottom of the barrell, nor am I living the high life. But, no matter what happens to the value of my place - I live there, so I must continue to pay the mortgage.

Many people held off buying for the first year or two when prices started to increase because they believed prices would drop. But over 5+ years prices increased and increased. If I had bought at the start (which I could have if I really tried) then I would be laughing. But, I waited and waited. I did buy well before things peaked though, because I could see prices rising further.

Everyone makes decisions as an adult (we hope). I can say with certainty for most property, there is no scope for further price rises in the next five years and in fact there will be substantial falls (real and nominal), due to oversupply of housing units and self-reinforcing negative price feedback cycle and rising unemployment. On average I expect 30% nominal falls.

Paulw wrote: »

People really do need to see that a property value crash will not simply lower prices, but it will have a very major impact on the rest of the Irish economy and our whole way of life.

The Irish economy will not stop because of falling house prices. What we were doing was unsustainable and it was always going to correct, we cannot continue to build a whole way of life based on taking on increasing amounts of debt without the matching wages. House prices are now a secondary concern to rising energy prices which are feeding into rising prices for low order goods across the board.

patrickolee

Pa ElGrande wrote: »

Increasing mortgage interest relief simply allows the banks to lend more money that they would have been able to due to interest rate rises.

It would also assist people who have very large mortgages and perhaps approaching negative equity, but not investors. Would that not be a good thing?

The_Conductor

patrickolee wrote: »

It would also assist people who have very large mortgages and perhaps approaching negative equity, but not investors. Would that not be a good thing?

Aka- people who borrowed far more than they should have done, without due regard for having a minimum comfort zone should interest rates increase.

What happened the last time the government caved in to this group of people and increased mortgage relief- interest rates went up 10 days later and the benefit of the relief was wiped out overnight.

Current comments indicate that the ECB is far more interested in its direct mandate- to keep inflation under 2%, than to stop the European economy imploding (there are a discussion of Axel Weber's comments last week in the Housing Bubble thread). It is a reasonable assumption that there are another 2 rate increases on the cards, possibly more- as EU inflation has been stubbornly above the 2% mark for several months running. The ECB are *not* going to bale out the Irish/Dutch/Spanish/Portuguese/Greek housing markets- its not in their direct interests to interfere. Unfortunately governments have interfered- which is what prolonged the mess in the first place.

We are all hurting from higher interest rates- we got used to cheap credit and over stretched ourselves. Now we must tighten our belts and get on with trying to clear our hangover after the credit party. It is going to be messy- it is going to hurt like hell, but it is necessary. Hopefully we all learn a few lessons from it for the future.

Merrion

The Irish economy will not stop because of falling house prices.

In the longer term falling house prices will be very good for the Irish economy as it will encourage investors to look beyond bricks-and-mortar which will increase the amount of investment available to new business start-ups which will result in a more diverse and exporting economy.

iguana

Paulw wrote: »

Unfortunately, a lot of our economy is linked to construction.

Which is completely and utterly unsustainable. It is reasonably estimated that 1 in 6 residential properties in Ireland are empty. The building industry as it currently exists is over. Maybe once the crash is well under way they can start knocking the crap they have built over the last decade and build decent houses and proper apartments.

seamus

Firetrap wrote: »

Unfortunately, this isn't the case now and I would love for prices to come back down. Ordinary people have been priced out of the market.

This is one thing which we have waiting in the wings which I believe will end up stabilising the market after a serious fall - pent up demand.

Many people who would/will buy were priced out of the market, which is what caused the abrupt halt to house sales at some point late last year. We hit a point whereby the cost of buying a home remotely close to where people wanted to be, was just out of reach for new entrants to the market. With nobody joining the ladder, those who wanted/want to trade up had no-one to take their home and the whole thing ground to a halt.

Those looking for somewhere to buy have to go somewhere - so we saw the rental market take the push. Renting in Dublin is now a nightmare - rents are high and rising quickly and even getting a place to begin with is tough.
So while this continues, and as house prices continue to drop, the see-saw will go back the other way - we'll hit a tipping point where it will make more sense to pay €1400 a month to buy a decent-sized home, than paying the same money to rent a shoebox on James's St and demand will kick into the property market again, although at standard levels, not the stupid growth of years gone past.

FWIW, while I was skeptical about touching property until next year, we've found a place that we want to live and where we can get a mortgage for cheaper than renting, so I'll probably end up buying this year. I'm not really all that concerned about the price dropping - in fact I'm expecting to probaby lose about 30k in the short term, but break even in the medium term. I suppose it depends - the value of a home has to be counted in more than euros.

soupie

What you say Seamous makes a lot of sense.

I had initial concerns but I believe a lot of would be buyers are now turning to renting. That wont last long if rent costs more than a mortgage. I dont expect to see anything like the rises we have seen but i do think it will fall further before it stables.

I'm just putting the finishing touches to my first property purchase and like you expect to see the value drop by maybe 30k but it doesnt concern me as I plan to live there for more than one swing in the property market. I dont think you can put value on a home, if you have many happy years in it whats 30k - 50k.

I think as long as you can afford the mortgage and it is going to be your home and not an investment then work away.

SkepticOne

I'm not sure about Seamus's reasoning. True if people aren't buying that will push up the demand for rented accomodation. But it also pushes up supply of rented accommodation since all those places that would otherwise have been bought will be forced onto the rental market.

Apparently a vast amount of property was bought from developers by investors last year. Many of these would have been hoping to sell on at a profit (there would not have been the yields to justify long term rental investment). Now that people aren't buying, those dwellings are going to be rented out. We could well end up with a glut of rental property on the market. The upswing on daft inventory may be the start of this.



and we are beginning to see some falls in rental prices after some large gains earlier in the year.

But I would agree with Seamus and soupie that if you are buying your own home and don't intend to sell it, subsequent rises and falls are of little consequence. Even if, as some economists have predicted, values fall by 50%, you still have the house you paid for and will continue paying for.

seamus

SkepticOne wrote: »

I'm not sure about Seamus's reasoning. True if people aren't buying that will push up the demand for rented accomodation. But it also pushes up supply of rented accommodation since all those places that would otherwise have been bought will be forced onto the rental market.

Total speculation on my part, but I have a feeling that we're starting to see rents level a bit now because those people who attempted to push the "abort" button have now realised their investment property won't sell, or won't sell for the price they want, so they throw it back into renting.

I still have faith in the existing demand though. Although we have high supply, I'm still of the belief that there are many, many people who want to buy but are frozen out of the existing market. So while it appears as those demand has dropped, as soon as we see real drops in price, I think demand will start to pick up again.

conor_mc

seamus wrote: »

Total speculation on my part, but I have a feeling that we're starting to see rents level a bit now because those people who attempted to push the "abort" button have now realised their investment property won't sell, or won't sell for the price they want, so they throw it back into renting.

I still have faith in the existing demand though. Although we have high supply, I'm still of the belief that there are many, many people who want to buy but are frozen out of the existing market. So while it appears as those demand has dropped, as soon as we see real drops in price, I think demand will start to pick up again.

Two things:

- According to the CPI stats last month, rents actually fell. Granted, they've shot up in recent times, but from a level that has been static for 5 years. That tells you all you need to know about housing supply in Ireland.

- There isn't pent-up demand imo. There is latent demand, demand which has always been there in the background behind all the hype and mania. Latent demand being people who actually need to buy a house - getting hitched, maybe a kid on the way, that kinda thing. But there are alot of people who were keen to dive into the rising market, but won't be so keen to get into a falling market. This group is not under pressure to buy right now, they'll see prices falling 5-10% a year and think "hey, why not hold off til next year?". They'll disappear out of the "pent-up demand" category until they find themselves in the "latent demand" category through circumstance. Like those who were afraid of being priced out, in a falling market you'll find those just waiting to be "priced in".

mel123

I sold at the beginning of the 'crash' - had an apartment. Found this very hard to sell until i dropped the price considerably. Was not too bothered, as i still had made a 'profit' even if it wasnt what the estate agent told me i would have got the year before when we had him up. The way i look at it, if i would have sold the year before and made the 110k profit (IF it sold at that price) i would have now been living in an overpriced house, paying a whopper of a mortgage. I had intended once i sold to find a house i liked, but paying stamp duty i was being careful looking, wanted it to be the right house. I never found it, so now am going renting, and still looking for a house i like. The house i would be looking for would be in a good established area, semi-d, second hand, garden, 3 bed etc. Where i find these type of houses have not dropped an awful lot, they are now starting to come down, so i think renting is the right option for me. I just have to hope that i am doing the right thing and that the bank will lend me the money when i do find that house. One i have had my eye on has already dropped 15k, and no offers on it. Id say i went to view it about 2 months ago. Anyway, thats my story!!

iguana

seamus wrote: »

This is one thing which we have waiting in the wings which I believe will end up stabilising the market after a serious fall - pent up demand.

Was there no pent up demand in late 80's Britain. I don't know for a fact but I'd imagine there was. How about in Japan 10 years ago? The one thing that Ireland has, that neither Japan or Britain had was 1 in 6 empties. I just don't see pent up demand being that big an issue.

ciano6

I own my own home. With a mortgage of maybe a third of the value. And you know what, I hope prices and the economy crash badly. Why?
Because too many people in Ireland have too many houses and too much money. You can only live in one house at a time. Many Irish construction workers have been overpayed for menial jobs for way too long. It was the easy option for alot of fellas who wouldn't apply themselves to do anything else. And even in the eighties, the good ones were able to survive with work anyway.
In most countries in the world, a labourer has enough money to live an average lifestyle (food in belly and clothes on back). In Ireland, they have three sun holidays, an SUV, a widescreen TV and SKY Digital, a breakfast roll everyday. For what? Lifting things and putting things down?
Roll on the downturn.

mel123

ciano6 wrote: »

I own my own home. With a mortgage of maybe a third of the value. And you know what, I hope prices and the economy crash badly. Why?
Because too many people in Ireland have too many houses and too much money. You can only live in one house at a time. Many Irish construction workers have been overpayed for menial jobs for way too long. It was the easy option for alot of fellas who wouldn't apply themselves to do anything else. And even in the eighties, the good ones were able to survive with work anyway.
In most countries in the world, a labourer has enough money to live an average lifestyle (food in belly and clothes on back). In Ireland, they have three sun holidays, an SUV, a widescreen TV and SKY Digital, a breakfast roll everyday. For what? Lifting things and putting things down?
Roll on the downturn.

Go and stir s£$!e somewhere else.

ciano6

mel123 wrote: »

So if i work in an office, do i sit on my ass in front of a computer typing all day?!

I imagine for most people in offices, that is what they do for most of the day.
Anyway, I'm far from the green-eyed monster. In fact the opposite. I fell sorry for some of the people with the two plus houses. I took labourers as an example. The same applies to dentists, teacher, politicians, busdrivers...whatever...
People in Ireland are payed too much for what they do. Me included when I lived there. It has made people greedy and moneymad. Not everyone of course. But certainly, in the construction industry, to see people getting paid €800 or €1000 per week when most people in the world don't make much more than that in a year, makes me wonder?
I genuinely feel that getting back to the original question, a downturn in the Irish economyn would be great to show people who have lost the run of themselves,what they and their houses are really worth.

horgan_p

while we (myself and GF) arent hoping for the sky to fall, it would be nice for us to afford a nice house where neither of us has to travel an hour and a half to work and the same in the evening. i work long hours and an extra 3 hours onto my day would be most unwelcome.

i feel sorry for those mortgaged to the hilt for 3 bed semis with cardboard walls.those people have been as much let down by the system as the people priced out of the market.

so no green eyed monster here, just biding our time ,watching our savings increase so that we can get as much of a deposit together as we can.i for one am hoping to avoid 100% mortgages.

in my view , when we can get a handy 3 or 4 bed detached house in cork suburbs for around the 280 - 300k mark then we'll dive in.until then we are renting a nice house not far from where we work , and i dont view rent as dead money because we have the use of the house for a lot less than the cost of a mortgage.