Buyer bubble burst...

adam.number2

Is there a bubble of buyers building up? What will happen when it bursts?

http://www.independent.ie/business/irish/one-third-of-people-renting-want-to-buy-their-own-home-1383865.html

DublinDilbert

adam.number2 wrote: »

Is there a bubble of buyers building up? What will happen when it bursts?

http://www.independent.ie/business/irish/one-third-of-people-renting-want-to-buy-their-own-home-1383865.html

so 1/3 of people renting are going to buy within a year and 2/3 of people are going to buy within 3 years, it looks like the all ready over supplied rental market is going to implode if what the article says is true.


As was pointed out on another thread here that when people who rent a house then buy a house, the net effect on the housing stock is very little. So even if 1/2 of all the people who rent were to buy, lots of the rental properties which they were living in would be put on the market, as there would no longer be a rental demand for them.

Afuera

ALMOST one third of people renting a home plan to purchase a property in the next year.

There are a lot of Eastern Europeans planning on going home to buy property in the next year alright.

BigglesMcGee

adam.number2 wrote: »

Is there a bubble of buyers building up? What will happen when it bursts?

http://www.independent.ie/business/irish/one-third-of-people-renting-want-to-buy-their-own-home-1383865.html

Any statement like that is not welcome here

It took the bears long enough to be right, so they want to bask for a while.

On a serious note though. I dont believe the majority of waiters will get into the market til they see prices start to rise again, therefore keeping the prices static or falling slightly for another while yet,

johnnyskeleton

adam.number2 wrote: »

Is there a bubble of buyers building up? What will happen when it bursts?

http://www.independent.ie/business/irish/one-third-of-people-renting-want-to-buy-their-own-home-1383865.html

Of course they plan to buy, but those plans are not very realistic. FTBs have to save up a deposit for the first time in a number of years, they have to get mortgage approval in a tighter climate than previously, and many of them have lost their jobs or are facing an uncertain future.

It is often said that there are loads of buyers waiting in the wings, and this is of course true. But what is misleading about it is the suggestion that they are going to buy at current prices.

dazberry

But despite feeling that rent was a waste, potential first-time buyers were unable to get the funding to buy a home, the Red C research indicates.

Non-homeowners cited lack of funds, saving for a deposit and further drop in house prices as key factors in their decision to hold off purchasing a new home to date.

Another finding was that banks are still the primary starting point for future property buyers.

GE Money, which provides subprime or specialist mortgages for those who can't get loan approval from mainstream banks, said ...

Why are we even discussing this?

D.

adam.number2

dazberry wrote: »

Why are we even discussing this?

D.

Prefer to chat about the eurovision?

SkepticOne

A very good question by number 2.

adam.number2 wrote: »

Is there a bubble of buyers building up? What will happen when it bursts?

http://www.independent.ie/business/irish/one-third-of-people-renting-want-to-buy-their-own-home-1383865.html

Once prices have halved from what they are currently they will level off and we'll get the long-awaited soft landing that everyone has been talking about.

BigglesMcGee

I think that the bears are getting as carried away now as the bulls were getting previously.

My own (crystal ball view - it has to be said) is that when mortgage payments (incl trs) fall below what people are paying for rent on similar properties, we'll see people get back into the market. If rent is falling its not (unfortunatly) a significant fall at all - in dublin anyway.

I know a lot of people saving like the bejasus now, who have enough put away for deposits on houses. They are just not yet ready, as they want to see the bottom before they buy.

We rented an apartment a couple of weeks ago for our daughter. That same apartment could be bought for a 30k deposit and payments of about €150 per month less than the rent (with trs, but even without trs it would be less). Only problem is shes a student and earns no money

But i think it probably wont be long before people realize that they can buy for less than they are renting. Also, people are worried about their jobs at the moment, so that insecurity in the economy needs to be undone too, which may take some time.

I'll qualify what i said about rents being more than mortgages by saying that i think that this is in Dublin area only (North Wicklow, parts of Kildare and Meath included). I think the rest of the country is on a complete loser as far as property is concerned though. Cant get decent rents, houses are way over-valued for location, petrol for those commuting is crippling.

A 50 mile each way commute (not uncommon) in a car costs nearly €1000 pm (Just wait for the carbon tax to appear too).
Better off renting a place in Dublin, or in a commuting town with a train station, luas, bus etc into Dublin than that. Anywhere else is just screwed as far as house prices are concerned. Before anyone kills me, i know not all people commute to Dublin, but a massive amount do.

SimpleSam06

BigglesMcGee wrote: »

when mortgage payments (incl trs) fall below what people are paying for rent on similar properties, we'll see people get back into the market. If rent is falling its not (unfortunatly) a significant fall at all - in dublin anyway.

I know a lot of people saving like the bejasus now, who have enough put away for deposits on houses. They are just not yet ready, as they want to see the bottom before they buy.

Of course what a lot of people are missing is that even if you can afford to pay the rent every week on a place, you might not be able to get the mortgage on it, even if similar, as the banks won't qualify you for it.

Credit rules are tightening and this is the primary indicator of where house prices will hit the bottom, not whether a BTL would be a sound investment in that area.

The days of free money are long gone.

johnnyskeleton

BigglesMcGee wrote: »

My own (crystal ball view - it has to be said) is that when mortgage payments (incl trs) fall below what people are paying for rent on similar properties, we'll see people get back into the market. If rent is falling its not (unfortunatly) a significant fall at all - in dublin anyway.

I think it more likely that when mortgage payments fall to a level whereby a person of a certain salary can purchase a property suitable to their position without taking out a ridiculous mortgage, then property prices will recover. The idea that someone earning 50k ( a lot of money) can barely afford the cheapest one bed apartments is crazy, as is the idea of paying 3/4 of a million for a family home. However, I believe this would happen before mortgage payments fall below equivalent rents (firstly, because mtg repayments being greater than rents could attract more investors, and secondly because rents are also falling).

BigglesMcGee wrote: »

I know a lot of people saving like the bejasus now, who have enough put away for deposits on houses. They are just not yet ready, as they want to see the bottom before they buy.

That's very sensible, and the way people used to go about buying property, instead of just getting a 100% mortgage out on the basis of "Sure our combined salary will cover it (as long as interest rates don't go up, we stay in the same job and we don't decide to break up)".

BigglesMcGee wrote: »

We rented an apartment a couple of weeks ago for our daughter. That same apartment could be bought for a 30k deposit and payments of about €150 per month less than the rent (with trs, but even without trs it would be less). Only problem is shes a student and earns no money

Can I ask where this was?

BigglesMcGee wrote: »

I'll qualify what i said about rents being more than mortgages by saying that i think that this is in Dublin area only (North Wicklow, parts of Kildare and Meath included). I think the rest of the country is on a complete loser as far as property is concerned though. Cant get decent rents, houses are way over-valued for location, petrol for those commuting is crippling.

Well, outside of major urban areas I would say.

SkepticOne

There may be some instances where the asking rent is greater than mortgage payments for an equivalent property. After all, asking rents can be just as delusional as asking prices for property.

Just like in the early days of the Irish property slump, the changing market conditions are manifesting themselves in a build up of inventory rather than the substantial lowering of asking prices which inevitably follows.

DublinDilbert

BigglesMcGee wrote: »

A 50 mile each way commute (not uncommon) in a car costs nearly €1000 pm (Just wait for the carbon tax to appear too).

This is a good point, not sure if it would cost as much as €1000 (it might), but definitely more than €700 / month when you factor in car / tolls / tax / maintenance / petrol, and getting more expensive all the time.

Also people didn't mind spending this money (and time in traffic) when they thought their house in navan was going up by 1% / month and on paper they were getting better off. Its a much different story now, people will be burnt out after doing this for a few years.

BigglesMcGee

JohnnySkelton.
That Apt is in Swords. Im a great bargainer. That was the lowest i could get anywhere decent for. Believe me i hate spending more than i have to (my daughter is under strict instructions to get someone to share with within the month ), so we looked for a few weeks. There are slightly cheaper, but they are all in Holywell (tiny kips) and were complete dumps.

That is by far the best we could get for that price and even the dumps werent much lower.

---

sign of the times here

http://www.breakingnews.ie/Business/mhgbmheycwsn/rss2/

---

I believe that banks will lend people money, within reason, if they have proven an ability to pay even higher rent than the mortgage on the property is worth. But not until the downward trend in property prices has ceased for a while and of course that they meet whatever criteria apply.
Even at the moment a single person on 50k with a 25k deposit would be approved on the apartment i was talking about, and that is a lovely apartment in a lovely location.

Still, i think that prices have a bit to fall yet, but not all that much. I think the whole Ireland inc ship will steady soon enough.

---
Just saw this
sign of the times here

http://www.breakingnews.ie/Business/mhgbmheycwsn/rss2/
---

On a side note i'm just back from Gorey and the amount of for sale signs is unbelievable. More signs than there were election posters before the election. I guess the 1.5 hour commute on a Sunday evening (probably closer to 3 on a weekday morning) is not as good as people thought it was when they bought.


(The management knows they are not an economist and so predictions are only as reliable or unreliable as the next mans)

gurramok

BigglesMcGee wrote: »

Even at the moment a single person on 50k with a 25k deposit would be approved on the apartment i was talking about, and that is a lovely apartment in a lovely location.

Still, i think that prices have a bit to fall yet, but not all that much. I think the whole Ireland inc ship will steady soon enough.

And to comment on this

A person on 50k with a 25k deposit shouldn't have affordability issues in the main city area and have to live in a town about 10miles up the road and thats one reason why prices will keep coming down until that person on 30-40k(like most of us) can afford an apt in the main city in a decent area.(as in decent, it rules out Beirut type suburbs )

The above applies to renters too, as the survey says, they will buy and its not at any price hence prices will come down to their level when they jump and we ain't there yet by a long shot.

Pa ElGrande

The rental market is affected in the following ways by the housing bust:-

More renters: Some renters have delayed taking a mortgage out on a house because they realise they can get better and cheaper property for their Euro's simply by waiting a while longer. Employment in the private sector is declining making more people hesitant about taking on insane debt levels, the public sector will also be cut as there is less demand for some services and reduced government revenue.
Some former house owners have been forced back into the rental sector after either a short sale or repossession by the bank.

More rental units: Some property owners and builders have rented out apartments or houses because they can't sell them today at a price that's acceptable to them, also evidence continues to mount that the migration patterns are changing with many Eastern Europeans returning to their homelands, or joining the Irish themselves and moving to other countries where the work is, be that Canada, Norway, Australia, or Germany.

More sharing. Some property owners have taken in lodgers to help pay the increased mortgage costs and avoid repossession.

Mortgage Costs: The ECB will not be cutting it's rates this year and will likely rise towards the end of the year, this is because oil continues to rise and feeds into the price indices they use to measure inflation. The ECB's primary mandate is price stability. Interbank lending rates are also staying high, and several Irish banks have had to go to the ECB for funding. Like it or not mortgage rates are heading higher and Irish mortgage holders should anticipate the real possibility that ECB rates could reach 7% within 2 to 3 years, either way mortgages rates will be higher by at least .5% by year end. Landlords will pass this on to renters where they can, so there will be limited scope for rental cuts.
Lending criteria has also tightened and all potential first time buyers must have deposits now, banks will only lend 80% on apartments in Dublin and 70% outside that.

Social Welfare: As unemployment grows so do claims for rental allowance and this helps put a floor on the market for landlords.

Undercapitalised and/or accidental landlords: These people are about to get financially wiped out and will make up the first repossession wave to hit in 2009. A combination of increased supply, increased mortgage and maintenance costs and long void periods will force them from the market. Some renters will have to move at short notice.

johnnyskeleton

Pa ElGrande wrote: »

Like it or not mortgage rates are heading higher and Irish mortgage holders should anticipate the real possibility that ECB rates could reach 7% within 2 to 3 years, either way mortgages rates will be higher by at least .5% by year end

If the ECB base rate reaches 7% variable rates for mortgages could be in the 9-10% range, and even good tracker rates will be over 8%.

This represents 3-4k extra per 100k per year.

This would not just be very bad news, it would be absolutely crippling to tens of thousands of Irish people.

While I don't think rates will be dropped, and I think some small increases are due, I can't imagine they will go up this much.

Pa ElGrande

johnnyskeleton wrote: »

If the ECB base rate reaches 7% variable rates for mortgages could be in the 9-10% range, and even good tracker rates will be over 8%.

This represents 3-4k extra per 100k per year.

This would not just be very bad news, it would be absolutely crippling to tens of thousands of Irish people.

While I don't think rates will be dropped, and I think some small increases are due, I can't imagine they will go up this much.

I spoke about this before. It's much worse than just rising mortgage rates, throw in the rising cost of oil which feeds into the rising cost of everything we do, this feeds into the rising price indices that the ECB use to measure inflation. On top of that government is going to raise taxes and councils are going to impose water charges to make up the shortfall in revenue.

SimpleSam06

BigglesMcGee wrote: »

I believe that banks will lend people money, within reason, if they have proven an ability to pay even higher rent than the mortgage on the property is worth.

While the banks may have been willing to lend out cash willy nilly over the last while, they can no longer risk using what you can do now as a measure of what you can do in ten years say. They are starting to factor in things like children, sickness, accidents, unemployment and so on, which they should have been including from day one (not that Ireland had subprimes of any sort :rolleyes:). So even if you can pay the rent on a place now, they know full well that doesn't mean you can pay a similar mortgage in the long term.

SimpleSam06

Pa ElGrande wrote: »

Landlords will pass this on to renters where they can, so there will be limited scope for rental cuts.

Unless the landlords aren't paying a mortgage on their properties, and there are many who aren't. In that case they can afford to undercut new or accidental landlords as much as required, and they will.

adam.number2

SimpleSam06 wrote: »

... and they will.

...if they have to. No landlord will decrease his rent unless he is very desperate. It'll be a long time before that happens.

Kipperhell

gurramok wrote: »

A person on 50k with a 25k deposit shouldn't have affordability issues in the main city area and have to live in a town about 10miles up the road and thats one reason why prices will keep coming down until that person on 30-40k(like most of us) can afford an apt in the main city in a decent area.(as in decent, it rules out Beirut type suburbs )

I actually laughed out loud when I read this. It is crazy to think city centre apartments are affordable to buy for people on an average industrial wage in a capital city as the norm. You keep "shoulding" the world into existence it is worth the laughs but the frustration will kill you.

ixoy

Kipperhell wrote: »

I actually laughed out loud when I read this. It is crazy to think city centre apartments are affordable to buy for people on an average industrial wage in a capital city as the norm. You keep "shoulding" the world into existence it is worth the laughs but the frustration will kill you.

Ah but a couple, both on just above the average wage, should be able to afford a decent 3-bed in the suburbs to raise a family but currently they ain't - short of moving to real commutersville.

Kipperhell

ixoy wrote: »

Ah but a couple, both on just above the average wage, should be able to afford a decent 3-bed in the suburbs to raise a family but currently they ain't - short of moving to real commutersville.

Actually I don't think that's how it does work either. As cities get bigger older areas often become more expensive and therefore for the more well off. This results in areas being a different make up to when they were built. The simple fact is there are more people living here now and people live longer. Working class wage means working class area the dual income aspect basically is a change in society around the world.

gurramok

Kipperhell wrote: »

I actually laughed out loud when I read this. It is crazy to think city centre apartments are affordable to buy for people on an average industrial wage in a capital city as the norm. You keep "shoulding" the world into existence it is worth the laughs but the frustration will kill you.

If you had read it properly, i meant the entire city including its suburbs and not towns like Swords hence commuterland springs up.

In your scenario, the vast majority cannot afford to buy in the city and suburbs including high earning professionals which is true.

Kipperhell wrote: »

Actually I don't think that's how it does work either. As cities get bigger older areas often become more expensive and therefore for the more well off. This results in areas being a different make up to when they were built. The simple fact is there are more people living here now and people live longer. Working class wage means working class area the dual income aspect basically is a change in society around the world.

Do you not see the folly of your last statement?

Working class wage AND high earning professional wages cannot afford to live in a working class area whether that area is in the city centre or miles out in the suburbs.

Hence its still cheaper to rent and they will keep renting until house prices come down alot.

BigglesMcGee

€50k isnt high earning though.

luckat

Isn't 50k for a single earner the top limit for Social and Affordable Housing help? So it should be possile to get a home through this.

gurramok

Yeh, you'd want to be on over maybe 80k to afford somewhere to live in Dublin city and suburbs where your starter gaff in your range would be in the less desirable suburbs which is really taking the p1ss for such a high earner.

Anyone on 50k shouldn't have to be on affordable housing lists to afford a place to live as affordable housing was originally aimed at those on much lower incomes but sadly the bubble has screwed nearly everyone.
50k is a well enough comfy wage to live on when you rule out buying the house/apt factor.

SimpleSam06

Kipperhell wrote: »

It is crazy to think city centre apartments are affordable to buy for people on an average industrial wage in a capital city as the norm.

Its a bit glib to say "capital city" as if that explained it all. Would it not be fairer to compare cities of similar size rather than their political position? In the grand scheme of things, Dublin is a fairly modest sized place, and there is no way that accommodation in Dublin should be anywhere near the prices in a place like, for example, New York.

BigglesMcGee

Much as i hate to say it, dublin is actually much more in demand than your average capital city. Most of the jobs are in Dublin. Most of the infrastructure is in Dublin. Its the area where most people have to get to and have to live. It is, by a long long way the biggest sh!t in the bowl.

Until we get proper infrastructure in the whole country. Broadband, Roads, Trains etc and spread out where the jobs are then Dublin will remain disproportionatly more desirable (or the be more exact - required) to live near or in and therefore will be outrageously more expensive than anywhere else in Ireland.

I really dont see this changing anytime soon. All they seem to be doing is spreading the rail links out to the suburbs (which is no bad thing, but the rest of the country is still being neglected in a big way.)

So i dont see the greater Dublin area suffering too much as long as the economy steadies itself (If it doesnt then all bets are off). The brunt of the suffering will be 50 miles plus from Dublin city center (with maybe a few pockets spared because of a good rail link to Dublin) and i just dont see any way around this for those areas. They are in for a torrid time.

WhatsGoingOn

BigglesMcGee wrote: »

A 50 mile each way commute (not uncommon) in a car costs nearly €1000 pm (Just wait for the carbon tax to appear too).

You'd want to get yourself a new car Biggles. My commute is 60 miles a day (30 each way) and I spend about €130 a month on diesel.