Buyer bubble burst...

gurramok

Gegerty wrote: »

My comments at FTB was to those sitting on their nest eggs waiting for a better deal.

People who are upgrading need to put their homes on the market for what they are really worth today, and haggle a better deal from the property they are buying. This is the affect on the ladder. People who can't sell are not being realistic with their prices and/or their home is not fit to sell. People will not put up with shoddy DIY etc in a buyers market.

an example:
A house goes up for a totally unrealistic price of 500K for a month or two before the vendors cop on and put the price down to what it should have been in the first place, say 450K. Now this gets added to the statistics as a 50K drop in asking price. Whereas if they had put it up for what it was worth in the first place it doesn't show in the statistics and the statistics would reflect what is really happening.

That example is not an example of a FTB property. Bring it under 300k. Your example is what happens on maybe 3rd, 4th rungs of the ladder in my view.

FTB's have every right to sit on their nest eggs as you call it until the time comes to jump, it's their money after all.

Please explain to me how an economy can depend on residential construction? Exactly how is building homes bringing outside money coming into the country?

Pa has explained it but this independent report shows how dependent the Irish economy really is on construction(estate agents, mortgage brokers etc are included in this sector), thats where 22% comes from, its about double what a normal economy should be(based on other Western countries)

The first few pages show it.
http://www.environ.ie/en/PublicationsDocuments/FileDownLoad,15353,en.pdf

Gegerty

gah. Sorry I'm repeating myself.

Gegerty

Pa ElGrande wrote: »

On the contrary the impact of the bubble burst is being felt worldwide, you are paying more for food and energy as a direct consequence of bailouts to banks who have funnelled these funds into higher earning commodities in order to make up the losses in the housing market.

Yes the US subprime market, not the Irish property market. Property prices were falling before the subprime market fell apart. And when I say people need to open their eyes to what is being spoon fed by the media and celebrity economists I'll give you another example based on what I've quoted above. Commodities are soaring because investors are lumping everything into commodities, not because the housing market has slumped. They could put their money into all sorts of things, even staying on in property and taking advantage of some real bargains.

Calina

Gegerty wrote: »

Everything is because of the property bubble. It's tiring. Join the dots back further and everything is because of 9/11. Why not go all the way back to WWII or the famine.

well just on that...the bubble was caused in this country by unprecedented low interest rates which were introduced because of 9/11...if you like.

The property bubble is tiring. It was tiring when it was being inflated because no one wanted to recognise that it was problematic for the long term future of the economy. Now the chickens are coming home to roost, it's tiring too.

Prices had started to fall in this country as the ECB slowly started to up the interest rates. The subprime fiasco in the US is a useful smokescreen for that.

jmayo

Gegerty wrote: »

Please explain to me how an economy can depend on residential construction? Exactly how is building homes bringing outside money coming into the country?

Well lets see now... for a start most of the jobs that were created over the 5 odd years upto 2007 were either directly in construction or in construction related areas such as all those nice new furniture shops that have the sales signs up now. Besides that we had a huge jump in retail due to all the lovely cheap credit and the extra immigrants working in primarilyour construction area.
The tax income for the collector general was up since there were more people working, there was more VAT from construction related activities, there was a huge chunk of doe from stamp duty payments.
The government hired more public servants paid for the by increased tax take from construction industry.
Neither these jobs nor the construciton jobs adds to our exports or brings revenue into the country.

Thus we had an economy based on construction.

adam.number2 wrote: »

Holiday home, expats returning, foreign workers joining our workforce and buying homes, these all result in outside money coming into the country.

OMG is this the dummies guide in how to attract money into an economy ?
Sure who needs exports :rolleyes:
Oh and how much of this inward money was counteracted by Paddy going off to buy his buy to let holiday homein Sunny Beach :rolleyes:

How many of our foreign workers bought property here and if they did would they not have got mortgages from our banks ?
Fe** all percentage of the huge total I would bet.

Pa ElGrande

Gegerty wrote: »

Yes the US subprime market, not the Irish property market. Property prices were falling before the subprime market fell apart.

It is true that property prices were falling before the subprime market finally imploded in Summer 2007. The US market topped in 2005, Ireland topped in 2006. The subprime implosion also killed the Irish banks ability to securitise mortgage debt to raise new funds and repeat the cycle, in fact they had to go the the ECB for a 'digout'.

Gegerty wrote: »

And when I say people need to open their eyes to what is being spoon fed by the media and celebrity economists I'll give you another example based on what I've quoted above. Commodities are soaring because investors are lumping everything into commodities, not because the housing market has slumped. They could put their money into all sorts of things, even staying on in property and taking advantage of some real bargains.

The rule as regards the VI's is always watch what they do and not what they say.
Commodities are soaring because of the cheap money policies of the ECB, Japanese and Americans (i.e. monetary inflation). That cheap money previously found it's way into asset backed securities and other funny paper and created the bubble we in Ireland called the housing boom. Since the housing sector is now being repriced downwards, that money is flowing into one of the few sectors that preserve the purchasing power of money i.e. commodities.

Gegerty

Pa ElGrande wrote: »

Houses are very definitely not selling all around, there is currently a project underway to document the ghost estates across the country that will be with us for many years to come.

They're called holiday homes. These estates were there before, during and after the so called bubble. If you bought one of these as an investment you had very little chance of shifting one of these during the sellers market never mind a buyers market.

beeno67

jmayo wrote: »

Well lets see now... for a start most of the jobs that were created over the 5 odd years upto 2007 were either directly in construction or in construction related areas such as all those nice new furniture shops that have the sales signs up now. Besides that we had a huge jump in retail due to all the lovely cheap credit and the extra immigrants working in primarilyour construction area.





OMG is this the dummies guide in how to attract money into an economy ?
Sure who needs exports :rolleyes:
.

Immigrants work primarily in service area not construction

Pa ElGrande

Gegerty wrote: »

They're called holiday homes. These estates were there before, during and after the bubble. If you bought one of these as an investment you had very little chance of shifting one of these during the sellers market never mind a buyers market.

I had no idea holiday homes in the Midlands and east Cork were so popular. :eek:
Before the boom these houses did not exist and were largely greenfield sites, they are a function of the section 23 tax breaks introduced in 2001 and first time buyers being priced out of the the main urban centres. No demand exists for these places outside of the boom, there are no jobs in these areas beyond construction, farming and maybe the public sector.
What a waste of resources.

Gegerty

Pa ElGrande wrote: »

No demand exists for these places outside of the boom,

what was the demand before the boom? You say yourself:

Pa ElGrande wrote: »

there are no jobs in these areas beyond construction, farming and maybe the public sector.

These were awful investment decisions during the boom and they still are. A nice example of greedy development companies using hype to make profit.

Pa ElGrande

Gegerty wrote: »

what was the demand before the boom? You say yourself:

There was no demand, the trend has been rural to urban migration for several decades now.

Gegerty wrote: »

These were awful investment decisions during the boom and they still are. A nice example of greedy development companies using hype to make profit.

The men behind the development companies are not stupid or greedy, they too were misled by the availability of cheap credit. Here is how the mechanism of the bust happens.

jmayo

beeno67 wrote: »

Immigrants work primarily in service area not construction

Ah yes the service area :rolleyes:
Would that be the service area of a filling station, the service area of O'Briens Sandwich bars or the few call centres that we have ?

Pa ElGrande

jmayo wrote: »

Ah yes the service area :rolleyes:
Would that be the service area of a filling station, the service area of O'Briens Sandwich bars or the few call centres that we have ?

Information is a bit dated now (from 2005) but should give a breakdown.

AIB report says almost 160,000 non-nationals in employment in Ireland - 8% of workforce; Magnitude of inflows may slow; Many buying property

beeno67

jmayo wrote: »

Ah yes the service area :rolleyes:
Would that be the service area of a filling station, the service area of O'Briens Sandwich bars or the few call centres that we have ?

Yes as regards Eastern European immigrants. Of our 400,000 immigrants less than half are from Eastern Europe.

luckat

Just for interest I asked two estate agents to come and value my house. The valuation varied by €150,000 between the bottom of one estimate and the top of the other!

I get the distinct impression from talking to them that estate agents are frantic with terror and doing anything to get the market moving.

DJDC

Mortgage Costs: The ECB will not be cutting its 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.

I’m sorry but the probability of the ECB being forced to raise rates to 7% is absolutely tiny, I'd go as far as saying it’s implausible in the medium term (till 2012). The chances of it even reaching 5% are low. The peripheral countries such as Ireland, Spain, Portugal and Italy are starting to really struggle and any hike in rates would be dangerous.
http://www.bloomberg.com/apps/news?pid=20601085&sid=a3JWntntntUY&refer=europe
Reports released today showed French consumer sentiment to be below what analysts expected and the ECB March Current A/C surplus was replaced by a significant deficit in April. The markets see the demand for oil and other consumer goods dropping off due to this tightening and hence why today oil dropped 4%, with declines in many equities that have both elastic and inelastic products. The EUR lost 50+ basis points against other major currencies, which wouldn’t happen if traders felt the ECB were going to hike rates.

People 50K is not a high salary.
If you think it is, then like me and my car, you should rethink you're aims in life.

I personally know very few people on less than 50k who are over 30.

Have to agree with you here. Dublin is a capital city with excellent corporation rates making it highly attractive for a huge variety of companies. While not in the same category as London or NYC, it is useful comparing house prices as I feel Dublin isn't far of in terms off job opportunities/ desirability.

€50k = €78k = £39K. $78k wouldn’t get you anywhere liveable near Manhattan; likewise £39k would have banks laughing in your face as properties in nice safe areas near London are way outside your range. You need to double, maybe even triple those salaries. Then you get a €150k salary in Dublin, which when combined with savings, partner earnings etc should be enough to buy a nice semi-d in rathfarnham, clontarf, stillorgan etc. A lot of people working in financial services, law and medicine can reach this salary by house buying age 30-35. I know this isn't fair but its reality. The vast majority of the population simply will never be able to afford prime real estate. That’s capitalism.

Note: I am a bear on the Irish property market and can see further falls and no price gains until c.2012. But I fundamentally disagree with the arguement that 50k should buy you a nice house in a good neighbourhood close to Dublin city. Market forces worldwide dictate that it doesn't for 95% of the time ( might be possible at bottom of major major property crash)

gamer

WELL,theres factorys closing every week, so people are insecure ,why buy now,in a years time prices will be ten percent lower,banks are looking 4 higher deposits from buyers .ITS like a perfect storm a number of different factors which coincide to bring down property values.INFLATION is increasing ,which may,cause a 70,s style wage spiral,its not helped by the government getting 38k wage awards .
it would take a brave person to pay more than 250k for a house now.

SimpleSam06

DJDC wrote: »

Have to agree with you here. Dublin is a capital city... €50k = €78k = £39K. $78k wouldn’t get you anywhere liveable near Manhattan; likewise £39k would have banks laughing in your face as properties in nice safe areas near London are way outside your range.

Here is a list of the 178 largest urban areas/cities on earth. Dublin is about half the population of number 178. Capital city or not, there is no way that Dublin should be even vaguely approaching the prices of New York or London. NYC by itself has 5 times the population of this entire country.

DJDC wrote: »

with excellent corporation rates making it highly attractive for a huge variety of companies.

Or to put it another way, mainly financial services groups. Bit like Iceland, really.

DJDC wrote: »

I feel Dublin isn't far of in terms off job opportunities/ desirability.

Have you ever lived outside Dublin?

DJDC wrote: »

I know this isn't fair but its reality. The vast majority of the population simply will never be able to afford prime real estate. That’s capitalism.

Its neither reality nor capitalism, its unparalleled greed on the part of the lending institutions combined with a certain naivety on the part of the Irish public.

adam.number2

SimpleSam06 wrote: »

Or to put it another way, mainly financial services groups. Bit like Iceland, really.

Yes Sam, Iceland sounds very like Ireland... but despite their similar names, they are very different countries. It was a very interesting article though, so thanks for linking it. It reminds me of what the hedge funds did to Ireland back in the days of the Punt. Very nearly bankrupting the country. Luckily since we are in the Euro now, this is not possible. Vote yes to Lisbon!

beeno67

SimpleSam06 wrote: »

Here is a list of the 178 largest urban areas/cities on earth. Dublin is about half the population of number 178. Capital city or not, there is no way that Dublin should be even vaguely approaching the prices of New York or London. NYC by itself has 5 times the population of this entire country.
quote]

But New York has a much higher population density. At a guess I'd say about 20 times higher. Lets face it in what developed country can someone earning less than the average teacher or policeman buy a house within a few miles of city centre. It is supply and demand. There is a limited supply of properties in Dublin City and those with money are going to buy them.
As regards Iceland. You say NYC has a population 5 times that of Ireland, well Dublin has a population 4 times that of Iceland

beeno67

SimpleSam06 wrote: »

Here is a list of the 178 largest urban areas/cities on earth. Dublin is about half the population of number 178. Capital city or not, there is no way that Dublin should be even vaguely approaching the prices of New York or London. NYC by itself has 5 times the population of this entire country.
.

Just looked at your list again. Vancouver caught my eye, a city I know well. It has a population of about 600,000 or about half that of Dublin with an average house price of €336,000. I wouldn't put too much faith in this list

Calina

beeno67 wrote: »

But New York has a much higher population density. At a guess I'd say about 20 times higher. Lets face it in what developed country can someone earning less than the average teacher or policeman buy a house within a few miles of city centre. It is supply and demand. There is a limited supply of properties in Dublin City and those with money are going to buy them.
As regards Iceland. You say NYC has a population 5 times that of Ireland, well Dublin has a population 4 times that of Iceland

The problem I have is this: just because all that doesn't mean that by definition, Dublin has to be unaffordable for the vast majority of people who work there. You could take a progressive view that this is detrimental to the economy as a whole and in fact, if we were a sufficiently developed country it would be possible for the average teacher or policeman, or nurse or IT worker to be able to live within a few miles of where they work. Just because it is not possible in London or New York doesn't mean that it's right or alright that it's not possible here.

It's just an excuse at the end of the day. As regards limited supply of properties in Dublin - note that rents and sales asking prices are dropping. This suggest that there isn't a shortage of supply per se.

Gegerty

The difference with Ireland is that the backbone of our economy is still strong. IT built the celtic tiger, its weathered its own crash and considering the size of our country its still going strong and taking competition like India on the chin. People should get back to basics, stop looking for the next big thing and get back to working hard. Speaking of which....my tea break is over

beeno67

Calina wrote: »

The problem I have is this: just because all that doesn't mean that by definition, Dublin has to be unaffordable for the vast majority of people who work there. You could take a progressive view that this is detrimental to the economy as a whole and in fact, if we were a sufficiently developed country it would be possible for the average teacher or policeman, or nurse or IT worker to be able to live within a few miles of where they work. Just because it is not possible in London or New York doesn't mean that it's right or alright that it's not possible here.

It's just an excuse at the end of the day. As regards limited supply of properties in Dublin - note that rents and sales asking prices are dropping. This suggest that there isn't a shortage of supply per se.

Of course there is a shortage of supply compared to demand it is just not as bad as it used to be. For example hundreds of thousands of people would like to live in a mansion on Ailesbury Road, but, demand means the vast majority cannot afford it.The other point is that the average nurse or police man can afford to live in Dublin City, as thousands do. They can even afford to buy as thousands have done and are still doing.

Calina

I don't want a mansion on Ailesbury Road. I want a semiD somewhere near to where I work which I suspect is what the vast majority of people want. UNfortunately a load of them have bought houses as far out as Navan and Tullamore and commute in because they couldn't afford to buy in Dublin or, what they could afford wasn't suitable for their needs.

beeno67

Calina wrote: »

I want a semiD somewhere near to where I work which I suspect is what the vast majority of people want.

But Callina there isn't enough space in Dublin to build everyone a semid near where they work. At about 1.2million population. Even at 2 per house thats 600,000 semi detached houses. Obviously if everyone got there own house thats 1.2 million semid houses. Where would you put them.

Calina

Currently I rent 5 minutes drive from where I work. Now you tell me why it might be possible to afford to rent a 3bedroomed semiD five minutes from where I work when it is not possible to afford to buy it. If supply was an issue I wouldn't be able to rent or buy same.

Gegerty

Calina wrote: »

Currently I rent 5 minutes drive from where I work. Now you tell me why it might be possible to afford to rent a 3bedroomed semiD five minutes from where I work when it is not possible to afford to buy it. If supply was an issue I wouldn't be able to rent or buy same.

You don't know what the landlords mortgage is. He more than likely put a sizeable deposit on the house and as such your rent is probably covering his mortgage interest even though it may seem cheap compared to the price of the house.

beeno67

Calina wrote: »

Currently I rent 5 minutes drive from where I work. Now you tell me why it might be possible to afford to rent a 3bedroomed semiD five minutes from where I work when it is not possible to afford to buy it. If supply was an issue I wouldn't be able to rent or buy same.

2 Points. The housing market does not revolve around your needs. Secondly it is supply and demand not just supply. If the price of this property was reduced so you could afford to buy it them the demand would be too great. Probably from those people you spoke about living in Kildare.

Calina

One point. I am an FTB and so the property market - to work as it has for the past 5 years - depends on me and people like me entering the market. So yes, to some extent, it does revolve around me and my ilk. If I cannot enter the market at a price that I want, then I won't enter the market and those who entered the market before me cannot trade up because I am not trading into the market. This is the issue with the property market right now. FTBs are not buying for any number of reasons which include less available credit and maybe a little more nervousness about the market.

Second point: housing supply is not dependent on my landlord's mortgage. It isn't even relevant in the debate of are there enough houses around for people to live in. If there weren't, I wouldn't be able to find one. Either you understand this concept or not. My money is on "not". Rent is largely set by the supply and demand curve. When the number of houses available to rent is less than the number of people looking for said houses, rents go up, as they did through most of 2007 when supply halved almost over night (while sales supply tripled). When rental supply starts to rise and tenant supply starts to fall, rents start to fall too. Currently rents are down on average 15% in my locality over what they were 12 months ago. There are a number of people out there who think rents are set by the landlord's mortgage. This is not the case. Rent is set by the answer to a simple questionL: "can you get people willing to pay the money you want" and if the landlord is looking for more money than tenants are willing to pay, then the house goes unrented, doesn't matter what their mortgage is.

Third point: property prices in my estate are roughly 20% less now than they were 18 months ago and still falling and supply is still rising. In other words, the number of people buying is still less than the number of people selling and it doesn't matter why people are not buying if they are not buying.

In simple terms: if there was a shortage of housing in the Dublin area I would not be able to find one that I can afford to rent within a five minute drive from where I work. As I can, and there is an increasing choice of same, I can only conclude that there is not a shortage of houses where I want to live. The issue is that those that are on the sales market are clearly priced too high for the market - as they are not shifting.