Eddie Hobbs: "Starter homes will be 175,000 euros in 2 years"

ParkRunner

The reality of the situation now is that some of these people are now here:

http://www.courts.ie/legaldiary.nsf/ea75dd68239e4b6980256c590060ee70/ffc74514d5907527802574f300394725?OpenDocument

niceirishfella

EF wrote: »

The reality of the situation now is that some of these people are now here:

http://www.courts.ie/legaldiary.nsf/ea75dd68239e4b6980256c590060ee70/ffc74514d5907527802574f300394725?OpenDocument

Busy day for the men in wigs.

LEGEND24

clown bag wrote: »

Agreed. Already lots available for under 200k and if you assume that asking prices can be haggled down a further 20% - 30% at the moment then i'd say hobbs was actually a bit high in his valuation for 2 years time.

wud i be right in saying that from reading u here that u can actually haggle on a house price? is this with an estate agent or builder or who?i thought that watever the houseprice was then that was it?????

Daith

LEGEND24 wrote: »

wud i be right in saying that from reading u here that u can actually haggle on a house price? is this with an estate agent or builder or who?i thought that watever the houseprice was then that was it?????

Of course. In fact it's possible that when setting the house price the seller will add 20% to it because they know the customer will haggle and they can easily say they will knock 20% off. The customer "saves" 20% and thinks they got a bargan.

SimpleSam06

Daith wrote: »

Of course. In fact it's possible that when setting the house price the seller will add 20% to it because they know the customer will haggle and they can easily say they will knock 20% off. The customer "saves" 20% and thinks they got a bargan.

That means hes selling at 20% above the market rate, which makes it unlikely he'll get any buyers even making inquiries.

bangersandmash

Daith wrote: »

Of course. In fact it's possible that when setting the house price the seller will add 20% to it because they know the customer will haggle and they can easily say they will knock 20% off. The customer "saves" 20% and thinks they got a bargan.

Presumably this could only possibly work if there are no similar properties for sale in the area (unlikely in urban areas in the current market), and interested buyers have no idea what such properties would have sold for around the peak (possible due to the lack information on Irish property). I think most buyers are a little more cautious with their money these days.

But as SimpleSam06 says this can easily backfire. They won't get offers of any kind if they get no viewings.

Dirk Gently

The above 2 posts do assume though that advertised prices are genuine and there is not an industry wide reluctance to advertise realistic prices. As soon as a few properties are advertised at real prices it creates a chain reaction dropping all relevant asking prices. I think Daith is correct but not in relation to a single property advertising 20% more than all other similar properties, but rather all advertised prices have the haggle % built into them. No need for an individual to stand out by increasing that haggle % even further.

bangersandmash

clown bag wrote: »

The above 2 posts do assume though that advertised prices are genuine and there is not an industry wide reluctance to advertise realistic prices. As soon as a few properties are advertised at real prices it creates a chain reaction dropping all relevant asking prices. I think Daith is correct but not in relation to a single property advertising 20% more than all other similar properties, but rather all advertised prices have the haggle % built into them. No need for an individual to stand out by increasing that haggle % even further.

I definitely wouldn't assume that advertised prices are genuine. In fact in most cases they seem to be nothing of the sort.

The idea that nobody needs to stand out or sell for lower is fine in a sellers market. But I really don't think this is the case in the current market where the competition between several difference agencies is cutthroat (and no sale means no commission), and where there are distressed vendors out there. All it takes is for one vendor to reduce their price by necessity to make the other vendors stand out. They can then either follow suit with a price drop or potentially miss out on a sale.

rockbeer

As someone who is currently trying to sell (have been for over a year now) I've just decided to go the private route and kick the agents into touch. Why? Because they refuse to deal in realistic prices that reflect what's really going on out there.

You can say "Price it to sell" and "We need a quick sale" until you're blue in the face; most agents are in denial because they're clinging to the memory of the good times. They realize that once they put prices down there is no going back and they will resist this as long as possible.

More and more people who've owned their homes for more than a few years will do as we've done because, like us, they need to make their sale, not sit around for years asking ludicrous prices that they've no hope of achieving. And that pressure will in turn eventually force agents to become more realistic with their prices. It's the relatively recent buyers who plunged in at or near the peak of the market who could find themselves in a truly dire situation.

As for haggling, you'd be insane not to. No one can afford to turn away a buyer at the moment, they're like hen's teeth. It's a supply and demand thing.

Saskia

On TV3 tonight Kelly Morgan predicted that houses selling for €800-€900k in 2006 will be worth no more than €220k :eek:

Surely not?

Saskia

After a Googling of Kelly I found this

http://irserver.ucd.ie/dspace/handle/10197/38

SimpleSam06

Saskia wrote: »

On TV3 tonight Kelly Morgan predicted that houses selling for €800-€900k in 2006 will be worth no more than €220k :eek:

Surely not?

He's not far off, barring some miraculous influx of wealth into the world from the ether.

gurramok

Well, if someone in 2001 said to me, a house asking for 200k would be asking 500k 5 years later, would you have believed that person?

I'd be surprised too but anything is possible on the downside just as it was on the upside years.

Saskia

gurramok wrote: »

Well, if someone in 2001 said to me, a house asking for 200k would be asking 500k 5 years later, would you have believed that person?

I'd be surprised too but anything is possible on the downside just as it was on the upside years.

Fair point.

blast05

Any opinions on potential impacts of dropping interest rates. If you were to take most economist opinions as realistic (big if i grant you), then we are in for up to another 1 to 1.5% interest rate cut over the next 6 to 9 months. A cut of 1.5% would mean bank rates of probably around 3.25% standard variable. A 30 year mortgage of say 250K would be €1088 - add in interest relief and you have a repayment of <€900 .... and you will probably be able lock in your rates for 5 to 10 years at about 5%.

Given the amount of people out there that are waiting for the market to bottom out and with cheaper money to possibly be available (and banks will lend - i have just remortgaged with AIB - best standard variable on market - with a mortgage almost 3 times greater than the combined income of both myself and my wife .... albeit this was really freeing up a large chunk of equity which is now on deposit in Irish Nationwide at 4.8% after DIRT - higher than the mortgage rate !!!) then will we see a panic rush to buy in 6, 12, 18 months among those people waiting when they see the first indication of property prices stabilising or heaven forbid even rising by a tiny fraction

Don't get me wrong, this is not a scenario that i feel would be good for the country in the long term but is one i tihnk could happen. Making money cheap again by the ECB could well have the same effect it has had on the Japanese economy over the last 10 years where it still hasn't recovered properly from their crash of the early 90's.

phelixoflaherty

Could buy them off BRENDAN investments

gurramok

blast05 wrote: »

Any opinions on potential impacts of dropping interest rates. If you were to take most economist opinions as realistic (big if i grant you), then we are in for up to another 1 to 1.5% interest rate cut over the next 6 to 9 months. A cut of 1.5% would mean bank rates of probably around 3.25% standard variable. A 30 year mortgage of say 250K would be €1088 - add in interest relief and you have a repayment of <€900 .... and you will probably be able lock in your rates for 5 to 10 years at about 5%.

Given the amount of people out there that are waiting for the market to bottom out and with cheaper money to possibly be available (and banks will lend - i have just remortgaged with AIB - best standard variable on market - with a mortgage almost 3 times greater than the combined income of both myself and my wife .... albeit this was really freeing up a large chunk of equity which is now on deposit in Irish Nationwide at 4.8% after DIRT - higher than the mortgage rate !!!) then will we see a panic rush to buy in 6, 12, 18 months among those people waiting when they see the first indication of property prices stabilising or heaven forbid even rising by a tiny fraction

Don't get me wrong, this is not a scenario that i feel would be good for the country in the long term but is one i tihnk could happen. Making money cheap again by the ECB could well have the same effect it has had on the Japanese economy over the last 10 years where it still hasn't recovered properly from their crash of the early 90's.

Cutting rates won't help, even cutting it to 1%!

The primary reason is this, the domestic economy is entering a serious long recession. I'll repeat what i said in the other thread:

25% of the economy was based on construction related activity in 2006(source DKM). Its around 10% in other 1st world countries hence oversupply of too many employed in construction etc.
A govt policy should redeploy the excess to export industries but to get that, you need to protest outside FF headquarters to make them listen as they have not done that yet.

To sum up, 15% of the economy is disappearing in a normal housing demand arena and that's the crux that cannot be rolled back for generations.

Unemployment is 6.7% now. Most experts whether they are experts or not forecast it could hit 10% by the end of 2009.

Other reasons like sentiment which feeds off the economy, the chronic oversupply of housing, the serious situation facing the banks with bad debts in 2009, too much private sector debt(reputed to be the highest in EU by a mile).
And the big elephant in the room, the public finances out by circa €12bn per yr, some say 10% of GDP borrowed in 2009 onwards, that is bordering on IMF territory. To fix it will mean higher taxes attacking disposable income.

The above we did not have in 2002 when rates were slashed, we actually had an economy that was not heavily dependent on construction plus private sector debt was much much lower.

The slashing of rates in the US(2yrs now) and Japan did not save house prices. It won't save the UK either as they are getting hammered economy wise.

Highsider

Thank god im off the property ladder but if i was in the unfortunate position of looking for a first timer i'd be holding out as hobbs says.

niceirishfella

Holding out is a no brainer now. The Economy is KAPUT as we all know.

blast05

Holding out is a no brainer now.

Agreed, but what are the indicators or triggers to go and actually buy if you are a first time buyer in waiting. Will it be the enevitable large drops in interest rates ? No doubt prices will drop beyond their real value before bouncing back but when will that be. My sister and brother in-law (both public sector) are sitting waiting to buy but haven't a clue when to do so.

the chronic oversupply of housing

40-50,000 seems to be the figures being bandied about. Given that construction will barely hardly meet 10,000 units next year (one-off housing) then how long should it take to clear the backlog once people starting buying again ? ..... >60,000 people doing the Leving Cert every year with ~20,000 dieing so barring nett emigration of 40,000 per year ....

the serious situation facing the banks with bad debts in 2009

... and the tax payer will take the hit .... oh please government, nationalise AIB, BoI and Anglo IB quick - at a cost of about half the money in the pension reserve fund

that is bordering on IMF territory

... indeed, but while 10% would probably be accepted in 2009 only, the pension reseve fund would get us through 2010 and indeed 2011 if the banks are not nationalised .... presuming of course that the government continue to cop out and for example fail to put an extra social insurance tax of 10% on public sector pay cos of job security and pensions plus a drop of at least 5 of pay in the public sector pay accross the board as per in Holland recently plus the long needed reform


Basically, all i am trying to get at is peoples takes on how long before we kick out of this downturn ?

BobbyD10

As stated previously i don't think that cutting interest rates will help the housing market. Albeit it is good news for mortgage holders and reduce some of the massive repayments some people have.

There are many reasons this will be long and protracted. It is hard to put them in order, but I will name just two reasons that I see as primary.

Firstly is the prices some people still think they can get for their houses/apartments, I think there needs to be a realisation that these prices are no longer achievable in the current climate.

Secondly is employment. Not much you can say on this as it is self evident that a slow down/recession will see significant job losses.

niceirishfella

blast05 wrote: »

Agreed, but what are the indicators or triggers to go and actually buy if you are a first time buyer in waiting. Will it be the enevitable large drops in interest rates ? No doubt prices will drop beyond their real value before bouncing back but when will that be. My sister and brother in-law (both public sector) are sitting waiting to buy but haven't a clue when to do so.

I think the first sign required is the end of this recession and a couple of quarters of growth - then , and only then, maybe, possibly will we see the end of this slump.

uncanny

Saskia wrote: »

On TV3 tonight Kelly Morgan predicted that houses selling for €800-€900k in 2006 will be worth no more than €220k :eek:

Surely not?

This is approximately what €800k got you in Dublin in 2006 in similar (awful) condition.

http://www.myhome.ie/residential/search/brochure/16-cremore-drive-glasnevin-dublin-co&-city/BQEGG373979

This one is on at €570k which is still totally and utterly ludicrous as you'd need to put at least €100k into it to make it habitable.

KITCHEN: 2.8m x 2.3m stainless steel sink with press unit

Yes folks - this €570k house features an 8 foot x 6 foot kitchen. Just about big enough to install a telephone, because you'll be calling for a lot of take away.

Directly across the road (about 30 metres away) is this newer, bigger, house in much better condition asking €390k

http://www.myhome.ie/residential/search/brochure/26-cremore-drive-glasnevin-dublin-co&-city/KESGQ361561

Some vendors are still very high up on the slope of denial. I would say €220k is an entirely reasonable price for that first one in it's current condition.

SimpleSam06

blast05 wrote: »

Basically, all i am trying to get at is peoples takes on how long before we kick out of this downturn ?

It took eight or ten years of boom to reach the top, don't be surprised if it takes eight or ten years to reach the bottom. I'm betting on accelerated drop rates myself, because waves crash faster than they build up, so maybe 2012 or 2013, but its anyone's guess really.

blast05

It took eight or ten years of boom to reach the top, don't be surprised if it takes eight or ten years to reach the bottom.

I'd be very surprised if it took 8 to 10 years ..... that analysis presumes prices will drop to where they were at pre the boom despite wages having more than doubled, inflation now back under control, interest rates being a lot lower and no fear of mad interest rate spikes like in the 80's cos we're now part of the ECB.
At the end of the day - if unemployment grows to say 12% from full employment when ~3.5-4% of the labour force are signing on - then there are still 88% of the work force in employment who can afford mortgage repayments and all that goes with that etc.
I also still feel that given there are huge amounts of first time buyers waiting to pounce when they feel the market has bottomed, that on the first hint of the market beginning to stabilise that there will be a rush of people trying to jump on which will bring a bit more stability and perhaps even a bit of a jump. If i were a betting man then i would say that given that interest rates are expected by all to have dropped by another 1-1.5% by next April that by the following September we may will see the bottom ..... with prices probably nationally on average 30-40% off their peaks (a lot more in some places and a lot less in others)

SimpleSam06

blast05 wrote: »

I'd be very surprised if it took 8 to 10 years ..... that analysis presumes prices will drop to where they were at pre the boom despite wages having more than doubled, inflation now back under control, interest rates being a lot lower and no fear of mad interest rate spikes like in the 80's cos we're now part of the ECB.
At the end of the day - if unemployment grows to say 12% from full employment when ~3.5-4% of the labour force are signing on - then there are still 88% of the work force in employment who can afford mortgage repayments and all that goes with that etc.

Once again, affordability is not value. Houses were affordable at the peak of the boom, because people were still buying them; they were, however, terrible value. They still are.

Also house prices don't depend on earnings, inflation or what have you, they depend largely on the amount the banks are willing to lend. Leaders of industrialised nations are meeting shortly to discuss new controls and regulations on banks, so don't expect that to go up anytime soon.

There is no assumption being made that prices will drop to 1996 levels, merely that it could take eight to ten years for prices to bottom out.

blast05 wrote: »

I also still feel that given there are huge amounts of first time buyers waiting to pounce when they feel the market has bottomed, that on the first hint of the market beginning to stabilise that there will be a rush of people trying to jump on which will bring a bit more stability and perhaps even a bit of a jump.

I'd say that will happen a few times before the bottom. These are known as "dead cat bounces".

blast05

they depend largely on the amount the banks are willing to lend

and as i've previously said, banks are still lending despite the misconception - i have recently re-mortgaged with AIB to 3 times the combined income of myself and my wife .... albeit to largely free up equity although the bank didn't know or care about that

These are known as "dead cat bounces".

Ah jaysus, would you give me some credit. I deliberately avoided using the cliche.

All in all, imo you seem to have an extreme negative sentiment towards the market. Time may well show you to be spot on and perhaps i am overly optimistic. However, 2 things i would say:
- you seem to presume we will achieve some utopian position of property prices being sold for a fair and realistic value giving the buyer value for money. However, the fundamentals in the way the Irish property market operates haven't changed - i.e.: the CIF haven completely turned off the taps on new supply meaning we will enevitably be in a position in 2-3 years of undersupply (presuming no nett emigration then population growth of 40K per year) or even sooner in other places as the current over supply is primarily in commuter towns or in tax designated counties. CIF will then be in a position to dictate prices again and so the cycle starts once again .... unless there is much much greater reuglation in the finance industry. There will be more enevitably but i can't see there been enough
- The rental yield in certain places is currently at levels where investors could well step back in. I have a property in the Dublin commuter belt which currently has a rental yield of ~5.5% i.e.: i am taking its current real value to be its price on daft.ie for similar properties minus 20%. Of course no investor in their right mind would step back in just yet but another 10-20% drop in prices and who knows .....

SimpleSam06

blast05 wrote: »

and as i've previously said, banks are still lending despite the misconception

They aren't lending half as much as they used to, anecdotal evidence notwithstanding.

blast05 wrote: »

Ah jaysus, would you give me some credit. I deliberately avoided using the cliche.

How is a term used to describe an aspect of normal market performance a cliche?

blast05 wrote: »

All in all, imo you seem to have an extreme negative sentiment towards the market.

I prefer "realistic".

blast05 wrote: »

- you seem to presume we will achieve some utopian position of property prices being sold for a fair and realistic value giving the buyer value for money.

Heh. And would you mind telling me how aspiring to fair and realistic value for money is "utopian". One would have thought that would have been basic common sense.

blast05 wrote: »

However, the fundamentals in the way the Irish property market operates haven't changed - i.e.: the CIF haven completely turned off the taps on new supply meaning we will enevitably be in a position in 2-3 years of undersupply (presuming no nett emigration then population growth of 40K per year) or even sooner in other places as the current over supply is primarily in commuter towns or in tax designated counties.

There is anywhere between 5 and 10 years of supply overbuilt in the market at the moment, depending on who you talk to. That means that if no more houses are built in the next three or four years, supply won't be exhausted. Also demand does not track population growth, especially given the surplus of revolving door economic migrants boosting the population.

Also you seem to have some notion that the CIF is some sort of a centrally controlled corporation which dictates when builders build and when they don't - to say this is erroneous is the understatement of the decade.

blast05 wrote: »

CIF will then be in a position to dictate prices again and so the cycle starts once again ....

Something is only worth what the market will pay for it, no more and no less. The CIF were never in a position to dictate prices.

blast05 wrote: »

unless there is much much greater reuglation in the finance industry. There will be more enevitably but i can't see there been enough

Really?

The longer-term problem is reducing the risks of a re-run of the events that gave us the current crisis. Changes to financial regulation will be at the heart of that.

There are a number of striking areas the finance ministers are being let loose on.

One is executive pay and how it links to incentives to take risks.

And here is one to set the pulse racing: "mitigating against pro-cyclicality in regulatory policy". That might actually turn out to be quite important.

The idea is to have banking regulation that does not exacerbate the cycle of boom and bust - indeed the aim is to moderate it.

blast05 wrote: »

The rental yield in certain places is currently at levels where investors could well step back in. I have a property in the Dublin commuter belt which currently has a rental yield of ~5.5% i.e.: i am taking its current real value to be its price on daft.ie for similar properties minus 20%. Of course no investor in their right mind would step back in just yet but another 10-20% drop in prices and who knows .....

Then again, you could say that the rental levels are sorely out of touch with reality as well, given the enormous rental supply coming on the market at the moment. While 5% may be not unreasonable (where is that by the way?) it would seem likely that rents will drop generally, bringing the fair value ratio for a house lower.

blast05

They aren't lending half as much as they used to, anecdotal evidence notwithstanding.

Its not anecdotal - its may actual experience

I prefer "realistic".

Fair enough - we're all just giving little more than opinions here

And would you mind telling me how aspiring to fair and realistic value for money is "utopian".

OK, utopian not quite the right word. Substitute the word "perfect". I just can't see any amount of regulation preventing continuous property cycles, albeit to a lesser degree

There is anywhere between 5 and 10 years of supply overbuilt in the market at the moment, depending on who you talk to.

Show me a single quote from any source where they are suggesting a 5 to 10 year oversupply. The only stats i have seen have varied between 30-50,000 units .... and 50,000 units does not represent a 5 to 10 supply

The CIF were never in a position to dictate prices

I will just simply to have to fundamentally disagree with you on this.

(where is that by the way?)

Ratoath - remember i am trying to be realistic in taking 20% of current asking prices

bakerbhoy

There seems to be no mention of the cost of construction having any influence on the pricing of houses.New regulations regarding insulation/renewable techs and overall energy efficiency will have an added cost ,also the extra attention to detail to achieve such standards will invariably increase costs.

If developers cannot achieve a price above their costs they will not build,period.
Given that one off houses,shell built to builders finish to meet old regs were coming in at 60 - 80 euro sq ft x 1350 grant size €81000 / €108000.
thats no flooring/kitchens/bathroom units /painting / bog standard carpentry etc
Add in land costs /architects fees/developement charges/site developement
the costs are heading up fairly fast.
Now add in extra costs to meet new regs. Any chance of a profit???
If not , they won't build houses for current available prices.

The above is not perfect but you should get the drift.