House prices have much further to fall: Morgan Kelly

punchestown

Firetrap wrote: »

Why are you so bothered by house prices falling may I ask? Are you an estate agent? A builder? Someone who has property on their hands that they want to sell?

Yeah, cmon Joe. Tell us your position and how deep in the **** you are. Why are you so desperate to see an unsustainable price on housing going forward and fail to see the benefit of affordable housing for the masses?

Ootermus

gurramok wrote: »

Will these investors still enter when rental supply is rising?

Looking at daftwatch, rental supply in Dublin alone where demand is supposed to be the greatest is double of what it was this time last year.
This pressure on lowering rents is not helping. Would a long term investor be looking at 10yr+ returns factoring in lower future rents making it attractive to invest?
I think the profs who wish to buy now are been screwed by the amateur BTL's and indeed speculators who messed up the market.

I don't disagree that lowering rents/increased supply are a major concern for any property investor, but im just saying they're only part of the conundrum. Long term interest rates, long term demographics, long term economic growth, long term inflation, long term supply of property all have to be considered by them. Rates have come lower recently, but bank margins have also probably increased a bit. Rising inflation helps a long term investor who's has lots of leverage, as he gets to inflate away his debt and raise rents all the time. A young and growing population like ours is obviously going to keep up the demand, but the huge increase in supply over the last few years is probably going to create a big overhang for some time to come. I'm not saying right now is the time to invest, or tomorrow, or last week or whatever. All im saying is that eventually things correct back to more realistic levels. We've already corrected back a good bit, and probably have more to come, but eventually property will be attractive again, and it'll be a long time before rental yield get anywehre close to the 10-12% some people pulled out of their asses earlier.

gurramok

Flamed Diving wrote: »

R-R-Reality?

Its about time people found out!!!

Yeh, reality of what they are buying for their entire lives.

If recent buyers did another bit of R called research they might not have ended up in negative equity with 35yr+ jumbo mortgages around their necks forking out 40%+ of their net wages every month.

Flamed Diving

gurramok wrote: »

Yeh, reality of what they are buying for their entire lives.

If recent buyers did another bit of R called research they might not have ended up in negative equity with 35yr+ jumbo mortgages around their necks forking out 40%+ of their net wages every month.

I'm sure glad it ain't me!

:pac:

punchestown

Ootermus wrote: »

All im saying is that eventually things correct back to more realistic levels.

Here here!

professore

mrgaa1 wrote: »

in response:

Banks are open for mortgages and are glad to take the business - get out there and improve your portfolio - renting has strong returns.
the DOOM and GLOOM merchants want to talk DOOM and GLOOM.

Banks are short of money now, look at the ridiculous 5%+ APR savings deals on offer now. The last thing they want is a pile of property on their balance sheet that no-one wants. They will probably end up with that anyway when a few developers go under. I expect the property bust will last as long as the boom did - unless we pull out of the euro and devalue our currency.

Flamed Diving

professore wrote: »

unless we pull out of the euro and devalue our currency.

How would we do that exactly, and how would that benefit the housing market?

gurramok

Ootermus wrote: »

I don't disagree that lowering rents/increased supply are a major concern for any property investor, but im just saying they're only part of the conundrum. Long term interest rates, long term demographics, long term economic growth, long term inflation, long term supply of property all have to be considered by them. Rates have come lower recently, but bank margins have also probably increased a bit. Rising inflation helps a long term investor who's has lots of leverage, as he gets to inflate away his debt and raise rents all the time. A young and growing population like ours is obviously going to keep up the demand, but the huge increase in supply over the last few years is probably going to create a big overhang for some time to come. I'm not saying right now is the time to invest, or tomorrow, or last week or whatever. All im saying is that eventually things correct back to more realistic levels. We've already corrected back a good bit, and probably have more to come, but eventually property will be attractive again, and it'll be a long time before rental yield get anywehre close to the 10-12% some people pulled out of their asses earlier.

I have to disagree with you on demographics. Our birth rate from the 80s till the millennium plummeted. From memory, around 70k to 45k give or take.
Immigration has been reversed as seen by recent trends of PPS numbers and anecdotals. Even in my own workplace, 3 colleagues have upped sticks to their own countries.
And demographics do depend on a good economy. We're screwed for the next 2 yrs at least on that front due to huge dependency on construction, lets hope long term good times do return.

Long term inflation i cannot see it at 5%+ levels. This recession will lower it for the next while. Govts are more careful now than in the 70s at getting growth at any cost when inflation sky rocketed.

And yes, property will be attractive again, it will be a long while yet. Its anybodys guess on the long term.
Falling prices will help rental yields if those prices do fall by half and rents fall by a lower margin, lets say 10%. Investors will come back with rising yields but i'm talking years away

Though, i'd rather these investors invest in industry than bloody property

professore

Joseph Kuhr wrote: »

Ireland loves jumping on the band wagon. How many goons have all their money tied up in commodities now? Likewise people jumping on the doom band wagon. Where there's money to be made, there's a band wagon. And people are making money out of the gloom in exactly the same way they did in the boom.

Now sorry to bring the sunshine out on your parade but banks are still lending. I'm sorry but its true...

It will be hard for you to get a 100% mortgage but guess what.....thats actually good news! Despite the doom merchants making it look otherwise.

Banks lending? I run a successful business with an account that processes over 100 K per annum for the last 5 years, recently applied for a 2K overdraft for cashflow management and had to jump through all sorts of hoops for it. 6 months ago they were begging me to take loans and overdrafts.

professore

Flamed Diving wrote: »

How would we do that exactly, and how would that benefit the housing market?

Before I reply let me say I don't think it's a good idea ... better to deflate the bubble naturally and wean the economy off bricks and mortar.

Easy, we won't be invaded if we pull out, then we devalue the currency by 1/2, all loans are only 1/2 what they were, salaries double, and hey presto people can afford their mortgages and houses again. Of course to euro countries it would mean a 50% drop in the price of housing to them.

Flamed Diving

professore wrote: »

Banks lending? I run a successful business with an account that processes over 100 K per annum for the last 5 years, recently applied for a 2K overdraft for cashflow management and had to jump through all sorts of hoops for it. 6 months ago they were begging me to take loans and overdrafts.

T'interesting, I got a 5k loan no bother from the bank, and I'm a student! I know its not a reasonable comparison.

Ootermus

gurramok wrote: »

I have to disagree with you on demographics. Our birth rate from the 80s till the millennium plummeted. From memory, around 70k to 45k give or take.
Immigration has been reversed as seen by recent trends of PPS numbers and anecdotals. Even in my own workplace, 3 colleagues have upped sticks to their own countries.
And demographics do depend on a good economy. We're screwed for the next 2 yrs at least on that front due to huge dependency on construction, lets hope long term good times do return.

Long term inflation i cannot see it at 5%+ levels. This recession will lower it for the next while. Govts are more careful now than in the 70s at getting growth at any cost when inflation sky rocketed.

And yes, property will be attractive again, it will be a long while yet. Its anybodys guess on the long term.
Falling prices will help rental yields if those prices do fall by half and rents fall by a lower margin, lets say 10%. Investors will come back with rising yields but i'm talking years away

Though, i'd rather these investors invest in industry than bloody property

'Screwed' is a pretty relative term - i'd rather have our economy than one in the shape of the US or UK, and lots of Europe, like Spain and Italy, aren't looking too hot either. We've had 15 years of almost uninterupted, 5%+ annual growth. We need to be realistic and understand that long term growth rates of 2.5% are actually more the norm and therefore shouldnt be considered 'bad', but that we're probably better positioned to acheive this or higher than most of Europe.

professore

Flamed Diving wrote: »

T'interesting, I got a 5k loan no bother from the bank, and I'm a student! I know its not a reasonable comparison.

Should also say that until recently getting a 50K unsecured personal loan with no documentation seemed to be no problem .... even when I didn't want one !

professore

Ootermus wrote: »

'Screwed' is a pretty relative term - i'd rather have our economy than one in the shape of the US or UK, and lots of Europe, like Spain and Italy, aren't looking too hot either. We've had 15 years of almost uninterupted, 5%+ annual growth. We need to be realistic and understand that long term growth rates of 2.5% are actually more the norm and therefore shouldnt be considered 'bad', but that we're probably better positioned to acheive this or higher than most of Europe.

Fair point ... although Ireland is a horrendously expensive place to do business.

Flamed Diving

professore wrote: »

Before I reply let me say I don't think it's a good idea ... better to deflate the bubble naturally and wean the economy off bricks and mortar.

Easy, we won't be invaded if we pull out, then we devalue the currency by 1/2, all loans are only 1/2 what they were, salaries double, and hey presto people can afford their mortgages and houses again. Of course to euro countries it would mean a 50% drop in the price of housing to them.

What???? Ok, I dont even know where to begin with this! Right, first of all, all of the countries foreign debt (private and public) will be now twice as expensive, which means our entire country would basically default. (Bringing the dreaded IMF on our back) Given that our country relies so heavily on imports for essential resources, this means that our total costs would sky-rocket, meaning that the CB would have to raise interest rates to double-digits, not to mention the field day that currency speculators would have on our poor-old punt. The potential benefits such a move would have would be wiped out by the disaster the above move would cause.

No wonder the bank were wary about giving ya 2k!

:pac:

Ootermus

professore wrote: »

Before I reply let me say I don't think it's a good idea ... better to deflate the bubble naturally and wean the economy off bricks and mortar.

Easy, we won't be invaded if we pull out, then we devalue the currency by 1/2, all loans are only 1/2 what they were, salaries double, and hey presto people can afford their mortgages and houses again. Of course to euro countries it would mean a 50% drop in the price of housing to them.

Mercy, where did this insanity come from??? If we pull out of the Euro all of our debt is still in euro's, you can't just re-denominate it back into Punts, so devaluing the currency wouldn't help one little bit! The only benefit to pulling out of the euro is that our exports (and our property) would look really cheap to the rest of the world. So this would provide a huge boost to manufacturing and the property market, but the downside would be so big as to possibly collapse the economy: all foreigners would sell their Irish assets (shares, property, bonds etc) before the devaluing, any future irish debt (consumer, commercial, government) would be much more expensive to borrow, and everything we import would be much much much more expensive. So petrol, which we import 100% of, would double at the pump more or less. Insanity, plain and simple. The only rational for leaving the euro would be to re-value/strengthen our currency upwards, bring inflation lower and so make long term borrowing costs cheaper.

Ootermus

professore wrote: »

Fair point ... although Ireland is a horrendously expensive place to do business.

Probably the first unanimously agreed statement on this forum!!

gurramok

And Irish people like myself with savings in euro will move those savings abroad to avoid massive depreciation. Same applies to any investor with capital.

Disaster and that will be the real doom and gloom.

punchestown

gurramok wrote: »

And Irish people like myself with savings in euro will move those savings abroad to avoid massive depreciation. Same applies to any investor with capital.

Disaster and that will be the real doom and gloom.

gurramok, its DOOM and GLOOM!

gurramok

Ootermus wrote: »

'Screwed' is a pretty relative term - i'd rather have our economy than one in the shape of the US or UK, and lots of Europe, like Spain and Italy, aren't looking too hot either. We've had 15 years of almost uninterupted, 5%+ annual growth. We need to be realistic and understand that long term growth rates of 2.5% are actually more the norm and therefore shouldnt be considered 'bad', but that we're probably better positioned to acheive this or higher than most of Europe.

Disagree here also

Our economy is not like the Uk/US. Ours is based on 22%+ GNP on construction related activity(source: independent DKM consultant reports commissioned by govt http://www.finfacts.com/irelandbusinessnews/publish/article_1011255.shtml) which accounted for huge chunks of that 5%+ growth over those 15yrs.(especially since '02)

Its double what it is in the likes of the UK/US/everywhere else in Europe bar Spain.
Half of that 22%+ is disappearing now in the adjustment cycle and now re-aligning hopefully into new industry and thats when sustainability will come for the economy with that 2.5% growth.

Ootermus

gurramok wrote: »

Disagree here also

Our economy is not like the Uk/US. Ours is based on 22%+ GNP on construction related activity(source: independent DKM consultant reports commissioned by govt http://www.finfacts.com/irelandbusinessnews/publish/article_1011255.shtml) which accounted for huge chunks of that 5%+ growth over those 15yrs.(especially since '02)

Its double what it is in the likes of the UK/US/everywhere else in Europe bar Spain.
Half of that 22%+ is disappearing now in the adjustment cycle and now re-aligning hopefully into new industry and thats when sustainability will come for the economy with that 2.5% growth.

i didnt mean structurally, i just meant right now. In both the US and the UK the banks are in an absolute mess having made massive massive losses over the last year, they're in far worse condition than ours - Irish banks, for all the bad sentiment surrounding them, have actually steered almost 100% clear of the whole subprime, CDO, CLO SIV, conduits etc. RBS, HBOS, Citi, Bank of America, Merrill Lynch, Bradford and Bingley, Barclays, Wachovia etc etc have all had to raise fresh capital to keep their balance sheets afloat, never mind Bear Stearns and Northern Rock - Irish banks haven't and won't this year touch their shareholders looking for capital. The worst thing to happen to the Irish banks last year was a couple of solicitors fleecing them for a few quid. Couple this with inflation running amok and currencies more fitting of toilet paper in both countries and you have the receipe for serious long term problems in the US and UK.

gurramok

I see.

Problem is the banking shares are down 70%+ on a few years ago, the stock market insiders know there is something wrong with the Irish banks, we just don't know publicly yet until this whole bust bottoms out.

I don't like how developers owe Irish banks €100bn, that is a truely frightening figure to lend to one sector. Even if 5% of that is written off as bad debt, it ain't rosy.

Ootermus

SimpleSam06 wrote: »

At least I'm not talking in txt-spk.


There is a difference between investors looking for capital appreciation and ones looking for rental returns. You won't get rich or even make much money doing that in the Irish property market at the moment.


Interest rates get dropped in the US, and inflation rises in the US. Do you think stateside inflation will have no effect on the Eurozone? I'll point out as well that the ECB, unlike the Fed, has one single mandate-control inflation-and thats what they will do, despite political pressure. Inflation in the Eurozone is twice where they want it to be at the moment. I would have thought a financial genius such as yourself would know that.


No. You're making the mistake of thinking that a wage rise will automatically be put into a higher rent area. This is demonstrably untrue. If anything it will be put towards savings to purchase a permanent residence, reducing demand for rental properties. Unfortunately for the property market, drastic wage rises are rather uncommon, so it won't affect much on the larger scale.


Hey, I provided the figures that buried your argument, Answer them if you like.


Well first off, when wage rises are set against a backdrop of tightening lending criteria, you have to see which offsets the other. The requirement for more of an initial deposit in the last few months by banks more than offsets whatever pay rises you might mention. Secondly, this has nothing to do with rental rates. Rental rates are decided by supply and demand, not mortgage rates, regardless of what some of the more feckless investors might like to believe. You're not selling pints here.


Sigh. Renters don't care that you have a huge mortgage. And most investors can't sell. They'll be undercut by the longer term landlord who has been in the game sicne before the boom, and doesn't need to service a loan.


You've got yourself bass ackwards there as usual. There is shag all correlation between house prices and immigration, except to the extent that the increased money supply brought in mroe immigrants hoping to strike it rich. What you originally said was that rising wages lead to rising rent. This is baldly incorrect. Every single fluctuation in rental rates you have pointed out has been due to supply and demand. You even said so yourself. Except you were wrong in saying that supply and demand will find a balance next year.


So you weren't advising or implying that people should buy property in Ireland for the purposes of rental returns?


The main thing that upsets me about this situation, and the likes of you, is that my taxes are going towards bailing out specuvestors from the shambles they landed themselves in.

Ok, once more i'm going to say it - asset price collapses, like the one that you're suggesting in the US as a result of the Alt-A issue, do not cause inflation, even if the Fed decided to cut rates from 2% (though they can't exactly bring rateasall that much lower can they?). Asset price collapses, like that seen in Japan in the 90's, are massively deflationary. The housing market in the US is worth around 30 trillion dollars - if house prices drop 10% then 3 trillion dollars in household wealth is destroyed. If the Fed cuts rates it'll be because of just such a fear of deflation. If the Alt-A bubble pops like ur suggesting, do you think that people are going to be spending money with wild abandon just because rates are a 1% or so lower? Seriously, linking to articles about the economy doesn't mean you actually understand it. You can sigh all you like, make strange and unbelievably irrelevant points about me speaking text speak, or use quirky little phrases like bass ackwards (im sure everyone chuckled at you being so smart and funny with that one...) all you want, but it won't change the fact that you're completely wrong on this one.

And of course immigration has an effect on rents and house prices, as they fill a huge portion of the demand side of the equation. If 100k Poles left this country tomorrow i'd expect rents and house prices to fall significantly within a matter of days - demand would be lowr and supply would be higher from their vacated property. Likewise if 100k additional Poles arrived in in the coming weeks, i'd expect rents to start moving up aggressively as they'd fill the rental overhang we've all been discussing here. As you've said, everything is determined by demand and supply, wages and immigration are part of the demand, property moving from the for sale market to the rental market boost supply. You seem to be fixated on the supply side without ever considering the demand side.

And i'd really like to know how your taxes are helping out speculators (you can do a McWilliams and invent your own new words if you want, im sure it makes you feel great, but i'll pass thanks) given that the amount of tax they've paid over the years has probably been subsidising many parts of the economy.

Ootermus

gurramok wrote: »

I see.

Problem is the banking shares are down 70%+ on a few years ago, the stock market insiders know there is something wrong with the Irish banks, we just don't know publicly yet until this whole bust bottoms out.

I don't like how developers owe Irish banks €100bn, that is a truely frightening figure to lend to one sector. Even if 5% of that is written off as bad debt, it ain't rosy.

Ok, fair enough, bank shares are massively down, no question, though i personally think its overdone (though nor do i think they'll get even remotely close to their previous highs for many many years)

However, i'll just stick this out there (not directed at u personally):

Bank economists etc say interest rates are going down - our forum says "what do they know, they're idiots who've gotten everything wrong".

Bank equity analysts say Irish bank shares are going lower - our forum says "the insiders obviously know something is up with them, they know they're in trouble".

Some people are trying to have it both ways me thinks!!

Joseph Kuhr

gurramok wrote: »

If they didn't find it hard to get 92% mortgages, why are they staying away? An answer about doom and gloom is no good

I'd like to see your statistics on 100% mortgages. I'm guessing very few people were stupid enough to take these out. The fact that people have to have a deposit to buy a home means nothing and yes the reason people are staying away is part doom and gloom and part greed. FTBs these days are a generation who have never had to work for anything.

I'm not denying prices are declining and will decline further. Nor am I a vested interest. What I'm saying is there's great value out there now for the majority of people who are moving and waiting any longer makes little sense at all. If people can't see that then great, all the better for those who can.

gurramok

Joseph Kuhr wrote: »

I'd like to see your statistics on 100% mortgages. I'm guessing very few people were stupid enough to take these out. The fact that people have to have a deposit to buy a home means nothing and yes the reason people are staying away is part doom and gloom and part greed. FTBs these days are a generation who have never had to work for anything.

As you never bothered to look it up yourself, here's some.
http://82.195.132.30/uploadedfiles/market_news/pdf/2007%20Aug%20-%20H&MacD%20Market%20Outlook.pdf

Other data published in the Housing Bulletin show that 50 per cent of all new house purchase loans paid out in 2006 was to first-time buyers, of which 36 per cent was for the full purchase price of the home i.e. 100 per cent mortgages. More up-to-date data from Irish Mortgage Corporation for the first six months of 2007 show that 24 per cent of first-time buyers borrowed 100 per cent of the purchase price

Here's more http://www.mymortgages.ie/mortgage_news/irish_mortgage_news.html
35% of FTB mortgages were 100% in second half of 2006

100% mortgages have been around since at least 2005 and pimped heavily by the banks, were you in the country at that time?

Joseph Kuhr wrote: »

I'm not denying prices are declining and will decline further. Nor am I a vested interest. What I'm saying is there's great value out there now for the majority of people who are moving and waiting any longer makes little sense at all. If people can't see that then great, all the better for those who can.

I like to see your statistics on this great value for the majority of 'movers'

Ah yes, your contradicting yourself while 'not denying'.
Why wait when that house will be cheaper in a few months, yeh that makes sense all right!

Climate Expert

Looks like somebody has been talking poo.

http://www.rte.ie/news/2008/0820/housing.html

beeno67

Ootermus wrote: »

.

If 100k Poles left this country tomorrow i'd expect rents and house prices to fall significantly within a matter of days

I'd expect a lot more than that to happen. There is only 63000 Poles here in the first place.

Duckjob

beeno67 wrote: »

I'd expect a lot more than that to happen. There is only 63000 Poles here in the first place.

:D

Joseph Kuhr wrote:

I'm not denying prices are declining and will decline further. Nor am I a vested interest. What I'm saying is there's great value out there now for the majority of people who are moving and waiting any longer makes little sense at all. If people can't see that then great, all the better for those who can.

Not sure what you mean here. Are you arguing that there's little sense in people waiting to move from one home to another or little sense in FTBs waiting to buy?

Ootermus

beeno67 wrote: »

I'd expect a lot more than that to happen. There is only 63000 Poles here in the first place.

Touché.

However, while 63,200 or so were here for the 2006 census, i think we all know the real number is much much higher. I've seen crazy estimates as high as 250k, but i'd imagine the real number is probably something like 125k.