David McWilliams predicts further 50% fall in house prices

K-9

smccarrick wrote: »

Its a safe bet mortgage relief will be abolished for all (as oppossed to the current Year 7 cut-off, and for investors- mortgage interest will no longer be an allowable as a tax deductable cost....

YEP, for anybody buying, do not factor in Mortgage Interest Relief. It's gone after 7 years anyway and there could well be more cuts to the FTB relief.

K-9

blast05 wrote: »

Good debate.
Smccarrick - as already commented by others, i pretty much always agree with your comments. However, your comment i have pasted below is that 1 in 100 i have to disagree with. Not of course that it is impossible that wages will stagnate but if they do then it will be like Japan and thus interest rates will have to stay low for the 10 years ..... i.e.: if you argue that wages will stagnate for a decade then i would argue you have to accept that interest rates will also remain very low for a decade ...... you are using both points to support your argument.

And interest rates are outside our control, unlike Japan.

johnnyskeleton

smccarrick wrote: »

The totally unprecedented interest in

1. Unpaid leave
2. Career breaks of up to 10 years duration
3. Early retirement

post the budget and the public sector/private sector bashing- would lead one to disagree with your hypothesis. Those elements of the public sector who have the opportunity to vote with their feet- are doing so.

I accept what you are saying, but don't accept that it disproves my point. Each individual will do what they think is best. In a similar vein, let's look at the workers in Luftansa (i've heard the same is true of Dell true but haven't it confirmed) who rather than take a paycut, lost their jobs, to go into no other job. There is a feeling in Ireland at the moment that people would cut off their nose to spite their face. When the chips are down, we won't want for people looking for jobs in the public as the private sector.

smccarrick wrote: »

It would be fairest on the public sector to be honest- to focus on where the bulk of the waste is- the HSE. The civil service is already at the lowest level per head of population in the world- and good luck with any plans to reduce nos of teachers/gardai etc......

The HSE, parliamentary aides, quangoes, the courts service, semi state bodies, across the board there are a lot of administrative jobs that can be cut without too much difficulty. As I said in my previous post, the cuts of the admin staff would make it easier to get essential staff to take a pay cut.

smccarrick wrote: »

Ps- what do you consider to be a 'modest paycut'? Are you looking at gross salaries- or takehome pay. If its the latter- both the public sector and the private sector are already experiencing a cut of between 20 and 30% on average in take-home-pay (not gross salaries). If you whack another 20-30% on this- its not that you'd have people striking- its that you'd have them in sleeping bags outside the local church.

Gross salaries, I don't agree with this "let's call it a pension levy malarky". Calling it a pension levy has only made it worse in my view. The level of cut should obviously be gradient and based on market forces. If you will not get a suitable candidate for the job of Forensic Science Lab Technician for any less then you are paying now, then, such being an essential part of the public sector, there shouldn't be any cuts. By contrast, there is no point paying a secretary X when you can get a more experienced secretary for X-5k or whatever. At the really top end, there is no justification for senior RTE staff earning half a million for a few hours work. There are plenty of new faces that could do the job just as well, in fact I don't see why Pat Kenny was ever considered suitable for the job.

Public sector employees should earn a fraction less than private sector employees in a similar job of similar qualifications. This stands to reason as the public sector is more vocational, gives the satisfaction of working for the public good (I know), comes with a safer pension etc. As things stand, public servants are earning significantly more than their private sector equivalents. This is not a public/private rivalry, it's that when viewed as a whole, it is the private sector, not the public sector, which drives a capitalist economy.

smccarrick wrote: »

People made plans on the basis of assurances made to them by the government and the media- who deserted them for greener pastures. The Irish people have the highest private debt per capita- in the whole world. People are at breaking point. When interest rates return to 'normality' (taken by the ECB to be between 4 and 5%) this will be sufficient to put a large portion of the Irish public over the edge- before any other factors at all are taken into account.

I know it's sad, I wish everyone could have a good salary and comfortable life, but the factors you mention are currently affecting the private sector as badly if not worse.

smccarrick wrote: »

We have a mess....... You're not going to solve it with your proposals. Some elements of them will have to be implemented- but its simplistic to suggest- fire the public sector and country will be out of the doldrums. Make effigies of the bankers and burn them outside Dail Eireann...... It might not achieve anything- but it would make people feel a little better for a while.......

No, I didn't suggest cuts in public sector pay as a panacea and didn't suggest burning effigies of the bankers. But increasing taxes and drastic cuts in the minimum wage are not the way to solve our problems either. In fact, they may only exacerbate the situation.

smccarrick wrote: »

Why not? We have the highest minimum wage in the world. Contrary to people's widespread beliefs, we do not have the highest cost of living in the world. Studies (by the ESRI, Alan Matthews in Trinity and the Smurfit Business School) have shown the manner in which reducing the minimum wage increases economic activity. Its accepted as fact.

Do those studies take into consideration the recession? I do not believe that cuts in the minimum wage would stimulate economic activity at present, as investment in new businesses and expansion of current businesses is quite low. Cuts in the minimum wage could stem the tide of job lossess, but not massively, and into that you have to factor in that however bad things are for the public sector employees on €23k, things are a lot worse for those on the minimum wage of €17k. For both I accept it is difficult to make your way, which is why cuts should be limited to being kept in line with deflation and/or slowly reduced when there is inflation again.

smccarrick wrote: »

Those who are recently unemployed are claiming an allowance they have paid for with PRSI contributions- rather than an unfunded benefit. Those on longterm unemployment *need* to be pressurised into retraining themselves- by making further benefits contingent on attending and successfully completing prescribed courses in areas seen as crucial for the Irish economy- such as IT and the sciences. If necessary- pay them to get their leaving certs and college qualifications. Do it though.

I agree with you, but I am a bit more of a heartless bastard which is why I suggest reduced social welfare for long term recipients of jobseekers (as opposed to pension/disability/carers etc).

I should add that my views on cutting state spending have nothing to do with public/private rivalry, but are instead based on the fact that our public spend as a % GNP is shockingly close to countries that have much better state benefits than us. It is therefore clear that we either need to cut public spending or else keep it the same but get much better service out of it.

blast05

And interest rates are outside our control, unlike Japan.

Yes, i know. But can you really see a situation where an open economy like Irelands will still have wage stagnation (and thus low to no growth) in 10 years time while the main economies in Europe are driving interest rates up to control inflation and prevent their growing economies from over-heating ?

Wage stagnation for 10 years would imply low interest rates for 10 years imho

quozl

blast05 wrote: »

Good debate.
Not of course that it is impossible that wages will stagnate but if they do then it will be like Japan and thus interest rates will have to stay low for the 10 years ..... i.e.: if you argue that wages will stagnate for a decade then i would argue you have to accept that interest rates will also remain very low for a decade ...... you are using both points to support your argument.

How about wage stagnation in Ireland, and rising interest rates because the rest of the eurozone is suffering inflation?

That's what I'd expect.

We will have wage stagnation because we're ridiculously over-paid currently, thanks to our debt fueled spending spree.
And we don't have control over our interest rates, as pointed out, so even if we're stagnating, and we need wages stagnating or decreasing, then if the rest of the eurozone picks up, the ECB will set interest rates for germany, france, etc, not for us.

So having both is not only possible, I'd consider it probable.

The_Conductor

blast05 wrote: »

Good debate.
Smccarrick - as already commented by others, i pretty much always agree with your comments. However, your comment i have pasted below is that 1 in 100 i have to disagree with. Not of course that it is impossible that wages will stagnate but if they do then it will be like Japan and thus interest rates will have to stay low for the 10 years ..... i.e.: if you argue that wages will stagnate for a decade then i would argue you have to accept that interest rates will also remain very low for a decade ...... you are using both points to support your argument.

What quozl is suggesting is possibly more probable that actual cuts in gross salaries- but if you talk to any reputable recruitment consultant- they will readily tell you that the going rates for most skillsets are in freefall.

I think we are in for a few years of falls- before we hit a period of stagnation. I also think this has to occur hand-in-hand with a cut (or even the abolition) in the minimum wage. Only when the government has stopped trying to manipulate the market- will the market determine the going rate for different jobs. By all means- make the availability of income supplements more obvious to those on lesser salaries- but to blatantly tell employers that they have to pay X or Y- is creating needless redtape that is discouraging the creation of employment- particularly in the service sector. I am not suggesting that the way forward is a massive expansion in the service sector- however in an Irish context it would be one way to try to encourage domestic expenditure and consumption- which is currently lacking.......

With respect of the studies done on the minimum wage- Alan Matthews latest research has taken the recession into account- the other research I referred to (from the ESRI and Smurfit Business school) is from better days before the current mess. I am sure there is more current research in the public domain- I spent a little while looking- but its not my particular field of expertise- perhaps someone can help me out on this one?

With respect of what is likely to happen with interest rates- the ECB board members are in open revolt on interest rate policy at present (as has been reported extensively in the FT). The current sticking plaster is a statement that rates may in fact go lower than 1% (something previously categorically ruled out). Some board members (in particular the Spanish member) are increasingly willing to push their own agendas. The Irish agenda (which we are too timid to push) is closely aligned to the Spanish agenda.

The stated aim of the ECB is to restore growth to the Eurozone in a 3 year window (level of growth unspecified) and to maintain inflation at below 2% (something the Germans are fastidious about). Given the current economic climate, and in particular consumer sentiment over much of the continent (curiously enough- sentiment levels are significantly higher in our former Eastern Block members- than they are in the old 15)- it is likely that in the medium term (3-5 years) interest rates may remain below 'normal' levels (defined as ECB overnight rates of between 4 and 5%).

So- it is not as unlikely as you might think, that we may have a protracted period of low interest rates- in tandem with poor consumer sentiment, low inflation, poor growth etc. The Eurozone as a block, is an export orientated economic entity- and is reliant on global factors over which it has very little control to stoke the flames of growth again. Several measures are underway in different national countries (notably France and Hungary) to try to encourage domestic consumption- to date with very limited results. The German car scrappage scheme that is being widely imitated elsewhere (notably in the UK) is already in disrepute- and has decimated the resale values of secondhand cars- as they effectively have a universal floor value of EUR2k at 10 years of age- irrespective of the relative merits of the cars (the example used in last weeks Der Spiegel- showed 10 year old CK200's being crushed- how on earth does that make sense?)

We really are in uncharted territories- the problem is the Irish response is akin to a cross between an ostrich and a gorilla approach- on the one hand ignore major problems (such as private sector indebtedness, irrational social welfare entitlements, a dysfunctional HSE and wages and costs that are totally out of control), and instead focus on lesser problems (but still big problems- such as the complete and utter disintegration of the banking sector). Why are we even playing the illusion that we have a private banking sector anymore? Anyone who listened to Michael Summers in front of the Public Finance Committee in the Oireachtas last week- should be quaking in their boots.......

There are many many factors over which we have very limited influence or control- however the vast number of possible actions that we could be taking- are being ignored by those who can take them. That a particular course of action would be 'politically irresponsible', as Micheal Martin said on the Week in Politics- should be regarded as recognition of who the politicians are really in favour of saving- themselves and their own skins. I am not suggesting any particular political party is any better or worse than any other one- simply- that they do not have the best interests of the country at heart, and if the public expect them to- they are deluded at best.......

Enough ramblings from me- I've got to run.

SMcCarrick

gurramok

TaxiManMartin wrote: »

All of your arguments here are speculation.

My point :
People who say mortgage payments are cheaper than rental payments on the same property are actually not talking through there arses.

You are flying in arguments about ifs and buts that may or may never happen. Keep going by all means.
You're actually coming out worse than the idiots who pulled down any possible argument they could find for property prices rising.

Give us examples to back up your argument. You're new to the forum, we use figures here to support our views, i have not seen any from you to support your thesis.

Either that or you are talking through your arse

TaxiManMartin

gurramok wrote: »

Give us examples to back up your argument. You're new to the forum, we use figures here to support our views, i have not seen any from you to support your thesis.

Either that or you are talking through your arse

I believe i did.
And just for pig iron i did a search on the same stuff and you come up a hell of a lot of times asking for examples of exactly the same thing and then ignoring them when they are given. I dont have the patience to argue with you and have to go to work.

I provided you with sites to work it out. But i know you wont from your reaction to others giving you the figures, so i dont really see the point.

Dob74

quozl wrote: »

How about wage stagnation in Ireland, and rising interest rates because the rest of the eurozone is suffering inflation?

That's what I'd expect.

We will have wage stagnation because we're ridiculously over-paid currently, thanks to our debt fueled spending spree.
And we don't have control over our interest rates, as pointed out, so even if we're stagnating, and we need wages stagnating or decreasing, then if the rest of the eurozone picks up, the ECB will set interest rates for germany, france, etc, not for us.

So having both is not only possible, I'd consider it probable.

Only one problem, if wages stagnate and interest rates rise.
We will never be able to move the mountain of debt on us.
The cost of paying back our loans will crush us.

We are screwed either way:(

johnnyskeleton

TaxiManMartin wrote: »

I believe i did.
And just for pig iron i did a search on the same stuff and you come up a hell of a lot of times asking for examples of exactly the same thing and then ignoring them when they are given. I dont have the patience to argue with you and have to go to work.

I provided you with sites to work it out. But i know you wont from your reaction to others giving you the figures, so i dont really see the point.

I think it would be fairer to say that there are many threads where gurramok has asked for examples and people have either refused to do so, or have given a skewed example and when asked to consider other factors, declined to do so.

If you really have seen a lot of such threads, it wouldn't be too much effort or an invasion of your privacy if you were to post a link to those threads here, would it?

Kine

D3PO wrote: »

thats what you get when you have a laywer in charge of the countries finances.

Oh jesus dont get me started on that "area" of politics....

Social worker as Tainiste anyone?!

gurramok

TaxiManMartin wrote: »

I believe i did.
And just for pig iron i did a search on the same stuff and you come up a hell of a lot of times asking for examples of exactly the same thing and then ignoring them when they are given. I dont have the patience to argue with you and have to go to work.

I provided you with sites to work it out. But i know you wont from your reaction to others giving you the figures, so i dont really see the point.

Nope, i do not see any monthly mortgage payment examples\rent on a single property you posted.

Post your figures here to back up your assertion that "People who say mortgage payments are cheaper than rental payments on the same property are actually not talking through there arses."

..if you don't, its baloney!

TaxiManMartin

johnnyskeleton wrote: »

I think it would be fairer to say that there are many threads where gurramok has asked for examples and people have either refused to do so, or have given a skewed example and when asked to consider other factors, declined to do so.

If you really have seen a lot of such threads, it wouldn't be too much effort or an invasion of your privacy if you were to post a link to those threads here, would it?

Heres an example. Though its nothing that hasnt been posted before in other threads by other people as far as i can see.
Its just that people ignore them and pretend they never saw examples the next time the subject comes up.

Im not going to pick specific properties. Too many to choose from. You can choose whatever ones you want and adjust the amounts for them.

€300,000 house in Dublin from Daft (choose any, and look up the rent of similar on Daft)
Knock 10% of both the house price and the rent (more if you want)

€270,000 paid for house
€220,000 mortgage

€1210 per month (before interest relief for 1 or 2 people) 25 year mortgage fixed for 10 years at 4.41% APR (AIB)
or
€1125 per month (before interest relief for 1 or 2 people) 25 year mortgage fixed for 5 years at 3.69% APR (AIB)



Adjust amounts to suit whatever deposit is paid or whatever you think you'll get knocked off the house price or the rent.

Interest relief is not gone yet, and there was no mention of it going for first time buyers at all. So no point speculating about it being gone.

johnnyskeleton

TaxiManMartin wrote: »

Heres an example. Though its nothing that hasnt been posted before in other threads by other people as far as i can see.
Its just that people ignore them and pretend they never saw examples the next time the subject comes up.

Im not going to pick specific properties. Too many to choose from. You can choose whatever ones you want and adjust the amounts for them.

€300,000 house in Dublin from Daft (choose any, and look up the rent of similar on Daft)
Knock 10% of both the house price and the rent (more if you want)

€270,000 paid for house
€220,000 mortgage

€1210 per month (before interest relief for 1 or 2 people) 25 year mortgage fixed for 10 years at 4.41% APR (AIB)
or
€1125 per month (before interest relief for 1 or 2 people) 25 year mortgage fixed for 5 years at 3.69% APR (AIB)

That's not an example at all. You see, if I respond (like I've done many times before) and I chose a property, you will simply reply "you chose an overpriced/low rent property", so I can't win. Also, your argument is predicated on the basis that you can get the property for 10% less than its worth, in which case you must accept a 10% reduction on rents too.

Here's an example, one based on a development that has particularly low purchase prices and fairly high rental prices:

Single person under 55 wants a 2 bed apartment in castleforbes square to live in for 10 years which he will then sell on. He has €30k saved up.

1) To buy €250k
less 25k deposit €225k. He spends the remaining 5k on an initial kit out.
at AIB's 10 year fixed rate 4.41% (so that interest rate fluctuations are not a factor) = gross monthly payment of €1,412.55 over 20 years, or €169,506 in total over 10 years (€89,040.48 capital repayment, €80,465.52 interest).
less TRS (for first 2 years €4808.66. for years 3,4 & 5 €5913.62 and for years 6 & 7 €3,124.75 total = €13,847.03)
plus managment fees of, say €1800 for 10 years = €18,000
plus repairs, refurnishing etc of say, €1,000 p.a. = €10,000
plus insurance (building no contents) say €300 p.a. = €3,000
plus solicitor's fees €1,000


After 10 years, you have spent a net total of €187,658.97 have €135,959.52 remaining on the mortgage, and are no longer a FTB.

2) To rent €1,300 per month
or €156,000
less tax credits of €400 per year or €4,000

After 10 years you have spend a net total €151,000 on renting, and have a deposit, let's say (since we used fixed rates above) that you got a fixed rate of 4% for 10 years less 25% dirt = 10.8k interest on 30k or 40.8k.

3) So far, based on the equity built up in the mortgage, buying looks like a better option. If the purchasor can sell for what he paid, then he will net a cool €135,709.52 less solicitors fees and estate agents fees of say €3,500 is €132,209.52. He has spent €36,658.97 more than the renter (let's ignore interest on this figure), so the net benefit of buying is €95,550.55, while the net benefit of renting and saving is €40.8k. The purchasor is €54,750.55 better off than the renter.

4) The next part is the crucial part, and involves a level of guesswork. So, will house prices drop and how far, and will rents drop and if so how far? I don't propose to answer this, as it is up to everyone to decide for themselves. Prices and rents could even go up. But just to put it in context, if the house price drops by 21.9% it will negative all the gains for the buyer over the renter. If rent on such a property drops to €843.75 (on average and excluding interest) then that would also negative the gains to the purchasor. A combination of drops in both price and rent would also do the same (e.g. rents of €1k and house prices drop 7% would see the same result). Another factor to consider is that when the purchasor goes to buy again, he will have to pay stamp duty, which could be a significant cost, and on his next home he will get less tax relief.

IMO, rents and house prices are going to drop further, above the levels posted above. However, people who think they will drop by less or will increase can buy if they like and take that risk.

5) you should also factor in the human factors - do you feel safe "owning" as opposed to renting, do you want to be able to move at short notice, what if the property is crap/noisey, or what if in a few years time all your neighbours behave badly and the area is no longer as pleasant. These factors are of some significance and it really depends on the person.

6) Ultimately though, what can be said? Well:
a) in the longer term, buying can be cheaper
b) if we are going to see inflation, fixed rates are a good idea
c) to buy or sell depends on personal circumstances
d) don't forget that the property above is a reduced price (in fact, I think that €250k is just a headline price and most of those apartments are going for about 300k at the moment) and is in a high rent area.
e) there is no certainty, and every way is a gamble.

I don't think that the 10 year argument particularly applies to the people who advise not to buy at the moment. Most, I think, would advise renting for the moment, and buying when the price has been reduced further. This would be the best of both worlds.

Feel free to add anything I might have missed, or to give your own example, using specific figures.

RandomAccess

I've read through the entire thread and its been great reading.

One point thats been raised a few times is that people expect house prices to rise strongly again at some point, I'm not entirely convinced that this will happen for the following reasons.

1. A carbon tax for homes is expected in the next Carbon budget (Yes we have a Carbon budget). This will make it far more desirable to own a new/newer home. We are moving towards having all new homes built to passive house standards. This is not a standard which can be achieved by retrofitting insulation to an existing home. The government recently changed our car tax rates so they are tied to CO2 emissions and this has had a marked effect on the purchasing habits of buyers. Buyers will expect Prius/TDi levels of frugality from homes.

2. We will likely see a move away from traditional home design and construction methods, to homes which are more advanced in every way. We have some examples of these smart homes at the high end of the market, they provide advanced zoned heating and lighting, have brighter better designed internal spaces which take advantage of solar gain, and are generally more pleasant places to live.

3. Many of the homes built during the boom have construction/design flaws and compromises which will make them substantially less desirable in future. Poor soundproofing, draft proofing, poor ergonomics. Many housing estates have homes which face in every possible direction to make the most use of the available land.. so much for a south facing garden!

4. The BER is something which I put quite a lot of faith in, as I have rented some fairly poor homes over the years. People are going to expect a lot more from homes from now on.


I reckon that much of our boom era (98 onwards) housing stock will decay in value and some of the worst will become obsolete and have to be torn down.

I'm aware that this sounds overly pessimistic on first reading, but I'm thinking about the long term value of homes. Particularly those in housing estates with an eye to 20-30 years in the future. I would consider any building a depreciating asset unless it has some considerable architectural merit. Once the mortgage has been paid off, will you have an asset? or just a building site for the next generation? And if you live in a housing estate you don't even have that!

You may counter that your parents home value didn't dissolve like toilet paper, but then home design and construction hasn't changed much since the 80's so with a bit of work the home can be brought up to our wonderful boom era building standards. This just isn't going to happen in the future.

gurramok

Stress tests on mortgages mean 'high earners' only get the low rates

http://www.independent.ie/business/personal-finance/property-mortgages/bank-accused-of-restricting-mortgages-with-tough-rules-1744558.html

AIB is publicly claiming that new borrowers can get a rate of around 2.25pc.

But -- along with Permanent TSB and other lenders -- it will now only approve home loans for borrowers who can cope with repayments if interest rates more than double to 5pc.

Permanent TSB said it will only approve mortgages for people who can make repayments if rates reach 6.15pc.

Mortgage brokers said this "stress testing" of potential borrowers by AIB and Permanent TSB was a way of cherry picking the market, and meant that only high earners would now qualify for a mortgage.

Stress testing means checking the income of a mortgage applicant to see if they can still meet repayments if interest rates are much higher.

The Permanent TSB changes mean it will only approve mortgages for first-time buyers and those switching home loans if they can show that they will still be able to meet monthly repayments on a €300,000 mortgage if repayments surge from €1,300 a month to €1,800.

The new rules are far more restrictive than the "stress testing" level required by the Financial Regulator.

Mortgage experts said that the changes would mean that someone on an annual income of €30,000 would now qualify for a mortgage of €155,000, some €50,000 less than they could have been approved for last week -- before the new restrictions were introduced.

Consumers' Association boss Dermott Jewell accused the banks of misleading people by advertising one borrowing rate but only approving loans for much higher rates.

He said banks were being hypocritical when they claim that they are providing credit.

Operations director of Irish Mortgage Brokers Karl Deeter said the changes meant that only people on very high incomes would qualify for mortgages under the new rules.

"AIB and Permanent TSB are using this stress testing as a way to restrict credit. They have decided that they are only going to lend to the cream of the crop. They are saying that you will need to earn a shed load of money to qualify."

Frank Conway of Irish Mortgage Corporation said: "All of the lenders are stress testing and some are doing it more visibly than others. AIB is very visible on how it stress tests whereas other lenders build it into their mortgage calculators."

Mr Conway added that the fact that people would now qualify for smaller mortgages meant that house prices would be forced to fall further.

quozl

Mortgage experts said that the changes would mean that someone on an annual income of €30,000 would now qualify for a mortgage of €155,000, some €50,000 less than they could have been approved for last week -- before the new restrictions were introduced.

So someone on 30k can get over 5 times their salary?
That's not restricting mortgages to high earners, it's restricting mortgages to sane multiples. House prices will fall to where people on 30K can buy a reasonable property if these lending practices continue.

This is not the ordinary people getting scr3wed as it seems to be being protrayed in the paper's quotes as, but the ordinary people being helped. Great news, imo.

harsea8

gurramok wrote: »

Stress tests on mortgages mean 'high earners' only get the low rates

http://www.independent.ie/business/personal-finance/property-mortgages/bank-accused-of-restricting-mortgages-with-tough-rules-1744558.html

I know this is probably an unpopular viewpoint, but I'm not so sure this is a bad idea. Making sure that someone can afford to pay their mortgage in the eventuality that interest rates return to a (sort of) average level for the EU makes sense to me. A bit of common sense by the banks was sorely lacking over the past 5-10 years, so I think this is a step in the right direction.

What is worrying though is that in the example they give, "Mortgage experts said that the changes would mean that someone on an annual income of €30,000 would now qualify for a mortgage of €155,000, some €50,000 less than they could have been approved for last week -- before the new restrictions were introduced." they seem to be suggesting that they are still happy to lend 5x the annual salary, which is excessive IMO (or have I missed something?)

blah

As part owner (i.e. Taxpayer) of AIB do you feel re-assured that AIB are now implementing prudent lending policies?

Or are you outraged that they are being tight with the 3.5 billion taxpayers gave them, and believe that if they reverted back to the same generous policies of the boom then the economy would turn around?

harsea8

RandomAccess wrote: »

I've read through the entire thread and its been great reading.

One point thats been raised a few times is that people expect house prices to rise strongly again at some point, I'm not entirely convinced that this will happen for the following reasons.

1. A carbon tax for homes is expected in the next Carbon budget (Yes we have a Carbon budget). This will make it far more desirable to own a new/newer home. We are moving towards having all new homes built to passive house standards. This is not a standard which can be achieved by retrofitting insulation to an existing home. The government recently changed our car tax rates so they are tied to CO2 emissions and this has had a marked effect on the purchasing habits of buyers. Buyers will expect Prius/TDi levels of frugality from homes.

Interesting point and not something I am that aware of. My concern would be that we have situation where there is an excess of houses in this country. Surely we would be looking at that excess being used up before we can expect to see newbuilds built to these passive housing standards? Will we really see a situation where thousands of poorly built boom homes and homes built in last 20, 30, 40 years (which don't meet these standards and cannot be retrofitted) are simply standing empty or are unsellable (sp?) whilst brand new ECO-homes are built down the road?

I'm not disputing what you are saying BTW, just intrigued as to how this "sea of change" will come about.

bullpost

harsea8 wrote: »

Interesting point and not something I am that aware of. My concern would be that we have situation where there is an excess of houses in this country. Surely we would be looking at that excess being used up before we can expect to see newbuilds built to these passive housing standards? Will we really see a situation where thousands of poorly built boom homes and homes built in last 20, 30, 40 years (which don't meet these standards and cannot be retrofitted) are simply standing empty or are unsellable (sp?) whilst brand new ECO-homes are built down the road?

I'm not disputing what you are saying BTW, just intrigued as to how this "sea of change" will come about.

IMO I think this point of view ignores the obvious factor of Location,Location,Location. Most of the desirable locations are already occupied by old-stock housing and these will continue to be coveted for a long time into the future.

RandomAccess

harsea8 wrote: »

Interesting point and not something I am that aware of. My concern would be that we have situation where there is an excess of houses in this country. Surely we would be looking at that excess being used up before we can expect to see newbuilds built to these passive housing standards? Will we really see a situation where thousands of poorly built boom homes and homes built in last 20, 30, 40 years (which don't meet these standards and cannot be retrofitted) are simply standing empty or are unsellable (sp?) whilst brand new ECO-homes are built down the road?

I'm not disputing what you are saying BTW, just intrigued as to how this "sea of change" will come about.

To take the first point,
"Surely we would be looking at that excess being used up before we can expect to see newbuilds built to these passive housing standards?"

Not really, there are bound to be a minority of developers who were not badly exposed to the property crash. They will buy up the now cheap development land and begin construction of homes which they think will sell, in the current climate I reckon passive homes and so on would be a relatively easy sell. I expect people will still be spending a considerable sum on homes, obviously not as much as they did during the boom years but enough to net the developer a good profit, especially when you consider that he can get labour and materials for recession prices and that his biggest cost which is the development land is now much more affordable.

As for the rest of your point,
Well homes are now coming with Energy labels, and the standards are going to move forward. People are buying houses based on the traditional measures of location, space, aesthetic appeal, as well as new attributes such as power efficiency. I believe its only a matter of time before water rates come in as well and we have a further tax and something similar to a BER cert.

Homes are coming on the back of a truck, we have the huf house kit, and now Ikea are even selling homes.

I'm not saying its going to happen overnight, but if people are offered a choice then they will vote with their feet.

I'm just trying to think ahead now that the blinkers are off.

RandomAccess

bullpost wrote: »

IMO I think this point of view ignores the obvious factor of Location,Location,Location. Most of the desirable locations are already occupied by old-stock housing and these will continue to be coveted for a long time into the future.

Yes, but which is the coveted asset? Is it the location or the old-stock housing. A short browse around MyHome.ie or Daft will turn up some truly rubbish houses in desirable areas which have million euro plus price tags attached. Many of those will have to say hello to a bull dozer before people would want to live there.

Obviously there are homes which deserve to stay standing as I mentioned in the original post, such as classic red bricks and so on. "I would consider any building a depreciating asset unless it has some considerable architectural merit"

If you look at an example from McWilliams favourite country Japan,

http://en.wikipedia.org/wiki/Housing_in_Japan

"As houses age, owners replace them. A common pattern is to rebuild on the same site. To accomplish this, the occupants move to a temporary residence. A contractor demolishes the old structure and builds a new one on the grounds. The residents can then return to the location. Not having moved, they enjoy the convenience of keeping the same address, telephone number, and utility accounts, as well as avoid the cost of purchasing new land. Because of the wooden construction and relatively short lifespan of Japanese houses, this is often considered cheaper than maintaining the old structure."

In Ireland we tend to pay for the potential of a site. Just look at all the ads which say something to the effect of "ample opportunity for expansion subject to planning permission" or "requires extensive modernisation" The property in this example would be priced at a level very similar to one which had already had the work done. We don't seem to understand that a doer-upper should be priced accordingly.