David McWilliams predicts further 50% fall in house prices

ionapaul

There are hundreds of empty apartments within the M50 in Dublin, there could be thousands. Many are unsellable at current prices. Why exactly are we focusing on the BMW region?

SoupyNorman

jmayo wrote: »

As both SMCCarrick and Fozziebear have pointed out it is just not the BMW region that have half finished or unoccupied estates.
Take a drive around Carlow, a commuter town for Dublin has one estate that is empty with entrance gate locked up.

BTW looking at your post you appear to have a condescending atttidue towards BMW region. Planning was also granted in villages and towns in the East with no regard for local infrastructure that couldn't cope with influx of people who would be of course commuting to Dublin.
That is just as bad as giving planning in the ars*whole of nowhere as you term it.

Just to make a point clear, I have nothing against the BMW region (I survived 4years of college in Athlone!).

The reason I focused on that area is because back at the end of the summer last year when things were ''going gimpy" the news and media used those areas in a kind of shock tactic way as they do.

The truth is it is country wide of course but it is also true to say that those areas have quite low levels of development, both in terms of industry and infrastructure (although it's getting better) which makes them less attractive places to live.

The_Conductor

SoupyNorman wrote: »

those areas have quite low levels of development, both in terms of industry and infrastructure (although it's getting better) which makes them less attractive places to live.

You could say the exact same about some areas of Dublin that have turned into monstrosities- look at Lucan- or Clonee for example- absolutely no thought whatsoever given to infrastructure, facilities or amenities- just a 'build the houses and they will come' mentality. As for industry- once again- look at some areas of Dublin- there are more unemployed people in Tallaght than there are in Donegal, Sligo, Leitrim and Mayo- combined.....

The EU Commission organised education tours of Ireland for new memberstates on accession- to show them examples of what the implications of rampant development without a coordinated structural plan would be. Hopefully they learnt some lessons from us- we obviously haven't learnt those lessons ourselves, even now.

The BMW areas were always a favourite with the media- because these were considered to be the 'less developed areas' of the country (and were the lions share of EU structural funds were focused). Much of the development there, while akin to elsewhere, was done solely for tax purposes without any thought given to actual purpose (other than tax shelters). As tax shelters- they were very useful- who wouldn't want to pay no tax- but as a means of providing needed accommodation- they were a disaster.

Politicians tried to use decentralisation as a means of giving many of these areas a boost- but this was an abject failure- because it totally re-wrote social planning, and destroyed the concept of a number of 'gateway towns' in the different regions. Were both financial incentives and other measures targetted to the benefit of these gateway towns- it could very well have been a roaring success- but instead parochial politics stepped in, and any benefit that might accrue got frittered into nothingness- as TDs, Ministers and others- cajolled for their slice of the action for their constituents.

SoupyNorman

smccarrick wrote: »

You could say the exact same about some areas of Dublin that have turned into monstrosities- look at Lucan- or Clonee for example- absolutely no thought whatsoever given to infrastructure, facilities or amenities- just a 'build the houses and they will come' mentality. As for industry- once again- look at some areas of Dublin- there are more unemployed people in Tallaght than there are in Donegal, Sligo, Leitrim and Mayo- combined..... .

I agree with all but this, I don’t believe you can compare the Dublin commuter belt areas with rural areas. The likes of Lucan and Clonee were more like spill off zones for the rapid population growth in Dublin; the reason for the growth was Dublin having a big bright ‘Job Vacancy’ sign hanging over it. I do agree that there was no thought put into incorporating schools/shops/medical facilities into any of these areas which made them inconvenient places to live from the point of view of the home owners.

Areas in BMW and other rural regions will never turn into monstrosities, not even if they ran an Autobahn through it, years of neglect from the government has done irreparable damage, too late for the European subsidies to rectify and certainly too late for any sort of de-centralization to have an impact (even if it was rolled out with any degree of competence)

When all is striped away, the planning authority are the ones who have the most to answer for but of course they will never have to.

Kipperhell

SoupyNorman wrote: »

When all is striped away, the planning authority are the ones who have the most to answer for but of course they will never have to.

I think people here have a distorted view of what happens in this country. Corruption starts at the low level of somebody asking their local TD to do something for them. The TD does it and the people give him their vote. Basically that is corruption as we all know people who suddenly go up in a queue after subvention.

Now if 20 families start complaining about the planning they can't get and house prices the TD puts pressure on the planning people and when you have numerous TDs doing this you get bad ideas becoming bad realities. The planning authority is overridden by people power.

There really is only one way to sort this out and that starts with the people of Ireland to not to participate in corruption and put politicians that interfere with civil service into jail. I personally believe the government leave things in bad order so they can trade their fixing the problem for votes. When I go to a TD I want them to fix the problem with the system not fix my problem. I have met very few people who look past their own problems when going to a TD.

jmayo

SoupyNorman wrote: »

Just to make a point clear, I have nothing against the BMW region (I survived 4years of college in Athlone!).

The reason I focused on that area is because back at the end of the summer last year when things were ''going gimpy" the news and media used those areas in a kind of shock tactic way as they do.

The truth is it is country wide of course but it is also true to say that those areas have quite low levels of development, both in terms of industry and infrastructure (although it's getting better) which makes them less attractive places to live.

No worries, sometimes a bit paranoid what with a few easterners on here wanting everyone to move to cities
4 years in Athlone, I shall say nothing

You know one of the interesting things, one of the few councillors of any hue that complained about housing planning in small villages in Roscommon was the one they all treat as an eejit, yer man Ming the Merciless of legalise cannabis fame.
He actually objected to another housing estate being built in a local village, since the first one was already empty and actually of a poor build quality.
Did they listen, of course not.

smccarrick wrote: »

You could say the exact same about some areas of Dublin that have turned into monstrosities- look at Lucan- or Clonee for example- absolutely no thought whatsoever given to infrastructure,

....
The BMW areas were always a favourite with the media- because these were considered to be the 'less developed areas' of the country (and were the lions share of EU structural funds were focused). Much of the development there, while akin to elsewhere, was done solely for tax purposes without any thought given to actual purpose (other than tax shelters). As tax shelters- they were very useful- who wouldn't want to pay no tax- but as a means of providing needed accommodation- they were a disaster.
...

I thought Clonee was in Meath

Certain villages in Leitrim had huge estates built as tax right offs and they had no other value :rolleyes:
Dromod in Leitrim comes to mind as one example.

MG

The Pope's children being repeated at the moment on BBC4 at about 9pm. First epidose last night was hilarious. Full of brand new 06 BMWs (it was made in 2006) and builders crowing about easy money. The past, as they say, is a diferent country.

Second episode tonight for nostalgia fans.

In fairness to David he's clear about the warning signs that were there.

MG

MG wrote: »

The Pope's children being repeated at the moment on BBC4 at about 9pm. First epidose last night was hilarious. Full of brand new 06 BMWs (it was made in 2006) and builders crowing about easy money. The past, as they say, is a diferent country.

Second episode tonight for nostalgia fans.

In fairness to David he's clear about the warning signs that were there.

It actually makes you cringe seeing it now. Pity the BBC are showing it because it makes us look (and rightfully so) like some pack of fools.

osurdivol

I can see another 30% coming off max, there is no way they will fall 50%.

The_Conductor

osurdivol wrote: »

I can see another 30% coming off max, there is no way they will fall 50%.

On what basis do you make this assessment?
McWilliams guesstimate is purely hypothetical- but he does provide justification for what he is saying (even if a lot of people would disagree with him). On what basis are you suggesting a further 30% fall is in the offing, and that there is 'no way they will fall 50%'?

S.

partyguinness

I think McWillams is deliberately trying to shock people with figures and trying to bring about a change of attitude and debate.

He prob thinks they will drop about 20-30% but why not use 50% it is more dramatic.

Even this thread is a testament to his logic...just my guess.

spockety

smccarrick wrote: »

On what basis do you make this assessment?
McWilliams guesstimate is purely hypothetical- but he does provide justification for what he is saying (even if a lot of people would disagree with him). On what basis are you suggesting a further 30% fall is in the offing, and that there is 'no way they will fall 50%'?

S.

Ignore it.

I have never, ever, EVER seen someone who argues against the likelihood of various price drops back up their argument with any logical reasoning whatsoever.

You are wasting your breath.

SoupyNorman

spockety wrote: »

Ignore it.

I have never, ever, EVER seen someone who argues against the likelihood of various price drops back up their argument with any logical reasoning whatsoever.

You are wasting your breath.

You could have said similar in the mid 90's about price rises.

ntlbell

SoupyNorman wrote: »

You could have said similar in the mid 90's about price rises.

People who were predicting price rises usually had good reasoning as to why they would rise.

They're falling people have good reasoning as to why.

Now they're falling some people are saying a leveling out or even price rises are imminent with no reasoning...

slightly different.

SoupyNorman

ntlbell wrote: »

People who were predicting price rises usually had good reasoning as to why they would rise.

They're falling people have good reasoning as to why.

Now they're falling some people are saying a leveling out or even price rises are imminent with no reasoning...

slightly different.

Only slightly, and what I said was in 'slight' jest also.


Why so srs Accom and prop forum!

stevedublin

ntlbell wrote: »

People who were predicting price rises usually had good reasoning as to why they would rise.

They're falling people have good reasoning as to why.

Now they're falling some people are saying a leveling out or even price rises are imminent with no reasoning...

slightly different.

whats the reasoning as to why prices will fall then?
Ha?

SoupyNorman

stevedublin wrote: »

whats the reasoning as to why prices will fall then?
Ha?

Supply > Demand

The_Conductor

stevedublin wrote: »

whats the reasoning as to why prices will fall then?
Ha?

That would be:

1. Interest rates are at less that 1/4th what the ECB consider to be 'normal'.
2. Unemployment looks likely to hit 18-20%
3. People's NET income is tumbling
4. Taxes are rising (including a proposed property tax in December)
5. Financial institutions are not lending

- need I go on?

ntlbell

stevedublin wrote: »

whats the reasoning as to why prices will fall then?
Ha?

rising unemployment.
over all reduced income/higher taxes/levy's
credit crisis.
over supply

your still talking 8/9X's the avg ind wage to buy a shoe box

take your pick really.

whizzbang

smccarrick wrote: »

4. Taxes are rising (including a proposed property tax in December)

Really? Anything formally proposed or just rumour? I'm sure they are soarly tempted!

partyguinness

I think its about 10 years too late for a property tax.

I have been working in a property related service industry for the lat 7 years. Most of the people I had buying 2/3/4 houses were not developers of speculators but ordinary folk releasing equity and trying to get on some easy money.

Now they had it planned that they would rent to our nice eastern workers and then sell off in 10yrs for a nice retirement nest egg. Now these people are in big trouble

1. Buying beyond their means;
2. Now no rental income coming in.
3. They are in serious serious trouble and with families etc

A property tax will be the end of them and TBH the Gov will not be able to collect it as people just will not have it to pay.

Steviemak

spockety wrote: »

I have never, ever, EVER seen someone who argues against the likelihood of various price drops back up their argument with any logical reasoning whatsoever.

Is that right??

I think his reasoning is sound and clear - See below from his column today

A house is just a simple investment and should be valued according to some financial benchmark. In America, where they have had booms and busts in every generation, the long-term price of a house is equal to 14 times the annual rent the place can generate. Using this valuation, where could Irish prices go?

So, let's pick a typical ghost estate area such as Oranmore in Galway. If you go on Daft.ie you will find all the answers. If you want to buy a three-bed semi in Oranmore, it will set you back €335,000. However, you can rent the same place for €800 a month. What's more, there are 75 vacant three-bed semis in Oranmore advertised on Daft.ie alone.

Using the American valuation method, it implies that the house generates rent for the owner of €9,600. The house is worth 14 times that which gives us a value of €134,400. Yet the seller expects to get €335,000 for it!

The_Conductor

whizzbang wrote: »

Really? Anything formally proposed or just rumour? I'm sure they are soarly tempted!

Rumour. The story is that they didn't do it in the supplementary budget- as they wanted the local and EU elections, along with the 2nd vote on the Lisbon treaty out of the way first, and they were worried that politically it would be suicide before then. The proposal for a further supplementary budget in September was nuked on the basis that it would further erode what little international faith there is in Irish treasury notes. Btw- there is another 8 billion in short term notes due to be issued tomorrow (all at under 90 days- 4 different redemption dates). We are consistently trading at 2-2.5% above German rates- showing the lack of faith in the Irish Government by international investors- and the credibility problem posed by having to revisit the market so frequently.

The bank guarantee is almost worse than anything else- and is a millstone around the NTMA's neck. Whatever about NAMA- if they renew/extend the guarantee- we are screwed.

The_Conductor

Steviemak wrote: »

Is that right??

I think his reasoning is sound and clear - See below from his column today

A house is just a simple investment and should be valued according to some financial benchmark. In America, where they have had booms and busts in every generation, the long-term price of a house is equal to 14 times the annual rent the place can generate. Using this valuation, where could Irish prices go?

So, let's pick a typical ghost estate area such as Oranmore in Galway. If you go on Daft.ie you will find all the answers. If you want to buy a three-bed semi in Oranmore, it will set you back €335,000. However, you can rent the same place for €800 a month. What's more, there are 75 vacant three-bed semis in Oranmore advertised on Daft.ie alone.

Using the American valuation method, it implies that the house generates rent for the owner of €9,600. The house is worth 14 times that which gives us a value of €134,400. Yet the seller expects to get €335,000 for it!

Your calculation is accurate. The going rate for a long term investment is between 7 and 8% (adjusted for risk). This implies a maximum 14 times annual rent (and more realistically- closer to 12 times) for a property- which internationally is actually on the high side if anything......

S.

spockety

Steviemak wrote: »

Is that right??

I think his reasoning is sound and clear - See below from his column today

I think you misread my post. I said that I have never seen a reasoned or logical argument from people who say that prices are NOT going to drop any further or to the same kind of degree that is suggested.

markpb

partyguinness wrote: »

I have been working in a property related service industry for the lat 7 years. Most of the people I had buying 2/3/4 houses were not developers of speculators but ordinary folk releasing equity and trying to get on some easy money.

I wish we could stop using this phrase and just call it what it is: borrowing money.

partyguinness

markpb wrote: »

I wish we could stop using this phrase and just call it what it is: borrowing money.

Well yes of course it was borrowing money what else would it be..against their family home i.e. getting a top up mortgage to buy elsewhere. Dont see what difference it makes which expression is used.

I was never happy about it.

whizzbang

markpb wrote: »

I wish we could stop using this phrase and just call it what it is: borrowing money.

No! It's vital to release all that money building up in the house, otherwise it will start bursting out of the plug sockets and taps!


ermm, ok, yeah, it is just borrowing money.

whizzbang

partyguinness wrote: »

I think its about 10 years too late for a property tax.

I have been working in a property related service industry for the lat 7 years. Most of the people I had buying 2/3/4 houses were not developers of speculators but ordinary folk releasing equity and trying to get on some easy money.

Now they had it planned that they would rent to our nice eastern workers and then sell off in 10yrs for a nice retirement nest egg. Now these people are in big trouble

1. Buying beyond their means;
2. Now no rental income coming in.
3. They are in serious serious trouble and with families etc

A property tax will be the end of them and TBH the Gov will not be able to collect it as people just will not have it to pay.

i would say they will get more property tax from 1000 people owning 3 properties than from 3 developers each owning 1000 properties. Spread the risk of non-payment. I'm sure they are planning on pushing these property owners as close to breaking point as they can.

Rics

Haven't read the whole thread but I hope the prediction is correct.
Houses here have been hugely over-valued for years.
Plus I need to think about buying one in the coming years so it is also for selfish reasons!

The_Conductor

Its irrelevant- pretty much the bulk of the population under the age of 40 are in a negative equity situation they are unlikely to ever extricate themselves from...... In most cases- its primarily a factor if/when they have to sell- as in the case of ye mini-property kingpin with his/her 6-7 properties- the 'having to sell' will be determined in time by the financial institutions.

The transfer of wealth from the younger generations in Ireland to the older generations- is wholly without precedent in the developed world.....

The_Conductor

Rics wrote: »

Haven't read the whole thread but I hope the prediction is correct.
Houses here have been hugely over-valued for years.
Plus I need to think about buying one in the coming years so it is also for selfish reasons!

By the same reasoning McWilliams is applying to his logic- the average industrial wage is going to take a similar tumble- so from an affordability perspective, you are standing still.......

Small Change

markpb wrote: »

I wish we could stop using this phrase and just call it what it is: borrowing money.

I hear you!!
Here are a few other phrases we could do without aswell,
Credit Crunch, Green Shoots, Bail Out, Property Ladder

All these buzzwords actually stifle proper debate IMO

Small Change

smccarrick wrote: »

Its irrelevant- pretty much the bulk of the population under the age of 40 are in a negative equity situation they are unlikely to ever extricate themselves from...... In most cases- its primarily a factor if/when they have to sell- as in the case of ye mini-property kingpin with his/her 6-7 properties- the 'having to sell' will be determined in time by the financial institutions.

The transfer of wealth from the younger generations in Ireland to the older generations- is wholly without precedent in the developed world.....

I've no data readily to hand, but surely this is overstating it a bit?

The_Conductor

Small Change wrote: »

I hear you!!
Here are a few other phrases we could do without aswell,
Credit Crunch, Green Shoots, Bail Out, Property Ladder

All these buzzwords actually stifle proper debate IMO

'Rent-is-dead-money' is another one that comes to mind (blood slowly beginning to boil)........

ki

HI Rics

I'm looking at buying at the moment as well, It is difficult to know when is the right time...

SoupyNorman

ki wrote: »

HI Rics

I'm looking at buying at the moment as well, It is difficult to know when is the right time...

Well it is pretty clear that now is not so just sit back, relax and rent away. Thats what I'm doing, it's no great science currently.

The_Conductor

Small Change wrote: »

I've no data readily to hand, but surely this is overstating it a bit?

I don't think so to be honest. The younger generations were brainwashed with the 'rent-is-dead-money' argument and actively encouraged at every possible stage to 'get-on-the-property-ladder'. The lack of property was seen as a manner of ridiculing someone (or pitying them, depending on the way one felt towards them). We have had 14 years of this- which equates with 2 or possibly even 3 generations (depending on how you define a generation).

I have precisely zero sympathy for the property magnets who bragged about retiring at 40 with their property portfolios- screw them. Its the average person who was brainwashed by the politicians, media and the older generations- into buying into this madness- who deserve some sort of recognition.

How many people between the ages of 25 and 40 do you know who do not own their own little shoebox somewhere? Not very many, I'll wager. Its not difficult to predict the decimation in price of these shoeboxes...... Sure there are some nice shoeboxes out there- but they're still shoeboxes, you know.......

SkepticOne

faceman wrote: »

My fear is more when the market does bottom out and the "time is right" *crystal ball* and there is a rush to buy property because its so cheap causing a race to snap it out over a short to medium term, artificially inflating prices similar to what we saw in 2006.

As well some people fearing that I suspect there's an even greater number hoping for it.

sneakyST

smccarrick wrote: »

I don't think so to be honest. The younger generations were brainwashed with the 'rent-is-dead-money' argument and actively encouraged at every possible stage to 'get-on-the-property-ladder'. The lack of property was seen as a manner of ridiculing someone (or pitying them, depending on the way one felt towards them). We have had 14 years of this- which equates with 2 or possibly even 3 generations (depending on how you define a generation).

I have precisely zero sympathy for the property magnets who bragged about retiring at 40 with their property portfolios- screw them. Its the average person who was brainwashed by the politicians, media and the older generations- into buying into this madness- who deserve some sort of recognition.

How many people between the ages of 25 and 40 do you know who do not own their own little shoebox somewhere? Not very many, I'll wager. Its not difficult to predict the decimation in price of these shoeboxes...... Sure there are some nice shoeboxes out there- but they're still shoeboxes, you know.......

We are not all foobarred dont you know. I would say there are a fair few of us who arent too bad - granted we didnt buy shoe boxes at high prices but bought house we thought was a good price.I have no regrets in buying.
Just a question for people who rent - are you going to rent into your 50's/60's? I've never really thought about long term renting.........

partyguinness

sneakyST wrote: »

We are not all foobarred dont you know. I would say there are a fair few of us who arent too bad - granted we didnt buy shoe boxes at high prices but bought house we thought was a good price.I have no regrets in buying.
Just a question for people who rent - are you going to rent into your 50's/60's? I've never really thought about long term renting.........

Plenty of people rent into their 60s/70s...my g/uncles did..even into their 80s...admittedly they never married so that was a factor also they were too mean fisted...:o..but when they died they each had over 200k in cash sitting in the bank with no debts whatsoever....cash was king to their generation..no credit...no loans.

Another aspect to the Irish property obsession is the obsession of passing on inheritance which is directly linked to the craze.

There is nothing wrong with people wanting to buy a house as a h ome to live in..but this obsession with having 4-5 houses was obscene and just greedy.

sneakyST

partyguinness wrote: »

Plenty of people rent into their 60s/70s...my g/uncles did..even into their 80s....

wow so when I clear my mortagage at 45 - thats 25 odd years rent I'm saving.......not so bad so......

partyguinness

sneakyST wrote: »

wow so when I clear my mortagage at 45 - thats 25 odd years rent I'm saving.......not so bad so......

What exactly is the point of your sarcasm?

I simply made a point that people do rent into old age and its not the end of the world...jesus:rolleyes:

sneakyST

partyguinness wrote: »

What exactly is the point of your sarcasm?

I simply made a point that people do rent into old age and its not the end of the world...jesus:rolleyes:

Wasnt getting at you PG.....trying to make the point that not all buyers are screwed and I dont like the way buyers are cannon fodder at the moment. There are good and bad on both sides of the fence.

gurramok

sneakyST wrote: »

wow so when I clear my mortagage at 45 - thats 25 odd years rent I'm saving.......not so bad so......

Or 25yrs of financial freedom as renting is generally cheaper than buying. (has been for the recent past)

Of course, the shoe is on the other foot for a property when buying is cheaper than renting for that property and it would make sense to buy at that stage, all down to the individual.

sneakyST

gurramok wrote: »

Or 25yrs of financial freedom as renting is generally cheaper than buying. (has been for the recent past)

Not sure I get this tbh. Your are not financially free as you still have to pay rent.... which is probably more than what the mortgage is.....what am I missing

partyguinness

If you buy a house to live in raise a family etc..it doesnt really matter what the value is or if it gone into negative equity. As long as you can comfortably make the payments and you plan on having it as your hoome for the next 30-40 years then valuations are irrelevant in the grand scheme of things. It's your home.

Buying to sale in the short term is whole different ball game and yes you are screwed if you bought ove the last 2-3 years.

eoinshan

SoupyNorman wrote: »

Well it is pretty clear that now is not so just sit back, relax and rent away. Thats what I'm doing, it's no great science currently.

Another option is to just act if you think the market is going to drive prices further down. If you're worried about prices falling more, why not just offer what you think/fear it might be worth when prices do reach the bottom? The worst that can happen is rejection.

ntlbell

sneakyST wrote: »

Not sure I get this tbh. Your are not financially free as you still have to pay rent.... which is probably more than what the mortgage is.....what am I missing

paying a mortgae for 25 years.

renting for 25 years.

one you state gives you 25 years financial freedom

if you use the money you saved and didn't give to the bank in interest and earned interes on it you could buy your own home in cash after 25 years

which will leave you with financial freedom also

one you pay the bank a lot of money

one depending on the circumstances will pay a landlord a lot less and EARN money on your savings.

you can argue till the cows come home what's best but at the end of the day whatever is best for you and depending on the "climate" will be the best regardless.

spockety

gurramok wrote: »

Or 25yrs of financial freedom as renting is generally cheaper than buying. (has been for the recent past)

The monthly cost of renting increases over the years in line with inflation (or booms and busts )

The monthly cost of a mortgage is relatively fixed, so by the end of a 25 year term the monthly repayments should be relative pittance compared with the cost of renting the same property for a month.

This is not something that people seem to take into account when they say "renting is cheaper than buying". It might be, if you compare monthly repayments in the first year of the mortgage/lease.

The above assumes normal economic conditions and historic levels of inflation