50% Drop speculation, hardly everywhere?

professore

drunkmonkey wrote: »

What does everyone think of the american model, rent x 14 years = house value..

the house chris is looking at has a rental value of approx 1200pm (i'm being generous)

It would give the house a value of €201600 which would seem better value but not seriously cheap either in a normal market...

i'd offer them that Chris, let them refuse if the wish, sit tight and save up some more money..values are only going one way at the moment...

I think it's a good yardstick.

I think it's more like (income - expenditure) x 14 years = house value, so taking in account it could be empty for 2 months of the year and allow a month's rent for maintenance plus property tax coming down the track it becomes a different result.

chris_ie

professore wrote: »

I think it's a good yardstick.

I think it's more like (income - expenditure) x 14 years = house value, so taking in account it could be empty for 2 months of the year and allow a month's rent for maintenance plus property tax coming down the track it becomes a different result.

Try 168k A very similar house in the area is being rented at round 1k per month.

Shambo

Chris,

Don't worry about waht it cost to build, that is not your problem.

In different times it may have been an issue, buy not now.

There is a lot of nonsense talked abiut builders having to make profit. They made commercial decisions to build houses in the hope of making considerable profits, but those days are gone, and with the huge over supply still out there they will not be coming back for s long time. Unfortunately for the builders they will have to either take the hit on profits or mothball the houses and wait until if or when there is an upturn in prices, but they will be waiting for quite a while.

I suppose at the end of the day, if the bank puts them under enough pressure they will take whatever they can get just to get some cash.

How many similar houses are for sale in Letterkenny?

chris_ie

Shambo wrote: »

Chris,

Don't worry about waht it cost to build, that is not your problem.

In different times it may have been an issue, buy not now.

There is a lot of nonsense talked abiut builders having to make profit. They made commercial decisions to build houses in the hope of making considerable profits, but those days are gone, and with the huge over supply still out there they will not be coming back for s long time. Unfortunately for the builders they will have to either take the hit on profits or mothball the houses and wait until if or when there is an upturn in prices, but they will be waiting for quite a while.

I suppose at the end of the day, if the bank puts them under enough pressure they will take whatever they can get just to get some cash.

How many similar houses are for sale in Letterkenny?

I know what you mean. I've heard of some people sympathizing with some builders but you could be pretty sure the builders weren't sympathizing with people having a 400k or so mortgage on a house they built for 200k when houses were selling.

There are quite a few other houses similar to this size wise. Although we've seen quite a few and didnt like the layout and some didnt make the best use of space. This one ticks all the boxes for us apart from price. So we are willing to wait.

Shambo

chris_ie wrote: »

I know what you mean. I've heard of some people sympathizing with some builders but you could be pretty sure the builders weren't sympathizing with people having a 400k or so mortgage on a house they built for 200k when houses were selling.

There are quite a few other houses similar to this size wise. Although we've seen quite a few and didnt like the layout and some didnt make the best use of space. This one ticks all the boxes for us apart from price. So we are willing to wait.

Good decision, if there are a fair few similar houses for sale you are in an even better position. Your tastes could be quite different to other people and althogh you like it not many other people might,so I would not necessarily feel the need to move quickly in case somone else picks it up.

ionapaul

dclare wrote: »

2 things need to happen before house prices begin to recover (1) the banks need to open up their lending (2) confidence need to return to the market.

Not trying to pick on your post for the use of this word, but let's be clear; house prices currently are recovering. House price rises were unsustainable and we are currently seeing recovery towards a saner level of property prices! If prices were to rise again in the near future, recovery (for the future prospects of our country) would be further away than ever...

Our housing bubble was a disease that we are slowly recovering from - prices dropping are what will help cure us!

Senna

chris_ie wrote: »

We seen a nice 4bed detached in a nice area, small estate, for 290k. I have spoken to a few people that reckon such a house may have cost around 200k to build. Will a house like this drop much more or is close to its true value.

It might have cost 200k to build at bubble prices but since then the cost of building as dropped considerable in Letterkenny, e60sq ft is now possible with a good finish, (although i have heard lower prices with all direct labour).

I know the Letterkenny market very well and my advice is to stay away from the town. If your looking at 290k house i'd say your either looking up lisnennan or behind ballyraine. Neither of these two estates are worth that.
I would say prices in Letterkenny will drop by at least another 50% bring an average 3 bed semi to the 60k-80k price, there is nothing on the horizon to help here and our prices should be lowest in the country.

If you do want to buy now, i would look outside the town, there are plenty of one-off builds that have been on the market for a year or two.
I'd also look at spending no more than 200k for a 2200-2500sq ft within ten minutes of the town.

drunkmonkey

ionapaul wrote: »

house prices currently are recovering

ahh, I'd beg to disagree, house prices are still far from normal, something is skewing the market at the moment, i'd like to say it's NAMA but i'm not sure, were not to long into the recession and I think developers, banks, the government are playing a wait and see game for as long as they can, tbh i don't think we've seen the half of what's yet to come.

MG

drunkmonkey wrote: »

ahh, I'd beg to disagree, house prices are still far from normal, something is skewing the market at the moment, i'd like to say it's NAMA but i'm not sure, were not to long into the recession and I think developers, banks, the government are playing a wait and see game for as long as they can, tbh i don't think we've seen the half of what's yet to come.

Some clarity required I think. I think he says that house prices going down is a recovery. That's an interesting and probably correct viewpoint

Jaysoose

One piece of advice would be to talk to the relevant professionals who are qualified in the subject of property markets, buying houses etc.

Taking the advice of a collection of self proclaimed 'property experts' is not the way to go. The only qualification of some posters on here is that they were blindly lucky enough not to have bought at the peak thus they awarded themselves degrees in 'Itoldyaso Studies'

drunkmonkey

Jaysoose wrote: »

The only qualification of some posters on here is that they were blindly lucky enough not to have bought at the peak thus they awarded themselves degrees in 'Itoldyaso Studies'

You could have all the qualifications in the world, but common sense is a lot more usefull than a piece of paper:D

Jaysoose

drunkmonkey wrote: »

You could have all the qualifications in the world, but common sense is a lot more usefull than a piece of paper:D

You cant wipe your arse with common sense:D

I.S.T.

If you look at this graph of house prices (ok, I know it related to UK prices) the last peak was in 1989, and it hit the bottom in 1996, that's 5 years. The previous peak was in 1980 and it hit the bottom in 1982. Bearing in mind that this peak is almost twice the height of the previous peak I'd say it will be at least 2013 before we hit the bottom, quite possible longer.

drunkmonkey

Jaysoose wrote: »

You cant wipe your arse with common sense:D

maybe not but it did keep some of us out of negative equity:D

Jaysoose

drunkmonkey wrote: »

maybe not but it did keep some of us out of negative equity:D

And there it is.... "The Smug Prick That Got lucky" showing at a bar stool near you.

Himselfe

Jaysoose wrote: »

You cant wipe your arse with common sense:D

Yeah, but you may as well wipe your arse with your qualifications!! No-one, qualified 'experts' or otherwise, knows whats going to happen.

oceanclub

Jaysoose wrote: »

And there it is.... "The Smug Prick That Got lucky" showing at a bar stool near you.

Ah, bubble myth no. 56: Anyone who didn't buy because they thought property was hideously overpriced was merely "lucky".

Luck had nothing to do with it, mate.

P.

mathie

oceanclub wrote: »

Ah, bubble myth no. 56: Anyone who didn't buy because they thought property was hideously overpriced was merely "lucky".

Luck had nothing to do with it, mate.

P.

So oceanclub if it wasn't luck at calling the top then it was ... knowledge?

And will that knowledge of being able to call the top be able to call the bottom?

oceanclub

mathie wrote: »

So oceanclub if it wasn't luck at calling the top then it was ... knowledge?

And will that knowledge of being able to call the top be able to call the bottom?

There's a difference between being able to predict the precise top or bottom of a bubble, and knowing that having a situation where average mortages are 10 times the average salary is untenable.

In the same way a doctor cannot predict exactly when you might die, but that doesn't mean you should ignore them when they advise against eating 10,000 calories a day.

P.

mathie

oceanclub wrote: »

There's a difference between being able to predict the precise top or bottom of a bubble, and knowing that having a situation where average mortages are 10 times the average salary is untenable.

In the same way a doctor cannot predict exactly when you might die, but that doesn't mean you should ignore them when they advise against eating 10,000 calories a day.

P.

What do you see as tenable?
4 times average salary?

oceanclub

mathie wrote: »

What do you see as tenable?
4 times average salary?

At the height of the bubble in the US, the average house was 6 times the average salary. In Ireland, that would correspond to an average price of €180,000, and that's not including the fact we're see wage decreases across the board.

In 2003, the multiple was around 3.36 in the UK:

http://www.mortgageguideuk.co.uk/blog/house-prices/house-prices-income/

According to this, if you exclude bubble years, the multiple is again around 4:

http://www.moneyweek.com/investments/property/how-far-do-house-prices-have-to-fall-14677.aspx

So a return to an average price of €130,000, provided that wages remain the same, is historically accurate.

P.

spockety

mathie wrote: »

So oceanclub if it wasn't luck at calling the top then it was ... knowledge?

And will that knowledge of being able to call the top be able to call the bottom?

You didn't need to be able to spot the top. You just needed to realise we were in the middle of a classic property bubble. Well documented, happened in lots of other markets/countries. Buying at the 'top' of the bubble isn't the only point at which it's unwise to do so in retrospect, buying at any point in the upcycle of the bubble is unwise. For a lot of people it didn't take 'luck' to make this decision, it took educated research. For a lot of people the stuff they are saying now is the same they have been saying for a long time, only now everyone can see they were right and it hurts.

Similarly, going forward, you don't need to buy at the bottom to ensure you have made the correct decision to enter the market. You just need to buy at a point where you can see that the market conditions reflect historical norms to within a tolerance of a few percent.

Whether that's before the bottom is reached, or after the upswing from the bottom doesn't matter.

If as some people are predicting the Irish market undershoots on the way down, the bottom will be about as reflective of a normal property market as the top was. That is to say, not reflective at all really.

What are the conditions at which it's a good time to buy, historically?
Well everyone has their own take on it, and there is lots of historical data to help.
For some it will be when a house in an area someone of their status or social or professional standing traditionally lives can be bought for 3-4 times their income. For others it will be when those same houses are valued at somewhere from 14-20 times the annual rent that such a property would command. For others it is when a 20-25 year mortgage at an interest rate that is not historically low will take no more than 30-40% of their take home pay.

For some people, it's all of the above!

Jaysoose

oceanclub wrote: »

Ah, bubble myth no. 56: Anyone who didn't buy because they thought property was hideously overpriced was merely "lucky".

Luck had nothing to do with it, mate.

P.

Luck has a lot to do with, unless they were sitting on mortgage approval for the last ten years and decide to wait for said bubble to burst.

But then its more likely that they got approved in the last two years when things started going wrong and they dodged a bullet through inability to buy for so long in that they could spot the obvious signs. Luck by design is still luck.

Listen good luck to anybody who didnt buy but the claims of 'any idiot could see it was gonna burst' are pathetic.

An idiot is somebody that took a mortgage they couldnt comfortably afford to pay.

oceanclub

Jaysoose wrote: »

Luck has a lot to do with, unless they were sitting on mortgage approval for the last ten years and decide to wait for said bubble to burst.

I could have easily gotten mortgage approval at any time in the last 15 years. Friends of mine thought I was mad not to buy in 2000.

Look, I would love to be charitable and meet you half-way for the sake of a quiet life, but I'm not going to indulge in either false modesty or be intellectually dishonest. I can only repeat myself; luck had nothing to do with it. I decided that instead of getting a mortgage for something overpriced, I would spent my youth saving and living it up, and buy if/when the bubble burst.

P.

Jaysoose

oceanclub wrote: »

I could have easily gotten mortgage approval at any time in the last 15 years. Friends of mine thought I was mad not to buy in 2000.

Look, I would love to be charitable and meet you half-way for the sake of a quiet life, but I'm not going to indulge in either false modesty or be intellectually dishonest. I can only repeat myself; luck had nothing to do with it. I decided that instead of getting a mortgage for something overpriced, I would spent my youth saving and living it up, and buy if/when the bubble burst.

P.

So what stopped you buying 15 years ago and flipping when the Bubble was at its peak if it was that obvious?

Lets leave it at that..

spockety

Jaysoose wrote: »

Luck has a lot to do with, unless they were sitting on mortgage approval for the last ten years and decide to wait for said bubble to burst.

There were some people (admittedly they are a minority) who did sit tight in the knowledge that a classic property bubble was under way. And yes, it took almost 10 years to burst, but that does not make them wrong, or lucky.

But then its more likely that they got approved in the last two years when things started going wrong and they dodged a bullet through inability to buy for so long in that they could spot the obvious signs. Luck by design is still luck.

Things started going wrong in 1997. It was pointed out as early as 2000 by the Central Bank themselves that Irish property was already at that point way overvalued. Here's a snippet from an Irish Independent article from December 20th, 2000.

"The Central Bank yesterday issued a warning that house prices could fall 'quite dramatically'. It cited the example of other countries which had experienced house price inflation on the same scale as Ireland. There has not been a single episode of such inflation which did not end in prices 'falling, in some cases quite dramatically', said the bank in its winter quarterly bulletin."

Listen good luck to anybody who didnt buy but the claims of 'any idiot could see it was gonna burst' are pathetic.

The problem is that not enough was done to show the 'idiots' (i.e. the masses) that a property bubble was under way. In fact, it was the opposite. Government and local authority (wreckless planning, taxation, incentives)colluded with banker (wreckless lending)who colluded with property developer (wreckless building) who colluded with media (wreckless advertising and advice) in order to artificially not only sustain but inflate this bubble to levels rarely seen even in other property bubbles.

An idiot is somebody that took a mortgage they couldnt comfortably afford to pay.

Property buyers a human, and a lot of emotion goes into thoughts about property, and people get carried away with the emotion of it, and let cold hard rationalisation go out the window. They're not idiots, in fact most of them are highly educated, they were just misguided and brought down a garden path.

Himselfe

oceanclub wrote: »

Ah, bubble myth no. 56: Anyone who didn't buy because they thought property was hideously overpriced was merely "lucky".

Luck had nothing to do with it, mate.

P.

Have to agree with you. Its not luck. Words like 'caution', 'prudence', 'research' and 'hold on a minute, you are trying to rip me off with crazy prices that I don't think I should have to pay' would be more appropriate.

I'm not lucky I didn't buy. I purposely didn't buy.

oceanclub

Jaysoose wrote: »

So what stopped you buying 15 years ago and flipping when the Bubble was at its peak if it was that obvious?

Because, I had no idea how long the bubble would last, and money is not a priority for me.

I think I've made this point _three_ times today alone but just because you don't know exactly when a bubble will end, does not mean you don't know it's a bubble.

Lets leave it at that..

Funny how people who want to get the last word in say that.

P.

Jaysoose

oceanclub wrote: »

Because, I had no idea how long the bubble would last, and money is not a priority for me.

I think I've made this point _three_ times today alone but just because you don't know exactly when a bubble will end, does not mean you don't know it's a bubble.



Funny how people who want to get the last word in say that.

P.

word

AARRRGH

April house price drop was a record
Wednesday, 27 May 2009 16:23 | RTE

New figures show that falls in house prices accelerated last month, with a particularly sharp fall in house prices for first-time buyers.

The house price index, compiled by Permanent TSB and the ESRI, fell by 1.9% in April, the biggest monthly drop since the index started in 1996. Prices fell at an annual rate of 10.7% in April, up from 10% in March.

The average prices of a house last month was €248,640, down almost €13,000 or 5% from the figure at the end of last year. This brings prices back to levels not seen since the summer months in 2004. The peak, according to the index, was €311,078 in February 2007.

House prices for first-time buyers dropped by 4.1% in April from March. Permanent TSB's Niall O'Grady said this reflected their reluctance to buy in a market which was still declining, and where prices of unsold properties were being cut further. Prices for second-time buyers were down 0.8% in the month.

He also said that he expects house prices nationally to continue falling to 2001/2002 levels.
He said it was difficult to predict when house prices would bottom out, but he expected house prices to fall to the level they were at in the 'early days of the turn of the century'.

He said that would represent a peak-to-trough fall in prices of around 30% from their February 2007 level, the high point of the property market.

Today's index reveals that house prices in Dublin fell by 1.1% in April, while the fall was 1.7% for houses outside Dublin. House prices in the commuter countries around the capital fell by 1.4% in the month. New house prices were down 2.6% in the month, while prices of existing houses fell by 1.5%.

The survey is based on the agreed sale price and is calculated using figures from mortgage drawdowns. The index is a three-month moving average. The compilers point out that there may be a time lag between the time the sale price is agreed and when the mortgage is drawn down.

We ain't no where near the bottom.