Irish property market bound for recovery

gurramok

_Kooli_ wrote: »

It is a possibility alright. If they do how much do you think a mortgage on a 1 bed apartment will be? - Something ridiculously tiny. Tiny enough that people will be dying to buy them long before they reach that point. There is a floor.

What if they dont come down to €240k? Do you agree that this is a possibility too? Will you buy something smaller or just keep renting?

I see 1beds ranging from below 100k to 150k and they ain't selling. The floor hasnt been reached yet in that segment.

Nope, I just don't see value paying 300k for a 3bed terrace in Santry or for that 3bed semi in the outer reaches of Lucan next to a dodgy area. The state of the economy does not support the price at that level hence the optimism it will fall further.

Whatever I pay when buying, it would be serious change of lifestyle as where I am now is central to everything. Yes, I could buy something smaller but the thing is I do not fancy paying huge mgt fees per yr on an apt so a 2bed house could be a possibility down the line. (don't plan to have kids )

If I see value in an area I like, I will buy and stop renting. At the moment, renting is favourable.

_Kooli_

gurramok wrote: »

I see 1beds ranging from below 100k to 150k and they ain't selling. The floor hasnt been reached yet in that segment.

Nope, I just don't see value paying 300k for a 3bed terrace in Santry or for that 3bed semi in the outer reaches of Lucan next to a dodgy area. The state of the economy does not support the price at that level hence the optimism it will fall further.

Whatever I pay when buying, it would be serious change of lifestyle as where I am now is central to everything. Yes, I could buy something smaller but the thing is I do not fancy paying huge mgt fees per yr on an apt so a 2bed house could be a possibility down the line. (don't plan to have kids )

If I see value in an area I like, I will buy and stop renting. At the moment, renting is favourable.

Sounds sensible.
Im thinking seriously about buying a house myself when i feel its time.

As you said the state of the economy does not support price levels. The problem is that the economy will improve eventually and then support higher levels, the better it gets.

Those of us not seriously effected by the recession so far are in prime position for when it picks up.

Investors are not making any moves at present because they are afraid of getting punished with property taxes etc.
When the government realize that its them keeping the investors away and thus reducing their own tax take, i wonder what they will do.
Im scared that they will roll back and encourage investors again. And then we're all screwed again.

Treehouse72

_Kooli_ wrote: »

As you said the state of the economy does not support price levels. The problem is that the economy will improve eventually and then support higher levels, the better it gets.

Not necessarily. It is my belief that there's not going to be a recovery - instad, we are going back to being the poor country we have been through most of our history.

When people talk about "recovery", what precisely are they thinking will "recover"? The housing market? But we know now that that was just a bubble and not sustainable at all, so it can't possibly "recover". What else? Nothing. There was nothing else during the "boom" except for buying and selling houses. That was it.

No, forget about "recoveries". There quite simply is not going to be one UNLESS we re-create a brand new economy based on some genuine and real form of wealth creation. I see absolutely no reason whatsoever to believe that new economy will be here any time soon. So I think everything will simply keep going south for years and years to come, house prices especially.

ronbyrne2005

All the factors that contribute to house price growth/stabalisation are negative or likely to become negative in coming year or two.
Population, immigration etc
State of economy, after tax incomes,pay rates etc
Unemployment
Cost of and availability of credit
Oversupply will also keep driving things down and cheaper rents make buying or investing less attractive.

With savage budgets for next 3 +years i cant see a bottom till then.

beeno67

bangersandmash wrote: »

Putting aside that you don't provide any statistics ("meeting" or "knowing" people and their tax rates doesn't cut it), as Treehouse72 pointed out, your argument doesn't prove anything about property affordability.

Applying the same argument to the October exchequer figures, you could deduce that people are in a much better position to buy property this year than they were in 2008

Provide Statistics? Do you not believe me that income tax rates were 60%, 48% and a bottom rate of 35%. You may be interested in an article Garrett Fitzgerald had in the Irish Times yesterday about how little income tax the average Irish worker now pays especially related to EU and UK averages.

beeno67

gurramok wrote: »

I first asked beeno67 yesterday at 12:34pm of where are those affordable 3 bed semi's are and all I got was an answer that a politician would be proud of

You see, I have a genuine interest as to where these affordable 3bed semi's lay as i am a potential FTB and am one of those that has been 'holding back' until value occurs in the market.

Sorry Gurramok. I have been away. I have checked Daft. As of now there are 15,171 houses for sale for 250,000 or less. As I said before this is the average price for a 3 bed house in Ireland. Your comments later imply that you believe the average house price should be a house you want to buy in a nice area of Dublin. I am afraid averages do not work this way.

beeno67

Treehouse72 wrote: »

Now I've heard it all. You're saying that because so few people are earning enough to be in the top tax rate, that proves that people have more money? Insanity.

.

Of course I didn't say that. Treehouse you have not been paying attention. If the government reduce tax in the next budget you will have more disposable income. If they raise it you will have less. In the last 20 years tax rates have reduced about 20%. Reducing tax means more disposable income. We have gone from paying an effective tax rate of about 35% down to about 16%.

_Kooli_

Treehouse72 wrote: »

Not necessarily. It is my belief that there's not going to be a recovery - instad, we are going back to being the poor country we have been through most of our history.

When people talk about "recovery", what precisely are they thinking will "recover"? The housing market? But we know now that that was just a bubble and not sustainable at all, so it can't possibly "recover". What else? Nothing. There was nothing else during the "boom" except for buying and selling houses. That was it.

No, forget about "recoveries". There quite simply is not going to be one UNLESS we re-create a brand new economy based on some genuine and real form of wealth creation. I see absolutely no reason whatsoever to believe that new economy will be here any time soon. So I think everything will simply keep going south for years and years to come, house prices especially.

None of us know really though do we?
The only thing we do know is that economies recover and collapse every so often. Cycles.

gurramok

beeno67 wrote: »

Sorry Gurramok. I have been away. I have checked Daft. As of now there are 15,171 houses for sale for 250,000 or less. As I said before this is the average price for a 3 bed house in Ireland. Your comments later imply that you believe the average house price should be a house you want to buy in a nice area of Dublin. I am afraid averages do not work this way.

Not looking for a nice area, looking for a safe area like all other buyers beeno67. Whats on offer at the mo is only areas where you'd have to pay me to live there so hence it ain't suitable for the 'average' buyer.

I should not as a worker have what Ireland offers me at the moment(it was never like this before the bubble), a house in a kip of an area mixing with junkies. :mad:

Treehouse72

beeno67 wrote: »

Of course I didn't say that. Treehouse you have not been paying attention. If the government reduce tax in the next budget you will have more disposable income. If they raise it you will have less. In the last 20 years tax rates have reduced about 20%. Reducing tax means more disposable income. We have gone from paying an effective tax rate of about 35% down to about 16%.

Oh for crying out loud beeno you are stuck in 2006. You are confusing the situation during the boom with the underlying, long-term reality. The era of low taxes and high disposable incomes was fleeting and has disappeared with the housing boom. You are also being entirely tautological in your reasoning: because people had more income, houses became more affordable, driving demand, pushing house prices up. This is the entirely circular logic of the bubble, it is not how a functioning economy works.

_Kooli_ wrote: »

None of us know really though do we?
The only thing we do know is that economies recover and collapse every so often. Cycles.

But this is not a normal economic cycle, and we are not simply on the downward part of the wave awaiting the inevitable upswing. Rather this is the unwinding of an asset bubble: the drop we are experiencing has no corresponding upside at the other end because the "up" from which we are falling no longer exists. We can't get back there because there is nothing left to go back to. We need to create wealth to get out of this mess and there is shag-all wealth creation happening now (and I see no prospect of it).

So I agree, none of us know. But I am comfortable in my belief that we are screwed long-term until someone shows me something (anything!) to suggest we will recover. Industry? Manufacturing? Innovation? Technology? What is the name of God are people basing their hope in? I just don't see it.

I think deep down everyone is expecting the housing bubble to return (and that includes Messers Cowen and Lenihan). They'll be waiting a long time IMO.

BobbyD10

_Kooli_ wrote: »

Investors are not making any moves at present because they are afraid of getting punished with property taxes etc.
When the government realize that its them keeping the investors away and thus reducing their own tax take, i wonder what they will do.
Im scared that they will roll back and encourage investors again. And then we're all screwed again.

I would hope and its only a hope with the banks, that they dont lend again to this sector of society until at least 2020.

oflahero

It might also be worth making the point that just because a lot of people can now 'afford' mortgages that two, three years were out of their reach, this does not mean that taking on such a mortgage is a sensible decision.

The notion of 'affording' a mortgage over the bubble years commonly corresponded to the loan manager interviewing a couple saying, what's the most you can pay per month? You get a bonus, we'll stick that on as part of your income. And you, you're public service, we'll consider your increments as permanent, we'll budget for that. Resulting in a stretched notion of what people could 'afford', *providing the good times never ended*.

Just because you can barely stretch to a certain amount does not mean that paying that amount is a good idea. As more people gradually get to grips with the idea that huge house prices are not an indicator of economic health, the better off we all will be.

beeno67

beeno67 wrote: »

Provide Statistics? Do you not believe me that income tax rates were 60%, 48% and a bottom rate of 35%. You may be interested in an article Garrett Fitzgerald had in the Irish Times yesterday about how little income tax the average Irish worker now pays especially related to EU and UK averages.

Actually I was wrong. In 1986 the top rate of tax was 65% not 60% as I said. Happened to come accross this today.

" At this time the standard income tax rate was 35 per cent (20 per cent today), there was an intermediate rate of 48 per cent, and the top rate was 65 per cent (today’s single upper rate is 41 per cent). And you hit those higher rates at fairly modest income levels. Oh, and you paid PRSI on top of that. The standard Vat rate was 25 per cent."

bangersandmash

beeno67 wrote: »

Sorry Gurramok. I have been away. I have checked Daft. As of now there are 15,171 houses for sale for 250,000 or less. As I said before this is the average price for a 3 bed house in Ireland. Your comments later imply that you believe the average house price should be a house you want to buy in a nice area of Dublin. I am afraid averages do not work this way.

If we're going to be pedantic about averages, then we should probably base calculations on average incomes in the areas in which these houses are located. Even within Dublin it would be useful to consider more specific averages, as certain suburbs will naturally distort the average.

_Kooli_ wrote: »

Will we say anything between €250k and €300k on daft. Knock 10 - 20% off the asking price. After deposit should give you a mortgage of €200k to €250k.
Should give you a mortgage of €900 to €1200 for 25 years at 4%. Fix it for the first 5 or 10 if you want for even less. Get a working girlfriend and you're sorted after halving that to €450 - €600 each.
Havent taken interest relief into account.

To be fair you did find a reasonable selection of 3 bed properties on Daft around the €300k mark. Some solid ones not too far from the city centre mixed with some over-priced ones in poorly serviced areas.

But the availability of a second income is a huge assumption in your figures. Also I wouldn't assume that vendors will knock 10-20% off.

Let's consider the single income case. Based on the fact that BOI are now to 4X actual income (forget bonuses and commission etc), a small 3 bed house on the fringes of Ballymun will require a salary of about €70k. That's roughly twice the current average industrial wage. If we go back to the 1980s, are these the kinds of properties that somebody earning twice the average industrial wage would have aspired to?

beeno67

bangersandmash wrote: »

If we're going to be pedantic about averages, then we should probably base calculations on average incomes in the areas in which these houses are located. Even within Dublin it would be useful to consider more specific averages, as certain suburbs will naturally distort the average.

Well I hardly think I was being pedantic about what an average is. It is hard to know what the average wage is in certain areas of Dublin. Obviously wages in Dublin are higher are higher than outside Dublin. I am unaware of statistics showing earnings in different areas of Dublin. Again I think we can assume some would be much higher than others.

My point about tax rates was to show the folly of comparing house prices as a multiple of gross income. It simply does not work. Comparing house prices as a multiple of net income would be more suitable.

However for Dublin it becomes even more complicated. In the last 20 years the population of Dublin has increased about 25%. On top of that there are large amounts of people living in places like Wicklow, Kildare, Meath etc who would rather live in Dublin. So demand for this 3 bed semi within easy access of Dublin city centre will have gone up a huge amount. On the other side in the last 20 years very few 3 bed semis have been built within a 3-4 miles of Dublin. So low supply and high demand will push prices up.

So if the house you want was 4 times average gross salary 20 years ago, that does not mean it will come back down to 4 times current gross salary

Treehouse72

beeno67 wrote: »

My point about tax rates was to show the folly of comparing house prices as a multiple of gross income. It simply does not work. Comparing house prices as a multiple of net income would be more suitable.

I agree that disposable income is the best valuation method.

But if you look at these net salaries they also point to significant further falls in house prices. A 40k gross salary means you can afford to pay between 800 and 1000 pm on mortgage repayments (33% - 40% * €2500pm). Since last week's tax returns, we know that this 40k is an above average salary at very least. For Dublin, it might be pretty close to a median salary. This person should probably not be borrowing much more than €150k. And if this single average earner had only that amount to spend, she would be struggling at the bottom of the market to find a grotty 1 bed shoebox. That can't be right.

_Kooli_

All well and good if they come down low enough for a single worker to afford.
But i suspect that any single worker will be outbid easily by double income couples. They days of the majority of people being able to buy your own are just gone.

asdasd

They days of the majority of people being able to buy your own are just gone.

Its almost like prices aren't falling.

asdasd

By the way there seems to be a misconception that prices of houses are lower bounded at a percentage of peoples income. I dont see what that would be the case. They can fall forever. As long as there is an overhang of stock, there will be a push towards lower prices. There is not reason the historical norm of two point five time salary cant be breached lower.

on that note, asdasd will come back in here and tell you when to buy. It will be hen interest rates reach peak, and - probably - inflation is at a high. Then you should spend as much as you can on housing.

_Kooli_

asdasd wrote: »

Its almost like prices aren't falling.

You know what i mean.
The reason prices are falling now is because people dont want to buy.
When they feel more secure in their jobs, and they do want to buy, then we'll see how it goes.

bangersandmash

_Kooli_ wrote: »

All well and good if they come down low enough for a single worker to afford.
But i suspect that any single worker will be outbid easily by double income couples. They days of the majority of people being able to buy your own are just gone.

And I suspect that, for many former double-income couples, the days of actually having two incomes are just gone.

stepbar

beeno67 wrote: »

However for Dublin it becomes even more complicated. In the last 20 years the population of Dublin has increased about 25%. On top of that there are large amounts of people living in places like Wicklow, Kildare, Meath etc who would rather live in Dublin. So demand for this 3 bed semi within easy access of Dublin city centre will have gone up a huge amount. On the other side in the last 20 years very few 3 bed semis have been built within a 3-4 miles of Dublin. So low supply and high demand will push prices up.

So if the house you want was 4 times average gross salary 20 years ago, that does not mean it will come back down to 4 times current gross salary

How many people are currently in negative equity?

_Kooli_

bangersandmash wrote: »

And I suspect that, for many former double-income couples, the days of actually having two incomes are just gone.

I disagree.
Besides the the construction sector. Most job losses are at the unskilled and low skilled end . They should never have, and will not be able to afford to buy houses anyway.

I know of nobody who was made redundant and didnt get another job yet who is skilled.

_Kooli_

stepbar wrote: »

How many people are currently in negative equity?

14

stepbar

_Kooli_ wrote: »

14

Just 14, eh?

The recession is over..... Yippee!!!! The Celtic Tiger is alive once again!!!!

bangersandmash

_Kooli_ wrote: »

I disagree.
Besides the the construction sector. Most job losses are at the unskilled and low skilled end . They should never have, and will not be able to afford to buy houses anyway.

So when you talk about all these people who'll be chomping at the bit to buy, you're basically talking about everyone... besides the 300,000 people who worked in construction at the peak, their partners/spouses (because the days of single income buyers are gone remember), and anybody in an unskilled or semi-skilled job. Regardless of the issue of who should be able to buy or not, that's suddenly a much smaller pool of potential buyers right there.

Incidentally just because you don't know skilled workers who have been unemployed, that does not mean they don't exist. I'm sure there are plenty of unemployed solicitors and architects who would be able to correct you.

Honestly some of the posts here recently look like they're straight out of an estate agency "research" report.

Firetrap

I love the sentiment that low-skilled workers shouldn't be able to buy a house.

beeno67

Firetrap wrote: »

I love the sentiment that low-skilled workers shouldn't be able to buy a house.

It is not the level of skill that is important. It is the level of pay. One of the things that got us into the mess we are in now is this idea that people have a "right" to own a house. You don't. If you are on or near minimum wage then you should not expect to own your own house especially if you live in a city. You should however have the right to accomodation of a good standard whether provided by private landlords or by the state.

Likewise you should not expect to be able to buy your own house the minute you start working. It used to be said that people got married and settled down 5 years after starting work. That should be a handy rule of thumb to keep in mind.

Ulysses Gaze

stepbar wrote: »

How many people are currently in negative equity?

David Duffy of the ESRI estimates that the numbers of people falling into negative equity on their homes has increased from 140,000 home owners in November 2008 to 150,000 households in August 2009.

http://http://www.businessandleadership.com/news/article/16381/leadership/one-in-three-households-in-negative-equity-by-2010

robd

There's been an awful lot of trolling going on in this thread over the last number of pages. One word or one line answers with little or no information, contrarian to the general viewpoint.

The idea that lower wage people may or should never be able to afford to buy a place is simply wrong. The only given should be that you need to have built up a good enough credit rating to borrow. Investors will invest in providing accommodation but the rental income needs to be such that the long term costs or borrowing are covered. Hence rent needs to be more expensive than the cost of a mortgage. The idea that it is not is simply a cognitive bias from the bubble days. An investment that doesn't produce an income greater than the cost of funds is not sustainable and is simply not an investment.

The modern state will only invest in accommodation if it can provide said accommodation for much cheaper than the private sector. In other words the premium being charged by the private sector is too high. Again this is tied to the cost of funds or the cost of a mortgage.

The bullish arguments related to property over the last number of pages seem to completely ignore even the most basic economics. Renting and owning is fundamentally economically tied together as outlined above.

If someone builds up a good enough credit rating, through working full-time and earning a steady wage and paying off all debts, then they will be able to buy something. There wage level is irrelevant to this argument. By law it must be above minimum wage (caveats accepted). Higher wages means you can buy in a better serviced, more desirable area.

This is simply not the case at the moment. We're still recovering from a property bubble that has a long way to go. When this is over it will be the case. Economics says so and the people who came up with these ideas are far more informed, intelligent, read and right than the trolls who have appeared here recently. Economic Models will be extended over time to cover the currently broken ones.