House prices still too high!

OMD

fliball123 wrote: »

Well then go ahead educate...what part of what I said have I got wrong?

NAMA only takes property portfolios worth over €5 million. Ordinary houses or even small developers do not go to NAMA

fliball123

dan_d wrote: »

Just spotted this
http://www.irishtimes.com/newspaper/property/2010/0610/1224272187779.html?via=mr

Still a bit pricey for a one bed. Would these be considered fire sales??

I bet they get more than the asking price

fliball123

OMD wrote: »

NAMA only takes property portfolios worth over €5 million. Ordinary houses or even small developers do not go to NAMA

thats where it is starts and also have you looked into the definition of r portfolio these can be broken up by developer, estate, area ...there is so much wiggle room ...

dan_d

fliball123 wrote: »

I bet they get more than the asking price

Are you serious? Personally I wouldn't touch them!! Not yet...

gurramok

fliball123 wrote: »

Ok but your missing all the points I made

On Point 1: Nama isnt just for new builds are you serious. Nama will take over the loans weather they are new builds or for a building that was built 100 years ago and bought recently. These loans are against the asset of the building/property. If a person is forced to sell its a repossion and as I said it will either go into Namas Property portfolio (reducing supply) or there will be firesale which will result in more of the tax money paying for this instead of paying off the national debt.

On Point 2: There are a ****e load of FTBs waiting to buy...like I have said to you if your looking for an investment property here in Ireland is not the place for it. If your buying home for 20years+ and remember FTBs want to buy they have to weigh up how much of a drop in prices there will be. how much higher will interest rates be by the time they want to buy and then factor in how much will they pay in rent in that time.

On Point 3/4: No one knows if there is going to be more paycuts that said I dont think there will be too many payrises. The public sector for the last 15 years has driven the wages in this country they were streets ahead years ago then got benchmarked up. and now dont want to be cut and the Croker agreement to me says that wage prices are stablising Could be wrong and if I am then IMF is in and if that happens I will be on the first plane to Oblivion.

On point 5 - I agree there hasnt been enough regulation with regard to property builds. Families will live where they are put you cant have both ways like less wages , higher taxes, more unemployement and then if someone is in that unfortunate position and losses a house and are offered somewhere to live I garentee you most families will jump at the chance to live somewhere. Construction will never come back as big as it was...Not in a million years. Once again you cant have it both ways your saying that banks will not lend as they are stricter well the same applies here for construction companies looking for loans.

On point 6 - 6 - Well let me go through it again we are still more populated now than 10 years ago we have more birth rates increasing all the time from 40 years ago. So the adults leaving are being replaced all time. 18th birthday your an adult. All I am trying to point out is that emigration will only be a factor if it doubles. Not saying it wont but at the moment it isnt a factor.

Point 1 - Nama is for development loans. Not for residential mortgage ones. Remember the recent calls to help residential mortgage borrowers in trouble/ 'Nama beag' they called it as there is no support for them yet.

Point 2 - Where is your source for this 'huge amount of FTB's? We already agreed there are alot of Irish adults emigrating!!
Oh and there is sky high unemployment too which the young bare the brunt of.

Point 5 - I did not say construction going back to 2006 levels. I meant sustainable construction based on local demand, that cold be 1998 levels. Banks will lend to any company which has a good business model.

Point 6 - 18th birthday. We'll have to wait 18yrs for the present babies to be able to buy, assuming there are jobs for them.
The adult population(who buy) is probably going down though due to emigration of Irish and foreigner alike so how does that agree with the following..

"All I am trying to point out is that emigration will only be a factor if it doubles."

fliball123

dan_d wrote: »

Are you serious? Personally I wouldn't touch them!! Not yet...

Well its a good yard stick I tell ye this will be a real indication of where things lie..I mean if they dont sell well then I will eat my words and bow out of the boards

OMD

fliball123 wrote: »

thats where it is starts and also have you looked into the definition of r portfolio these can be broken up by developer, estate, area ...there is so much wiggle room ...

No there is not. Ordinary house owners/mortgage holders will not now or ever be within the remit of NAMA

Zamboni

fliball123 wrote: »

Well then go ahead educate...what part of what I said have I got wrong?

It is neither my wish nor will to educate you on Nama.
There are several threads in the Politics forum which would greatly assist you in that regard. There are several long standing intelligent and articulate posters who have come on in this thread who you have disregarded out of hand.
Arguing with a person who has a decent grasp of economics, property etc can be quite entertaining but arguing with someone who has only a vague grasp of these areas can be quite frustrating and I for one am out.

gurramok

fliball123 wrote: »

I bet they get more than the asking price

The article says 2,500 new units unsold in South County Dublin alone. Thats alot for one area which competes with the 2nd hand market.
You see, reduce the price and it will generate some interest. Remains to be seen in this economic climate if they will sell though.

fliball123

gurramok wrote: »

The article says 2,500 new units unsold in South County Dublin alone. Thats alot for one area which competes with the 2nd hand market.
You see, reduce the price and it will generate some interest. Remains to be seen in this economic climate if they will sell though.

True but as I said it will be a yard stick as to where we are with property ...

stereo_steve

AARRRGH wrote: »

These problems dominate boards.ie, and are the reasons why this is my last ever post.

I don't post often but I find I agree with a lot of your posts! You'll be missed!

dan_d

fliball123 wrote: »

Well its a good yard stick I tell ye this will be a real indication of where things lie..I mean if they dont sell well then I will eat my words and bow out of the boards

It's definitely a yard stick, but I feel it's anyone's guess as to how the sale will go...I've no idea how it will work out!

fontanalis

fliball123 wrote: »

Well its a good yard stick I tell ye this will be a real indication of where things lie..I mean if they dont sell well then I will eat my words and bow out of the boards

Yes, if they sell the economy is back on track.
To the helipad!

Treehouse72

OMD wrote: »

You are getting a little worked up about this Treehouse.:)

You are right that the average Dublin house is not affordable to the average single earner but it is not as bad as you think. First of all you are comparing median salary to average house price. This of course is an incorrect way to view things. You should compare average wage to average house price or else median wage to median house price. But we will let that go for the moment.

You are also looking at current median wage, compared with house prices 4+ months ago. As you know prices are falling. Assuming the price falls have not slowed down in the last 3 months compared with the 3 months before that, it means the current average house price in Dublin is €222,000 but lets assume prices are not falling as fast and say the average price is substantially higher at €230,000

Your maths is not very good. 33% of €2373 is not €783 it is €791 but that is not your biggest mistake. I have told you 3 times already that you are using the calculator incorrectly. The actual take home pay of a single person earning €38,664 is €2543 (your figures assume a self employed person which is really getting into niche markets).

So the question is how unaffordable is this average house worth €230,000 to the average single person taking home €2543 a month.

He will need a 10% deposit so will be looking for a €207,000 mortgage. EBS will offer a variable rate mortgage on this amount over 30 years at €883.92 a month which is 34.75% of take home pay. I agree however that someone in this situation should fix. So a 5 year fixed rate mortgage over 30 years would cost €1030 which is 40% of take home pay although it does leave slightly over €1500 a month after mortgage payments.
http://online.ebs.ie/internet/forms/loan_centre/repay_calculator_result.jsp
So I agree it is still not affordable to the careful purchaser but as I said things are not as bad as you think.




By the way I love in your calculation of rent cost and purchase cost you assume the renter will negotiate a discount of 10% but the buyer will pay the asking price:D You are right however that the return here at 4.5% is low.



Edit: Just as a short aside. When using your calculator of median wage maybe you should look at years experience. Traditionally the average first time buyer in Ireland is over thirty. Someone with over 10 years experience earns a median wage of €50,684. But that is a seperate issue I suppose.

Firstly, thank you for the courtesy of at least looking over my numbers.

I stand corrected on the monthly income of a €38,000 salary: it is €2,500 pm not €2,300, and so 33% of that is indeed €825. But notwithstanding that, I agree with your fundamental point: the question is how much mortgage a €850 pm budget will bear.

If we accept the €250,000 house price, 10% deposit, so €225,000 mortgage over the term you stipulate of 30 years, using the EBS calculator I get these figures:

5 Year Fixed: €1120
10 Year Fixed: €1228
http://online.ebs.ie/internet/forms/loan_centre/repay_calculator_result.jsp

(And let's also just note that 30 year mortgages are something of a bubbletime phenomenon. If we were to calculate it over a 25 year term, those numbers are significantly higher again at €1231 and €1335.)

So with our budget at €825, those first numbers are 36% and 50% above our budget respectively.

To again state that clearly: for an average mortgage on an average house price assuming a median income, the mortgage repayments are between 36% and 50% higher than the 33% of disposable income EBS now stipulate. And, in all likelihood, all lending institutions will soon be working to.

As I said in my post above, it is my contention that house prices are 30% - 40% overpriced. I find the coincidence rather striking that the calcs above corroborate this almost exactly. In addition to which, the rent/yield calcs I provided throw up almost the exact same number too (and I don't think you are disputing the calculations there).

If you want another piece of corroboration, look at this now famous graph:



If you look at that and wonder where long term trend suggests we should be, and even if we accept there was some structural HPI in the late 90's/early 00's, following those lines to where they most logically should be, I see the same 30% - 40% drop.

So, we have 3 things all pointing to almost the exact same numbers:
1. Lending multiples/disposable income levels
2. Yield calculations
3. Long term trend

I could add two more that would almost certainly give us a similar figure:
4. Price per square foot v. international comparisons
5. The level of credit available now v. long term trend going backwards to the bubble period and looking forwards to the likely future norm.

One might be able to argue that one of those measures is a bit off here or there, or that the calcs are fuzzy on a few points, but when all 3 (perhaps 5) are demonstrably saying almost the exact same thing I think that pattern of evidence is overwhelming.

...........
...........

A couple of notes on other general points you make:

1. On the median wage v. average house price point, first, since these are the only figures we have, I don't know what other figures we can use. Second, it is unlikely this small anomaly will significantly skew the ballpark big picture. And third, it is possible that the bottom end of the market is dragging down the average price anyway so the apparent differences may be moot.

2. While you have shuffled downwards some of my numbers, I notice the €38,000 salary hasn't been marked down at all. Isn't it likely this too has fallen in recent months? And won't it fall significantly after the budget for sure? We could make that €35,000 if the homeowener gets hit for more tax, a new property tax, water rates and a pay cut. All that is entirely possible if not probable.

3. I also take issue with the way you have magically given this €38,000 earner a €25,000 deposit and thus done away with the need for a larger mortgage. That is a hell of a lot of money for someone on this salary to have saved. But I have granted this 10% in my calcs above. Going forward, the more difficult it becomes to get this size of deposit, the further prices will need to fall.

4. On the rent point you make, I can promise you that 10% below asking for rent is still the norm. And on the house price, I was merely using that as an example of a €250,000 house. If you prefer, I could find one for €270,000 and assume the buyer also gets 10% off. It's the actual clearing amounts that matter for the calcs, not the asking.

quozl

I saw this and thought of you fliball123

http://www.businessworld.ie/livenews.htm?a=2617093

Emigration to impact housing demand,.......Friday June 11
The new wave of Irish emigration and the return of immigrants to Poland and elsewhere is having a noticeable effect on housing demand, according to a bulletin from AIB chief economist, John Beggs.
From April 2000 to April 2008, net inward migration was the main driver of population growth, accounting for almost 60pc of the total increase in the population over the period, he said.
However, he said that this turned negative in the year to April 2009 and have accelerated as the effects of the recession continue to impact.
“Indeed, we estimate net outward migration of around 50,000 in the year to April 2010.

OMD

Treehouse72 wrote: »

A couple of notes on other general points you make:

1. On the median wage v. average house price point, first, since these are the only figures we have, I don't know what other figures we can use. Second, it is unlikely this small anomaly will significantly skew the ballpark big picture. And third, it is possible that the bottom end of the market is dragging down the average price anyway so the apparent differences may be moot.

2. While you have shuffled downwards some of my numbers, I notice the €38,000 salary hasn't been marked down at all. Isn't it likely this too has fallen in recent months? And won't it fall significantly after the budget for sure? We could make that €35,000 if the homeowener gets hit for more tax, a new property tax, water rates and a pay cut. All that is entirely possible if not probable.

3. I also take issue with the way you have magically given this €38,000 earner a €25,000 deposit and thus done away with the need for a larger mortgage. That is a hell of a lot of money for someone on this salary to have saved. But I have granted this 10% in my calcs above. Going forward, the more difficult it becomes to get this size of deposit, the further prices will need to fall.

4. On the rent point you make, I can promise you that 10% below asking for rent is still the norm. And on the house price, I was merely using that as an example of a €250,000 house. If you prefer, I could find one for €270,000 and assume the buyer also gets 10% off. It's the actual clearing amounts that matter for the calcs, not the asking.

Treehouse, as I have said constantly said I believe house prices will fall further. I never said house prices in Dublin were affordable. I said prices nationally were becoming affordable but it depends how you define affordable. I said affordability in Dublin was not as bad as you made out.

Just some points you raised above (not necessarily in order):
1. The median wage I used was from the website you quoted. It says it was last updated on 31/05/2010. I am assuming wages have not fallen significantly in last 12 days. Although you seem to. The wage is actually €38,664 not €38k you keep saying. This gives take home pay of €2543 a month for a single person or €2735 for a couple.
2. Usual affordability I have heard used is 35% not 33% you say. Small points I know but it makes a small difference. So by this definition mortgage should be €890 a month (or €957.25 for a couple)
3. I have given a 10% deposit because they will not get a mortgage without it. There is no point assuming 100% mortgages.
4 Average house price of 250,000 was 4 months ago. My figures assumed a modest drop since then yours don't.

€890 would pay a 30 year mortgage on this property at a variable rate of interest or a couple could fix for 3 years and still fall within the 35% margin. A couple could get a variable rate mortgage over 20 years and still have more than €1,500 a month left over (another measure of affordability). I am not saying they should do so just that it is possible to.

Idbatterim

By Allison Bray
Friday June 11 2010
BARGAIN-HUNTING homebuyers flocked to the first receivership sale in Co Dublin yesterday where they snapped up homes at less than half of their peak boom price.

By 6pm, 15 of 49 units at the salubrious Carrickmines Green development in south county Dublin were as good as sold.

The mothballed development is being sold at fire-sale prices by Anglo Irish Bank through a receiver.

Thirteen of the units sold were one and two-bedroom apartments ranging in price from €135,000 and €180,000.

They were selling for €365,000 and €490,000 respectively at the height of the boom in 2006.

Two four-bedroom townhouses were also snapped up at a modest €350,000, compared to their top-of-the-market price of up to €770,000.

Word of the sale due to the bankruptcy of developers Laragan brought would-be buyers by their droves, said estate agent David Browne of HT Meagher O'Reilly New Homes.

The majority of purchasers were young first-time buyers who had given up all hope of buying just three years ago.

The fire-sale of properties in Carrickmines could result in a paltry €10m going back to taxpayer-owned Anglo Irish Bank.

- Allison Bray

Irish Independent

the one bed units are going for just over one third of their peak boom price in 2006!

quozl

And those 15 units only have booking deposits. So people may repent.

Still, if i was going to be selling my SCD apartment block I'd definitely want to be the first to market. I'd guess they'll sell them all, but will the 10th such sale?

Benedict

It seems to me that all contributors agree on one thing, that houses are still grossly over-priced - although contributors differ on the extent of the over-pricing.

I feel that contributors may be ignoring the huge role that estate agents continue to play in this whole farce. They play a significant role in setting the asking price for a property - and they constantyl advise the seller to go for an unrealistic price that they must know only a dope would pay.

Anytime there's a fire-sale (like the one a few days ago in Carrickmines), the property sells immediately. Because it's value! So there are buyers out there waiting for the right price - and they are simply not going to fooled into paying 6 polysacks full of money for a house only worth 3 or 4 polysacks full.

So why don't the estate agents say to their clients "Look, if you drop the price by 40%, you'll sell tomorrow"? Surely it is not in the estate agents' interests to have property sitting there unsold for years?

ricman

gosh, bring the price down to a realistic price and people will buy.Thats amazing.NOTE TO BANKS, thats how capitalism works, the invisible hand of the market, if something is not selling its TOO expensive.
The original price of these units was crazy anyway.
the banks probably want to sell units gradually otherwise it make effect the general price of
apartments ie the banks own alot of property due to builders going bust.
i think you can sell anything in dublin as long as the price is right.

Duckjob

Benedict wrote: »

It seems to me that all contributors agree on one thing, that houses are still grossly over-priced - although contributors differ on the extent of the over-pricing.

I feel that contributors may be ignoring the huge role that estate agents continue to play in this whole farce. They play a significant role in setting the asking price for a property - and they constantyl advise the seller to go for an unrealistic price that they must know only a dope would pay.

Anytime there's a fire-sale (like the one a few days ago in Carrickmines), the property sells immediately. Because it's value! So there are buyers out there waiting for the right price - and they are simply not going to fooled into paying 6 polysacks full of money for a house only worth 3 or 4 polysacks full.

So why don't the estate agents say to their clients "Look, if you drop the price by 40%, you'll sell tomorrow"? Surely it is not in the estate agents' interests to have property sitting there unsold for years?

2 points:

Firstly, a lot of EAs are in denial, but equally, a lot of sellers are still completely deluded about the worth of their properties. If you spent 500K on a property in 2007, it's not a easy reality to confront that that property might now have a real value of 300K and dropping.

Easier as long as you don't HAVE to sell, to just dig in heels and actively seek out EA's that will support your fantasy that you haven't just flushed 300K (200K price diff + approx 100K in interest over 30yrs) down the crapper.

Secondly, (and more relevant IMO), anyone who is in negative equity CANNOT sell unless their lender consents to it, and the banks aren't about to start giving that consent.

As loan security goes, they still see having a €500 secured on a 300K (and dropping) asset as better than having a €200K loan secured on nothing.

Wibbler

Benedict wrote: »

So why don't the estate agents say to their clients "Look, if you drop the price by 40%, you'll sell tomorrow"? Surely it is not in the estate agents' interests to have property sitting there unsold for years?

A lot of people can't afford to sell at 40% of the their asking price.

beeno67

Duckjob wrote: »

2 points:

Firstly, a lot of EAs are in denial, but equally, a lot of sellers are still completely deluded about the worth of their properties. If you spent 500K on a property in 2007, it's not a easy reality to confront that that property might now have a real value of 300K and dropping.

Easier as long as you don't HAVE to sell, to just dig in heels and actively seek out EA's that will support your fantasy that you haven't just flushed 300K (200K price diff + approx 100K in interest over 30yrs) down the crapper.

Secondly, (and more relevant IMO), anyone who is in negative equity CANNOT sell unless their lender consents to it, and the banks aren't about to start giving that consent.

As loan security goes, they still see having a €500 secured on a 300K (and dropping) asset as better than having a €200K loan secured on nothing.

I find it hard to believe EAs are to blame for high asking prices. They only get paid when the property is sold. It is in their interest to sell as soon as possible.

The second thing you have to look at is "who is selling?" I would suggest there are 3 types of sellers of second hand homes
1 Traders up or down. This is traditionally by far the largest group. Their selling price will be hugely dictated by the asking price of the house they want to buy and so will have a certain floor to the amount they can sell their own property for. If they cannot sell for that price then they just stay put.
2. Those who can no longer afford to pay their current mortgage and want to off load property and move to rented accomodation or want to sell a second home. Obviously unless they can cover the mortgage or at least come close to doing so with the sale, then selling will not improve their financial situation
3. Repossessed homes and inherited estates. This is the only group that can easily drop its asking price.

stepbar

Wibbler wrote: »

A lot of people can't afford to sell at 40% of the their asking price.

Well they should then fcuk off and take their house off the market so.

stepbar

beeno67 wrote: »

I find it hard to believe EAs are to blame for high asking prices. They only get paid when the property is sold. It is in their interest to sell as soon as possible.

O really? :rolleyes:

Some EA's are still living in 2007....

Benedict

It is well known that some EA's withhold information about offers from the owner of the house because they don't want the owner to accept a low price. Their reason is, apparently, that they don't want word to spread that it's easy to negotiate downwards. Everyone already knows that it's already the case that you offer 15% to 20% less than the asking price - but if people hear that some are getting 40% to 50% off, then everyone will expect a huge reduction. That is what EA's are terrified of.

mrgaa1

From my own experience most EA's are completely and utterly useless. They are happy with their little cartel - most people became EA's after selling cattle, tractors etc.. because if you didn't buy no worries because the next person did. All they want is their fees for this, that and the other.
Sell it yourself, get a good solicitor that you can trust will do the job and do it that way. In this way you kow exactly who calls, you have their details and you can talk directly.

House prices are high because the previous debt has to be paid. If its not paid the bank who approved the loan chase you and bankrupt you - for F*%K sake we bailed them out - what deal did we get????

Benedict

But when you are interested in buying a property, it is often impossible not to deal with an EA. They have complete control and will often refuse a low offer without telling the owner - who might have accepted it. This is because they are determined not to allow prices to fall too low. There is anecdotal evidence that the EA cartel has decided, for example, not to allow 2 bed apartments to fall below 250K asking price even though they will quietly accept much less.

TheCityManager

Is it just me or have asking prices taken another big tumble this last week or so ????

Benedict

Citymanager - have you any concrete examples of a tumble? I hope you're right because prices are still ridiculous!