Just the facts : Reasons to buy or to wait

mathie

Hi

Would it be possible to have a sticky with what people see as the main reasons to buy or to wait?
I see the question and the reasons come up quite a lot and think it'd be great to have it as a reference.

We could keep is as just the 'cold hard facts' and try to keep away from peoples thoughts or feelings.

Something like ....

Reasons to buy

• Recession is over (http://online.wsj.com/article/SB10001424052748703426004575338433422665358.html?mod=googlenews_wsj)
• Interest rates at record lows of 1% (http://www.finfacts.ie/irishfinancenews/article_1020104.shtml)

Reasons to wait

• PTSB / ESRI House Price Index for Q1 2010 : Average national house prices down 4.8% in first 3 months of 2010 (http://www.esri.ie/irish_economy/permanent_tsbesri_house_p/)
• Unemployment is at record levels (http://www.cso.ie/statistics/sasunemprates.htm)

Obviously a very short list but maybe we can flesh it out?
I understand that something like ECB rate at 1% might be seen as a reason to buy and to wait so we can have some 'facts' on both sides.

Thanks
m

quozl

Please no.

This is a terrible idea.

Both your pros are extremely misleading to the uninformed.

Without detailed explanations of why they're misleading, which we've had elsewhere on this forum, I honestly believe they'll just mislead people.

And if this is stickied, there's a fair chance it's the first, and only, place many will look.

mathie

quozl wrote: »

Please no.

This is a terrible idea.

Both your pros are extremely misleading to the uninformed.

Without detailed explanations of why they're misleading, which we've had elsewhere on this forum, I honestly believe they'll just mislead people.

And if this is stickied, there's a fair chance it's the first, and only, place many will look.

Can you tell me why the pros are misleading?

I'm not looking to mislead people.
I'm looking to collect together all the facts so that people can make their own informed choices.

I see too many posts in this forums saying the market will bottom out in X years.
All I'm trying to do is collect the facts and not opinions.

D3PO

quozl wrote: »

Please no.

This is a terrible idea.

Both your pros are extremely misleading to the uninformed.

Without detailed explanations of why they're misleading, which we've had elsewhere on this forum, I honestly believe they'll just mislead people.

And if this is stickied, there's a fair chance it's the first, and only, place many will look.

here here

quozl

mathie wrote: »

Can you tell me why the pros are misleading?

I'm not looking to mislead people.
I'm looking to collect together all the facts so that people can make their own informed choices.[

The problem is that listing bald facts does not necessarily help people make informed decisions.

Telling someone that the recession is over, while technically true, is going to lead in many peoples mind to believing that the worst is over and we're now in recovery. We're not in recovery, we're still losing jobs. While technically out of recession thanks to pharma exports (and the pharmas are even making people redundant) things are likely to be getting worse.

As to the record low interest rates - I've met many people who think that is a reason to buy now, even if they're not going to fix over a long period of time. That thinking is daft, but seeing the bald fact that interest rates are at a historically low that is the reaction of many people. "Buy now, quick before interest rates rise!"

That's why imo simple statements without any explanation, dissenting or not, can mislead. Especially the type of person who is going to be reading a quick for/against list as their main research, and there are people like that.

D3PO

mathie wrote: »

Can you tell me why the pros are misleading?

I'm not looking to mislead people.
I'm looking to collect together all the facts so that people can make their own informed choices.

I see too many posts in this forums saying the market will bottom out in X years.
All I'm trying to do is collect the facts and not opinions.

anybody can make a "fact" spin to back their argument. A list of facts is a terrible idea.

there is no factual reason to buy or not, its a cumulative affect of lifestyle choice, individual circumstances, financial considerations etc

facts dont tell you anything about any of these

ei.sdraob

mathie wrote: »

Reasons to buy

• Recession is over (http://online.wsj.com/article/SB10001424052748703426004575338433422665358.html?mod=googlenews_wsj)

thats not a reason to buy, thats a reason to be confident that you might not loose your job, but unemployment is still rising and so are taxes therefore the income you might be able to allocate to repayments might either disappearor end up in the pockets of revenue....

mathie

quozl wrote: »

The problem is that listing bald facts does not necessarily help people make informed decisions.

Telling someone that the recession is over, while technically true, is going to lead in many peoples mind to believing that the worst is over and we're now in recovery. We're not in recovery, we're still losing jobs. While technically out of recession thanks to pharma exports (and the pharmas are even making people redundant) things are likely to be getting worse.

Well then the 'fact' that GNP is down and GDP is up is something that people can use to make their own informed decision.

D3PO

mathie wrote: »

Well then the 'fact' that GNP is down and GDP is up is something that people can use to make their own informed decision.

problem is those that need help to make an informed decision probably dont know the difference between GDP & GNP !!

P.S heres just 1 more example why a list is of no use.

You say historically low interest rates is a reason to buy, i would argue the opposite. Making people overlook affordability at normal interest rates in not a good idea.

quozl

mathie wrote: »

Well then the 'fact' that GNP is down and GDP is up is something that people can use to make their own informed decision.

That would be better, but that then needs an explanation to go with it. Someone who understands the difference between GNP and GDP and why one going up and one going down is important isn't the target audience for a quick list of these sort of facts, I think.

I understand you're trying to help but I think if you did something like that you would need explanations to go with each fact. And to be fair you'd probably need dissenting interpretations/explanations because plenty of people won't agree with my interpretations or yours.

mathie

D3PO wrote: »

problem is those that need help to make an informed decision probably dont know the difference between GDP & GNP !!

The reason I wanted to start this thread was to put together some reasons for someone to allow them to make up their own mind if they wanted to buy or not.

I'd been inspired by Calinas excellent post (http://www.boards.ie/vbulletin/showpost.php?p=62366856&postcount=12)

Can no-one see a good reason for a thread like this?
Maybe I've phrased things incorrectly but I think there's some value to it!

mathie

D3PO wrote: »

problem is those that need help to make an informed decision probably dont know the difference between GDP & GNP !!

P.S heres just 1 more example why a list is of no use.

You say historically low interest rates is a reason to buy, i would argue the opposite. Making people overlook affordability at normal interest rates in not a good idea.

And that's why I said in my OP that some 'facts' could be on both sides.

Cookie_Monster

Recession is over

why does that have any bearing what so ever on buying a house?

D3PO

mathie wrote: »

Can no-one see a good reason for a thread like this?
Maybe I've phrased things incorrectly but I think there's some value to it!

a thread perhaps but not a list

mathie

Cookie_Monster wrote: »

why does that have any bearing what so ever on buying a house?

Job security?

mathie

D3PO wrote: »

a thread perhaps but not a list

But I like lists!

D3PO

mathie wrote: »

But I like lists!

and I like giving Ricman a hard time. Doesnt make it the right thing to do though :p

Cookie_Monster

mathie wrote: »

Job security?

I don't think being technically out of recession will have much impact on this.

most big multinationals will re-scale periodically regardless of this.
most PS worker have that regardless
many of the big Irish companies are only just starting to plans cuts: BOI, AIB, Quinn, Eircom.

Treehouse72

mathie wrote: »

Reasons to buy

• Recession is over (http://online.wsj.com/article/SB10001424052748703426004575338433422665358.html?mod=googlenews_wsj)
• Interest rates at record lows of 1% (http://www.finfacts.ie/irishfinancenews/article_1020104.shtml)

Neither of these is a reason to buy. The opposite in fact - the second one is a reason NOT to buy!

One should buy property when at the top of the interest rate cycle, not the bottom, since at that time prices will be at their lowest (prices move in inverse to IR's...as we saw during the bubble time of low rates and high prices). So if you buy when IR's are high, it means prices will be near the bottom. By contrast, if you buy at the bottom of the IR cycle, it means not only that prices are at their highest, but also that with certainty ahead of you lies a period of increasing rates, so your repayments will be rising making planning and budgeting very hard, not to mention that rates might rise more than you anticipate, putting you in a serious bind. And also as those rates rise the value of your property is falling! If you buy when rates are high, the only way is down so none of this is a problem. The opposite in fact - as rates fall your property will increase in value since more people could afford the mortgage to buy it. And if you buy when rates are low it is possible that the larger period of your mortgage will be paid when rates are high.

As for the other reason to buy - the recession being over - this is now becoming THE great lie of the Summer. A rise in GDP is almost entirely accounted for by foreign multinationals' profits increasing due to improving international trading. This means Ireland gets some more corporation tax (which is good)....but that's about it....it brings precious few extra jobs, it does shag-all to reduce or national debt or deficit, which are our big problems and there is hardly any multiplier associated with it to "drag" the rest of the economy up behind it. So while GDP might be stabilising, we still have 500,000 unemployed, a €100b national debt and a €20b deficit. Pulling in some extra corpo tax (which is basically all that rising GDP will do for us) effects none of this a jot. Those things can only be improved by wealth and job creation...the Irish economy is doing neither and shows no signs of doing so for years and years.

mathie wrote: »

Reasons to wait

• PTSB / ESRI House Price Index for Q1 2010 : Average national house prices down 4.8% in first 3 months of 2010 (http://www.esri.ie/irish_economy/permanent_tsbesri_house_p/)
• Unemployment is at record levels (http://www.cso.ie/statistics/sasunemprates.htm)

Both of these are indeed good reasons not to buy. You could add:

• Emigration is continuing, depressing demand for property and thus prices
• The immigration we saw in the 00's is finished, also depressing property demand and prices, especially for the buy-to-let amateur investors who bought into the narrative of perennially buoyant demand
• Taxes are rising, including a coming property tax, putting less money in people's pockets to spend on housing, depressing prices
• At the same time, salaries are still falling, which also hits disposable income and thus affordability
• Credit availability - which is the single most important factor in setting house prices - has contracted enormously and continues to do so. Absent credit, prices will continue to fall. After all, where do people borrow the money to buy the houses? Until credit is freer, prices will continue to fall.
• There are 300,000 empty properties in the country. If for no other reason, this will psychologically dissuade people from buying and depress prices. On a more practical level, something will have to happen to these properties - firesales? Give them over to the homeless? Whatever - the empties help destroy prospects for price growth.
• NAMA is about to start fire-selling properties by the looks of things: http://www.independent.ie/opinion/analysis/emmet-oliver-nama-is-now-the-biggest-danger-to-property-prices-2250388.html. This can only further depress prices.
• The multiplier effect of budget cuts in December will suck more money out of the economy, further depressing prices.
• Sentiment towards prices is negative, just as it was positive during the boom. If you believe that positive sentiment pushed up prices in the bubble (and only a fool would claim otherwise) then the corollary of that is that negative sentiment must push prices down now.
• Rental yields are so low (because prices are so high) that there are almost no investors in the property market. Investors are a key constituency in keeping house prices high or stable. Without these investors, there can be no price stability, only falls.

To make this thread as balanced as possible, we need more contributions suggesting Reasons to Buy. By my calculation we don't have any yet.

mathie

Thanks Treehouse72
I think a better title or angle of approach might be 'Factors that would influence the purchase of a property' and let people make up their minds if they're reasons to buy or not.

Thanks for the input. Much appreciated.

Cookie_Monster

Reason to buy: None
Reason not to buy: property still over valued by at least 50%

ricman

Theres at least 40k job losses coming, banks, construction industry finishing big projects,eg motorways ,we are no where near a recovery .
theres a big deal about some company building motorway rest stops/garages .Thats good , but that just takes business from other shops ,garages in small towns.
YOU buy house x in 2 years it,ll be worth price now minus 20 per cent.IF we have a recovery it,ll be from the export industry ,tourism etc And by being more competitive ,better broadband infrastructure etc

D3PO

ricman wrote: »

Theres at least 40k job losses coming,

and your basis for saying this is ??

ricman

Large construction projects like motorways will be ending in a few years ,and banks and other companys will have more job losses ,eg eircom 2000 job losses predicted.WHEN company a loses 1000 workers it effects shops in the area etc as people reduce spending when they lose their job.I THINK saying every home is 50 per cent overvalued is illogical,
ie is a house in darndale the same as a house in donnybrook ,it makes no sense.Price depends on location, acess to transport,jobs , atmosphere, local crime rates etc thats why theres ghost estates.
reason to buy= tax credits on mortgage ,save on rental payments ,you might find house x at a good price ,eg renovation project if you are good at diy.
IF the government cuts spending by 3billion ,this has to effect government contractors ,eg suppliers.
The government has lots of empty buildings ,they could just sell off , save alot on maintenance ,security.

jetski

Cookie_Monster wrote: »

Reason to buy: None
Reason not to buy: property still over valued by at least 50%

So houses / appartments should be sold for less than it cost to build them?

jetski

Definitly definitly definitly a good idea to have a stickie.

ntlbell

jetski wrote: »

So houses / appartments should be sold for less than it cost to build them?

After all this time, are you really going to ask this question?

D3PO

ricman wrote: »

Large construction projects like motorways will be ending in a few years .

which captial projects are you referring to ? How many peopel do you think will be let go. Have you taken into account new capital projects ?

ricman wrote: »

,and banks and other companys will have more job losses ,eg eircom 2000 job losses predicted.WHEN company a loses 1000 workers it effects shops in the area etc as people reduce spending when they lose their job.

I dont need you to explain the knock on effect, i need you to explain your prediction.

you havent answered my question where does your 40k workers come from ?

You figures contradict those budgeted for by the dept of finance, and those suggested by the ESRI & the OECD.

So explain your numbers or admit you just picked a random figure out of the top of your head.

I expect your response to be the latter

mathie

D3PO wrote: »

you havent answered my question where does your 40k workers come from ?

Perhaps why I should have stipulated we need links to relevant sources for all 'fact's

ricman

Maybe it,ll be 20k job losses ,im not a financial civil servant,its a guess.

D3PO

ricman wrote: »

Maybe it,ll be 20k job losses ,im not a financial civil servant,its a guess.

ok so a you put in a guess for a thread thats titled just the facts.

Classic

:D