The MAJOR property crash is coming

Dannyboy83

These 2 articles show the future of what is to come with the property market in Ireland.
We are on the cusp of THE major crash.
Personally I believe it will be less than 12 months until the major crash really happens, at which stage Irish house prices will return to 2.5 to 3x the average industrial wage MAX.
It's likely many, many houses will fall far below that as properties will be bought and sold for cash.

It's a catch 22 situation. There is no exit.

Mortgage market wipeout
http://www.independent.ie/business/irish/collapse-of-lending-for-new-mortgages-is-gathering-pace-2442935.html

The value of mortgages given out in July, August and September has crashed by more than 40pc when compared with a year earlier.

Just 7,261 people took out a mortgage in the three months at the end of the summer, compared with almost 55,000 for the same three-month period at the height of the housing boom in 2006.
====
The value of the mortgages drawn down in July, August and September of this year was just €1.2m. This compares with €11bn in the third quarter of 2006.
====
Director of the Irish Mortgage Corporation Frank Conway said the latest statistics showed the mortgage market continued to be wiped out. "In the third quarter 2006, there were a total of 54,623 mortgages drawn down. Today, this figure has been reduced to 7,261, a fall of almost 87pc.

"This is as much of a market wipeout as one could have feared just four short years ago," said Mr Conway.
==
Bloxham economist Alan McQuaid said there was very little good news in the latest figures from the Central Bank, with no sign that the trend would change any time soon.

"Until the banking sector crisis is fully resolved and things improve on the labour market front, then the supply and demand for credit will remain subdued, in our view," he said.

http://www.independent.ie/national-news/irelands-drop-in-house-prices-is-worst-in-world-2438385.html

HOUSE prices in Ireland have deteriorated further than any other country in the world, a new survey has revealed.

The Global Property Guide (GPG) yesterday said Irish prices were down by 14.94pc over the year to the end of September. This has placed Ireland at the bottom of a house price league for 35 countries.

This comes in the wake of a report by credit rating agency Standard & Poors, which predicted in June that house prices in Ireland would fall by another 10pc this year before reaching the bottom in 2011.

deise go deo

Dannyboy83 wrote: »

These 2 articles show the future of what is to come with the property market in Ireland.
We are on the cusp of THE major crash.
Personally I believe it will be less than 12 months until the major crash really happens, at which stage Irish house prices will return to 2.5 to 3x the average industrial wage MAX.
It's likely many, many houses will fall far below that as properties will be bought and sold for cash.

It's a catch 22 situation. There is no exit.

I think you might be 2 years late there OP.

Fratton Fred

I'm looking forward to Kellogs giving away a free apartment with every box of cornflakes.

Seriously, I think there is more to come when NAMA start selling off whole blocks of apartments, but I can't see a huge crash coming.

Cuddlesworth

Fratton Fred wrote: »

I'm looking forward to Kellogs giving away a free apartment with every box of cornflakes.

Seriously, I think there is more to come when NAMA start selling off whole blocks of apartments, but I can't see a huge crash coming.

There will be more to come when the social welfare subsidising of the rental market gets cut.

sealgaire

It's a great thing really

gurramok

Indo wrote:

HOUSE prices in Ireland have deteriorated further than any other country in the world,

They went up the highest in the first place.

Indo wrote:

"Until the banking sector crisis is fully resolved and things improve on the labour market front, then the supply and demand for credit will remain subdued, in our view," he said.

Mass emigration means hell of alot less buyers around too Mr. McQuaid.

Dannyboy83

deise go deo wrote: »

I think you might be 2 years late there OP.

:rolleyes:
Thanks for that.

I'm referring to a MAJOR crash, as Morgan Kelly has alluded to, i.e. houses being bought and sold for Ca$h

Fratton Fred wrote: »

I'm looking forward to Kellogs giving away a free apartment with every box of cornflakes.

Seriously, I think there is more to come when NAMA start selling off whole blocks of apartments, but I can't see a huge crash coming.

Doubt the NAMA stuff will be released tbh.
Although there will be colossal losses made on it either way.

deise go deo

Until the banking sector crisis is fully resolved and things improve on the labour market front, then the supply and demand for credit will remain subdued, in our view," he said

The phrase No Sh!t Sherlock comes to mind.

Seriously though, While prices may continuue to fall, in the absence of something major like the fall of the euro then I dont see why there would be a second Crash in prices

Liam Byrne

Dannyboy83 wrote: »

These 2 articles show the future of what is to come with the property market in Ireland.
We are on the cusp of THE major crash.
Personally I believe it will be less than 12 months until the major crash really happens, at which stage Irish house prices will return to 2.5 to 3x the average industrial wage MAX.

Those of us who didn't fall for the whole fiasco would view that as a "recovery", i.e. a return to normality.

That's why I have such an objection to NAMA and Lenihan's twisting of English waffling about profits "when the property market recovers".

Dannyboy83

deise go deo wrote: »

The phrase No Sh!t Sherlock comes to mind.

Seriously though, While prices may continuue to fall, in the absence of something major like the fall of the euro then I dont see why there would be a second Crash in prices

Well for a start, because

• 80% of people were refused a mortgage
  
• Because emigration is expected to run at 100,000 over the next 4 years

• Because Rent Relief is gone from December 7th
  
• Because Mortgage Interest Relief is gone
  
• Because Public Sector Wages and Social Welfare is going to be reformed.
  
• Because the Average National wage has fallen from €36,000 to €31,000 euro, and the tax burden has increase by approximately €4,500
  
• Because 100,000 mortgages are in trouble and that number will double at least over the next 4 years.
  
• Because banks are going to start charging higher rates of interest which will cause more defaults.
  
• Because supply massively exceeds demand, even without NAMA

There are too many reasons to go into, but that's just a select few.

Dannyboy83

p.s.

Never thought I'd see this in my lifetime

Newly built 2 bed apartment on outskirts of Cork city for €100,000
http://www.daft.ie/searchsale.daft?id=484848&search=1

That's just a taste of things to come. (You'd want to be on some mind altering drugs to go buy that now when our economy is about to deflate 25 to 50% over 4 years!)

Bill2673

Note to anyone wondering what house prices might do in the next 12 months:

(i) There is nothing in this thread to suggest the MAJOR house price collapse is on the way.

(ii) House prices have already fallen by 60% from peak. No matter what way you cut it, even if house prices go down all the way to zero, the major part of the house price decline has already taken place.

deise go deo

Dannyboy83 wrote: »

Well for a start, because

• 80% of people were refused a mortgage
  
• Because emigration is expected to run at 100,000 over the next 4 years

• Because Rent Relief is gone from December 7th
  
• Because Mortgage Interest Relief is gone
  
• Because Public Sector Wages and Social Welfare is going to be reformed.
  
• Because the Average National wage has fallen from €36,000 to €31,000 euro, and the tax burden has increase by approximately €4,500
  
• Because 100,000 mortgages are in trouble and that number will double at least over the next 4 years.
  
• Because banks are going to start charging higher rates of interest which will cause more defaults.
  
• Because supply massively exceeds demand, even without NAMA

There are too many reasons to go into, but that's just a select few.

Yes, and as I said House prices will in all probability continue to fall as a result of those factors but regardless of that there will still be people wanting to buy there own home, These people are, Quite naturally waiting because they know they will fall further but individuals will not wait more than a few years, The property market will continue to tick over, To imagine that it will recover upwards from where it is now would be rediculus but I dont see any reason to suggest a second crash is imminent.

Oafley Jones

Dannyboy83 wrote: »

p.s.

Never thought I'd see this in my lifetime

Newly built 2 bed apartment on outskirts of Cork city for €100,000
http://www.daft.ie/searchsale.daft?id=484848&search=1

That's just a taste of things to come. (You'd want to be on some mind altering drugs to go buy that now when our economy is about to deflate 25 to 50% over 4 years!)

Still overpriced.

Dannyboy83

Bill2673 wrote: »

Note to anyone wondering what house prices might do in the next 12 months:

(i) There is nothing in this thread to suggest the MAJOR house price collapse is on the way.

Yes there is, read the thread

(ii) House prices have already fallen by 60% from peak. No matter what way you cut it, even if house prices go down all the way to zero, the major part of the house price decline has already taken place.

No, not uniformly.
Many, many houses in Cork are still advertised at 240k for example.
That is 8 times a person's annual income.
Traditionally, before the bubble, houses were priced at 2.5 to 3x the average industrial wage.

http://www.voxeu.org/index.php?q=node/5040

Figure 2. Irish house prices relative to average industrial earnings, 1980 – 2009



Figure 3. Irish new house prices and first time buyer mortgages relative to average industrial earnings, 1990 – 2009

handlemaster

Dannyboy83 wrote: »

p.s.

Never thought I'd see this in my lifetime

Newly built 2 bed apartment on outskirts of Cork city for €100,000
http://www.daft.ie/searchsale.daft?id=484848&search=1

That's just a taste of things to come. (You'd want to be on some mind altering drugs to go buy that now when our economy is about to deflate 25 to 50% over 4 years!)

I would say they won't sell at that price. Its looks expensive still.

jimmycrackcorm

We'll know when the market is corrected when a typical house costs 2.5 times the primary salary + 1 times a second, just like the old days.

Of course, wages have to stabilize too for that to hold true.

Dannyboy83

handlemaster wrote: »

I would say they won't sell at that price. Its looks expensive still.

These are already sold out.

But you are right in that, generally, those who are capable of buying, are not willing to do so.

Given that we are about to become a high tax economy with virtually no services provided in return, Brain Drain is going to kick in massively again as it did the in the 80s.

A lot of friends who finished college with me haven't bought because they weren't able to, they were waiting.
Now most of them are saying that they won't buy, it would be kamikaze, because they may well need to emigrate.

Dannyboy83

jimmycrackcorm wrote: »

We'll know when the market is corrected when a typical house costs 2.5 times the primary salary + 1 times a second, just like the old days.

Of course, wages have to stabilize too for that to hold true.

It depends on interest rates of course, but I agree with that.

Loads of the talker-uppers/soft landing-ers kept repeating over and over that we'd never see 7% interest rates again in Ireland.

That was before bond rates shot up to 9% and before the IMF/ECB arrived and we received bailout money at 5.8% variable.

ECB rates will rise, just a matter of time.

We should have had a healthy recession in 2001, which would have brought things back to normality.
Instead the whole thing was inflated.

The bigger the boom, the bigger the bust!

Dannyboy83

One thing I'm curious about is the impact of LTV

We will have LTV by 2013.

This potentially reduce rental yield by 1/8th to 1/4 per month (at current rates)!
That is a serious adjustment.
We need to look back to pre-1977 since we had that situation in Ireland.

Now rent relief is gone and rent allowance is due to be reduced.
I think LTV & water rates are going to massively drive down the yield on rents and consequently, the price of property.

Dannyboy83

deise go deo wrote: »

Yes, and as I said House prices will in all probability continue to fall as a result of those factors but regardless of that there will still be people wanting to buy there own home, These people are, Quite naturally waiting because they know they will fall further but individuals will not wait more than a few years, The property market will continue to tick over, To imagine that it will recover upwards from where it is now would be rediculus but I dont see any reason to suggest a second crash is imminent.

Where will they get money to buy?

dreenman

What actually happens in a slump like this is that house sales almost stop.

I would expect new house prices will fall to a level where people can afford them - if mortgage lending ever starts. However the second hand house market freezes because people can not afford to sell - and that is why markets like this bottom out. No one is going to sell a house if it leaves them 100000 euro in debt! So to many people the 'market value' of their house is academic until it is worth the same as their mortgage.

That is why many people now in their twenties and thirties will live in their current house for the rest of their lives which is in itself a return to times past.

Kiki10

The fact homes are becoming cheaper is wonderful. I don't give a rats ass for the greedy blood suckers who trampled on first time buyers in order to grab a quick buck to blow on hookers & Bentleys. I hope all the latte drinking political correctness comes to and end too!

Kiki10

dreenman wrote: »

What actually happens in a slump like this is that house sales almost stop.

I would expect new house prices will fall to a level where people can afford them - if mortgage lending ever starts. However the second hand house market freezes because people can not afford to sell - and that is why markets like this bottom out. No one is going to sell a house if it leaves them 100000 euro in debt! So to many people the 'market value' of their house is academic until it is worth the same as their mortgage.

That is why many people now in their twenties and thirties will live in their current house for the rest of their lives which is in itself a return to times past.

Its a nice theory but iv seen a lot of people abandon there homes to emigrate. I know one couple renting, only to be told by the bank, that the landlord they were paying hadn't payed the mortgage in over a year and the rent was starting them in Australia. Anyone who gets to pay a 2008 size mortgage after the IMF money runs out will have won the lotto. It wont come from working as a slave.

Highly Salami

Dannyboy83 wrote: »

Where will they get money to buy?

by getting a mortgage (of course!)

Dannyboy83

Highly Salami wrote: »

by getting a mortgage (of course!)

From who?

Dannyboy83

Kiki10 wrote: »

Its a nice theory but iv seen a lot of people abandon there homes to emigrate. I know one couple renting, only to be told by the bank, that the landlord they were paying hadn't payed the mortgage in over a year and the rent was starting them in Australia. Anyone who gets to pay a 2008 size mortgage after the IMF money runs out will have won the lotto. It wont come from working as a slave.

It also doesn't account for executor sales, inherited properties etc.

It really only accounts for FTBs from about 99/00 onward, about 1 decade.

Highly Salami

Dannyboy83 wrote: »

From who?

Banks/building societies.
Irish banks have been massively capatalised recently. If you still don't think they will lend, there are always foreign banks (National Irish Bank are owned by Danske Bank).

yosser hughes

Bill2673 wrote: »

Note to anyone wondering what house prices might do in the next 12 months:

(i) There is nothing in this thread to suggest the MAJOR house price collapse is on the way.

(ii) House prices have already fallen by 60% from peak. No matter what way you cut it, even if house prices go down all the way to zero, the major part of the house price decline has already taken place.

Read the thread. You are offering an opinion backed up by eh...nothing. We ain't seen nothing yet.

Kiki10

Dannyboy83 wrote: »

It also doesn't account for executor sales, inherited properties etc.

It really only accounts for FTBs from about 99/00 onward, about 1 decade.

It just makes me sick to even think about it... its getting harder to even laugh at this

Dannyboy83

Highly Salami wrote: »

Banks/building societies.

Irish banks have been massively capatalised recently. .

As you've seen from the posts so far in this thread, 80% of people are being refused mortgages.
That is going to get worse, not better.
(If you pay more and more tax, on the same salary - how do you qualify for the same mortgage? Answer is: you don't!)

The ECB have set a fractional reserve of 100:8 for Irish banks.

The banks are going to have to restrain lending until it is line with the amount of deposits. We know that there have been massive capital flights from the banks, and they're being recapitalised (yet again), yet that that is only temporary.

Simply by attrition through falling salaries and rising tax demands, the current capital reserves are going to be swallowed up by more and more defaults.

There are 800,000 mortgages from the last decade.
100,000 are currently in big trouble.
Public servants own disproportionately more properties than the private sector, as they've had the massive salaries.

So the public sector wage bill in 2009 was €19.8 billion for 330k people, compared to €7 billion in 1999.
The MNC private sector wage bill in 2009 was was €7 billion for 270k people.

Public sector pay is only going to go one direction. And that is down.
And property prices will go with it.
And defaults will go up.

Even if public servants salaries are not reduced, their available income will be, through tax increases. Just depends on the route chosen.
Factor in interest rates then and you have a catastrophe, waves of defaults.

Let me quote the original article again:

The value of the mortgages drawn down in July, August and September of this year was just €1.2m. This compares with €11bn in the third quarter of 2006.

Assuming a third of those mortgages from summer 2006 go in trouble, that's an almighty hole in a bank's reserves, meaning no new lending and more bailouts, increasing interest rates.
It's a vicious circle and the problem becomes compound.

If you still don't think they will lend, there are always foreign banks (National Irish Bank are owned by Danske Bank)

I have it on good word that the foreign banks are trying to get the hell out of Ireland, e.g. ACC bank & Nobody staying behind wants to lend into a collapsing country/property market, until they are sure the collapse is complete.
We still have 4 years and €15billion worth of collapsing to do.

A colleague of mine applied to a French bank to buy a property in Ireland and was told, bluntly, no chance - not for Ireland.


In order to sustain the price of houses, you need to sustain similar levels of lending - that's simply not going to happen.

http://www.voxeu.org/index.php?q=node/5040

Figure 1. Bank lending to households and non-financial firms as a percentage of GDP (GNP for Ireland), 1997 and 2008.