No living space in Dublin

Acoustic Fanatic

noxqs wrote: »

I must object to the notion that a house is a base of wealth. The Germans, The French, The Scandinavians, the majority there does not own homes and they are very wealthy and they seem content and happy with bringing up a family in rented accommodation (their regulation is better, but no reason it could not be done better here as well).

A house is not a pension, it is not a nest egg, it is a house. It is not money.

It's an illiquid asset which may or may not represent some value but it is not a base of wealth. Savings and investments in stocks/bonds is a base of wealth. Something which has an outstanding debt to it in the form of a mortgage is a farcry from wealth. It is the exact opposite!

Good point. Though I would say, for the sake of argument, that if you are an average homeowner in Ireland, your house represents the vast majority of your assets.

Acoustic Fanatic

IRLConor wrote: »

My girlfriend and I got a mortgage roughly two years ago. We were offered more than 2.5 times the amount we asked for. I don't understand what the bank was thinking though, the monthly repayment was more than the monthly net take-home of the bigger of our two salaries! Nuts!



Anyone who is naive or trusting when it comes to banks is stupid. Anyone that took the kind of mortgage we were offered (in 2009!) isn't safe to be let out on their own.



Ask your father what percentage of his pay went towards his £30k mortgage. His principle may have been £30k, but he probably had significantly higher interest rates to deal with which would narrow the gap that you see between your situation and his.

Good point. I will.

noxqs

Good point. Though I would say, for the sake of argument, that if you are an average homeowner in Ireland, your house represents the vast majority of your assets.

But it may be an asset but it is not money that can be readily extracted when needed. Ergo it is not wealth, it is a house people can live in. The act of selling is usually to buy another house. Which means the money is pretty much non existing in a sense at it isn't 'to spend' freely.

So the idea in Ireland that a house is a good investment strategy for the future is for the lack of a better word right now: dumb. I think a lot of people would need to familiarize themselves with bonds and stocks. Even buying the most conservative global investment fund would be better yield and lower risk than putting cash in the banks. And god forbid, into bricks and mortar.

Acoustic Fanatic

Snakeblood wrote: »

Why do you think demand will return? Given that wages are stagnant, emigration is rising, unemployment is up, public debt is high meaning higher taxes, interest rates have one way to go, and there's a large overhang of property held by nama to come on the market. Prices have fallen by 50% in the last five years, and the price fall doesn't really look like slowing down. Also, banks have been burned too and don't want to lend, and if they do lend, will gouge with interest rates to make up for all the tracker mortgages. Also people who have tracker mortgages will be very reluctant to move properties as their interest rates will then be exorbitant.


Edit: also, you say you think there are more people out there wanting to buy than want to sell. What are you basing that on?

As far as I am aware there are no new houses being built in Dublin. While there are no new houses being built, there will still be more first time buyers getting ready for their first mortgage, in anticipation of the prices levelling. I think it's a safe assumption that over the last year, given the financial instability of Ireland, most people who would have gotten a mortgage decided to hold off until the prices stabilize.

There will also still be buy-to-rent/sell investors too, hoping to get in before the prices bounce back from the bottom.

Snakeblood

Acoustic Fanatic wrote: »

As far as I am aware there are no new houses being built in Dublin. While there are no new houses being built, there will still be more first time buyers getting ready for their first mortgage, in anticipation of the prices levelling. I think it's a safe assumption that over the last year, given the financial instability of Ireland, most people who would have gotten a mortgage decided to hold off until the prices stabilize.

There will also still be buy-to-rent/sell investors too, hoping to get in before the prices bounce back from the bottom.

There are no new houses being built because there's a surfeit of accommodation. No one is buying. There are Nama houses that have not yet come onto the market. They're afraid to put them on the market because it will flood and house prices will drop like a stone. Banks are afraid of repossessing houses because the houses themselves are worthless compared to what was paid.Once the overhang of property is gone, it will again be worthwhile for someone to build houses. At the moment, there's no demand, so why should anyone build any?

A lot of people have in all likelihood neither the financial ability nor the desire to get back into the property market seeing as roughly 70000 people are having difficulty paying their mortgages.

Prices are too high at the moment, and dropping. People are waiting for lower prices, but people are also burned by the experience of the last ten years, they're leaving the country, and they're also unemployed where once they would have expected to be in permanent employment and buying.

Do you know how a buy to let investor works? They calculate the rental income from the property. At the moment, the government is subsidising roughly half the rental accomodation in Ireland. They pay rent allowance etc, which puts an artificial floor on rentals. Why drop the price more if you can get an unemployed person in and the government will pay their rent? That works up to a point, if the government can afford to pay the rent for half the country. As it stands, now they can't. So that's going to go.

That will have a knock on effect on rents for non social welfare people, dropping them too. So the buy to let investor will be getting out his calculator, and the sums won't add up for him. He expects a rental yield of maybe 6-8% to make it worth buying an illiquid asset instead of shares or something else. If rents drop, then his yield drops, so he won't buy until the house or apartment becomes cheaper.

He'll divest himself of the property he has or lower prices, or go bankrupt, and property prices will fall further. You see threats of people who will refuse to rent if the rental income fall too low. Those people are idiots who would rather make nothing than something. But someone will come in and buy a cheap house or apartment and rent them at a low enough level that he can make a profit and get the rent allowance.

House prices won't bounce back from the bottom. We are mired in an incredibly deep recession. People don't have the money to chase house prices back up (and that's how you get a bounceback).

House prices don't exist in a vacuum. In this country, people are afraid to buy, they have no jobs, they have no certainty, they have no lenders, they have lots of tax, they see little future.

noxqs

Excellent post Snakeblood.

I would like to just point out that a bounce back in property prices is the last thing this economy needs right now (nevermind the impossibility of that happening in the next many years). High cost of accommodation is not good for the economy - it increases cost of living which puts pressure on wages which reduces Irelands competitiveness (which is only saved by a low tax for MNCs right now).

We need cost of living to drop if we want the economy to recover. Not 'recoup' to 2006/2007 levels.