Buy in 2012 or 2013

P. Breathnach

During the bubble years there was a chorus of voices talking up property prices. It was inevitable that they would eventually be wrong.

Now, during the bust period, we have as loud a chorus talking down property prices. Inevitably, they too will eventually be wrong. Whether that happens in 2012 or at a later date is impossible to predict.

Learpholl

Theboinkmaster wrote: »

What about when the ECB rate rises to 3% and your monthly repayment doubles?

Is it unrealistic to think if the ECB rate has risen to 3% which would be 8 increments the way they're currently behaving, that the overall economy here in Ireland & Europe in general would be in a much better state of affairs? Genuine question btw.

robd

P. Breathnach wrote: »

During the bubble years there was a chorus of voices talking up property prices. It was inevitable that they would eventually be wrong.

Now, during the bust period, we have as loud a chorus talking down property prices. Inevitably, they too will eventually be wrong. Whether that happens in 2012 or at a later date is impossible to predict.

It's not impossible. I'm not saying it's easy or obvious but if you take an objective approach rather than subjective it's doable.

You can analyses the data from Ireland and other countries going back years. You can see where we're out now viz-a-viz long term trends. You can look at where take home pay and disposable income is going over the next three years and draw conclusions.

You need a basis for a recovery. Like growing GDP/GNP, decreasing unemployment, and wage inflation.

Yes there'll likely be people who are still arguing down when it turns around but seriously we've a while to go yet.

P. Breathnach

robd wrote: »

It's not impossible. I'm not saying it's easy or obvious but if you take an objective approach rather than subjective it's doable.

You can analyses the data from Ireland and other countries going back years. You can see where we're out now viz-a-viz long term trends. You can look at where take home pay and disposable income is going over the next three years and draw conclusions.

You need a basis for a recovery. Like growing GDP/GNP, decreasing unemployment, and wage inflation.

Yes there'll likely be people who are still arguing down when it turns around but seriously we've a while to go yet.

If it's not impossible, don't give me generalised (and incomplete) arguments, followed by a statement of your conclusions.

Give me stats.

robd

P. Breathnach wrote: »

If it's not impossible, don't give me generalised (and incomplete) arguments, followed by a statement of your conclusions.

Give me stats.

Give me stats that it has reached the bottom.

Ronan's graph in this article gives a good objective idea of where we are at versus both long term real prices and income ratio.

In conclusion we were about 3/4 of the way there in July (versus income ratio) and we should be there based on current decline of 4% per quarter in early 2013.
Given tax increases still to come which will reduce available income, I'd say 150,000 is optimistic as long term average. I'd expect it to continue on back towards the real long term price of 100,000 due to the severe adjustments (tax and expenditure) required in budget 2013 and 2014. Read article and you'll understand the 150k and the 100k.

http://www.ronanlyons.com/2011/07/05/are-we-nearly-there-yet-finding-the-new-floor-for-property-prices/

P. Breathnach

robd wrote: »

Give me stats that it has reached the bottom.

Why? I never said that it had. I never expressed an opinion on house prices. I have no need to prove anything.

Ronan's graph in this article gives a good objective idea of where we are at versus both long term real prices and income ratio....

[I quite like the first-name familiarity with Ronan.]

There is a simple fatal flaw in the piece: it is based on asking prices. Five years ago, property usually sold for more than the asking price; nowadays, it usually sells for less (no, I don't have stats, but I don't need them: I am challenging a claim rather than making one). The effective price drop from peak to now might be quite a few percentage points greater than in Lyons's graphs.

I have an opinion on property prices. I don't state it because I can't back it up strongly (I can back it weakly, but that's not good enough for me to try to influence others by stating that opinion).

I am quite willing to say that I don't actually know where the housing market is going. I believe that is a position that should be taken by more people. In general, they don't know either, and should be willing to say so.

robd

P. Breathnach wrote: »

[I quite like the first-name familiarity with Ronan.]

I really don't like your tone.

I have done the research over the last decade, and combined with my understanding of macro and micro economics am able to decipher the various articles and data, am able to work out where we are currently at versus long term trends. I've made money on property and held onto it.

I could argue this all day but judging by the tone of your last reply it's very obvious I'd be completely wasting my time.

P. Breathnach

robd wrote: »

I really don't like your tone.
...

You might not like my tone, but I am making a real point: when you cite somebody and refer to him by first name, you create an impression of belonging to an inner circle, and create an aura of authority. You have added to your implication of authority by the rest of your post.

This argument is not a matter of you and me locking antlers. I have no personal decisions to make on investing in property. My interest is in addressing the question posed by OP, an answer that is probably of some importance to many other people trying to make decisions about their short-to-medium term strategy.

I don't think it is helpful to give unsubstantiated opinions. Nor does "trust me, I'm an expert" cut it as substantiation of an opinion.

I accept that your citing Lyons is an effort to move towards a more solid basis for discussion. But I see a big flaw in his basing his argument on asking prices. The world and his wife know that asking prices are higher, often a great deal higher, than where the market actually is. Sites like collapso.net indicate to us how unrealistic asking prices often are.

I can also add the point that many people base their property purchasing decisions on expected monthly cost more than on the headline price. Cheap money and tax breaks on housing finance can push property prices up: we have seen that happen. Lyons doesn't mention that. Yet I know, from personal experience, what the effect of an 8.75% rate of interest is.

We also have an enormous oversupply of already-built property that is currently lying empty, much of it in places where the demand is very modest - what is a one-bedroom apartment in Carrick-on-Shannon likely to be worth?

Then we have the question of the availability of finance. If the lending institutions are extremely unwilling to engage with people seeking property loans, then the market can be forced down.

So many variables, so little data. Some of those variables might change in the next year or two; others, like the stock of surplus housing units, probably won't.

I am not aware of any serious study that takes account of the huge range of significant variables that need to be factored in. Which leads me to conclude that in predicting property prices, nobody knows.

heate

People really need to do there sums to decide if they actually have the finances to support a home purchase.
Interest rates are at historic lows and will not remain there for as long as people think. Repayments are thus tempting but the market is still falling steadily so why not wait..
A comment was made about interest rates rising and Europe's economy being stronger - a bit foolish to assume that Ireland itself will see an increase in peoples incomes again.

Bobeagleburger

Why buy something that could be worth 20% less in 2 years?

KindOfIrish

I would like to know how much property tax and water rates will be in... say 2015 before even thinking of house-hunting :rolleyes:

BlueIsland

rarnes1 wrote: »

Why buy something that could be worth 20% less in 2 years?

Is this not equally as speculative as 5 years ago a person saying,

" Why are you not buying now when that house may be worth 20% more in 2 years?"

gurramok

BlueIsland wrote: »

Is this not equally as speculative as 5 years ago a person saying,

" Why are you not buying now when that house may be worth 20% more in 2 years?"

Whether its 5% or 20% is anyone's guess, the indication is downwards. Add the following to the factors mentioned which will mean a continuing fall in prices:
A severe lack of FTB's due to high unemployment among young people who have not emigrated. You can take young as those under 35 years of age as this is the age group mainly affected by unemployment.
And the continuing falling employment numbers(where disposable incomes are still falling thanks to tax rises and any paycuts\freezes)

http://www.rte.ie/news/2011/1212/unemployment.html

The CSO says the falls in employment were concentrated mainly in the 25-34 and 20-24 age groups.
Full-time employment fell by more than 53,000, but part-time employment rose by just over 7,000.

http://www.irishtimes.com/newspaper/opinion/2011/1214/1224309043471.html

EMPLOYMENT PEAKED in late 2007 when over two million people were at work in a booming economy. Since then the rate of decline has been steep – a 16 per cent drop in the numbers employed – while the adjustments have been sharp and painful in both human and financial terms.

But as yet there are few convincing signs that the worst is indeed over. The CSO, in its Quarterly National Household Survey, offers little encouragement. Job figures for July–September show, on a seasonally adjusted basis, a fall in employment five times larger than that in the preceding quarter, with 20,500 fewer people at work. It represents the biggest quarterly drop in two years. So dramatic a reversal and so quickly – in just three months – is a worrying development; in particular, given the uncertain global economic outlook in 2012.

A breakdown by sector presents a depressing picture. In the July-September quarter, agriculture, food and the fishing industry was the most adversely affected group. The sector, which lost 5,000 jobs, has seen employment decline by almost a third in 2½ years. Likewise, the “financial, insurance and real estate” sector recorded similar job losses in the quarter. However, no part of the economy has been hit harder by recession than construction. There, employment has shrunk from 272,000 at the peak of the boom to 107,500 – a 60 per cent decline. Nevertheless, this sector does show some signs that employment has stabilised, by recording a modest increase in those at work. For the construction sector the adjustment in employment numbers may well be over; for others – such as the banks and the public sector – job losses are unavoidable in the months ahead. The major banks have yet to outline their redundancy programmes in response to greatly reduced operations, while the public sector is facing further employment losses in 2012.

What is very clear is that no part of the economy has escaped the adverse impact of the downturn. Each sector provides depressing evidence of the scale of the jobs crisis. Certainly, export-led growth has helped, in some measure, to offset the contraction in employment in the rest of the economy. But, given the uncertainties that surround the euro, increased signs of investor nervousness and weaker demand in a deteriorating global economy, Ireland’s reliance on export-led growth for economic recovery is called into question.

One matter of particular concern in the jobless figures is the increased number of those out of work for over a year. In the third quarter, the long-term unemployed accounted for over half the total. Two years ago, one in four of the unemployed was in that category. Those in long-term unemployment also find it hardest to regain employment when economic recovery comes. Another matter of equal concern must be the high rate of unemployment in the youngest age group. Joblessness is highest among 15 to 19-year-olds, where 39 per cent were out of work in the latest quarter. A figure that suggests the youngest are carrying the heaviest burden of the jobs crisis deserves more critical public scrutiny and urgent attention from the Government.

jmayo

Supercell wrote: »

We closed last Friday does that count?
...

2) Price accepted - yes the market is about 10-20% overvalued in SCD roughly to bottom, it doesn't mean all vendors are in lala land. We did probably pay about 10% more than it will be worth at bottom i reckon,

Do you have a crystal ball, because I would like to know next weeks Euromillion numbers.

How the hell do you know that the market is 10-20% overvalued roughly to bottom in any particular place ?
Are prices down to mid to late 90s prices in the area ?
I am just using that as a ball park figure as normally after bubble burst the prices go back to below start of bubble prices.
For the the life of me I can't see how anyone at the moment can predict where the bottom is.

Supercell wrote: »

but its the best deal we can get right now in our desired area. There is no other comparable house in our area anywhere close to what we went sale agreed on from what i can see in myhome or daft. I think our sellers had a bit of cop on and got maybe 10% higher than they would have if they waited another year or so.

It does help that sellers have cop on and go for realistic selling price relative to all the others in area and that they accept realistic offer, because otherwise they are going to be sitting watching the offer getting lower and lower.

Supercell wrote: »

We can currently pay the amount we agreed comfortably so it was the right decision for us at this time.

Fine, if you can easily make repayments and are happy.

Ray Palmer wrote: »

WHat you will get here is the exact same view of people who said the prices will keep going up. One view prices will only go one way for the future untill some point then it will change.

When somebody tells you that the prices are "dillusional" in the area they want it says a lot. Basically if nobody will sell their houses in that area less than this "dillusional" point that actually is the price of the property. A closed market with no extra supply in that area soemthing has to give. There is a point at which nobody will sell and a point people will sell. It doesn't matter what the buyer thinks it is the people who are selling and have the stock think.

This is basic economics. There is a point where the vacant property will be sold but certain areas will still be expensive as people there don't need to sell so constrict supply. THa banks being so risky at the moment is a huge issue.

I'll put on asbesto pants now as people start to flame they magically know how and when the furture will unfold. I wouldn't buy now as lots of uncertainties with the Euro and the banks.

No one knows how the future will unfold, but there are certain assumptions one can make weighing up the available data.
Oh and BTW the right assumptions could also have been made during the bubble if people cared to look at the real indicators.

Your model above fails to note that there has affectively been a moratorium on repossessions and there are probably a large group who are just with their heads above water.
Any little thing can cause this group to have their property shoved onto the market.
As it is a combination of government and financial institutions has distorted the normal supply and demand dynamic within a normal market.

Granted the ones in Ailesbury road may not need to sell (and is thus a closed market), but most other areas will have someone that has way overextended themselves and are just on the border line.

P. Breathnach wrote: »

During the bubble years there was a chorus of voices talking up property prices. It was inevitable that they would eventually be wrong.

Now, during the bust period, we have as loud a chorus talking down property prices. Inevitably, they too will eventually be wrong. Whether that happens in 2012 or at a later date is impossible to predict.

Can you find any indicators that would indicate that the house prices will stop decreasing in 2012, if they continue to decrease at the speed they are currenty decreasing ?

We have been spared the real bloodbath so far, due to banks being ordered to facilitate borrowers in arrears, the fact that it takes so long for repossessions to work their way through the courts, and that interest rate hikes and property taxes haven't really hit.

BTW most of the ones I find talking down property prices were the ones that were doing so 5 odd years ago.
A lot of the bulls have disappeared along with their bulls**t.
Of course there will always be the bandwagon jumpers like all those ex fianna fail voters who suddenly became scathing of the party they previously defended.
Heck that definition could include the entire previous ff government cabinet.

P. Breathnach

jmayo wrote: »

...
Can you find any indicators that would indicate that the house prices will stop decreasing in 2012, if they continue to decrease at the speed they are currenty decreasing ?

No. Which is why I said "Whether that happens in 2012 or at a later date is impossible to predict".

Equally, I do not see anything that convinces me that the decline will inevitably continue beyond 2012.

I am firmly planted in the "don't know" camp, and find myself dispiritingly short of company. Most people seem to know the future of the property market. The problem is that whatever they know, they can't or won't prove to me that they are right.

shangri la

odds_on wrote: »

Seeing as you won't be buying until the 2nd half of 2012, just wait and see what is happening.

No harm in starting to keep a note of the properties that interest you and as time goes on, see which ones have been sold and which are still for sale.

I am going to buy soon (basically, I will need somewhere from early next year and I don't want to rent) and have a small database with all the properties that interest me. I have over 20 areas where I award points and this also helps to show which properties are the best for me. Incidentally, I've been looking for over a year, but somewhere there will be a sale.

Unfortunately, estate agents are usually pretty useless at providing sufficient info in their adverts - those houses / apartments don't get as many points and do not come high in my list. This way, I know which properties I want to view first.

Furthermore, if you e-mail an estate agent - don't expect a reply. I have e-mailed and sent another e-mail asking for a reply to the original, and guess what - still no reply. If I was the seller, I would be very worried. Perhaps sellers should request any and all information as regards interested buyers or people contacting the agents.

can you post your 20 points?

shangri la

robd wrote: »

I've been looking over the last few months but have largely given up due to the delusional prices in the area I'm looking.

It's possible that the interest relief will continue to prop up parts of the market for 2012. It might even create the fabled dead cat bounce. The reality is that the savings it gives will be priced into the house, so if you wait till 2013 the house will be reduced by at least the savings you would make by buying in 2012.

The other think is 2014. Latest indications are that ?100 household charged will be replaced by this valuation based taxed then. Then there's water charges. My estimate is that 3 bed in Dublin will be circa ?1200 per annum household charge and circa ?400 per annum water charges. I'd expect this to bring market down further again. So I'm hmmhing and hawing at the moment. Guess I'll see what happens in the New Year. If I see stuff coming down a bit I might buy but I'm in no hurry as ultimately think it will come down to meet me.

those are very large estimates. A lot of families simply cant afford E1600 even working full time.

shangri la

Instead of talking in general terms lets compile a list of all the factors that will effect prices and once its well rounded add in the individual figures and their effect on the whole.

emigration
mortgage interest relief ending
introduction of household charges
ending of mortgage insurance payments for people made redundant
nama properties made more widely available
decreased rent supplement for those on welfare
increased rate of repossessions
uncertainty over future of euro and a devalued punt nua
developers selling property in a distressed market to meet loan repayments
nama renting empty units and decreasing average rental yields
irish people moving back with parents
large numbers of eastern europeans going home
pressure on gov to raise corporation tax resulting in exit by multinational companies
mortgage moritorium
lack of future bailout funds from imf and europe due to additional drain on funds (italy)
a higher percentage of the remaining population will be elderly and unskilled and will be a major drain on the governments likely smaller budget for social and health expenditure
euro crisis will impact the uk, our largest trading partner by a long shot
asia and mainly china has shown a lot of reluctance to invest in europe in the next few years
improved education in india has decreased our technology advantage to FDI.
a dollar that is expected to continue to weaken due to massive quantative easing results in less jobs here


what have i missed?

shangri la

As you can see I dont just expect the market to continue to decrease into 2013, I expect the country to go into a worse recession and you may regret having a mortgage here when that happens.

Zamboni

shangri la wrote: »

Instead of talking in general terms lets compile a list of all the factors that will effect prices and once its well rounded add in the individual figures and their effect on the whole.

emigration
mortgage interest relief ending
introduction of household charges
ending of mortgage insurance payments for people made redundant
nama properties made more widely available
decreased rent supplement for those on welfare
increased rate of repossessions
uncertainty over future of euro and a devalued punt nua
developers selling property in a distressed market to meet loan repayments
nama renting empty units and decreasing average rental yields
irish people moving back with parents
large numbers of eastern europeans going home
pressure on gov to raise corporation tax resulting in exit by multinational companies
mortgage moritorium
lack of future bailout funds from imf and europe due to additional drain on funds (italy)
a higher percentage of the remaining population will be elderly and unskilled and will be a major drain on the governments likely smaller budget for social and health expenditure
euro crisis will impact the uk, our largest trading partner by a long shot
asia and mainly china has shown a lot of reluctance to invest in europe in the next few years
improved education in india has decreased our technology advantage to FDI.
a dollar that is expected to continue to weaken due to massive quantative easing results in less jobs here


what have i missed?

Packing your bags for the flight?

Treehouse72

P. Breathnach wrote: »

During the bubble years there was a chorus of voices talking up property prices. It was inevitable that they would eventually be wrong.

Now, during the bust period, we have as loud a chorus talking down property prices. Inevitably, they too will eventually be wrong. Whether that happens in 2012 or at a later date is impossible to predict.

In 1900 nobody knew what gravity or energy mass equivalence was.

This chap called Einstein could have thought about it. But instead, he thought, ah sure, shag it, nobody knows what gravity is. He figured that some day, somebody, somewhere might know - it's inevitable. So, not much point in thinking about it too much.

And so, young Mr. Einstein decided not to even think about it. He continued working away in that Berne patent office, visiting Starbuck's in the morning and picking up the groceries at Aldi on the way home, confident that someone, somewhere, some day would work out why it is that apples fall down and not up, and what the relationship between energy and mass is.

As far as I am aware, Mr. Einstein is still sitting in his apartment waiting for the day when someone tells him what it all means.

jmayo

P. Breathnach wrote: »

No. Which is why I said "Whether that happens in 2012 or at a later date is impossible to predict".

Equally, I do not see anything that convinces me that the decline will inevitably continue beyond 2012.

There doesn't appear to be anything at the moment that will halt the slide.
I think there is still a way to go and historically AFAIK after a bubble crash prices go back to a point before the bubble began.
Now some say the bubble began in 2002, but others say it began in mid to late 90s when the real celtic tiger economy started taking off.

P. Breathnach wrote: »

I am firmly planted in the "don't know" camp, and find myself dispiritingly short of company. Most people seem to know the future of the property market. The problem is that whatever they know, they can't or won't prove to me that they are right.

I don't know either when the ultimate bottom will be reached, but I do know the whole thing has been totally drawn out due to intervention by the state.
The state has prevented a sharp quick correction.
Because nobody has an idea when things will bottom out it has led to huge uncertainty and by extension very negative sentiment about the proeprty market.

What I am betting on is that general house prices go back to mid to late 90s levels.
Of course there are exceptions to that on either side.
There are some properties out there that will be virtually worthless due to location, type and build quality.
Take for example Priory Hall apartments, they will always be very hard to sell.

P. Breathnach

jmayo wrote: »

...
What I am betting on is that general house prices go back to mid to late 90s levels.

We are in the realm of one guess being as good as another (within a reasonable range of possibilities). Late 90s, early 90s, early 200s, that sort of zone.

Of course there are exceptions to that on either side.
There are some properties out there that will be virtually worthless due to location, type and build quality.
Take for example Priory Hall apartments, they will always be very hard to sell.

We can ignore extreme cases like Priory Hall. Even if there had not been a bust, they would not now be salable (although when I think of the madness, I wonder).

There are many places where even good-quality houses are difficult to sell, such as the longer-range Dublin commuter belt. Shoebox apartments are hard to sell. Shoddily-built houses and apartments are hard to sell. I think some properties will lose more than 80% from their peak prices.

But there are also properties that are still considered quite desirable, such as good traditionally-built family houses in many Dublin suburbs. The decline from peak for such houses might be of the order of 55-60%.

I'm not suggesting that my percentages are right. What I want to emphasise is that jmayo is indicating something that does matter: that the decline in prices is far from uniform. Potential purchasers should not look at the average performance for the entire property market; they should look at the performance of that segment of the market in which they are interested.

robd

P. Breathnach wrote: »

We are in the realm of one guess being as good as another (within a reasonable range of possibilities). Late 90s, early 90s, early 200s, that sort of zone.

No we're not. You've decided to ignore the data and make excused for why it's not accurate etc. You're alone in your views there.

P. Breathnach

robd wrote: »

No we're not. You've decided to ignore the data and make excused for why it's not accurate etc.

I made the point earlier that there isn't sufficient data to allow anybody to make a good judgement. In particular, I pointed out that asking price is not a reliable indicator of selling price.

You're alone in your views there.

Are you trying to make me feel bad by using the methods of a playground bully? That's not a constructive way to conduct a discussion.

shangri la

Your right, its better to keep argueing and not bother using any facts.

P. Breathnach

shangri la wrote: »

Your right, its better to keep argueing and not bother using any facts.

Give me facts, and I will use them.

My position is that we don't have enough facts available to enable us to make an informed judgement.

Snakeblood

P. Breathnach wrote: »

I made the point earlier that there isn't sufficient data to allow anybody to make a good judgement. In particular, I pointed out that asking price is not a reliable indicator of selling price.



Are you trying to make me feel bad by using the methods of a playground bully? That's not a constructive way to conduct a discussion.

There's a lot of data pointing negatively. You seem to be ignoring the disparity between positive and negative data amounts, which allows you to say that no one knows. If you stop ignoring that there are many, many reasons to say things will get worse, and very very few to say things will get better, then while you can't say definitively, you can say it's extraordinarily likely that things will worsen in the short term.

P. Breathnach

Snakeblood wrote: »

There's a lot of data pointing negatively.

Agreed. Much of that has already been factored into the market, and I am not suggesting that the market has yet reached bottom.

You seem to be ignoring the disparity between positive and negative data amounts, which allows you to say that no one knows.

I don't understand what you mean by that, especially the phrase "data amounts".

If you stop ignoring that there are many, many reasons to say things will get worse, and very very few to say things will get better, then while you can't say definitively, you can say it's extraordinarily likely that things will worsen in the short term.

I'm not ignoring the negative indicators or the relative lack of positive indicators. I have suggested that I think the price decline will continue in the short term. To me, the short term is a period of about one year. I am not trying to put a figure on that decline, but I am happy to suggest that whatever the decline is, it will not be even across all sectors of the market.

This discussion is about when the market might reach bottom. My position is that I don't know, and I suspect that people in general don't know. Rather than be critical of my position, I would prefer that people adduce evidence in support of any position they take. Without good information as a basis for judgement, we are in the realm of guesswork rather than forecasting.

I don't mind if people guess, but I would like them to acknowledge that they are guessing. And I find it strange that people seem to be angry about my taking the position that we don't have a good idea of what will happen in the medium or long term.

Treehouse72

P. Breathnach wrote: »

During the bubble years there was a chorus of voices talking up property prices. It was inevitable that they would eventually be wrong.

And if I keep insisting the earth is round will I eventually be proven wrong?

It was inevitable the bubble cheerleaders would eventually be proven wrong because they were wrong all along. One more time: they were wrong all along. There was no point at which they were right. You seem to be labouring under the illusion that they were right for a long time, but then something changed and one morning they woke up and were suddenly wrong.

Do you still not understand all this stuff? Still? Come on.