money..??

Feeona

Feeona wrote: »

It's not addressed to you.

It's addressed to the countless threads pointing and laughing at those who find themselves in an unfortunate position nowadays. It's quite easy to spot the demographic of AH with threads like that!

okay, just a bit on edge

ronjo

mkdon05 wrote: »

Well I'm glad to hear Mammy and Daddy could house you. Not the case for everyone!

Thats not the case either for me but actually possibly a 4th option too I guess now that you mention it.

atila

Have people who like the idea of renting for life considered how they may fund housing in retirement years? buying a house is very dependent on what stage in life you are at. Always think long term when buying a house, but the same is true of choosing not to buy. You need to also consider the longer term horizon. The main thing is to have a plan and not just stumble through.

Nyan Cat

The point is a lot of people who did buy a house didn't actually have the means, hence the huge mortgages people are saddled with now. Yes the bank is partly to blame for throwing loans at people but that in no way excuses the responsibility that comes with the decision to do it.

It sucks that so many are saddled with huge debts now. But it is important to remember that while they couldn't know that the market would crash, you always have to be aware that the market changes. So do circumstances. And it seems many did not think about that.

I dont think renting gives anyone the moral high ground EXCEPT in cases where people refuse to acknowledge that they perhaps didn't think things through fully. And say things like '... I had to buy..' '...why should I be punished for biting..' etc or worse the ones that suggest everyone should share their burden.

Feeona

bluewolf wrote: »

okay, just a bit on edge

no worries!





AH gets to me sometimes too

dxhound2005

Every age has it's problems and in the nature of things people who hold property for a number of years will become "richer". When I bought my house 30 years ago mortgage rates were 18% or so and rising. It was a very difficult time to be a new house owner just like now and just like always. At least people over the past few years have had the comfort of relatively stable interest rates.

http://www.irishtimes.com/newspaper/opinion/2010/1015/1224281145830.html

later12

Doc Ruby wrote: »

You can make a very solid case based on rental returns for the area though, which does make financial sense.

Yes, and indeed there is mathematical way of determining intrinsic value in an asset, be that real estate or any thing else. Banks and financial institutions do this all time time, and did so during the boom times in Ireland, too.

But these sorts of calculations are never concrete determinants of "intrinsic value". None of the property investors nor the financial institutions ever foresaw the calamitous shock that was to be delivered to the property industry and the wider economy, and could never reasonably have integrated such a shock into their calculations in determining the future effects of a housing collapse. Therefore, they could quite easily and quite reasonably have judged someone paying €600,000 or even €6,000,000 for a home to have been a reasonable and sage investment. That's entirely possible.

cb7

There is a lot of people that I know moaning they have no money but yet dont want to give up their landline, broadband, gym membership, or sky!!!! I also know a few people moaning but still have a house keeper a few days a week!!! They don't work but yet don't want to give these things up. It is hard to listen to these people. There are of course genuine people who dont have much I know that. But there is also the ones who like to moan as they don't want to give up their lifestyle they have become accustomed to!!.

foxyboxer

gymman39 wrote: »

what probably didnt come across in my post was "is it worth putting up an image of been wealthy when things are that tight"I heard one story of a couple that have 5 credit cards and two huge loans from the bank and the credit union...madness..!!!

The 'Big Hat, No Cattle' merchants.

later12

cb7 wrote: »

I also know a few people moaning but still have a house keeper a few days a week!!! They don't work but yet don't want to give these things up.

They don't work and they have a housekeeper?

Either you are friends with titled members of the royal family, or else I don't think I believe you.

Doc Ruby

later10 wrote: »

None of the property investors nor the financial institutions ever foresaw the calamitous shock that was to be delivered to the property industry and the wider economy, and could never reasonably have integrated such a shock into their calculations in determining the future effects of a housing collapse. Therefore, they could quite easily and quite reasonably have judged someone paying €600,000 or even €6,000,000 for a home to have been a reasonable and sage investment. That's entirely possible.

Nah I don't buy it. Property investment is a pretty simple picture usually, especially compared with other forms of investment, and the financial institutions had to have known that there was a bubble.

Posters on boards, askaboutmoney, and the property pin all made accurate predictions about the bubble constantly, and I doubt they had access to more information than the banks.

What it smacks of is the banks knew full well that they were systemic and could lean on weak politicians for a bailout whenever they wanted. After all it happened before in both the banking and insurance industries. Its not even conspiracy theory territory, banks are very strict top down hierarchies, all it would take is for the guys at the top to realise this and act accordingly.

Further supporting this is the mysterious midnight meeting with Lenihan and the top banking heads, after which an unconditional guarantee was issued.

So yeah, I would guess a deliberately inflated bubble with the taxpayers as the ultimate fall guys. Lets hope people listen to the voices in the wilderness the next time it happens.

dxhound2005

Doc Ruby wrote: »

Nah I don't buy it. Property investment is a pretty simple picture usually, especially compared with other forms of investment, and the financial institutions had to have known that there was a bubble.

Posters on boards, askaboutmoney, and the property pin all made accurate predictions about the bubble constantly, and I doubt they had access to more information than the banks.

What it smacks of is the banks knew full well that they were systemic and could lean on weak politicians for a bailout whenever they wanted. After all it happened before in both the banking and insurance industries. Its not even conspiracy theory territory, banks are very strict top down hierarchies, all it would take is for the guys at the top to realise this and act accordingly.

Further supporting this is the mysterious midnight meeting with Lenihan and the top banking heads, after which an unconditional guarantee was issued.

So yeah, I would guess a deliberately inflated bubble with the taxpayers as the ultimate fall guys. Lets hope people listen to the voices in the wilderness the next time it happens.

I remember a similar mania for agricultural land in the 1970's with prices doubling/tripling. Our property bubble is a repeat of many others around the world over a long period. It seems we are doomed never to learn from our or others mistakes and it would not surprise me if the whole cycle was repeated here in the next 20 to 40 years.

cb7

Husband works and she stays at home. Mrs claiming social welfare.

later12

Doc Ruby wrote: »

Nah I don't buy it. Property investment is a pretty simple picture usually, especially compared with other forms of investment, and the financial institutions had to have known that there was a bubble.

Why do you say that? There's no reason as to why investing in a house is more straightforward than investing in a security or in equity, the means of assessing the value of a real estate asset is very similar to the means of assessing the value of a share portfolio.

Posters on boards, askaboutmoney, and the property pin all made accurate predictions about the bubble constantly, and I doubt they had access to more information than the banks.

Accurate? How accurate? Were there calculations, or merely expressions of an expectation of a bust?. I think it's safe to say the banks were prepared for a certain amount of doom, the problem with us using terms like doom and bust is that its magnitude is never quantified.

We just say something bad will happen, and if anything bad at all happens we say told you that would happen. The problem for a financial institution is that they have to get the downturn pretty much exactly right in a quantitative sense, they have to have ideas (Probabilities) about the size and nature of the shock, and where the floor is going to be in asset values.

later12

cb7 wrote: »

Husband works and she stays at home. Mrs claiming social welfare.

Oh right. I thought you said

cb7 wrote: »

I also know a few people moaning but still have a house keeper a few days a week!!! They don't work but yet don't want to give these things up.

That's quite different to saying that the husband has a job.

Doc Ruby

later10 wrote: »

Why do you say that? There's no reason as to why investing in a house is more straightforward than investing in a security or in equity, the means of assessing the value of a real estate asset is very similar to the means of assessing the value of a share portfolio.

The factors that can affect most forms of investment are complicated and often non intuitive, people can and do get stung for not understanding them. Watch what happens with gold shortly. And thats to say nothing of direct investment in a business.

Property on the other hand, check out the local classifieds for rental rates, factor in local amenities (close to a college or business park, good), see if the yields are 7% or better, and away you go. It doesn't change quickly either.

later10 wrote: »

Accurate? How accurate? Were there calculations or expressions of doom and gloom.

Yes, plenty of solid calculations, pretty graphs, feuds with online property websites for spidering their data, and so on. I recall seeing graphs of property prices going back thirty and forty years in 2003, they certainly saved me from buying then.

later10 wrote: »

We just say something bad will happen, and if anything bad at all happens we say told you that would happen. The problem for a financial institution is that they have to get the downturn pretty much exactly right in a quantitative sense, they have to have ideas (Probabilities) about the size and nature of the shock, and where the floor is going to be in asset values.

Nah it was a huge and really really obvious property bubble. They knew full well what they were doing, and knew full well what the end result would be. When you have the capital of a nation in your coffers, your perspective changes.

cb7

Oops. Sure its up to themselves what they spend their money on. Its just the moaning that annoys me as their salary has been reduced a bit. Just dislike the moaning!!!

later12

Doc Ruby wrote: »

Watch what happens with gold shortly. And thats to say nothing of direct investment in a business.

This is exactly the problem though. Everyone says "gold is in a bubble, it's going to crash". It is very likely that gold is in a bubble, it is very likely that its value will fall, and it is very likely that investors will lose a lot of money. But it's one thing for someone to pass off this remark, and quite another thing for a financial institution or a risk professional to try to assess the likelihood of how much further gold will rise, and when and how it might eventually fall. People train for years to learn how to do this stuff and develop fantastic machines and programs that can assist in this work, and there is a far greater burden of information required of them than someone who casually notes that "gold will eventually burst" which is a bit like saying "some day it will rain".

That's what we had with the celtic tiger. A lot of people saying "someday, a bust will come" Well of course it was going to happen. Have you ever seen a graph that only ever increased across a time series? What the banks had to do, and what they did (according to Morgan Kelly himself in 2007) was make provisions for the anticipated losses in the event of an Irish crash. Even he only predicted a 6-7% per year reduction in house prices which would be sustained rather bearably over a 9 year period

What happened in the end was something that nobody seriously expected, a perfect storm of an irish crash alongside a global credit squeeze and a sovereign crisis in Europe.

Property on the other hand, check out the local classifieds for rental rates, factor in local amenities (close to a college or business park, good), see if the yields are 7% or better, and away you go. It doesn't change quickly either.

It really is not this simple. If you were to follow this method, you could still have paid €600k or €6m for a house in 2007 that is now worth a fraction of that.

Doc Ruby

later10 wrote: »

But it's one thing for someone to pass off this remark, and quite another thing for a financial institution or a risk professional to try to assess the likelihood of how much further gold will rise, and when and how it might eventually fall.

Doesn't matter. Banks aren't common investors, they are a carefully regulated industry for a good reason, in that they are gambling with other peoples' money. One you start to see a graph like the prices of Irish property, its time to call a halt.

But wait, there's more. When a third party is responsible for funding 90-110% of a transaction, that third party controls the price.

With that in mind, you can't handwave it all away by saying, oh its too complicated for us peasants. Its not too complicated, the skyrocketing prices were very clear, and were made to skyrocket by the banks. The only reason they might do this without pulling on the reins was because they knew very well they could lean on the politicians to make the taxpayer foot the bill.

It was deliberately engineered, top to bottom, by people like this.

later10 wrote: »

It really is not this simple. If you were to follow this method, you could still have paid €600k or €6m for a house in 2007 that is now worth a fraction of that.

A swing and a miss I'm afraid, yields during the bubble were 0.5% to 1.5% or thereabouts - this means you'd get a return on your investment in 75 to 200 years, if you had all of the money upfront. Thats why you could count the number of foreign investors in Irish property during the bubble on the fingers of one foot. It was often quipped that you'd pay less in rent than you'd pay in interest alone.

When I say it was simple and obvious, I mean it was simple and obvious.

foxyboxer

Some thoughts.

Bubbles are a fantastic way to make money.
Very few people buy the bottom of any asset price cycle.
If they do they'll probably have a pamphlet or system for sale whereas they simply got lucky with the timing :rolleyes:


A bubble stems historically from investments, so to suggest that property was a bubble is to imply that property was an investment and not simply buying a home. So if property is taken as an investment in this scenario, then the first rule of investing is "If it goes wrong, how do i get out" i.e. exit plan, cutting your losses etc etc.

Now the first question you'd ask yourself is considering my current job, what might happen if

- I lost my job
- I became sick and couldn't work
- I needed to take care of a family member

Will my means cover the cost of repayment?

You know something is wrong when a middle aged man or woman on the average industrial salary could not afford a semi detached house in a Dublin suburb. The only way to do so would have been on a joint income application.

Now some people wanted to buy a home but had the misfortune of simply being at the point in their lives where a home was needed at a time of persistently rising house prices. It is simply human nature to view such a month on month price increase (on average it was 3k per month IIRC) and not get a little agitated about wasting a buying opportunity. They've seen a house they like, they have a good job, the economy is vibrant. Why the hell not. :cool: On a side note we can see the inverse of this psychology at work now "Why should I buy now when prices are falling each month" as opposed to "Feck it, I better buy now before they're too expensive!!"

So people who bought the houses from say 2002 to early 2007 did so during a phenomenal move in house prices. Let's say the house was bought in 2002. If Johnny bought then by the end of 2006, he'd be feeling pretty happy with himself. He might even argue that he could see it coming all along. That others who didn't buy when he did were suckers who weren't as financially savvy as him, smart and ballsy indeed.

If by 2006, Sinead has scrounged together a deposit over the past 3 or 4 years and with a little help from the parents finally has the 10% deposit. She hears from people how important it is to get on the ladder, she sees the property porn in the national papers. She feels right about the decision.

In both scenarios it appears that they have done the right thing, AT THE TIME.

What sticks in my craw is that while Johnny's Equity maybe a little below his initial Modest mortgage, so long as he's working away, it's fine. But contrast that with Sinead who may have been made redundant and not be able to even afford the repayments on the Jumbo mortgage and is 12 months in arrears. Same decision process yet wildly different consequences.



TL;DR?

Buy a house with 50% deposit and 50% mortgage.
Can't pay that much cash? You can't afford it.

A car anlogy is good.
If I see a Mercedes or a Lexus, I'd imagine it was a judge, a doctor or a top accountant behind the wheel.
They have a big salary and they drive a big car.

If I see a Volkswagon Golf, I'd imagine it was a solicitor, a builder or a teacher.
If I see a second hand Punto or a Fiesta, it might be someone in Retail or general operative.

The problem was that the general operative wanted to drive the Lexus and felt ok borrowing the money to achieve it.