Dead Cat Bounce

PhilMcGee

You can buy a 100k property now for 25k deposit and less than €450 per month payments on the remaining mortgage.
Thats very attractive to investors when you see what rents those properties can achieve.
Probably very attractive to owner occupiers too, but I only see investors jumping in at the moment.
I think most property might still be out of the reach of ordinary families, but there are easy pickings for investors.

Anynama141

The Spider wrote: »

That argument doesn't stand up when it comes to buying a house, you are using the rising cost of utilities and services against the rising cost of an asset someone has invested in? You can use that argument against the rising cost of rent as it's an outgoing cost with no return.

We are told time and time again that housing IS NOT AN ASSET. Housing is a basic requirement for living, unless you want to live in a field or something.

Thus increasing costs of housing, be it for rent or for mortgages are a BAD thing. And the consequences of increasing housing prices on people's economic behaviour - wealth effects etc. - are also A BAD THING. Do you remember the property bubble at all?

The Spider wrote: »

Put it this way if you invest your money in shares do you want to see that price drop? If you have a pension that you invest in do you want to have less than you put in when you cash in, all of this applies to people buying houses.

I don't HAVE to buy shares. I DO have to live somewhere, and pay rent or a mortgage.

I really don't understand how people can be so ignorant of these principles after the decade we've just had when the evidence has been all around them.

Anynama141

The Spider wrote: »

Nope recovery is based on supply and demand, as it always was, if those prices are being achieved, then thats the new baseline, recovery was always going to begin in the most desirable location.

The recovery was when prices crashed from ridiculous levels to the current more realistic, more healthy (but still high) levels.

PhilMcGee

There is a concept of a "healthy market" for everything.
A healthy market does not involve prices going down.

desertcircus

PhilMcGee wrote: »

There is a concept of a "healthy market" for everything.
A healthy market does not involve prices going down.

Cars, PCs, phones?

The Spider

Anynama141 wrote: »

We are told time and time again that housing IS NOT AN ASSET. Housing is a basic requirement for living, unless you want to live in a field or something.

Thus increasing costs of housing, be it for rent or for mortgages are a BAD thing. And the consequences of increasing housing prices on people's economic behaviour - wealth effects etc. - are also A BAD THING. Do you remember the property bubble at all?

I don't HAVE to buy shares. I DO have to live somewhere, and pay rent or a mortgage.

I really don't understand how people can be so ignorant of these principles after the decade we've just had when the evidence has been all around them.

Well that's the most ridiculous thing I've ever read, housing is an asset, historically it's the most basic asset there is, every economy on the planet is based on people owning land, that's what wars are fought over territory!

Now as for somewhere to live, yes you do have to live somewhere, however that doesn't mean you are entitled to a cheap house, you can rent.

Or you can commute into the city centre and buy in a town outside Dublin, as do the vast majority of people working in the likes of London, New York etc. Why does everybody think they're entitled to Nice house in a great area of the city centre, have excellent schools, and want it all for below 200k?

I have news the reason those places are nice is because they're expensive a certain type of person can't live there because they can't afford to, and every professional in the city wants to live in those areas, thus high prices.

PhilMcGee

desertcircus wrote: »

Cars, PCs, phones?

Different beasts altogether. Im sure you know why.
But over time the amount that people spend on these should increase in a healthy market, they might get more for their buck, because of advances in technology. But all of those things are perishable in the short term. Property is not, unless you are talking about Baldoyle

Solair

A healthy market is more about being sustainable in the long term.

Ireland's housing market just had a spectacular crash on a scale that's almost unprecedented. It was a mega-bubble.

There are a few spots of demand in the market but let's not forget that outside of a select few Dublin suburbs we are still seeing falling prices and extremely low volumes of sales.

You'll always get a few expensive areas that don't quite follow the general trend but, I'd be more concerned about the fact that a huge % of the market still hasn't even found the floor.

A healthy market is one where supply and demand roughly meet in the middle. Ireland's housing market is absolutely not like that.
It's more like a market with a severe case of bipolar disorder.

There are also huge risk factors:

*Banks' future still far from certain.
*Insufficient normal access to credit
*Poor credit rating for the state & banks.
*Falling incomes due to lower wages and increased taxation.
* very high unemployment
* net emigration
*Potentially loads of reposed properties appearing on the market (there are loads of people in family homes in severe mortgage distress in desirable areas)
Currency uncertainty
*Fundemental economic policies being made up by both Dublin & Brussels on the fly.
*EU fiscal policy being dictated by national election concerns in Germany & the Netherlands etc

I could go on but I would definitely say its a dead cat bounce until some of those issues get fixed.

Anynama141

The Spider wrote: »

Well that's the most ridiculous thing I've ever read, housing is an asset, historically it's the most basic asset there is, every economy on the planet is based on people owning land, that's what wars are fought over territory!

Does any of that make it better if it gets more expensive? No.

The Spider wrote: »

Now as for somewhere to live, yes you do have to live somewhere, however that doesn't mean you are entitled to a cheap house, you can rent.

Where did I say that people are 'entitled' to a cheap house? I think you'll find that I said that you could also rent. Do you think people being forced to pay higher rents is also a good thing?

The Spider wrote: »

Or you can commute into the city centre and buy in a town outside Dublin, as do the vast majority of people working in the likes of London, New York etc. Why does everybody think they're entitled to Nice house in a great area of the city centre, have excellent schools, and want it all for below 200k?

Who exactly are you arguing with here?

What does this have to do whether property get more expensive is a good thing?

The Spider wrote: »

I have news the reason those places are nice is because they're expensive a certain type of person can't live there because they can't afford to, and every professional in the city wants to live in those areas, thus high prices.

Wow, what a marvellous grasp of the property market you have.

Now can you explain why it is a good thing if a fundamental basic human need is getting more expensive?

Anynama141

PhilMcGee wrote: »

Different beasts altogether. Im sure you know why.
But over time the amount that people spend on these should increase in a healthy market, they might get more for their buck, because of advances in technology. But all of those things are perishable in the short term. Property is not, unless you are talking about Baldoyle

Property is also perishable. You have to spend money to maintain your property. If you take a house that hasn't has a penny spent on it in a hundred years, you will have an unliveable wreck. The only thing you are sure won't 'perish' and needs no maintenance - unless it is a leasehold - is the land that house is standing on.

PhilMcGee

Anynama141 wrote: »

Property is also perishable. You have to spend money to maintain your property. If you take a house that hasn't has a penny spent on it in a hundred years, you will have an unliveable wreck. The only thing you are sure won't 'perish' and needs no maintenance - unless it is a leasehold - is the land that house is standing on.

Now its getting ridiculous. OK. If it makes you feel better to think you are right, who am I to argue.
Maybe you will be found to be right in the long term.
Might be a long wait though.

The Spider

Anynama141 wrote: »

Wow, what a marvellous grasp of the property market you have.

Now can you explain why it is a good thing if a fundamental basic human need is getting more expensive?

You're obviously coming at this from the side of someone who rents, I'll come at it from the other side, why is it a good thing that property prices rise? Simple it means I'm not in negative equity and I have an asset that's performing, it means I feel richer even if I'm not and I'm more likely to spend money in the economy rather than hoard it away, it's a psychological thing, basically if I do lose money there's always the house I can sell, it should never come to it, but if people think they are worth more they're happier.

Why is it a good thing that rents rise? Again simple assets that I've invested in are performing and giving me a maximum return for the money I've put in.

If you're going to worry about basic human need and play the social card, fine but that's up to the government to provide that, as a private citizen I am entitled to maximise profit for the use of an asset.

Anynama141

PhilMcGee wrote: »

Now its getting ridiculous. OK. If it makes you feel better to think you are right, who am I to argue.
Maybe you will be found to be right in the long term.
Might be a long wait though.

Wait, what?? You never heard of house maintenance? Painting? New kitchens, bathrooms? Wiring? Maintaining/replacing doors and windows?

Roofing? Internal decor? Structural issues, subsidence? Insulation?

Is the idea of maintaining a property really a new idea to you?

PhilMcGee

Anynama141 wrote: »

Wait, what?? You never heard of house maintenance? Painting? New kitchens, bathrooms? Wiring? Maintaining/replacing doors and windows?

Roofing? Internal decor? Structural issues, subsidence? Insulation?

Is the idea of maintaining a property really a new idea to you?

I cant argue with the wife either. So I just let her be right all the time.
Sometimes life is just easier that way.
You are right. Go for it.

Anynama141

The Spider wrote: »

You're obviously coming at this from the side of someone who rents, I'll come at it from the other side, why is it a good thing that property prices rise? Simple it means I'm not in negative equity and I have an asset that's performing, it means I feel richer even if I'm not and I'm more likely to spend money in the economy rather than hoard it away, it's a psychological thing, basically if I do lose money there's always the house I can sell, it should never come to it, but if people think they are worth more they're happier.

A house is 'performing' if it keeps you warm and dry. So basically you are saying that rising property prices create an ILLUSION of wealth and encourage people to spend more extravagantly than they normally would?

You remember the bubble, right? That didn't end well, did it?

The Spider wrote: »

Why is it a good thing that rents rise? Again simple assets that I've invested in are performing and giving me a maximum return for the money I've put in.

So it's good for the landlord - is it good for the renter? Is it good for the economy? Is it good for society?

NO, NO and NO.

The Spider wrote: »

If you're going to worry about basic human need and play the social card, fine but that's up to the government to provide that, as a private citizen I am entitled to maximise profit for the use of an asset.

Sure you can, maximise all you like, I'm all for that. But I wonder how you feel about repossessions of those properties in mortgage arrears?

And I still don't understand why you think basic needs getting more expensive for everybody is good for a society and an economy.

Anynama141

PhilMcGee wrote: »

I cant argue with the wife either. So I just let her be right all the time.
Sometimes life is just easier that way.
You are right. Go for it.

Not the most gracious acknowledgement ever, but I'll accept it. If you have no counterargument, you can just say that. We all get things wrong from time to time.

desertcircus

The reason rising housing coats are a bad idea is that it ties up investment and spending in an incredibly unproductive enterprise. Every extra euro spent on housing is a euro less spent on something else; something that provides employment, or advances technology, or reduces costs elsewhere. Assuming a given supply of housing, it's economic bad news for the price of that housing to be much beyond the cost of providing and maintaining it.

PhilMcGee

Anynama141 wrote: »

Not the most gracious acknowledgement ever, but I'll accept it. If you have no counterargument, you can just say that. We all get things wrong from time to time.

Thats what she always says too.

Galego

Consequences of a housing bubble. No disposable income left in the economy to spend! :-(

Results summary, Q3 2012

Household net worth increased by €11bn or 2.5 per cent during Q3 2012, reaching €456.9bn or €99,646 per capita. This marked the first rise in household net worth since Q1 2008

Household debt to disposable income, an indicator of debt sustainability, declined further during Q3 2012, to stand at 203.8 per cent

Source: http://www.centralbank.ie/

RATM

I remember reading before that one prominent feature of property crashes worldwide is a dead cat bounce, economists have analysed lots of crashes over the last 100 years and come to to the conclusion that it is almost unheard of for it not to occur when a property market is in decline.

Of course Ireland is different :rolleyes:

Economists have also found strong correlations between unemployment and property prices during a crash. In short property markets can't recover until unemployment goes down. The reason is that it it all due to consumer sentiment. Ireland has an effective unemployment rate of 23% and when you have that then then sentiment shoots downwards because for every person who is unemployed you have another person who is still working but is in constant fear of losing their job. People don't like uncertainty and markets hate it even more. When uncertainty exists then people put their wallets away and prices will continue to fall.

In my mind two major events need to happen before there is a true market recovery. One is for unemplyment to sink below 10%. But that alone won't do it, the other event that needs to happen is for a major foreign bank to come in and start lending mortgages in a big way. Our so called pillar banks do not have the funds to fill this void.

Last October Tesco Banking offered UK customers mortgages at 2% interest rates provided that they have a 40% deposit.
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9619675/Tesco-launches-1.99pc-mortgage-deal.html

There is a five year backlog of Irish first time buyers (myself included) who have deposits in the region of 40% but are still sitting on the fence waiting. As a very cash rich company Tesco could easily come in here with a similar deal and sell mortgages to tens of thousands of people. They have a ready made network of supermarkets in Ireland and they already have the necessary IT systems in place in the UK.

But back in August Tesco looked at the Irish mortgage market and decided not to enter it, despite the already present infrastructure in every major town in Ireland. If a company like Tesco turned their nose up at the Irish mortgage market then we really are fooked more than I'd thought.
http://www.independent.ie/business/personal-finance/property-mortgages/tesco-wont-offer-irish-mortgage-service-26888898.html

The Spider

Anynama141 wrote: »

A house is 'performing' if it keeps you warm and dry. So basically you are saying that rising property prices create an ILLUSION of wealth and encourage people to spend more extravagantly than they normally would?

You remember the bubble, right? That didn't end well, did it?

So it's good for the landlord - is it good for the renter? Is it good for the economy? Is it good for society?

NO, NO and NO.

Sure you can, maximise all you like, I'm all for that. But I wonder how you feel about repossessions of those properties in mortgage arrears?


And I still don't understand why you think basic needs getting more expensive for everybody is good for a society and an economy.

Well it is good for the economy, people spend more when they feel richer, look at B&Q closing down in Waterford and other areas because people won't spend.
When people save other than spend the economy suffers, and that's what happens when house prices are low.

Is it good for the renter? Doesn't matter they're a minority group, and as I said before they don't exactly have a voice as they are constantly losing members as soon as they buy a house they cross to the other side.

Then they hope prices don't crash, no one wants to be the clown that bought at the top, so seeing prices rise allays that fear somewhat.

Do I have a problem with repos? Absolutely not I waited out the bubble and saw a fantastic house that the owners had to sell through the bank, I got it for a song.

So swings and roundabouts capitalism in action.

Galego

The Spider wrote: »

Well it is good for the economy, people spend more when they feel richer, look at B&Q closing down in Waterford and other areas because people won't spend.
When people save other than spend the economy suffers, and that's what happens when house prices are low.

Sorry but IMO I think you keep ignoring the main point. The debts to disposable income ratio keeps going up because there is less and less disposable income in each Irish house.

Many Irish people do not spend money because they do NOT have it!!! It is not like deposits from Irish residents are getting much bigger. According to you, where is all that money not spent in the economy? Under their mattress?

The Spider

Galego wrote: »

Sorry but IMO I think you keep ignoring the main point. The debts to disposable income ratio keeps going up because there is less and less disposable income in each Irish house.

Many Irish people do not spend money because they do NOT have it!!! It is not like deposits from Irish residents are getting much bigger. According to you, where is all that money not spent in the economy? Under their mattress?

Ok fine, but yet we have houses in SCD continuing to rise and being snapped up by people, so where is this money from, there's job areas in Ireland that are booming, IT being one.

I haven't been affected by the bust in fact I don't know too many people outside the building industry that have been. Even those guys now have work on and it's only increasing.

Sometimes listening to the news you'd swear we were all fecked, but there's a lot of people who aren't and by the looks of things they've stopped waiting and are making their move.

Galego

SCD guys are a VERY small percentage of the overall population. I mean, does it even represent 1% of the Irish population? I wouldn't think so. Ireland is heading towards an economy in which the top of the society (a very small percentage) has plenty of money and the rest struggle to meet the bills or live in poverty. The middle class is getting weaker and weaker.

So according to you, Ireland does not have a 14% unemployment (an effective rate of 23%) and there are plenty of jobs out there fore everyone, correct?
Are these unemployed people flying just over to collect the doll every week? Where are they? Are they hidden in the Wicklow mountains? Can they please stand up? :-)

I guess your comment reminds me when I was in Brazil talking to these wealthy Brazilian people, telling me how well the country was doing, how much money they were making, etc, and at the same time (right next to them) there were a group of 5 years old kids begging for food (in their bones). I guess it is all depends in which reality you live or whether or not you want to acknowledge or ignore the other side of the coin. Remember that Ireland is not only where you live!

Glenbhoy

The Spider wrote: »

Plenty of houses below 300k, the problem is everyone wants to live in south county Dublin, which was always a premium area, there's this sense of entitlement about that people who called the crash that they feel they deserve a house in south county Dublin for below 300k.

Sorry but this is the most desirable area in the entire country and will always be out of reach of people on average or just above average wages.

The top 10-15% of earners by definition are not on average wages. The issue is that even for those people, those salaries will only command enough buying power to purchase a run of the mill semi-detached home in SCD. The problem stems from lack of supply, and as we know, there are a number of artificial restrictions on supply, ranging from people's unwillingness and inability to sell because of negative equity, through to banks unwillingness to force repossessions because of the damage loss crystallisation would do their balance sheets (and of course erroneous legislation pushed through the dail).
With the supply side so damaged, in my opinion the market is not functioning properly and allied with the numerous downside risks such as those highlighted so succinctly by Solair, the irish property market has a bit to fall yet.

Anynama141

The Spider wrote: »

Well it is good for the economy, people spend more when they feel richer, look at B&Q closing down in Waterford and other areas because people won't spend.
When people save other than spend the economy suffers, and that's what happens when house prices are low.

No, that's what happens when the economy is in the toilet, nothing to do with house prices. In this instance, the economy is in the toilet because of people called Fianna Failure who, in government, had the attitude that higher property prices were good and encouraged a devastating bubble to emerge.

The Spider wrote: »

Is it good for the renter? Doesn't matter they're a minority group, and as I said before they don't exactly have a voice as they are constantly losing members as soon as they buy a house they cross to the other side.

Children are also a minority, so they don't matter. Men are a minority, so they don't matter.

What kind of stupid idea is that, that 'minorities don't matter'? Do you seriously believe this nonsense yourself?

Also, if you stop to think for a second, you will realise that new people are coming into the rental market all the time just as they leave it. And if you did a minute's worth of research, you would see that the number of renters in Dublin alone has more-or-less doubled since 2000 or thereabouts.

Anynama141

The Spider wrote: »

Sometimes listening to the news you'd swear we were all fecked, but there's a lot of people who aren't and by the looks of things they've stopped waiting and are making their move.

Don't listen to the news; that's the facts simplified for broadcast in 2 minute bursts. Find the information that is easily available on the internet about our economy, our debts and our banks, and you will see for yourself that we are far more fecked than 'the news' lets on.

Glenbhoy

Anynama141 wrote: »

No, that's what happens when the economy is in the toilet, nothing to do with house prices. In this instance, the economy is in the toilet because of people called Fianna Failure who, in government, had the attitude that higher property prices were good and encouraged a devastating bubble to emerge.

As I recall the policies proposed by the other parties were broadly in line with FF policies, the one thing you can't accuse FF's brand of politics with is being out of touch with the wishes of the people, Bertie's govt was the most populist govt I have ever lived under, people got pretty much what they voted for.

evolving_doors

It's all about averages, as someone mentioned earlier...a few months ago a far as I remember the price rises were taking place in more affluent areas of dublin..so an increase of 200 k on one posh gaffe has more of an impact on the average house price than 20 regular houses with price rises of 10k...now think of any mansions that didn't sell for the last few years but are starting to shift again...hence the indo rag can lead with "house prices are slowly rising"..

In ireland also pensions with companies are complete crap for the average joe... that's why alot of people invest in property..with the hope of selling or renting down the line...

in germany people just dont do this and trying to say we should try and become a renting nation is a moot point...btw the old argument that "rent is dead money"still applies in ireland as the rent aint far off the prices of mortgages repayments..

..people are simply just waiting untill they have sufficient cash to purchase... Once that floodgate opens prices will rise...

Banks aren't stupid, they know the profile of their savers and they also have the power to control supply buy varying the amount of mortgages given out coupled with controlling the amount of repossessions... Thats why they are slow to repossess.. It's better to keep people in house s keeping them maintained etc then mass repossessing and having them depressing the market ....when the time is right the banks will slowly but surely make a killing...and nobody will notice...

hfallada

Armelodie wrote: »

It's all about averages, as someone mentioned earlier...a few months ago a far as I remember the price rises were taking place in more affluent areas of dublin..so an increase of 200 k on one posh gaffe has more of an impact on the average house price than 20 regular houses with price rises of 10k...now think of any mansions that didn't sell for the last few years but are starting to shift again...hence the indo rag can lead with "house prices are slowly rising"..

In ireland also pensions with companies are complete crap for the average joe... that's why alot of people invest in property..with the hope of selling or renting down the line...

in germany people just dont do this and trying to say we should try and become a renting nation is a moot point...btw the old argument that "rent is dead money"still applies in ireland as the rent aint far off the prices of mortgages repayments..

..people are simply just waiting untill they have sufficient cash to purchase... Once that floodgate opens prices will rise...

Banks aren't stupid, they know the profile of their savers and they also have the power to control supply buy varying the amount of mortgages given out coupled with controlling the amount of repossessions... Thats why they are slow to repossess.. It's better to keep people in house s keeping them maintained etc then mass repossessing and having them depressing the market ....when the time is right the banks will slowly but surely make a killing...and nobody will notice...

The problem is banks can't repossess. There is a ridculous loophole which means they can't repossess houses easily like in other countries. It's nothing to do with forcing up prices artificially.

On daft.ie you see that average apartments and house are increasing in prices. People had them on the market for x amount and have now put it up by 10%