The madness has returned

Valentine1

Ray Palmer wrote: »

No the bubble was caused by a load of people coming to house buying age at the same time and they had jobs. These people can't wait forever so they are now returning to the market to either upgrade or get their first home if they missed their opportunity before.

The banks helped this but weren't the cause.

Doesn't matter how many people want to buy houses if the money isn't available to them they can't do it. The Banks were prepared to loan large amounts of money on slight security and flimsy paperwork, the effect was to superheat the property market.

If the issue was as you suggest, an increase in the number of buyers, we would have seen a rise in demand and house prices but not the massive overnight (relatively speaking) inflation in prices all over the country that did come about.

Obviously people had to accept the loans and the responsibility that comes with it so I'm not trying blame the banks solely. What I am saying is that a rise in prices in D4 and G4 does not necessarily mean "the madness is back".

seamus

The house in the OP is a bad example, tbh. It would easily have fetched in excess of €2m at the height of the bubble. The price being dangled out there is to attract very wealthy cash buyers looking for a landmark property they can develop into a luxury family home, not a couple in their 40s with a teenage family.

I know of a house that sold in D6W 2 years ago, that wouldn't be far off this one, though a good deal newer. The house sold for €670k, and the new owner is currently in €200k+ worth of renovations (effectively rebuilding the entire house).

There are plenty of cash buyers out there for this kind of thing.

The one on Churchtown Road however is absolutely taking the piss.

Idbatterim

lads what do you reckon a fair asking price would be for the one in churchtown? 550?

Ray Palmer

Valentine1 wrote: »

Doesn't matter how many people want to buy houses if the money isn't available to them they can't do it. The Banks were prepared to loan large amounts of money on slight security and flimsy paperwork, the effect was to superheat the property market.

If the issue was as you suggest, an increase in the number of buyers, we would have seen a rise in demand and house prices but not the massive overnight (relatively speaking) inflation in prices all over the country that did come about.

Obviously people had to accept the loans and the responsibility that comes with it so I'm not trying blame the banks solely. What I am saying is that a rise in prices in D4 and G4 does not necessarily mean "the madness is back".

Again the demand drove the mortgages from the banks. The people insisted the banks gave more out. They met the demand that was there from the masses of people at the right point in their life.

People were complaining the banks didn't give out the money it wasn't the banks insisting giving out more it was the public. The banks reacted to their customer base. People taking out loan on top of the mortgages, borrowing from family, lying on applications. The banks weren't doing this.

What are people complaining about now? Banks not giving out money.

You can complain they gave fuel to the fire but they weren't putting it on the fire the public did.

Valentine1

Ray Palmer wrote: »

Again the demand drove the mortgages from the banks. The people insisted the banks gave more out. They met the demand that was there from the masses of people at the right point in their life.

People were complaining the banks didn't give out the money it wasn't the banks insisting giving out more it was the public. The banks reacted to their customer base. People taking out loan on top of the mortgages, borrowing from family, lying on applications. The banks weren't doing this.

What are people complaining about now? Banks not giving out money.

You can complain they gave fuel to the fire but they weren't putting it on the fire the public did.

I respectfully disagree with you on almost every point and i think you give the banks far too much credit. People would not have been able to pay the amounts they did had the banks not made those amounts available. It was in the interests of the banks to make more money available as it represented greater returns and greater possibilities for speculation such as securitisation. Which is why there was such irresponsible lending and why all the untruths in applications and over valuations along with crazy LTVs got through, the Banks didn't want to know any reason not to lend.

As I say, the same lending isn't happening now and we won't see another bubble or "return of the madness" because of that.

Ray Palmer

Valentine1 wrote: »

I respectfully disagree with you on almost every point and i think you give the banks far too much credit. People would not have been able to pay the amounts they did had the banks not made those amounts available. It was in the interests of the banks to make more money available as it represented greater returns and greater possibilities for speculation such as securitisation. Which is why there was such irresponsible lending and why all the untruths in applications and over valuations along with crazy LTVs got through, the Banks didn't want to know any reason not to lend.

As I say, the same lending isn't happening now and we won't see another bubble or "return of the madness" because of that.

I don't disagree that if the banks stopped giving money it would have capped house prices earlier. You seem to happily blame the banks for people falsifying records because the banks didn't inspect everything in more detail. People chose to do that and quite often they were hiding things from the banks that they could not have found out.

The problem with the theory that the banks not giving out money now will stop the market is it is simply wrong. They do give out money now. Family members will go garenteur or take out loan on their own property, give them money etc... That was a huge element of increased prices not just the banks.

It is very popular to blame the banks but they by no means were the sole cause or the driving force. Just a factor. To take this one factor and say it will stop house prices is way too simplistic and ignores the past.

ChRoMe

Ray Palmer wrote: »

It is very popular to blame the banks but they by no means were the sole cause or the driving force. Just a factor. To take this one factor and say it will stop house prices is way too simplistic and ignores the past.

True, but they are certainly not without blame.

Valentine1

Ray Palmer wrote: »

I don't disagree that if the banks stopped giving money it would have capped house prices earlier. You seem to happily blame the banks for people falsifying records because the banks didn't inspect everything in more detail. People chose to do that and quite often they were hiding things from the banks that they could not have found out.

The problem with the theory that the banks not giving out money now will stop the market is it is simply wrong. They do give out money now. Family members will go garenteur or take out loan on their own property, give them money etc... That was a huge element of increased prices not just the banks.

It is very popular to blame the banks but they by no means were the sole cause or the driving force. Just a factor. To take this one factor and say it will stop house prices is way too simplistic and ignores the past.

All I've said is that the decreased supply of credit (and the supply of credit is greatly decreased) will limit the rate at which prices will increase. I don't think that is disputable. the cause of the rapid increase in price houses in South County Dublin is cash buyers and people with large cash reserves who need only low loan to value mortgages. That is very different to the property market several years ago.

I am also of the opinion that the Banks loaned recklessly, I see both the circumstances of such loans and results of them every day through my work. Loans advanced without due diligence and proper documents in place, without proper stress testing and where the bank either had knowledge of falsified information or only didn't know because they didn't check what they were supposed to. Thats before we go into those sub prime cases where people shouldn't have been approved for loans at all.

I've also stated on this thread that I recognise the role of borrowers, that they were adults who knew what they got themselves into. However had the amounts of money that were available during the tiger years not been available or available so easily, prices would not have risen so fast and the bubble may not have come about or may not have burst so dramatically. It was the easy credit that accelerated things and the banks must share responsibility for that.

Scortho

Ray Palmer wrote: »

No the bubble was caused by a load of people coming to house buying age at the same time and they had jobs. These people can't wait forever so they are now returning to the market to either upgrade or get their first home if they missed their opportunity before.

The banks helped this but weren't the cause.

And none of the buy to let's had an effect? None of the section 23s and many other sections that I've forgotten about.
Coupled with cheap credit and lending to people who never should have had been able to take out a mortgage in the first place.

Ray Palmer

Scortho wrote: »

And none of the buy to let's had an effect? None of the section 23s and many other sections that I've forgotten about.
Coupled with cheap credit and lending to people who never should have had been able to take out a mortgage in the first place.

Ask yourself did section 23 exist before the boom and were BTLs about bore too?

Scortho

Ray Palmer wrote: »

Ask yourself did section 23 exist before the boom and were BTLs about bore too?

Possibly, I was fairly young before the boom!:p

But you can't say that they coupled with cheap credit didn't have any effect on the bubble.
They were still present when the bubble ended, cheap credit wasn't.
Likewise cheap credit wasn't around prior to the start of the bubble.
I know when I was born rates were in the high teens.

Ray Palmer

Scortho wrote: »

Possibly, I was fairly young before the boom!:p

But you can't say that they coupled with cheap credit didn't have any effect on the bubble.
They were still present when the bubble ended, cheap credit wasn't.
Likewise cheap credit wasn't around prior to the start of the bubble.
I know when I was born rates were in the high teens.

They both were about before hand and the boom started before the cheap credit.

jmayo

Ray Palmer wrote: »

No the bubble was caused by a load of people coming to house buying age at the same time and they had jobs. These people can't wait forever so they are now returning to the market to either upgrade or get their first home if they missed their opportunity before.

The banks helped this but weren't the cause.

I presume we are talking about our bubble rather than what is happening in certain areas today.
If we are I think your explanation is simplistic.

Yes there was an increases in FTBs, and an increase in Irish people either not emigrating or returning back to the country, but these alone cannot explain our bubble and the drastic rise in prices particularly post 2002.
This had been happening to a degree since the mid 90s and yes there were increasing house prices, but it was post 2001 when there was a huge increase in the availability of ultra cheap credit that the bubble really took off.
And yes there were increasing number of immigrants, but what was fueling the emplyment that was bringing them here. They were working in the construction industry or in retail, all again fueled by cheap credit.

You have completely disregarded the increased amount of people who bought for investment and speculative reasons.
By the sounds of it you and your family were longtime landlords, but how many people from almost every walk of life decided to become landlords or even worse would be landlords just roosting on property to garner the capital appreciation down the road.
How many normal business people decided to become mini developers in every town the lenght and breath of the country.

Ray Palmer wrote: »

Ask yourself did section 23 exist before the boom and were BTLs about bore too?

And yes section 23s did exist, but the minister of finance one b cowen decided to continue them in place even though they were doing untold harm.
I can show you villages in Leitrim where section 23s resulted in entire unwanted estates which never had a local market.

There were no need for those kind of incentives to continue.
If anything disincentives were necessary to stop people buying extra properties, and by extension others building even more, in places that they were unwanted and unncecessary.

JJJJNR

moxin wrote: »

Its 170 Sq. Metres, much bigger than your usual house and has that huge garden. A builder would snap this up and try to get PP for a 2nd dwelling. It does have potential for those that have the dosh

Here we go!!!!!

Scortho

Ray Palmer wrote: »

They both were about before hand and the boom started before the cheap credit.

Im not saying that wage increases, economic growth and population growth had no effects, they did.
But in my opinion, access to cheap credit was the main reason.

From Morgan Kelly
"effect of bank lending exacerbated by narrowness of Irish Market: by increasing lending by 20% a handful of banks could drive up property prices by 20%."


Are you trying to argue that cheap credit didn't play a significant role in increasing property prices?

If so, why did the bubble end when access to credit started to dry up?
Did the generation coming up just decide one morning as a collective that they didn't want houses anymore?

dazberry

Ray Palmer wrote: »

No the bubble was caused by a load of people coming to house buying age at the same time and they had jobs. These people can't wait forever so they are now returning to the market to either upgrade or get their first home if they missed their opportunity before.

The banks helped this but weren't the cause.

As with your fuel/fire analogy (heat/fuel/oxygen), at the peek FTB figures ran at something around 32k p/a, while total units ran at around 92k p/a. Those extra 60k units while containing trader uppers/downers was primarily made up of BTL investors. That latter were not people just reaching house buying age and having jobs, it was generally people my age and older who had previously purchased and were releasing equity by re-mortgaging their existing *cough* portfolios and purchasing additional properties.

This became self-perpetuating until it burst, fueled by (too) low interest rates, poor bank regulation / practices, and bad government policy. Where the banks come squarely in the spotlight is simply down to trying to gain market share, and to do this they bent and ultimately broke the rules and practices they previously followed. I don't agree that it was the banks facilitating what people wanted, as I see it an attempt to out-do each other in order to gain market share whatever the cost.

D.

Idbatterim

below is another bloody good one, asking 565 for that sh*t?! wow, have just gone into the layout, speechless!

http://m.myhome.ie/for-sale/brochure/2673742

Shedite27

Idbatterim wrote: »

below is another bloody good one, asking 565 for that sh*t?! wow, have just gone into the layout, speechless!

http://m.myhome.ie/for-sale/brochure/2673742

I think this is the picture that best captures the asking price
http://m.myhome.ie/for-sale/map/2673742

kennyb3

ChRoMe wrote: »

Excellent posts Ray,food for thought.

This is something I've been thinking about a lot recently, as a migrant who will be returning from best part of 7 years in London.

While I gasp in horror at my friends in their negative equality homes, the fact that trackers are no longer available in this country make me question if I'll essentially be in the same (or even worse position) when I come to buy in the next year or two. Even with a decent deposit, no debts and not having to pay rent while I house hunt.

Good discussion on this here. I really don't think you'll be in a worse position.

Ray Palmer

kennyb3 wrote: »

Good discussion on this here. I really don't think you'll be in a worse position.

Except that thread is based on the assumption you bought at the very peak. That premise is false as sales were slowing down by that point hence the crash. What about all the people that bought in a rising market?

Look at this way some people are buying at the same price people already paid years ago but now they are paying more interest (will always do so) and were renting during the years the other person wasn't. Rents were very high then and kept going up then. They are now going up again. My mortgage is still cheaper than the rent next door to me and I am there 10 years.

House price in the area only dropped for about 6 months below what we paid. Yet people will turn around and reference peak prices to figure out how people in my situation are in. It is a faulty premise. It doesn't matter that price were down 50% from the peak as I didn't buy at that price.

Some people even like to consider rental yield on a property based on current market property prices which is wrong. Rent yield on a property is based on what you bought at.

There is a lot of unreasoning thinking going. Nothing is clear cut many factors at play, populous opinions should always be questioned as it always gets exaggerated.

mitosis

Idbatterim wrote: »

below is another bloody good one, asking 565 for that sh*t?! wow, have just gone into the layout, speechless!

http://m.myhome.ie/for-sale/brochure/2673742

If one in the area is over priced, perhaps look at another?

Tea drinker

mitosis wrote: »

If one in the area is over priced, perhaps look at another?

Practically whole SCD is gone crazy.

kennyb3

Ray Palmer wrote: »

Except that thread is based on the assumption you bought at the very peak. That premise is false as sales were slowing down by that point hence the crash. What about all the people that bought in a rising market?

Look at this way some people are buying at the same price people already paid years ago but now they are paying more interest (will always do so) and were renting during the years the other person wasn't. Rents were very high then and kept going up then. They are now going up again. My mortgage is still cheaper than the rent next door to me and I am there 10 years.

House price in the area only dropped for about 6 months below what we paid. Yet people will turn around and reference peak prices to figure out how people in my situation are in. It is a faulty premise. It doesn't matter that price were down 50% from the peak as I didn't buy at that price.

Some people even like to consider rental yield on a property based on current market property prices which is wrong. Rent yield on a property is based on what you bought at.

There is a lot of unreasoning thinking going. Nothing is clear cut many factors at play, populous opinions should always be questioned as it always gets exaggerated.

You'll see that point is clearly covered on page 3, post 5 by 2Pack, hence I pointed to the thread as a good overall discussion rather than pointing to specific posts. And clearly the thread is based on an assumption - it's title refers to buying at the peak - not 5 years before - hardly misleading. You are right that everyones situation/circumstances are but if you look at the transaction volumes and prices paid, I think it's fair to say there is a very significant amount of people in deep negative equity - in fact the statistics back this up, so clearly it's quite relevant.

Anyway I was only trying to point the poster towards that as a good read, I didn't expect anyone to jump all over my post but its clearly a subject you feel strongly about.

digzy

My own feeling looking at these properties quoted is that the prices are lunacy, concurring with most of ye.

However, compared to the last bubble where easy cheap credit fuelled it, this time isn't there a lot more 'cash buyers'? I don't know the ltv or the interest rates on offer from the banks but I can't imagine it's too generous. Therefore, I don't see why the increase in prices is alarming so many people.if the prices drop say by 20% technically the buyer isn't in neg equity if they've lower than 80% ltv.

A mate of mine with a 6 figure income and his wife who's permanent with the hse recently paid over half a mill for what I considered an avg enough house in templeogue. Now maybe they could have stretched more If they wanted but I'm wondering what kind of clients are out there snapping up those properties in scd in excess of 600k.

There seems to be a clamour for government intervention but what can they do? It's supply/ demand. Personally, I'd like to think that there'd be increased stamp duty for investors as opposed to those trading up or first timers. But bar that I can't think of anything else. I'd like to see a situation where a couple in scd on a combined income of 100k can live there in a reasonable family house. However, whether I like it or not the market will dictate the price. I heard jan o Sullivan on rte 1 saying that everyone should be entitled to be able to buy a home. I can't agree with this socialist waffle. That's what helped drive things bananas last time!

handlemaster

I think the prices in west dublin have gone up as with the rest of dublin but you will get a better house for half the cost of the south side. The prices have to go up all over dublin to an unsustainable level before we start calling it a bubble.. At the moment there is a choice of either paying alot for a house as in scd or paying a more manageable amount else where in Dublin so its no where near bubble territory yet.

lima

Ray Palmer wrote: »

Look at this way some people are buying at the same price people already paid years ago but now they are paying more interest (will always do so) and were renting during the years the other person wasn't. Rents were very high then and kept going up then. They are now going up again. My mortgage is still cheaper than the rent next door to me and I am there 10 years.

Yeah but the person who bought years ago has been paying rent in their money for years, plus many people bought 35-40 year mortgages whereas now its more like 25-30

plus if you bought before the boom then you have lost money by not selling at the peak, you threw money away.

lima

ChRoMe wrote: »

Excellent posts Ray,food for thought.

This is something I've been thinking about a lot recently, as a migrant who will be returning from best part of 7 years in London.

While I gasp in horror at my friends in their negative equality homes, the fact that trackers are no longer available in this country make me question if I'll essentially be in the same (or even worse position) when I come to buy in the next year or two. Even with a decent deposit, no debts and not having to pay rent while I house hunt.

Well you wont have lost years of your life by being obsessed with property and being stuck out in the suburbs, and the years of stress of facing negative equity.

Meanwhile you were living it up in London actually having a life.

Add to that, prices are still 50% less than the peak, so as long as you have a decent deposit you will be completely better off that a lot of those who unfortunately bought at the peak.

Scortho

digzy wrote: »

My own feeling looking at these properties quoted is that the prices are lunacy, concurring with most of ye.

However, compared to the last bubble where easy cheap credit fuelled it, this time isn't there a lot more 'cash buyers'? I don't know the ltv or the interest rates on offer from the banks but I can't imagine it's too generous. Therefore, I don't see why the increase in prices is alarming so many people.if the prices drop say by 20% technically the buyer isn't in neg equity if they've lower than 80% ltv.

A mate of mine with a 6 figure income and his wife who's permanent with the hse recently paid over half a mill for what I considered an avg enough house in templeogue. Now maybe they could have stretched more If they wanted but I'm wondering what kind of clients are out there snapping up those properties in scd in excess of 600k.

There seems to be a clamour for government intervention but what can they do? It's supply/ demand. Personally, I'd like to think that there'd be increased stamp duty for investors as opposed to those trading up or first timers. But bar that I can't think of anything else. I'd like to see a situation where a couple in scd on a combined income of 100k can live there in a reasonable family house. However, whether I like it or not the market will dictate the price. I heard jan o Sullivan on rte 1 saying that everyone should be entitled to be able to buy a home. I can't agree with this socialist waffle. That's what helped drive things bananas last time!

Everyone is entitled to buy their own home...but they have to work for it. I never understood why the state subsidised lower income families who couldn't afford to buy a house, to buy houses.

Those that would be paying more than your friends did would either have sold at the height and rented since, had a large amount of savings etc etc.

But if can't see the ltv being much more than 80% on any house over 500 k as the mortgages would be massive.

Villa05

Looks like the real madness has been spotted by Investec. The snake that is the Irish mortgage market continues to eat itself in what can only be described as a kamikaze market

Investec, the South African-owned bank, has put its plans to offer up to €300m in new Irish mortgages on hold, as it reviews changes in the market place which is increasingly dominated by State-owned zombie banks.

This is seen as a massive blow for consumers with mortgage lending at a 40-year low. The IBF/PwC mortgage report showed that just 15,881 mortgages were issued last year – the lowest amount for any year since 1973.

It is understood that Investec, headed by Michael Cullen, views the Irish mortgage market as increasingly uncertain because of recent changes to the repossession and insolvency regimes. These changes make it harder for banks to repossess properties if they are Personal Dwelling House (PDH) loans.

Sources told the Sunday Independent that while Investec remains interested in entering the mortgage market, it has growing reservations about being able to get its money back if loans go bad because of new repossession and insolvency regulations. The rising cost of litigation has now to be factored in to mortgage pricing.

http://www.independent.ie/business/irish/investec-puts-300m-plan-for-new-mortgage-lending-on-hold-29818741.html

indiewindy

Villa05 wrote: »

Looks like the real madness has been spotted by Investec. The snake that is the Irish mortgage market continues to eat itself in what can only be described as a kamikaze market


http://www.independent.ie/business/irish/investec-puts-300m-plan-for-new-mortgage-lending-on-hold-29818741.html

This shows that groups like new beginnings have won. In any other Country if you cant or wont pay your mortgage you lose the asset, here barristers and solicitors milk the situation for high fees and appear on RTE often getting free publicity advocating debt forgiveness while taking their cut.