Are we 3 years from another property bubble crash?

morrga

The opposite of the 2007 property crash is now a real live threat to creating a new bubble. From too many developments to now a situation where too few houses are available in the Dublin area and prices are rising rapidly.

We as a nation don't earn enough on average to sustain 500/600k mortgages and when people start defaulting again in 2/3 years we will be back at square one with no lessons learned only an understanding that greed and poor housing policy supply is generating such a precarious position again.

The average mortgage in Dublin that people can realistically afford is 300/400k. There is only one winner here again, sellers, builders and agents.

The rising market prices co-inciding with a rental crisis I can only assume is being driven from non government intervention and an allowance for a free for all market where those in control are manipulating and controlling the vulnerable, who are those in need of the product that is realistically not affordable for most.

ezra_pound

morrga wrote: »

The opposite of the 2007 property crash is now a real live threat to creating a new bubble. From too many developments to now a situation where too few houses are available in the Dublin area and prices are rising rapidly.

We as a nation don't earn enough on average to sustain 500/600k mortgages and when people start defaulting again in 2/3 years we will be back at square one with no lessons learned only an understanding that greed and poor housing policy supply is generating such a precarious position again.

The average mortgage in Dublin that people can realistically afford is 300/400k. There is only one winner here again, sellers, builders and agents.

The rising market prices co-inciding with a rental crisis I can only assume is being driven from non government intervention and an allowance for a free for all market where those in control are manipulating and controlling the vulnerable, who are those in need of the product that is realistically not affordable for most.

You do know that the average property is valued at under 150k?

Edit: and Dublin average prices c. 250k?

riclad

Prices are going up in dublin, areas, of high demand,
I have not seen prices going up on rural areas.
I ,d say the average price in dublin is closer to 130k, than 250k.
ITS much harder to get a mortgage now.
I don,t think theres much chance of a property crash in 3 years.

cmssjone

morrga wrote: »

The rising market prices co-inciding with a rental crisis I can only assume is being driven from non government intervention and an allowance for a free for all market where those in control are manipulating and controlling the vulnerable, who are those in need of the product that is realistically not affordable for most.

Part of the rental crisis is due to Government intervention. Yes, supply and demand is a factor due to banks not giving as much credit as before but rents have also gone up due to all of the new associated costs for landlords.

All these costs are going to be passed on to the tenant and as some of them are not tax deductible, the landlord needs to effectively double the increase for some of these charges. Ironically if the Government hadn't meddled in the rental market, then rents would probably be cheaper.

hfallada

People seem to forgot that 10% of Irish workers earn over €100k a year and a lot of them can afford large mortgages. There is just so people in irelans that really in any other country world be forced to rent as they aren't credit worthy.

Taking monthly rent to price of apartments. Some apartments are far cheaper to buy than to rent. Plus most family houses are quite good value considering some peoples wages

Demand for housing by middle class and upper middle class families will be totally different to the demand of low income earners. When property prices are rising but its followed with improving economy and rising wages. People will be able to serve their mortgage

Derek Zoolander

hfallada wrote: »

People seem to forgot that 10% of Irish workers earn over €100k a year and a lot of them can afford large mortgages.

Is there a source for this - I was under the impression it was closer to 5%

Zamboni

morrga wrote: »

We as a nation don't earn enough on average to sustain 500/600k mortgages and when people start defaulting again in 2/3 years we will be back at square one with no lessons learned only an understanding that greed and poor housing policy supply is generating such a precarious position again.

House prices in Dublin are decoupled from earnings (at the moment).
A significant portion of houses are being bought with cash.

What I will say is this - based on people's experience from the last crash - when a mere hint of another crash looms, and it will, people will offload properties like lunatics and the market will nosedive at a much faster rate this time around.

I'm not even sure if it will take three years to see another crash in Dublin.

Lantus

there are fundamental problems with the property market but even bigger ones with the economy as a whole. Technological unemployment and the as yet unsolved derivatives bubble are much more of a worry to normal people and the ongoing ability of our society to operate.

marathonic

morrga wrote: »

The opposite of the 2007 property crash is now a real live threat to creating a new bubble. From too many developments to now a situation where too few houses are available in the Dublin area and prices are rising rapidly.

But still at about half of the 2007 values.

morrga wrote: »

We as a nation don't earn enough on average to sustain 500/600k mortgages and when people start defaulting again in 2/3 years we will be back at square one with no lessons learned only an understanding that greed and poor housing policy supply is generating such a precarious position again.

Are you saying that, as a nation, we should all be able to afford a house in some of the most affluent parts of Dublin? As a nation, we are generally able to afford the mortgage required to live in the area we should be targeting to live.

A person on average Irish earnings can look at Foxrock et. al, all the want but they're only dreaming.

morrga wrote: »

The average mortgage in Dublin that people can realistically afford is 300/400k.

Which is more than enough.

morrga wrote: »

There is only one winner here again, sellers, builders and agents.

sellers - you do realise that the house they are moving to is also rising in most cases (and at a much faster pace).

builders - I'm glad to see a little pickup in this industry, but they're making nowhere near what they used to (and a lot of the boomtime builders are straddled with debt and unable to enter the industry again). It'll be nice to see some new entrants creating employment and creating more supply to reduce the upward pressure on prices

morrga wrote: »

The rising market prices co-inciding with a rental crisis I can only assume is being driven from non government intervention

The government are intervening - but government intervention is adding to the rental crisis, not helping it. If such high taxes and expenses weren't imposed on landlords, more would come to the market. More landlords in the market means more houses need built to satisfy demand. More houses for rent means less competition in the rental market.

cson

It'll be interesting to see what happens when the cash buyers dry up.

Other than that; with Dublin becoming even moreso the economic centre of the country you'll probably see something of a mini boom happen here imo - if you look at the rental market and what people are paying, the amount turning up to viewings, the amounts people are willing to bid on rentals... that classic Irish boom mentality is still alive and well. It will probably translate to house buying whenever the cash buyers dry up and the banks start lending. In my opinion; there will probably be a sweet spot in between the cash buyers drying up and the lending market heating up again that'll be the perfect time to buy. When that'll happen is anyones guess.

Zamboni

cson wrote: »

It'll be interesting to see what happens when the cash buyers dry up.

Other than that; with Dublin becoming even moreso the economic centre of the country you'll probably see something of a mini boom happen here imo - if you look at the rental market and what people are paying, the amount turning up to viewings, the amounts people are willing to bid on rentals... that classic Irish boom mentality is still alive and well. It will probably translate to house buying whenever the cash buyers dry up and the banks start lending. In my opinion; there will probably be a sweet spot in between the cash buyers drying up and the lending market heating up again that'll be the perfect time to buy. When that'll happen is anyones guess.

It could be the 1st of January 2015 when the CGT exemption expires.
Then the investors withdraw from the market and...:eek:

marathonic

cson wrote: »

It'll be interesting to see what happens when the cash buyers dry up.

In my opinion, people are VASTLY underestimating the amount of cash out there. I myself am aiming to be a cash buyer of a BTL next year and am on below average earnings. If someone like me can afford to buy in cash, god knows how much cash is out there - enough to purchase absolutely everything on the Dublin market I would imagine.

the_syco

marathonic wrote: »

If someone like me can afford to buy in cash, god knows how much cash is out there - enough to purchase absolutely everything on the Dublin market I would imagine.

Enough money to buy, but probably not enough interest to buy in some areas. And one doesn't have money if they throw it away at the first available property.

marathonic

the_syco wrote: »

Enough money to buy, but probably not enough interest to buy in some areas. And one doesn't have money if they throw it away at the first available property.

But my point is that, if someone is waiting for the cash buyers to dry up so that there's a subsequent fall in property prices allowing them to purchase a nice property at a knock-down price, they may be in for a long, long wait.

Marchbride

marathonic wrote: »

In my opinion, people are VASTLY underestimating the amount of cash out there. I myself am aiming to be a cash buyer of a BTL next year and am on below average earnings. If someone like me can afford to buy in cash, god knows how much cash is out there - enough to purchase absolutely everything on the Dublin market I would imagine.

Now you have me curious... Below average earnings and confident of purchasing as a cash buyer? How long have you been saving and what would be your price range?

People keep referring back to 2007 & citing 'there still not as high as 2007 prices'. Back then, wages were better, you saw more of your wage. Now there's USC, PRSI for nothing, property tax, looming water tax, bin charges... Economic status was different then so you can't compare like for like when there are variations in economy such as mentioned above. Also, at least back in 2007, there were houses being built, no chat about tracker mortgages and neg eq preventing sales. Oh how times have changed.

marathonic

Marchbride wrote: »

Now you have me curious... Below average earnings and confident of purchasing as a cash buyer? How long have you been saving and what would be your price range?

In the context of this thread, all of this is irrelevant.

Marchbride wrote: »

People keep referring back to 2007 & citing 'there still not as high as 2007 prices'. Back then, wages were better, you saw more of your wage. Now there's USC, PRSI for nothing, property tax, looming water tax, bin charges... Economic status was different then so you can't compare like for like when there are variations in economy such as mentioned above.

The valid comparison to 2007 is in rental yields as any property market needs to be made up of a combination of landlords and owner occupiers. In 2007, the yields weren't there. Landlords were subsidising mortgages in the hope that 'the greater fool' will come along and buy the house from them at a higher price.

Today, the yields are there. Landlords can earn an income from their properties as opposed to their properties being a drain on their finances. For this reason, property prices today are not overvalued.

Marchbride wrote: »

Also, at least back in 2007, there were houses being built, no chat about tracker mortgages and neg eq preventing sales. Oh how times have changed.

I seem to recall an advertising campaign seen all across the country chatting about tracker mortgages. In fairness, the chat was more proclaiming "I don't know what a tracker mortgage is" on public buses as opposed to "will I keep my tracker mortgage if I rent my property"

NIMAN

Surely even us Irish aren't that stupid?:)

Marchbride

marathonic wrote: »

In the context of this thread, all of this is


I seem to recall an advertising campaign seen all across the country chatting about tracker mortgages. In fairness, the chat was more proclaiming "I don't know what a tracker mortgage is" on public buses as opposed to "will I keep my tracker mortgage if I rent my property"

Yep it was the latter I was referring to there... Compelled to keep the tracker for fear of losing it should one move!

Shedite27

Derek Zoolander wrote: »

Is there a source for this - I was under the impression it was closer to 5%

Last year it was 14% of households earn over 100k, so yes, these people can afford the mortgages of the more affluent areas.

Eldarion

Shedite27 wrote: »

Last year it was 14% of households earn over 100k, so yes, these people can afford the mortgages of the more affluent areas.

BIG difference between % people and % of households...

jmayo

marathonic wrote: »

....
The government are intervening - but government intervention is adding to the rental crisis, not helping it. If such high taxes and expenses weren't imposed on landlords, more would come to the market. More landlords in the market means more houses need built to satisfy demand. More houses for rent means less competition in the rental market.

Why oh why do we need more little landlords trying to be the next donal trump?
Why not have fewer, but more professional landlords operating in a truly professional manner ?
Then add in some rental legislation (ala prompt dispute resolution) and a 3rd party deposit holding entity and the industry could be transformed.

NIMAN wrote: »

Surely even us Irish aren't that stupid?:)

Never underestimate a humans inability to learn or to continually make the same mistakes.
Add the herd mentality and the Irish love for all things property & construction and it only makes it 10 times worse.

Eric Cartman

morrga wrote: »

The opposite of the 2007 property crash is now a real live threat to creating a new bubble. From too many developments to now a situation where too few houses are available in the Dublin area and prices are rising rapidly.

We as a nation don't earn enough on average to sustain 500/600k mortgages and when people start defaulting again in 2/3 years we will be back at square one with no lessons learned only an understanding that greed and poor housing policy supply is generating such a precarious position again.

The average mortgage in Dublin that people can realistically afford is 300/400k. There is only one winner here again, sellers, builders and agents.

The rising market prices co-inciding with a rental crisis I can only assume is being driven from non government intervention and an allowance for a free for all market where those in control are manipulating and controlling the vulnerable, who are those in need of the product that is realistically not affordable for most.

In line with peoples salary's they should be able to afford something right now if they could get a mortgage. however , saying that somebody on the average industrial wage should be able to buy a detached house in dalkey for example would be poor logic at best.

house prices have normalised and I would predict will rise within rates of inflation for the next 3 years, dublin prices are only going up as cash-rich buyers can now buy up the most desirable homes in dublin for what will probably be their lowest valuation for years to come.

Ray Palmer

marathonic wrote: »

The valid comparison to 2007 is in rental yields as any property market needs to be made up of a combination of landlords and owner occupiers. In 2007, the yields weren't there. Landlords were subsidising mortgages in the hope that 'the greater fool' will come along and buy the house from them at a higher price.

That is only one way to look at doing a property investment. You can easily rent out a property less than your mortgage and being doing very well. Effectively you can pay a lot less to own a property due to rent.

What you have said here is the same as saying the only way to make money off the stock exchange is based on the dividends from the shares. That is not how the majority of money is made in the stock exchange.

It is simplistic think of how the property market that confuses people. Restrictions on entry and exit are very real factors as is the lag in supply time.

I will quite happily buy a house for €100 a month for 20 years knowing the €100 will reduce in time and the property is also likely to rise in value. Anybody suggesting somebody in that situation is crazy or doesn't know what their doing should look at themselves first.

newbie2013

NIMAN wrote: »

Surely even us Irish aren't that stupid?:)

Anyone who thinks there isn't going to be another boom is off their rocker. We live in a capitalist world, we are all greedy bastards, some will not admit this but it's true. Once the banks start lending to the next generation, it's off we go again on our road to boom and bust and you and I and everyone will be wanting their own bit of the pie.

sabat

I'd be interested to know how many of these high earners are living off the carcass of the collapsed bubble. Between NAMA, liquidators/accountants, solicitors, estate agents etc, it must be several thousand- most of whom will be looking to buy in "better" areas of Dublin. When this work runs out over the next few years it will undoubtedly affect prices.

http://www.irishexaminer.com/business/14-ntma-employees-paid-more-than-200k-despite-public-sector-pay-cuts-257101.html

Ray Palmer

sabat wrote: »

I'd be interested to know how many of these high earners are living off the carcass of the collapsed bubble. Between NAMA, liquidators/accountants, solicitors, estate agents etc, it must be several thousand- most of whom will be looking to buy in "better" areas of Dublin. When this work runs out over the next few years it will undoubtedly affect prices.

http://www.irishexaminer.com/business/14-ntma-employees-paid-more-than-200k-despite-public-sector-pay-cuts-257101.html

That is pretty ridiculous statement. You do realise there are lots of people who don't rely on anything to do with property earning this level of money.

Many accountants may never ever touched liquidation.

Do you think professionals occupations are somehow corrupt just by existing?

marathonic

Ray Palmer wrote: »

That is only one way to look at doing a property investment. You can easily rent out a property less than your mortgage and being doing very well. Effectively you can pay a lot less to own a property due to rent.

It's difficult to build a reasonably sized portfolio of 5+ properties when the yields aren't there and you are relying solely on capital gains. This is made more difficult with CGT tax at 33% compared to 20% in recent years.

You can only subsidise so many properties where the mortgage is more than the rent before you become asset rich and cash poor. A true, professional, landlord will try to avoid this situation.

Ray Palmer wrote: »

What you have said here is the same as saying the only way to make money off the stock exchange is based on the dividends from the shares. That is not how the majority of money is made in the stock exchange.

It is totally different. Over the long term (30+ years), it's unsensible to expect that properties will rise by much, if any, above the level of inflation (recent times have been out of the norm).

A company that you by shares in makes profits and pays dividends out of those profits. However, they usually own assets that also rise with inflation and reinvest profits in themselves to grow and make more profits. Over the long term, one would expect shares to increase by a few percent above inflation.

sabat

Ray Palmer wrote: »

That is pretty ridiculous statement. You do realise there are lots of people who don't rely on anything to do with property earning this level of money.

Many accountants may never ever touched liquidation.

Do you think professionals occupations are somehow corrupt just by existing?

Did you even read my post? I even included a link showing that there are at least 105 €100K+ earners at NAMA whose jobs will cease to exist. How much money is funneled to PWC and Arthur Cox as a direct result of the collapse, to name just two firms?

marathonic

jmayo wrote: »

Why oh why do we need more little landlords trying to be the next donal trump?
Why not have fewer, but more professional landlords operating in a truly professional manner ?

The main landlords that are causing issues today are the accidental landlords who only own that single property that they lived in before and couldn't sell.

There's too much work involved in keeping abreast of the roles and responsibilities of being a landlord for such an accidental landlord to keep up with.

In this way, I agree that there needs to be fewer landlords.

However, I don't agree that we need to solely have landlords with 20+ properties - just that we need landlords that are in the letting business because they chose to get into it, not because they were forced into it. Such landlords will, for the most part, act in a more professional manner than your average accidental landlord.

A landlord with a single property who is striving to purchase additional properties can be just as professional, if not more, than a landlord with 30 properties.

Shedite27

sabat wrote: »

I'd be interested to know how many of these high earners are living off the carcass of the collapsed bubble. Between NAMA, liquidators/accountants, solicitors, estate agents etc, it must be several thousand- most of whom will be looking to buy in "better" areas of Dublin. When this work runs out over the next few years it will undoubtedly affect prices.

I agree with Ray Palmer. Far too many "normal" jobs. The amount that are based on the recession is a drop in the ocean

marathonic

sabat wrote: »

I'd be interested to know how many of these high earners are living off the carcass of the collapsed bubble. Between NAMA, liquidators/accountants, solicitors, estate agents etc, it must be several thousand- most of whom will be looking to buy in "better" areas of Dublin. When this work runs out over the next few years it will undoubtedly affect prices.

http://www.irishexaminer.com/business/14-ntma-employees-paid-more-than-200k-despite-public-sector-pay-cuts-257101.html

Just so I understand your logic correctly, you believe that property prices will drop because the recession will end, the economy will start improving, the recession-related jobs will no longer be needed and there won't be jobs to replace them?

Surely, by the time the recession-related jobs are no longer needed, there will be many times more 'normal' jobs to replace them.