Are we heading for another property bubble?

johnp001

Eric Cartman wrote: »

wage inflation

interest rates will go up, so will wages, with the EU's terrible quantitive easing plan get ready for 2 euro cans of coke , 2 euro a litre diesel and the night link costing a 10er, on the other hand your 220k home won't seem so expensive anymore.

Ireland is in deflation, Europe has initiated QE to try to stave off deflation and economic stagnation. QE would soon be halted if inflation started to approach the 2% target.
Banks are currently offering 5 year fixed interest rates for a tiny overhead on their variable rate which is a strong indicator that inflation and interest rates are not expected to increase any time soon.

riclad

No one has a crystal ball,
one could work out loads of disaster scenarios,
greece leaves the eu.
OIL prices go up ,theres a middle east war, etc
people have a choice, rent or buy a property .
in Dublin at least rents seem always to increase.
MY advice is buy a house ,or even a 1bed apartment if you are on a good wage,
Don,t pay 400k for a house just cos its in a posh area .
Work out could i afford the mortgage if payments went up by 20-30 per cent .

riclad

riclad wrote: »

.
Work out could i afford the mortgage if payments went up by 20-30 per cent .

Yes, and meanwhile use that 20% to pay down the capital as much as possible. Otherwise, when the interest rate rises do come, you will be running furiously just to stay still.

riclad wrote: »

.
MY advice is buy a house ,or even a 1bed apartment if you are on a good wage,
.

I would avoid Dublin apartments. One bed apartments in Dublin are too small and often badly built and in my view will be the slums of the future. A sustainable size (to live permanently) for a one bed is 50/60sqm, for a two bed 100sqm and there are few of those in Dublin. The reasons are greed, an idea that apartments were for students and transients and the conventional (and wrong imho) wisdom that Dublin should be a flat city.

Michael D Not Higgins

johnp001 wrote: »

My post stated "Dublin" stock and inflow, source is Daft listings.

Fair enough. Is there any indication that the stock of housing in Dublin coming into the market is of a higher spec than that of a year ago?

If, for example, most of the new properties in Dublin were 3/4 bed semi-ds, you'd expect the average price to go up.

Panda_Turtle

Deleted User wrote: »

my view will be the slums of the future. A sustainable size (to live permanently) for a one bed is 50/60sqm, for a two bed 100sqm and there are few of those in Dublin. The reasons are greed, an idea that apartments were for students and transients and the conventional (and wrong imho) wisdom that Dublin should be a flat city.

Just on that.

36 or so storey 120m watchtower began construction in 2008 down at the point village behind the 3arena, before the money ran out and they pulled the plug on it after building the basement.

http://www.skyscrapercity.com/showthread.php?t=706176

Would the planning permission for this have gone?

johnp001

Michael D Not Higgins wrote: »

Fair enough. Is there any indication that the stock of housing in Dublin coming into the market is of a higher spec than that of a year ago?

If, for example, most of the new properties in Dublin were 3/4 bed semi-ds, you'd expect the average price to go up.

The average asking price went up in Q1 according to the latest Daft report.

Theboinkmaster

johnp001 wrote: »

The average asking price went up in Q1 according to the latest Daft report.

Asking price so nearly irrelevant.

gaius c

Eric Cartman wrote: »

wage inflation

interest rates will go up, so will wages, with the EU's terrible quantitive easing plan get ready for 2 euro cans of coke , 2 euro a litre diesel and the night link costing a 10er, on the other hand your 220k home won't seem so expensive anymore.

Hoping for wage inflation here is optimistic because our wages are already well out of whack with the rest of the world.

Mohamed El-Erian is keeping his wealth liquid and in cash. That's a fellow expecting deflation and putting his money where his mouth is.

Q. Where is your money? Stocks? Treasuries? Bonds?

A. It is mostly concentrated in cash. That’s not great, given that it gets eaten up by inflation. But I think most asset prices have been pushed by central banks to very elevated levels.

Q. So we’re nearing a bubble?

A. Go back to central banks. Central banks look at growth, at employment, at wages. They are too low. They don’t have the instruments they need, but they feel obliged to do something. So they artificially lift asset prices by maintaining zero interest rates and by using their balance sheet to buy assets.

Why? Because they hope that they will trigger what’s called the wealth effect. That you will open your 401k, see it has gone up in price, and you’ll spend. And that companies will see their shares are going up and they will be more willing to invest. But there is a massive gap right now between asset prices and fundamentals.

Michael D Not Higgins

johnp001 wrote: »

The average asking price went up in Q1 according to the latest Daft report.

I'm still not sure what you're trying to suggest in your posts. You say stock is up so price will go down then say price is going up (asking price at least). Are you saying there is or isn't a bubble?

You say the estate agents say it's a bubble (to the banking inquiry, so could have numerous ulterior motives), but do you believe it is so? If you think so, has the stock of Dublin property increased in the higher end of the market as opposed to smaller flats which would skew the average price and thus wouldn't be a bubble? If you don't know, how do you know it's a bubble?

johnp001

Michael D Not Higgins wrote: »

I'm still not sure what you're trying to suggest in your posts. You say stock is up so price will go down then say price is going up (asking price at least). Are you saying there is or isn't a bubble?

The Daft Q1 report says asking prices are up. I mentioned this in answer to your previous question

Michael D Not Higgins wrote: »

Fair enough. Is there any indication that the stock of housing in Dublin coming into the market is of a higher spec than that of a year ago?

If, for example, most of the new properties in Dublin were 3/4 bed semi-ds, you'd expect the average price to go up.

I don't have a detailed breakdown of the type and location of supply inflow so that was the only information that I could usefully provide as an answer.

Michael D Not Higgins wrote: »

You say the estate agents say it's a bubble (to the banking inquiry, so could have numerous ulterior motives), but do you believe it is so?

I'd be far more likely to believe an estate agent under oath than otherwise. What would be the reaseon for falsely claiming there is a bubble to the enquiry?

Michael D Not Higgins wrote: »

If you think so, has the stock of Dublin property increased in the higher end of the market as opposed to smaller flats which would skew the average price and thus wouldn't be a bubble? If you don't know, how do you know it's a bubble?

I do believe that prices are inflated and that the price increases in Dublin over the last 12-18 months are unsustainable. I don't have the information for the spec of Dublin market supply inflow at the level of detail you describe.
My opinion is that there is a bubble based on the level of information that I have and my understanding of it. I read this forum to hear other's opinions and counter-arguments so that my own opinion can be better informed.

woodseb

gaius c wrote: »

Hoping for wage inflation here is optimistic because our wages are already well out of whack with the rest of the world.

Mohamed El-Erian is keeping his wealth liquid and in cash. That's a fellow expecting deflation and putting his money where his mouth is.

That's a bit of a misrepresentation of what he meant - he also invested in alot of private equity and high risk ventures in barbell strategy

http://video.cnbc.com/gallery/?video=3000369034

Michael D Not Higgins

johnp001 wrote: »

The Daft Q1 report says asking prices are up. I mentioned this in answer to your previous question
I don't have a detailed breakdown of the type and location of supply inflow so that was the only information that I could usefully provide as an answer.


I'd be far more likely to believe an estate agent under oath than otherwise. What would be the reaseon for falsely claiming there is a bubble to the enquiry?



I do believe that prices are inflated and that the price increases in Dublin over the last 12-18 months are unsustainable. I don't have the information for the spec of Dublin market supply inflow at the level of detail you describe.
My opinion is that there is a bubble based on the level of information that I have and my understanding of it. I read this forum to hear other's opinions and counter-arguments so that my own opinion can be better informed.

Okay, so you do believe there's a bubble (in Dublin at least). I would contend however that the availability of credit and sentiment meant that the prices of 2012 were not reflective of the true price due to what was on the market and the low number of transactions.

The average asking price is only up 5% each year since 2012 (however this is mainly driven by high increases recently, but this is from a historically low base) and is still 40-50% below the bubble of 2007. Of course there's going to be areas that outstrip others, but I've checked 3 beds in South Dublin and in 2007 they were going for nearly 700k and in the latest daft report 460k, which is 35% below its peak.

Sure if the current acceleration continues then it's gonna spiral out of control quickly but what I want to know is what people think the actual value of property in our capital is, how we determine this and stop worrying about what this month's % change is.

riclad

Prices vary in dublin from area to area,
you can buy a 3bed on a private estate for 120k in some area,s .
The planning authority could have set a size for a 1bed apartment ,
eg not less than x 100 sq ft .
But even in dublin prices are still at least 40 per cent below the peak price .
You can still get a good deal now,
this may not be true in 3-4 years time .

evolving_doors

[Deleted User] wrote: »

Interest rates are at historically low levels. It is absolutely possible, even likely that they could double or even treble, and this in the absence of inflation. With repayments spread out to 30 years this would effectively double or treble the monthly mortgage payment. How would this not crash the market?

But thats looking at it in a bubble... whats the alternative 'cost' of renting in relation to Any mortgage?

There has to be a parallel with limited stock (which there is and always will be in dublin) and rising demand for rental properties. Thus, if your rent increases then wouldnt the attraction to getting a mortgage still grow (even in spite of rising interest rates).

If there is a crazy rise in interest rates though I think there will be a slow transformation from individual landlords with a couple of properties, and a switch to big private international investment firms who can swoop in and pay hard cash so no loans to worry about.

Have a look at the next Allsop auction coming up, I wonder will there be an international interest in domestic family homes? Maybe there won't but it would be very telling if they were to jump in.

johnp001

Michael D Not Higgins wrote: »

Okay, so you do believe there's a bubble (in Dublin at least). I would contend however that the availability of credit and sentiment meant that the prices of 2012 were not reflective of the true price due to what was on the market and the low number of transactions.

The average asking price is only up 5% each year since 2012 (however this is mainly driven by high increases recently, but this is from a historically low base) and is still 40-50% below the bubble of 2007. Of course there's going to be areas that outstrip others, but I've checked 3 beds in South Dublin and in 2007 they were going for nearly 700k and in the latest daft report 460k, which is 35% below its peak.

Sure if the current acceleration continues then it's gonna spiral out of control quickly but what I want to know is what people think the actual value of property in our capital is, how we determine this and stop worrying about what this month's % change is.

I think that 2007 prices should only be used as a frame of reference if your prediction for the macro-economy culminates in another bailout.

Michael D Not Higgins

johnp001 wrote: »

I think that 2007 prices should only be used as a frame of reference if your prediction for the macro-economy culminates in another bailout.

You're avoiding my point in the last paragraph.

Panda_Turtle

Michael D Not Higgins wrote: »

Sure if the current acceleration continues then it's gonna spiral out of control quickly but what I want to know is what people think the actual value of property in our capital is, how we determine this and stop worrying about what this month's % change is.

The mortgage restriction rules have a limit of 3.5 times salary. So the average house price in Dublin should not be much more than say 5 times the average salary, at a complete guesstimate?

gaius c

woodseb wrote: »

That's a bit of a misrepresentation of what he meant - he also invested in alot of private equity and high risk ventures in barbell strategy

http://video.cnbc.com/gallery/?video=3000369034

Contradicts his earlier statement somewhat.

Hedge funds are not high risk ventures though. Looks to me that he's steering clear of exposure to "assets".

Barely Hedged

Panda_Turtle wrote: »

The mortgage restriction rules have a limit of 3.5 times salary. So the average house price in Dublin should not be much more than say 5 times the average salary, at a complete guesstimate?

Two teachers on 45k:

45 * 3.5 = 315k.

House = 395k (deposit of 80k required, mortgage 315k).

Search of MyHome.ie for min 3 beds under 400k = 1639 dwellings.

I say Dublin is affordable

And for completeness:

Search of MyHome.ie for min 3 beds over 400k = 1519 dwellings.

* Theres a data union at 400k

Michael D Not Higgins

Panda_Turtle wrote: »

The mortgage restriction rules have a limit of 3.5 times salary. So the average house price in Dublin should not be much more than say 5 times the average salary, at a complete guesstimate?

Now we're getting somewhere, a quantifiable number we can use. I don't know what the average Dublin wage is but I have read the average household income for the country was 50k. The average house price in Ireland is now just over 200k so our ratio is 4X household income. So we could say, on a whole, property is not overpriced in Ireland.

Let's look at Dublin as a special case. The different areas are all listed as between 223k and 316k with South Dublin being a law unto itself so let's ignore it for the time being. That gives maybe 260k as the average in Dublin right now. Let's say Dublin household income is 10% above average so 55k. We're now looking at the same multiple being 220k to be equally affordable as the rest of the country. Of course, it's Dublin so it's more expensive (by about 20%) but hardly outside the bounds of conceivable.

Rew

Barely Hedged wrote: »

Two teachers on 45k:

45 * 3.5 = 315k.

House = 395k (deposit of 80k required, mortgage 315k).

Search of MyHome.ie for min 3 beds under 400k = 1639 dwellings.

I say Dublin is affordable

And for completeness:

Search of MyHome.ie for min 3 beds over 400k = 1519 dwellings.

* Theres a data union at 400k

where do 2 teachers on 45k get ~90k cash to make that happen?

The Spider

Rew wrote: »

where do 2 teachers on 45k get ~90k cash to make that happen?

I'd go one again there's 831 3 bed houses under 300,000 in Dublin, so the two teachers don't have to buy the 400k house.

Barely Hedged

Rew wrote: »

where do 2 teachers on 45k get ~90k cash to make that happen?

2/3 years saving.

I used this an approximate benchmark as its a quantifiable example.

Barely Hedged

The Spider wrote: »

I'd go one again there's 831 3 bed houses under 300,000 in Dublin, so the two teachers don't have to buy the 400k house.

Even better.

Plenty of room for manoeuvre there

stevedublin

10% of 315k is only 31.5k
and 20% is 63k

jon1981

http://www.myhome.ie/residential/brochure/25-all-saints-road-raheny-dublin-5/3142024?utm_source=MyHomeie&utm_medium=Email&utm_content=PropertyAlerts&utm_campaign=ResidentialForSalePropertyAlert


This will be an interesting watch. We looked at a house identical to this around Sept 2013 on this road, with a massive garden but basically in bits like this. It's asking was 280k, i believe it sold for 360k or something in the end. This beauty is up for 395k

Barely Hedged

stevedublin wrote: »

10% of 315k is only 31.5k
and 20% is 63k

Them's not the rules.

20% of the purchase price...

stevedublin

Barely Hedged wrote: »

Them's not the rules.

20% of the purchase price...

I was working on the assumption that 315k is the purchase price.
Granted, 400k would be expensive for them.

Barely Hedged

stevedublin wrote: »

I was working on the assumption that 315k is the purchase price.
Granted, 400k would be expensive for them.

I was just using it as a stressed simple example to highlight affordability.

As you say it would be expensive for their income, but not unaffordable.

stevedublin

if they are first time buyers, the deposit would only need to be about 15%, less if the bank makes an exception for them.