Will there be a next "housing bubble"?

outlooks

With the rents and sales price incredibly expeculated, is there another housing bubble coming soon? When will that be and what will trigger it?

MarkAnthony

Rents are already in a bubble.

House prices are on the high side of sustainable. We'll probably see price growth slowing and hopefully settling down to +/-3% max.

Gumbo

While rents are high, I feel that house prices are not high relatively speaking. Getting the mortgage is the hard part.

endacl

I'd love a bubble house.

outlooks

kceire wrote: »

While rents are high, I feel that house prices are not high relatively speaking. Getting the mortgage is the hard part.

Wouldn't there be a concern that houses being sold by 500k or more may loose their value by half if building starts?

MarkAnthony

outlooks wrote: »

Wouldn't there be a concern that houses being sold by 500k or more may loose their value by half if building starts?

Nope, maybe some wishful thinking.

500K puts a home in a desirable area. Most desirable areas are full. Large scale development is going to happen, if it ever happens, outside of the M50 in most cases.

There might be some isolated pockets of massive devaluations but I doubt it.

thierry14

kceire wrote: »

While rents are high, I feel that house prices are not high relatively speaking. Getting the mortgage is the hard part.

Government are going to have to bring in new legislation or something to control rents, they are mad at the moment.

Would love to see something like 1:1.5 ratio brought in as a rule to control prices.

1 being the mortgage rate Eg 800 a month to buy a 200k house

1.5 being the max rent that can be charged based on the current market value of house if you were to buy, eg 1200 is the max landlord can charge on the 200k house.

Lower tax rates for landlords too, max rates of 30% for high earners ( over 100k combined) and under 20% for low earners.

Alter_Ego

thierry14 wrote: »

Government are going to have to bring in new legislation or something to control rents, they are mad at the moment.

Would love to see something like 1:1.5 ratio brought in as a rule to control prices.

1 being the mortgage rate Eg 800 a month to buy a 200k house

1.5 being the max rent that can be charged based on the current market value of house if you were to buy, eg 1200 is the max landlord can charge on the 200k house.

Lower tax rates for landlords too, max rates of 30% for high earners ( over 100k combined) and under 20% for low earners.

One issue with the proposal - it's incompatible with greed

Effects

outlooks wrote: »

Wouldn't there be a concern that houses being sold by 500k or more may loose their value by half if building starts?

Where are all the spots in Dublin city that all these houses will be built?

thierry14

Alter_Ego wrote: »

One issue with the proposal - it's incompatible with greed

Agree

90% of government/politicians being landlords will make sure it would never happen

Alter_Ego

Effects wrote: »

Where are all the spots in Dublin city that all these houses will be built?

The only one potentially having some impact is the development of 4000 units in Cherrywood. I would expect this may lower prices in surrounding neighborhoods, like Sandyford, Stepaside etc. Other than that, as other suggested - the desirable areas are already full, I don't see them dropping prices significantly any time soon.

otwb1

thierry14 wrote:

Would love to see something like 1:1.5 ratio brought in as a rule to control prices.

What about the house bought early boom for 285k, mortgage is 1350..... so rent can be over 2k instead of the 1,500 it is at the moment????

MarkAnthony

thierry14 wrote: »

Government are going to have to bring in new legislation or something to control rents, they are mad at the moment.

Would love to see something like 1:1.5 ratio brought in as a rule to control prices.

1 being the mortgage rate Eg 800 a month to buy a 200k house

1.5 being the max rent that can be charged based on the current market value of house if you were to buy, eg 1200 is the max landlord can charge on the 200k house.

Lower tax rates for landlords too, max rates of 30% for high earners ( over 100k combined) and under 20% for low earners.

Alter_Ego wrote: »

One issue with the proposal - it's incompatible with greed

My mortgage is roughly half of the rent I charge. The rent doesn't cover the mortgage. Not a massive issue - I have an asset at the end of it but any other business asset would be 100% tax deductible in relation to interest. Even assuming it broke even, over a 40 year mortgage on an asset worth 250,000 I'm making roughly 6K a year profit - assuming I break even which I don't. Not bad but there are much better investments out there and I'm an odd case as I've a tracker and long mortgage.

What needs to happen, and never will, is rent needs to be tax deductible for the tenant. It would force LL's into compliance with tax and give tenants some relief. As I'm fond of saying though - tenants currently keep the country running. We'd be bankrupt if we didn't have people earning 35K a year being taxed at roughly 30% paying 12K in rent just for upwards of 40% of that to go in tax too.

There is no political will, quite the opposite to assist tenants. The issue is most tenants buy into the smoke and mirrors mis direction that it's LL's causing the issues.

outlooks

Effects wrote: »

outlooks wrote: »

Wouldn't there be a concern that houses being sold by 500k or more may loose their value by half if building starts?

Where are all the spots in Dublin city that all these houses will be built?

http://m.independent.ie/business/personal-finance/property-mortgages/3000-new-homes-to-be-built-in-middle-of-dublin-city-34731683.html

thierry14

otwb1 wrote: »

What about the house bought early boom for 285k, mortgage is 1350..... so rent can be over 2k instead of the 1,500 it is at the moment????

2k would be the max.

Market rates of what people would actually pay would see it not rise to 2k if market was weak.

It would be based on current market value too. not what house was bought for in the past.

It would work for hot markets.

D15 you can buy houses for around 200k and rents are near 2k pm

outlooks

MarkAnthony wrote: »

... I'm making roughly 6K a year profit - assuming I break even which I don't.

Are you considering costs with new furniture, appliances and overall maintenance of the house?

MarkAnthony

thierry14 wrote: »

2k would be the max.

Market rates of what people would actually pay would see it not rise to 2k if market was weak.

It would be based on current market value too. not what house was bought for in the past.

It would work for hot markets.

D15 you can buy houses for around 200k and rents are near 2k pm

That's a sea change needed in the Irish attitude.

Here the property ladder is considered a bad thing, people in even their late twenties are still buggering about and traveling seems to be the norm. That's all well and good but it puts huge pressure on rents. It's much more common in the UK, if you're going to settle somewhere for a number of years to buy - that's why negative equity in that market is a bigger issue than Ireland.

Most people I know saved from their early twenties to buy something, of course people also got help etc. from parents. People also tend to start of in something small and move up over time building equity. Here people expect to walk into the forever home with very little deposit and gut the place on day one.

The CB has started this but it's a massive cultural shift and is going to take time.

ongarite

thierry14 wrote: »

D15 you can buy houses for around 200k and rents are near 2k pm

I'm from D15 and that is pie in the sky figures there.
For 2K rent a month in D15, the average selling price of the house was 350K according to the PPR website.

hytrogen

If there is I sure hope there's better land resource management this time by councils! Build up not out.
But I also hope there's more encouragement for home renovations from the gov.

MarkAnthony

outlooks wrote: »

Are you considering costs with new furniture, appliances and overall maintenance of the house?

It's a rough guestimate for the purposes of this discussion.

Maintenance is paid for in management fees. Furniture etc. isn't a huge outlay tbh given capital allowances/tax deduction. 40 years of (assumed) inflation also plays a part.

However the point is rents are nowhere what they need to be to make property investment worthwhile in the current climate for one or two off LLs. That's probably not a bad thing but there's too much demand on rent and not enough people buying, probably because they think you'll be able to pick up a 4 bed semi in Ballsbridge for €100K once the building starts or they just haven't saved.

thierry14

ongarite wrote: »

I'm from D15 and that is pie in the sky figures there.
For 2K rent a month in D15, the average selling price of the house was 350K according to the PPR website.

Look at Tyrrelstown for example.

200k houses on daft, rent rates 1700pm and rising

MarkAnthony

ongarite wrote: »

I'm from D15 and that is pie in the sky figures there.
For 2K rent a month in D15, the average selling price of the house was 350K according to the PPR website.

Perfectly reasonable houses in D15 under 250K tbh. The brother-in-law just bought one. Other areas of Dublin mainly in D5/D13 have pockets of good value also.

That said:

thierry14 wrote: »

Look at Tyrrelstown for example.

200k houses on daft, rent rates 1700pm and rising

Apples and oranges. If people want to buy then buy - if people want to rent then they'll pay market rate.

LiamoSail

thierry14 wrote: »

Government are going to have to bring in new legislation or something to control rents, they are mad at the moment.

Would love to see something like 1:1.5 ratio brought in as a rule to control prices.

1 being the mortgage rate Eg 800 a month to buy a 200k house

1.5 being the max rent that can be charged based on the current market value of house if you were to buy, eg 1200 is the max landlord can charge on the 200k house.

Lower tax rates for landlords too, max rates of 30% for high earners ( over 100k combined) and under 20% for low earners.

And do rents go up and down with interest rates? Presumably too a house with a mortgage term of 10 years can charge a far higher rent than a house with a mortgage term of 25.

Personally I think simply lowering the tax rate for LL's who charge rent at below a certain level would suffice. If a LL can earn more after tax by renting an apartment for €1k, than for €1400, it makes sense that he/she will rent it for €1k.

Additionally, an increased yield would attract more LL's into the market and increase the supply of rental properties, while the lower rents would decrease the Gov' expenditure on rent allowance

thierry14

MarkAnthony wrote: »

Apples and oranges. If people want to buy then buy - if people want to rent then they'll pay market rate.

People are being forced to buy.

I don't think that's a road we should go down.

Quality of life should be improving, forcing young people to buy and tieing them down isn't an improvement.

MarkAnthony

thierry14 wrote: »

People are being forced to buy.

I don't think that's a road we should go down.

Quality of life should be improving, forcing young people to buy and tieing them down isn't an improvement.

People can't have it both ways. There's a demand for the convenience of renting hence people pay. There are ways around that but it's not an issue stemming from LL's.

DubCount

For OP. Unless there is an increase in housing supply, there will be a housing bubble. Central Bank rules on borrowing have controlled Demand for House Purchase, but not demand for housing. It has pushed the supply v demand problem to the rental sector.

Rent controls don't work. More restrictions on Landlords will only make the problem worse.

Tax incentives for Landlords wont work, that will push the problem back to house prices.

Find solutions to increase housing supply.

Villa05

DubCount wrote:

For OP. Unless there is an increase in housing supply, there will be a housing bubble. Central Bank rules on borrowing have controlled Demand for House Purchase, but not demand for housing. It has pushed the supply v demand problem to the rental sector.

MarkAnthony wrote:

House prices are on the high side of sustainable. We'll probably see price growth slowing and hopefully settling down to +/-3% max.

Ie a soft landing :-)

kceire wrote:

While rents are high, I feel that house prices are not high relatively speaking. Getting the mortgage is the hard part.

House prices in the cities have gone over affordability criteria based on the new normal of 3.5 times household income

thierry14 wrote:

90% of government/politicians being landlords will make sure it would never happen

That was also the case in 2008. Politicians involved in property makes the bubble worse

MarkAnthony

Villa05 wrote: »

Ie a soft landing :-)

Aye lol you and I both know I danced round that phrase! However I think it's different this time, but who knows.

Henry Ford III

Prices are once again out of step with incomes. The new bubble already exists imho.

Villa05

MarkAnthony wrote:

it's different this time

Stop. Your killing me

Barely Hedged

Henry Ford III wrote: »

Prices are once again out of step with incomes. The new bubble already exists imho.

Examples please from Daft/My Home that support this point...