Buy now or will there be a crash?

pilly

Graham wrote: »

I don't think the buy a house for life is what should be peddled either. It would result in people owning/financing/running a property too large for their needs at both ends of their working life.

This is a real bugbear of yours Graham. Is someone sitting in a property you want or what is the exact problem?

Graham

pilly wrote: »

This is a real bugbear of yours Graham. Is someone sitting in a property you want or what is the exact problem?

Perfectly happy with the position I'm in but thanks for your concern Pilly.

I'm just not of the misguided opinion there's a 4 bed semi for everyone in the country or that such suggestions have any founding in reality.

ligerdub

I've taken the liberty of doing up some analysis of the market in Ireland. Nothing of great revelation here but it does combine sources of data (CSO and daft.ie) and you can look at different strands of the market or focus in on specific places you might be considering.

https://public.tableau.com/profile/eoghan.lyons#!/vizhome/IrishPropertyMarketAnalysis/Story1

AsianDub

Buy now as the CB rule change (a disaster IMO) is already pushing house prices up (in Dublin anyway) so by the time a crash does arrive (if it does) the prices will be so inflated anyway they'll crash down to today's levels. 10% increases already on a few properties on myhome.

shopper2011

What about if you want to buy now, have great offer on a house and the seller/owner decides they want todo a wait and see what happens the property market. The seller has offers and has the luxury of wait and see...

Is this fair?

ligerdub

The luxury so long as they think you're going to hang around regardless.

I'd put an expiry in any offer I'd make.

Yourself isit

jim-mcdee wrote: »

I remember a wise man said to me, regarding house buying, something like "No point standin on the sidelines, cribbin and moanin. I dunno why these people dont just go away"

Are you confusing a drunken guy in a pub with wisdom?

Viscount Aggro

The guideline is, no more than 25% of one's take home pay should go towards accomodation costs, mortgage or rent. Otherwise, you re living beyond our means.

pilly

Viscount Aggro wrote: »

The guideline is, no more than 25% of one's take home pay should go towards accomodation costs, mortgage or rent. Otherwise, you re living beyond our means.

Then I would say there's a huge amount of people living beyond their means in Ireland. I live in a very cheap part of the country and my rent is 29% of my take home pay.

BoatMad

AsianDub wrote: »

Buy now as the CB rule change (a disaster IMO) is already pushing house prices up (in Dublin anyway) so by the time a crash does arrive (if it does) the prices will be so inflated anyway they'll crash down to today's levels. 10% increases already on a few properties on myhome.

house prices only crash when there is a failure of lending, thats not going to be allowed to happen again in any future I can see.

Hence all thats happens in a rising markets is buying slows , supply overreaches demand and typically prices stabilise or far very slightly .

after a few years , prices rise again

we have been here before

Yourself isit

BoatMad wrote: »

house prices only crash when there is a failure of lending, thats not going to be allowed to happen again in any future I can see.

Hence all thats happens in a rising markets is buying slows , supply overreaches demand and typically prices stabilise or far very slightly .

after a few years , prices rise again

we have been here before

Unless prices drop most people will be priced out. Don't underestimate a political upheaval.

rsynnott

Deleted User wrote: »

My first mortgage was 17%. Think what that would do to peoples repayments on variable interest rates.

Presumably during a period of extremely high inflation (and thus wage inflation), though.

Current low mortgage rates actually aren't that historically unusual if you take into account the fact that inflation, and wage growth, has been practically 0 for years.

BoatMad

Yourself isit wrote: »

Unless prices drop most people will be priced out. Don't underestimate a political upheaval.

By demonstration, there are more buyers in the market then there is supply , hence as an overall helicopter views, people are not being " priced out" of the current market.

where there mor supply and for some reason prices remained high , and houses went unsold, then you could claim people were priced out

rising asset prices dont lead to crashes , the " free " market balances supply to demand, even if the lead/lag period is long for house supply

This is because as prices rise , its increasing profitable for more builders to build and hence more houses come on stream , more houses tend to reduce upward price trends and hence price rises tends to flatten out.

simples, we only had a price crash in 2009-2014 because lending failed , hitting both buyers and builders. That will not be allowed to happen again as per Fed and ECB decisions to ensure liquidity

Yourself isit

BoatMad wrote: »

By demonstration, there are more buyers in the market then there is supply , hence as an overall helicopter views, people are not being " priced out" of the current market.

where there mor supply and for some reason prices remained high , and houses went unsold, then you could claim people were priced out

Your definition of priced out is your own. It means that house prices are too high for most people to buy. We used to have 80% ownership which means there were plenty of houses available even for below average earners.

rising asset prices dont lead to crashes , the " free " market balances supply to demand, even if the lead/lag period is long for house supply

This is because as prices rise , its increasing profitable for more builders to build and hence more houses come on stream , more houses tend to reduce upward price trends and hence price rises tends to flatten out.

simples, we only had a price crash in 2009-2014 because lending failed , hitting both buyers and builders. That will not be allowed to happen again as per Fed and ECB decisions to ensure liquidity

Your statement that asset prices are credit driven only is empirically false. Think stocks. If supply meets demand prices will drop to a level the average guy can afford. In fact that's a tautology.

You think there will be a flattening out but that won't get more people to own houses. For that to happen prices must fall. In real terms at least, and relative to income.

Graham

Yourself isit wrote: »

Your definition of priced out is your own. It means that house prices are too high for most people to buy. We used to have 80% ownership which means there were plenty of houses available even for below average earners.

Times have changed even if your 80% figure is correct.

We have a more mobile workforce now and people are settling down later in life.

Villa05

tomfoolery60 wrote:

You should buy when it suits your financial circumstances and life needs, not according to how you forecast the housing market.

Barely Hedged wrote:

You also don't think the government wouldn't intervene with mortgage interest rate relief if people started to make noise about the impact of rising rates on them?

Government won't have money in a high interest rate environment as they will have increased repayments on our massive debt

Yourself isit

Graham wrote: »

Times have changed even if your 80% figure is correct.

We have a more mobile workforce now and people are settling down later in life.

Maybe but 80% that was a snapshot in time. Some of the 20% was in the private rental sector and went on to own. So it looks like the ownership levels were even higher for that generation.

Now if supply is ever to meet demand in Ireland that's the demand it needs to meet (and met in the past). When people say that we need 30k houses supplied, that's enough to satisfy that demand. Every family gets a house or appartment. To rent or own.

Now in the past the government would be producing some of that but these days it will provide rent supplements. However at supply demand equilibrium it would mean more people (most) will be able to afford a house. And there will be plenty of rental properties. This means price reductions.

Barely Hedged

Villa05 wrote: »

Government won't have money in a high interest rate environment as they will have increased repayments on our massive debt

There'll be two costs in this situation. Turf people out of their homes and pay to rehouse them, not too mention all the lobbying, or have an income tax offset scheme. I know which one a government will choose.

Also, look what the government have done in the past few years to keep people in their houses when the national debt scaled up to previously unfathomable levels?

johnp001

When interest rates rise the cost of assets that are bought with credit tend to fall.
There is also the complication that the level of debt is completely unpayable so either sovereign debt default or significant inflation are probable. The Euro as a currency is facing massive problems, from Monte de Paschi bail-in to insolvency of banks across the eurozone to countries likely to leave the common market and/or the currency in the coming months and years.
Property might not appreciate in terms of euros in the future (if the euro still exists) but would be a safer asset than holding cash. If inflation is the mechanism by which unrepayable debt levels are resolved then a mortgage is a good thing to have. Too many factors and unknowns to predict how it will all unravel though.

BoatMad

johnp001 wrote: »

When interest rates rise the cost of assets that are bought with credit tend to fall.
There is also the complication that the level of debt is completely unpayable so either sovereign debt default or significant inflation are probable. The Euro as a currency is facing massive problems, from Monte de Paschi bail-in to insolvency of banks across the eurozone to countries likely to leave the common market and/or the currency in the coming months and years.
Property might not appreciate in terms of euros in the future (if the euro still exists) but would be a safer asset than holding cash. If inflation is the mechanism by which unrepayable debt levels are resolved then a mortgage is a good thing to have. Too many factors and unknowns to predict how it will all unravel though.

the euro will fail , concept is rather overplayed, we have been hearing this since it was introduced . its not a useful analysis tool nor does it provide cogent reasoning as it a doomsday argument.

Ray Palmer

A crash is not inevitable and never has been. People have seen one crash and are expecting another. Property is cyclical and while boom and bust is s cycle it isn't normally very extreme. The problem is when it is very extreme it is felt for a long time. That is where we are now.
Warnings of a housing shortage years back were ignored because people were still reeling from the crash. That in turn has lead to low supply.
As everybody was afraid of a credit driven price rise restrictions were put in place. This stopped/slowed borrowing restricting prices.
Now you have too few properties and no way to buy so people rent. Higher demand for rent causes rent to go up.
Now in a closed system everything would settle down at some point but it isn't closed. International investors see they buy with cash and get a great return on rental income so they come in. House prices go up.
As time goes along rather than buying up property the international investors decide to build property with no intention of selling. They do it for the rental returns.
Ireland now has a similar market to the rest of Europe with blocks of apartments and housing estates rented by one big professional company.

Over time the legislation on landlords will tighten and it will be difficult for smaller landlords to comply so they will be forced out. That property will be bought up by the big companies as most people won't be able to buy.

All you have to do is decide where you want to be in this future. A crash is not what you should be worried about.

newacc2015

Ray Palmer wrote: »

International investors see they buy with cash and get a great return on rental income so they come in. House prices go up.
As time goes along rather than buying up property the international investors decide to build property with no intention of selling. They do it for the rental returns.
Ireland now has a similar market to the rest of Europe with blocks of apartments and housing estates rented by one big professional company.

Over time the legislation on landlords will tighten and it will be difficult for smaller landlords to comply so they will be forced out. That property will be bought up by the big companies as most people won't be able to buy.

All you have to do is decide where you want to be in this future. A crash is not what you should be worried about.

The investors in the market here are not here to stay. They are vultures here to take advantage of the knocked down prices. You can slowly see them pawning off the assets they have brought. There will be another crash in another country where they will buy their assets and sell their property here. The cycle continues.

A certain US REIT has said Irish property is no longer worth investing in, so they onto the next country to buy knocked down assets.

The important thing to remember is that institutional investors only really brought assets in Dublin. Even Irish REITs dont want to buy assets outside of Dublin. Despite Dublin only having about 40% of the population, Irish REITs tend to hold about 75-80% of their assets in Dublin.

ligerdub

A lot of those REITs are commercial property though no?

Out of interest, is there any source of stats which show how much of the residential market has been bought up by asset managers (and any other pedantic alternative to that category)?

Eric Cartman

when prices climb above 2007 levels (dublin, kildare, meath, wicklow), you'll see a glut of property from REIT's, small investors and accidental landlords coming on to the market where people are holding onto assets in the hope of running themselves out of negative equity. It will make the rental crisis worse, but ease buying, especially for FTB's as most of these NE properties are BTL's (so usually apartments, 3 bed semi's , duplex's )

with these mortgages cleared without default, it gives the bank better security to lend and allows developers to clear the bad assets they currently have on their books which restrict their borrowing capacity.

There are still developers and investors hoping prices rise to 2007 levels in the midlands/ west . I don't think theres a hope in hell of this happening. The guy with the apartment block in portlaoise should accept his stupidity and take the loss. This is holding up a lot of developers cash, banks ability to lend etc…

Builders will start building when we hit 2007 sale values , but you'd be silly to buy then, the flood of new and currently NE property to the market to try sell it before the tide goes out will leave a lot of development land in play and a serious increase in supply. give that 2+ years and prices will ease to a more normal level.

BoatMad

Eric Cartman wrote: »

when prices climb above 2007 levels (dublin, kildare, meath, wicklow), you'll see a glut of property from REIT's, small investors and accidental landlords coming on to the market where people are holding onto assets in the hope of running themselves out of negative equity. It will make the rental crisis worse, but ease buying, especially for FTB's as most of these NE properties are BTL's (so usually apartments, 3 bed semi's , duplex's )

with these mortgages cleared without default, it gives the bank better security to lend and allows developers to clear the bad assets they currently have on their books which restrict their borrowing capacity.

There are still developers and investors hoping prices rise to 2007 levels in the midlands/ west . I don't think theres a hope in hell of this happening. The guy with the apartment block in portlaoise should accept his stupidity and take the loss. This is holding up a lot of developers cash, banks ability to lend etc…

Builders will start building when we hit 2007 sale values , but you'd be silly to buy then, the flood of new and currently NE property to the market to try sell it before the tide goes out will leave a lot of development land in play and a serious increase in supply. give that 2+ years and prices will ease to a more normal level.

Not a bad reading of things

Ray Palmer

newacc2015 wrote: »

The investors in the market here are not here to stay. They are vultures here to take advantage of the knocked down prices. You can slowly see them pawning off the assets they have brought. There will be another crash in another country where they will buy their assets and sell their property here. The cycle continues.

A certain US REIT has said Irish property is no longer worth investing in, so they onto the next country to buy knocked down assets.

The important thing to remember is that institutional investors only really brought assets in Dublin. Even Irish REITs dont want to buy assets outside of Dublin. Despite Dublin only having about 40% of the population, Irish REITs tend to hold about 75-80% of their assets in Dublin.

I don't agree they are only here for quick gains on property. They are investment funds for large companies ultimately they want steady returns. The whole point I am making is things will evolve. Dublin only having 40% of the population is not even a concern. It will always be supply and demand, the steady rental yield just needs to be viable. It isn't outside Dublin which you have to acknowledge gets the best of what is going in Ireland and will continue.

Home ownership is going to decrease with very few small landlords is just the way things go. You are just going to see it happen like happens all around the world in capital cities