Opinions on when the next property crash may happen

Villa05

draiochtanois wrote:

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Ranking affected by Leprechaun economics

draiochtanois

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LirW

draiochtanois wrote: »

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When I look at that list it does seem a little bit... I don't know, off?
I do not want to downplay the economic position of Dublin and surely coporate tax plays a huge part in it.
I for example know Vienna very very well and it is definitely not on the same page with Dublin, not in the slightest. It's a lot more expensive, you do not have as many global companies as you'd have here. It's a good hub for connections to eastern Europe but it's waaaay behind Dublin.

But to keep the example with Vienna: One big difference between Dublin and Vienna is that property is a hell lot more expensive there for Families but rent is cheaper and more secured than it is here. Also the quality of rental properties is a lot better there.
Currently Vienna is facing the problem that Families simply can't afford to buy there. Wages in Austria are lower than here and property prices are higher. Viennese people are driven to the outskirts and surrounding areas. Even though financing property works very differently there, the situation of financial predicament there is pretty bad.
And of course it hits people earning lower wages having families the most.

But people can rent and the option of renting on a long term isn't too unattractive, not the way it is here. The renting market there is strictly regulated and never worked the way it does in Dublin. What Dublin did out of desperation was to imply a minimalist version of a system that needed to evolve decades on the continent and it's self speaking that this isn't going to work, therefore the situation on the renting market got even worse now.
Many places do not have the thing with buying is cheaper than renting in many cases.
This is one of the reasons why it is currently so bad here. If people not being able to buy would have more sustainable chances to rent with a good long term prospect, they wouldn't run to the bank in panic to get mortgages in the first place.
When I came to Ireland I said I'd have no problem to rent decent quality on a long term... but in reality there is no long-term (I'm talking 10 years+) rental sector.
The general direction you're pushed into is buying here in Ireland. Now credit is available, everyone wants to buy now. Supply isn't there because many parties messed up big time here. At some point the sub 350k market will be very exhausted, then there are two possibilities: Either the banks start to lend more than the 3.5 times gross or prices of the higher prices sector will drop a bit.
A bubble like the last time, I just can't see that happen. There will be troubles, but in a very different way.

draiochtanois

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scamalert

whoever thinks theres no bubble coming is naive as those prior 2008 were.

Someone i know applied for mortgage and bank added extra +20% more, so the banks aren't exactly tight and imagine will become loser if things are still going such way, that adding up annual income,taxes,bills they are willing to lend where it would be slim for person to make repayments given on their earnings.

another trouble is lack of houses so whatever people buy now at premium because its new built or nice space, if government decides to tackle issue and bring prices down you already have people sucked in overpaying for decades.

Since all hangs on peoples jobs while its secure everyone's happy but wonder how many people are actually in positions where they know if smth happened in 10-20 years at minimum they would be safe to find another job or as time goes to re-qualify when having 2k expenses to cover on month to month basis.Since while in Dublin there are many opportunities but in smaller towns many rely on single career or job for life which given Ireland s small market people forget how easily jobs go,and economy turns.

Cyrus

scamalert wrote: »

whoever thinks theres no bubble coming is naive as those prior 2008 were.

Someone i know applied for mortgage and bank added extra +20% more, so the banks aren't exactly tight and imagine will become loser if things are still going such way, that adding up annual income,taxes,bills they are willing to lend where it would be slim for person to make repayments given on their earnings.

another trouble is lack of houses so whatever people buy now at premium because its new built or nice space, if government decides to tackle issue and bring prices down you already have people sucked in overpaying for decades.

Since all hangs on peoples jobs while its secure everyone's happy but wonder how many people are actually in positions where they know if smth happened in 10-20 years at minimum they would be safe to find another job or as time goes to re-qualify when having 2k expenses to cover on month to month basis.Since while in Dublin there are many opportunities but in smaller towns many rely on single career or job for life which given Ireland s small market people forget how easily jobs go,and economy turns.

the bank may have made them eligible for 20% more, but it will still have been on the basis of a 20% deposit + 3.5 income cap

the lack of supply will take a decade at least to sort out

and mortgages have always hung on peoples jobs, nothing new there, anything you have borrow for over 20-25 years is contingent on your ability to keep earning

none of those points you had made make a bubble more likely

Yourself isit

Graham wrote: »

We have approaching 10 years worth of demand to catch up on, this is likely to have a maintaining or upward influence on pricing for some time to come.

Some supply could find its way to the market as a result of the following, but it will take time:

End of the 7yr break for CAT relief.
Banks finally reposessing properties, returning houses to the market.
Completion of the (very few) remaining ghost estates.
Government proposal to release land for construction.

Not really ten years. There was an oversupply for the first five of those - which is why prices continued to fall. There probably still is in most parts of the country. And as I said the demographics in Ireland can reverse quickly.

Graham

Yourself isit wrote: »

Not really ten years. There was an oversupply for the first five of those - which is why prices continued to fall.

You could equally suggest the falling prices reflected the lack of finance rather than the lack of demand.

Anongeneric

Because of the pent up demand in cities it's highly unlikely at present building rates that we will have a bust like the last time with oversupply etc which is well known.

However with the number of geopolitical threats to Ireland's economy at the moment I think anyone would be mad to buy, particularly in the big cities but also to some extent in the smaller cities and towns.

Threats the economy have to face:
Brexit, nobody has any idea how this is going to go and trying to make accurate predictions is gonna be pretty difficult but it's probably safe to say that your biggest trading partner,(by some distance at 1 billion per week in goods and services), could very well be catastrophic.

Europe, Macron is probably going to be elected in France, he's an ex Rothschild banker and committed European federalist. He is also very much in favour of CCCTB common consolidated corporate tax base, as is Merkel et al in Frankfurt,Brussels Luxembourg etc. When, not if, that passes our competitive advantage is over, and a lot of "skilled educated workforce" bolloxology from Leinster house won't stop companies going elsewhere.
(I don't think it will happen but if Le Pen wins she has promised to take France out of the Euro which will bring the whole thing down )

Trump reducing corporate tax rate to 15%, while this may not change things on a large scale for companies that have been here for a long time and have already spent big on their set up here it could have an effect on further FDI from America.

daveharnett

so, regarding the topic, is still a good investment to buy an apt in Dublin with prevision to live here for other 3-5 years?

I am thinking at worst scenario, where you buy an house, you want to sell in 5 years, but the price are down so you cannot sell and you cannot move country as you will get lower salary outside ireland..

The worst case scenario would also include you being unable to work due to injury/illness/recession.

Idbatterim wrote: »

yes I would say so, if the alternative is the extortionate market rent!

I'm wouldn't characterize the rental market that way. Gross yields lagged behind when property prices started booming in the early naughties, and they are just now catching up. The canaries in this particular coalmine are the accidental landlords - they seem to be fleeing the market as quick as they can.

Idbatterim wrote: »

Put it this way, if you are in a position to buy now, say you continue renting for 1 year at 1,500 month, so you are now down E18,000. Say property prices increase 10%, and the property is a lowly enough 300,000 for Dublin. So you have lost, 30k, the rent and the extra interest you will be charged on the mortgage, you could be looking at a loss of 55k a year over the next 2 - 3 years at least in my opinion.

Apart from the general impression that this could have been copy-pasted from 2006, I have some specific objections:

You're predicting a 33% increase in residential property prices over the next 3 years. If OP outlined the worst-case scenario above, I'd say your forecast would fall firmly into best-case scenario territory. Basing major financial decisions on the best-case scenario went out of fashion about a decade ago.

If we're counting opportunity costs as "costs", you should do it on both sides. If OP's only got the 40k deposit they need for a 300k mortgage, that could be earning 1-1.5k a year in the market.

Ownership has got costs too. 8.3k in interest the first year, insurance, lpt, furnishings, management fees, and maintenance. Call it 11k per anum, dropping to 10.5k by year 5. If you don't get stung for any major works.

The mechanics of buying and selling a house isn't cheap. Say 200 hours and 10k?

Idbatterim wrote: »

So you have lost, 30k, the rent.

I'd characterize this as "You've spent 18k on accomodation, and declined a gamble which could earn you 30k in cap gains if the property market goes really well". The world is a dark place if you count every winning horse you don't back as a "loss".

Idbatterim wrote: »

So you have lost, 30k, the rent and the extra interest you will be charged on the mortgage.

Wha?

yosser hughes

draiochtanois wrote: »

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Laughable.
These types statements are utterly meaningless. This is the danger of basing economic decisions on seriously flawed GDP figures.
Most people don't care about this though and like all the people who 'like'your post want their property decision re-enforced by someone telling them it's ok.

Cyrus

daveharnett wrote: »

The worst case scenario would also include you being unable to work due to injury/illness/recession.

is this not a reason not to buy a house regardless of your economic outlook, also injury and illness can be insured against, and if you dont believe in your own ability to hold employment for the life of your mortgage if healthy then you shouldnt take one

Cyrus

Anongeneric wrote: »

Because of the pent up demand in cities it's highly unlikely at present building rates that we will have a bust like the last time with oversupply etc which is well known.

However with the number of geopolitical threats to Ireland's economy at the moment I think anyone would be mad to buy, particularly in the big cities but also to some extent in the smaller cities and towns.

generally people buy a house based on need and if they can afford it (and they should have a min of 20% equity, most people i know buying at the moment are more like 30-50%)

on that basis why would you be mad to buy? surely a better quality of life for you and your family has to factor somewhere or are we all property speculators now?

draiochtanois

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Theboinkmaster

Anongeneric wrote: »

He is also very much in favour of CCCTB common consolidated corporate tax base, as is Merkel et al in Frankfurt,Brussels Luxembourg etc. When, not if, that passes our competitive advantage is over

Trump reducing corporate tax rate to 15%, while this may not change things on a large scale for companies that have been here for a long time and have already spent big on their set up here it could have an effect on further FDI from America.

I agree with the Brexit threat but as regards our tax rate we've resisted pressure so far and a change in rate just isn't going to happen, it would be suicide and the government know this. We'd leave the EU first.

Trump tax rate - another red herring isn't going to happen just because he announces it, no support to pass it just like building this wall along the mexico border - isn't going to happen and he'll be gone in 4years when all the inbred American hicks realise his nonsense talk hasn't impacted their lives or jobs one bit.

So really the only threat in your post to our economy is BREXIT but I don't think that will be enough to cause a property crash, just stop them going up.

Demand is far too strong and higher than supply, even in a BREXIT induced economic slowdown.

Wanderer78

draiochtanois wrote:

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The rise in the cost of housing is rising faster though, this is completely unsustainable

sbsquarepants

They were talking on the radio this morning about the population increasing by 1million in the near future (not sure what timespan). If that is even close to being true demand is not reducing any time soon. The vast majority of these people will be located in and around Dublin, coupled to the fact that houses are still something like 30% off peak, I don't see any crash in the near future.
Long term, it's as good as guaranteed, boom - bust, boom - bust, lather, rinse, repeat. Was always thus, will always be thus.

A lot of it is academic anyway - I've bought a house recently (this week in fact) I bought it now, because I need it now - It doesn't suit to wait for 5 years regardless of what prices are going to do (even if I could accurately predict) Plus the reality is, I can buy it for a lot less per month than I could rent it (less than two thirds), so there's also that to consider, any modest price drop could be largely or wholly negated by rent, any price increase and your caught on the double - you've overpaid for a few years and now you need to overpay again.

Cyrus

sbsquarepants wrote: »

A lot of it is academic anyway - I've bought a house recently (this week in fact) I bought it now, because I need it now - It doesn't suit to wait for 5 years regardless of what prices are going to do (even if I could accurately predict)

this seems to be the point thats being missed by a lot of people, if you need a house you need a house.

at least at the moment you are constrained by borrowing rules that mean you need 20% equity and cant borrow more than 3.5x gross salary.

of course there will be a 'bust' at some stage, but not soon

draiochtanois

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Wanderer78

draiochtanois wrote:

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Completely disagree there, I know people that have now given up on ever owning a home, some even moving back in with their parents for good, this market equilibrium nonsense has to stop, it doesn't work

yosser hughes

draiochtanois wrote: »

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But you've moved the goal posts. You compared Dublin to cities like New York and London based on 'economic output'
Now you are referencing things like interest rates(which by the way will start to increase soon enough) and migration.
Are you still comparing Dublin to New York and using this comparison to assert that property in at the lower end in terms of affordability.
When you mention 'economic output' tell me what exactly do you mean?

draiochtanois

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Idbatterim

daveharnett wrote: »

so, regarding the topic, is still a good investment to buy an apt in Dublin with prevision to live here for other 3-5 years?

I am thinking at worst scenario, where you buy an house, you want to sell in 5 years, but the price are down so you cannot sell and you cannot move country as you will get lower salary outside ireland..

The worst case scenario would also include you being unable to work due to injury/illness/recession.

Idbatterim wrote: »

yes I would say so, if the alternative is the extortionate market rent!

I'm wouldn't characterize the rental market that way. Gross yields lagged behind when property prices started booming in the early naughties, and they are just now catching up. The canaries in this particular coalmine are the accidental landlords - they seem to be fleeing the market as quick as they can.

Idbatterim wrote: »

Put it this way, if you are in a position to buy now, say you continue renting for 1 year at 1,500 month, so you are now down E18,000. Say property prices increase 10%, and the property is a lowly enough 300,000 for Dublin. So you have lost, 30k, the rent and the extra interest you will be charged on the mortgage, you could be looking at a loss of 55k a year over the next 2 - 3 years at least in my opinion.

Apart from the general impression that this could have been copy-pasted from 2006, I have some specific objections:

You're predicting a 33% increase in residential property prices over the next 3 years. If OP outlined the worst-case scenario above, I'd say your forecast would fall firmly into best-case scenario territory. Basing major financial decisions on the best-case scenario went out of fashion about a decade ago.

If we're counting opportunity costs as "costs", you should do it on both sides. If OP's only got the 40k deposit they need for a 300k mortgage, that could be earning 1-1.5k a year in the market.

Ownership has got costs too. 8.3k in interest the first year, insurance, lpt, furnishings, management fees, and maintenance. Call it 11k per anum, dropping to 10.5k by year 5. If you don't get stung for any major works.

The mechanics of buying and selling a house isn't cheap. Say 200 hours and 10k?

Idbatterim wrote: »

So you have lost, 30k, the rent.

I'd characterize this as "You've spent 18k on accomodation, and declined a gamble which could earn you 30k in cap gains if the property market goes really well". The world is a dark place if you count every winning horse you don't back as a "loss".

Idbatterim wrote: »

So you have lost, 30k, the rent and the extra interest you will be charged on the mortgage.

Wha?

To be clear I'm not in a position to buy. I have been renting for years. If I currently had the money to buy. I would do so. It's a rigged market here, the high prices suit the politicians banks, media who talk it up. I was and am the first to say what overpriced crap your money was getting you in 05/06/07...

My point about the waiting is, assuming increases over the next few years, say just say there is a 10% increase for next few years. That is going to ad up to some serious interest over the course of the loan.

There is nothing, nothing that is going to bring anything like the supply needed in Dublin for the next few years!

People need a home. If this was 2005-2006 I remember thinking anyone who bought was mad. Prices aren't at that level yet, if the alternative is wait pay market rent and cross fingers for another crash (which will come) but could be a long time off and probably won't be as severe as the last shock. I wouldn't be doing it if on podotion to buy.

Let's look at what we know, by waiting the rent you lose, it will likely go up. You are then hoping for a crash, hoping the banks even lend if that eventuality passes. U less you have cash.

I want to hear your argument for waiting ... because for me, if people are in a position to do so, the buy now argument is overwhelming ...

A key reason being, non of the vested interests actually want to do anything about the situation, they are all major beneficiaries of it!

draiochtanois

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Yourself isit

draiochtanois wrote: »

Dublin is a lot more important in the world economy than many people realise. More than Berlin, Boston or Munich

http://www.lboro.ac.uk/gawc/world2016t.html

Well. According to that website. San Jose is way behind Dublin but surely it's at the centre of world technology.

draiochtanois

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draiochtanois

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Wanderer78

draiochtanois wrote:

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Why shouldn't they? People work hard, why shouldn't they be able to buy a home from their hard earned money when previous generations were able?

draiochtanois wrote:

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Should people, who worked hard, raised their families etc, be forced to move on themselves when their kids grow up. This is not black or white, we all know homes have memories. My neighbour is actually extending their home to accommodate their daughters family return to the family home, I suspect they ain't alone.

draiochtanois wrote:

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Again life is not black or white, but sadly many who believe in market equilibrium models seem to think it is! Why should people be forced to take on more employment in order to survive?

draiochtanois wrote:

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Some are, some are not, again life is not black or white. We all know, having family and friends around us is good for raising kids etc.

It's truly time for us to move on from this dreadful market equilibrium nonsense

draiochtanois

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Tayschren

The chance of a property crash is very low as there is not enough housing/commercial stock for a run on prices; if credit becomes lax again across the construction industry, builders can speculate. But suppliers and banks are not loosening the purse strings for this type of loan/credit so the current stock will not in the near future rise enough for a price realignment or even a crash.

The only ones with access to funds (because credit is not available) to build are Nama and a small few builders that had some money under the mattress.

Nothing points to a property crash