Will house prices ever stop growing?

spuddy

For as long as demand outstrips supply, prices will rise. Even an increase in supply may not have the desired effect if demand is growing at a faster rate, which is effectively what we're seeing at the moment. The degree to which prices change has shown itself to be more volatile in Ireland than other countries. Why exactly this is the case, is up for debate. The old "small open economy" line probably has some truth, exasperated last time round by poor regulation. The latter has improved (for now), but the former will always remain a risk.

Wanderer78

Graham wrote: »

I don't think the Australian market is a great comparison. Their economy is getting hit by the slow-down in demand from China for mined products and their house prices have been inflated significantly by Chinese investors.

according to keen, their house prices have been inflated by government policy, in particular, introducing grants and incentives for first time buyers. sound familiar?

Graham

Wanderer78 wrote: »

according to keen, their house prices have been inflated by government policy, in particular, introducing grants and incentives for first time buyers. sound familiar?

I'm not disagreeing that Aussie house prices at the lower end of the market have been inflated by incentives.

You could probably find similarities in any property market if you looked. That doesn't make them similar. As I said, there's much bigger factors influencing the Aussie market, to the point that comparisons aren't particularly relevant in an Irish context.

KyussBeeshop

The Australian housing market is quite comparable - except, comparable to our property market of 10-15 years ago - as it's built on an unsustainable level of private debt:


The rest of the (mostly western) world already crashed from this exact problem, but Australia kept on ticking the bubble over up to today.

Whether they will experience a crash, or a gradual deflation, we don't know - but they've been building up to a very predictable type of trouble, for a long time - one that we've already been through.

Browney7

Graham wrote: »

I don't think the Australian market is a great comparison. Their economy is getting hit by the slow-down in demand from China for mined products and their house prices have been inflated significantly by Chinese investors.

And negative gearing. The amount of high paid professionals with investment properties at yields sub 5% is huge (considering their base central bank rate is higher than ours their risk premiums are very low). They're now letting "young Australian families" get on the ladder by facilitating deposit accumulation within their superannuation funds to try and keep the party going.

Ireland has a bit to go in implementing policies that blatantly hike up prices compared to Aus - OT over.

I think the bird has flown on the sub 500k Dublin market house market. Can't see future sale prices being ten % higher this time next year but then if the central bank fly a kite that they will bring the 20% deposit rule back and government scrap help to buy you could see a further spike due to impending panic among this market that they'll be two years off buying in one fell swoop.

Once this panic subsides sellers could see what they were going for in this said panic and might hold out for what the house down the road got during this panic.

It's impossible to know what will happen with all the tinkering that is being mooted. The change to the 20% deposit rule above 220k this year had the desired effect in sticking a rocket onto house prices.

rsynnott

The main oddity of the Australian property market (and also the Canadian one) is that their bubble never stopped inflating. It was already inflating in the Celtic Tiger days but never burst when ours did (whereas there were many bubble bursts and major corrections across the US and Europe). If anything, they're overdue.

The_Conductor

myshirt wrote: »

You are right in terms of where the money is, and that is in extracting a rent. If you were a baby boomer or late gen'x'er in the right place at the right time it's a great country. If you were a public servant, even better.

Having attended several funerals over the last few years, of both private and public sector employees, including 2 civil servants, one of whom was a civil servant from the Department of Finance- all of whom commited suicide- I'd have to disagree vehemently with this statement.

The perception that any segment of the population escaped the downturn- is patently false. According to the CSO- the demographic least affected by the downturn- were retirees- everyone else- but especially those in employment with young families, have been through appalling times. Curiously though- the media choose not to report on this.

Statistics are also showing that cash is finally drying up- the proportion of cash sales in the property sector has finally fallen off a cliff (several years after I and many others suggested it was a matter of time- who'd have guessed there was as much money out there sloshing around in the economy as there very obviously is).

The only reason that there are as many small landlords still in the sector as there now are- and more have not deserted the sector- is a dearth of investment opportunities for them. Once interest rates start to rise- there will be an increases impetus to get to the door- as along with higher costs- people will try to lock in whatever value they have accumulated in property- before it gets decimated through regulation and policy.

The_Conductor

rsynnott wrote: »

The main oddity of the Australian property market (and also the Canadian one) is that their bubble never stopped inflating. It was already inflating in the Celtic Tiger days but never burst when ours did (whereas there were many bubble bursts and major corrections across the US and Europe). If anything, they're overdue.

Few European countries should be added to your list- including Denmark, The Netherlands, Belgium, Luxembourg, Ireland, Malta- and Italy.

koheim

I think prices will continue to rice for the next 10-15 years, as property is still great value in Ireland. It still cost less to buy a 2nd hand house than build one yourself - cost is the main issue.

We bought a 2 bed apartment in a North Kildare town in 2005 for 245k, and today we might get 205k for it. Prices are still way off 2005, never mind 2007...

The supply side will not be fixed for the foreseeable as new houses cost too much to build for the average family.

The current government is enforcing its right wing, konservative policies, which is to privatise everything. They will never build the required amount of social housing, as it is not their policy (the last ministers have shown this in practice)

Graham

koheim wrote: »

I think prices will continue to rice for the next 10-15 years, as property is still great value in Ireland. It still cost less to buy a 2nd hand house than build one yourself - cost is the main issue.

That probably says more about the cost of building a house than it does about the value. An unpleasantly significant percentage of a new-build is non-build related.

The_Conductor

Graham wrote: »

That probably says more about the cost of building a house than it does about the value. An unpleasantly significant percentage of a new-build is non-build related.

+1

Also- the Minister signed a sectoral pay agreement for the construction sector giving them a 10% payrise earlier this week.

Construction costs are only going to go in the one direction.

Part of the reason the second hand sector has lagged the new build sector (from a price perspective)- is First Time Buyers have been corralled into new property. Traditionally they were the largest cohort of purchasers in the second hand market- however, the help-to-buy scheme torpedoed that. Abolition of the HTB scheme- should result in an overnight shot in the arm for prices in the second hand sector.

Moomintroll99

Hmm we moved to Ireland last year from Australia & have to say my first thought was 'Oh this is where the Aussie property obsession comes from'. There are some cultural similarities for sure in the way property is viewed.

I do think Australian property will correct or crash at some point. Prices are very high compared to average wages and interest rates very low, it wouldn't take much to tip things. Chinese investor money props things up to an extent but that could change. Aussie negative gearing rules are absolute madness but the government won't touch them, as so many baby boomer voters have investment properties and they are the single biggest voting cohort.

The main difference is in Australia, you wouldn't meet many people who don't have a rose tinted view of property. Most people see it as something that can only ever appeciate in value. Here everyone I meet seems to have a boom to bust hard luck story, like families stuck in flats they bought as couples, or with negative equity etc.

Definitely sobered me up hearing all that & I'm a lot more cautious with property generally now.

rsynnott

Moomintroll99 wrote: »

The main difference is in Australia, you wouldn't meet many people who don't have a rose tinted view of property. Most people see it as something that can only ever appeciate in value. Here everyone I meet seems to have a boom to bust hard luck story, like families stuck in flats they bought as couples, or with negative equity etc.
.

I think that's because Australia hasn't had a crash lately. Ireland was like that before 2007; if you dared question the orthodoxy that prices would always go up, you were ridiculed.

rsynnott

More on interest rates: http://www.independent.ie/business/personal-finance/property-mortgages/macquarie-predicts-bleak-growth-prospects-for-irish-banks-35940429.html

Irish banks will be forced to rein in "unsustainably high" mortgage rates by 2019, Macquarie Bank has predicted in a blisteringly negative assessment on the growth prospects of the State's pillar lenders.

Wanderer78

rsynnott wrote: »

I think that's because Australia hasn't had a crash lately. Ireland was like that before 2007; if you dared question the orthodoxy that prices would always go up, you were ridiculed.

25 year growth isnt it? id imagine somebody like steve keen is still heavily ridiculed for saying countries such as australia is heading for a crash soon

Idbatterim

would it be possible for the state to create a bank for mortgage lending only and to also finance developments are far cheaper rates than currently available to developers, in exchange for higher ratios of social housing for example?

rsynnott

Idbatterim wrote: »

would it be possible for the state to create a bank for mortgage lending only and to also finance developments are far cheaper rates than currently available to developers, in exchange for higher ratios of social housing for example?

That's effectively what NAMA developments are, aren't they? I think those are only on NAMA land, though.

Brian?

Yourself isit wrote: »

That is clearly empirically false.

There's plenty of evidence of land hoarding. One is just across the road from me in fact where the developer had just started to build on property he's owned for a decade.

The idea that developers will build €300k houses at 5% profit when they could wait for 30% margins when prices reach 400k is fanciful.

I think fanciful is too soft a word. It's bordering on delusional.

I've been carefully listening to he mouthpieces who represent the developers over the last year. They are using every excuse from VAT rate to the lack of tradesmen to justify land boarding and a lack of building.

Localised, government funded housing cooperatives is one solution I can see. Allow local communities to meet the demand for social housing. This nonsense of forcing developers to supply the social housing simply doesn't work. Housing cooperatives are working around the country but need to be better funded and encouraged to grow.

Expecting the private sector to increase supply to a point where prices fall is delusional as I said. What businessman who do such a thing?

Brian?

Idbatterim wrote: »

would it be possible for the state to create a bank for mortgage lending only and to also finance developments are far cheaper rates than currently available to developers, in exchange for higher ratios of social housing for example?

It would increase demand and do nothing i thing to fix the supply issue. Driving prices higher.

KyussBeeshop

Idbatterim wrote: »

would it be possible for the state to create a bank for mortgage lending only and to also finance developments are far cheaper rates than currently available to developers, in exchange for higher ratios of social housing for example?

It's possible but it's not the best plan - the best plan is to go straight-out with large scale social housing construction, not just with offering financing for it or for a meagre percentage of social housing.

We could certainly create a Public Bank for funding exactly these sorts of things (particularly for funding co-operatives, as mentioned above), but that is ideologically unacceptable with the current government.

It's simply not going to happen unless the public - armed with a clear plan, based on the above - starts to bring extremely heavy pressure down on government, to do this.

Right now we're not even at the stage where public discourse on this topic, is clear enough for the public to have a coherent idea of what should be done - hence, almost zero political pressure (even though what needs to be done, is actually pretty simple - and a good portion of us here have a good idea/seed-of-a-plan, for what needs doing - a coherent plan just needs to spread wider...).

koheim

rsynnott wrote: »

More on interest rates: http://www.independent.ie/business/personal-finance/property-mortgages/macquarie-predicts-bleak-growth-prospects-for-irish-banks-35940429.html

So in 2 years time the Irish Bank will be forced to be competitive?
"Irish banks will be forced to rein in "unsustainably high" mortgage rates by 2019"

Great news as it will make my mortgage more affordable. European average is less than 2%, but the likes of BOI offer variable interest of over 4%
The Irish Banks runs a shocking cartel when it comes to variable interest rates.

Idbatterim

speaking of housing co-operatives...

http://www.irishtimes.com/news/social-affairs/housing-co-op-sells-dublin-houses-for-140-000-1.3147094

Wanderer78

KyussBeeshop wrote: »

It's possible but it's not the best plan - the best plan is to go straight-out with large scale social housing construction, not just with offering financing for it or for a meagre percentage of social housing.

We could certainly create a Public Bank for funding exactly these sorts of things (particularly for funding co-operatives, as mentioned above), but that is ideologically unacceptable with the current government.

It's simply not going to happen unless the public - armed with a clear plan, based on the above - starts to bring extremely heavy pressure down on government, to do this.

Right now we're not even at the stage where public discourse on this topic, is clear enough for the public to have a coherent idea of what should be done - hence, almost zero political pressure (even though what needs to be done, is actually pretty simple - and a good portion of us here have a good idea/seed-of-a-plan, for what needs doing - a coherent plan just needs to spread wider...).

ive been a big fan of public banking for some time now, even though there are a couple of groups in ireland at the moment advocating for such a system, theres still very little knowledge in the general public of such systems.

Idbatterim

Mc Williams wrote the below last year, is it actually feasible if there was the political will?

With a few simple steps, State could provide social houses for €800 a year

http://www.davidmcwilliams.ie/2016/03/17/with-a-few-simple-steps-state-could-provide-social-houses-for-e800-a-year

rsynnott

koheim wrote: »

So in 2 years time the Irish Bank will be forced to be competitive?
"Irish banks will be forced to rein in "unsustainably high" mortgage rates by 2019"

Great news as it will make my mortgage more affordable. European average is less than 2%, but the likes of BOI offer variable interest of over 4%
The Irish Banks runs a shocking cartel when it comes to variable interest rates.

There've been some baby steps in the direction of competitiveness already; AIB, KBC and Ulster Bank all have rates close to 3% for low LTV properties, and Ulster Bank is introducing a 2.6% fixed rate subject to certain conditions. BoI and PTSB seem to basically be entirely ignoring this, though, and somehow people are still taking out mortgages with them. As a country, we're kind of sitting ducks for corporate overcharging; people don't seem to evaluate how much the mortgage will cost them before they take it out.

Zenify

rsynnott wrote: »

BoI and PTSB seem to basically be entirely ignoring this, though, and somehow people are still taking out mortgages with them.

Who cares about the rates when BOI have a great cash back offer.

🀔

Idbatterim

Who cares about the rates when BOI have a great cash back offer.

its so good of them caring about their customers so much :rolleyes:

q85dw7osi4lebg

Leaving the high variables aside, they have competitive fixed rates. Hence why people are still taking out loans with them.

koheim

Alistair Scarce Mothball wrote: »

Leaving the high variables aside, they have competitive fixed rates. Hence why people are still taking out loans with them.

sorry, but even fixed rates are completely uncompetitive in a European perspective. It is shocking that the Irish Banks can get away with rates 50 to 100% over the European average!! (even if they are fixed).

We already bailed the banks out, now they are absolutely fleecing us. Also, with lower interest the housing market will become more affordable.

Caliden

Alistair Scarce Mothball wrote: »

Leaving the high variables aside, they have competitive fixed rates. Hence why people are still taking out loans with them.

What sort of rate do you go on after the fixed rate?