Property price bubble - when will prices peak / decline / crash ?

worded

A friend is thinking of buying and I'm wondering has anyone a crystal ball?

Are of interest is the commuter belt of the city, popular I know ...

Sleeper12

Prices will continue to climb so long as there is a shortage. I see prices climb another 2 years maybe more. No great crash this time so after the two years I'd expect prices to level out. Can't really see them drop into price unless you we have over supply.
It's worth remembering Brexit. Plenty of UK citizens will be following their job to Dublin. This will keep demand high.
I'm willing to predict all that but can't bring myself to predict the results of the fight tonight.

The_Causeway

worded wrote: »

A friend is thinking of buying and I'm wondering has anyone a crystal ball?

Are of interest is the commuter belt of the city, popular I know ...

Prices are getting freakishly high everywhere at the moment. Crystal ball would come in handy alright!

Mirror game

Anyone know how long ago if ever, since Ireland had a property crash before the last crash?

jamesthepeach

Mirror game wrote: »

Anyone know how long ago if ever, since Ireland had a property crash before the last crash?

2001.
But it didnt last too long. It could have easily though.
It won't be a property crash. It will be an u foreseen economic crash somewhere else in the world that will lead to other economic issues worldwide, that will lead to job losses in Ireland that will lead to the home buying market collapsing in Ireland that will lead to prices plummeting.

Seriously. You won't see it coming. But it will come. And by the time you notice, it's done.

johnnyskeleton

Sleeper12 wrote: »

Prices will continue to climb so long as there is a shortage. I see prices climb another 2 years maybe more. No great crash this time so after the two years I'd expect prices to level out. Can't really see them drop into price unless you we have over supply.

Not necessarily. Scarcity leads to an "economic rent" factored into the price of a good. So, for example, someone might only pay €5 for a pint of heniken in the high street, but would pay €6 at a concert because there are no other vendors. In this scenario, the extra €1 can be described as a scarcity rent on the basis that it what people pay over the normal market clearing price due to scarcity. Obviously it is not always possible to say exactly how much of an economic rent is attached to a product due to scarcity, but it can be safely said that there is some included in the price.

So, if a person believes that a property is worth €300k but in order to secure it due to scarcity will pay €350k, then the €50k is an economic rent.

Moreover, there is a speculative value added to an asset in a rising market. So if I think a property is only worth €300k in normal conditions but will sell for €350k due to scarcity, I might even be prepared to pay €370k because, even though I think the value in normal conditions and the market clearning values are lower than what I am paying, I also believe that in two years the property will be worth €400k so I'm happy to take the risk.

Again, it's impossible to say with any sort of confidence what the normal market conditions market price is, but these are factors in what people are prepared to pay.

The reason I point these out is that if there is an undersupply of property at the moment, there would not need to be an oversupply in order for prices to drop. All that would be needed is that supply returns to a more normal level and people will no longer pay the scarcity rent. Equally, if people are prepared to pay an extra €20k on the speculation that the property will rise by another €50k, then not only is this speculation value lost but it actually gains a negative value i.e. if prices are believed to be flat at €350k, someone would rationally say I will only pay €340k just in case they drop a bit.

So if these two factors are present in the market at the moment, then prices levelling off will not happen because people are rationally attributing value based on perceptions of scarcity in the current market and projections as to the future of the market. The only way that they could level off is if these factors are not present, and even then levelling off can still mean a rise or fall of ~5% per year.

The 2007 property crash was not just caused by a credit crunch. It was caused because the price people were paying for properties was based on a perception of scarcity and some speculation coupled with loose credit availability. I accept that this time we don't have the same level of credit available.

But if people are currently paying "over the odds" for property because of perceived scarcity and a belief that property will keep going up, and I believe that they are, then prices cannot level off. They will keep going up until it bursts and then prices will fall.

Sleeper12

Mirror game wrote:

Anyone know how long ago if ever, since Ireland had a property crash before the last crash?

There's only ever been one property crash in the history of the state. 2007

Mirror game

jamesthepeach wrote: »

2001.
But it didnt last too long. It could have easily though.
.

Did property prices fall much? How long before they came back?

I'm not sure! But I was always under the impression growing up(from late eighties through nineties) that house prices were always going up it was only around 05' when things really started going mad talk of a "property crash" started.

Sleeper12

Mirror game wrote:

Did property prices fall much? How long before they came back?

Property increased 4.5 percent in 2001

jamesthepeach

Mirror game wrote: »

Did property prices fall much? How long before they came back?

I'm not sure! But I was always under the impression growing up(from late eighties through nineties) that house prices were always going up it was only around 05' when things really started going mad talk of a "property crash" started.

They had a long period of increasing before that and suddenly they went down instead. The tech crash didn't last that long amd there was money available elsewhere so property prices recovered quickly before they fell more than a few percent. By the end of the year they were positive again.
Many people bought house and got a shock when the value wasn't going up for a while.
But that's how it starts. Fortunately that didn't continue. The next one did.

In the 80s you had the interest rate crisis. And the UK had a good property shock around then too.

Mirror game

Sleeper12 wrote: »

There's only ever been one property crash in the history of the state. 2007

And throughout the the 50's 60's 70's 80's 90's and early2000's. What was the general opinions of people trying to get onto the market? I was under the impression that throughout this time they were always worried that prices are too high and climbing at an alarming rate.

Also for that 50/60 year period was "property crash" even a thing, as in, were perspective buyers holding out some hope of having their finances in order to cash in on the next crash?

So apart from the once in a 100 year crash the property market had a short dip in 01, that's 16 years ago!. I'm sure it had a few more dips throughout the decades but you'd need to be very lucky to be a buyer at that time.
Looking at it like this, is hoping for a decline or crash like waiting for a lotto win.

Carlos Orange

Sleeper12 wrote: »

There's only ever been one property crash in the history of the state. 2007

Not what these guys think "As for crashes, the housing market was devastated in the first half of the 20th century. The crash in real values from 1906 to 1947 was almost 88 per cent"

https://www.irishtimes.com/life-and-style/homes-and-property/300-years-of-property-booms-and-busts-1.2111375?mode=amp

Sleeper12

Mirror game wrote:

And throughout the the 50's 60's 70's 80's 90's and early2000's. What was the general opinions of people trying to get onto the market? I was under the impression that throughout this time they were always worried that prices are too high and climbing at an alarming rate.

Name even one recognised crash in Ireland since 1937. We've never had a bubble before
A crash is not when property slows, stalls or even falls 1 percent in a year. A crash is when the ass falls out of the market. Negative equity etc.

psinno wrote:

Not what these guys think "As for crashes, the housing market was devastated in the first half of the 20th century. The crash in real values from 1906 to 1947 was almost 88 per cent"

The foundation of the state is 1937. There is only one "crash" since then. 2007

Sleeper12

Mirror game wrote:

So apart from the once in a 100 year crash the property market had a short dip in 01, that's 16 years ago!. I'm sure it had a few more dips throughout the decades but you'd need to be very lucky to be a buyer at that time. Looking at it like this, is hoping for a decline or crash like waiting for a lotto win.

Property increased 4.5 percent in 01. In 2001 prices slowed but did not decrease so there was no killing to be made. We were in the middle of the celtic tiger at the time. A dip isn't a crash either.

steddyeddy

Brexit is going to have a severe effect on the economy and house prices.

jamesthepeach

steddyeddy wrote: »

Brexit is going to have a severe effect on the economy and house prices.

I personally don't think brexit will at all.

Mirror game

Sleeper12 wrote: »

Name even one recognised crash in Ireland since 1937. We've never had a bubble before
A crash is not when property slows, stalls or even falls 1 percent in a year. A crash is when the ass falls out of the market. Negative equity etc.




The foundation of the state is 1937. There is only one "crash" since then. 2007

I can't. That's what I'm saying bubbles and crashes are very rare. So rare that they should hardly ever be considered when deciding to buy a house. And one of the reasons talk of property crashes comes up so much is that we're only just after the last one.
A bit like when had 2 very cold winters a few years back and the following year people were taking precautions for another cold one yet it never came.

steddyeddy wrote: »

Brexit is going to have a severe effect on the economy and house prices.

I'm sure over the last 60/70 years several big issues have come up yet there has only been one crash and a few insignificant dips.

Mrs Shuttleworth

Economic shocks aside if the Govt bring in vacant property tax and expansion of CPOs expect a sharp contraction in lending from the main institutions as when the whistle blows on the game of property musical chairs an owner may not have the funds to discharge all sums due.

That would leave only owner occupier cash buyers and REITs etc in the market.

Anyone in positive equity on a buy to let would be best off selling up here now and buying in UK especially given the current XE.

steddyeddy

jamesthepeach wrote: »

I personally don't think brexit will at all.

One of our biggest trade partners will impose tariffs on our exports. Of course it will have a big effect.

Graham

steddyeddy wrote: »

One of our biggest trade partners will impose tariffs on our exports. Of course it will have a big effect.

When was that announced?

Varik

Graham wrote: »

When was that announced?

It's when it's announced otherwise.

steddyeddy

Graham wrote: »

When was that announced?

The UKs' desire to leave the single market. I live in England/America and I was thinking of investing in a second home back in Dublin, but Brexit has put those plans back. House prices will lower once the full impact of Brexit on Irish trade becomes obvious. It would be madness to buy now IMHO.

steddyeddy

Mirror game wrote: »

I can't. That's what I'm saying bubbles and crashes are very rare. So rare that they should hardly ever be considered when deciding to buy a house. And one of the reasons talk of property crashes comes up so much is that we're only just after the last one.
A bit like when had 2 very cold winters a few years back and the following year people were taking precautions for another cold one yet it never came.


I'm sure over the last 60/70 years several big issues have come up yet there has only been one crash and a few insignificant dips.

I can't think of a sea change of this magnitude. A large bulk of Ireland's trade will become more costly.

davindub

worded wrote: »

A friend is thinking of buying and I'm wondering has anyone a crystal ball?

Are of interest is the commuter belt of the city, popular I know ...

Arguably 2024, 2031.

The market is defunct, prices are driven by shortage and the majority of the zoned land is owned by landholding companies. They can control prices by limiting supply, once they have developed the current landbank enough, release the remaining causing a crash and purchase more.

Varik

Mrs Shuttleworth wrote: »

Economic shocks aside if the Govt bring in vacant property tax and expansion of CPOs expect a sharp contraction in lending from the main institutions as when the whistle blows on the game of property musical chairs an owner may not have the funds to discharge all sums due.

That would leave only owner occupier cash buyers and REITs etc in the market.

Anyone in positive equity on a buy to let would be best off selling up here now and buying in UK especially given the current XE.

The governments already taken constitutionally questionable measures with the caps, their defence being the temporary nature of it. Since the size of some of the reits and larger LL is growing I can see legal action being taken even if limited to just the removal of the rent being tied to previous tenants. The vacant or unused land tax won't get inroduced.

CPO aren't free, and even the limited amount they do now isn't easy for them. Not ever CPO has farmer celebrating a motorway route.

Mirror game

Why try and look into the future when you can actually look at the past.
It goes likes this.
In Ireland if you are ready and able to buy a house you should do so.
WHY? Because this has been the case for roughly 99% of the time for the last 80 years.

2Mad2BeMad

I hope they crash soon, I'm looking to buy haha

LirW

2Mad2BeMad wrote: »

I hope they crash soon, I'm looking to buy haha

And if the market crashes, unless you're a cash buyer, who's going to borrow you the money for it?

Bit cynical

There won't be a crash in the normal sense because it is not yet a bubble. Property is high because of undersupply and this is also very much reflected in the rental market.

The supply problem could be eased off over the coming years but this would not cause a crash but rather a leveling off or gradual falling of prices. But not a crash.

The last bubble was very different. We had plenty of units being built, rents not reflecting prices (low yields), very little control of lending, and buying purely on the expectation of future rises rather than return on rental yield.

It is very hard to predict which way prices will go at the moment. My guess is most likely up as ways are found around lending restrictions. I don't expect the supply problem to be solved any time soon.

Mirror game

2Mad2BeMad wrote: »

I hope they crash soon, I'm looking to buy haha

They might! or they might go up 3 to 4 times the current value over the next 10 years and then level off to a steady incline.
Remember last week when talk of nuclear war was all the rage!
People can come up with all kinds of reasons why it will go up or down. Thing is, it rarely ever goes down in fact it goes down so seldom I don't know why it even an issue.

Mirror game

Bit cynical wrote: »

There won't be a crash in the normal sense because it is not yet a bubble. Property is high because of undersupply and this is also very much reflected in the rental market.

How do mean the normal sense there has only ever been one crash.
Is property high? says who? how do know it's high? Some said it was high last year, apparently not!
Maybe we have undersupply because prices are low!

Bit cynical wrote: »

It is very hard to predict which way prices will go at the moment..

I reckon property prices are an easy call, they'll go up! cos they nearly always do!