When did the bubble start?

mloc123

I was reading an old article from 2000 on the Irish Times yesterday, it listed prices that aren't a million miles away from todays (maybe about 60%.. less if you adjusted for inflation).

I had me wondering when did they original bubble start? All The figures and stats I can find only seem to go back to 2005 when we were already well on our way to peak.

KellyXX

Almost a quarter of a century ago.

seamus

Mid-Late 90s is probably when the original housing demand started kicking. The economy was on the up, emigrants were starting to return home (and immigrants arriving) and the children of the 1970s/80s baby boom were coming into house-buying age.

The first I remember of it was as a teenager seeing an article in the Indo about the Daletree estate in Firhouse, where people were sleeping overnight in their cars to be able to buy houses off the plans. That was built in 98/99 as far as I know.

The conditions then were very similar to what we have now.

It was around 2002/2003 that it started cooling down, and there was a panic from the developers and the banks, who as we now know had been sending happy parcels to TDs and ministers for several years. So to make their *cough* supporters happy, the Fianna Fail government enacted several policies to encourage speculative investment in the residential sector, land hoarding and loose money lending.

So there's a strong argument that before then, there was no bubble - just a lot of demand like we have now. But certainly the seeds of greed had been sown well beforehand.

PhoenixParker

1996 is when house prices really started rising at rates that exceeded interest rates and inflation. The CSO has data.

There was a big wobble of instability in the market in 2003 and rents fell around then but house prices paused and then took of again. IMO the real bubble bubble was 2003-2007.

Gumbo

I remember my Mam selling her house in 1996 for 52k in Finglas west. The following year that buyer sold it for 100k.

mariaalice

1996/1997, Last year came across an old newspapers for those years and you can see it in the property section. The jump from say 1995 to 1997 is relay startling.

mariaalice

This is from 2008 but it is interesting.

https://www.irishtimes.com/life-and-style/homes-and-property/twenty-years-a-viewing-the-ups-and-downs-of-the-property-pages-1.939457

Sleeper12

House prices started to really kick off in 1996 but this was not a bubble. The baby boom generation were at the age where they wanted to buy a house. No one foresaw this so there wasn't enough housing. Nothing like today but still not enough housing. Shortage of houses and the price starts to jump.

House prices from 1996 to 2000 were high for a genuine reason so there was no bubble there. From 2000 the banks were tripping over themselves to loan more money. The more they loaned the more young people were willing to borrow. Fella and girl both working. As much overtime as you wanted so they were comfortable borrowing.

OP I don't think there is an exact answer to the question but if we had the world banking crisis any year up to 2000 we wouldn't have had a crash. This would suggest that we weren't in a bubble between 1996 and 2000. So the bubble started after 2000 imo.

audi5

mloc123 wrote: »

I was reading an old article from 2000 on the Irish Times yesterday, it listed prices that aren't a million miles away from todays (maybe about 60%.. less if you adjusted for inflation).

I had me wondering when did they original bubble start? All The figures and stats I can find only seem to go back to 2005 when we were already well on our way to peak.

Well you can listen to all the opinions, or you can look at the data and make up your own mind.

Go to this link below, uncheck all countries on the right, then check Ireland, click on Prices against average income tab, and then click on Prices against rents tab and see when prices started to go way beyond average of past 40 years which is Red line in the middle. (Hint: it looks like answer might be around early 2000s)

http://infographics.economist.com/2017/HPI/index.html

And you are not far off with your guess, that average price today is about 50-55% above 2000 in nominal terms and approx 15-20% in real terms.

Irish data is from 1977 and only goes up to end 2016. I am aware of general issues with averages etc, but this is best we have and better than most opinions.

Ps. Anyone thinking Ireland house prices are in a bubble territory, click on Sweden, Australia or Canada and then compare Ireland today (or in 2006) against these other countries on these two tabs for some perspective.

Peregrinus

You can also use the chart to which audi5 links to look at house prices in relation to average income. What this shows is that house prices fell relative to average income throughout the 80s and much of the 90s, so the rapid rises in the late 1990s were not indicative of a bubble; they were just house prices recovering after a long slump. The bubble came after that; I'd agree with others, between about 2003 and 2008.

Per the chart, as of the end of 2016 house prices were pretty much at their long-term average in relation to income.
.

The_Conductor

Its hard to pinpoint an exact time/date- however, most reasonable commentators point at late 1995 to late 1996- as when prices started to increase at increasing annual percentages. I was looking at one apartment during the week. It was completed in early 1996. It sold for 75k (IR£) in 1996. It later sold for IR£220k in 1999- for EUR460k in 2007, and now in late 2017 is on the market for EUR335k..........

When you start to look at the historic prices of units (there were bank valuations done for the unit I'm looking at)- it serves to highlight the movements over the months/years.

If you have time- I'd strongly suggest reading Peter Bacon's various reports- which chart the boom and bust- the causes- and possible mitigations that could have been taken at various stages- but were politicially unpalatable...........

Unfortunately- in Ireland- we don't seem to learn from our mistakes..........

KellyXX

Interesting if you plotting against average household income rather than just average income.
There are big changes when it became normal for two incomes in a home instead of one.

Peregrinus

KellyXX wrote: »

Interesting if you plotting against average household income rather than just average income.
There are big changes when it became normal for two incomes in a home instead of one.

But didn't that happen some time ago?

The_Conductor

Peregrinus wrote: »

But didn't that happen some time ago?

McCreevy tax reform 1998?
It was heralded as a massive win for feminists and a big stride in equalisation.
Unfortunately history has shown just how short sighted all this was.......

KellyXX

Peregrinus wrote: »

But didn't that happen some time ago?

It really took off in the naughties.
Whereas now it is unusual to have one earner in a family, then it was unusual to have more than one earner.

Peregrinus

The_Conductor wrote: »

McCreevy tax reform 1998?
It was heralded as a massive win for feminists and a big stride in equalisation.
Unfortunately history has shown just how short sighted all this was.......

No need for historical hindsight; even at the time it was obviously the case that the McCreevy reform reduced the flexibility available to women, not increased it.

But that's beside the point. Wasn't it the case even well before that that most mortgages were being advanced to couples, both of whom were earning?

Wanderer78

The_Conductor wrote:

Unfortunately- in Ireland- we don't seem to learn from our mistakes..........

To be fair to ourselves, it's not just an Irish problem, but a global one. This is gonna end very badly indeed if we don't get a handle on it

PhoenixParker

Peregrinus wrote: »

No need for historical hindsight; even at the time it was obviously the case that the McCreevy reform reduced the flexibility available to women, not increased it.

But that's beside the point. Wasn't it the case even well before that that most mortgages were being advanced to couples, both of whom were earning?

In the 80s/early 90s interest rates and inflation were high. One affect of that was the struggle that generation talk about to get their first house and scraping the money together for it and for the first few years . . . But after a few years your salary would go up considerably to take account of inflation but your mortgage would remain the same. That gave a lot of scope to switch to one salary a few years after your house was bought.

audi5

KellyXX wrote: »

It really took off in the naughties.
Whereas now it is unusual to have one earner in a family, then it was unusual to have more than one earner.

Good point on household income vs income.

After a 2 minute google, I see that female employment rate was approx 35% in 1983 and 61% in 2014 (using this as a crude proxy for 2 income housholds) or very roughly speaking ratio of household income to single income has gone up by approx 13% in these 30 years. So you can adjust average income by that amount when looking at that chart and that would make average irish house price against household income slightly less than average today.

spaceHopper

In 96 to say 99 they were building apartments in Temple Bar and Christchurch which were section 23 it was to bring the area up. With the tax advantage they were a good buy as you could live for less than rent.

The dot com boom fulled a feel good factor and there was demand, say 2000 until 2003.

In 2001 it was over heating so they brought out the SSIA saving scheme.

About 2004 they abolished the first time buyers grant but gave first time buyers an exemption on stamp duty if they spent less than 317500.

Almost over night budding wars on houses in Crumlin and other starter home area went from ending in the 260/280's to ending at 31700 as after that the buyer had to pay about 10K stamp duty. They stayed there for a few months then moved higher.

In 2006/7 the SSIA matured and banks were giving 100% trackers (even more 115%). Then 2008 it went hiss then when Lehman Brothers went under all banks panicked and went into lock down. Business operating on over drafts lost them....

If it wasn't for the global financial crisis and EU rates dropping to near 0 things here would have been much worse. Because so many people had trackers it protected them form wage cuts and tax hikes. That's why the tracker scandal is so serious

KellyXX

spaceHopper wrote: »

In 96 to say 99 they were building apartments in Temple Bar and Christchurch which were section 23 it was to bring the area up. With the tax advantage they were a good buy as you could live for less than rent.

The dot com boom fulled a feel good factor and there was demand, say 2000 until 2003.

In 2001 it was over heating so they brought out the SSIA saving scheme.

About 2004 they abolished the first time buyers grant but gave first time buyers an exemption on stamp duty if they spent less than 317500.

Almost over night budding wars on houses in Crumlin and other starter home area went from ending in the 260/280's to ending at 31700 as after that the buyer had to pay about 10K stamp duty. They stayed there for a few months then moved higher.

In 2006/7 the SSIA matured and banks were giving 100% trackers (even more 115%). Then 2008 it went hiss then when Lehman Brothers went under all banks panicked and went into lock down. Business operating on over drafts lost them....

If it wasn't for the global financial crisis and EU rates dropping to near 0 things here would have been much worse. Because so many people had trackers it protected them form wage cuts and tax hikes. That's why the tracker scandal is so serious

Did the government ever successfully intervene in the housing market here.
It seems to me that anything they have done has 100% always just made it worse. And then that multiplies over the years.

Nermal

Joining the € didn't really come at a helpful time, that will have contributed.

Wanderer78

KellyXX wrote: »

Did the government ever successfully intervene in the housing market here.
It seems to me that anything they have done has 100% always just made it worse. And then that multiplies over the years.

time for us to move on from this idea of 'the market', theres sufficient evidence to show its a failed economic theory

KellyXX

Wanderer78 wrote: »

time for us to move on from this idea of 'the market', theres sufficient evidence to show its a failed economic theory

Most of the world wouldnt agree with you on that one

Shedite27

mloc123 wrote: »

I was reading an old article from 2000 on the Irish Times yesterday, it listed prices that aren't a million miles away from todays (maybe about 60%.. less if you adjusted for inflation).

I had me wondering when did they original bubble start? 

Wanderer78

KellyXX wrote:

Most of the world wouldnt agree with you on that one

I will actually agree with you on this one, how many more booms and busts do we actually have to experience before the tide turns?

KellyXX

Wanderer78 wrote: »

I will actually agree with you on this one, how many more booms and busts do we actually have to experience before the tide turns?

What is the alternative though?

Wanderer78

KellyXX wrote: »

What is the alternative though?

good question, there are individuals and groups working on this problem, with some interesting ideas being produced, but i suspect we ll have to wait until we experience a few more serious economic crisis such as 2008 before these alternatives are even considered.

KellyXX

Wanderer78 wrote: »

good question, there are individuals and groups working on this problem, with some interesting ideas being produced, but i suspect we ll have to wait until we experience a few more serious economic crisis such as 2008 before these alternatives are even considered.

So no alternative then. Just theories. Sure I have loads of those. They should come talk to me

Wanderer78

KellyXX wrote: »

So no alternative then. Just theories. Sure I have loads of those. They should come talk to me

yes and no, some of these ideas are actually in practice, and in some cases seem to be working ok, with some issues here and there of course, but first, we must actually accept theres something fundamentally wrong with our current approaches related to these matters, its very evident with our housing issues, to keep it in the context of the thread and forum.

spaceHopper

KellyXX wrote: »

Did the government ever successfully intervene in the housing market here.
It seems to me that anything they have done has 100% always just made it worse. And then that multiplies over the years.

Yes every time they intervene they make it better for banks builders, estate agents, but for you and I not we f00ked

Even now there is a housing and homelessness crisis but they haven't started building or encouraged more building. Instead they have said we want more high rise so any builder who was about to start sees a new opportunity coming down the road and stops the build he as about to start because he may get 4 more floors. Last year it was going to be smaller sizes.

They want to be seen to do something. Housing wise we'd be better off with the wild wild west and true market forces than a government.

What if they lowered the vat rate on building materials for 3 years to 13% instead of 23%. Or said that in 3 years time new builds had to be bugger not smaller, there would be a rush to build now.