Property Market 2019

aloooof

Jaster Rogue wrote: »

For a married couple who are both experienced professionals, €200k household income is not uncommon.

I agree with a lot of your post, but I disagree with this. It's far more than not uncommon. I'd wager it's very much the exception.

voluntary

Come back to earth lads.
The average gross weekly household income for the State in 2015-2016 was 1,099.70. That's from the last CSO household budget surevy's.

Interested Observer

aloooof wrote: »

I agree with a lot of your post, but I disagree with this. It's far more than not uncommon. I'd wager it's very much the exception.

I'd say you'd be in the top 95% of households at least on 200k, and probably higher. It's not common at all.

In fact you enter the 10th decile on around 125k household income per year. So top 95% is conservative. Data source as the post above.

LotharIngum

Jaster Rogue wrote: »

That would happen if everyone earned the average industrial salary. There will always be groups of skilled professionals (medicine, law, IT, financial services, management etc) who eventually earn 2-3 times the average and who prefer to live in more affluent areas. If a 3 bed semi costs the same in Ballymun and Clontarf, which area would you select?

I think the upper limit in desirable areas will be a lot higher than €450k. For a married couple who are both experienced professionals, €200k household income is not uncommon. They could easily afford properties €700k+. That's what 3 beds cost in areas like Rathgar and Mount Merrion.

There's also a lot of inherited wealth in this country. We're mistakenly assuming the only means people have to purchase property is their salary from work.

Everyone cannot afford a house.
There is also a floor that people wont sell at and that builders wont build at.
Properties will rarely sell below that.
The central bank cap is definitely having effect at a particular price point. This will ripple and compress the range.

Salary from work is the most common indicator of affordability.
Everything else is an outlier.

voluntary

I would go further and say not a salary, but disposable income. Meaning salary after tax MINUS the non housing costs of living expenses.

voluntary

LotharIngum wrote: »

...
There is also a floor that people wont sell at ...

Just taking one part of your quote.
No, there's no floor that people wont sell at.

There will be always these who must sell, or want to sell irregardless of the current market price. There's nearly zero chance the market can stall and stop trading because of too low prices. We've investment funds who buy mortgages for 20-30% of their face value. They could sell much cheaper than others without even writing a loss. They will also take losses much easier than private owners. When investors/stakeholders request funds withdrawal from such funds they MUST SELL (or declare temporary non liquidity, which already happened before). In bad times it will be the investment funds setting up market pricing. And this will be the new reality for years. Private owners will simply accept the new reality after a while, the same way as they accepted the current market.

beauf

Bit premature to be talking about the bottom of the market. But when it's too low some might be forced to sell but many will wait. Often by renting. Until they get a return on investment or back on positive or close equity. I know a good few people who held on to properties like that for 10yrs or more.

voluntary

I'm just saying what would happen in a recessionary scenario, not when or if this is going to happen. Generalizing. That's very true, most people won't trade in bad times, but this is also true in the good times - most people don't buy and sell their homes This fact changes nothing though, as these who will decide do buy or sell will do this at lower prices.

Recession may be also the best time to sell your house if you plan to upgrade. You get less money for your property but you can buy a better house also much cheaper. You may save huge amount of money upgrading in bad times VS upgrading in good times. Plus, you may avoid the Capital Gains tax swapping homes in recession. So yeah, people will sell homes in bad times.

.

voluntary

I can give you an example of saving one could make by selling during the last crash.

Let's assume you had a terraced house worth 300k, but your dream house was a 5-bed detached in the affluent area beside the sea, worth 1M.
If you sold on the peak, you needed to top up by 700k to buy the sea side mansion.

Now, a crisis came, property prices dropped by 50%.
You sold your house for 300*50%=150k and bought the sea side mansion for 1M*50% = 500k.

It then only cost you 500-150=350k to upgrade and not 700k which you would had to pay before the crash.
It really makes a lot of sens to sell in bad times if you wish to upgrade. Best time to upgrade is in bad times.

You sell, somebody else buys. That's how it works. The market doesn't stall or die just because prices went massively down. The construction stops, but that's not a big deal then, as the unemployment is low so people emigrate and free up housing stock.

.

q85dw7osi4lebg

Where do you get 350k in the down turn + what is your equity in the original house? You are assuming this person has a 50% LTV.

We'll start with that one.

aloooof

voluntary wrote: »

I can give you an example of saving one could make by selling during the last crash.

Let's assume you had a terraced house worth 300k, but your dream house was a 5-bed detached in the affluent area beside the sea, worth 1M.
If you sold on the peak, you needed to top up by 700k to buy the sea side mansion.

Now, a crisis came, property prices dropped by 50%.
You sold your house for 300*50%=150k and bought the sea side mansion for 1M*50% = 500k.

It then only cost you 500-150=350k to upgrade and not 700k which you would had to pay before the crash.
It really makes a lot of sens to sell in bad times if you wish to upgrade. Best time to upgrade is in bad times.

You sell, somebody else buys. That's how it works. The market doesn't stall or die just because prices went massively down. The construction stops, but that's not a big deal then, as the unemployment is low so people emigrate and free up housing stock.

.

All of this is what the major caveat of "if you can get a mortgage for that amount".

Cuddlesworth

voluntary wrote: »

I can give you an example of saving one could make by selling during the last crash.

Let's assume you had a terraced house worth 300k, but your dream house was a 5-bed detached in the affluent area beside the sea, worth 1M.
If you sold on the peak, you needed to top up by 700k to buy the sea side mansion.

Now, a crisis came, property prices dropped by 50%.
You sold your house for 300*50%=150k and bought the sea side mansion for 1M*50% = 500k.

It then only cost you 500-150=350k to upgrade and not 700k which you would had to pay before the crash.
It really makes a lot of sens to sell in bad times if you wish to upgrade. Best time to upgrade is in bad times.

Sounds good....
Except the value lost in the house is your equity first. So if you owned 50% of the first house, you now own 0% of it when trying to sell.
That getting the mortgage on the mansion is more difficult. You have to be rock solid financially with a huge deposit to get one, the bank don't want further losses.
That you will be up against cash buyers, there are people with money and they swarm the market during these downturns.
And that because of the above, house prices in the top spec most desirable homes don't really drop that much. There is always a market there for them because they are not reliant on the banks for customers.

voluntary

Sure, you need to be cash rich to make money in recession. Going into a recession with debt is never good.

voluntary

aloooof wrote: »

All of this is what the major caveat of "if you can get a mortgage for that amount".

Yes, many won't get loans. Some will. Some have savings. Not everyone with a house has a mortgage on it.

Colonel Claptrap

voluntary wrote: »

We've investment funds who buy mortgages for 20-30% of their face value. They could sell much cheaper than others without even writing a loss. They will also take losses much easier than private owners. When investors/stakeholders request funds withdrawal from such funds they MUST SELL (or declare temporary non liquidity, which already happened before). In bad times it will be the investment funds setting up market pricing. And this will be the new reality for years.

An investment fund buys the debt, not the equity. This is an important distinction. While they might own the mortgage, they cannot easily force the homeowner to sell and recoup the collateral. Bad mortgage debt as an investment product is incredibly illiquid. Open ended funds rarely if ever buy bad mortgage debt. Investor redemptions cannot force the fund to force the mortgage holder to sell the property in a short amount of time.

JJJackal

voluntary wrote: »

I can give you an example of saving one could make by selling during the last crash.

Let's assume you had a terraced house worth 300k, but your dream house was a 5-bed detached in the affluent area beside the sea, worth 1M.
If you sold on the peak, you needed to top up by 700k to buy the sea side mansion.

Now, a crisis came, property prices dropped by 50%.
You sold your house for 300*50%=150k and bought the sea side mansion for 1M*50% = 500k.

It then only cost you 500-150=350k to upgrade and not 700k which you would had to pay before the crash.
It really makes a lot of sens to sell in bad times if you wish to upgrade. Best time to upgrade is in bad times.

You sell, somebody else buys. That's how it works. The market doesn't stall or die just because prices went massively down. The construction stops, but that's not a big deal then, as the unemployment is low so people emigrate and free up housing stock.

.

All based on you owning the 150k terraced house that you may have bought at a peak price and now want to sell for 150k less. If you borrowed to buy the 300k house (300k -10% is 270k) this suggests you are earning about 80k (assuming you borrowed close to max).

Now in a recession with a 50% reduction in house prices you need a 20% deposit (almost the full value of the first house that you are selling) and to borrow 4.5times your salary (its more probable that your salary will fall than rise if 50% of the value of homes has been wiped away - so lets say your salary has stayed the same for ease)

So you still cant buy the 500k house

Edit: the person in the 150 or 300k house will find it difficult to upgrade to the 500 k or 1 million house unless they have a massive change in circumstances. Potentially a more realistic example would be upgrading to a 250k (recession price) or 500k (boom price) house

voluntary

Colonel Claptrap wrote: »

An investment fund buys the debt, not the equity. This is an important distinction. While they might own the mortgage, they cannot easily force the homeowner to sell and recoup the collateral. Bad mortgage debt as an investment product is incredibly illiquid. Open ended funds rarely if ever buy bad mortgage debt. Investor redemptions cannot force the fund to force the mortgage holder to sell the property in a short amount of time.

While that's true that there will likely be no rapid reposession numbers increase, it's also true that there will be some reposessions so some properties will end up on the market.

There are also funds (including pension funds) which invest in properties. Guess what happens when members get scared and request withdrawals from property funds? The same as what happens with stock market as the funds are forced to sell to allow withdrawals. You have a scenario where it doesn't matter what a fund's management/analyst believe, they have to sell because their clients want their money back.
In the last crash many of big property funds halted withdrawals causing fury across investors. This might happen when a large fund owning thousands of houses simply cannot offload their stock fast enough to meet the investors withdrawal requests on time. Big funds would often have clauses saying that this might happen, therefore smart investors start withdrawing from property funds before the crash (and actually fuelling/accelerating the crash) and not during the crash.

voluntary

JJJackal wrote: »

All based on you owning the 150k terraced house that you may have bought at a peak price and now want to sell for 150k less. If you borrowed to buy the 300k house (300k -10% is 270k) this suggests you are earning about 80k (assuming you borrowed close to max).

Now in a recession with a 50% reduction in house prices you need a 20% deposit (almost the full value of the first house that you are selling) and to borrow 4.5times your salary (its more probable that your salary will fall than rise if 50% of the value of homes has been wiped away - so lets say your salary has stayed the same for ease)

So you still cant buy the 500k house

Edit: the person in the 150 or 300k house will find it difficult to upgrade to the 500 k or 1 million house unless they have a massive change in circumstances. Potentially a more realistic example would be upgrading to a 250k (recession price) or 500k (boom price) house

Yeap, only few cash rich people make money in recessions. Don't also assume that people ALWAYS stretch their affordability and buy the most expensive house they can get mortgage on.

q85dw7osi4lebg

Is it just a coincidence that Voluntary set their account up a day or two after Pussyhands got banned?

ionapaul

Interested Observer wrote: »

I'd say you'd be in the top 95% of households at least on 200k, and probably higher. It's not common at all.

In fact you enter the 10th decile on around 125k household income per year. So top 95% is conservative. Data source as the post above.

I think maybe 'a €200k household income is not uncommon' wasn't the right words to use, the poster maybe should have said 'there are enough households on €200k annual income to currently sustain the prices seen in Rathgar, Blackrock, etc...' That would be a bit more accurate. As someone else pointed out, households on €200k+/annum probably represent less than 5% of total households, but that being the case that probably means a big enough segment of potential buyers to maintain higher prices in the most desirable neighbourhoods. Prices set on the margins and so on, it's not like 1,000 houses a year are bought/sold in some of these areas, 20 households fighting over 15 available houses would be enough to drive up prices.

Would be interesting to find out how many €200k+/annum households exist in Dublin, and then try to extrapolate the number of them that might be looking for housing in any given year. I'd also give more weight to the person above that pointed out that existing wealth needs to be considered when it comes to its impact on house prices; you'd think that people who end up becoming the types of professionals that earn over €100k/annum each might be professionals like accountants, solicitors, etc... and that upper-middle class folk often spring from upper-middle class stock, with big inheritances coming their way at some stage in life, help from the bank of Mum and Dad, or just big savings built up from years of earning chunky salaries ahead of buying a home.

The above is just musings on how and why high prices are sustained in the very small areas of universal desirability in any housing market! The same supports just don't exist in most areas, though prices are still set on the margin of course.

seamus

ionapaul wrote: »

I think maybe 'a €200k household income is not uncommon' wasn't the right words to use, the poster maybe should have said 'there are enough households on €200k annual income to currently sustain the prices seen in Rathgar, Blackrock, etc...' That would be a bit more accurate. As someone else pointed out, households on €200k+/annum probably represent less than 5% of total households, but that being the case that probably means a big enough segment of potential buyers to maintain higher prices in the most desirable neighbourhoods. Prices set on the margins and so on, it's not like 1,000 houses a year are bought/sold in some of these areas, 20 households fighting over 15 available houses would be enough to drive up prices.

I think the volume of parental involvement can't be downplayed either.

Although many people lost huge chunks of pensions at the downturn, many others didn't. Many others had investment properties that they sat on through the recession because they were fully or mostly paid off.

I've seen large numbers of people in their 30s and 40s getting into spending massive sums (€1m-€2m) on purchasing and upgrading property, money which cannot be squared with their incomes/jobs.
To me, most of these only make sense if there's significant money coming in from inheritance or otherwise as gifts from the older generation.

beauf

voluntary wrote: »

...So yeah, people will sell homes in bad times.
..

People seem to be implying that the volume of transactions is more of less constant regardless of market conditions.


https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/qb3-16/estimating-cash-buyers-and-transaction.pdf

https://www.zoopla.co.uk/press/releases/023/property-transactions-at-their-lowest-point-in-20-years/

Askthe EA

L1011 wrote: »

The grants have changed since then with different amounts for different things. Believe gas boiler gets nothing now for instance

Yup, no grant for a boiler, but there is a grant for heating controls and the new BER Cert

Askthe EA

seamus wrote: »

I think the volume of parental involvement can't be downplayed either.

To me, most of these only make sense if there's significant money coming in from inheritance or otherwise as gifts from the older generation.

There is A LOT of that going on.

Bluefoam

Askthe EA wrote: »

There is A LOT of that going on.

Why is there so much focus on people who can afford more? People have sucess through their jobs, business ownership, business deals, property deals, personal financial management, inheritance, investment, parental gifts, personal gifts, family money, winning on the horses or the lotto...

At the end of the day, it's irrelevant, you can only afford what you have, so get as much together as you can, by whatever means you have... Buy the best place within your means & enjoy it...

There always going to be people more wealthy, with more resources etc. Become one of them if you can, but worry about your own situation rather than theirs.

ELM327

No matter how much you have, there is always someone better off and worse off than you.
The post ranting about others/inheritance etc is typical irish begrudgery

Jaster Rogue

ELM327 wrote: »

No matter how much you have, there is always someone better off and worse off than you.
The post ranting about others/inheritance etc is typical irish begrudgery

I think it's an important point and explains why there's a significant portion of the market selling for well above 3.5x the average industrial wage. It's an often overlooked factor that potentially impacts property prices greatly.



Something else in the media today made me think about the consensus that CB income rules have put the brakes on property prices.

Rising wages will drive up costs of rent and childcare


Labour costs have increased by 2.9pc in the past year, the National Competitiveness Council warns today.

https://www.independent.ie/business/personal-finance/rising-wages-will-drive-up-costs-of-rent-and-childcare-38007836.html


For every 1pc increase in salary, that person can now borrow 3.5pc more than before the increase. Property prices being linked to an index like that is actually good for the economy, provided they are starting at an affordable level, and providing no other factors impact prices which as discussed above is not the case (inheritance, gifts, investment yields, etc). Then there's the whole other topic of REITs snapping up entire developments in a single transaction to rent out and how that reduces supply of property for sale, another important factor in determining prices.

ELM327

Jaster Rogue wrote: »

I think it's an important point and explains why there's a significant portion of the market selling for well above 3.5x the average industrial wage. It's an often overlooked factor that potentially impacts property prices greatly.



Something else in the media today made me think about the consensus that CB income rules have put the brakes on property prices.





https://www.independent.ie/business/personal-finance/rising-wages-will-drive-up-costs-of-rent-and-childcare-38007836.html


For every 1pc increase in salary, that person can now borrow 3.5pc more than before the increase. Property prices being linked to an index like that is actually good for the economy, provided they are starting at an affordable level, and providing no other factors impact prices which as discussed above is not the case (inheritance, gifts, investment yields, etc).

The average industrial wage is not an accurate measure of what someone earns on average.
It is skewed at the top end by the 1% as statistical outliers and at the bottom end by part timers.


The median hourly wage would be a better calculation, and go from there.

Greyian

Jaster Rogue wrote: »

For every 1pc increase in salary, that person can now borrow 3.5pc more than before the increase.

No, for every 1% increase in salary, a person can borrow 1% more.

If someone is on €10,000 euro, they can borrow €35,000.
If someone is on €10,100 (€100 increase, 1% of €10,000), they can borrow €35,350 (€350 increase, 1% of €35,000).

tobsey

ELM327 wrote: »

The average industrial wage is not an accurate measure of what someone earns on average.
It is skewed at the top end by the 1% as statistical outliers and at the bottom end by part timers.


The median hourly wage would be a better calculation, and go from there.

There’s no point looking at the mean or median of the entire population when looking at the impact on property prices. Look at the mean or median of those attempting to apply for mortgages and buy a home. I’d say the median there is either a FTB in their early 30s with no kids or maybe a bit older with some equity behind them. Their buying power is what impacts the market. Not someone who bought in the 80s and paid off their mortgage in 20 years and is coasting to retirement, or someone early in their career who hasn’t reached their earning potential yet.