Irish Property Market chat II - *read mod note post #1 before posting*

fliball123

https://www.boards.ie/discussion/comment/119589767#Comment_119589767

This is starting to look bleak now the Euro has dropped below 99 cent again after the move can see another .5 to .75% before the end of the year. The lads on trackers and variable mortgages will be feeling the pain.

Timing belt

https://www.boards.ie/discussion/comment/119589953#Comment_119589953

They have had 14 years of the lowest mortgage rates around with majority of repayments going against the principal balance so will have a significant wedge paid off as long as they have been making full payments all along.

combat14

https://www.boards.ie/discussion/comment/119590385#Comment_119590385

exactly hard to feel sympathy for them..

its businesses struggling on variable rates and would be first time buyers who will start to feel the pinch as they will now be able to afford less house going forward ..

anyone looking to sell will have to get the finger out before buyers reassess the situation

fliball123

https://www.boards.ie/discussion/comment/119590385#Comment_119590385

Yeah granted but eaten bread is soon forgotten people would of made lifestyle decisions on low interest rates its just human nature to do so and anyone with a fixed or tracker rate will be feeling these increases. At least banks would have stress tested interest rates rising which is positive. We also have a swarm of people who held off due to Brexit, then covid and now the Ukraine. Rates rising will dampen affordability and demand. The option of moving abroad has opened back up IMO with property prices dropping in Oz, Canada and the US so we may see our old reliable emigration release valve kicking in at some point in the next 24 months.

L1011

https://www.boards.ie/discussion/comment/119590385#Comment_119590385

Don't think many will have held payment levels and hacked capital away quicker. Wouldn't be as many of them left around if so.

Timing belt

https://www.boards.ie/discussion/comment/119590454#Comment_119590454

I get the point on people getting used to lower payments but assuming that they paid for the 14 years and with rates so low they would have paid off a substantial amount of the principal.

Anyone that maintained the same level of payment from ‘08 would have probably paid off the mortgage by now. The people who will feel the pain of rates rising are the people who got into financial difficulty and renegotiated lower payments as they will still have a large principal balance.

Villa05

And the covid mortgage holiday. Adding up that is a significant amount of mortgages

Villa05

For that poster looking at New Zealand, the wind is at your back.

Decision time on Irish assets maybr

Villa05

https://www.boards.ie/discussion/comment/119588865#Comment_119588865

Notable that the word months was chosen

IWW2900

https://www.boards.ie/discussion/comment/119587173#Comment_119587173

So much wrong with this post. You really think people will pay any money as long as they can afford it.... Clueless.

Sentiment is biggest mover of markets. People have been paying more and more because sentiment and policy has been behind the market for the last decade.

Rates are rising, cost of living is rising, recession is imminent. There will be people who can no longer afford to buy. As soon as we see potentially declines and SENTIMENT shifts, even those who can afford to buy will either hold of or only be prepared to pay less. As sentiment shifts more, investors will consider selling. This can quickly turn into a momentum driven spiral, people spend less, not just on housing, but in general. This effects business which in turn effects jobs and further effects buying power.

All the while there will be people who can buy, but they wont. They will be waiting for "the bottom" Always amazes me how people forget the last lesson and come up with some new narrative on why property can only go up.

combat14

https://www.boards.ie/discussion/comment/119591327#Comment_119591327

cost of living is all work colleagues talk about now - barely discussed even during last 2008 recession....

with more rate rises posted for october and december sentiment can turn very quickly this winter if it hasnt done so already.. the writing is on the wall..

Tonesjones

When will I see a return on my savings

awec

https://www.boards.ie/discussion/comment/119591327#Comment_119591327

You’ve completely missed the point. I do not think prices can only go up.

I am saying that prices will only go down when demand is cut, I.e. buyers are removed from the market. If people are just waiting; this is constant demand.

For people who don’t get removed and do decide to wait, they will be paying through the arse on rents in the meantime. This is a fact that is constantly overlooked, people have this magic notion that waiting is free or cheap.

And the fewer people who buy, the greater the demand for rents. Rents will go in one direction only.

We have a rental population of people in their mid 30s or older who are desperate to buy. The people frustrated with the current market. These people are at the age that they’re going to start getting reduced mortgage offers. They are in a very limited position to wait.

To repeat; the only way prices drop is if these people are prevented from buying.

IWW2900

https://www.boards.ie/discussion/comment/119591445#Comment_119591445

I didnt miss the point. You literally said as long as people can afford to buy, they will buy.

Thats not true. While I agree, people will pay anything they can afford, if narrative suggests prices are going only up. Once that narrative shifts and sentiment is that prices are going down, people wont buy, they will wait.

awec

https://www.boards.ie/discussion/comment/119591584#Comment_119591584

But again, it's not as straightforward as that. We're back to assuming that waiting is cheap or free.

Reality is paying rent is more expensive than paying a mortgage. Even with rate increases, this is unlikely to change as rents are more likely to go up than down, especially if people do decide they want to stay in the rental market for longer. This problem will be exacerbated even further if landlords continue to leave the market.

The notion that people will continue paying through the arse on rent in a 2 bed apartment, when they could be living in a 3 bed house paying similar or even less every month does not seem realistic to me. For anyone renting like-for-like what they want to buy the decision is even more stark.

Renting is very expensive. Renting is highly likely to get even more expensive.

And again, you have to factor in potential buyers aging. People are buying houses later than ever in Ireland, there are a ton of buyers not in a position to wait.

I strongly believe that given the desperate state of our rental market and the difficulty people have had getting on the housing ladder will see many people jumping out of the rental market as soon as they possibly can.

I mean, prices can go down. It's inevitable they eventually will. Either it'll be through a burst of supply, or because demand is cut because enough people have lost their job or whatever else.

ticktickboom

https://www.boards.ie/discussion/comment/119591445#Comment_119591445

I'm one of those renting in my late thirties. I'm approved for a certain amount, if interest rate rises continue it will effect my repayment amount. I will then need to look at cheaper houses or have a lower cut off point when bidding. There's thousands of me, so if everyone needs to adjust based on repayment capacity and interest rates, prices will drop.

Interest rates are guaranteed to go up at least another 1% this year so it doesn't take a rocket scientist to work out what'll happen if wages don't rise accordingly.

Separately, the energy crisis we're facing is likely going to cause a deep recession. A lot of manufacturing will be affected, SMEs and small businesses won't survive 4X bill hikes. Those whose job is unaffected will have way less cash in their pockets and won't be as confident about getting that big mortgage.This will take huge amounts of demand away.

IMO, The only way is down for prices or stagnation at best.

awec

https://www.boards.ie/discussion/comment/119591812#Comment_119591812

I get what you're saying, but here's an example:

Totally made up numbers, but imagine you're approved for 300k, but with the rate hikes you're now only approved for 250k. People who were approved for 350k are now only approved for 300k and so on.

There are 500 buyers for 300 houses. The rate increases trickle down, and a bunch of people drop out at the bottom. Now there are only 400 buyers for 300 houses.

What ends up happening is that houses at the very top of the market start losing value first. And it takes a long time to work it's way down to the houses you were originally looking at, because people keep dropping down the rungs but ultimately demand still more than meets supply as demand is reducing very slowly.

You could decide to wait until the houses you were originally looking at drop into your new price bracket, but this could take a couple of years or more, and you have no idea if it'll ever actually happen. In all of that time, you are paying rent. High rent. Hopefully you maintain an income to pay rent to avoid homelessness in this time.

On the other hand, let's imagine there are widespread job losses or income cuts. Suddenly, there's a huge drop in demand and 300 of those 500 buyers are suddenly removed from the market because they can no longer get a mortgage. Now you have 200 buyers for 500 houses, prices will drop much faster, and waiting here might make sense, but only if you are not one of the 300 who just got removed from the market.

I don't envy anyone who is currently in the market right now, it must be super stressful.

TLDR: if you want drops in price, realistically you need a ton of buyers removed from the market. And you need to hope you won't be one of them.

awec

Of course I could also be totally wrong, we’ll find out eventually! 😁

No certainties in this game as we’ve found out the past 5 or 6 years!

IWW2900

https://www.boards.ie/discussion/comment/119591726#Comment_119591726

It is as straight forward as that. Of course there will be people who will buy now regardless due to life circumstances.

But there will also be many who will decide to opt out for a while. I know several people in their 20s who bought recently. Their decision was largely dictated by fear that they would never be able to buy. This will shift.

Investors will be flushed from the market. You dont understand what rising rates, cheap money and market sentiment does to markets.

awec

https://www.boards.ie/discussion/comment/119592321#Comment_119592321

Investors being flushed from the market is terrible news for renters and will only push rents even higher.

Is it your opinion that this will have no impact on people's ability to wait it out?

IWW2900

https://www.boards.ie/discussion/comment/119592341#Comment_119592341

Thats if said investor was actually renting the property. There are owners out there who just sit on property while watching price rise. As soon as sentiment changes there are more sellers. I know this first hand.

Government "taxes" wont bring empty house back on the market as quick as falling prices can.

Then there are those small time flippers who buy a property, do a little work and sell for 20 percent more. This demand is all going to be wiped out once sentiment changes.

combat14

https://www.boards.ie/discussion/comment/119591879#Comment_119591879

we dont necessarily need buyers removed from the market .. just as the previous poster stated .. interest rate rises will eventually affect repayment amounts and thus affect amounts to be borrowed .. thus having a serious affect on demand and downward pressure on house prices ... all without removing buyers from market ..

mcsean2163

What ends up happening is that houses at the very top of the market start losing value first. And

...the buyer who was going to pay 800 pays 750 and so on down the line as the price of houses drop, IMHO.

Villa05

There is an obvious flaw in @awec theory or am i missing something

Renters enter the market at the bottom rungs except for a crash similar to 08. Buyers at the middle/upper rungs don't fall down a rung, they stay in the house there in

Drog79

I meant to quote the poster saying a mortgage with normal repayments from 2008 would likely be gone.

Nope, we've thrown everything we had at payments, in other word much more than the payments..... And still have a chunk to go. It's 14 years, most mortgages are 25-30 years.

awec

https://www.boards.ie/discussion/comment/119592655#Comment_119592655

I didn't mean ladder in that context.

I meant price buckets.

Shauna677

The number of price drops on myhome.ie is risung by the hour, house prices are already on a downward spiril.

dontmindme

https://www.boards.ie/discussion/comment/119592885#Comment_119592885

Think that largely depends on what price bracket you're looking at.

Timing belt

https://www.boards.ie/discussion/comment/119592419#Comment_119592419

ability to repay is not what is restricting peoples ability to borrow it’s the LTI limit in a lot of cases. Maybe it will change in time if rates keep rising but as noted in the ECB speech today there are signs of a wage/inflation spiral and that will mean that the nominal price of housing will more than likely rise.

e.g.

if inflation is running at 10% and you have wage growth to try keep up with it then even if the house stays at the same price the property has dropped 10% in real terms. There is a reason why investors are attracted to property during an inflationary period because property tends to hold its value better than cash/bonds etc. It might be a mistake to assume than investors will exit.

There will be downward pressure on house prices but there is plenty of upward pressure out there also due to lack of supply and increasing costs to build.

combat14

https://www.boards.ie/discussion/comment/119593025#Comment_119593025

appreciate LTI nominal house price increase concept assuming actual pay rises are provided by heavily struggling businesses...

the reality is that between interest rate and enormous cost of living increases (let alone job losses if businesses close due to energy cost spiral) repayment capacity is being massively affected whether we like to admit it or not - today's indo indicate an extra €3,000 (before income taxes are factored in) hit with more uncertainty on the way this winter.. this is a massive drag on would be FTB's potential purchasing pockets ...

Double whammy of mortgage and energy bill hikes to cost households extra €3,000

Costs for families to jump by up to €3,000

https://m.independent.ie/business/personal-finance/double-whammy-of-mortgage-and-energy-bill-hikes-to-cost-households-extra-3000-41974475.html