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

Villa05

https://www.boards.ie/discussion/comment/121753672#Comment_121753672

it is their largest asset, the value of which helps their kids prosper in later life.

Seems to be working out well for the current generation of kids that can't afford rent or purchase and have the debt of the last property bubble dumped on there shoulders and there kids, if they ever have any. Most of them would be children of homeowners I'd suspect

Pure dynamics of a pyramid scheme. Every excuse is made, despite the hard facts proving the opposite

BlueSkyDreams

https://www.boards.ie/discussion/comment/121753812#Comment_121753812

In later life, the kids will have the asset.

Doesnt mean they can leverage that asset today though.

chalky_ie

https://www.boards.ie/discussion/comment/121753812#Comment_121753812

What does that even mean?

CorkRed93

https://www.boards.ie/discussion/comment/121753804#Comment_121753804

lowering house prices is unachievable?

BlueSkyDreams

https://www.boards.ie/discussion/comment/121753842#Comment_121753842

It is an unachievable instant outcome.

To lower house prices means a lot of levers shifting over a period of time, some which the govt have control of and some which they do not.

Its rather a pointless and populist thing to say "we will make house prices 300k" and then not explain how it will be done and over what time frame.

Which is why SF got ripped for saying it and is probably one of the reasons they are tanking in the polls.

I think more people are waking up from the haze and realising that SF are talking populist nonsense.

Villa05

https://www.boards.ie/discussion/comment/121753452#Comment_121753452

If you make homes a highly speculative asset you are far more likely to get large amounts of buyers into negative equity as with our current system

If on the other hand you linked standard home prices and rent to general inflation, you probably never enter negative equity.

There would also be huge demand for an asset that tracks inflation particularly amongst thosee close to or in retirement to protect there wealth and provide for them in non earning years

What would our house prices, national debt, taxes be had we such a system in place since 1995. Almost everyone would be in a far better position.

timmyntc

True negative equity is fairly rare - you need to have a large mortgage and a very large price drop.

Anyone with little or no mortgage left on the house would not be in negative equity if house prices dropped such that average in dub was 300k.

If you aren't in actual negative equity, prices dropping is pretty much irrelevant. If you want to trade up or down, seeing as all house prices have fallen you are no worse off than before they dropped.

chalky_ie

https://www.boards.ie/discussion/comment/121753929#Comment_121753929

Right, so all we have to do is completely restructure the world, grand.

hometruths

https://www.boards.ie/discussion/comment/121753555#Comment_121753555

That is very true.

But currently whether or not government accept property prices falling has a huge bearing on whether or not they actually fall.

hometruths

https://www.boards.ie/discussion/comment/121753452#Comment_121753452

Totally agree, a house purchase isn't like anyhting lese. Its a 20, 30, 40 year commitment. And the chances are pretty high over that 20, 30, 40 year term that it will be financially beneficial.

Therefore why should the government care that some people have negative equity on paper 2 or 3 years into that long term commitment.

Sure the individuals may not want to hear their house is worht less than they paid for it last year, but why that's not everybody else's problem,

If you want a functioning housing market you have to accept that some people will buy at the peaks just as some will buy at the troughs.

As you say, some people are just unlucky with timing. That's the nature of the beast, no need for government to try and mitigate that bad luck for the minority who experience it.

Blut2

https://www.boards.ie/discussion/comment/121753620#Comment_121753620

If average home prices in Ireland dropped 30% tomorrow it wouldn't push the "majority of the country" into negative equity.

30% of households are renting - unaffected

36% of households are mortgage free homeowners - unaffected

And for the remaining 34% of mortgage owners only a minority would actually be impacted. The only people who would be pushed into negative equity are those with large outstanding mortgages on property bought in the last 5 odd years. And even within that cohort only those who're planning on selling their house in the next few years would actually feel this in real life, as opposed to as a theoretical asset value figure.

The people who would actually be hugely hit by a large drop in home values are the institutional investors, property developers, and property speculators. Which is why the government fights tooth and nail against it.

chalky_ie

https://www.boards.ie/discussion/comment/121754446#Comment_121754446

I don't think the government should do that, the only thing I've been saying is there is no point in going on about lowering house prices, talk about what you're going to do to build more houses, stop people being outbid by huge funds, and the other solutions that will result in the housing market functioning properly. It's a sound bite, not a solution.

L1011

If the banks have been doing their job properly, a 10% reduction wouldn't leave anyone in negative equity at all and every % above that would only bring in small volumes until at least 20%

The problem is that people think negative equity just means being at a loss on total purchase price.

chalky_ie

https://www.boards.ie/discussion/comment/121754459#Comment_121754459

I never said it would?

EDIT: Re-read the series of posts and it did read like I said that, apologies! Did not mean that, I was referencing home owners in totality when talking about opinions of house prices drastically dropping. Most people that own homes would not want that to happen, in my opinion.

Blut2

https://www.boards.ie/discussion/comment/121754575#Comment_121754575

You'd be wrong on that. Even a majority of home owners want a drop in prices now:

"A significant 69pc of people agreed that the average price of a house in Dublin, which currently stands at €430,000, should fall to €300,000 as suggested by Ms McDonald.

A further 63pc of people polled said they would like to see property prices fall even if it meant their own home depreciated in value."

https://www.independent.ie/irish-news/poll-public-backs-mary-lou-mcdonalds-call-for-300000-average-house-price-in-dublin/a1386646140.html

Presumably because most home owners are more negatively impacted by the current excessive house prices than they would be by any fall - those who own/manage businesses can't get staff, hundreds of thousands of children in their 20s/30s not leaving home and stuck at home with non-plussed parental home owners etc.

chalky_ie

https://www.boards.ie/discussion/comment/121754677#Comment_121754677

Fair enough, I don't personally know a single person that owns a home that would want the value of it to drop by 30%, but a poll is a poll.

L1011

https://www.boards.ie/discussion/comment/121754736#Comment_121754736

Hello.

I own my home and a holiday home. Abd I'd have no problems with a 30% drop. And I have never and will never vote SF

Villa05

https://www.boards.ie/discussion/comment/121754270#Comment_121754270

Nope, just eliminate ftb grant, shared ownership.

If supply cools on these measures, the state have housing projects ready to go to absorb excess labour. Issue an inflation linked bond to fund it

Approach the problem with supply rather than fueling existing demand which just drives up price

Limit investment funds to new apartments that they fund

The state together with funds are largely responsible for taking house prices beyond the 3.5/4 times mean to average salary

chalky_ie

https://www.boards.ie/discussion/comment/121754818#Comment_121754818

You must be in a nice financial position so! 30% drop when nothing else in the world gets any cheaper is a big hit. It's also basically impossible to do in isolation, realistically, so a bit of a pointless question. But happy to admit I was wrong in my assertion.

L1011

https://www.boards.ie/discussion/comment/121754858#Comment_121754858

If your house is in any way expensive, you're already owing 20% below market rate so a 30% drop doesn't mean anything close to 30% NE

BlueSkyDreams

https://www.boards.ie/discussion/comment/121754400#Comment_121754400

It does not. It has equal irrelevance.

Unless the Govt change policy to push prices down in some way...

But thats a very different thing than accepting price falls.

That would be activley pursuing house price falls. Which I dont see happening personally, other than by virtue of more homes coming to market, as they should do.

But there is still a lot of track left on that road and I dont think with the numbers being built currently that there will be any real fall for years as a result of increased home building - unless we suddenly started building upwards of 50k per year.

chalky_ie

https://www.boards.ie/discussion/comment/121754855#Comment_121754855

How does any of that control house prices to be linked with inflation? Dublin is still a desirable market for international buyers etc., there is no real way to ultimately control house prices to that degree.

timmyntc

https://www.boards.ie/discussion/comment/121754858#Comment_121754858

It could be 50% drop for all I care, I will not be materially impacted by it at all unless I decide to sell.

However if all house prices are falling, then the difference between my house and the house I want to trade up might actually be smaller, so I could save money!

Also if valuation of my home drops a lot, I would owe less LPT

PeadarCo

https://www.boards.ie/discussion/comment/121754818#Comment_121754818

The problem with a 30% drop in house prices is what drives it. Take the last crash house and rent prices plummeted. Taken completely in isolation from that point of view the last crash was a good thing. However what caused the last crash was a banking and wider economic crisis that resulted in large numbers of people unemployed and others emigrating. That was something people were definitely not happy with.

There were also large numbers of people complaining about negative equity and the negative equity situation did impact directly anyone who was unemployed and couldn't keep up with their mortgage repayments. I know the central bank rules have changed dramatically but a mortgage is still an asset backed loan. A house is that asset/collateral. The value of the house matters,banks don't ask for property valuations for the fun of it. Any significant drop in that assets value is going to impact the banks balance sheet. At some point this then impacts the banks lending capacity and ability to lend to the wider economy. Again thank the ECB for tightening up banks capital requirements. You could easily end up with a negative feedback loop that impacts the wider economy. Remember due to how hard it is for Irish banks to repossess houses(IE collateral) Irish mortgages are already considered relatively risky as mortgages go in a European context. A large drop in house prices will not improve things.

It's very easy to say house prices need to drop 30%/another large amount, it's far far harder to achieve a drop anything remotely like that without messing up the entire economy.

downtheroad

https://www.boards.ie/discussion/comment/121755278#Comment_121755278

You can be certain that the valuations bands will be re-jigged if there is a material adjustment to average national house prices.

Donald Trump

https://www.boards.ie/discussion/comment/121754155#Comment_121754155

Plenty of people - and I've noticed it on threads on here - appear to think "negative equity" just means the price went down. They could have a house paid for, that was valued at 400k last year, it's valued at 500k this year, and then next year if it's valued at 480k they think they are suddenly 20k in "negative equity"

Donald Trump

https://www.boards.ie/discussion/comment/121755278#Comment_121755278

The only counterpoint to that argument is that people can, and do, leverage off the equity when trading up (the kind of behavior which also helped inflate the last bubble)

chalky_ie

https://www.boards.ie/discussion/comment/121755278#Comment_121755278

Yes, it is beneficial to those looking to trade up, but not to anyone downsizing, or anyone that has bought around the peak and wants flexibility in life. I don't see why you wouldn't care about a 50% drop, just because you had no plans to sell at that moment in time, who knows what could happen in the future. It would also probably attract even more high earner immigrants, as one of the main things stopping people from buying in Ireland is the price of property, and then you're back to square one with rising house prices again.

Focusing on delivering on housing supply promises and other things like proper transport infrastructure to commuter towns is going to be far more beneficial than just talking about how prices have to drop by some huge number.

Timing belt

https://www.boards.ie/discussion/comment/121753632#Comment_121753632

it restricts options on mortgages.

negative equity usually results in paying higher interest and being unable to switch or take out Fixed mortgage.

Timing belt

https://www.boards.ie/discussion/comment/121753929#Comment_121753929

And why do you think pension funds invest in property?