"average Dublin house prices should fall to ‘the €300,000 mark" according to Many Lou McD.

hometruths

https://www.boards.ie/discussion/comment/121604926#Comment_121604926

My point exactly.

GreeBo

https://www.boards.ie/discussion/comment/121604926#Comment_121604926

I'm not sure what point you are trying to make here tbh.

GreeBo

https://www.boards.ie/discussion/comment/121604320#Comment_121604320

Does your assumption also assume that no one remortgages their house for any reason?

hometruths

https://www.boards.ie/discussion/comment/121605411#Comment_121605411

Assuming the house is the only asset an individual owns, and they are not intending to sell it in the short term in order to downsize to cheaper property or to rent, and assuming they're not in negative equity, what are the meaningful disadvantages to a 30% fall in house prices to that individual?

Apart from getting less of a kick out of their notional paper wealth, I'm struggling to see why it is such a disaster for that individual?

hometruths

https://www.boards.ie/discussion/comment/121605660#Comment_121605660

My assumption assumes the majority of people are not remortgaging their house.

Common sense and CB lending limits will tell you that the only people remortgaging their house are by definition those least at risk of negative equity from a 30% fall in prices.

DataDude

https://www.boards.ie/discussion/comment/121605666#Comment_121605666

You are 100% right in theory. There are some small benefits to a lower LTV with mortgages but nothing life changing.

That said there is something about human nature which grates on people if they buy a new house for say €600k and a year later someone moves in next door for €400k even though it doesn’t directly change their circumstance. Rightly or wrongly I see it all the time with my friend group who have all bought in last 3 years. Hated high prices and cursed them when looking. But second they’re in:

‘I just really hope I didn’t buy at the very top. I’ll be sick if these are going on the cheap in a few years’.

You’d imagine anyone who bought pre 2017 (other than 05-07) won’t be too fussed.

HerrKuehn

https://www.boards.ie/discussion/comment/121605666#Comment_121605666

I don't necessarily disagree, but most people don't think like that. I don't think there is great social cohesion in Ireland, it isn't so much "ask not what your country can do for you, but what you can do for your country", it is more like "I wanna hear more about what the country can do for me". This goes from top to bottom. The water charges in particular was very instructive for me, many of the people protesting would be paying little if any additional taxes. It is all about me, me, me and someone else should be paying for everything. So good luck getting a bit of altruistic behavior, I am doubtful.

o1s1n

https://www.boards.ie/discussion/comment/121604926#Comment_121604926

Is your mortgage 70% LTV or less?

Lots of folks on 80% or 90% LTV rates who'd go into negative equity if prices dropped by 30%.

You'd imagine they wouldn't be selling any time soon though so it shouldn't impact them in reality. It might though if they decide to upsize in ten years.

It might be brought about by accident, first time buyer are going to be nervous paying today prices if within 5 years the value of there home goes down by 40%, for those with no mortgages or negliabel mortgages if avarage house prices drop to 300k.

dasdog

https://www.boards.ie/discussion/comment/121605729#Comment_121605729

I noticed the change around 2003/4 - a kind of latent Thatcherism. Enormous prosperity for all of its many benefits brings its own problems. And there was always a cohort of of the population that wanted things without putting in any effort and they will take advantage.

The only time the country is "together" is during international sporting events.

Sad really but better than mass unemployment and actual barefoot poverty.

HerrKuehn

https://www.boards.ie/discussion/comment/121605846#Comment_121605846

I don't think it is anything to do with Thatcherism. It isn't just at the top, it is just as prevalent if not more so at the bottom. You can even see it in the disregard for rules generally, that isn't a way to build a cohesive society, it is all about me and f**k other people. Even small things, like near where I live there is a park with playing pitches (no dogs off leads) and another area of the park specifically designated as a dog park. Do you think that the majority of people keep their dogs on the lead unless they are in the dog park area? 🤣 Of course they don't, it's Ireland, they think of themselves and couldn't give a f**k about their dogs **** on the pitches the kids play GAA and football on!

DataDude

https://www.boards.ie/discussion/comment/121605801#Comment_121605801

Anyone with the brains to be a potential first time buyer will be aware that a 40% drop in house prices over the next 5 years has almost no chance of occurring and is merely a throwaway comment hoping to attract some votes.

10% increase in wages for the entire public sector on the way over next two years. Private sector will be slightly lower but similar...

hometruths

https://www.boards.ie/discussion/comment/121605717#Comment_121605717

Therein lies the problem, it's the pull up the ladder behind you mentality.

You cannot have a functioning market without accepting the reality that hindsight will show some people have inevitably bought at the top of the market.

Sure that's not ideal for those individuals, but that's how functioning markets work, and in the grand scheme of things these are a relatively small number of people. That's what I meant by my earlier point that the tail is wagging the dog.

The problems we have now are largely driven by the fact that government policy has been to protect and endorse the pulling up the ladder mentality.

And that's a vicious cycle. The longer that government policy tries to ensure that nobody has to suffer the consequences of buying at the top of the market, the more out of reach houses become for those that are not yet on the ladder.

The only solution to this is more assistance for those not yet on the ladder, which pushes prices higher, and this of course intensifies two problems - the need to pull the ladder up further, whilst simultaneously requiring more assistance for others to get onto the ladder. And so on and so forth. The longer it goes on the worse it gets and the harder it is to stop.

We will never sort the problems in the housing market until there is the political will to reverse this thinking and accept that it is not governments job to protect private buyers from the vicissitudes of market cycles.

And unfortunately the only way we'll get that political will is if there is a wider understanding from the general public that the entire country is being crippled in order to look after a relatively small number of individuals.

Judging by a lot on the posts on this thread we're a long way from that understanding!

Clo-Clo

https://www.boards.ie/discussion/comment/121604320#Comment_121604320

You made a statement and then skewed a census to try backing it up. Totally disregarding people who have switched homes/topped up mortgages etc which happens daily in Ireland.

Anyway I will agree to disagree because it's pointless going around it.

MegamanBoo

https://www.boards.ie/discussion/comment/121605729#Comment_121605729

I wouldn't necessarily think of it as an altruistic outlook.

Personally I think it's in my interests if house prices drop, even as a homeowner.

I think it benefits me, my kids, my family a) if they can afford homes, b) and if we don't have staff shortages in essential services, c) we don't have a further housing fueled rise in social disorder - see riots, arson, roadblocks.

Plus houses prices should drop along with construction costs. A lot of homeowners will be forced in the next few years to retrofit their homes. It didn't get much attention in the media but we've recently signed up to ban fossil fuels for heating in 2040. Upgrading to an heat-pump ready home will be hugely expensive for most people as things stand, I'd guesstimate 100k on average (including the nonsense one-stop-shop grants).

suvigirl

https://www.boards.ie/discussion/comment/121605764#Comment_121605764

Yes it is. But like you said negative equity doesn't really matter until you're selling. And most people wouldn't be selling for a good few years after buying. I don't think

HerrKuehn

https://www.boards.ie/discussion/comment/121606006#Comment_121606006

People will view it in different ways, some people don't have kids, many people are selfish, some will be looking to sell up to retire etc. I am not necessarily opposed to it. But I think we could sort out the essential workers using a proportion of the current part V. It seems like an easy win for me.

Clo-Clo

https://www.boards.ie/discussion/comment/121606075#Comment_121606075

The likes of the following should be used for essential workers

https://www.independent.ie/business/irish/lda-to-put-621-cost-rental-apartments-on-offer-in-dublin-and-kildare-area-from-next-week/a1588773054.html?fbclid=IwAR3udM78T4N8y8-bZQuajaNRBMJmQdgjwNKVbCXClRCpYjzmDJr8MvwlNyY

DataDude

https://www.boards.ie/discussion/comment/121605950#Comment_121605950

I agree completely with all of your sentiments.

Thats said, we can’t be oblivious to the wider world and the reality that Ireland remains a relatively cheap place to buy property when you consider other first world countries. What capital city that you’d actually want to live in has 3 bed semis at €300k? Unlike last time where we were the basket case, this time we look affordable relative to peer countries (credit to CBI limits for keeping us in check while others lost their mind).

I still believe the least painful way out of this is a continuation of what we have had over the last 18 months:

• very low house price growth (slightly negative would be preferable).

• strong wage growth outpacing the above which means houses are getting cheaper year on year (they are currently)

• continuation of the strong increases in building and associated increase in numbers of first time buyers.

• home ownership rates starting to stabilise/marginally increase

An all out collapse down to €300k would cause exactly what we saw in 2009 and led us to where are now. No new building. Pulling of financing. Only cash buyers can capitalise. Home ownership rates plummet. Mass emigration.

The idea house price drop 40% and we all live happily ever after with 35k+ new builds continuing to go up is fantasy land.

hometruths

https://www.boards.ie/discussion/comment/121606078#Comment_121606078

To be honest haven't spent a lot of time comparing Dublin to other countries, but I don't doubt that it is expensive everywhere.

And in my opinion it's not so much the price of houses I have the biggest problem with, it's the fact that the market is not functioning properly, and much of this is a result of misguided government policy, the root of which are reasons set out above. And its having knock on effects across the board.

Those policies have pushed prices higher than they otherwise would be, irrespective of international comparisons.

I suspect that if the policies were reversed we wouldn't see a return to an average Dublin price to 300k, but I do think we'd see a fall in prices without 2009 style armageddon.

I'd agree with your least painful ways out, but above all what I think our way out of this is increasing turnover in the market, restarting the musical chairs you've probably heard me bang on about before. The market is currently clogged up like a blocked pipe. We need to get it flowing again to solve the problem.

I am not holding my breath though.

Blut2

https://www.boards.ie/discussion/comment/121603108#Comment_121603108

"I don't doubt the poll but what I am pointing out 2 things the poll doesn't indicate the drop people are prepared to accept"

The poll literally points out exactly a defined number people are in favour of, a drop to a €300k average price.

Again, not being harsh, but you either didn't read the article at all or clearly didn't understand the not very complex words in it.

37% of voters being against something in a democracy is the opposite of huge. We haven't had a government in Ireland in 100 years that had the support of more than 55% of the public. 63% of voters being in favour of a policy is as clear a majority as you're going to get in a democracy.

GSBellew

https://www.boards.ie/discussion/comment/121603444#Comment_121603444

The poster I was responding to was saying that landlords should rent below mortgage costs because they have the equity in the property at the end and it should be viewed as a long term investment, but the sums do not add up, yes there will be equity and a property at the end of it all, but it will have cost the landlord a substantial amount to attain that equity, there are alternative long term investments that would see a much greater potential return with less risk. If this posters argument stacked up why rent, surely buy the property outright and have the equity yourself, not so easy to do though is it, so why expect a landlord to do the hard bit only to loose money on the deal?

I'm illustrating that it is a nonsensical notion, a landlord is a landlord to make money and receive a return on investment, they are not a housing charity.

I imagine there are more enjoyable ways to loose money over a thirty year period.

DataDude

https://www.boards.ie/discussion/comment/121606163#Comment_121606163

The best way to unlock a clogged up market is new supply. The best way to get more supply is higher prices. Transaction have been rapidly increasing since the crash (COVID aside). As we have seen before, falling prices causes transactions to drop significantly as you simaltaneosuly lose new supply and have existing owners keen to ‘wait it out’.

It’s a tricky problem and will take time to solve. I think it is important for people to acknowledge all indicators are going the right way for the last 12-24 months.

• more houses are being built every year

• more first time buyers are getting homes than any year since 2007 and it’s increasing fast

• house prices are falling relative to wages in the first time since I don’t know when.

I fear people will lack the patience required to solve a very deep rooted and complicated problem and instead turn to extreme reactionary policies that are almost certain to break things in some other way.

Blut2

https://www.boards.ie/discussion/comment/121603413#Comment_121603413

I said capital appreciation in the housing market is almost guaranteed over the long term for a landlord, ie very obviously yes not in a cherry picked 3 year recessionary period. No landlord should be buying property to rent out for 3 years and then sell.

Since the foundation of the Irish state Irish house prices have increased, on average, consistently, for over a century now. They're currently at the highest ever. I, and most other landlords and analysts, would be quite comfortable predicting that house prices in the year 2050 will be higher than now. Because for the opposite to occur would require reversing 100 years of performance of the asset, and going against all economic theory. It is not, in fact "very likely", that prices will fall over the long term - its very, very statistically unlikely.

Your maths are horrendous from the very first point. If you have a property on a 30 year mortgage from today, that rents for €1400pm in 2024, its going to rent for much, much more than that over time. Rents aren't going to stay static for 30 years. This alone completely ruins your entire argument...

And even with your awful maths you've still made a profit of €216,500 - literally hundreds of thousands of euros, for doing very little actual day-to-day work compared to someone working a full time job to earn that.

Your comparison to a savings account is also very bad maths - to put in 1400 per month that would assume the comparison is you're renting your property out at 0 euros per month.

If you're a landlord, and your grasp of maths is this bad, then thats very clearly why you're not making money. Its not from a lack of capital appreciation (which has been consistent and reliable in Ireland for a century), or from low rents (which are at their highest in the history of the Irish state currently, and still growing every year).

MegamanBoo

https://www.boards.ie/discussion/comment/121606225#Comment_121606225

Any indications I've seen are that we've pretty much peaked in terms of construction output.

And as for house prices decreasing... I'm not so sure in practical terms.

With higher interest rates, prices staying still is the same as prices increasing in terms of affordability.

DataDude

https://www.boards.ie/discussion/comment/121606321#Comment_121606321

It is concerning that we appear to be approach maximum construction output and think all ideas to increase that are welcome. I know for sure reducing prices dramatically will not help construction output.

On affordability, for the vast majority it’s about price to income limits as it’s almost always cheaper than renting. We weren’t celebrating ‘affordability improving’ when mortgage rates dropped down to 1.95%. Everyone was referencing the increasing prices. Can’t have it both ways when rates start to go back up again.

HerrKuehn

Another way to get prices down would be to reduce demand. They could bring in new central bank LTI rates of say a max of 1x earnings or something like that. Guess not a lot would get built and people would be complaining they can't borrow enough.

hometruths

https://www.boards.ie/discussion/comment/121606225#Comment_121606225

The best way to unlock a clogged up market is new supply. 

Assuming you're talking about new build supply, I'd disagree with this.

Transaction numbers might have been increasing, but that's largely driven by increased numbers of new builds. Turnover of existing stock remains extremely low by historic standards.

Most new builds are bought by FTBers, Investors, Housing bodies, govt etc. none of which does anything to free up an existing unit to get musical chairs going. People looking to trade up/down/sideways are stuck.

Of course new build supply is important, but in order to unclog the current market, greater numbers of existing stock need to be on the market. It's a catch-22 - the barrier to 2nd hand homes coming on the market is the lack of 2nd hand homes on the market.

I'm not suggesting we abandon the strategy of increasing new build numbers, but there are a number of inevitable delays to those properties becoming available.

In the meantime there is plenty that could be done now that would have an effect on 2nd hand supply in the short term, but nobody is even talking about the low turnover rate let alone discussing measures that could be used to increase it.

MegamanBoo

https://www.boards.ie/discussion/comment/121606364#Comment_121606364

Surely that depends where the increased supply is coming from?

And wouldn't is also depend on the state of the market?

But do tell us why you know for sure...

GSBellew

https://www.boards.ie/discussion/comment/121606281#Comment_121606281

Hmm, ok, the theoretical profit I showed is taking your rent payment into account, you may want to re read that part.

Sale Proceeds after 30 Years € 700,000.00

Less CGT on disposal € 115,500.00

€ 584,500.00

Mortgage repayments 30 Years € 504,000.00

€ 80,500.00

Plus your rental payments after tax € 216,000.00

€ 296,500.00

Less my initial deposit € 80,000.00

Net Profit after 30 years € 216,500.00

I'm not sure you understand that the cost of financing the property via the mortgage is higher than the purchase price do you?

It is not a simple thing of it being 350k today, 700k then, profit = €350k, the interest on the €270k mortgage works out at € 234,000.00 in the 30 years, again I used a mortgage calculator from one of the main irish banks to arrive at the figure.

If you suggest I only save the net amount less your net rental amount I would have to deduct the rental income from the profit, taking it down to €500.00

Eg if there was no rent and the house was idle:

Cost of house € 350,000

Sale Proceeds € 700,000

"Profit" € 350,000

CGT € 115,500

€ 234,500

Less Interest € 234,000

€ 500

€ 216,500 over 30 years is € 138.46 per week, it is nothing in the grand scheme of things, you say it is a lot compared to someone in a full time job? if you are not earning €138.46 or close to it in a day you need to look at getting another job, a minimum wage job has someone at €99.06 per day.

Yes I understand that rental payments would increase, interest payments are likely to also & I have not allowed for inflation, maintenance costs, insurance, property taxes.

Can you show my how much you believe a landlord would make in this hypothetical scenario and explain why you would choose to rent and not buy if it is so profitable.