House Prices

GreeBo

dochasach wrote:

Tom Barrack (smarter, quieter and more successful version of Don Trump) is normally fearless but even the relatively tiny property bubble in the U.S. has him nervous.

You reckon the US has a tiny bubble?
Are you taking the country as a whole or looking at the areas with Massive increases?
Florida, California, etc?
I wouldnt call it tiny myself.

TheBigLebowski

Dochasach, it appears you are quite bitter about the fact that you sold property and the prices have continued to rise, and so every day they rise it's like you're losing money.

Victor

Note: Interest rates dropped to 2% in the USA. Anyone who got to lock-in on a rate like that could buy something very expensive.

30% of current buyers are non-nationals.

- I suspect quite a few of the properties under this heading could be non-resident investors. The vast majority of non-Irish workers here are from the EU or are skilled enough not to have their works permits / visas pulled. While a sudden downturn in construction or services activity could see a lot of people leave the country, domestic demand will probably remain.

dochasach

Victor wrote:

Note: Interest rates dropped to 2% in the USA. Anyone who got to lock-in on a rate like that could buy something very expensive.

AFAIK U.S. consumers could never lock in 2%, the U.S. prime rate is the _short term_ interest rate federal banks charge banks. But yes a low interest rate makes property more afforable and tends to raise prices. Today the U.S. Fed raised interest rates for the 12th consecutive time. It now stands at 4%. Inertia keeps prices rising for a while but eventually high rates make property less affordable and when no one can afford it, demand evaporates. Then prices start to fall and it's just as difficult to turn things around as it is to slow a rising bubble. Japan dropped it's lending rate to 0% and it still couldn't bring back the boom.

The E.U. has so far decided to keep its rate stable but in order to attract investors it may eventually have to raise rates to be closer to the U.S.

Victor wrote:

- I suspect quite a few of the properties under this heading could be non-resident investors.

These speculators are the most dangerous investors. They have no desire or vested interest in Ireland. They'll bail out immediately if things go sour and dump property on the market at discount rates just to get out.

GreeBo wrote:

You reckon the US has a tiny bubble?
Are you taking the country as a whole or looking at the areas with Massive increases?
Florida, California, etc?
I wouldnt call it tiny myself.

Oh it's big enough in the northeast, california, florida and many of the big cities, but if you ever compare property in an average U.S. city to property in Ireland you'd see that the U.S. bubble is tiny in comparison. There are still places in the U.S. where you can get a 3 bedroom detached house with a garage on 1/4 acre in a good neighborhood for under 100,000 Euro.

TheBigLebowski wrote:

Dochasach, it appears you are quite bitter about the fact that you sold property and the prices have continued to rise, and so every day they rise it's like you're losing money.

No, I'm pretty happy and I have no regrets. I'd do the same in the same situation and my rental property is far better than what I could buy with a lifetime of mortgage payments equaling my monthly rent. I am bitter about the fact that young people and their parents are being put into a potentially disasterous financial situation in order to benefit a few ultra-wealthy developers and politicians.

I'll leave you with this advise:
http://biz.yahoo.com/special/afford05_article1.html

MorningStar

dochasach wrote:

You must be younger than me, before the bubble this was possible

My family and I have been involved in property for a long time well before what you probably call a bubble. AS it has been going for over 10 years maybe you can tell me where it started and where you think prices will roll back too?.

dochasach wrote:

This is O.K. advice with all the disclaimers:
IF you can afford it (if you need a 100-120% adjustable mortgage, you can't)
IF it is your primary home
IF you can ride out 5-25 years of stagnant or falling property prices and
IF you have the right to live in Ireland long enough to ride out a period of negative equity.

..

Mostly people were just talking about their homes. If people were to take the same path you did they would not own and be renting. The objective of most people is to own their house and not rent. So if you have bought rented out and now are a tenant most people see that as a failure on the objective. So I can't really see why anybody would listen to you!

lomb

theres an emotional value to property every irish person wants it and has always wanted it (perhaps as a hangover from british colonial days where they took alot of the good land from paddy), even if they dont need it.its one of the few things that distinguish the boys from the men, that has value also.

GreeBo

Another point is that a bubble only bursts for *you* if you are trying to sell.
If your house price collapses it doesnt matter a sh1te unless you are trying to sell.
As long as your house has a "good" value when you want to sell the rest is someone elses problem.
(obviously if you are trying to borrow against your house then its an issue, but if you are in a down turn you shouldnt be increasing your debt anyway!)

GallicProphet

There might be a bubble ... or not... as far as I m concerned I didnt buy my house for the promise of a bonanza, but because I need a place to put my feet up in the evening, raise a family and call home. The market might fall, rise or do summersaults I couldnt be bothered.

RainyDay

GallicProphet wrote:

There might be a bubble ... or not... as far as I m concerned I didnt buy my house for the promise of a bonanza, but because I need a place to put my feet up in the evening, raise a family and call home. The market might fall, rise or do summersaults I couldnt be bothered.

This makes perfect sense. If you're buying as a home for your family, forget about the market predictions. Your mortage will be the same regardless of whether your house market value goes up or down. The potentially disastrous impact of being priced out of the market while waiting for the bubble to burst is more important than the risk of the bubble bursting.

Buying for investment is a different story altogether - There does seem to be a rash of people who think that property prices can only go one way (up) and who ignore the yield that they are going to get on their property.

FreeAnd..

I have decided to enter the property market for 2 reasons - need a place to live medium term and as a long term investment. After years of paying of someone elses mortgage through crazy rent prices the only thing that I will judge the worth of the property by is by how much it is worth after I move out. Even if the price drops over the next 5 years once it is by less than 72k (which i can't realistically see happening) I will be happy because that is the kind of rent I will have paid in that time (sharing with my girlfriend 1200 pm).

I do believe that it is stupid to go into it blind thinking that rent will always fully cover someones mortgage and crazy to not be able to absorb a significant increase in interest rates but it still feels alot better to be paying off my own mortgage than someone elses and I would be willing to throw in an extra few hundred a month to cover the mortgage while renting the place out, because at the end of it I will end up with an asset that is hopefully worth more than was paid for.

dochasach

MorningStar wrote:

My family and I have been involved in property for a long time well before what you probably call a bubble. AS it has been going for over 10 years maybe you can tell me where it started and where you think prices will roll back too?.

As you said on another thread, this is only my opinion. You can hear thousands of other _OPINIONS_ that say this isn't a bubble and the runup will continue 'til doomsday, but here is my opinion.

Before the (B{oom or ubble}) average mortgages were approximately 4X salary and now they are approximately 12X Salary (Source, RTE this morning.) This would make the average property overvalued by 300% but even I don't think that's quite right so let's look at the Price/Earnings ratio. The average house should sell for no more than 200X average monthly rent. According to this recent report (http://www.daft.ie/report/DaftReport-Q22005.pdf) the average rent in dublin is 1164. By this standard the average dublin property should sell for no more than 232800. Now this average contains many 1 bedroom and possibly shared places so it's more meaningful to look at what has happened over time. As the daft report notes, rents are 15% below what they were in 2002 and yet property continues to rise. I'd expect a 15% drop at minimum. So to answer your question, I expect property to drop to what it was in 2002. When will it happen? That all depends on a combination of mob psychology and when the property cartels decide to throw in the towel. The runup could continue another 2 years but I sure wouldn't bet on it. If we had any real estate transparency laws, we would have some warning with a rising trend of time-on-market (as they're currently seeing in parts of the U.K. , U.S. and Austrailia.) Perhaps there is an estate agent here who would like to share with us monthly time-on-market data?

Mostly people were just talking about their homes. If people were to take the same path you did they would not own and be renting. The objective of most people is to own their house and not rent. So if you have bought rented out and now are a tenant most people see that as a failure on the objective. So I can't really see why anybody would listen to you!

No I'm not suggesting to sell your primary home, though if others were in exactly the same circumstance as I was, they might consider it. If the objective is to own at all cost, by all means go right ahead. But if the objective is to be financially self-sufficient and have a roof over your head, buying isn't always the right answer. Remember if you have a 100-120% mortgage you don't own the property. You don't own it entirely for 10-40 years and you don't own any of it until you start paying the principle. Except that you are paying taxes and maintainence, you are basically renting from the bank. Now I know my landlord, an extremely good person who has treated us well. She hasn't raised the rent and I trust that she wouldn't without good cause. If you have a variable mortgage you are at the mercy of your bank and whoever decides the E.U. interest rate. I don't know these people. I don't trust them.

copacetic

can you link that report from RTE where they said average mortgages were 12 times salary??

It just can't be true tbh.

Culchie

daveym wrote:

can you link that report from RTE where they said average mortgages were 12 times salary??

It just can't be true tbh.

I heard it as well this morning, although I think it said 'Income' (implying household Income) rather than Salary

japanpaul

I have to say that although I don't agree with everything that dochasach is saying you do have a lot of valid points.
I would definitely agree that the house prices here in proportion to salaries is crazy. A lot of couples buying E350,000 houses now on 35 year mortgages will have to have both people working continuously until their late 50's early 60's to pay off the mortgage. We have it good in Ireland at the moment with nearly full employment, "free" 3rd level education, etc but if this changes there will be difficult times for many people.
I am just back from Japan where I lived for a few years, because the salary here looked so good(I'm on 45% more than I was in Japan). But I am saving less here than I was there even though my social life here is non existent.
My friend stayed over there and bought a new 3 bed house for E140,000, about 5-6 times his salary(salaries in Japan are not big outside Tokyo). With interest rates in Japan so low and the possibility of a fixed 10 year mortgage at 1.9% he will be paying E587 a month for the next 10 years on a 25 year mortgage, but with Irelands rates(which could easily rise) at 3.5% he would be paying E700 a month. This is hypathetical anyway, because you are never going to find a house at 5-6 times your salary in an area where you would want to live.

copacetic

Culchie wrote:

I heard it as well this morning, although I think it said 'Income' (implying household Income) rather than Salary

would that not be even higher, eg if average household income is 60k (double average industrial wage)that is saying the average mortgage is 720k!
(average householf income is prob lower but you get the idea)

was it 12 times the industrial wage? that would still be 360,000 which is not an average house price countrywide.

MorningStar

dochasach wrote:

No I'm not suggesting to sell your primary home, though if others were in exactly the same circumstance as I was, they might consider it. If the objective is to own at all cost, by all means go right ahead. But if the objective is to be financially self-sufficient and have a roof over your head, buying isn't always the right answer. Remember if you have a 100-120% mortgage you don't own the property. You don't own it entirely for 10-40 years and you don't own any of it until you start paying the principle. Except that you are paying taxes and maintainence, you are basically renting from the bank. Now I know my landlord, an extremely good person who has treated us well. She hasn't raised the rent and I trust that she wouldn't without good cause. If you have a variable mortgage you are at the mercy of your bank and whoever decides the E.U. interest rate. I don't know these people. I don't trust them.

Besides having your facts wrong as is easily shown by working national average wage and average house costs out you then make wiild assumptions. Rent value has a relationship to house price but not a direct one as you suggest. A 15% drop in house prices would not even bring house prices back 2 years in most places but certainly not for the majority of Dublin.
You make the assumption again that people are saying own at all costs but nobody really is. Nobody here said that. You again assume everybody getting a mortgage is getting 100-120%. Very few people are getting this and not that many applied either. The main reason for them is to pre-empt the SSIA money. I trust my EU elected reps more than I would trust you when it comes to money matters as you after years of having property ended up renting.

You are looking at a doomsday situation but it truth the chances of all your beliefs being true or happening are unlikely. Some might happen but not to you complete extremes. You aren't completely wrong but tone it down and get more accurate details. Don't forget the media bubble that distorts facts.

Culchie

daveym wrote:

would that not be even higher, eg if average household income is 60k (double average industrial wage)that is saying the average mortgage is 720k!
(average householf income is prob lower but you get the idea)

was it 12 times the industrial wage? that would still be 360,000 which is not an average house price countrywide.

I dunno, all confused:o

Definitely the 12 times multiple was used, compared with 4 times 15 years ago.....seems it is salary after your example.


BTW and slightly OT, I've my house for sale (suitable for first time buyers market), had first visitors yesterday evening, 2 offers already, both above quoted asking price, so one think I know for sure, is the market is H..H..Hot at the moment.

Tazz T

In either case, fewer households would have had two incomes 15 years ago.

dochasach

MorningStar wrote:

Besides having your facts wrong as is easily shown by working national average wage and average house costs

Source please? I'm only saying what I heard on the radio, now it was early and maybe I wasn't fully awake but it seems others heard it also. My own disbelief that people would be stupid enough to indebt themselves up to 12 times their salary is why I ignored it and used other parameters to come up with my guess.

MorningStar wrote:

out you then make wiild assumptions. Rent value has a relationship to house price but not a direct one as you suggest. A 15% drop in house prices would not even bring house prices back 2 years

O.K. then maybe I'm underestimating. You're right the drop should be to at least 15% below 2002 values.

MorningStar wrote:

I trust my EU elected reps more than I would trust you when it comes to money matters as you after years of having property ended up renting.

I'll try not to take this as a personal attack. I may be renting but I haven't squandered billions of euros in stamp duty and other taxes the government is obviously raking in because of the boom. Don't you ever wonder why our public services aren't much better than before the boom and in some cases still not as good as they are in 3rd world countries? Maybe I should also mention that I'm in very much the same position my great-grandfather was in 1928. He died a millionaire property baron and afaik he took most of it with him ;-)

MorningStar wrote:

... tone it down and get more accurate details. Don't forget the media bubble that distorts facts.

Tone it down? In every case in the above posting I ignored the wild doomsday estimates (300% overvalued) and used the most optimistic figures. I even left out that the P/E range should be 150-200X monthly rent which means the average should be 174600-232800. And as you found yourself, I grossly understimated that the potential fall would only be 15% when it really should fall to 15% below 2002 levels.

Methinks thou dost protest too much.

MorningStar

dochasach wrote:

Source please? I'm only saying what I heard on the radio, now it was early and maybe I wasn't fully awake but it seems others heard it also. My own disbelief that people would be stupid enough to indebt themselves up to 12 times their salary is why I ignored it and used other parameters to come up with my guess.

The average industrial wage in Ireland? You want me to tell you what it is? Maybe you should try find that out for yourself but it has been stated and do some fundemental research

dochasach wrote:

O.K. then maybe I'm underestimating. You're right the drop should be to at least 15% below 2002 values.

Maybe you are over estimating there. Can you not give us that translated to current markets? Considering in the time you are talking about wages went up and the minimum wage was introduced and raised. So as far as I can see wages have increased as have the production costs of housing so for them to drop at huge levels you are talking is actually a reduction to below production costs. What you are talking about is something like a 50% drop. If you can give me any story of where this happened to a whole market other than caused by war I'd be interested.

dochasach wrote:

Tone it down? In every case in the above posting I ignored the wild doomsday estimates (300% overvalued) and used the most optimistic figures. I even left out that the P/E range should be 150-200X monthly rent which means the average should be 174600-232800. And as you found yourself, I grossly understimated that the potential fall would only be 15% when it really should fall to 15% below 2002 levels.

You may have ignored some wild assumption but it doesn't stop you piecing together facts from these studies and coming up with your own wild assumptions. Rent is not directly proportional to house prices! I don't believe your fall figure are actually close to what could be possible as you have not considered current production cost. House may start selling below cost of production at some point but that is only ever short term.

dochasach wrote:

Methinks thou dost protest too much.

I think you are assuming a lot there. If you are so wise with what the market is going to do why are you renting? No matter what happened according to you use of knowledge you should own a house. It sounds like you made a few mistakes to get where you are so how can you be the man with the answers.

You view relies on half facts and assumptions. You are expecteing catastrophic failures to hit all at once and no action from the government. You ten ignore the basic fact that a place to live is important. Even at a 50% price drop most home owners will be safe not much of the population would truely be devastated by such a drop.

dochasach

MorningStar wrote:

Maybe you should try find that out for yourself but it has been stated and do some fundemental research

Believe me, I've done some basic research far beyond just reading builder's trade journals and estate agent brochures. Here are a few things I think you should read before shooting this messenger:

http://www.economist.com/finance/displayStory.cfm?story_id=4079027
http://www.unison.ie/business/stories.php3?ca=80&si=1498551
http://www.finfacts.com/irelandbusinessnews/publish/article_1000716.shtml

MorningStar wrote:

...So as far as I can see wages have increased as have the production costs of housing so for them to drop at huge levels you are talking is actually a reduction to below production costs.

Overview of Housing and Prices in Ireland
Since 1995, house prices have trebled or even quintupled. Building costs, by
contrast, have risen only by 75%. Ergo, someone's pocketing a bunch of loot. ...
www.movetoireland.com/movepag/housover.htm

MorningStar wrote:

What you are talking about is something like a 50% drop. If you can give me any story of where this happened to a whole market other than caused by war I'd be interested.

I never said the drop would happen overnight but if you read the economist article above you'll see a 43% drop has happened in Hong kong.

MorningStar wrote:

... Rent is not directly proportional to house prices!

Exactly, that is because we are in a bubble! The Economist explains this ratio pretty well. Throughout recent history and throughout the world reasonable ratios have held. Ireland isn't that special.

MorningStar wrote:

It sounds like you made a few mistakes to get where you are so how can you be the man with the answers.

I wish you would spend less time on ad-hominem attacks and more time researching possible alternative worldviews. I'm not the man with all the answers, I'm expressing one opinion. And as for my choice of renting right now, that decision is my personal choice and should be a personal choice for everyone. I'm already in a better position to repurchase my home than I was when I sold it, but I don't want it right now.

I'm not happy about a potential fall in house prices, many of my friends are homeowners or in industries which would be affected by a fall. But I think we'd be safer if people bought property without this polyannaish assumption that nothing can go wrong, that interest rates will stay low and prices will continue to rise.

This is just my opinion, you can freely choose to disagree - - but you would be wrong ;-)

GreeBo

dochasach wrote:

Ergo, someone's pocketing a bunch of loot. ...

Err land prices?

Victor

GreeBo wrote:

Err land prices?

Ergo, developers and speculators are pocketing loot.

lomb

Victor wrote:

Ergo, developers and speculators are pocketing loot.

aye they are, many have become hundred millionaires, but its a free world, this aint communism:D

homeOwner

Overview of Housing and Prices in Ireland
Since 1995, house prices have trebled or even quintupled. www.movetoireland.com/movepag/housover.htm

I always find that statistic (and it is repeated in lots of places) to be the funniest thing i have heard in ages.

House prices have gone up in Dublin closer to 10 times not the 3 or 5 times often bandied around. Maybe the country wide average is 3or 5 times but I dont believe that.

This article in yesterdays indo
"THEIR homes are worth a six-figure sum - but four Dublin pensioners have won the right to buy them for under €30,000. Neighbours Thomas McDonald, Gary Sinnott, John Dunleavy and Hermie Wallace at Pearse Close in Sallynoggin are celebrating after a landmark High Court judgment which means they will soon become property owners in Dublin's affluent southside.
The four men have not only won the right to buy their council homes - the High Court yesterday paved the way for them to buy the houses from Dun Laoghaire Rathdown County Council at 1996 prices. An expert valuer put the 1996 values at €37,000-€40,000. On the market they would fetch around €380,000 each. "

In 1996 a house valued at 40K is now worth 380K - thats 9.5 times. I see what my parents house is worth now compared to what houses on the road were selling for in 1995 - in fact my Dad has an estate agents brochure for the house beside ours which went for sale back in late 1995, they are now selling for over 10.5 that price.

MorningStar

dochasach wrote:

Here are a few things I think you should read before shooting this messenger:

THe problem is you are making up your own message and using facts to support it but ignoring some of the points in the articles that counter your opinion.

dochasach wrote:

Overview of Housing and Prices in Ireland
Since 1995, house prices have trebled or even quintupled. Building costs, by
contrast, have risen only by 75%. Ergo, someone's pocketing a bunch of loot. ...
www.movetoireland.com/movepag/housover.htm:

That is an unverified source claiming facts from god knows where.

dochasach wrote:

I never said the drop would happen overnight but if you read the economist article above you'll see a 43% drop has happened in Hong kong.

Yes, Hong Kong nothing unusual happened there to give such a dramatic change. THe article claims reasons for the growth which are some of the reason for house rises here but not all of the Irish reasons. Irish property was undervalued for years as there was little employment.

dochasach wrote:

Exactly, that is because we are in a bubble! The Economist explains this ratio pretty well. Throughout recent history and throughout the world reasonable ratios have held. Ireland isn't that special.

There is,was and never will be a direct connection between rent and house prices. It is a completly flawed view and does not consider tax benifits and other such local market aspects. Ratio of rent to property prices vary wildly around the world due to different social models. Irealnd is special because it has the highest home ownership in the world and an increasing population and the next country to it has a reducing population and is 10% below.

dochasach wrote:

I wish you would spend less time on ad-hominem attacks and more time researching possible alternative worldviews. I'm not the man with all the answers, I'm expressing one opinion. And as for my choice of renting right now, that decision is my personal choice and should be a personal choice for everyone. I'm already in a better position to repurchase my home than I was when I sold it, but I don't want it right now.

Alternative world views have nothing to do with with a property market in a country. It is supply and demand in the country nothing more nothing less. Predictions on that supply and demand require local facts and knowledge of external effects.
You are claiming a mass of knowledge but for you to be a considered a person of worthy views I would like to see evidence that you know what you are talking about. By the fact you are renting and currently don't own property I see that as the least favourite position to be in so so I see your applied knowledge as lacking. Hence I mention it. Personal choice and personal opinion are the heart of the matter.

dochasach wrote:

I'm not happy about a potential fall in house prices, many of my friends are homeowners or in industries which would be affected by a fall. But I think we'd be safer if people bought property without this polyannaish assumption that nothing can go wrong, that interest rates will stay low and prices will continue to rise.

This is just my opinion, you can freely choose to disagree - - but you would be wrong ;-)

I don't think anybody truely believes nothing could go wrong but to have your view that everthing will go wrong is equally unsafe. People hav been sprouting this doomsday situation for over 10 years. If you are buying a home all of this is not advise but just worrying. The idea is still to minimise the risk not avoid it as it is simply a risk. Taking massive 120% mortgages and risks are not the norm, very few people are capable of qualify and not that many take it up or use the SSIAs as part of their plan.
Opinion is fine but it can be wrong if is based on selective facts or overblows threality of the situation. Your initial premise can be wrong also which seems to be where you fit in. Home ownership is the objective not how many ways could it all possibly go wrong and destroy your life.
I don't think house prices can keep on going up, I don't believe there is a price bubble and I beleive density will have to change. Construction will slow down as it already will in two years due to the lower planning applied for. Regardelss of what happens a good property will keep most of its value and recover quickest in the event of any price reduction. A baddly built house in a bad place with over extended loans is a bad idea no matter what the market but was passable in a high moving market. Ultimately very few people would truelly suffer even with a crash and the rate of 20% or above crash wound be considered massive no matter what. If it is going to happen it would be very unlikely in the next 2 years due to the SSIAs which are most likely going to cause a rise. It's all opinion but it is about buying a home the doomsday info does little good.

Dellgirl

I heaard on the rasio this morning that intrest is going to go up 1%. This will prolly leave me even more broke than I already am.
I think alotof people will be affected by this. My question is...could we see a repeat of what happenned in britan in the 80's happen here re houses?

copacetic

Dellgirl wrote:

I heaard on the rasio this morning that intrest is going to go up 1%. This will prolly leave me even more broke than I already am.
I think alotof people will be affected by this. My question is...could we see a repeat of what happenned in britan in the 80's happen here re houses?

interest rates aren't going up 1%...

Culchie

This always happens.

The people who are renting are always saying that the bubble will burst, the people who own a house say that rent is dead money.

'Renters' have been saying the bubble will burst for 10 years now.

dochasach

MorningStar wrote:

THe problem is you are making up your own message and using facts to support it but ignoring some of the points in the articles that counter your opinion.

I haven't seen a single link or fact in any of your posts to backup your opinion. I've presented several.

MorningStar wrote:

That is an unverified source claiming facts from god knows where.

O.K. since you're the ultimate source of information we'll use your estimate of a 50% property price increase since 2002.

At first I thought you were an estate agent and I was going to ask you for monthly time-on-market figures to prove me wrong. But I don't think you're an estate agent, maybe you're a builder. So what in construction cost has increased 50% since 2002 (500-1000% since 1995)? Concrete? Wood? Shoddy workmanship? Are builders buying $10,000 hammers from the U.S. military? Or are you telling me the average carpenter or brickie immigrating from eastern europe or africa now earns 50% more than in 2002? Sources please? (assuming the source of this information is not you)

It's obvious that I've frightened you and that surprises me because if you understand the property markets as well as you claim, nothing I've said should be shocking. Methinks thou dost protest too much.