Future price of Irish properties

* Estate Agents, Mortgage Lender and Governement say "it's still going to increase, so buy today and you will save money (which is true in the early days of a growing market, untrue when top is at reach" (note: these 3 has vested interest)
* Economists say "it's going to go down" as a world wide trend as the increase was also a world wide trend (e.g. property in Paris doubled in price in the last 7 years)
* Citizen say "it can not go down".
A London economist one day said "the thing you should believe is not the same as the thing you'd want to believe"

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* Rental market has been slowly declining showing there is more offer (i.e to many investment property on the market) than demand.
* FTB are really struggling to get up the first step of the ladder
* Everybody is talking about "investment property" and want to be part of it. This to me indicates that it's too late. The gravy train has been missed.
* UK property is projected to go down by 30%, so are German and French ones.
*Mortgage repayment is higher than cost of renting
*Properties are way over-valued
*Many people have the "naive" view that prices can go down
*The house price to earning ratio is at its highest ever.
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You would have guessed i am pessimistic regarding the future of property market in Ireland....but what's your view?

I cant see house prices in dublin decreasing. I think they will continue to rise for at least another 3 years, appartments will increase but at a smaller rate.

The demand in Dublin is high enough to maintain the increase, the population in dublin is due to increase to 2 million in the next few years is it not?

There are houses in Lucan that have increased in value by 10% since the beginning of the year, many 3 beds there were 295-300 at the start of the year, they are now 325-330. The increase there I think was due to the FTB's being exempt from stampt duty up to the 317 mark. Can we expect another sudden increase when the SSIA's come on stream? Probably.

On one extreme you have the irrational optimism; the people who have placed their future dreams in property so in the face of any and all facts they believe house prices will rise to higher and higher levels and they will always find someone willing to pay more - lots more - than they did.

On the other extreme you have those who believe we are in a massive debt-fueled property bubble that is beginning to resemble the Hindenburg Zeppelin; and when it falls it will leave Ireland as the economic basket case of Europe for many years.

Then we have our financial elite who are promoting the middle-ground with the soft-landing scenario. It sounds like they are saying that when the dice is cast, it will land on 3.5

Personally I have other concerns with the soft-landing or stagnation scenario. Investors have been accepting very low yields, because they expect capital gains. So what could a soft-landing actually mean? It could mean better opportunities seen elsewhere. It could mean just waiting for bad news to happen to go negative. It could mean lots of risks and difficulties and not much of the return. It could mean investor exit plans kicking in.

For this reason and for quite a few others my own stance on property is that there is more downside risk now than at any point in the recent past. Impossible to time it though because of the emotion/psychology aspects so we may see further increases before a top is reached.

There's plenty of good advice on this site regarding diversifying portfolios that are over reliant on property but it's really up to each individual to choose.

So rollup, place your bets, sit back and let it ride...

Anyone thinking of "investing" in property in the current environment would really want their heads examined. The "financial elite" are misleading the population. Oil, international uncertainty, ireland's loss of competiveness, job losses in multinationals need I go on. Have a look at the following link about Germany

[broken link removed]

It is now the world's largest exporter. It exports more than the US and has a bigger trade surplus than china and india combined. Yet our "financial elite" are still talking about Germany's depressed economy. They are supressing stories that indicate a strengthening germany and rise in interest rates. When the tide turns though it wont be them that get burnt but the people that have been swallowing their nonsense.

The Irish Central bank figures on mortgage and non mortgage credit growth are staggering. Has any country ever had similar figures and then had a soft landing?
I don't know,maybe if the ECB raises rates slowly over the next few years there'll be a soft landing.

Amazing to think that just over a year ago, the Brits were as "property mad" as we still appear to be today. What a difference a year can make !

The telegraph mentions a woman who wants to sue her surveyor because her property is worth so much less today than what she paid for it a year ago !!

For many homeowners, falling prices already are a reality. Not that all seem able to believe it. On one online property forum last week a woman from Cambridge wrote in to say that her property, which she bought for £350,000 last year, had now been valued at £300,000. She wanted to know if she could sue the surveyor who had valued it at £350,000 in her homebuyer's report.

That certainly is a novel way of losing money in the property market: running up large legal bills trying to sue a surveyor who did not spell it out in idiot's language that house prices can go down as well as up.

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http://www.telegraph.co.uk/property/main.jhtml?xml=/property/2005/09/05/prat04.xml&sSheet=/property/2005/09/10/ixpright12.html

But never fear you can now earn 5,000% yes thats 5,000% in the latest craze to sweep Ireland. Phone your physic now the will no doubt confirm that massive profits are achiveable,

http://www.unison.ie/meath_chronicle/stories.php3?ca=34&si=1451811&issue_id=12875&printer=1

The SBP reported yesterday on a new Euro law to help combat pyramid schemes

A pyramid scheme is essentially a scam where ‘investors' pay a sum of money to enter a pyramid and are promised a financial windfall ...The people who set up the scheme may make significant sums of money.

However, the further down the pyramid investors are, the more likely it is that they will lose money. Every pyramid eventually collapses when there are no more willing recruits, leaving those who have recently joined the scheme nursing their losses.

Click to expand...

Wow! looks like EU are set to outlaw the Irish property market

Was listening to a debate on newstalk106 a day or two ago and one of the guests said that of the 70,000 units built last year - 30,000 are currently lying vacant.

Anyone know if that figure is accurate..?

Soma - a surprisingly-large proportion of all Irish properties are lying empty or at least not in the statistics as PPR. The academics and economists are trying to puzzle it out. There are half-a-dozen excellent articles in the AAM archives with links to articles on this phenomenon.

might holiday homes account for a large amount of these. As I remember a large proportion of these completions were second homes, incentives in coastal resorts have a lot to answer for!

I think the cause of concern is why there is very rapid growth in the number of vacant properties (holiday homes etc.) and what are the underlying reasons (surely not just leisure) why people are acquiring and holding vacant properties.

Trying to answer these questions can give clues to the "frothiness" factor of the housing market.

e.g. Could we be looking at a "PIPS" factor here ?

I think you would be surprised as to the amount of people who purchases homes purely as holiday homes, not particularly expecting or caring about capital appreciation. I know that anyone I know who has such a property has it solely as a residence they can escape to at the weekends or perhaps have it for their retirement. Obviously my poll ain't very scientific!!

My own experience aside, I do feel that tax incentives in coastal resorts have contributed to purchases, as people can effectively buy these properties at vastly reduced costs due to the incentives, they do so, again they don't care if they can rent them out, they would prefer to, but as long as the price holds steady at worst they will make money.

The oft' quoted figure for 2004 is 30,000 units out of 78,000 are still vacant. We'll likely see a similiar figure for 2005. These are unprecedented numbers and I don't think anyone knows with certainty the underlying story behind them. I don't think it's even known what percentage are holiday homes.

I'll say it again hats off to the Irish construction industry. If the current output can be maintained and other factors fall into place, Ireland's house price issue could be solved for many years to come...

yeah, we could end up like Italy with thousands of vacant properties, falling into disrepair (many of them apartment blocks built in scenis areas).

Duplex said:

The damage that a bursting bubble would do to the Irish economy is frightening.

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Indeed it is very frightening. I looked at buying a house, as an investment, two years ago.

All the factors pointed towards quite a recession (I have experience of the UK 80's bust) so I didn't buy. At the time I didn't see house prices going down too much but I had big concerns about rental yield and actually letting the place as the market was becoming more and more saturated.

So many people in Ireland say it will never end but they are wrong. The growth will end and the bubble will go pop. It's not if, but when. One thing that certainly will not help Ireland is the maturing SSIA's. Yes, the smart ones will divert the money to pay chunks off mortgages but I suspect the majority will buy cars/holidays/electrical gizmos etc.

If the bubble bursts here (if Merkel gets in with her desired partners proper reforms might take place which would lead an increase in interest rates at an accelerated pace I believe) the knock on effect will be felt across the economy. Pubs will be hit by people cutting back on their discretionary spending, car sales will be hit and the high street will be hit. Just look at what is happening in the UK as their house prices are falling (and will fall more according to the FT)

I believe the government have alot to answer for, they should have being doing all in their power to take the heat out of the market and discourage speculators. The problem is that the massive inflation in houses has been a huge boost to the economy. When you think about it when someone takes out a 200,000 euro mortgage, that money flows into the economy immediately, so all those big morgages are giving some boost to the economy today!!!!!! The problem is that those mortgages will have to be paid back over the next 25 to 30 years. so all that money will be taken back out of the economy for the next 25 to 30 years causing one heck of a drag. This is the reason why property bubbles should never be allowed develop simply because of the huge quantities of money involved. In the past if we got into difficulty we could have devalued the currency allowing inflation to reduce the real debt. Unfortunately this option is no longer open to us. A strengthening germany can only result in one thing "a strengthening euro" and rising interest rates. I guarantee that within the next 5 years Irish politicians will be calling for Ireland to leave the euro for this exact reason, it will start to cripple the irish economy

It may well prove to have been a massive mistake by McCreevy to reintroduce the deductablity of mortgage interest for investors back in 2001. Then we probably had the so called 'soft landing' however as we know the builders' lobby is a strong one!!