# Future price of Irish properties



## bacchus

* 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"

--------------------------

* 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.
--------------------------
You would have guessed i am pessimistic regarding the future of property market in Ireland....but what's your view?


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## SteelBlue05

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.


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## CoffeeBrew

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...


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## joe sod

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.


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## tyoung

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.


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## CoffeeBrew

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.


 


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


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## Duplex

The Irish bubble has reached such a colossal size that it has become invisible to anyone trying to see it in Ireland, it dominates our economy, our media, our banks  and our futures.  Daft will report falling rental values in their latest report according to the SBP,  the number of empty properties and debt are skyrocketing we are falling down the competitiveness  league table at an alarming rate, house prices are falling across the UK, inflationary pressures are building across the global economy.   The damage that a bursting bubble would do to the Irish economy is frightening.


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## Duplex

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


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## CoffeeBrew

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.


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


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## soma

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..?


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## Marie

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.


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## Glenbhoy

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!


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## CoffeeBrew

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 ?


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## Glenbhoy

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.


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## CoffeeBrew

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...


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## Glenbhoy

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


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## Smi1er

Duplex said:
			
		

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


 
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.


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## beattie

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)


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## joe sod

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


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## Glenbhoy

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!!


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## Duplex

If the Irish Central Bank still had control of interest rates what base rate would we have today?


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## soma

Duplex said:
			
		

> If the Irish Central Bank still had control of interest rates what base rate would we have today?



At a guess.. somewhere between 5-7%. (my $0.02)

For all intents & purposed, 'real' interest rates are virtually zero when take into acount I.R.s minus inflation.

It's been said before, but we're a boom economy operating under interest rates suitable for an economy in recession, anyone know of an international precdent for this..? May be hard to find as I think the concept of sovereign nations not determining their own interest rates was relatively rare before the EU. (?)


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## Glenbhoy

hard to know exactly, if we go to high our exports become too expensive, thus we may not be so attractive for the US mnc's.  Though on second thoughts, maybe they would not mind, after all the reason for having multinational european hq's here is so that they can charge inflated transfer prices to their european subsidiaries and thus pay irish corporation tax (great for us), hence it does not matter what price they charge the subsids.  However where mnc's are involved in selling to the european market we could have problems.  As usual we would probably stay somewhere similar to UK rates - say 5%


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## joe sod

Glenbhoy said:
			
		

> 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!!


 
Yeah i agree fully with your posting. The nettle should have been grasped in 2001. Up to 2001 the government was very worried about the then house price inflation what with the bacon report etc. However when the measures started working and prices started to drop in 2001 they quickly backed off. It was then a case of shoot the messenger ie "bacon". It is notable that  as more and more people have got on the property bandwagon and as it now constitutes such a big part of the economy, any measures to bring down property prices are a "political no no". So Germany and the ECB will eventually decide its fate now that the irish government has abdicated responsibility.


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## Gringo78

My own opinion of the holiday house schemes in certain coastal towns is that while definetly causing a rapid increase in house price in these areas, it did have the desired effect of tourism growth. In my own hometown with a population of around 8000 people there have been over 500 new houses built over the last 5 years as holiday houses and these are actually being successfully rented out and due to the terms of the tax incentives are not available for year round lettings and so have not damaged the normal year round rental market. The increase in tourism to the town has been invaluable to the local economy and the rental returns from holiday letting during June/July/August means the rental yield on a property costing c. 220,000 is very good and covers complete mortgage payments, not just interest repayments. I think people buying houses, leaving them vacant, expecting that in 3 years they can sell them on with a nice capital appreciation are getting themselves involved in a pyramid scheme. If growth slows to 1 or 2% a year, never mind a property price decrease, these type of investors are in trouble. Houses are barely affordable as it is and rents do not cover repayments on apartments so if people are relying solely on capital appreciation to make money and would lose money if they cannot sell the property, then they are playing a dangerous game. Perhaps in a few years time there will be some bargains to be had. With the price of hotels in Dublin at the moment, I think there may be signifcantly higher rental yields to be had in renting out apartments week by week to tourists as an affordable alternative to hotels so maybe some people would be forced to go this route.


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## ubiquitous

> 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!!



The so called "soft landing" in 2001 was nothing of the sort. Landlords were coining it as rents had ballooned in the absence of competition from new lettings. At the same time, tenants were experiencing problems in sourcing accommodation due to shortages of properties for letting. Had the Bacon measures (then almost five years in operation at the time) not been repealed, prices would have continued to rocket, shortages of accommodation would have worsened and existing landlords not wholly dependent on mortgage finance would have found themselves in an uniquely profitable position.


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## Smi1er

soma said:
			
		

> At a guess.. somewhere between 5-7%. (my $0.02)
> 
> It's been said before, but we're a boom economy operating under interest rates suitable for an economy in recession


 
I disagree.

The Irish economy is certainly not operating under interest rates more suitable for a country in recession. You need high interest rates to calm it all down.

IMHO Ireland was booming before joining the Euro so you were unable to increase rates as you had to meet the low interest rates needed for Euroland. This in fact fuelled the boom. Remember that the Euro is geared around France and Germany.

Your high interest rates will come, but only when France and Germany say so. Until then your boom will continue.

Mrs Smi1er visits Ireland 2-3 times a year and ever since the Euro came in Ireland has got unbelievablely expensive.

I hear people saying it will never end. But it will. And an awful lot of people will be hurt.


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## Glenbhoy

Ubiquitous, 
I don't know that I fully agree with you, from my recollection was there not a cgt of 20% on development land at that stage, however that was supposed to be for a limited time only, the belief being that developers would free up their land banks before the rate increased again to 40%. This should have meant that the supply side of the market was incentivised (is that a word) to release land for development.  The figures show that completions in 1999, 2000 and 2001 were approximately 50,000 per annum.  The fact that property prices had slowed down shows that without the super-extra demand created by investors, demand and supply were in quasi equilibrium.  In addition, given that rents were rocketing, surely there was enough premium in rent to attract a certain amount of investors regardless. (I',m only bitter about all of this cos I was a student and missed out on it all, leaving me to purchase at exorbitant prices!!)
Also, i may be wrong on this, but i think Bacon only came in mid 98 did it not?


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## ubiquitous

Hi Glenbhoy

Problem was that by 2001, the rate of demand for residential accommodation in Ireland (mainly due to immigration) had far outstripped the forecasts of Bacon and other economists from the 1997-98 period.

There was no real slowdown in property prices in 2001, except for a temporary nervousness in the market for a couple of months following the September 11 2001 terrorist attacks. This nervousness had dissapated by the time Charlie McCreevy launched the 2002 Budget in early December 2001 and McCreevy was sufficiently confident at that stage in the soundness of the construction sector that he increased the VAT rate on construction from 12.5% to 13.5% in that Budget

It is wrong to say that investors created the demand that there was for rented accommodation. That demand was there anyway due to demographic factors and the booming economy. Investors and developers merely serviced this demand by providing additional accommodation. They were extremely inhibited in doing so by the Bacon measures up to 31/12/2001. This inhibition caused a bubble to occur in the rental market in 2000 & 2001 as existing landlords increased their rents in the absence of competition from new landlords. Once Bacon was scrapped this bubble disappeared, normal market conditions resumed and rents quickly decreased. 

The Bacon anti-investor measures were introduced in March 1998 and remainded intact until the end of December 2001 - 3 years 9 months and not 5 years as I stated above.


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## CoffeeBrew

Other than waiting for oversupply and the ECB to end this binge, what can be done now ? 

Some possible solutions I've seen:

We can't increase interest rates but the financial regulator can increase the banks' capital reserves on mortgages. This would reduce the amount the banks would be willing to lend and in turn reduce the debt burden that people can assume. Going after the source of the problem like this could cool things down very quickly. The regulator has been threatening to do this but has not acted on it yet.

More balanced reporting in the Irish media to raise awareness of the risks of overheated housing markets.

Tax on hoarded land to encourage its release for development as suggested by Hobbs.

Tax on second properties as suggested by ESRI.
Anything else ?


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## soma

Smi1er said:
			
		

> I disagree.
> 
> The Irish economy is certainly not operating under interest rates more suitable for a country in recession. You need high interest rates to calm it all down.



Sorry mate but you've got it completely backwards.

Sovereign nations have low interest rates (in this case, incredibly low) to stimulate growth by making money cheap when there is very little activity in the ecomomy. The only reason we still have these low IRs, is that we dont control our interest rates, otherwise we'd have a minimum IR of at least 5%.

As you say "You need high interest rates to calm it all down" - you're talking about high interest rates to calm down heating economy - exactly what will happen when france/germany/italy get out of the doldrums.

Just look at the USA, Greenspan had interest rates extremely low due to their recession, but once the economy started to get healthy & busy, the interest rate increases started - they had ten straight interest rate hikes.

recession = low interest rates
strengthening/overheating economy/massive credit surge = rising interest rates (*when* you can control them)


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## Glenbhoy

I worked for a while with one of the banks, checking to ensure that branch managers and underwriters etc were applying the correct criteria to mortgages issued, ie ensure that wages stated by applicants were realistic and that deposits  came from verifiable sources etc (ie not loans).  My remit was to ensure that mortgages issued by the bank complied with central bank guidelines which were essentially:
92% LTV max.
Remaining 8% was not a loan, ie had to be savings, giift etc.
Affordability - loan repayment was no more than 35% of net income of borrowers.

That was 2 years ago, since then most of these guidelines have gone out the window, Ulster bank started it with the 100% mortgage for professionals, and now they all offer a 100% mortgage, surely at this stage in the cycle  it is dangerous to offer these products?  Whilst it is acknowledged that the central bank cannot be responsible for peoples actions, maybe if these guidelines had been enforced, things could have slowed down earlier?  I dunno, probably just being pessimistic, now where's that half empty cup of coffee i left somewhere?


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## CoffeeBrew

Glenbhoy you just reminded me of a 'fifth' bullet in my possible solutions list above.

Clamp down on cheating and the banks collusion in cheating during the mortgage application process.
Did you have any direct experience of this ? No worries if you can't discuss.


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## Duplex

The question is why do central banks attempt to reign in liquidity by raising the cost of borrowing.  The Federal Reserve has upped rates, if you read Greenspans statements, to address the US housing bubble, what threat was the bubble to the American economy if CPI was steady at around 2%, what happens to an economy if an asset bubble bursts? 





As for measures that the Irish Central Bank could take, any credit squeeze would more than likely wreck the economy and I can’t see anyone volunteering to take action, gust a little gentle chiding, it’s easier to blame irrational exuberance, ask Greenspan.-


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## Glenbhoy

Coffeebrew

Whilst I won't discuss my own experiences, I would be quite sure that this goes on in places, I'm sure we've all heard the stories of which broker/bank etc to go to if you want a mortgage forced through.  It would be extremely easy to do given the laxness of checking procedures.

Duplex

Perhaps if the central bank guidelines had been enforceable (and enforced, policed by the CB) and remained as they were 2 years ago that would have helped keep the upward momentum in check slightly, I agree with you things are very delicately poised at the moment and no-one want to be the one to do anything to disturb it, however  the reality is that rates will rise in this country, then we will see how accurately the stress test applied by banks on new borrowers works!!


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## CoffeeBrew

Macfarlane the Reserve bank governor in Oz, Mervyn King Bank of England, Greenspan of the US Fed have all now taken action to protect their economies
and citizens from overheating housing markets.

They obviously figured that doing nothing would have worse consequences than taking some proactive steps - despite the risk of a reaction to those steps.

Same figuring should be applied here, I think. To use Joe Sod's phrase, we can attempt to "grasp the nettle" now in a measured sense or we can face potentially worse consequences by continuing to do nothing on the "easy credit" side.


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## tyoung

Duplex
 Low interest rates discourage saving and encourage borrowing consumption and debt accumulation. They also can lead to inflation and asset bubbles. Asset bubbles whether in stocks or property make people feel wealthy and so further encourage debt and speculation and discourage savings. This has happened in the US. the UK and Australia. So far I don't think the saving rate has fallen dramatically in Ireland.
Bursting asset bubbles make people feel poor. They stop spending and increase saving. Think of the 1930's or Japan in the 1990's.
There has been a lot of debate about what central banks should look at when setting interest rates. Should it just be the CPI or should they include asset prices? My opinion is they should look at the price of everything money can buy including stocks bonds property and commodities as well as the CPI.


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## Smi1er

soma said:
			
		

> Sorry mate but you've got it completely backwards.


 
Apologies. I took your context wrong in your original post. You are correct.

I wouldn't quite say the likes of Germany, France, or indeed are in a recession. Certainly a light recession.

However, tougher times are around the corner and looming quicker and quicker.


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## CCOVICH

tyoung said:
			
		

> So far I don't think the saving rate has fallen dramatically in Ireland.



But it will be interesting to see what savings rates do after the SSIAs have matured.  And also after the launch of 100% mortgages.


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## Duplex

I believe that any debate on the state of the property market and the existence or otherwise of a speculative bubble should tackle the issue of behavioural economics and investor psychology.  



Classical economic theory ignores to a great extent human psychology and the concept of heuristics, the short cuts the human mind is designed to make in accessing new information.  Issues such as positive affirmation, herding, low risk weighting and denial all play a part in irrational exuberance and the formation of speculative bubbles. People can make money in bubble markets, but not all the people all the time, (avoid being Paddy last as David Mc Williams says).  



The problem is that most people believe themselves to be shrewd investors, some are, most are not.  Attempting to persuade someone that they are mistaken by investing in an off plan apartment in the Costas in today’s market, is akin to talking down a jumper on a skyscraper, people do not like to be told they are behaving irrationally.






> “You'd think these people would've recognized by now that whatever investment success they had in the late '90s was due solely to one of the most massive bubbles in the history of stock markets, and that they should get out while they still have even a little bit of money left. I'm sure some are doing so, but many aren't because they'd have to acknowledge some extremely painful truths (e.g., they should not, and should never have been, picking stocks; they speculated with their retirement money and frittered most of it away, and so on).”
> 
> Charlie Munger


 



> There are styles in securities as there are in clothes. A security may be undervalued, but if it is also out of style it is of little interest to the speculator. He is, therefore, compelled to study the psychology of the stock market as well as the elements of real value. - _Phil Carret _


 





> ..if anything, I make as many mistakes as the next guy. But where I do think that I excel is in recognizing my mistakes, you see. And that is the secret to my success. The key insight that I have reached is recognition of the inherent fallibility of human thought. - _George Soros _


  






> Never adopt permanently any type of asset or any selection method. Try to stay flexible, open-minded, and skeptical. - _John Templeton _


 






> "The market does not move consistently with interest rates, consumption," dividends or productivity, he said. He believes investment bubbles such as the Internet stock craze of the 1990s in the United States and the tulip bulb mania of the 1630s in Holland drive a stake through the heart of rational-expectations theory.
> _Robert Shiller_ Professor of Economics Yale University


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## CoffeeBrew

I've often thought there must be great opportunities for study in this area in Ireland.

Wouldn't it be fascinating to see a study that attempts to reveal what's going on in people's heads as they outbid each other to record levels?

I'd imagine in the future there will be a lot of interest here and abroad of the "lessons to be learned" kind in the situation we are experiencing now.

Shame the property market is so closed that a lot of the details and the thought processes might be lost to history.


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## Duplex

Having said all that;

[broken link removed]

Look at the first page, the guy is laughing and drinking a glass of champers, you to could be laughing and drinking champers, very tempting.


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## gearoid

Duplex said:
			
		

> Having said all that;
> 
> [broken link removed]
> 
> Look at the first page, the guy is laughing and drinking a glass of champers, you to could be laughing and drinking champers, very tempting.



I believe the following article from the Evening Standard catalogues the collapse of Mr Michael's empire. Surprised the website is still up!

http://www.findarticles.com/p/articles/mi_qn4153/is_20050817/ai_n14877496

On the subject of bubbles and signs thereof. What do folk think of the Jury's site being re-developed as apartments?


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## joe sod

"The question is why do central banks attempt to reign in liquidity by raising the cost of borrowing. The Federal Reserve has upped rates, if you read Greenspans statements, to address the US housing bubble, what threat was the bubble to the American economy if CPI was steady at around 2%, what happens to an economy if an asset bubble bursts? "


The CPI is one of the most manipulated statistics of all. The reason it is manipulated is that what it says has far reaching consequences. The actual inflation rate in other words the inflation rate that people feel is far higher than the CPI. For example the things which have risen the most in the last few years such as housing costs, rent, petrol, healthcare are not included in the CPI. The basket of goods which is included are in areas where pricing power is poorest such as food and clothing and where competition is fiercest. By keeping the CPI artificially low politicians can claim all is well and that the economy can cope well with higher oil prices. However people know something is wrong because they feel their money does not have the same buying power. Look at the reaction to Eddie Hobbs and to paraphrase his catch phrase "The low inflation economy is a myth". The CPI is like a messenger on how the economy is performing but that messenger like stalin's messengers is only allowed deliver good news.


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## owenm

What puzzles me: Every dog in the parish knows their is a bubble, but a bubble _by definition_ burts. This one hasn't burst yet. so when the hell will it? we are still waiting and waiting...for ecb rate hikes for .....what. If we get another year of modest to flat growth before the ecb lets loose how much of the bubble remains ?


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## tiger

gearoid said:
			
		

> What do folk think of the Jury's site being re-developed as apartments?


 
I think Jury's will be the begining of the end, for me the no.s just don't add up.  To make a return on their investment, they will have to build a thousand odd appartments.  This will result in a "site" cost of approx E250,000 per appartment.  Construction costs will be at least the same (a high quality of fit-out will be expected).

I would guess when they come to market, the asking price will be E750K + for the smallest units, with most being priced at over 1 million.

What happens when there aren't a thousand people waiting to spend over 1 million on an appartment ?


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## soma

owenm said:
			
		

> What puzzles me: Every dog in the parish knows their is a bubble, but a bubble _by definition_ burts. This one hasn't burst yet. so when the hell will it? we are still waiting and waiting...for ecb rate hikes for .....what. If we get another year of modest to flat growth before the ecb lets loose how much of the bubble remains ?



Just take a look at this article to see just how much this bubble is staring us all in the face:

from today's irish independent
http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1470610&issue_id=13012

>>>>>>>>
 IT may be the most expensive property in the world. 

 A 10-foot wide former tool shed literally squeezed into a terrace in The Liberties area of Dublin is about to be snapped up for a whopping €220,000 although it measures a mere 280 sq ft. 

 Billed as Dublin's smallest house, the mid-terrace mini-home at 25a John Dillon Street in Christchurch consists of a combined livingroom/kitchen and bedroom with ensuite bathroom divided by a spiral staircase. 

 It has no main floor windows or back garden and even made property history at the height of the Celtic Tiger boom when it sold for €140,000 in 2000 - a record price of €571 per square feet. 

 Its would-be owner - who has agreed to buy the property for €220,000 will be laying down an astonishing €785 per sq ft for what used to be used as a tool storeroom by workers for Dublin Artisan Dwellings who built many of the Victorian terraces in the area. 

 It was built as a result of a building blunder in which the Victorian-era builder found he had extra space in the middle of the terrace after building from the outside in. 

     It had been rented to the company's workers until the 1970s when it was sold to a tenant for a more reasonable £500. 

       Young's Auctioneers, who have had the house on the market since May, refused to comment. 

*But Michael Kilcoyne, chairman of the Consumers Association of Ireland, said it's a sign of a property market gone mad. 

 "It shows you it's gone off the rails. There is no property that is worth that kind of money and it is probably the most expensive property in the world," he said.* 

 But house hunters can take heart from a more modestly priced property. A former haven for poteen bootleggers in a Co Mayo island has gone on the market for €150,000. 

   It consists of 35 acres of land on Glass Island in Lough Conn, a prime trout and salmon lake. 

     Castlebar-based auctioneer Tomas Collins said the tranquil island would make an ideal setting for a holiday home. 

*Allison Brayand Tom Shiel*


----------



## Duplex

The best case scenario for the government would be a gradual tightening of ECB rates, this would allow an organised retreat for the Irish Economy away from the speculative era.  But bubbles do not require monetary tightening to bust, and once a bust is evident central banks nearly always attempt to reflate by lowering the cost of borrowing anyway as in Japan, US and UK in the early 90’s. These liquidity splurges were unsuccessful mainly because it  takes an economy (i.e. consumers)  some time to recover from the excesses  of a credit fuelled boom.   



There are  many instances of speculative markets crashing without a regulatory credit squeeze;  a change in the numbers of participants is sufficient;  bought about by a dwindling in the number of people who can afford or are inclined to join the pyramid at the base, even with the aid of 100% mortgages.    The coming to light of new information, such as falling housing markets in other economies may affect sentiment and of course rising unemployment would impact the market.  I think good leading indicators for the Irish market are the US and UK housing markets, where they go we will probably follow. ( where the US economy goes everyone will follow for that matter.)   





At the moment the construction and related industries are the central pillars of the economy it seems certain that the number of new homes being built will fall over the coming years, possibly dramatically if the market busts.  Any downturn will impact Irelands ‘guest workers’ hardest as they tend to work in the ‘frothier’ parts of the economy , how many would or could remain in a downturn is questionable if greener pastures are available. 



One last point , when the Euro was introduced the problem of a one size fits all monetary policy in a continent with diverse economies was supposed to be addressed with national taxation measures targeting excess liquidity or otherwise.  The Germans failed to reform a taxation system that has stunted growth while the Irish have failed to target fiscal policy at a dangerous speculative bubble.  But that was then and this is now.


----------



## CoffeeBrew

Trichet, interviewed by the Irish Times, dropping big hints that national action is needed on our overheated property market



> The president of the European Central Bank which sets interest rates for the euro zone, Jean Claude Trichet, has showcased Ireland as an example of how countries can succeed within the euro area. However, he sounded a note of caution on property prices.
> .
> .
> "Although not alarming at a euro-area level, we have a lot of good reasons to follow up and monitor closely what happens in countries of the euro area. In some countries of the area - which are very dynamic and have a lot of real growth - there is a case for as appropriate national action as possible to calm down the market," he said.


 
Will anyone listen ?


http://www.finfacts.ie/news/irishtimesnews.htm


----------



## beattie

I don't think the government will listen, they collect too much money from Stamp duty and the last thing they want is their war chest to be depleted two years before an election


----------



## CoffeeBrew

At any cost...



> Aboard the SS Titanic on her maiden voyage a helmsman firmly took the wheel. Behind him stood two powerful figures, the ship’s Captain, Edward John Smith, and Bruce Ismay, the Chairman of the White Star Line. Behind them stood the prestige and power of the owner of the White Star Line, Ismay's father.
> 
> "There is testimony that Ismay urged the captain to maintain maximum speed,"
> 
> said Bisset, one of the first men on the rescue scene after the sinking. Thus the helmsman aboard the Titanic actually wielded little power, exercised little judgment, aside from spinning the wheel. Those who stood behind him in the shadows set the course and determined the speed (and were wholly responsible for the ship).
> 
> A New Atlantic Speed Record for her maiden voyage became an enviable goal. All that was required was an increase in power, and thus, speed for the entire voyage.


 
Are there enough lifeboats ?


----------



## Theo

Property is a long term investment.  Take Dublin residential property, say Ranelagh.   Are these properties likely to be worth more than they are now in 20 years time, or do you think they will be worth less than they are now in 20 years time, in real terms?

As long as I can remember, property has always been expensive, until you looked back 20 years later and said, "if only........"

It was like that in the 50's, 60's,70's,80's, 90's and its like that today.   
I do think that Dublin property is currently not good value IF you are an investor looking for an exit in 5 years that will reap huge returns.  If you have the long view and can ride out the storms that inevitably pass us by from time to time, then it can prove to be very lucrative indeed.  The problem is that in our current instant, throwaway society, few people have the patience and discipline required to achieve it.

So in answer to your original question on the future of irish property prices (i'm assuming we're talking residential),  it is yes and no, depending on the person buying the property.

t


----------



## CoffeeBrew

If someone is looking to buy a property to hold for 20-30 years then I say why not wait 2 or 3 years before buying? This is very small amount of time compared to the period you plan to hold the property.

Why wait? Global property markets in general and the Irish property market in particular are out of balance and appear to be reaching a critical phase. In addition, our leading bank economists are indicating a dramatic slowdown in price increases.

If, however, none of this matters and the potential buyer is convinced they are not buying in the middle of what appears to some to be a massive house price bubble than by all means - go buy now !!


----------



## Murt10

I believe that property prices in Ireland are way overvalued.

I have only one house , my PPR, which I cannot/am unwilling to gamble with.

Has anyone any idea of how to short the Irish property market.


Murt


----------



## Theo

CoffeeBrew said:
			
		

> If someone is looking to buy a property to hold for 20-30 years then I say why not wait 2 or 3 years before buying? This is very small amount of time compared to the period you plan to hold the property.
> 
> Why wait? Global property markets in general and the Irish property market in particular are out of balance and appear to be reaching a critical phase. In addition, our leading bank economists are indicating a dramatic slowdown in price increases.
> 
> If, however, none of this matters and the potential buyer is convinced they are not buying in the middle of what appears to some to be a massive house price bubble than by all means - go buy now !!


 
You're absolutely right.  If the goal is long term, waiting is always an option.  It may be that there is an element of panic in some property markets at the minute and we all know where that leads.  If a person is the type that panics when buying, it is likely that person will also panic when selling.  Fools truly rush in............


----------



## Duplex

> Has anyone any idea of how to short the Irish property market.


 

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-15T191832Z_01_N15301_RTRIDST_0_PROPERTY-SHORT-STOCKS.XML


American homebuilders such as Toll Bros have seen a lot of insider selling over the past few months.  I would'nt go shorting Irish Builders or Banks until the writing is on the wall for all to see.


----------



## RainyDay

Murt10 said:
			
		

> Has anyone any idea of how to short the Irish property market.


I think one of the spread-betting companies had an option to bet on movements of one of the house price indices.


----------



## CoffeeBrew

Theo said:
			
		

> ... It may be that there is an element of panic in some property markets at the minute and we all know where that leads. If a person is the type that panics when buying, it is likely that person will also panic when selling.............


 
Well put, Theo.



			
				Duplex said:
			
		

> I would'nt go shorting Irish Builders or Banks until the writing is on the wall for all to see.


 
I'd agree with that also. Now might be a good time to think through the process but not necessarily execute it. 
E.g. research trading strategies & understand how to keep any losses under control, identify the stocks that will be vulnerable, have an account set up and ready to go (e.g deltaindex, others?), get a feel for entering and exiting short positions using a simulator (no real money involved).


----------



## joe sod

"I would'nt go shorting Irish Builders or Banks until the writing is on the wall for all to see."

Yea I agree with this also, since 2001 I have been bearish on residential property. However many people have predicted the end of the boom and it hasnt happened yet. If you had been shorting banks or builders over the last few years you would have lost alot of money. Alot of people have been predicting the "if" its the "when" thats the problem and its the "when" where the money is to be made. Having said that I am convinced the "when" is now nearly upon us, the retirement of Alan Greenspan will be a key event it is him and him alone that has maintained this global bubble the "biggest bubble in history" to quote the economist. Even George Bush was afraid to get rid of him. Im sure who ever takes over the FED will preserve him like a relic they will entomb him like Lenin to maintain confidence in a failed ideology. Liberal economics is dead just like communism but it will take thirty years before the masses realise this. On a completely different note unions I hadn't heard of since the 1980s are now making the news again the ATGWU. YOU are going to hear alot more from these before the decade is out.


----------



## delgirl

Next Monday - the return of RTE’s “Big Bite” current affairs program hosted by David McWilliams at 2:30PM. 

The panel will discuss the Irish property situation, bubble or not.


----------



## CoffeeBrew

I'll have to set the recorder for that one.

By the way.........

Dublin's average house price now exceeds that of London's !!!!   

[broken link removed]

(Note the Dublin average has gone even higher since the survey gathered its data: It's now greater than E 350,000 )


----------



## Duplex

The Jurys Doyle site sells for 53,000,000 an acre. Dublin now more expensive than London ? their must be some rational explanation  

http://www.bloomberg.com/apps/news?pid=10000102&sid=ah8NnSt.33wk&refer=uk


----------



## CoffeeBrew

Duplex said:
			
		

> The Jurys Doyle site sells for 53,000,000 an acre. Dublin now more expensive than London ? their must be some rational explanation


 
Well, we do have a lot of eastern european workers arriving here. This appeared to be the jist of the justification given by a prominent bank economist the other day. And I kid you not !!


----------



## ubiquitous

As if there are no immigrants in London...


----------



## soma

The view from bloomberg... they've pretty much decided we're all nuts 

http://www.bloomberg.com/apps/news?pid=10000102&sid=ah8NnSt.33wk&refer=uk


----------



## Marie

That link posted by CoffeeBrew states: _"Some 65.2 percent of Europeans owned their own property in 2004, compared with 62 percent the previous year. Spain has the highest rate of home ownership at 87 percent, followed by Ireland at 81 percent and Belgium at 78 percent."  _

If Ireland had 81% home ownership when that survey was done, and 70,000, and the rumour is that a third of houses are unoccupied, it is puzzling that prices keep climbing.

By chance today I caught an afternoon t.v. programme "A Place By The Sea" (don't usually watch daytime t.v.).  It featured a Limerick hairdresser who wanted to buy a holiday home in West Cork.  His choice was some rather wonderful cottages around Schull, Kinsale etc. at what seemed to me very reasonable prices (£190,00 to £250,000 stg).  I did a double-take when the programme anchor-person told him he could "expect to rent out a two-bedroom apartment for "about E1,000 a week" to cover the mortgage.  Yet I read recently that the tourist activity in the regions - anywhere other than Dublin - had fallen off _dramatically_ in recent years.  

As someone starting to think about relocating to Ireland for retirement it is very difficult to get a sense of the realities of buying a home.  If these 'vibrant centres of international yachting and tourism' are half-boarded up do I want to live there?  If the property 'bubble' is about to burst and the country go into deepest recession (and then go bust-after-bust because of the huge social services commitment rise in unemployment would entail) it might not be the most cheerful arena in which to land up.


----------



## CoffeeBrew

soma said:
			
		

> The view from bloomberg... they've pretty much decided we're all nuts
> 
> http://www.bloomberg.com/apps/news?pid=10000102&sid=ah8NnSt.33wk&refer=uk


 
Something to note on the Bloomberg article that Soma posted.

It raises the possibility of the we have a bubble in Ireland and quotes someone who believes the boom is ending.
Later on it quotes the chairman of McInerney Holdings who says the Irish market remains buoyant and continued strong demand is anticipated.
This might be an odd concept to the reader who normally relies on Irish media sources. It's called balance. It's starts out with the facts and then allows a deduction to be made from the facts but then invites another viewpoint.

It seems to me anyway that nearly all "reporting" from Irish sources on property issues seem to quote from estate agents or banks and allow their statements to go unchallenged or fail to invite an alternative viewpoint.

Here's an example:
http://www.unison.ie/business/stories.php3?ca=80&si=1477573

Where's the downside ? Where's the risk ? Where's the alternate viewpoint ? Amazing !

Occasionally a balanced article crops up but it within a few days it's lost in a flood of vested interest hype.

It's not just me is it ?


----------



## ubiquitous

Somebody said recently that property speculation is the new religion in this country, and just like the in days of John Charles McQuaid, woe betide anyone who challenges or dissents from the consensus view.


----------



## Duplex

Who ever pays the piper, names the tune.


----------



## evan

which banks are most vulnerable if the housing market collapses. Ive heard that northern rock are vulnerable


----------



## Carpenter

ACCBank have considerable interests in the development sector also.


----------



## RainyDay

evan said:
			
		

> which banks are most vulnerable if the housing market collapses. Ive heard that northern rock are vulnerable


As NR don't offer mortgages in Ireland, I can't see how this could be the case. Anglo Irish do have a substantial dependancy in the Irish & UK property markets, as far as I know.


----------



## Smi1er

Murt10 said:
			
		

> Has anyone any idea of how to short the Irish property market.


 
I know someone who did that to the UK market in the 80's bust.

He thought the bubble would bust. He sold his house they had lived in for 30 odd years (and needed a bit of work). With the money received they travelled the world in complete luxery (including Concorde and QE2) for 12 months. Came back and bought a house in the same street, done it up top to bottom and effectively it didn't cost them a penny.


----------



## royrogers

Will they put up interest rates??

http://news.bbc.co.uk/1/hi/business/896064.stm


----------



## beattie

Could happen but I would think unlikely at the current moment, the point about Germany still being in the infancy of a recovery is still the most critical one in my view. I do however think the rises will come sooner than many think and there could be more of them than envisaged by some economists over here.


----------



## le francais

I agree entirely on the property coverage by the Irish media being anything but objective, media in US and UK (NY Times, Guardian, Daily Express) becoming much more negative of late, maybe due to the fact that we have never experienced a property bust, always a first time.


----------



## CoffeeBrew

Even when an article is balanced, they often choose a headline that is not.
That way, people who are glancing or skimming will be given the "correct" impression.

For example:

http://www.unison.ie/business/stories.php3?ca=80&si=1480675

The headline here is:

*"House-build sector for a bumpy landing, but certainly not a crash"*


There we go, message delivered.


However what the author actually said was:


*"If the brokers are right, it will be a bumpy landing for the house-building sector, but certainly not a crash"*


You can see the use of the 'If' conjunction conveys an important condition in order for the headline to be true. That condition is dropped for the headline.


Also doesn't the SBpost sponsor property investment seminars around the country ?


----------



## Gabriel

CoffeeBrew said:
			
		

> Even when an article is balanced, they often choose a headline that is not.
> That way, people who are glancing or skimming will be given the "correct" impression.
> 
> For example:
> 
> http://www.unison.ie/business/stories.php3?ca=80&si=1480675
> 
> The headline here is:
> 
> *"House-build sector for a bumpy landing, but certainly not a crash"*
> 
> 
> There we go, message delivered.
> 
> 
> However what the author actually said was:
> 
> 
> *"If the brokers are right, it will be a bumpy landing for the house-building sector, but certainly not a crash"*
> 
> 
> You can see the use of the 'If' conjunction conveys an important condition in order for the headline to be true. That condition is dropped for the headline.
> 
> 
> Also doesn't the SBpost sponsor property investment seminars around the country ?




This is really clutching at straws. That's the nature of a HEADLINE. It's supposed to be catchy/ eye-catching.

"_If the brokers are right_, it will be a bumpy landing for the house-building sector, but certainly not a crash" would not make for a very good headline.


----------



## CoffeeBrew

Gabriel said:
			
		

> This is really clutching at straws. That's the nature of a HEADLINE. It's supposed to be catchy/ eye-catching.
> 
> "_If the brokers are right_, it will be a bumpy landing for the house-building sector, but certainly not a crash" would not make for a very good headline.


 
Wow !

Guess who's back back back...

It certainly got my eye - it seemed biased.


----------



## Gabriel

CoffeeBrew said:
			
		

> Wow !
> 
> Guess who's back back back...



I didn't realise this was a mutually exclusive club.



			
				CoffeeBrew said:
			
		

> It certainly got my eye - it seemed biased.



All newspaprers are biased. A journalist will always put his/her slant on an issue...whether it be house prices or the price of cheese. This applies to all articles in all newspapers.

However the omission of an IF condition (in a headline) hardly strikes me as particularly biased.


----------



## CoffeeBrew

Gabriel said:
			
		

> All newspaprers are biased. A journalist will always put his/her slant on an issue...whether it be house prices or the price of cheese. This applies to all articles in all newspapers.


 
House prices and cheese are similar in some ways - they're both a bit stinky. But housing is probably a more important issue to most people.

Even if some journalists are biased, the question is: on balance is the Irish media giving fair coverage to the downside and the risks to Irish citizens and the economy as house prices appear increasingly out of balance. Perhaps this deserves a thread of its own - with examples and omissions ?

I don't get to read every newspaper and article so perhaps I'm missing a few. I would actually like to be wrong on this issue. I'd like to think that the Irish media are serving well the hundreds of thousands of young people who are planning to acquire very significant debt in the housing market.


----------



## JR Rizzo

Smi1er said:
			
		

> - deleted -
> 
> Mrs Smi1er visits Ireland 2-3 times a year and ever since the Euro came in Ireland has got unbelievablely expensive.
> 
> I hear people saying it will never end. But it will. And an awful lot of people will be hurt.



The only certain thing in life is change!

and wrt property and interest rates, it doesnt happen overnight.

some famous quote about property prices and rates (I think its american)
about Property Crashes are like jumping off a high building, things may seem fine on way down, (eg thanks to estate agents hype and spin)
but then you obviously hit the bottom.

The point is, as you are falling oblivious to whats coming, you cant do anything about it.

Is a coming Irish property crash simply the inevitable "gravity" of higher rates in France and Germany??? 
They are gonna raise them when they have to and theres nothing we can do in Ireland!


----------



## Observer

Lets face it - you can construct perfectly reasonable arguments as to why property prices will certainly crash..................OR continue to soar.  

On the one hand, immigration at net 70,000 pa.  Low interest rates from the ECB.  Huge pent up demand from a (relatively) newly rich economy. LImited supply in the more desirable areas of Dublin. SSIA's coming on stream.  etc etc.

OR

Rising interest rates, stagnant growth in major EU economies, outsourcing of economic activity to wherever, immigrants can leave as easily as they arrive, possible removal of tax incentives.

Either scenario is plausible......you pays your money, you takes your choice!


----------



## Lemurz

Irish property prices will fall sooner or later!  The magic anwser of when! is the issue.

We talk of all these immigrants keeping property demand high.  What I can't understand is how they can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages?


----------



## Marie

Lemurz said:
			
		

> Irish property prices will fall sooner or later! The magic anwser of when! is the issue.
> 
> We talk of all these immigrants keeping property demand high. What I can't understand is how they can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages?


 
Well - the answer to this appears in the AAM columns every day with newbie landlords asking about how to handle Health Board income from rents!  _Taxes  - _it would appear - are paying _rents and mortgages_!  Even those of us who are not trained economists might find that particular 'loop' alarming.


----------



## Laurie

Observer said:
			
		

> On the one hand, immigration at net 70,000 pa.


 


			
				Lemurz said:
			
		

> We talk of all these immigrants keeping property demand high. What I can't understand is how they can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages?


 


			
				Marie said:
			
		

> Well - the answer to this appears in the AAM columns every day with newbie landlords asking about how to handle Health Board income from rents! _Taxes - _it would appear - are paying _rents and mortgages_! Even those of us who are not trained economists might find that particular 'loop' alarming.


 
To answer Lemurz’s question as to how immigrants can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages: in the exact same way the tens of thousands of Irish emigrants who went to New York or London in the 80s to work in low-skilled jobs paid their rents– by working long hours, sometimes having two jobs, and sharing apartments with a large number of fellow emigrants. 

Marie, the Health Board does not pay the rents of the tens of thousands of immigrants from Eastern Europe who have come here to work in the last year. To suggest otherwise is more than a little disingenuous.


----------



## CoffeeBrew

When I lived in Vancouver in the late 80's there was a huge influx of immigrants from Hong Kong as they exited their city prior to the hand-over to China.

Many of these immigrants were professionals and others well-heeled business folks having made fortunes in previous years Hong kong. Their arrival in Vancouver pushed house prices to extremely high levels.

It seems many people in Ireland are anticipating the same affect here with the levels of immigration and population growth often been quoted as a justification for the dizzy heights of property prices here.

But I wonder if our situation is quite the opposite. Our construction and services are attracting immigrants who are great people: hard-working and keen but earning low wages. Our situation is probably more akin to districts of California that have had large inflows of low-paid migrant workers from Mexico. It's not uncommon there also to see the long hours, the two jobs and sharing apartments and houses with a large number of fellow workers. And then when the business cycle changes downwards - as the construction industry will here - these areas can become quite depressed economically. You can imagine downward pressure on rents and house prices in many neighbourhoods if thousands of immigrants find themselves out of work and can't or won't return home.


----------



## Marie

Laurie said:
			
		

> Marie, the Health Board does not pay the rents of the tens of thousands of immigrants from Eastern Europe who have come here to work in the last year. To suggest otherwise is more than a little disingenuous.


 
Laurie - Nothing in _the least _disingenuous, and my comment is on an area of which I am more knowledgeable than most.  A good number of questions on AAM are from people enquiring about how the H.B. payments work.  They are interested in this sector because it is 'guaranteed' rent and - reading between the lines! they anticipate not having to be too particular about the state of the place, the safety of appliances or the quality of the decor and furnishings.   Three years ago I  inherited a half-share in my family home in Central Dublin.  Initially my plan was to 'buy out' my co-inheriting sibling (which she was willing for) and rent the house for the few years up to my retirement and return to Dublin in 2007.  Out of 30+ responses I received from a 'tester' advert, some 20 were from the Balkan countries.  The applicants had 'school English', they did not have/did not know how to open bank accounts to set up direct debits and offered cash-deposits; they did not have work waiting, they usually wanted an available house within _days_ of contact and the system appeared to be 'get a house first, then look for work'.  I found some applications very moving, was concerned for a number of them that their openness and trust would be abused.  I conducted protracted e-mail exchanges with three individual males trying to bring selves and family over (e.g. told them NOT to hand over any cash to anyone who asked in advance, sent them lists of banks/building societies in Dublin, mailed them info on moving to Ireland etc.)

Doubtless most of them are getting along perfectly well now, housed and with jobs........but as CoffeeBrew has written, the work is in construction, or packing-plants, or component-manufacture.  _If_  (and I sincerely hope it wont!) the Irish economy goes belly-up in the short to medium term then tens of thousands of these newcomers - most of whom have 'burnt their boats' and invested everything they have in relocating - will (rightly and justly!) require State support.  That will be the apotheoisis of the current powerful interdependencies between State, property market, construction industry, and immigrant labour.


----------



## Glenbhoy

Marie, I fail to see how your most recent post in any way backs up your earlier assertion that health boards are paying immigrants rents.  What you seem to say is that possibly in the future that may happen, but at present these immigrant workers are happily working in various jobs.  In addition there is a habitual residence condition in operation (rightly or wrongly) in this state which is supposed to prevent the payment of benefits to persons who have not been resident for 2? years or have no familial connections to the state (this may have to be rescinded shortly as it may be illegal under EU Law).


----------



## lotus

Hi all

I wonder do people believe house prices have now gone too high in Ireland to make them a reasonable option for investing in?

For people with little funds, residential investment can be the only option as the bank will not lend you money for investing in shares etc.

Are there places in Ireland where you can still purchase a house or apartment and the rent will cover the mortgage repayments? I wonder is one better to stick to the main cities or more regional towns?

Regards


----------



## RainyDay

lotus said:
			
		

> For people with little funds, residential investment can be the only option as the bank will not lend you money for investing in shares etc.


WHat do you mean by 'little funds'? I can't see how anyone can get into a property investment without have say €30k at their disposal for deposit, legals, survey, furnishing etc - hardly 'little funds'.

And it's not true to say that banks won't lend you money for investing in shares - see eTrade - trading on margin - note that I'm not recommending this approach - just pointing it out.


----------



## markowitzman

Theo in my book you make sense. Long term you do not lose. Same as stock market. But caveat is you buy quality. Quality in a property sense in my book is demographics. Dublin and environs will grow and grow in long term. Swallow hard and buy. Analyse your rental market and go for quality property with good rental potential. When the bubble burst and it will it will be important to have manageable loan to value portfolio with units in good areas with solid occupancy levels. Which makes me think should we be looking at our property portfolios and be thinking of selling our dot com properties??
i.e. the ones that are hard to rent and get poor quality tenants in favour of reinvesting in the good quality areas etc? A sort of "quality" reallocation of portfolio. Interested in views on this? are others thinking of selling the poor performers and reinvesting in better quality stuff. The stock market phrase of "flight to quality" comes to mind!


----------



## beattie

If inflation rises throughout the eurozone like the way it is doing here I think the days of interest rate rises might not be that far off


----------



## CoffeeBrew

beattie said:
			
		

> If inflation rises throughout the eurozone like the way it is doing here I think the days of interest rate rises might not be that far off


 

I think emerging euro inflation and the resulting interest rates could be key triggers here.

The ECB issued another warning yesterday:

http://www.unison.ie/business/stories.php3?ca=80&si=1488211

Here's an article on the global re-emergence of inflation. 

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/10/13/ccamb13.xml

It's been argued that the reason British consumer spending slowed so abrubtly when interest rates started to rise was that so many people had mortgages based on earnings that were, shall we say, imaginatively optimistic. So it didn't take many interest rate hikes to have a serious impact.

I don't know how much imagination goes into mortgage applications here but I wonder if we'll find out fairly soon.


----------



## CoffeeBrew

http://www.rte.ie/business/2005/1017/IMF.html



> The International Monetary Fund (IMF) says that there is a risk of a sharp decline in Irish house prices, despite the recent slowdown in prices.


 
I believe they have issued several warnings in the past few years on Irish property.

There has obviously been no correction and debt and prices continue to expand.

In Ireland, many people seem to assume that being early is the same as being wrong and now dismiss these warnings. How wise is that?


----------



## Sherpa

How come anyone on this site who has the temerity to suggest that you can 'time' the equity markets gets put in their place, but people are allowed to pontificate at length about an imminent meltdown in the Irish property market?

Just wondering...


----------



## Eurofan

Sherpa said:
			
		

> How come anyone on this site who has the temerity to suggest that you can 'time' the equity markets gets put in their place, but people are allowed to pontificate at length about an imminent meltdown in the Irish property market?
> 
> Just wondering...



Don't think anyone actually timed it but I see valid reasons for the market being unsustainable. But if it will make you happy i give it 2 years tops before the 'imminent meltdown'.


----------



## Sherpa

I still don't understand why the 'buy and hold' strategy is advocated (to the exclusion of all else) for equity investments, but this doesn't apply to property investments.  

If I posted a view that equity markets were overvalued and that it was the right time to sell, I'd be criticised for attempting to 'time the markets' (which is, according to the received wisdom on this site, a mugs' game, apparently).  Strangely though, the same criticism doesn't seem to be applied to opinions on the state of the property market.  

Seems a little inconsistent to me, that's all.


----------



## ClubMan

I guess I'm one of the people who often advocates a buy and hold long term strategy and believes that timing the market or basing investment decisions on past performance is a mug's game. I believe that this applies even more so to property especially given the significant acquisition, maintenance and disposal costs involved. I just can't be bothered reading all of these threads about the property markets most of the time as I don't find them interesting. But for what it's worth, like any liquid/open market, I certainly don't believe that people can generally time the property markets with any accuracy (other than perhaps with the benefit of insider information of some sort - which, unlike with equities, is not necessarily illegal!) and because of the costs involved a buy and hold long term strategy (in order to benefit from rental income or capital appreciation) would generally make most sense. I don't really see any inconsistency in _AAM's _treatment if different investment options to be honest. I do agree that some of the guff posted about the property markets is largely meaningless though.


----------



## CoffeeBrew

My preferred formulation is "Timing the market is for gamblers" because gamblers can get lucky.

I remember reading about an experiment in which a chimpanzee was trained to "time to market". He was given two lights (red and green) which would light one at a time at random . The green light indicated prices going up and the red light represented prices going down. The chimp had to predict which colour light would come on next. When the sequence was altered so that the green light came on, again at random but for 75% of the time, the chimpanzee noticed the "up" trend and always predicted green (Buy!) to get his rewards.

This is the "trend is your friend" approach to investing that has generated so much profit in Irish property as it surged upwards.

But so many people seem to associate the luck of buying in an uptrend with investment acumen and proof of a "sure thing".

As far as I remember the chimp got confused when a "top" was simulated and quite agitated when the red started coming on more frequently as his previously winning strategy was causing him to lose his bits of banana or whatever. He eventually adapted to it though.


----------



## Eurofan

ClubMan said:
			
		

> I do agree that some of the guff posted about the property markets is largely meaningless though.



Very true however i for one do find reading differing opinions on the future of Irish property quite interesting, perhaps more so to see how people choose to justify their own decisions (and I don't exclude myself from that).

These threads have appeared periodically over the last few years with varying degrees of debate but what is interesting is the distinct increase in the sentiment that the "good times are over" and even that "bursting of the bubble is inevitable". More surprisingly such sentiments are even beginning to appear in the mainstream media with vested interests doing their best to talk down property gains going forward and talking up the infamous "soft landing".

Personally I don't believe in timing markets either and am currently investigating my own portfolio which will indeed be a 'buy and hold' strategy. However when investigating what to invest in it makes sense to me to avoid a market where gains have been massive in the past and evidence going forward for better gains is shakey at best. Maybe I'm just conservative but especially considering the levereged nature of most property investments the risk/reward maths just don't work out for me anymore.

{Btw (and maybe I'm just being thick about this) could someone explain the difference between equities and shares to me, the terms seem to be very similar in some of the literature I'm reading.}


----------



## ClubMan

Eurofan said:
			
		

> {Btw (and maybe I'm just being thick about this) could someone explain the difference between equities and shares to me, the terms seem to be very similar in some of the literature I'm reading.}


Equities and shares are the same thing really. That used to confuse me too.


----------



## CoffeeBrew

The International Monetary Fund approximates that Irish house prices are 20% overvalued at _*current*_ interest rates.

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1489698&issue_id=13148
"Experts sound alert on house price fall"



> House prices have risen faster in Ireland than any other developed economy, doubling in the last six years, the report finds.
> 
> Although it is difficult to measure the right value, the IMF thinks an increase of around 80pc is all that could have been justified by lower interest rates and rising incomes.


 
Meanwhile euro zone inflation spikes to 2.6% increasing the odds for interest rates to go up.

http://www.rte.ie/business/2005/1018/eurozone.html

A few more cracks appearing in the foundation ?


----------



## Eurofan

ClubMan said:
			
		

> Equities and shares are the same thing really. That used to confuse me too.



Thanks for that! One article in particular kept switching the terms with seemingly no reason.


----------



## CoffeeBrew

Perhaps it's just the fact that I haven't had enough caffeine this morning but here is another article on property where the headline is bullish on property but the article doesn't appear to back it up..

http://www.unison.ie/business/stories.php3?ca=80&si=1490154

The headline is *"Property still remains top investors' first choice"*

Now as you read the article you quickly encounter:



> one in three in the AB socio stratum - a segment including senior managers, professionals
> 
> and owners of medium/larger businesses - intended to invest in property in the next 18 months.


 
Ok, there's the first hint. What this is saying is the vast majority of senior investors - 66% - will not be investing in property in the next 18 months.

Then read further below and you find:



> the survey found 60pc of them still favour low risk guaranteed products.


 
Perhaps I'm missing something here but wouldn't a more appropriate headline be *"Most top investors to avoid property investment"*


----------



## CCOVICH

You could interpret it this way:

33% of those surveyed would invest in property
Of the remaining 67%:
- 30% would invest in tracker bonds
- 30% would "invest" in high yield deposits
- 7% would invest in equities

So, property would still be the first choice (most popular) on an investment-by-investment comparison.  

The interpretation that most investors would avoid propery is of course an equally valid interpretation, but the title of the article appears to be factually correct.  If 60% of those who favoured lower risk guaranteed products all favoured tracker bonds, then the tiltle would be incorrect, as it would be tracker bonds that would be the top choice.


----------



## CoffeeBrew

Thanks for that.



> The interpretation that most investors would avoid propery is of course an equally valid interpretation


 
I would see this more as a direct fact from the survey as opposed to an interpretation. The survey states directly that only 33% will invest in property. Therefore 66% will not. Not much interpretation required there!

Rather property being the top investment is the interpretation because it depends on a choice to group all types of property (residential ,commercial, domestic, EU , foreign etc) into a catch-all "property" category but to break out other categories like guaranteed products into different types.

Anyway let each take what they may from this article but to me the head does not fit the body and the real news is that at a time when it is so easy to borrow for property for ordinary souls (even easier for the well-heeled) and at a time of record construction with such a large choice of property investment types that the vast majority of top-layer investors will be giving property a miss.


----------



## CCOVICH

CoffeeBrew said:
			
		

> Thanks for that.


 
Don't mention it.  Happy to be of assistance.


----------



## Sherpa

Clubman,

Thanks for the clarification and explanation.  Btw, glad to see I'm not the only one who finds all these property threads a bit repetitious.

I hear what you're saying about the differences between the equity and property markets, but still think there's an element of double-think/double-standards involved.

If someone asks "Should I invest in property?" the debate inevitably focuses on the current level of the market and whether or not it is overvalued.  If someone says they have a few quid and they want to invest it somewhere, the advice is often to put it into equities or an equity-linked product (and to adopt a buy-and-hold strategy).  That's fair enough, but what I find strange is that - in complete contrast to property discussions - no-one ever gets into a debate about whether or not now is a good time to put money into an equity-based investment (and if they do they get ridiculed for attempting to 'time the market').

I don't have any axe to grind here, I just find it a little odd.


----------



## ClubMan

Sherpa said:
			
		

> That's fair enough, but what I find strange is that - in complete contrast to property discussions - no-one ever gets into a debate about whether or not now is a good time to put money into an equity-based investment


I don't think that's true. I'm sure that we have had discussions about timing both markets and have had a diverse range of views on both. I do agree that the property market threads tend to go on and on and generate more heat than light in my opinion since any discussion of predicting the future is ultimately fruitless in any context.



> (and if they do they get ridiculed for attempting to 'time the market').


I don't think that anybody has ever been "ridiculed" for talking about timing any market. Obviously some people (such as myself) don't believe that this is a meaningful strategy but simply stating that (even in the shape of calling it a "mug's game") hardly constitutes ridicule.


----------



## Sherpa

Fair enough, "ridiculed" might have been a bit o.t.t.


----------



## minion

I'm writing to the Oxford Dictionary to have the spelling word 'Wolf' changes to 'Crash'.


----------



## CoffeeBrew

RTE July 2005:
The Central Bank has forecast that the Irish economy will grow by 5.5% this year.


RTE October 2005:
The Central Bank has cut its figure 2005 growth to 4.25%


That's quite a revision isn't it. ? Must be a lot of headscratching going on.

Also the Central Bank seems somewhat surprised as to why the IMF is recommending that money be taken out of 
the Irish economy. 

Hmmm why would the IMF suggest such a thing ?

(Hint: it begins with PROP- and ends with -BBLE)


----------



## Marie

CoffeeBrew said:
			
		

> RTE July 2005:
> The Central Bank has forecast that the Irish economy will grow by 5.5% this year.
> 
> 
> RTE October 2005:
> The Central Bank has cut its figure 2005 growth to 4.25%
> 
> 
> That's quite a revision isn't it. ? Must be a lot of headscratching going on.
> 
> Also the Central Bank seems somewhat surprised as to why the IMF is recommending that money be taken out of
> the Irish economy.
> 
> Hmmm why would the IMF suggest such a thing ?
> 
> (Hint: it begins with PROP- and ends with -BBLE)


 
Irish Times article today reports the Central Bank has cut its growth forecast from 5.5% to 4.25% and warns employment growth will be considerably lower in 2006 as activity in construction sector slows.

Surely it is not pure conjecture or speculation to _observe _and note the perspectives of a wide range of interested parties - including potential property purchasers and landlords - and make one's own mind up?  Monitoring the pulse of an economy isn't a matter of 'belief' or 'scepticism'; it is making a working hypothesis which informs one's actions.


----------



## beattie

That is some revision from the central is such a short space of time. I wonder what will drive the economy forward when the bubble ends. We can't just keep building new shopping centres and office blocks that have a large likelihood of remaining empty for large amounts of time


----------



## sonar

I've seen this a lot and it's understandable that some property owners in Ireland should be more focused on the present. They've already bought. They rode prices up and as sure as property-price-cycles they'll ride prices down. The ride down might not nearly be as much fun but there's nothing they can do about that so why even conjecture about the future.

However for someone considering pouring their life savings and future earnings into some little brick rectangle that has quadrupled in value in the past few years.....well, ignoring risk is a fool's game.

And heaven knows it's getting easier and easier to see the risks.


----------



## Marie

Hi Sonar!  In the 1950's very few people 'owned' their homes, and you had to be quite well off and have a better-than-average job to get a mortgage as the cost of borrowing money was (relative to incomes) high.

However the whole culture of housing and community was also different.  As young people married and started families of their own they settled very near mother and siblings and in many cases lived in the family home in the early years.  Mortgages were over decades and people were _definitely_ not thinking about the resale value of a house if/when they got a deposit together and settled down to repaying the mortgage over a lifetime.

Individual expectations and standards - as well as the financial institutions and 'the market' - have changed as well.  'The market' is not something 'out there' which is nasty and depriving hardworking folk of opportunities, it is a social mechanism _created by people and their needs and desires!_  unfortunately greed and stupidity (as well as generosity and creativity) go into that.


----------



## darraghdog

Hey Bacchus,

Interesting insight. Just wondering where you got the info. that German property prices are expected to go down 30%. I'm planning to invest there, and I understand since 1990 they are going steadily down, and have dropped ~10% since then.

Would be great if you could let me know,
Thanks,
Darragh.


----------



## Guest127

I bough a town site 25 years ago and built a small bungalow on it ( straight out of the book) and later on built an extension. Kids are more or less reared now so while I have no urgent desire to move nontheless I no longer have to reside close to schools/Churches/Shopping centres etc.I was on holidays  for the past week and besides doing nothing ( vastly underrated) I took a few spins out of town in different directions , Blackrock/Dromiskin and the Cooley Penininsula. I saw a few houses that I made enquires about. most around 2000 sq ft, some a bit smaller/larger. What shocked me was not the numbers the auctioneers were looking for but the fact that every single house I looked at was either sold or nearly sold. Dundalk is by no means a must have address but obviously this frenzy to buy has now reached this area. One house I looked at had no kitchen, no floors fitted, no fireplace and while it was in a nicer area the price was €595,000. probably buttons by Dublin prices but this was a rural(ish) part of the cooley peninsula. I think we have gone mad.


----------



## royrogers

I think you are right!!


----------



## beattie

I see that AIB have upped their forecast for price increases. I would have thought that this was a bit on the high side but I suppose if net immigration keeps rising it could happen. It is the only thing keeping the rental market stable at the moment imo


http://www.rte.ie/news/2005/1027/housing.html


----------



## sonar

The SBPost mentioned the fact the shares in Irish Banks have
been slipping steeply away from their highs causing a jolt to the system.

From the article:
AIB down 9%
BOI down 11%
PTSB down 9%

The article (hidden top right page M2 Oct 23) suggested that international investors may be dumping Irish banking shares. 

Coincident with this, of course, is the increasing risk that the ECB may begin
the process of raising interest rates sooner and more aggressively than anticipated.

We can maintain the great property pyramid a while longer if interest rates remain low. 

If there has been a serious miscalculation about inflation and interest rates take off in the EU as they have elsewhere then ..... TIMBEEERRRRRRR !!

Meanwhile expect upbeat news in the media about the property market.


----------



## ClubMan

RTÉ News today:



> [font=Verdana, Arial, Helvetica, sans-serif]A Central Bank report has warned about high debt levels, but it is now less worried about the possibility of a sharp fall in house prices.


[/font]


----------



## CoffeeBrew

Some practical advice on Yahoo from the US.

"Five Ways to Defend Yourself from a Housing Bubble"
It quotes an economist Joel Naroff after US new-home sales hit yet another record high in June, "Welcome to our worst nightmare. It is the housing market."

These guys in America have no clue on what a real bubble is  For that they need to see how it's done Irish style: abnormally low interest rates and profligate bank lending practices with no real opposition.

Forget the Florida bubble with 96% increase over the last 5 years or the New york bubble with 78%.

They should come to Dublin 6 where a small semi-detached sold recently for over a million: a 1000% increase in value over the last 10 years or so. 

Yeeah HA ! - 1000% ! Now that's what I'm talkin' about ! Let's see the Americans beat that ! 

http://biz.yahoo.com/special/afford05.html


----------



## Duplex

The US market seems to be tanking under the pressure of over speculation and rising rates and in Auckland New Zealand the bottom has fallen out of the apartment market. Could Dublin suffer the same fate?




[broken link removed]


----------



## CoffeeBrew

ClubMan said:
			
		

> RTÉ News today:
> 
> 
> 
> 
> Central Bank report has warned about high debt levels, but it is now less worried about the possibility of a sharp fall in house prices.
Click to expand...

 

Is the central bank concealing what they believe to avoid destabilizing the market ?


From the Irish Times:



> The Irish Times reports that senior officials from the OECD and the Central Bank recently accepted that the Irish property market is overvalued by 15 per cent, according to a confidential account of their meeting produced by the Paris-based body.
> .
> .
> .
> While not disagreeing with the figure presented, the Central Bank officials indicated their nervousness about presenting such figures in public. The OECD records them as stating: "They suggested that any numerical estimate of overvaluation should be presented only with extreme caution to avoid destabilising the market."


 
To read on:

http://www.finfacts.com/irelandbusinessnews/publish/article_10003835.shtml


----------



## Sherpa

Duplex said:
			
		

> The US market seems to be tanking under the pressure of over speculation and rising rates and in Auckland New Zealand the bottom has fallen out of the apartment market. Could Dublin suffer the same fate?
> 
> 
> 
> 
> [broken link removed]


 
I've heard that prices of semi-detached yak-herding tents in Tibet are coming under pressure.  Maybe this could have some implications for the Irish property market too...


----------



## Duplex

You see no parallels between Ireland and New Zealand Sherpa? I wonder if there is any nation in a analogous position to Ireland, past or present, not willing or able to control crippling debt growth and falling competitiveness.  Your mocking reference to Tibet might be apposite, but I’m pretty sure they have control of their economy.



Dr Bollard the governor of the Central Bank in New Zealand has issued more warnings about the risks of excessive debt, while our central bank spikes independent reports on the Irish property market. The lessons of the recent past about the damage denial can do to a society have yet to be learnt it seems.      






> Mr Quirk reckons Dr Bollard "stepped it up a notch" this week when he issued a fresh stern warning about consumer spending and the runaway housing market.
> 
> Dr Bollard told banks, homeowners and international investors they could be in for a sharp shock if New Zealanders are allowed to continue their current borrowing and spending.
> 
> He said he was willing to "take further action" on top of the eight interest rate hikes since the start of last year. Dr Bollard will almost certainly raise the official cash rate to 7.25 per cent from 7.0 per cent at the bank's next review on December 8 as he tries to tame the 3.4 per cent annual inflation rate.
> 
> Dr Bollard repeated his concerns that homeowners were continuing to spend more than they earn and many were "vulnerable" to interest rate rises, a fall in property prices, or their job prospects worsening.
> 
> New Zealanders' love affair with home ownership and borrowing money on their sole financial asset was a recipe for disaster, he said.


 
http://www.stuff.co.nz/stuff/0,2106,3470648a1865,00.html


----------



## Sherpa

Sorry - I wasn't trying to be mocking (well maybe just a little bit).  I was just trying to make the point that what happens in NZ has no more or no less relevance to the Irish property market than what happens in Tibet.

I happen to agree with your concerns about the Irish situation.  I just don't think that pointing to overseas experiences is particularly helpful or relevant - everywhere is different.  For example, I could be wrong but I don't imagine that Auckland is experiencing anything like the net immigration that Dublin is (to take just one example).

I honestly don't know what's going to happen to Irish property prices (neither does anyone else!), but I certaintly wouldn't be investing my hard-earned cash in Irish properties right now.


----------



## CoffeeBrew

> ....experiencing anything like the net immigration that Dublin is


 
I was reading about an immigrant yesterday & I though it just about sums up the Ireland of today and where we might be heading.

The SBPost told the story of a talented Polish Physicist who came to Ireland. His specialty I think was the physics of metals. 

Now, is he researching metals and materials that might one day contribute to Irelands competitiveness on the international scene ?

Guess again ! He works carrying cement bags in support of a construction site.


----------



## beattie

I find it a bit disconcerting that the Central Bank would be loathe to release information that might destabilise the market. Do they want more people to get in way over their heads. I have a feeling that interest rates will go up by a good deal more than some commentators are suggesting at the moment which will leave a great deal of people in serious trouble.


----------



## ClubMan

CoffeeBrew said:
			
		

> I was reading about an immigrant yesterday & I though it just about sums up the Ireland of today and where we might be heading.
> 
> The SBPost told the story of a talented Polish Physicist who came to Ireland. His specialty I think was the physics of metals.
> 
> Now, is he researching metals and materials that might one day contribute to Irelands competitiveness on the international scene ?
> 
> Guess again ! He works carrying cement bags in support of a construction site.


What has that got to do with anything - in particular house prices!? Since he is from an _EU _state he is entitled to seek any job that he wants here in _Ireland _or anywhere else in the _EU_ - including working as a physicist. However if such a job does not exist then we can't create one out of thin air for him or if he decides that he wants to work on the sites then that's up to him. I don't think that this individual experience says anything about _"the Ireland of today"_ or relates to house prices in any way.


----------



## ivuernis

There's an old saying: if it looks like an elephant, walks like an elephant, and has "I'm an elephant" tattooed to its rump, the odds are overwhelmingly in favor of its not being a duck-billed platypus.


----------



## ivuernis

Sherpa said:
			
		

> I was just trying to make the point that what happens in NZ has no more or no less relevance to the Irish property market than what happens in Tibet.


 
I don't know about that… I've been to Tibet and the Chinese are turning Lhasa into an identikit copy of many other pollution-choked Chinese cities. What price the Irish overseas property investor being targeted to release equity from their Irish property portfolio/ATM to invest in an apartment complex in Lhasa with views of the Potala Palace


----------



## ivuernis

Duplex said:
			
		

> You see no parallels between Ireland and New Zealand Sherpa? I wonder if there is any nation in a analogous position to Ireland, past or present, not willing or able to control crippling debt growth and falling competitiveness.


 
Spot on. It's a globalised world and in the medium to long run it'll be the global market that rectifies the inflated property prices in Ireland and we probably won't be able to do a damn thing about it as we watch prices go south.





			
				Duplex said:
			
		

> Your mocking reference to Tibet might be apposite, but I’m pretty sure they have control of their economy.


 
Unfortunately not Duplex, as the Chinese control it and it is they who are benefiting from it and not the Tibetans.


----------



## Duplex

Can you imagine an Irish minister advising the public of the risks of an overheated property market in this manner;












> However the Minister for Business and Economic Affairs, Bendt Bendtsen, says there will be no helping hand offered to house owners if they do find themselves in trouble when prices drop.
> 
> “People must get used to the idea that house prices are going to be significantly lower in the coming years than they have been,” he said, adding that the Danish economy is in good shape and that most families will be able to withstand interest rate increases and a period of lower housing prices.


  





[broken link removed]


Thanks for the Tibet info ivuernis, I'll get my coat if you'll dial a lama.


----------



## Marie

*The Irish Times* report that the OECD and Central Bank accepted that the Irish property market is overvalued by 15 per cent, but [font=arial, helvetica, sans-serif]Central Bank officials begged off sharing this with the constituents "in case it might destabilise the Irish property market" gives cause for fear - not only in that what many people _felt_ about the property market in the past few years is confirmed, but in the decision not to disclose facts which are in the public interest and _should_ be in the public realm![/font]

[font=arial, helvetica, sans-serif]_An account of the meeting produced by the OECD, and seen by The Irish Times, states: "There is clearly a speculative element and econometric work by the OECD secretariat suggests prices are 15 per cent overvalued."_[/font]

[font=arial, helvetica, sans-serif]_The think-tank represents 24 of the world's leading economies, including Ireland. It conducts in-depth studies of a range of policy topics and issues policy advice to its member states._[/font]

[font=arial, helvetica, sans-serif]Translated, does this not mean "The Establishment decided to support the interests of Big Money over the wellbeing of ordinary citizens, even in the teeth of uncoerced, expert witness".[/font]
[font=arial, helvetica, sans-serif][/font] 
[font=arial, helvetica, sans-serif]_While not disagreeing with the figure presented, the Central Bank officials indicated their nervousness about presenting such figures in public. The OECD records them as stating: "They suggested that any numerical estimate of overvaluation should be presented only with extreme caution to avoid destabilising the market."_[/font]

Clearly they can't disagree with the facts, and one can understand this 'nervousness' at a sudden outing of the truth.  

Surely 'the truth' and an end to the upward spiral will bring the craziness to an end, no losers?  The speculators and entrepreneurs have made their "fabulous wealth"; the ordinary punters have got something out of it by dabbling in the rental market through a couple of properties funded by interest-only loans.....so they have a few bob and a lot of experience; people needing homes or apartments to rent have benefited because everyone was watching "makeover' programmes on t.v., refurbishing,redesigning and making life more aesthetically pleasing........so they learned as well.  The 'frenzy' kicked 'the system' into motion and now there are lots and lots of houses.........so first-time buyers and newly-establishing couples have more choice.  

Where's the 'victim' of this truth that it had to be suppressed.......or have I missed something?


----------



## Grumpy

Government and business have a major interest in keeping this sort of information from the public domain.
I would guess that this 15% is on the low side as OECD, funded by governments, will not destabilise the Irish economy and produced a comprise figure.Politics is everywhere.
Early 1990`s, price of housing was 4 times average industrial wage, now its 12 times AIW.For me, this is a frightening figure.
As another contributor noted...Eur400,000 for something with a base value of Eur150,000..it won`t last.
Newspapers will be full of articles, by those who know, explaining why the market cannot fall....a day before it falls.The day after, we`ll be told the fall won`t last.


----------



## joe sod

Interest in property is now a global phenomenon caused by Alan Greenspan. The whole english speaking world seems to be involved in it and the economist has rightly called it "the biggest bubble in history". Every english speaking country seems to be going down the same path of excessive consumption caused by cheap credit. When the bubble finally bursts it will be like falling dominoes, every country will be hit some more than others, whether it be ireland, eastern europe, australia, or america. No countries local factors will escape this global phenomenon. I wouldn't even bank on germany even though it never really was part of the bubble.


----------



## CoffeeBrew

I'm still trying to absorb all the news on the Irish property market that has come forward recently:


1. Reports that Irish personal debt is on track to be the most severe in Europe

2. ECB (Trichet) drops big hints that action is needed to cool Irish house prices

3. IMF warns that house prices are overvalued

4. OECD warns that house prices are overvalued

5. ECB sounding very hawkish on interest rates. The upward movement could begin as soon as December or
early 2006.

6. Central Bank tries to soothe the public by moderating its warning on house prices

7. Confidential memo reveals the Central Bank recently accepted in private that house prices are overvalued but
did not want this fact to go public

8. Economist Rossa White stated house prices are overvalued by between 15pc and 20pc and risk a sharp fall, 
while interest rates could rise as soon as next month


At least no one in Ireland can claim they weren't advised of the risks !!


----------



## beattie

Good points Coffeebrew, I would just add that we are also adding about 4% (I think) to our housing stock every year which I have not heard of being matched anywhere else.


----------



## Duplex

The Economic and Social Research Institute in Ireland has issued another warning on the Irish property bubble.  Phrases such as “massive house price fall” and “house prices could fall by over 30%” are not lightly bandied about by academics in the pay of government.  This warning follows a statement by the ECB yesterday warning of the risks of unsustainable asset price inflation.  The ruling Finna Fail party however won’t act to gently deflate the bubble by some combination of fiscal and regulatory action.  The government will instead allow the bubble economy to succumb to an inexorable savaging by the forces of globalisation; safe in the knowledge that it can sell this pup to the credulous majority.  


*



ESRI warns of threat to house prices 
By Brian O’Mahony, Chief Business Correspondent
HOUSE prices could fall by over 30% if the economy was hit by a sudden loss of confidence, the Economic and Social Research Institute (ESRI) has warned.


Prof FitzGerald warned, however, of the real dangers for the economy in its over-dependence on the construction sector. 

Not only that but borrowers are showing no signs of caution and continue to invest at a very high level. 

These are “internal risks” that have to be set against the “global imbalances that, if anything, are growing in magnitude.” 


That loss of momentum could then trigger the massive house price fall as unemployment undermined confidence and lenders got worried about borrowers’ ability to repay their debts, warned Prof FitzGerald. 

Click to expand...

* 





http://www.irishexaminer.com/pport/web/Full_Story/did-sgvn6bYA0jaDcsglO-LCk0lQvU.asp


----------



## micheller

*Bubble?*

I have no background knowledge of economics in general. Perhaps this is waaaay too complex question to be put like I'm going to, but here goes...

If the property 'bubble' in Ireland was to burst- what impact would external or internal factors have to do with it? 
In other words, would external things like the dollar value, oil prices, world economics etc have more/less/any bearing on the property market here? 
Or would things like Irish economy, immigration & growth buoy the market here if external factors were in troubled times?

Sorry if that's a stupid question  , just wondering if there were any considerations outside of the irish market we should be aware of?


----------



## tiger

*Re: Bubble?*

Wikipedia is always a good start:
http://en.wikipedia.org/wiki/Economic_bubble
(I like the tulip mania story)

The problem when a bubble bursts is that people are left with assets worth less than what they paid for them.  This can be a problem if they borrowed on the strength of these assets (e.g. borrow 350K for a 400K house, drops to 200K).  This becomes worse if they lose the ability to pay back (e.g. economy slows down, lose job).  This becomes worse again if the lending institutions get stuck with the undervalued asset as a result of bad debts.  Bit of a viscious circle unfortunately...


----------



## Duplex

Ireland is well positioned to shrug off any global slowdown. The US debt and deficit bubbles may be worrying some as yield curves invert and mortgage lending and house prices stall, with consequent blows to  consumer spending.  The UK may be witnessing rising unemployment, rising trade and current account deficits and a consumer spending slowdown but this will not have an impact on the Irish economy.

Though the level of debt creation in Ireland is running at the highest in the western world (maybe the entire world) the debt is being invested in property which is of course the safest investment class.  And while yields are now below self financing levels and rents are deflating (in real terms) the pyramidal shape of the market ensures that a collapse in house prices is not only highly improbable but in fact impossible. 

And finally immigrants, this is complicated but it goes something like this ‘If you build it they will come’ or aah maybe it’s ‘If they come they will build it’ anyway something like that.

The main point is that you shouldn’t worry your pretty little head about all this silly money stuff leave that to the banks. 



(But a good question


----------



## Champions

<the pyramidal shape of the market ensures that a collapse in house prices is not only highly improbable but in fact impossible>

Can you please explain what you mean by this?


----------



## extopia

Surely the Irish economy is inextricably linked to the US economy? If they go down, so do we. And if we go down, surely a vicious cycle of rising unemployment, reduction in spending, drop in consumer confidence, slowdown of housing demand, more unemployment in the construction sector, tightening of credit, and so on, will conspire to cause a collapse in the housing market --  which itself is now "artificially" buoyed by speculative purchasing and high demand for investment property.


----------



## micheller

Extopia- that's what I was wondering! Is Ireland economy so autonomous that it could self sustain in overall world decline?
Also, I've heard that whilst Western economists are much more upbeat that other sources (Pravda was mentioned) are not so upbeat?


----------



## hmmm

I believe Duplex was being somewhat ironic in his previous post. Nice post too.

The impact of a credit tightening squeeze in a negative equity environment is missed by a lot of commentators. If you have a 300k mortgage and your house price drops by 20%, most people are taking the attitude that "give it time and prices will rise again". In the meantime, you will have difficulty financing that car or kitchen loan as no bank is going to lend you money whilst you have a 60k unsecured mortgage loan outstanding.


----------



## micheller

Duplex said:
			
		

> .....
> 
> The main point is that you shouldn’t worry your pretty little head about all this silly money stuff leave that to the banks.
> 
> (But a good question



mmm, not sure I like being verbally patted on the head 

Anyway, anyone have any further comments on any visible changes to the overall market since end last year? Any further global trends to watch?


----------



## sudden

hi,
a fall in house price's will not necessarily hurt estalished investors with good equity as long as rents do not drop too much,
panic selling by those of nervous disposition of rental property could see first time buyers buying the former rentals as owner occupiers thus leaving strong rental demand
of course life is never that simple,
the next couple of years should be interesting,
getting your feet on the property is only the first step-keeping them there when they get slippery will require some dancing etc......
sudden


----------



## shnaek

Euphoria. Even the pessimists are optimists now. The situation with property here is a lot like the situation with stocks back in 2000. Personally I find that quite scary.

I would still buy a house in which to live. But I would be very slow to invest in all but the most rentable of properties (ie. location ...)


----------



## gearoidmm

I loved that poll in the Irish Times yesterday saying that we think that there are too many immigrants in the country and that further entry should be restricted.

40% of all properties sold last year were investments or second homes.

I wonder where the market would be going at the moment if the 'cursed' immigrants weren't coming in renting these apartments and keeping demand high?

What if they stop coming?


----------



## beattie

I believe that daft.ie have indicated that immigration is the only thing preventing the rental market going into freefall. If we keep building proportionally more units than Germany did after WW2 we will need the projected 300,000 extra immigrants to fill these units.


----------



## Marie

Newspapers give coverage today that number of properties in the RoI have increased by ONE-THIRD in the last 10 years.


----------



## extopia

Shurely shome mishtake? I think most properties have increased in value at LEAST threefold in the last 10 years?


----------



## Marie

No!  The _stock _of Irish domestic properties has been increased by one-third by buildings completed in the past 10 years.  It's a main headline in yesterday's Irish Times.


----------



## Marie

An afterthought.  Properties have not 'increased in value' to the quoted extent.  This is illusory.  They have increased in _cost _but as far as their _value _is concerned this is relative to dozens of other economic markers.  Like most magic tricks, it's all a matter of sleight of hand.


----------



## extopia

Sorry Marie, misunderstood you there.


----------



## Duplex

Warren Buffett on the difrence between price and value;

"'For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for someone else.' The sage of Omaha sums up pithily: 'The dumbest reason in the world to buy a stock is because it's going up.'"


----------



## bearishbull

another warning on house prices today http://www.rte.ie/business/2006/0127/centralbank.html

im not buying for next few years,the market is showing classic bubble behaviour as alluded to by yale professor shiller who predicted dot.com bust. http://money.cnn.com/2005/01/13/real...shiller1_0502/

prices fell in many parts of england in last 4 months



_[broken link removed] page 5 to see house price falls for last 3 moths of 2005_
_._


more warnings on uk market.
http://www.thisismoney.co.uk/mortgag...&in_page_id=57


anyone who doesnt think irish property is wildely overvalued is living in a bubble!!! if you can afford to wait for a few years then do so,house prices are falling in many parts of usa uk france,rental yields are ridiculously low but prices still go up this =highly speculative behaviour=high risk bubble. 
the irish obsession with property ownership is irrational and will be the downfall of this economy.
prices may rise for the next few years but in the medium to long term a correction in prices is ineviatable,wages arent rising fast enough to sustain such increase indefinetely,interest rates heading up,american economy starting to slowdown,intel chief executive on radio today says we are becoming inefficient even with our low low taxes-the multinationals will be off to eastern europe and asia when the tax advantages dont outweigh the high labour and business costs... there may be trouble ahead!!!!!!!!!!!

www.housepricecrash.co.uk


----------



## Teapot

This is what is happening in the UK with FTB's is there any FTB's anymore in Ireland?


----------



## Teapot

Sorry forgot to post link!

http://news.bbc.co.uk/1/hi/uk/4657868.stm


----------



## chihiro

FTB putting down the deposit on it tomorrow, God help me!! sure i'm paying too much but isn't everything overvalued anyway? 3 bed ex council house in Dublin close to town in an "up and coming area"
if the bubble bursts we're all %$%$%$!!!!!


----------



## RainyDay

chihiro said:
			
		

> if the bubble bursts we're all %$%$%$!!!!!


How would a bursting bubble affect you? You'll still be living in the same house and you'll still be making the same mortgage repayments - right?


----------



## chihiro

worried about resale and negative equity. will be getting a 97% mortgage. i know the days for making big returns are probably gone (if only i'd bought sooner!). chances are we could sell up in a few years and move to cork but would feel stuck in dublin if house had lost value. It's all very daunting. Been househunting for a year. Got offer accepted Friday. Good house/not so good area. paid a bit more than we would have expected for this area cos house is in such good nick, wouldn't change a thing. (well just the windows!)
i'm just getting nervous!


----------



## power1

A reduction in house price values will only affect people who bought second homes as investment. If you are a FTB it would be great! and if you own a home and plan to trade up then its still no big deal. example: buy a house for €250,000 but plan to trade up for a house worth €500,000 then say property values drop 20%, you have to sell for €200,000 but buy for €400,000. So you would actually save €50,000! and for people who already own a house and want to stay in it...Does it matter that the value falls? because if you're not going to sell it and you can afford the repayments then so what as long as you're in the house you want.


----------



## bankrupt

> power1A reduction in house price values will only affect people who bought second homes as investment.


 
Wishful thinking power1!  I suspect it will affect a lot of people just like chihiro who have bought less than ideal homes in less than ideal locations with the expectation of trading up in a couple of years.  These people will be stuck with serious negative equity and with the inevitable tightening of credit will be in the same boat for many years to come.


----------



## extopia

Which is why you should only buy if you can afford to. If not, rent and let the landlord take the risk.


----------



## RainyDay

chihiro said:
			
		

> worried about resale and negative equity. will be getting a 97% mortgage. i know the days for making big returns are probably gone (if only i'd bought sooner!). chances are we could sell up in a few years and move to cork but would feel stuck in dublin if house had lost value.


So if there is a bubble, won't the relative price of your desired house in Cork also have fallen proportionally?


----------



## dam099

RainyDay said:
			
		

> So if there is a bubble, won't the relative price of your desired house in Cork also have fallen proportionally?


 
Thats true as long as they have some equity but if they are in negative equity they will have to make good to the bank the negative equity when they sell. As it is unlikely that they will get more than a 100% mortgage on the new house this is additional cash a buyer would have to stump up themselves at the time they go to buy the new house.


----------



## Duplex

Interesting to get an American prospective on their bubble, it seems that the American media is less inhibited about discussing the subject than their Irish counterparts. This storey relates to investors in Orlando 





> Baldwin Park has been ground zero in the real-estate boom -- the Promised Land of six-figure flipping profits.
> 
> One example: Last September an investor paid $428,700 for a house in the east Orlando neighborhood, once a Navy base bustling with sailors, not builders. Six weeks later, he flipped it for $625,000.
> 
> A house bought for $279,200 last March is on the market for $499,500.
> 
> A townhouse bought in October for $337,700 is on the market for $445,000.
> 
> A house bought in October for $403,000 is on the market for $670,000. I actually found a comparable house from a builder in a better location for about $60,000 less.
> 
> Baldwin investors have developed a sense of entitlement to fast, huge profits. But now those prices have caused a backlog of inventory. There are about 90 listings on the market, and many have sat there for months. You'd never know it because "For Sale" signs aren't allowed.
> 
> Realtors say houses used to sell in weeks for full asking price. The unthinkable has happened. Baldwin Park has become a buyer's market.
> 
> Consider someone who paid $330,000 for a town house, hoping for a quick flip. The various fees amount to about $5,000 per year. He faces another $3,000 or so in property taxes. Throw in a $300,000 mortgage, and the monthly tab comes to about $2,400.
> 
> Some investors use creative loans to keep the number lower at the start. As the mortgage company starts adding more interest and principal, their payments go up.
> 
> So do their property taxes if they don't live there. Investors do not get the same protection against annual increases in appraised values as do homeowners. Nor do they get a homestead exemption.
> 
> So every month, these investors will be making payments, holding out for prices that are based on a real-estate frenzy that may no longer exist. If the market outlook dims, they do the math on what it costs to hold the asset versus the expected return of doing.



http://www.orlandosentinel.com/orl-miket2906jan29,0,2502546.column?track=mostemailedlink


----------



## CoffeeBrew

Duplex said:
			
		

> Interesting to get an American prospective on their bubble, it seems that the American media is less inhibited about discussing the subject than their Irish counterparts.
> 
> 
> 
> 
> Baldwin Park has been ground zero in the real-estate boom -- the Promised Land of six-figure flipping profits.
Click to expand...

 
..and yet Baldwin Park seems good value compared to Dublin South !


----------



## walk2dewater

RainyDay said:
			
		

> How would a bursting bubble affect you? You'll still be living in the same house and you'll still be making the same mortgage repayments - right?


 
Why do I get the sense that most Irish people don't really understand what a severe correction in prices entails? Or how property markets work, the interaction of marginal pricing, sentiment and volumes, or indeed whether they actually understand that property prices can and do fall and currently are falling outside Ireland. Neg equity will be a very real and ugly reality for many; too many finances, marriages, and aspirations will be ruined.  Loss of income/employment, govt deficits/layoffs, and social disorder will impact everyone, even those with a large equity buffer (pre-2002 buyers)

The remarkable ability of the Irish construction/estate agent cabal to churn out and sell unit after unit is more than just a critical economic support, its become the psychological bedrock for the feel-good binge we're on. The inevitable outcome aint gonna be a nice, manageable 30% decline peak-to-trough as mentioned by the ESRI recently, we're talking significantly more. Why? well firstly prices have doubled twice since 1997 and we are currently in a mad 'race against rates' frenzy now, leading to I'd guess a 10%+ spike in 2006 alone. Second, escalating fear and panic half-way down the 'slope of hope' means that busts always overshoot, with the last sellers capitulating for buttons at the very bottom. losses of 50%+ is not unimaginable given the state we're in. If all this sound a bit loony, I suggest you hit the history books. The behaviour of market participants in boom and bust cycles is well documented.

At this stage, surely anyone promoting more price increases is the doom monger. I sincerely hope for 2006, 2007 we dont 'go Japanese' in ireland. Remember a 50% decline is equivalent to a 100% increase in the first place, and -50% will only get us back to 2002 prices. The sooner we hit the peak, take our deflationary lumps and start unwinding the excesses of this the better.


WTTW


----------



## Chamar

walk2dewater said:
			
		

> Why do I get the sense that most Irish people don't really understand what a severe correction in prices entails? Or how property markets work, the interaction of marginal pricing, sentiment and volumes, or indeed whether they actually understand that property prices can and do fall and currently are falling outside Ireland. Neg equity will be a very real and ugly reality for many; too many finances, marriages, and aspirations will be ruined. Loss of income/employment, govt deficits/layoffs, and social disorder will impact everyone, even those with a large equity buffer (pre-2002 buyers)
> 
> The remarkable ability of the Irish construction/estate agent cabal to churn out and sell unit after unit is more than just a critical economic support, its become the psychological bedrock for the feel-good binge we're on. The inevitable outcome aint gonna be a nice, manageable 30% decline peak-to-trough as mentioned by the ESRI recently, we're talking significantly more. Why? well firstly prices have doubled twice since 1997 and we are currently in a mad 'race against rates' frenzy now, leading to I'd guess a 10%+ spike in 2006 alone. Second, escalating fear and panic half-way down the 'slope of hope' means that busts always overshoot, with the last sellers capitulating for buttons at the very bottom. losses of 50%+ is not unimaginable given the state we're in. If all this sound a bit loony, I suggest you hit the history books. The behaviour of market participants in boom and bust cycles is well documented.
> 
> At this stage, surely anyone promoting more price increases is the doom monger. I sincerely hope for 2006, 2007 we dont 'go Japanese' in ireland. Remember a 50% decline is equivalent to a 100% increase in the first place, and -50% will only get us back to 2002 prices. The sooner we hit the peak, take our deflationary lumps and start unwinding the excesses of this the better.
> 
> 
> WTTW



One highly likely outcome you ignore is that prices stagnate for 10/15 years i.e. soft landing. For example, despite the crunch that came with the nasdaq that is pretty much what has been happening in equity markets the last 5 years. A trend that is expected to continue. I agree though that people seem to have no knowledge, or wish to ignore many other housing crashes in countries more advanced than ours. A sort of "it could never happen here" mentality.


----------



## CoffeeBrew

I propose we come up with a prayer to keep these horrible events at bay. Not a religous prayer - that would be highly inappropriate in the New Ireland.

But something along the lines:

Hail immigrants arriving in plenty
 renting is with thee
blessed art thou amongst speculators
and blessed is full employment
in construction 
and stay not the hand of moneylenders
for they shall upon us deliver more
of money,money holy money.


----------



## Glenbhoy

> ..and yet Baldwin Park seems good value compared to Dublin South !


 
Now CoffeeBrew, that's just a ridculous statement.


----------



## walk2dewater

Chamar said:
			
		

> One highly likely outcome you ignore is that prices stagnate for 10/15 years i.e. soft landing. For example, despite the crunch that came with the nasdaq that is pretty much what has been happening in equity markets the last 5 years. A trend that is expected to continue. I agree though that people seem to have no knowledge, or wish to ignore many other housing crashes in countries more advanced than ours. A sort of "it could never happen here" mentality.


 
By definition, busts follow booms. If you believe they'll be no bust then you believe there's been no boom. And with property values doubling twice in 9 years I'd beg to differ. Proponents of the mythical soft-landing following a genuine speculative boom need to read their history books.

As for the nasdaq having a soft-landing, tell that to someone who bought Nortel for $142 share in March 2000. The same item can be hand for about $2.50 today. Same for Cisco, or Yahoo or, you get the picture.


----------



## Chamar

Sorry, my point was _excepting_ Nasdaq & tech stocks. _Other_ stocks and equities i.e. DOW, FTSE indices etc. have been trading sideways (relatively speaking) since the dotcom bubble and are likely/widely forecasted to remain flat for years. Also I don't neccessarily agree that by definition busts have to follow booms. Corrections yes. The question is will this correction come in the form of a short sharp shock or a gradual re-adjustment. In the irish housing market a long period of stagnation can amount to the same thing as 30% drop over a shorter time-frame, but that is not a bust imo - while acknowledging the market had been booming.


----------



## CoffeeBrew

Glenbhoy said:
			
		

> Now CoffeeBrew, that's just a ridculous statement.


 
Sure just replace the skinny birch tree with a palm tree in this photo and you could be right in elite Baldwin Park, Florida and you wouldn't even know the difference 

  

[broken link removed]=


----------



## Marie

Nice one CoffeeBrew!  Notice this is so small it can only fit a corner bath!  Also I see there are another 3,000 newbuild properties scheduled for West Dublin by the end of 2006.   Things are getting very interesting. 

Isn't there a big difference between owning property in a 'crash' and owning shares?  

I sold a property in Dublin eighteen months ago against unanimous advice that it was a 'fantastic' investment to retain it to let until I retired back there in a couple of years on a modest health services pension.

There have been a few moments when I've wondered if I was mad, and 'on paper' the property has increased by 18.5% of its value.  However deep down I did not - nor do I still - trust the situation and would not have slept nights had my retirement nest-egg been so vulnerable.  It would be useful if the pundits would define 'soft landing'; it sounds innocuous but those who witness or experience it know it entails heavy financial loses, life-changes and sometimes hardship.

Ireland has not experienced this yet and I agree with previous posters that there is a manic quality of denial about property.  Here in the formerly-salubrious south-east of the UK for 8 years properties were selling easily and prices rising steadily BUT that succeeded a decade of flat market.  For the past two years prices have been dropping and the situation is the reverse of the Dublin experience of paying over the asking-price.  Here it's a buyers market.  Offers 10% _under_ the asking-price are accepted immediately and gratefully.  Rent levels have plummeted and many investment properties - domestic and corporate - lie empty for 4 - 6 months at a stretch.  Recently unemployment figures have begun to rise again.

The Irish response to this is invariably "Oh well - it's different here; we've got _immigrants!"  _So does the UK and every other developed country in Europe.  Saturation is saturation.


----------



## markowitzman

I worked in the south east of England during the crash.
Clients within the space of six months from being a high earning private client with high end health insurance became income support claimers.
Change was dramatic and horrific.
From owning a period listed house to renting on rent support.
Lines of speculators that thought they were investors totally wiped out.
Banks were giving 120-130% loans to all.
I think the central bank is the key factor to regulate banking T&Cs to give us any sort of soft landing especially as they have no control over rate decisions.


----------



## bearishbull

CoffeeBrew said:
			
		

> Sure just replace the skinny birch tree with a palm tree in this photo and you could be right in elite Baldwin Park, Florida and you wouldn't even know the difference
> 
> 
> 
> [broken link removed]


 
jaysis a dog box! 
for that price you could buy a mansion in  many developed countries like france america etc


----------



## gidxl03

Has any AAM investor with a second house asked themselves "What price would need to be offered on my investment before I would sell up"?

I've just worked out that my one-and-only house increased by 13.5% APR (335%) over the last nine years.

I now find it strange, even shocking, that I had never even thought about selling *despite* the massive gain. I wonder, what would have convinced me - 500%, 600% increase? Probably not, yet, because I stretched myself at the time, that is more my total gross pay for the same period.

I don't understand why it has gone up so much. In poker that say "If you don't know who the mug at the table is - it's you".

I freely admit, I can't predict long term trends and I won't feel bad if it continues to increase sharply for the next 5 years (I half expect that it will!). But after much thought over the last 3 days, this morning I called the auctioneer and I for one am bailing out!

So what % increase would convince you before selling up? I'm interested to know!


----------



## bearishbull

gidxl03 said:
			
		

> Has any AAM investor with a second house asked themselves "What price would need to be offered on my investment before I would sell up"?
> 
> I've just worked out that my one-and-only house increased by 13.5% APR (335%) over the last nine years.
> 
> I now find it strange, even shocking, that I had never even thought about selling *despite* the massive gain. I wonder, what would have convinced me - 500%, 600% increase? Probably not, yet, because I stretched myself at the time, that is more my total gross pay for the same period.
> 
> I don't understand why it has gone up so much. In poker that say "If you don't know who the mug at the table is - it's you".
> 
> I freely admit, I can't predict long term trends and I won't feel bad if it continues to increase sharply for the next 5 years (I half expect that it will!). But after much thought over the last 3 days, this morning I called the auctioneer and I for one am bailing out!
> 
> So what % increase would convince you before selling up? I'm interested to know!


as any great investor will tell you,you must know when to sell and take profits.its a fact that booms dont last forever so a wise investor will take profits before the market peaks,most accept we are close to the market peak and reality will set in eventually.


----------



## bearishbull

[broken link removed]
article on UK property but has relevance to irish market.


----------



## thewatcher

gidxl03 said:
			
		

> Has any AAM investor with a second house asked themselves "What price would need to be offered on my investment before I would sell up"?
> 
> I've just worked out that my one-and-only house increased by 13.5% APR (335%) over the last nine years.
> 
> I now find it strange, even shocking, that I had never even thought about selling *despite* the massive gain. I wonder, what would have convinced me - 500%, 600% increase? Probably not, yet, because I stretched myself at the time, that is more my total gross pay for the same period.
> 
> I don't understand why it has gone up so much. In poker that say "If you don't know who the mug at the table is - it's you".
> 
> I freely admit, I can't predict long term trends and I won't feel bad if it continues to increase sharply for the next 5 years (I half expect that it will!). But after much thought over the last 3 days, this morning I called the auctioneer and I for one am bailing out!
> 
> So what % increase would convince you before selling up? I'm interested to know!


 
Snap,i'm no professional either but i'm bailing out myself !.


----------



## bankrupt

Interesting article by David McWilliams in the SB Post today:

[broken link removed]

Any comments? His analysis rings truer to me than the fatuous nonsense I've been reading in the press recently about how immigrants are going to prop up our property market.

B.


----------



## bearishbull

another article in todays sunday times by damien kiebard on property and irish economy driven by debt ,he says

"For the moment the mood is euphoric. But anybody who tells you that we are not witnessing a credit bubble — and an associated asset price bubble — is simply wrong. "

so irish commentators are finally starting to say what the dogs in the street know-that theres a property bubble and we all know bubbles burst! i suppose people will still invest according to the "greater fool" theory.


----------



## bearishbull

and even another article on dublin house prices by jill kirby in the sunday times warning of bubble bursting.
she says
"These figures are beginning to frighten me. If I were the only one in my family to decide, I would sell our house, bank the money and rent an equally nice one (in a nicer neighbourhood) for less than the interest paid on the proceeds of the sale. It is this yield anomaly that has me convinced there is a big house-price correction on the way. "
http://www.timesonline.co.uk/newspaper/0,,176-2024737,00.html


----------



## ivuernis

bearishbull said:
			
		

> another article in todays sunday times by damien kiebard on property and irish economy driven by debt


 
Here's the link to the aforementioned article:
http://www.timesonline.co.uk/newspaper/0,,2769-2024754,00.html


----------



## beattie

How will changes to tax laws announced today play out in the long term, were they expected to go and hence saavy investors will already have placed their bets....


----------



## Duplex

The purpose of the property based  tax incentive schemes was to attract capital to locations which the market had previously considered unappealing.  I suppose the intention was to build infrastructural capacity which would encourage further investment.  The hotel tax break has resulted in oodles of shiny new 3 star hotelsm, however the traditional Irish B&B industry has suffered as a result and the added decline in long stay holiday trips has not helped.  In my opinion investment should have been targeted at improving public/ tourist attractions e.g.  long distance footpaths, cycle paths, signage, tourist information etc.  this investment would have built on existing demand and may have attracted additional visitors.  

The benefits of the Section 23 scheme are hard to define. Would the apartments and houses built under the scheme have being built anyway supposing that the market would have rushed to fill demand at a price that the local market would bear?, more than likely, but the provision of relatively cheap rental accommodation is a benefit and the overcapacity and investment risk is spread.


I don’t think the winding down of these schemes will have a major impact on a market which is still struggling to meet demand even though production breaks records every year.  The Irish property market is far more vulnerable to a global economic downturn;  a change in market sentiment, will expose current prices to an acid test of essential value and given present yields I think it’s going to flunk the test.


----------



## bearishbull

European Central Bank warned today that the housing market in Ireland and several other European countries is becoming overvalued following recent sharp price rises. [FONT=Verdana,Arial,Helvetica,sans-serif]"Euro area house price valuation measures continue to be above their historical averages, which, bearing in mind all the caveats attached to this approach, can be seen as a tentative sign of a growing risk of overvaluation in the euro area housing market," the bank said in its February monthly bulletin. It said some recent house price rises in some eurozone regions may be unsustainable. Prices have risen strongly in Spain, France, Italy and Ireland in recent years but have declined in Germany
[/FONT]
The bank said the recent increase in eurozone house prices appears to be mainly the result of strong demand, linked to declines in interest rates in many countries on the launch of the euro. 
This has increased the affordability of higher priced housing, it said. Banks have also tended to relax conditions for the approval of house purchase loans. As a result, mortgage borrowing has increased sharply and mortgage debt rose to around 35pc of GDP by mid-2005 from 25pc in 1999, it said. This expansion of lending appears to have fuelled the sharp rise in house prices, which have been running ahead of growth in disposable incomes since 1999. This may be a correction of the 1994-1998 period, when house prices lagged behind income growth, according to the bank. But house prices can also be measured against rents and returns on government bonds, and such calculations suggest that the housing market has been overvalued since 2001, it warned.


----------



## ivuernis

bearishbull said:
			
		

> house prices can also be measured against rents and returns on government bonds, and such calculations suggest that the housing market has been overvalued since 2001, it warned.


 
I know this is based on US Treasury yields but this calculator gives some indication of the value of rental returns vs. capitalisation. 

http://www.forbes.com/cms/template/tools/calculator/caprate_rent_vs_sell_house.jhtml


----------



## beattie

Hope my landlord doesn't see this calculator, he gets approx €1500 pm for a house which would probably fetch ~900k


----------



## derryman

as an existing landlord with good (>50%) equity across portfolio - things are certainly getting a bit toppy in my opinion - <3% rent yields are bets against increasingly unlikely capital gain - time to take stock - me thinks...


----------



## kane3000

Hi All,

After reading yesterday's Sunday Business Post, I must say that I feel a serious underlying conspiracy between the government, banks and all others with a vested interest in property prices in this country, trying to prop things up with media propaganda. Tell the common folk that things still look good and they will believe it. 

(Aside: I smirked when I read that this particular report will prove positive for Fianna Fail, who are preparing for election next year). 

The OECD state that the Irish market is not a bubble waiting to burst!!
Well thats fine then, nothing to worry about folks.

As I meandered further through the paper I came across mentions of more reports delivered by the OECD (in smaller print at the bottom of some centre page) claiming that "IF" things do go south in Ireland it will be devastating. 

So, it depends on which report from the OECD you read to determine what the mood is. 

They are saying in reality that, one way of looking at it things look good, on the other hand things could be devastating. The Newspaper chose the more positive message to splash across its front page - leading essentially to positive feeling for it's property investor reader and in turn helping to keep the mood bullish in terms of property.

Who are the OECD anyway? - what about the report last week from the ERTE saying that everyone is going to make millions, or the report from the POIF saying things are crashing now - the R.I.D and the C.U.P as well as the P.U.K and O.F.F are all saying buy buy buy.!!!! I have never seen so many acronym organisations come out of the woodwork - I think half of them are made up by banks, government agencies etc. as vehicles for getting the positive/negative news across.

Do people not see that fundamental economics tells us that Ireland's economy is a bit unrealistic and could be in a bit of trouble. I am no expert but I get worried when I read general statements like "The housing market will continue to grow therefore the economy will continue to grow"...surely this is the wrong way around or am I mistaken?? - In a healthy economy should the housing market determine the whole economic growth - surely there are a lot more major factors to consider - both internal and external??

The common person on the street knows that things are a little unsustainable...and the media are trying to throw him/her off the scent. Trying to keep the mood positive - because it is mood and not interest rates,US current account deficits etc. that can ultimately bring on a swing in the value of stocks and assets. 

If the common man/woman starts to feel things are a little dodgy, he/she will pull out leading to a flock of sheep effect - the public en masse will pull out and the price will fall....zerfor zey need to be told zat thinks vill remain positif.

Looking back on our recent property history I ask myself "Has there ever been such a way for the ordinary Joe to make hundreds of thousands of euros for doing sweet FA ? " - it seems to me that when the average guy on the street can make maybe a million or more by simply buying a house(s) and letting it sit there for a few years- things are a little off. 

It is easy money, and I know because I have made some of that money...and I had no clue in the world about property. 

It is like what was said about the great Wall street crash, when the fool on the street gets wind of easy ways to make money on the stock exchange, it is time to get out. 

But the fool on the street has already made fortunes on the Irish property market and still no-one is 'getting out' - what gives?

[broken link removed]


----------



## extopia

I had a taxi driver recently boasting about his €900,000 mortgage. Made me a little queasy.


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## ivuernis

kane3000 said:
			
		

> After reading yesterday's Sunday Business Post, I must say that I feel a serious underlying conspiracy between the government, banks and all others with a vested interest in property prices in this country, trying to prop things up with media propaganda. Tell the common folk that things still look good and they will believe it.


 
Good post kane3000. There's very little objective analysis on the property market in any of the Irish Sunday broadsheets... and how can there when they are all loaded with property supplements and their associated revenue streams. While the housing market may continue to grow for the next two years what about the years after that. In two years time and at current borrowing rates we'll be carrying even more debt. What then if things go bad?


----------



## ivuernis

extopia said:
			
		

> I had a taxi driver recently boasting about his €900,000 mortgage. Made me a little queasy.


 
I don't know how that man can sleep at night! But maybe he's working so many hours to pay the mortgage that he falls asleep the minute his head hits the pillow.


----------



## extopia

As long as he doesn't fall asleep at the wheel. He was very proud of his big mortgage.


----------



## Glenbhoy

> While the housing market may continue to grow for the next two years what about the years after that. In two years time and at current borrowing rates we'll be carrying even more debt. What then if things go bad?


So presuming the prices continue to increase by approximately 8-10% for the next 2 years, that means that the house I want to buy, valued at around 500K at the moment will have increased to 605K, then a correction to the market (the polite term for a crash) of almost 20% is required to get back to the price I can pay now.
The question for me is - do I purchase now (when interest rates are lower and bank lending criteria is a bit lower) or do I wait, because like many on here (on this thread anyway), I am highly dubious of the sustainability of the economy and housing market at current levels?


----------



## ivuernis

Glenbhoy said:
			
		

> The question for me is - do I purchase now (when interest rates are lower and bank lending criteria is a bit lower) or do I wait, because like many on here (on this thread anyway), I am highly dubious of the sustainability of the economy and housing market at current levels?


 
It's a hard one to call, especially for first-time buyers with ever increasing prices for entry level homes and apts. It's a kinda damned-if-you-do, damned-if-you-don't scenario. Does one sit tight and watch prices continue to rise or jump in and hope for the best?

Personally, I think we are going to suffer in the long-term for our current property spending frenzy fuelled by historically low interest rates and lax lending policies. There are many potential hazards which could derail economies in the coming years... rising energy costs, US dollar collapse, instability in the Middle-East, competition from China and India to name just a few.


----------



## bearishbull

glenbhoy if you want to live in your own home and arent gonna be moving for a long time then i'd say buy and dont worry about prices dropping in future,even if prices do correct in 2,3,4 or more years they may not go much lower than the price you will pay now.though when supply catches demand  and interest rates rise and economy slows and rental yields fall further it will be interesting to see how much prices drop.


----------



## walk2dewater

bearishbull said:
			
		

> even if prices do correct in 2,3,4 or more years they may not go much lower than the price you will pay now..


 
Based on what? The tune has changed noticeably in the last year, from "prices won't fall" to "if they fall it won't be by much". Prices have >tripled since 1997, who would have thought that in 1996? Current prices are purely psychologically driven and have no basis in economic returns; I cant remember the last time I saw a property in Dublin that had a positive real yield. In fact, is anyone paying attention to prices at all? €300k, €400k. €500k, who cares is the view, as long as the monthly committment can be met eh? We've climbed the 'wall of worry' and sent prices to the moon, sooner or later we'll face the 'slope of hope' as the market tops and turns, and psychologically the mood does a 180. Fear of being left out is replaced by fear of massive, bankrupting-sized, losses.

Interesting times indeed.


----------



## bearishbull

walk2dewater said:
			
		

> Based on what? The tune has changed noticeably in the last year, from "prices won't fall" to "if they fall it won't be by much". Prices have >tripled since 1997, who would have thought that in 1996? Current prices are purely psychologically driven and have no basis in economic returns; I cant remember the last time I saw a property in Dublin that had a positive real yield. In fact, is anyone paying attention to prices at all? €300k, €400k. €500k, who cares is the view, as long as the monthly committment can be met eh? We've climbed the 'wall of worry' and sent prices to the moon, sooner or later we'll face the 'slope of hope' as the market tops and turns, and psychologically the mood does a 180. Fear of being left out is replaced by fear of massive, bankrupting-sized, losses.
> 
> Interesting times indeed.


 
i said they MAY not go much lower which is possible given the high price(often irrational value )irish people place on owning a house.
if you have read my previous posts you will know i am very negative on future house prices but if your buying your own home to live in for next 20 years house price movements shouldnt be of too much concern to you.
if you can afford it and intend to live in it and dont lose your job(in a crash the wider economy would probably be affected and many jobs would be lost) you'll be fine,if house prices slump every house slumps and you can move to a cheaper house by selling your equally cheaper house.


----------



## beattie

ivuernis said:
			
		

> I don't know how that man can sleep at night! But maybe he's working so many hours to pay the mortgage that he falls asleep the minute his head hits the pillow.


 
After what Trichet said today the taxi driver will have to pick up quite a number of new fares after the ECB meeting on March the 2nd


----------



## bearishbull

maybe there should be a windfall tax on all the property developers who made many millions each from young people for doing little just buying land up and sitting on it till its rezoned or developed,the ultra low taxes shouldnt apply to them as houses are a neccesity and unlike multinationals developers cant move country if taxes are too high


----------



## CCOVICH

bearishbull said:
			
		

> maybe there should be a windfall tax on all the property developers who made many millions each from young people for doing little just buying land up and sitting on it till its rezoned or developed



Surely there would then be less incentive to buy land and have it rezoned?


----------



## Neffa

Bearishbull, 

I lived in the UK during the crash of 1989/90 and believe me, it took much more than 2,3 or 4 years for things to come back. 

The general attitude in Ireland seems to be "sure, we'll ride out the drop if it happens". The problem is that the ride in the UK took far longer than people imagined because the scarring effect it had on people's appetite to buy was dramatic. In 1989, you were mad if you did not want to own a home - one of my colleagues at work saw a fight where one man had beaten another to the last of a new build development outside Birmingham! - but by 1991 you were mad if you wanted to buy because all you could see were prices falling. Everyone I talk to here says that they'd look to buy in again if/when the market falls, but the uncertainty in the market means that few do and the market gets messy for a long time. Banks squeezed credit and it became harder to buy.

In London, it took 8 years for the market to recover. For many, that meant no holidays or other "treats" during that period as they had to fund high mortgage costs to avoid a repossession.  

We bought a house in London in Summer 1998. The previous owners bought it in the Autumn of 1989, months before the crash. It took the market until January 1998 to recover. That's a long, long time.

I've been back in Ireland for just under a year, and I feel strongly that the market is overheated and ripe for a fall:

1. Irish house prices relative to income are the highest in the world.
2. Irish prices are higher than the UK (about 40% higher) but salaries are lower in general.
3. Salaries are growing at 3-5% but prices are growing at twice that rate and mortgage withdrawals are three to four times that rate. 
4. You can rent a house in nice parts of Dublin for about 60% of the cost of buying it. This is based on personal experience of our rented house in South Dublin. People are willing to pay a large premium for "ownership" which is unrealistic.
5. Buy-to-lets are just breaking even for many people at interest rates of 3.5% or so. Even if we see another ECB rise of 0.5% before year-end, the typical €350K mortgage for a 2-bed apartment in much of the country will add over €150/month to costs which will make yields for many buy-to-let investors turn negative.

SSIAs may disguise this impact for the next 12 months, but I think things could get very, very  interesting in the 2nd half of 2006.

Neffa


----------



## walk2dewater

bearishbull said:
			
		

> i said they MAY not go much lower which is possible given the high price(often irrational value )irish people place on owning a house.
> if you have read my previous posts you will know i am very negative on future house prices but if your buying your own home to live in for next 20 years house price movements shouldnt be of too much concern to you.
> if you can afford it and intend to live in it and dont lose your job(in a crash the wider economy would probably be affected and many jobs would be lost) you'll be fine,if house prices slump every house slumps and you can move to a cheaper house by selling your equally cheaper house.


 
Renting is a much better option to ride out this storm.  Why buy now when you can save more and buy more later?  I'd rather be liquid and have my money in non-property assets until this situation gets sorted.


----------



## bankrupt

walk2dewater said:
			
		

> The tune has changed noticeably in the last year, from "prices won't fall" to "if they fall it won't be by much".
> ...
> Current prices are purely psychologically driven and have no basis in economic returns;
> ...
> who cares is the view, as long as the monthly committment can be met eh? We've climbed the 'wall of worry' and sent prices to the moon, sooner or later we'll face the 'slope of hope' as the market tops and turns, and psychologically the mood does a 180. Fear of being left out is replaced by fear of massive, bankrupting-sized, losses.


 
This is an interesting perspective, I have certainly noticed much more bearish sentiment around of late.  Do you think this is indicative of an imminent collapse or have I just not been paying enough attention up until now?

Is there anyone reading who is as certain that we won't see a sudden "correction?"  (I love this euphemism - can you also say "six people died in a multiple car correction on the motorway?")


----------



## woods

walk2dewater said:
			
		

> Renting is a much better option to ride out this storm. Why buy now when you can save more and buy more later? I'd rather be liquid and have my money in non-property assets until this situation gets sorted.


I think that this is what everybody thought when we hit 2000 and turned the century. We all expected that the prices were going to at least stop if not go down a little. There was a serious lull in the market for a few months and then the maddness started all over again.
I would not advise anyone that was in a position to buy a house to live in and needed a house, to wait and "hope" to get it cheaper next year. I could not be responsible for the consequences of that advise.
This correction has been coming a long time and probably will come but nobody in the business is seeing it coming soon. The price of developement land has gone from half a million an acre to over a million in the greater Cork region in the past 18 months. Who do you think is buying up that land and do you think that they are idiots. I doubt it.


----------



## bankrupt

A little historical perspective perhaps?



			
				someone like woods said:
			
		

> I think that this is what everybody thought when we hit 1636. We all expected that the prices were going to at least stop if not go down a little. There was a serious lull in the market for a few months and then the madness started all over again.
> I would not advise anyone that was in a position to buy a tulip and needed a flower, to wait and "hope" to get it cheaper next year. I could not be responsible for the consequences of that advice.
> This correction has been coming a long time and probably will come but nobody in the business is seeing it coming soon. The price of bulb growing land has gone from half a million guilders an acre to over a million in the greater Amsterdam region in the past 18 months. Who do you think is buying up that land and do you think that they are idiots. I doubt it.


----------



## Glenbhoy

> if your buying your own home to live in for next 20 years house price movements shouldnt be of too much concern to you.


That's the problem, there's no way I could afford anything that would do me for the next 20 yrs - what with the 8 kids.  We have a very nice apartment at present, made a few euro on it, but that will be very quickly eaten up by the stamp duty and deposit.  It probably won't be viable to stay here for much more than another 18mnths, it's hard to know - there have been some good replies here which certainly give food for thought.  And I certainly would'nt be keen in extending myself too far if there is a possibility of falling house prices (as we all know, this would affect everything in the economy, and not in a nice way).

Neffa


> 1. Irish house prices relative to income are the highest in the world.
> 2. Irish prices are higher than the UK (about 40% higher) but salaries are lower in general.
> 3. Salaries are growing at 3-5% but prices are growing at twice that rate and mortgage withdrawals are three to four times that rate.
> 4. You can rent a house in nice parts of Dublin for about 60% of the cost of buying it. This is based on personal experience of our rented house in South Dublin. People are willing to pay a large premium for "ownership" which is unrealistic.
> 5. Buy-to-lets are just breaking even for many people at interest rates of 3.5% or so. Even if we see another ECB rise of 0.5% before year-end, the typical €350K mortgage for a 2-bed apartment in much of the country will add over €150/month to costs which will make yields for many buy-to-let investors turn negative.


Without trying to be smart, where did you get this information for number 1 and 2, and what exactly do you mean by No.4?


----------



## gearoidmm

> what exactly do you mean by No.4?


 
Currently renting an apartment for E1400 per month.  Similar apartment in the smae development was sold for ~E600000 last year.  100% mortgage @ 3.25% over 40 years would cost E2235/month and management fees and waste etc approx E150/month.

Therefore total cost of buying is E2385/month compared to E1400 to rent - 58.7% of the cost.  Of course this only works out if there little or no capital appreciation.  It makes absolutley no sense to buy unless you think there is going to be good appreciation or if you think that you have found a place that you will be happy to stay in for a long time.  I haven't, and I'll likely have to move abroad in 2-3 years so renting makes sense to me (despite what my Mammy keeps telling me)


----------



## walk2dewater

woods said:
			
		

> I think that this is what everybody thought when we hit 2000 and turned the century. We all expected that the prices were going to at least stop if not go down a little. There was a serious lull in the market for a few months and then the maddness started all over again.
> I would not advise anyone that was in a position to buy a house to live in and needed a house, to wait and "hope" to get it cheaper next year. I could not be responsible for the consequences of that advise.
> This correction has been coming a long time and probably will come but nobody in the business is seeing it coming soon. The price of developement land has gone from half a million an acre to over a million in the greater Cork region in the past 18 months. Who do you think is buying up that land and do you think that they are idiots. I doubt it.


 
Well I'm not trying to convince anyone, least of the the anyone "in the business".   At this stage there's really no point in debating the issue further.  Personally, I see minimum 50% drop in prices from peak to trough, far more in some areas/types, such as apartments etc. in West Dublin.

Want to know more?  Well I see prices topping in late 2006 early 2007.  The correction will be 3-5yr event, sharp falls then some bounces, then even more severe falls, etc.  The instability, psychological shock will create an unavoidable wider economic recession.  After the pain of this coming recession and after the first green shoots of recovery appear, Ireland will be a nicer place.

What am I doing?  Currently renting a very nice terraced house in south city centre for 60% of what a conventional mortgage would cost.  Have my assets in 60% short-term EU/CAN$ bonds (i.e. near cash), 20% in prec metals and prec metal shares, 20% in mining and energy shares.  I expect a return of minimum 10% p.a. over next 5 yrs, depending on my leverage, while res property takes an almightly beating in UK, Aus, USA and esp. Ireland.

WTTW


----------



## Glenbhoy

> Currently renting an apartment for E1400 per month. Similar apartment in the smae development was sold for ~E600000 last year. 100% mortgage @ 3.25% over 40 years would cost E2235/month and management fees and waste etc approx E150/month.
> 
> Therefore total cost of buying is E2385/month compared to E1400 to rent - 58.7% of the cost


Whilst I understand what you are saying, would I be right in saying that if you bought an apartment for 350K at 3.25% for 40yrs (there are a number of apartments close to town that could be purchased for this price), your repayments then would be €1303 per month, 948 interest and 356 capital, would this not then be more advantageous to you than renting (dead money as I'm sure your mammy tells you - experience ).  Obviously you now have interest rate risk to consider and the possibility of a correction.


----------



## gearoidmm

> Whilst I understand what you are saying, would I be right in saying that if you bought an apartment for 350K at 3.25% for 40yrs (there are a number of apartments close to town that could be purchased for this price), your repayments then would be €1303 per month, 948 interest and 356 capital, would this not then be more advantageous to you than renting (dead money as I'm sure your mammy tells you - experience ). Obviously you now have interest rate risk to consider and the possibility of a correction


. 

Not necessarily. Given that I will be moving on in a couple of years, what with transaction costs at first and the fact that I would lose first-time buyer status (I'm planning on returning to Ireland eventually) unless there was a lot of appreciation, I would lose out on the deal in the long run. Also, the apartment that I could buy for that amount would probably be a one-bed or very small 2-bed. the place I'm renting at the moment is exactly what I want in terms of location and size and I could never afford to buy it.

I suppose I'm making a lifestyle choice as much as anything. I no longer think the market is going to crash though, not unless the banks cut off the credit supply and I can't see that happening and the Irish imperative to own property will keep the whole bandwagon going


----------



## Neffa

1. Irish house prices relative to income are the highest in the world.

>Source - The Economist and others. The average house price here is heading for 10x average earnings.  Dublin average prices expected to be €400K by the end of 2006 and circa €300K nationwide. (In the UK, it is about 6-8x and most commentators there think that is too high.) See [broken link removed]

2. Irish prices are higher than the UK (about 40% higher) but salaries are lower in general.

>Source - personal comparisons. You will pay circa €1.5m for a good condition, 1400-1500sq.ft period house in Dublin 6 which is comparable to the London areas of SW6, W4, N1 etc. The same house there would cost £675K-£750K. Look at www.findaproperty.com and have a look in Fulham, Chiswick for what £600K will buy you and compare that to Ranelagh, Rathgar, Rathmines etc.

4. You can rent a house in nice parts of Dublin for about 60% of the cost of buying it. This is based on personal experience of our rented house in South Dublin. People are willing to pay a large premium for "ownership" which is unrealistic.

Source - We've looked at several houses which were on sale or for rent at the same time. In addition, you can see this on Daft and Myhome.ie. Look at how much it would cost to rent vs. buy different houses in the same area. 

Example 1 - Dublin 6

To rent - €4000/month

http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=pc6&s[mnp]=2800&s[mxp]=&s[bd_no]=&limit=10&search_type=rental&id=381116

To buy - very similar €1.7m AMV

[broken link removed]

Example 2 - Sandycove 

http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=ga5&s[mnp]=2800&s[mxp]=&s[bd_no]=&limit=10&search_type=rental&id=363353

It has been on the rental market for a while, so I'd assume the actual rent they will get will be less than €4K, nearer €3800. That's a €900K mortgage on a capital and repayment basis, or a €1.3m on interest only. If that house were to sell, it would be nearer €1.6-€1.7m based on what properties nearby have sold for. 

I'd look for others, but a quick skim of Daft and Myhome will confirm this - there is a striking difference. I assume it is because investors are simply covering interest-only mortgages assuming that capital upside is a given. This is not the case in other markets - in London, rents are much closer to mortgage payments than they are in Dublin.


----------



## beattie

Well researched post Neffa, didn't think there would be anything reasonable in Fulham for that sort of cash. Also would think that 4k for that house in Sandycove is a bit optimistic


----------



## kane3000

This "Rent is dead money" psychology is a lot of what is causing the price of property to spike in Ireland. 

Not wishing to bring up old sentiment so I make this point as generic as possible.

The thought of "Rent is dead Money" has been passed down from generation to generation since the days of Landlords (19th C) - . At this time not many indigenous Irish people owned land and most had to pay rent to Landlords to be allowed to farm land belonging to the Landlord and live in a small house provided by same landlord. The average Irish person never owned anything and never ever gained from capital appreciation etc. 

However. there was a big change and suddenly our forefathers were free to own their own land  - it has become like a drug ever since. 

There is an inherent genetic addiction passed down from generations that we must at all costs own our own piece of Ireland.

Now that is where the "Rent is dead money" comes from - it is a message intertwined in our D.N.A to never let anyone make us pay to live somewhere again..

However, if we look at things realistically - to live somewhere in Ireland one has three main options:

1. Buy a house outright - you own it fully.
2. Get the bank to buy a house for you - mortgage.
3. Rent.

How many people can buy a house outright - I would imagine it is a small percentage- so that is not really a possibility for most.

So people will either get a mortgage or rent.

Very generally, if you rent you pay say €1000 a month. For 25 years this will cost you €250,000.

If you get the bank to buy you an average house of value €400,000 it will cost you €2000 a month for 25 years at 3.5% - so total cost is €600000. 
Total cost charged by the bank for this service is €200,000.
So now you have a house that you own after 25 years.

Ok, so after 25 years of renting you have no asset - but you do have that extra €1000 a month that you have saved in Rabo bank at 3.2% interest by not paying the extra cost of the mortgage outlined above. This will yield you approximately €456000 after 25 years - enough hopefully to buy a nice house outright to retire in.

So which money is more dead??


----------



## walk2dewater

Neffa said:
			
		

> 1. Irish house prices relative to income are the highest in the world.
> 
> >Source - The Economist and others. The average house price here is heading for 10x average earnings. Dublin average prices expected to be €400K by the end of 2006 and circa €300K nationwide. (In the UK, it is about 6-8x and most commentators there think that is too high.) See [broken link removed]
> 
> 2. Irish prices are higher than the UK (about 40% higher) but salaries are lower in general.
> 
> >Source - personal comparisons. You will pay circa €1.5m for a good condition, 1400-1500sq.ft period house in Dublin 6 which is comparable to the London areas of SW6, W4, N1 etc. The same house there would cost £675K-£750K. Look at www.findaproperty.com and have a look in Fulham, Chiswick for what £600K will buy you and compare that to Ranelagh, Rathgar, Rathmines etc.
> 
> 4. You can rent a house in nice parts of Dublin for about 60% of the cost of buying it. This is based on personal experience of our rented house in South Dublin. People are willing to pay a large premium for "ownership" which is unrealistic.
> 
> Source - We've looked at several houses which were on sale or for rent at the same time. In addition, you can see this on Daft and Myhome.ie. Look at how much it would cost to rent vs. buy different houses in the same area.
> 
> Example 1 - Dublin 6
> 
> To rent - €4000/month
> 
> http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=pc6&s[mnp]=2800&s[mxp]=&s[bd_no]=&limit=10&search_type=rental&id=381116
> 
> To buy - very similar €1.7m AMV
> 
> [broken link removed]
> 
> Example 2 - Sandycove
> 
> http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=ga5&s[mnp]=2800&s[mxp]=&s[bd_no]=&limit=10&search_type=rental&id=363353
> 
> It has been on the rental market for a while, so I'd assume the actual rent they will get will be less than €4K, nearer €3800. That's a €900K mortgage on a capital and repayment basis, or a €1.3m on interest only. If that house were to sell, it would be nearer €1.6-€1.7m based on what properties nearby have sold for.
> 
> I'd look for others, but a quick skim of Daft and Myhome will confirm this - there is a striking difference. I assume it is because investors are simply covering interest-only mortgages assuming that capital upside is a given. This is not the case in other markets - in London, rents are much closer to mortgage payments than they are in Dublin.


 
Indeed an excellent post.  Problem is no one is listening to this, it's like the child with his hands to his ears, you can raise your voice as much as you like, but he'll just go 'nah nah nah nah nah' and press his hands ever tighter on his ears.  We've no experience of asset bubbles in Ireland, cos we've only just become rich enough to have them.  As a society we have no collective memory of hard times brought about by self-inflicted speculation... times past were all hard, times now are good....  But boy are we making up for lost ground.

No amount of rational economic analysis will convince someone, and its the majority still, who religiously believes that property in a one-way bet to riches.  The herd believes property prices will never go down in any serious way that would result in losses.  No matter what the price who "can never lose on property"... Any hypothetical losses will be made back in the "long term".  The herd believes that being highly geared is essentially zero risk, cos in "the long-term".....


----------



## Glenbhoy

Some interesting posts from everyone, pity I'm busy today!



> Ok, so after 25 years of renting you have no asset - but you do have that extra €1000 a month that you have saved in Rabo bank at 3.2% interest by not paying the extra cost of the mortgage outlined above. This will yield you approximately €456000 after 25 years - enough hopefully to buy a nice house outright to retire in.


Two issues here - firstly is rent of €1,000 realistic for a house worth 400K?
Secondly you are assuming capital appreciation of virtually nil, inflation likewise, as the 3.2% barely covers our supposed inflation rate, also do you forsee rent dropping in real terms?  
Additionally you have the vagaries of tenancy law to deal with!

Neffa:
A quick point on UK and Irish wage to house values, to my mind this pretty much identical:
UK National average wage: £22,411 Average House Price (per friday last) £185K  ratio is therefore 1:8.4
Irish national average wage €32K (couldnt find confirmation) Average House price €278K ratio is therefore 1:8.5

Additionally, the housing stock is vastly different, so are they really comparable?  I don't know London at all, but are places such as Fulham, Chiswick etc as handy as the likes of Ranelagh, Rathmines etc, these places in Dublin are a mile from the city centre (admittedly the transport system here is abysmal) and any inter city comparisons are a bit hypothetical.


----------



## kane3000

Glenbhoy,

I never said it had to be the same house - I am being very general in making the point that isn't paying interest on a mortgage as dead as the money used to pay rent ? Isn't it just psychology that is blinding people in general from seeing that?


----------



## glendale

I have done a spreadsheet in excel to compare the value of buying versus renting [broken link removed]


----------



## Duplex

If Irish buyers are looking for a good deal may I suggest the US, developers are ‘slashing’ prices. You can pick up a 2,000 sq ft detached with double garage and 4 bedrooms in Sacramento California for less than the price of a 2 bed flat in Dublin. 

http://www.globaleconomicanalysis.blogspot.com/


PS nice Spread sheet Glendale


----------



## jhegarty

kane3000 said:
			
		

> If you get the bank to buy you an average house of value €400,000 it will cost you €2000 a month for 25 years at 3.5% - so total cost is €600000.
> Total cost charged by the bank for this service is €200,000.
> So now you have a house that you own after 25 years.
> 
> Ok, so after 25 years of renting you have no asset - but you do have that extra €1000 a month that you have saved in Rabo bank at 3.2% interest by not paying the extra cost of the mortgage outlined above. This will yield you approximately €456000 after 25 years - enough hopefully to buy a nice house outright to retire in.



three questions...

1) where is the €400k house you can rent for €1000 a month ? 

2) how do I stop my rent going up in the next 25 years ?

3) what sort of house will €456k buy in 25 years ?


----------



## Neffa

I'll need to look into the wage comparisons a bit further and find the data. 

On areas, I agree it is very hard to do a comparison but Fulham and Chiswick are very accessible, family oriented redbrick areas with good schools. They are further away from the centre (30-40 mins by tube) than Ranelagh is, but London's centre is so much bigger that you cannot use geographic distance as a simple comparison.  The nearest (nice) residential areas are always 30 mins at least from the centre in London.

I think what you can do is say "how much does a comparably sized home cost in a sought-after area with similar demographics" and that is what I based my analysis on.


----------



## walk2dewater

jhegarty said:
			
		

> 3) what sort of house will €456k buy in 25 years ?


 
Probably one costing €456k today, or more.


----------



## Theo

Although one can never be certain, it is highly unlikely that you'll be able to buy anything in 25 years for 456k - it will probably represent a deposit and no more.  

Property has a track record of doubling on average every 7-10 years.  This track record is 2 centuries old. It includes downturns, recessions, wars and boom times.  As long as people want a roof over their heads, property will be in demand. 

Based on this, and assuming that a 3 bed semi in 1985 in a good area of Dublin was £50k, then in 25 years it should probably be valued at £1.2m or 1.5m euro.  Their true value today is likely to be £200k or 250k euros as opposed to 450-500k they are selling at now.

There will be a correction - unfortunately I do not know when and it will be a great time to buy.  So from that point of view, maybe kane3000 is on a winner with the rent for the moment.


----------



## kane3000

Hi folks,

I would just like to clarify, my above post is just a representation - I know the figures are unrealistic and subject to variance - I am just trying to get a point across that I think that the interest portion of paying a mortgage is just as dead as rent money. I believe it is purely psychological that the nation choose to be blinkered by this and hence do whatever they can to 'buy' rather than rent hence driving up prices.

Cheers
Kane


----------



## walk2dewater

Theo said:
			
		

> Property has a track record of doubling on average every 7-10 years. This track record is 2 centuries old. It includes downturns, recessions, wars and boom times.


Absolute nonsense.



			
				Theo said:
			
		

> As long as people want a roof over their heads, property will be in demand.


Absolutely true, people need shelter. When this crash is done and the carnage wrought, they won't want to buy it with a ten-foot pole in this country.



			
				Theo said:
			
		

> There will be a correction - unfortunately I do not know when and it will be a great time to buy.


The outcome of true crashes, like the one we're heading for, is that no one wants to buy XYZ ever again. Property will go wildly out of favour by the time the bottom of this crash is reached.

We will all pay dearly in terms of a wrecked economy for our stupidity.


----------



## tiroileain

Duplex said:
			
		

> PS nice Spread sheet Glendale


 
Is it not glaringly obvious that it assumes that rent will remain constant i.e. €11,700 pa throughout the 30 years?

Also, where can I get a return of 10.4% on my lump sum?


----------



## roryodonnell

A bit like Eircon shares


----------



## gearoidmm

It also assumes that the property will appreciate at ana verage rate of 8% over the next 25 years which seems a little optomistic


----------



## Glenbhoy

> I have done a spreadsheet in excel to compare the value of buying versus renting [broken link removed]


Interesting, I think by using this, it becomes apparent that buying offers the better deal.   This is because:
We need an annual return of 10% (as opposed to 8% on property) for each of the next 30yrs to make rent the better option.  The calculator takes no account of CGT or income tax effects on the fund value, the assumption is that 130K is available to invest from Day 1, this is a major determinant on the end fund value and IMO there are not many people who have a 26% deposit to put down on their purchases.

All that said, maybe sitting it out renting for a couple of years is the best option at present, I don't know, i prefer to buy anyway - sure it's only money!


----------



## kane3000

Imagine it is February 21 2010, what do you think the current property market will be like - what do you think the major headlines will have been in terms of Irish property since 2006 ?


----------



## Theo

walk2dewater said:
			
		

> Absolute nonsense.
> 
> What is nonsense?  The comment about doubling in value every 7-10 years?  Or the comment about that record based on 2 centuries?
> 
> If its the first, this comment is backed up by no less than Warren Buffett himself who invested in McDonalds for precisely that reason.  He rightly saw McDonald's as a property play.  I don't believe Buffett is a non-sensical investor.
> 
> If its the second,  well, the record speaks for itself.  Its simply fact.
> 
> 
> And the best time to buy property will be when everyone else is running away scared.  I do not agree that this will spell the end of the property market in Ireland or anywhere for that matter - time always heals the emotional scars and greed sets in again. This happens with shares as well as property.  The best time to buy shares in recent times was March 2003, just at the outbreak of the Iraq war.  The DOW was at 7500 - it recently broke 11000.  Unfortunately , the herd ran away scared (including pension funds) and of course they're now coming back with greed in their eyes.
> 
> No-one's fault, it's just human nature and the world (as far as successful investing goes) belongs to those who can read and predict it.


----------



## jhegarty

kane3000 said:
			
		

> Imagine it is February 21 2010, what do you think the current property market will be like - what do you think the major headlines will have been in terms of Irish property since 2006 ?



Average House in Dublin Hits 1 Million.....
Crash to happen soon ... really we mean it this time....


----------



## Neffa

Hmmm....

€1m average price means at least €125-€150K average salaries in 5 years time. I think not.


----------



## jhegarty

Neffa said:
			
		

> Hmmm....
> 
> €1m average price means at least €125-€150K average salaries in 5 years time. I think not.




you forgot about the 50 year mortgage they introduced in 2009...


----------



## extopia

Theo said:
			
		

> Property has a track record of doubling on average every 7-10 years.  This track record is 2 centuries old. It includes downturns, recessions, wars and boom times.



Can you point us towards the source of this claim?


----------



## Neffa

Guys

There's been some push back on part of my original post but no-one has yet presented any arguments on why renting here is so much cheaper than buying. For me, that is the single biggest indicator that something is wrong. 

The only conclusion I can draw is that investors are using interest-only mortgages to finance these properties and aim to cover the interest cost only on the assumption that the capital gain is "free". But when interest rates rise, some people will be in negative yield territory and some will try to sell, forcing the price downwards, making the capital gain go away, which then makes more want to sell...and so it goes on until the market shakes out. 

Any comments?


----------



## Duplex

I think they introduced a 100 year mortgage in Japan in 1989/1990, which seems to have had the desired effect. 



http://www.iht.com/articles/2005/12/25/business/bubble.php





> So Nakashima, a Tokyo city government employee who was then 36, took out a loan for almost the entire $400,000 price of a cramped four-bedroom apartment. With property values rising at double-digit rates, he would easily earn back the loan and then some when he decided to sell.
> 
> Or so he thought. Not long after he bought the apartment, Japan's property market collapsed. Today, the apartment is worth half what he paid. He said he would like to move closer to the city but cannot: The sale price would not cover the $300,000 he still owes the bank.


----------



## extopia

I suspect the reason renting is cheaper than buying is that the market can't sustain higher rents due to the huge number of rental properties on the market, as the world and its mother gets into property investment. It's a renter's market at the moment.


----------



## glendale

Re the spreadsheet.

The idea is that one put in your own values and then play with the percentage returns and interest rates and such.
I realise I need to factor in an increase in rent but I don't know the relevant fomula.

See 
http://www.finfacts.com/Private/curency/historicalstocksreturnsperformance.htm#DOW%20JONES%20INDUSTRIAL it saids the US stock market average annualised return (1926-1999) is 11%.


----------



## woods

I think that the problem is pensions. As long as nobody can be sure of a pension that will keep them in some degree of comfort then everyone sees the need to have a rental property to fall back on and as long as everybody wants that extra property then the demand will stay up. Who here feels secure with their pension prospects.


----------



## kane3000

Actually there was some talk about multigenerational mortgages in the press at the weekend - would this be the straw that breaks the camels' back. 

Back in September 2006 the Irish Finance Authority affirmed the roll-out of Multigenerational mortgages (MGMs) to Irish home buyers. This proved very effective in allowing first timers to enter the market. People did not care that their children would inherit their debts. One Dublin man told this paper "My kids ardnt even bordn yet, so they wont know any differdince if they have to pay my mortgage after Im dead and gone since everyone will be doin it - it'll be just part o' life". 

It seems people will shell out and agree to whatever is thrown at them just as long as they get their hands on their own pile of bricks.

However the strategic US dollar devaluation in December 06 whose aim was to reduce the CA deficit invoked the ECB under the direction of Trichet to increase Eurozone Interest lending rates to 4% to remain competitive. 

This had a minimal effect at first as homeowners just tightened their belts further. "Sure its only 150 nicker a month, I'll just stop goin out for so many dinners and give up the fags- the wife can do her own hair now aswell..."

The overall mood, however, started to shift. The media became a little more sceptical of further increases to the property market, this feeling started to bleed into the public at large. 

A few big investors started to offload property in early 2007, followed by smaller investors who were scared by the antics of the big boys.

Suddenly the market was flooded by highly priced rental property, there were not many buyers as most of the FTBs had been sponged up by the earlier introduction of 120% mortgages and MGMs, speculators were aware of the big sell and naturally "Wouldnt touch anything at the moment with a sh***y stick". 

Prices started to drop as investors became more and more aware of the volume of property out there - they gradually started to drop prices a little to make a quick sale. 

As prices of some properties dropped a little, more investors started to worry and started to sell at even lower prices aware that they had bought early and were still way above what they paid for the properties in the first place so wouldn't be too badly off if they knocked 50 or 75 grand off the asking. 

Others, who had bought later, were knocking more off as they were getting closer to negative equity - Some speculators waiting on the sidelines started picking up a few properties here and there believing that things wouldn't go much lower - this stabilised things for a short time but there was no growth between winter 2008 and spring 2009 - many investors and landlords took a deep breath. 

The Average house in Dublin was priced at €240,000 at around Christmas 2008.

Summer 2009, More bad news, a large American corporation was pulling out of Ireland and heading for China - on the belief that others would follow suit the mood plunged. 
Investors who had bought at the turn of the century were nearing break even point and couldn't hold out - knowing it was a sellers market they offloaded their 'keenly priced' investments and watched as the price again plummeted.

December 2010, The banks have reported that they have had as bad a 2010 as 2009 - AIB and BOI stocks have fallen for a 4th year in succession. 

Unemployment is at 15% as all of the major construction contractors have been hit hard. 

We have seen 50,000 immigrants leave Ireland this year, the biggest outfux of people from our shores since 1986. 

Credit has run dry, and mortgage approval rates have not been as low since 1972.

Irish Debt collection agencies have increased operations by 300% and large UK Debt Collection agencies are offering franchises in locations throughout the country.

Home and Vehicle reposessions are at the highest in the states history. 

The average price of a Dublin 3 bed semi is now €190,000. 

But things are starting to look a little more positive as many investors who didn't suffer in the "Celtic Lemming" are starting to pick up the cheap property. 

---the only way is up!!


----------



## Neffa

jhegarty said:
			
		

> you forgot about the 50 year mortgage they introduced in 2009...


 
What about 75 or 100 years?  

Joking aside, no matter how long the mortgage is, you always have to pay the interest - that's the issue. Making it longer gives you more time to pay off the capital, but leaves the interest element in place. The difference between a 35 year deal and a 50 year deal is not much in terms of monthly payments but a shed load extra in total repayments.


----------



## ClubMan

In this old thread I mentioned the possibility of long term mortgage financing akin to the _Pfandnbrief _system in _Germany _becoming more common (or available at all?) in _Ireland_.


----------



## bearishbull

if you rent for cheaper and invest the money saved in a pension you get immediately 42% extra if your on higher rate of tax,pensions have returned an average of 10% a year over last ten years,in long term 10%per annum  isnt unreasonable so this strategy is sensible in the current uncertain market where there are clearly asset bubbles.yes your  rent will rise by a few per cent a year but so will your salary. property historical has risen 10% per year but a lot of that would be inflation,in reality after inflation property hasnt increased much over last hundred years-only 1% per annum(according to yale economist shiller).
people think interest rates are so low nowadays so things are different but in reality when interest rates where 15% inflation was around the same! so real interest rates were around same as now! i heard the economic editor of irish times argue that we are in permanant low interest rate enviroment and this justifies higher prices but when interest rates were 15% inflation was 15% which erroded the value of the initial loan! and wages were rising at close to inflation so the debt got smaller in real terms.


----------



## extopia

bearishbull said:
			
		

> if you rent for cheaper and invest the money saved in a pension you get immediately 42% extra if your on higher rate of tax.



Incorrect. If you are on 42% rate and put €100 in a tax-deductible pension, in effect you're getting a €42 top-up on €58. So it's not 42% extra - it's more like 72%.


----------



## bearishbull

even better!


----------



## Loki

Does anybody know which "experts" have been saying there will be a crash  for any time longer than 5 years? 
We all read the reports from 10 years ago that were predicting price crashes I am just wondering are these peopel still saying the same thing that they were wrong about consectutively for  just 5 years.

A lot of people here are making the assumption that people must buy property at some point. No talk about the fact that some people simply may never own now. If you want to look at examples of where this happened look at all the georgian buildings owned in Dublin. Very few are owned by individuals or used as houses. The only reason I can see is that that kind of living had to change. If you compare dublin density etc to other European cities nobody elses seems to live with our density. I reckon this is what will change and not a drop in prices. The big problem with many "experts" is they look at the financial records and less at the social element or the engineering elements  of society. 

Many people quote huge drops yet in many cases that means houses prices would drop below construction costs. It is possible but not likely in the certain places such as those close to Dublin due to  a constant demand. If employement dries up more country people will have to move to Dublin. No matter what Dublin will always be the main area of employment in this country.


----------



## bearishbull

Loki said:
			
		

> Does anybody know which "experts" have been saying there will be a crash for any time longer than 5 years?
> We all read the reports from 10 years ago that were predicting price crashes I am just wondering are these peopel still saying the same thing that they were wrong about consectutively for just 5 years.
> 
> A lot of people here are making the assumption that people must buy property at some point. No talk about the fact that some people simply may never own now. If you want to look at examples of where this happened look at all the georgian buildings owned in Dublin. Very few are owned by individuals or used as houses. The only reason I can see is that that kind of living had to change. If you compare dublin density etc to other European cities nobody elses seems to live with our density. I reckon this is what will change and not a drop in prices. The big problem with many "experts" is they look at the financial records and less at the social element or the engineering elements of society.
> 
> Many people quote huge drops yet in many cases that means houses prices would drop below construction costs. It is possible but not likely in the certain places such as those close to Dublin due to a constant demand. If employement dries up more country people will have to move to Dublin. No matter what Dublin will always be the main area of employment in this country.


people havent been warning for ten years only around 6 and just because people are warning for a long time doesnt mean it wont happen, in fact the longer economists warn about a situation the more likely it is to happen as it brings us closer to the inevitable downward movement that all asset markets experience at some time as these markets are cyclical.

construction costs are only 30% of the price for most properties,land is the largest and most significant cost element.

i dont know what your point is regarding georgian houses but it doesnt make much sense and i think "experts" have taken all aspects of the scenario into consideration when judging the realisticness of house price valuations.


----------



## walk2dewater

Loki said:
			
		

> Does anybody know which "experts" have been saying there will be a crash for any time longer than 5 years?
> We all read the reports from 10 years ago that were predicting price crashes I am just wondering are these peopel still saying the same thing that they were wrong about consectutively for just 5 years.
> 
> A lot of people here are making the assumption that people must buy property at some point. No talk about the fact that some people simply may never own now. If you want to look at examples of where this happened look at all the georgian buildings owned in Dublin. Very few are owned by individuals or used as houses. The only reason I can see is that that kind of living had to change. If you compare dublin density etc to other European cities nobody elses seems to live with our density. I reckon this is what will change and not a drop in prices. The big problem with many "experts" is they look at the financial records and less at the social element or the engineering elements of society.
> 
> Many people quote huge drops yet in many cases that means houses prices would drop below construction costs. It is possible but not likely in the certain places such as those close to Dublin due to a constant demand. If employement dries up more country people will have to move to Dublin. No matter what Dublin will always be the main area of employment in this country.


 
The prospect of much lower property prices is totally unbearable for those with highly leveraged positions. It would mean absolute and total financial ruin. So there is no possibility of having a rational, unemotional discussion on the matter with them. It's psychologically too painful. Prices MUST NOT fall, young people must be encouraged to get in at the bottom of the pyramid, I MUST be able to sell on to someone else in the future for a higher price, I must stay in control my retirement depends on it.  In such an environment, supportive explanations for existing or higher prices become ever more contrived and bizarre... east euro immigration etc.  The unfavourable scenario is far to gruesome to consider.

There will be enormous economic, social carnage when prices unravel in this country.  Everyone will be impacted in some way.  FF will be severely, if not fatally, damaged as a political party.

WTTW


----------



## jhegarty

bearishbull said:
			
		

> people havent been warning for ten years only around 6 and just because people are warning for a long time doesnt mean it wont happen, in fact the longer economists warn about a situation the more likely it is to happen as it brings us closer to the inevitable downward movement that all asset markets experience at some time as these markets are cyclical.
> 
> construction costs are only 30% of the price for most properties,land is the largest and most significant cost element.
> 
> i dont know what your point is regarding georgian houses but it doesnt make much sense and i think "experts" have taken all aspects of the scenario into consideration when judging the realisticness of house price valuations.



the crash will happen , might be 10 months or 10 years ,but every day that passes means it will take a bigger crash for people who bought in 2004/2005 to be in negotiate equity...


----------



## Loki

bearishbull said:
			
		

> people havent been warning for ten years only around 6 and just because people are warning for a long time doesnt mean it wont happen, in fact the longer economists warn about a situation the more likely it is to happen as it brings us closer to the inevitable downward movement that all asset markets experience at some time as these markets are cyclical.


Sorry you are wrong there I remember  reading lots about house price warning and it was 10 years ago. It has certainly going on longer than 6. I only asked for the last 5 as I thought it would be easier for many people. I never claimed it won't happen just 


			
				bearishbull said:
			
		

> construction costs are only 30% of the price for most properties,land is the largest and most significant cost element.


I suggest you try to get a house built and you will find construction will run a lot higher than 30%. I think if you gauge it by mass estates built by a developer you may find construction costs go dwon to 30%. The problem is that to build a house you need many other services which will push up the cost to build a house. 


			
				bearishbull said:
			
		

> i dont know what your point is regarding georgian houses but it doesnt make much sense and i think "experts" have taken all aspects of the scenario into consideration when judging the realisticness of house price valuations.


Georgian houses were too expensive for people to live in, in the manner they did. The form of lifestyle changed not the property as it  will and will always last longer than the social order. The same applies now the 3 bed semis are an unviable constatn currently in Dublin. A 3 bed semi close to the city will no longer house a family instead it will be split and sold seperately like what happened to georgian houses. It happened all around London. The demographic of this country will change to need mre singel dwellings.  Financial "experts" tend to look at financial issues and don't normally think in human terms enough.  PLanners/Engineers "experts" tend to not think the financial loan aspects out very well. The experts in my eyes tend to miss the full picture. 
If the experts stories of doom an gloom don't come true for 6 years yet they keep saying it they will eventually be right  but it doesn't mean they are calculating  it out or ever right. A broken clock is right twice a day.  How many experts after saying something will happen in the next year come back and say well I was wrong and here is why or what I didn't consider?


----------



## walk2dewater

jhegarty said:
			
		

> the crash will happen , might be 10 months or 10 years ,but every day that passes means it will take a bigger crash for people who bought in 2004/2005 to be in negotiate equity...


 
How big is a crash?  This post confirms my belief that people really don't grasp what sort of monster we're dealing with.  The apex of a correction, the darkest moment if you like, where prices fall precipitously, is the point where sellers are forced to sell and buyers know it.  The game is effectively up.  There is no safety net below which prices cannot fall.  If no one wants what you have to sell the market value of what you're selling is ZERO.  Sellers who have to sell become panicked, fear of extraordinary wipeout losses pulls in more sellers, and the scarce few buyers around demand extreme discounts for "catching a falling knife";  todays extreme discount then becomes tomorrows best market price, as so on, until prices become so battered that some base is eventually achieved.  The base appears because buyers cannot extract any further concessions from sellers.

Spouting ideas that prices will only fall by "10%" or "40%" is unrealistic.  In a full blown bust, sellers look into an abyss.  Rational economic valuation is ignored on the down as much as it was on way up.

WTTW


----------



## jhegarty

walk2dewater said:
			
		

> How big is a crash?  This post confirms my belief that people really don't grasp what sort of monster we're dealing with.  The apex of a correction, the darkest moment if you like, where prices fall precipitously, is the point where sellers are forced to sell and buyers know it.  The game is effectively up.  There is no safety net below which prices cannot fall.  If no one wants what you have to sell the market value of what you're selling is ZERO.  Sellers who have to sell become panicked, fear of extraordinary wipeout losses pulls in more sellers, and the scarce few buyers around demand extreme discounts for "catching a falling knife";  todays extreme discount then becomes tomorrows best market price, as so on, until prices become so battered that some base is eventually achieved.  The base appears because buyers cannot extract any further concessions from sellers.
> 
> Spouting ideas that prices will only fall by "10%" or "40%" is unrealistic.  In a full blown bust, sellers look into an abyss.  Rational economic valuation is ignored on the down as much as it was on way up.
> 
> WTTW




there is a point where every crash will end.....houses will always sell for more than €1


----------



## gearoidmm

I don't think that the relatively small rise in interest rates this year is going to have much of an effect of house prices. The market is still being driven by investors buying-to-let. The place to watch out is in the rental market. As long as people are able to get a reasonable rent on their properties, even if it doesn't cover the mortgage, there will be that belief that eventually the price will rise and they will make money. A rise in interest rates or a slowdoen in the rate of house price inflation will not change that (as is evidenced by what happened last year - the rate of house price inflation was 2.5% for the first 7 months of last year and no-one took any notice of it).

Panic selling will only occur if there is significant over-supply in the rental market and people have properties going unrented for months on end. There is no sign of that happening yet. As long as there is some money coming in people will still convince themselves that everything is going to be alright. This market is no longer anything to do with fundamentals but is all to do with expectations and blind optimism.


----------



## Loki

walk2dewater said:
			
		

> How big is a crash? This post confirms my belief that people really don't grasp what sort of monster we're dealing with.



Sorry what are you saying? House prices will crash and all house prices  will crash and nobody will be able to sell their property? 

Where will people live? Why will people need to sell their homes? If it is only investment property I think you are mixing up financial information and reality.

AFAIK in the UK crash many properties recovered within a year or two. The properties that stayed in negative equity were mostly up north in areas of large unemployment at the time of pruchasing let alone after the crash. even in negative equity it doesn't mean you are actually in day to day trouble. 

If you own a house close to good services you will be protected from a crash and recover quicker. Many investment properties are in such places. Crashes aren't actually as bad as people think and certainly not enevitable espically in a country with an increasing population let alone high employment and the highest home ownership.


----------



## walk2dewater

Loki said:
			
		

> Sorry what are you saying? House prices will crash and all house prices will crash and nobody will be able to sell their property?
> 
> Where will people live? Why will people need to sell their homes? If it is only investment property I think you are mixing up financial information and reality.
> 
> AFAIK in the UK crash many properties recovered within a year or two. The properties that stayed in negative equity were mostly up north in areas of large unemployment at the time of pruchasing let alone after the crash. even in negative equity it doesn't mean you are actually in day to day trouble.
> 
> If you own a house close to good services you will be protected from a crash and recover quicker. Many investment properties are in such places. Crashes aren't actually as bad as people think and certainly not enevitable espically in a country with an increasing population let alone high employment and the highest home ownership.


 
Where will people live?  In their houses of course.  I'm talking about the PRICES of houses not the physical thing.  The price of something is set by the transaction between the marginal buyer and seller-- I didnt have to put my house up for sale to observe the market price of it change over time, the marginal activity in the market did it for me.

And yes, during the crash you won't get a very good price for your house;  buyers will be extremely scarce and will be in the position to force big discounts out of sellers, a true buyers market. Sellers who cannot get a good price will, if they have the option, withdraw from the market leaving the pricing to the 'have to' or forced sellers.

What is the point of the rest of your post?  The only protection anyone has from a general market crash is if you don't need to sell your house.  It's the sellers during market crashes that get scr*wed.  If you don't need to sell, what's the problem?

WTTW


----------



## walk2dewater

gearoidmm said:
			
		

> belief that eventually the price will rise and they will make money. ...people will still convince themselves that everything is going to be alright..


This is exactly the sentiment that is destroyed during a crash... everything will NOT be alright for people starting the crash in a highly leveraged position...


----------



## ubiquitous

> Many people quote huge drops yet in many cases that means houses prices would drop below construction costs.



I think that this point misses the fact that the sharp property price inflation of the past 10 years has generated a parallel surge in construction costs. (In 1995/96 it was eminently possible to build a house in most parts of the country for IR£30-40,000 plus site costs.) 

If there is a sharp downturn, it would be reasonable to expect at least some deflation in  construction costs. If, on the other hand, there is continued buoyancy in property prices and construction, then construction costs will continue to surge ahead.


----------



## Loki

walk2dewater said:
			
		

> Where will people live? In their houses of course. I'm talking about the PRICES of houses not the physical thing. etc...



I  don't get what your point is. There is a big monster out there is what you have said and you suggested houses  in real terms will be worth nothing (streaching logic there I think). I am asking  you what makes you think a price crash will be so devistating and the reality of what damage it will actually casue. All your dark  doom saying doesn't really make any sense. A very small portion of the population will be effeced in the worst case senario you are suggesting. Pension fears are actually a bigger problem in such a crash. Many pension funds rely on property. 


			
				ubiquitous said:
			
		

> I think that this point misses the fact that the sharp property price inflation of the past 10 years has generated a parallel surge in construction costs. (In 1995/96 it was eminently possible to build a house in most parts of the country for IR£30-40,000 plus site costs.)



Minimum wage and union rates increased along with changes in construction regulation.  In 95 you could not build a house for €30k with land. When I was pricing a house in 94 it was €140k  to build it and I owned the land. A small 3 bed semi in Dublin city.  Now that was without the 10% for the drawings or council fees which are part of the process.


----------



## walk2dewater

Loki said:
			
		

> I don't get what your point is.
> 
> .


 
I couldn't be clearer.


----------



## bearishbull

your quite clear walk2dewater.


----------



## Neffa

Loki said:
			
		

> Sorry what are you saying? House prices will crash and all house prices will crash and nobody will be able to sell their property?
> 
> Where will people live? Why will people need to sell their homes? If it is only investment property I think you are mixing up financial information and reality.
> 
> AFAIK in the UK crash many properties recovered within a year or two. The properties that stayed in negative equity were mostly up north in areas of large unemployment at the time of pruchasing let alone after the crash. even in negative equity it doesn't mean you are actually in day to day trouble.
> 
> If you own a house close to good services you will be protected from a crash and recover quicker. Many investment properties are in such places. Crashes aren't actually as bad as people think and certainly not enevitable espically in a country with an increasing population let alone high employment and the highest home ownership.


 
Errrr...in a word, no. Crashes are worse than people think because people in Ireland have never seen one so people tend to think it will be ok. It is not a blip, it leaves a real mess. It is true that better areas recover quicker - in the nice areas of London, it took 7 or 8 years to recover post the 40-45% correction in 1989/90. In the less-nice areas it took longer because they fell further. 

We owned a house in Chiswick (W4, 9th most expensive postcode in the whole of the UK and certainly one of the nicest areas in London) and it took from 1989 to 1997 to recover the value. Oh, and in the middle of that period, interest rates doubled. Nasty. 

As other posters said, once the "property is a one-way bet" belief goes out the window and uncertainty enters the market, then everyone hesitates and it takes a long time to go away. The sentiment on this board and elsewhere is that oh, there'll be a blip, then we'll go back to 10% growth again the next year - that was certainly not what happened in the UK and has not happened in Japan or other markets to have suffered a crash. It took 8 years in the UK and Japan has still not recovered nearly 20 years on.


----------



## jpd

I'll concur with Neffa. It was not pretty watching property prices in the UK during the crash in the early 90's - we had an investment  property and fortunately did not have to sell it and only had a small mortgage on it.

And again, in France we also lived through a slump of 25% in prices in the 90's in Paris - it took over 10 years for prices to recover to the levels seen in 1989-90. Although this time interest rates did not also rise.

I feel that as property prices have never actually fallen in nominal terms in Ireland, most people have no idea of the effects of prices falling 10-15% o(or more) - especially if interest rates are rising as well.

It will probably turn into a seller's market - as did the UK and France, at least for those with spare cash!

IMHO, it's only a question of when and not if.

Joe


----------



## woods

The problem with a lot of people is that they will see the value of their house as being the highest value that it reached before it drops (if it drops) and not the price they paid for it, and will be measuring their loss from there.
We did not make one penny on the first 3 houses that we owned in Ireland because there had been no increase in value while we had them. We were lucky to get our money back so all we had was the benefit of having a home for the years that we were there. 
Most home owners in the country have seen an increase in the value of their property and the drop will have to go below this average gain before it would get to be a problem for the economy.
The increase will have to come to a stop but I do not think that it will come to a sudden jarring halt that will catapult us all out of our orbits.


----------



## extopia

jpd said:
			
		

> It will probably turn into a seller's market - as did the UK and France, at least for those with spare cash!



You mean buyer's market, right? What we have now is a seller's market - i.e. the seller has more power than the buyer.


----------



## Neffa

woods said:
			
		

> The problem with a lot of people is that they will see the value of their house as being the highest value that it reached before it drops (if it drops) and not the price they paid for it, and will be measuring their loss from there.
> We did not make one penny on the first 3 houses that we owned in Ireland because there had been no increase in value while we had them. We were lucky to get our money back so all we had was the benefit of having a home for the years that we were there.
> Most home owners in the country have seen an increase in the value of their property and the drop will have to go below this average gain before it would get to be a problem for the economy.
> The increase will have to come to a stop but I do not think that it will come to a sudden jarring halt that will catapult us all out of our orbits.


 
You are quite correct in that most people do not lose money per se but crucially they lose the ability to move as they have to sit out until the market stabilises. However, as fewer people move, major domestic purchases such as white goods, furniture, kitchens, bathrooms etc also slowdown which has a significant knock-on effect for the general economy. So a general weakness affects the overall economy. Not to mention the drop in stamp duty for the government.

I would also speculate that a great deal of the immigrant labour in Ireland at present is directly or indirectly associated with property and construction so if that slows down, they may return to their home countries or go elsewhere in Europe, cooling the demand for rental property in due course. I've no proof of this, just a personal opinion.


----------



## walk2dewater

I said in an earleir post something like, "it's the sellers during market crashes that get scr*wed".  Who will the sellers be when the irish market sours?  Who will be able to ride out the related recession, keep their jobs or get new ones, pay their mortgage and muddle through?  I expect the vast majority will manage ok, but also a significant minority won't.

Who will this significant minority be, why will they end up selling into a bad market?  Any ideas?


----------



## Loki

You guys still just claim there will be a crash yet don't seem to accept this is speculation. 
The effects the price crash actually has a on a country is dependent on the reaction. It also depends on how the central bank reacts and as we don't control it some elements of the traditional market are gone. 
If the experts have gotten it wrong for so long what have they said to explain how they can't get it right? If you were to listen to them  6 years ago and not have bought you would be in trouble if you wanted to buy. 
There may not be a crash at all. It appears anybody who is irish and doesn't own wants to own. This could keep demand pretty constant.
In the event of crash how we react to  selling  will come in.  I think the whole zero value of property is way over the top. It amounts to a piece of fiction as very few people would suffer like that. Irish people have the highest home ownership in the world and  I beleive that we have a very low house turnover even now. 
It's all speculation you could be right  or I could be but the point I would make is the experts have been wrong for 10 years by memory  but at least 6 at what point do you decide they don't know what they are talking about or they are missing something in their understanding? Economists can miss social elements.


----------



## hmmm

Loki said:
			
		

> Economists can miss social elements.


Exactly. Economists are sensible rational people. Year after year they declare the housing market is at unsustainable levels, yet year after year prices go up. They have not been "wrong", their analysis appears correct which is that prices are overvalued. 

What they can't factor into their algorithms is the mass hysteria that is driving the housing bubble worldwide. For a rational investor, they can choose to ride the fundamentals or they can ride the momentum in a market.


----------



## roryodonnell

hmmm said:
			
		

> Exactly. Economists are sensible rational people. Year after year they declare the housing market is at unsustainable levels, yet year after year prices go up. They have not been "wrong", their analysis appears correct which is that prices are overvalued.
> 
> What they can't factor into their algorithms is the mass hysteria that is driving the housing bubble worldwide. For a rational investor, they can choose to ride the fundamentals or they can ride the momentum in a market.



The Economists are saying that there WILL have to be a house price correction.  I think they resemble a broken clock.  Yes they may be broken but they will tell the time correctly twice a day.


----------



## Loki

hmmm said:
			
		

> Exactly. Economists are sensible rational people. Year after year they declare the housing market is at unsustainable levels, yet year after year prices go up. They have not been "wrong", their analysis appears correct which is that prices are overvalued.
> 
> What they can't factor into their algorithms is the mass hysteria that is driving the housing bubble worldwide. For a rational investor, they can choose to ride the fundamentals or they can ride the momentum in a market.


Economists therofore can't predict anything as people do things based on social order not on economic principle. If economists ignored the weather effect of food production they would always be wrong if they ignore social order on housing they will get it equally wrong. There analysis is either correct or not. If they say  x will happen  and it doesn't you don't get to say they got the calculations right so they are right. X didn't happen their prediction has been wrong I don't accept that as their logic makes sense that makes them right.
Property  prices aren't hysteria people use a lot more reason. You may not agree but you calling it hysteria is actually the over reaction and as unreasonable as somebody yelling that prices can only go up. 
Fundmentals you are talking about is not supply and demand  but safe bets. The safe bet is to say house prices can't keep going up and  must at some point drop. It is not quite like gravity and has a high probability of being right over time. It is not analysis of the real world but predictions that are vague enough to be correct. Buying a house makes a lot of sense for many people renting and wanting to seatle down.


----------



## woods

roryodonnell said:
			
		

> The Economists are saying that there WILL have to be a house price correction. I think they resemble a broken clock. Yes they may be broken but they will tell the time correctly twice a day.


I would not be basing my investment stratagy on a clock that is only right for 2 secounds a day out of 8,640. Not very good odds. I am putting my money on a 3% to 5% rise for the next 3 years and a 0% rise for the 10 years after that.


----------



## ivuernis

woods said:
			
		

> I am putting my money on a 3% to 5% rise for the next 3 years and a 0% rise for the 10 years after that.


 
As most investment now in Irish property is primarily based on potential capital appreciation and not rental returns how will a flat property market for 10 years happen. Won't many investors who are in for the capital appreciation bail out at this stage as rental yields may not cover the mortgage and capital appreciation is zero? This could be the tipping point we're all talking about. Also, if prices didn't rise or fall for such a period as you suggest it would also take much demand out of the market as potential buyers will say to themselves that there is no panic to buy anymore because prices have stabilised. Much property buying now for first-time buyers especially is predicated on fear if they don't get in as quickly as possible they will miss out due to rising prices. In a 0% market this fear would be removed. 

Sorry, I just cannot see a situation where property prices will remain flat for a period of years after the vast increases of recent years. It may have been a possibility if prices had only increased moderately in which case we'd never be talking about a property price bubble and the debate would be mute. Either prices will keep rising forever (nigh on impossible) or prices will peak and then fall IMHO.


----------



## gearoidmm

> Sorry, I just cannot see a situation where property prices will remain flat for a period of years after the vast increases of recent years. It may have been a possibility if prices had only increased moderately in which case we'd never be talking about a property price bubble and the debate would be mute. Either prices will keep rising forever (nigh on impossible) or prices will peak and then fall IMHO.



You must remember that a flat market with 0% price rise over 10 years equates to a fall in value of 25% over the same period in real terms if inflation of 2% is factored in.


----------



## ivuernis

gearoidmm said:
			
		

> You must remember that a flat market with 0% price rise over 10 years equates to a fall in value of 25% over the same period in real terms if inflation of 2% is factored in.


 
True, I suppose what I really mean is that I can't see prices heading for this oft-quoted "soft landing" say even in the range of plus/minus 2%. I just think we've gone too far down the road of huge property price inflation for there to be a happy ending. I think the medium to long-term trend for western economies will be rising inflation and interest rates coupled with a slowdown in wage increases. We're living in almost optimal economic times now with historically low interest rates, full employment & high wages but this will change at some stage. 

Even a small drop in prices, whether actual or inflation based might be the trigger which causes many investors to cash-in on their investments and thus causing some sort of domino effect?


----------



## Loki

ivuernis said:
			
		

> As most investment now in Irish property is primarily based on potential capital appreciation and not rental returns how will a flat property market for 10 years happen.


What is that based on? I hear people say it but none actually give a reason why they say this is the case. Anybody I know that has rental  property is looking for the rental return for retirement and  maybe hoping for capital appreciation.  To claim the whole property investor market is only in it for appreciation and are speculative might be over stating. Even if the new investors are doing this what about the ones that have been in it for years and haven't sold.  When did it become most investors are just waiting for appreciation? I don't really need figures but it would be nice to clarify if this belief is true.

To then assume  all investors will panic or cash in under a change is also a big leap if you ask me. Many people dig in once hard times come. THe only people I can see panicing and cashing out are thoses late in.  The % of drop will determine how far and many years back people losing money would go back. A crash in the UK was brought on by a huge stock crash and business pulled out of investment property. 

What problem would start our crash and how much effect would big businesses pulling out on investement property actually have on the Irish marke? THe bird flu could do it I guess. People seem to be ignore these issues completely and taking a real simple view of how a crash happens and how it effects things. Each market is different and even though people don't like it Ireland is different, not because of some misplaced paitriotic view but becasue each market has different factors. Traditional economic views ignore many contributing factors that actually effect the out come. Eventually prices will stop rising  is a no brainer a sudden fall  and calls of a bubble are all speculative on till something happens. Anybody calling it a property bubble isn't right but they may be proven right. If they said it 6 years ago it appears they were wrong then and 10 years ago they were wrong too.


----------



## Neffa

Loki said:
			
		

> Economists therofore can't predict anything as people do things based on social order not on economic principle. If economists ignored the weather effect of food production they would always be wrong if they ignore social order on housing they will get it equally wrong. There analysis is either correct or not. If they say x will happen and it doesn't you don't get to say they got the calculations right so they are right. X didn't happen their prediction has been wrong I don't accept that as their logic makes sense that makes them right.
> Property prices aren't hysteria people use a lot more reason. You may not agree but you calling it hysteria is actually the over reaction and as unreasonable as somebody yelling that prices can only go up.
> Fundmentals you are talking about is not supply and demand but safe bets. The safe bet is to say house prices can't keep going up and must at some point drop. It is not quite like gravity and has a high probability of being right over time. It is not analysis of the real world but predictions that are vague enough to be correct. Buying a house makes a lot of sense for many people renting and wanting to seatle down.


 
What I am saying is that the economists are correct - I do believe houses are overvalued based on costs relative to rent, expected future rate rises, international comparisons and so on. And I think the reason most people use before they buy is "it went up last year, better get in quick while I can because it will be more expensive next time.") I really do not accept that the majority do anything more than this.

On your other point, I do agree that the economists ignore the human factor in all of this. What I am saying (and this is opinion, just like all our views) is that at some point soon the economic factors will make the insatiable appetite for property diminish and that will change people's views. That will see the economists view and the "hysteria" come into line and growth will slow/stall/decline depending on your view.


----------



## Neffa

Loki said:
			
		

> A crash in the UK was brought on by a huge stock crash and business pulled out of investment property.


 
Sorry, but this is not right. The UK Stock Market crashed in 1987 and property in 1990 and it was a residential market crash, not investment. It crashed because property simply became too expensive and the whole pyramid collapsed like a house of cards. It then drove the UK into recession.


----------



## ubiquitous

> Each market is different and even though people don't like it Ireland is different, not because of some misplaced paitriotic view but becasue each market has different factors.



This may be the case, but it is also true that the property price boom here, particularly in the past 5 years, has been mirrored by similar booms in the US, UK and most other developed western economies. This leads me to suspect that the factors behind the boom here are global as well as local in nature.


----------



## glendale

Loki said:
			
		

> What is that based on? I hear people say it but none actually give a reason why they say this is the case. Anybody I know that has rental property is looking for the rental return for retirement and maybe hoping for capital appreciation.


 
My understanding is that yields are very low ~2/3/4% and an investment property is only justified by an expectation of capital appreciation. Yields will only get worse as interest rates and house prices go up and rents are not going up at all or too slowly to catch up.



			
				Loki said:
			
		

> When did it become most investors are just waiting for appreciation?


 
When the investment wasn't justified on the strength of the yield alone maybe.



			
				Loki said:
			
		

> To then assume all investors will panic or cash in under a change is also a big leap if you ask me. Many people dig in once hard times come. THe only people I can see panicing and cashing out are thoses late in.


 
House prices are set on the margin so only a small percentage of homes need to be sold to affect the general price. I think that someone who buys in now in a panic of missing the boat is just as likely to sell in a panic as well.



			
				Loki said:
			
		

> Eventually prices will stop rising is a no brainer a sudden fall and calls of a bubble are all speculative on till something happens.


 
The point is that a lot of investment properties are being bought on the assumption of good capital appreciation and when this stops which you agree it has to then it will no longer make sense to keep the property and there will be a large amount of properties on the market and this will have a downward affect on prices (which in turn will feed back into the loop).
Also FTBs are rushing to buy a place lest they can't afford it later as prices keep rising. If prices stop rising or fall there is no rush and the demand will reduce and this will further increase the downward pressure on prices.


----------



## ivuernis

Loki said:
			
		

> What is that based on? I hear people say it but none actually give a reason why they say this is the case.


 
I don't have figures to back this up but I did read before where a lot (a sizeable minority) of new builds (mostly apartments) are left vacant by investors which leaves me to believe they are only in it for the capital appreciation. Any such activity which takes new builds out of circulation puts increased pressure on prices as people who may actually might want to buy and live there are priced out by investors who then leave them vacant while they wait for an opportune time to sell on. In the block of apartments where I live, of which there are 18, 2 have been unoccupied since they were completed over 2 years ago. 




			
				Loki said:
			
		

> To then assume all investors will panic or cash in under a change is also a big leap if you ask me. Many people dig in once hard times come.


 
All investors may not panic initially as it might just effect say the most recent investors. But if a large proportion of that tier get out then this will have an knock-on effect on the next tier of investors who may not have initially been exposed but as the threshold at which they might sell is reduced they may also get out. True, some will dig in and ride it out but many may not especially when cash/profit is on the line. 




			
				Loki said:
			
		

> What problem would start our crash and how much effect would big businesses pulling out on investement property actually have on the Irish marke? THe bird flu could do it I guess. People seem to be ignore these issues completely and taking a real simple view of how a crash happens and how it effects things.


 
I don't see bird flu being the cause. There's a lot of media hype about it to be honest. The potential is there for a mutation of course but that is most likely to occur in Asia if it happens. I'm not ruling it out though but there are many other geo-political issues which may impact on western economies in the coming years such as rising energy costs (if anybody has read about Peak Oil they'll know what I mean). Tensions in the Middle East have the potential to draw China and Russia into the mix. American is in Iraq for the long haul regardless of what George Bush spouts. The billions being spent on 14 "enduring bases" (i.e. permanent) in Iraq is testament to that. It's no coincidence that the world's major oil reserves are located in Iraq and the country to either side of it. There's also the precarious position of the US dollar and the ever-present threat from China and India w.r.t. their vast resources of cheap and educated labour which we have to compete against. These situations are and will continue to effect causes on over-exposed western economies for the foreseeable future and some of them may not be pleasant to bear for us. 

I know I've gone a bit off-topic on some of these issues but the world is in a far more precarious position now than it has been for quite a while. Globalisation is now a fact of life but with it comes new dangers and the balance of power is slowly shifting from west to east. It would be remiss to think that Ireland can go along on its merry way and remain immune to changes that are being effected on the global stage.


----------



## Loki

Neffa said:
			
		

> What I am saying is that the economists are correct - I do believe houses are overvalued based on costs relative to rent, expected future rate rises, international comparisons and so on. And I think the reason most people use before they buy is "it went up last year, better get in quick while I can because it will be more expensive next time.") I really do not accept that the majority do anything more than this.


Well that is a belief system close to religion not science or even close. Nothing is ever overvalued if people are willing to pay for it is a fact not beleif. THe economists can't be wrong and right.  What you are saying is you believe the economists are correct.There is belief that what they say is correct by not what is happening but "signs"  that lead to show how they are right yet the end figure is still not going down. If you use international comparisons what were the signs accross the world telling the UK? Japan? US? You only believe house prices are overvalued it is not a fact no matter what you say now it is only a fact after the event. At what point in your belief were they right? I have never beleived there is a direct correlation between rent and house price. Rent is more based on location than house price is and always has been from my experience


			
				Neffa said:
			
		

> On your other point, I do agree that the economists ignore the human factor in all of this. What I am saying (and this is opinion, just like all our views) is that at some point soon the economic factors will make the insatiable appetite for property diminish and that will change people's views. That will see the economists view and the "hysteria" come into line and growth will slow/stall/decline depending on your view.


Economists are a bit like chess players the calculate possible ways for the person to move _into _check mate and ignore  the threat. They are also _assuming_ the pieces the other player is trying to go for.  THey are ignoring cultural issues and various other real world factors cumilatively they effect the market. Re you considering the change in demographics in terms of increased single people and marriage break ups? What about the post colonial  driven demand to own housing? THe fact that irish home ownership will probably have to drop in line with most other EU countries?

I disagree with you I believe that the stock crash casued the housing crash in the UK as do other people. 


ubiquitous>
I think that is  belief in understanding of the facts. I remember the experts talking crash 10 years ago when house prises had risen. Suddenly linking us after 5 years to another market is I think is unrealistic. I am sure you can claim loads of links but you can see patterns in static too.  Weren't the economists at this time saying to expect a crash here but not saying it about the UK and US untill later? How did we suddenly get linked in that case?

People are too sure of themselves for speculation that has been proved wrong. I again asked what are the economists actually saying about the fact they have been wrong about the outcome they predicted more or less year on year for 6 years. If they are claiming to be correct  as suggested here that is a complete cop out and would not be accepted from most other profession.


----------



## Glenbhoy

> Sorry, but this is not right. The UK Stock Market crashed in 1987 and property in 1990 and it was a residential market crash, not investment. It crashed because property simply became too expensive and the whole pyramid collapsed like a house of cards. It then drove the UK into recession


My understanding had always been that this was all linked - ie, stock market crash, followed by economic recession, followed by decreased economic confidence, job losses etc which inevitably led to a crash in house prices.


----------



## walk2dewater

Some posters have said that there's no bubble, will be no crash etc.  Other posters have pointed to economic reasons why there should be a crash etc.  I will cut the bone and explain why a severe collapse in prices is an inevitable dead certainty.

The reason is precisely this:  There is a widespread EXPECTATION that you cannot lose, that property is a one-way bet, “money for old rope” as someone once put it to me.  Under these expectations dips would mean “buying opportunities” and everyone expects the “the long-term” will bail them out under all circumstances.  In the frenzy to grab a piece of the perceived risk-free action no one wants to be left out.  This is the essence of asset bubbles, this is why we’re in one, and this is exactly the reason why a severe fall in prices is guaranteed.

Here’s why price stagnation after a classic speculative bubble tops out doesn’t happen:

Imagine if you took away these expectations of price growth and replaced them with expectations of price stagnation?  Would first time buyers be scrambling to get in at *ANY* price? No, they are expecting prices to stagnate.  Would existing owners want to trade up at *ANY* price?  No, they too are expecting prices to stagnate.  What would owners of property do where monthly revenues fall short of monthly costs and there’s no more price appreciation?  Would all of them take it on the chin forever?  Remember they're not expecting further price growth.  Under these *new* expectations of the future, which side of the transaction would have the pricing power, buyers or sellers?


And all bubbles top out.  Eventually the game ends cos there are no more participants.  Buyers simply dry up, either they can't find the means to participate or they cop on to what's going happening.  What happens next is sellers have no one to pass the bag on to-- that's why the price growth slows, next it stops, then next, expectations of further price growth are ruined.

A bubble by definition is price growth based on EXPECTATIONS of further on-going price growth and NOTHING ELSE.  €700k apartments in Dundrum only make sense if you think you can sell them for more later.  Otherwise, why on earth would you pay that much?

Ireland is full of people who cannot imagine the market going against them because it’s psychologically too painful.  It means early retirement replaced by working longer.  Well I have news...

WTTW


----------



## Glenbhoy

> There is a widespread EXPECTATION that you cannot lose, that property is a one-way bet, “money for old rope” as someone once put it to me. Under these expectations dips would mean “buying opportunities” and everyone expects the “the long-term” will bail them out under all circumstances. In the frenzy to grab a piece of the perceived risk-free action no one wants to be left out. This is the essence of asset bubbles, this is why we’re in one, and this is exactly the reason why a severe fall in prices is guaranteed.


I don't accept that this is the case - possibly amongst the Sean Dunne's of the world, who probably forget just how close they all came to the precipice they came 20yrs ago.  But the ordinary man in the street in my opinion does'nt believe it's a one way bet!


----------



## Loki

glendale said:
			
		

> My understanding is that yields are very low ~2/3/4% and an investment property is only justified by an expectation of capital appreciation. Yields will only get worse as interest rates and house prices go up and rents are not going up at all or too slowly to catch up.


Then it is assumption that people are doing this. Who is to say they aren't buying expecting rents to increase or they see it as an investment where the rent pays a divident like a pention fund?


			
				ivuernis said:
			
		

> I don't have figures to back this up but I did read before where a lot (a sizeable minority) of new builds (mostly apartments) are left vacant by investors which leaves me to believe they are only in it for the capital appreciation. Any such activity which takes new builds out of circulation puts increased pressure on prices as people who may actually might want to buy and live there are priced out by investors who then leave them vacant while they wait for an opportune time to sell on. In the block of apartments where I live, of which there are 18, 2 have been unoccupied since they were completed over 2 years ago.




Well that would not consider the other investors in the market. How many of the investors in Ireland are actully these new speculative investors who are going to get caught at the tail end of the price "bubble" that will crash the market at first sign of danger. I do believe there are new investors but I reckon people are better hedged than people give them credit. If I have 3 properties I own 20 years and I buy another two with equity and the market drops I may easily being doing very well. The same applies if you bought 5 years ago but your liability is a little higher but maybe not that much. i can leave my property vacant for 2 years easily and be making money off my portfolio




			
				glendale said:
			
		

> When the investment wasn't justified on the strength of the yield alone maybe.


 It is assumption that people are doing it speculatively on house gain only in the short term.



House prices are set on the margin so only a small percentage of homes need to be sold to affect the general price. I think that someone who buys in now in a panic of missing the boat is just as likely to sell in a panic as well.




			
				glendale said:
			
		

> The point is that a lot of investment properties are being bought on the assumption of good capital appreciation and when this stops which you agree it has to then it will no longer make sense to keep the property and there will be a large amount of properties on the market and this will have a downward affect on prices (which in turn will feed back into the loop).
> Also FTBs are rushing to buy a place lest they can't afford it later as prices keep rising. If prices stop rising or fall there is no rush and the demand will reduce and this will further increase the downward pressure on prices.


 Actually the point is who is telling you that and is it true? I am not convinced it is true and I am in the property trade and know many investors. I am not convinced that the investors are going to need to sell and the portion that may need to may be very samll. Whty everybody assumes it is a big portion has yet to be explained.If people are buying a home to live in investment is not the key issue.

I think there is too many assumptions about the market and a lot of hearsay about how and what is currently happening. AFAIK crashes normally need a cause other than the sturcture itself. Demand still seems high and supply near cities is limited I can see part of the market failing alright.


----------



## roryodonnell

The only crash I can foresee in the near future will effect "the buy to let" market.  There is too much supply out there at the moment.  Just go to daft.ie and see what I mean.

Investors are thinking to themselves, "Sure, the price will rise and I can just sell in a year or two and make some profit."

I know a couple of people who have bought properties, or investments, as they call them, to let them out.  Their mortage is around 1200, they expect to get around 1300-1400 in rent.  When I ask them how much they will clear after tax, they just give me a blank stare.


----------



## walk2dewater

Glenbhoy said:
			
		

> the ordinary man in the street in my opinion does'nt believe it's a one way bet!


 
The opinion of the ordinary man on the street doesn't matter a tot!!  He doesn't set the price.  It's the opinion of the buyer and sellers in the last trade that matter.  THEY set the market price for EVERYONE.  Sellers are asking for ever higher prices and buyers are paying up.  Sellers and buyers are bidding up prices together.  Why are buyers not rejecting offers?  cos they like the look of rental returns, cos they think "Jezus" prices are such great value?  No, it's their expectations for the future (higher prices)that's driving them.  There's simply no other rationale for todays price action, the sums stopped adding up ages ago.

Ask yourself why are buyers at Adamstown accepting whatever price is thrown at them by the developer?  Answer:  Because they expect they will lose out it they don't, fear of being left out, off "the ladder", marginalised and never able to buy cos prices will shoot to the moon and leave them homeless.  They feel they have ZERO power in the transaction.  Buyers at Adamstown arnt exactly asking for discounts are they?

Again, and I don't mean to pick on you Glenbhoy, but it's apparent that there's widespread misunderstanding of the mechanics of markets.

WTTW


----------



## glendale

Ok Loki, what do you think is the average yield on a buy to let?
Do you think this alone justifies the investment.
Its may opinion that taking capital appreciation out of the equation at the moment a buy to let is not a good investment, do you agree?

I don't think they a lot of investors are going to need to sell but that they will want to sell.

I don't think FTBs are going to rush into buying into a market that is flat or going down, the sense of urgency will be lost and people will be able to save money by sitting back.


----------



## Loki

glendale said:
			
		

> Ok Loki, what do you think is the average yield on a buy to let?
> Do you think this alone justifies the investment.
> Its may opinion that taking capital appreciation out of the equation at the moment a buy to let is not a good investment, do you agree?
> 
> I don't think they a lot of investors are going to need to sell but that they will want to sell.
> 
> I don't think FTBs are going to rush into buying into a market that is flat or going down, the sense of urgency will be lost and people will be able to save money by sitting back.


You seem to have some problem with me asking people to justify what their belief is. A buy to let now is probably not a good idea in the short term gain. I don't think people are buying for the short term in mass. I am asking you to say why you beleive they are. If you arte a real investor you may increase your protfoli due to the gain on your other property. Where you planed to have two houses for retirement you now have 3 giving you more income. Tax breaks make this worth while. So asking about revenue misses what the reality is for many investors. The point is your believe is based on who you think is in the market and what they are doing. I am asking you how do you know?  I think your logical arguement to what will happen is so heavily based on knowing other people's intent that it is flawed. It also seems to miss the people I know in the market that probably own a larger portion of the market overall. There will always be idiots in the market doing the wrong thing logically but it working out  but the same is also true.
The simple truth is if you listened to the economists you would have been boned.


----------



## glendale

I don't think a lot of these people are 'real investors' with substantial porfolios.I don't think people are buying for the short term gain I think people are buying becauase they think that the current captial appreciation will continue for a long time. I think it won't, when they realise this they will sell. Some people have blind faith in property, ""you can't go wrong". 

This is what I think, it isn't fact but opinion. You obviously have a different point of view. None of us can predict the future.

I think its the people who are as you say "doing the wrong thing logically" that will cause problems.


----------



## Loki

glendale said:
			
		

> I don't think a lot of these people are 'real investors' with substantial porfolios.I don't think people are buying for the short term gain I think people are buying becauase they think that the current captial appreciation will continue for a long time. I think it won't, when they realise this they will sell. Some people have blind faith in property, ""you can't go wrong".
> 
> This is what I think, it isn't fact but opinion. You obviously have a different point of view. None of us can predict the future.
> 
> I think its the people who are as you say "doing the wrong thing logically" that will cause problems.


THere doesn't need to be a lot of them  for them to own a large part of the market. So if  your view is they aren't buying for the short term then the prices won't crash as people will be holding onto them and not panicing. Over the long term property does generally raise and I think that is what most small investors are thinking. 

I get it is just your opinion but it is shared by many and nobody can say why they think there are so many investors casuing rises and why they assume so many will jump at the first sign of trouble. 

It's not so much a differnt point of view as me asking why so many people think this, I just at this point would like facts that people are using.  THere are a lot of factors and many people only use a few to base everything on but if it isn't even based on fact it is not opinion but a belief system close to religion


----------



## Neffa

Glenbhoy said:
			
		

> My understanding had always been that this was all linked - ie, stock market crash, followed by economic recession, followed by decreased economic confidence, job losses etc which inevitably led to a crash in house prices.


 
Sorry - this is not correct. I lived in London during that period. The UK was not even close to recession in 1987 - the Tories were returned in a wave of economic euphoria and the late 80's were the preserve of the champagne lifestyle and yuppies. The stock market crashed as it was overbought and by 1990, when the housing market crashed the stock market was back to 1987 levels:

See the FTSE graph here: [broken link removed]

The housing crash helped drive the UK into recession, not the other way round.


----------



## Neffa

walk2dewater said:
			
		

> Some posters have said that there's no bubble, will be no crash etc. Other posters have pointed to economic reasons why there should be a crash etc. I will cut the bone and explain why a severe collapse in prices is an inevitable dead certainty.
> 
> The reason is precisely this: There is a widespread EXPECTATION that you cannot lose, that property is a one-way bet, “money for old rope” as someone once put it to me. Under these expectations dips would mean “buying opportunities” and everyone expects the “the long-term” will bail them out under all circumstances. In the frenzy to grab a piece of the perceived risk-free action no one wants to be left out. This is the essence of asset bubbles, this is why we’re in one, and this is exactly the reason why a severe fall in prices is guaranteed.
> 
> Here’s why price stagnation after a classic speculative bubble tops out doesn’t happen:
> 
> Imagine if you took away these expectations of price growth and replaced them with expectations of price stagnation? Would first time buyers be scrambling to get in at *ANY* price? No, they are expecting prices to stagnate. Would existing owners want to trade up at *ANY* price? No, they too are expecting prices to stagnate. What would owners of property do where monthly revenues fall short of monthly costs and there’s no more price appreciation? Would all of them take it on the chin forever? Remember they're not expecting further price growth. Under these *new* expectations of the future, which side of the transaction would have the pricing power, buyers or sellers?
> 
> 
> And all bubbles top out. Eventually the game ends cos there are no more participants. Buyers simply dry up, either they can't find the means to participate or they cop on to what's going happening. What happens next is sellers have no one to pass the bag on to-- that's why the price growth slows, next it stops, then next, expectations of further price growth are ruined.
> 
> A bubble by definition is price growth based on EXPECTATIONS of further on-going price growth and NOTHING ELSE. €700k apartments in Dundrum only make sense if you think you can sell them for more later. Otherwise, why on earth would you pay that much?
> 
> Ireland is full of people who cannot imagine the market going against them because it’s psychologically too painful. It means early retirement replaced by working longer. Well I have news...
> 
> WTTW


 
Excellent post - reflects exactly the difference between something being overvalued inherently (e.g. Tulips at the peak of the bubble in Holland) and that being shoved aside because expectations are that this is a one-way bet. Take that away and the world looks very, very different. Remember the dot-com valuations in early 2000? Remember them in early 2001?


----------



## Calina

Loki said:
			
		

> THere doesn't need to be a lot of them for them to own a large part of the market. So if your view is they aren't buying for the short term then the prices won't crash as people will be holding onto them and not panicing. Over the long term property does generally raise and I think that is what most small investors are thinking.
> 
> I get it is just your opinion but it is shared by many and nobody can say why they think there are so many investors casuing rises and why they assume so many will jump at the first sign of trouble.



The problem as I see it is that given the way that prices are rising, it is reasonable to suspect that quite a lot of people are panic-buying. In that case, you can't, per se, expect them not to panic when the prices either stop rising or are on the way down. There are a lot of people saying "if we don't buy now, we'll miss the boat, we'll never get our feet on the ladder, we'll be in rented hell at the mercy of landlords forever till we die". I actually can't call that a rational assessment. Queuing at new developments doesn't actually make me feel like anything approaching rational consideration is being applied.


----------



## Loki

Neffa said:
			
		

> Sorry - this is not correct. I lived in London during that period. The UK was not even close to recession in 1987 - the Tories were returned in a wave of economic euphoria and the late 80's were the preserve of the champagne lifestyle and yuppies. The stock market crashed as it was overbought and by 1990, when the housing market crashed the stock market was back to 1987 levels:
> 
> See the FTSE graph here: [broken link removed]
> 
> The housing crash helped drive the UK into recession, not the other way round.



A lot of people put the property crash down to a few things one of which was the stock crash , another was the council  selling off houses to people but there are many and Neffa stating one and claiming it is the only one that is right is nieve.

Being in a place doesn't give you any incite into why it happened unless you studied everything that happened prior and afterwards. 

Crashes are not a result in over pricing but sudden change in a point of view or fear. It is  silly to claim there is a right price or wrong price for anything. I might as well claim that a sudden under pricing casues a crash than you claiming years of  overpricing 

Why not try and be a bit more balanced and argue your point instead of saying people are wrong and stop assuming you are 100% correct.


----------



## beattie

There is speculation from some commentators who I would have considered quite dovish that interest rates will hit 3.5% before the year is out. That will put a major squeeze on many in the buy to let sector as costs rise IMO

http://www.rte.ie/business/2006/0223/germany.html


----------



## Loki

Calina said:
			
		

> The problem as I see it is that given the way that prices are rising, it is reasonable to suspect that quite a lot of people are panic-buying. In that case, you can't, per se, expect them not to panic when the prices either stop rising or are on the way down. There are a lot of people saying "if we don't buy now, we'll miss the boat, we'll never get our feet on the ladder, we'll be in rented hell at the mercy of landlords forever till we die". I actually can't call that a rational assessment. Queuing at new developments doesn't actually make me feel like anything approaching rational consideration is being applied.


It is equally logical to assume that people earning more money and high employment  can afford more. The banks beleive the ability to pay back loans has increased and how people will be working longer mean house prices go up. Less assumption on what I have said as it is all common knowledge that we have more employment, banks give more money and longer terms. Yours is based on assuming intent of people and giving reason to peoples' actions.  I don't think that is reasonable to assume, suspect or base your purchasing on that but it is personal choice


----------



## Duplex

Loki

Address the following points, 

1. The level of debt to disposable income in Ireland is 140% and growing. Soon we will be the most indebted nation in Europe. This trend is not sustainable.

2. The construction industry is building 80,000 homes every year, the construction and related sectors employ 20% of the workforce, how many jobs in the wider economy rely on the building boom is anyones guess. This trend is not sustainable.

3. Ireland is falling down the competitiveness tables and is no longer a longer attracting inward investment on the scale of the mid nineties. How do we address our poor competitive situation without impacting incomes?
4. The Irish export sector is heavily reliant on foreign multinationals who are increasingly locating/transferring their operations in E Europe, China and India. 

5. The United States the worlds largest economy has built up massive trade and government deficits, property prices are falling in some of the most expensive markets in the US. The Federal Reserve is set to continue raising interest rates, while long term rates remain low.  America is reaching a point where servicing existing debt and accumulating more debt will become impossible. 

6. I can provide many examples of a markets where prices have risen at a similar rate to the Irish property market and then crashed, can you provide an example which supports your hypothesis.


----------



## Neffa

Loki said:
			
		

> Well that is a belief system close to religion not science or even close. Nothing is ever overvalued if people are willing to pay for it is a fact not beleif. THe economists can't be wrong and right. What you are saying is you believe the economists are correct.There is belief that what they say is correct by not what is happening but "signs" that lead to show how they are right yet the end figure is still not going down. If you use international comparisons what were the signs accross the world telling the UK? Japan? US? You only believe house prices are overvalued it is not a fact no matter what you say now it is only a fact after the event. At what point in your belief were they right? I have never beleived there is a direct correlation between rent and house price. Rent is more based on location than house price is and always has been from my experience
> 
> Economists are a bit like chess players the calculate possible ways for the person to move _into _check mate and ignore the threat. They are also _assuming_ the pieces the other player is trying to go for. THey are ignoring cultural issues and various other real world factors cumilatively they effect the market. Re you considering the change in demographics in terms of increased single people and marriage break ups? What about the post colonial driven demand to own housing? THe fact that irish home ownership will probably have to drop in line with most other EU countries?
> 
> I disagree with you I believe that the stock crash casued the housing crash in the UK as do other people.


 
On your religion vs. science point - I am basing my argument on measurable quantitative (i.e. scientific) factors - relative prices, interest rates, debt/income ratios, rental incomes etc. I think those are scientific reasons and are as far from religion as you can get. Those lead me to believe that the market is inflated and over-valued. In the UK in 1989/90, prices relative to income were at an all-time high, the rental market was weak because "it is dead money" etc. Don't know the situation in Japan so I cannot comment. 

On overvaluation, were tech stocks overvalued in 2000? Were tulips overvalued in Holland? Were football clubs overvalued pre-ITV Digital crash? Were railway stocks overvalued in the mid 1800's? Were houses overvalued in the UK and Japan in the late 1980's? Yes it is only observable afterwards, but that doesn't stop someone having a view prior to the event on there being a difference between what people are willing to pay and someone else thinks it is worth. If you think it is still good value and still going to go up every year and no wobble is ahead, I say good for you and good luck. 

Coming back to Ireland (I came back 8 months ago after 18 years abroad) felt like (in property/gossip terms) like landing in London in 1989. "Property is my pension", "Sure you'd never trust the stock market", "Invest in Bulgaria", "Sure it's only ever going up - best time to buy is now" etc. etc. Read the RoboPaddy chapter in "The Pope's Children" - that's the best description I've read.

I've dealt with the UK recession influence point in an earlier reply - I lived in London through that period and worked in the City so feel quite qualified and confident in my judgement of what happened. The stock market crash affected a very small part of the UK population and did not cause the housing crash. It happened because houses became too expensive to buy and at some point, people stop. House prices cannot outgrow salary growth forever - that is economically impossible as people pay rent or mortgage through salaries - something has to give. 

Final question - would you buy a €500K two-bed apartment in Dublin today with a view to good capital appreciation and being able to cover the mortgage through rent? What would you do if the mortgage rose by €250/month leaving you with a rental shortfall every month?


----------



## ivuernis

beattie said:
			
		

> There is speculation from some commentators who I would have considered quite dovish that interest rates will hit 3.5% before the year is out. That will put a major squeeze on many in the buy to let sector as costs rise IMO
> 
> http://www.rte.ie/business/2006/0223/germany.html


 
The 3 related stories on the side of that page paint a more sobering picture of the German economy though.


----------



## Calina

Loki said:
			
		

> It is equally logical to assume that people earning more money and high employment can afford more. The banks beleive the ability to pay back loans has increased and how people will be working longer mean house prices go up. Less assumption on what I have said as it is all common knowledge that we have more employment, banks give more money and longer terms. Yours is based on assuming intent of people and giving reason to peoples' actions. I don't think that is reasonable to assume, suspect or base your purchasing on that but it is personal choice



That's assuming you consider longer term loans to be a good thing, along with higher salary multiples when calculating how much someone can afford to pay back. 

For that assumption to have any merit, I would say that it needs to be backed with the following certainties:

1) near full employment will continue ad infinitum. Show me an economy where this has actually happened and I'll believe it's actually possible. 

2) interest rates remain low. This is also unlikely. Currently our rates are a couple of percentage points below the rates in the UK, for example, and although it's too early to see a trend, there is some evidence to suggest that the ECB is looking towards moving them up again over the coming while. 

Unfortunately, I'd question the "we can afford more" scenario, given that the bulk of our consumer spending is based on credit rather than hard cold cash which we own. In the past, that used to be called "living on the never-never" and was never advisable financially. That is completely aside of our mortgage lending. You could claim that well, the banks wouldn't give it to us if they didn't think we could afford it. But you also have to accept that it is in the banks' interest to be able to charge us interest, not to have us clear off loans. 

For the record, I'd have to say that I think longer term loans and higher salary multiples are not good things, as ultimately you're exposed to the vagaries of interest rate movements over a longer period and they have been known to be double what they are now within recent memory. Realistically, I'd say the primary beneficiaries of them are banks, not consumers.


----------



## Neffa

Loki said:
			
		

> Crashes are not a result in over pricing but sudden change in a point of view or fear. It is silly to claim there is a right price or wrong price for anything. I might as well claim that a sudden under pricing casues a crash than you claiming years of overpricing
> 
> Why not try and be a bit more balanced and argue your point instead of saying people are wrong and stop assuming you are 100% correct.


 
A price is what someone pays which is objective. How much value there is is subjective. I think current prices offer poor value by historic/international standards and therefore I believe that they are too high. 

Actually, I do believe that the present boom (i.e. a positive crash) is caused by years of under-pricing and pressure being released as prices catch-up. I lived in London during the 1990's and property there was certainly very cheap through 1992-93. At some point, we crossed over into a world of over-pricing and only time will tell when that was.

I'm open-minded to data arguments about why the present situation is sustainable but I've not heard any other than "Ireland is different", "It is a post-colonial phenomenon" etc. Can you present any data/fact based arguments to support a long-run 5%+growth in the market? All I hear sounds a bit like "technology is different", "the old economy is dead" all over again.


----------



## Loki

Calina said:
			
		

> That's assuming you consider longer term loans to be a good thing, along with higher salary multiples when calculating how much someone can afford to pay back.


Actually I was not assuming good or bad about it it one way or the other. I stated as other possible reasons than the view people were panic buying which I beleive is assuming intent which can't really be calculated.



			
				Neffa said:
			
		

> A price is what someone pays which is objective. How much value there is is subjective. I think current prices offer poor value by historic/international standards and therefore I believe that they are too high.



Property means such radically differnt things culturally that internationally there really isn't a standard. I have been saying that if you keep staing they are too high it is skant amount to a religious belief. "The crash has come the crash will come again"



			
				Neffa said:
			
		

> Actually, I do believe that the present boom (i.e. a positive crash) is caused by years of under-pricing and pressure being released as prices catch-up. I lived in London during the 1990's and property there was certainly very cheap through 1992-93. At some point, we crossed over into a world of over-pricing and only time will tell when that was.


I don't disagree about the causes of rises but it is this vague "at some point" I think is a weak arguement. People quote 30% construction cost and claim super normal profits but foreget the tradition of construction market then jump back into traditional models claiming it is a problem. There really has to be a general formula to say a true value. If you were to believe some of the reports houses would be worth less than the materials it is built of in the heart of the capitol. It is possible but extremely unlikely.


			
				Neffa said:
			
		

> I'm open-minded to data arguments about why the present situation is sustainable but I've not heard any other than "Ireland is different", "It is a post-colonial phenomenon" etc. Can you present any data/fact based arguments to support a long-run 5%+growth in the market? All I hear sounds a bit like "technology is different", "the old economy is dead" all over again.



But you aren't providing any data either. All you seem to be saying is Ireland can't do this because people say it won't.  Ireland is differnt  and time is differnt the same situations have not been created so to claim they have somewhere else is flawed. If you were to indicate more links to the other markets it occured you might have a point. THe UK price rise had  different causes than here so I don't see them as the same.  As far as I am concerened that applies to current markets and all historical markets. I think you are comparing apples and oranges and have provided no reason why these are the same. 
I suspect the whole market will change. I can see more €1million 3 bed semis but they won't belong to a single family and will be changed into at least 2 different house.holds and I base that on the history of buildings which has a visable history in this city now. I look at 15 years not 1 or 2 as you seem to. I am a property investor and I look at property not vodoo economics that ignore social models and large chunks of reality


----------



## Glenbhoy

Hiya again Loki
we're all ganging up on you here and it's not fair
Anyway, I think Duplex laid out some excellent questions there which may merit some consideration - your thoughts would be appreciated.
Thanks.


----------



## Duplex

Loki 

Correct me if I’m misrepresenting your views, but basically you’re saying that the price of property in Ireland is more to do with the cultural context, than with what you call ‘voodoo economics’.  And am I right to believe that you consider Ireland’s present position to be fundamentally different than any similar set of circumstances that have existed in the past?

If my reading of your views is correct then my response is, that; 

1. The marketplace (particularly the global one) is not a place that deals kindly with unsustainable economic foibles.

2 . Economic history is littered with the victims of those who have prophesised that ‘it’s different this time’.   Its not different this time, there is nothing new about financial manias and the madness of crowds.


----------



## thewatcher

Loki,
you remind me of a conversation i had with a friend of mine one night.This girl was quiet intelligent and a primary school teacher no less,for two hours she tried to convince me that the scheme she was about to get involved in was the greatest thing since sliced bread and you could not lose.That time it was the "women empowering women" gifting scheme,she had completely convinced herself there was no downside to the scheme and everyone would win.You seem like a fairly intelligent person who has their head stuck in the sand,just this time it's the property pyramid.
you can't beat the fundamentals !


----------



## Neffa

Glenbhoy said:
			
		

> Some interesting posts from everyone, pity I'm busy today!
> Neffa:
> A quick point on UK and Irish wage to house values, to my mind this pretty much identical:
> UK National average wage: £22,411 Average House Price (per friday last) £185K ratio is therefore 1:8.4
> Irish national average wage €32K (couldnt find confirmation) Average House price €278K ratio is therefore 1:8.5


 
OK - just checked on this - the UK's average house price in Jan reported by Nationwide (largest UK Building Society) was £158K. Your earnings figure is roughly right - it is about £23K so that makes the ratio 6.9. Source: UK CSO and the Nationwide data is at [broken link removed]

For Ireland, CSO reported Sept 2005 ([broken link removed]) weekly Industrial earnings of €580, annualised to €30K against average price of €278K (ESRI/TSB) giving ratio of 9.3

Quite a big difference - Ireland is 35% higher on this measure


----------



## joe sod

From the tone of these postings most commentators are bearish on property now. Even the media seem to be sensing that the game is up and are starting to switch sides. It is interesting that the independent now has david mcwilliams writing very controversial weekly articles on the madness of the property market in ireland etc. He said as far back as 2001 that property in ireland was overvalued. He was very much on the outside then but the mainstream media is cosying up to him now


----------



## Loki

thewatcher said:
			
		

> Loki,
> you remind me of a conversation i had with a friend of mine one night.This girl was quiet intelligent and a primary school teacher no less,for two hours she tried to convince me that the scheme she was about to get involved in was the greatest thing since sliced bread and you could not lose.That time it was the "women empowering women" gifting scheme,she had completely convinced herself there was no downside to the scheme and everyone would win.You seem like a fairly intelligent person who has their head stuck in the sand,just this time it's the property pyramid.
> you can't beat the fundamentals !


The fundementals are supply and demand. I am not advocating a pyramid scheme and I never said there wouldn't be losers. A crash is not an inevitability. THe irish property stock is due a change which will effect the markets and economists aren't examininng it. 
Houses get changed over time and people are changing. In the 80s  ahuge amount of 3 bed semis was built. It appears they are due a change as the demographic is changing. A lot more single people housholds are coming about and right now the property ins't there to cater for this market. 
When prices fall in any market it is not even and many times housese in certain areas drop. In certain parts prices have doubled others only a small increase. The figure of a 5% increase is an  average wwhich often doesn't reflect the real property changes in areas. 
The building of houses in corner sites and extentions so an adult child lives in the house with theri children. These ttypes of things are skating underneath the economists radar. I live on a street where 7 housese have been split 5 in the last 2 years, there are no corner sites left and the extensions have increased. That is what happened to the terrace houses all around London. That happened before the crash using other people beleif that means that has to happen here first. 
The family structure is strong in ireland so family aid and ineritance might come into play. Grandchildren in houses  which is currently in play will likely be two grandchildren if it hasn't already been taken by the children. THe change in the market may mean more businesses own property. WHo is to say a more Germanic market of home ownership. THe highest home ownership in the world is Ireland maybe that will give well before the price. Maybe the prices will reflect the new market where people are out priced and rent returns stabalise. 
Parents have bought property as investments for their children also. My parents did it a long time agon but many people do it now. THey have 1 or 2 kids and buy 1 or 2 properties becasue they want to make sure the kids have a home. THese people aren't going to sell when there is a price problem. My parents did this for me when every body was telling them property was a disaster in the 80s.
People here seem to be obseesed with only one possibility not becasue it inevitable but they assume views and reason.
1) People are pannic buying
2) There is a property bubble
3) That only one thing can give and it is price
4) That a crash will happen without any casue
5) Investors are all short speculative investors
These are all ssumption
Duplex
I never said fundementally different not the same would be accurate. Tell me why the other booms happened and compare why they happpened here. Compare why they crashed with each other. To say they over heated is simply wrong and simplistic. There were actual casues. INstead of saying there will be a crash due to overheating look at what would casue it. Mass unemployment is a possible one but something would have to casue that , huge interest hikes but again there would need to be a casue. 
One huge differnce between the other markets would be our central bank don't control interest rates and as far as I know the actions of the banks may have been a large contributor to the crash. We are considerably smaller closer to just one city in some the markets people are using as an example. 
There are some big differences and little ones too to ignore them and property stock history  and social changes can easily mean you get the wrong view.  We aren't special  we are simply our own and forcing comparisons is.

I do think some property will devalue in the medium to long term and it will be unserviced estates that require cars for everything. Bored teenagers will tear the places a apart. It won't be a problem for the poor but those in baddly built estates. Generally houses in Ireland aren't price sensative enough to condition and location  and that is what will bite a lot of people. The adjustment  does not mean crash and there are still good buys out there if you look at it right. I would not suggest anybody buy  for the sake of price rises.


----------



## gearoidmm

Even with nothing else changing (ie interest rates, US economy etc) as Duplex pointed out, we are building 80,000 house each year.  This kind of a building rate is not sustainable in Ireland, eventually demand will begin to slow and the building rate will begin to fall.

The problem is that so much of our economy is tied to the construction industry (and so much of government revenue is not coming directly and indirectly from construction) that even if there is only a small fall in the number of houses being built, this will have a disproportionate effect of the economy as a whole and could, in itself, lead to a significant fall in GDP growth.

Even with the loose lending practices being followed by the banks over the last 2-4 years, there is still a limit that they will have to apply and start refusing mortgages to first-time buyers.  Whether that limit is 40% affordability or more, house price rises can only exceed salary rises for a finite amount of time and at that stage it will have to stop.  This is basic economics.  This in itself doesn't say for sure that there will be a crash but if there are a lot of rental properties lying vacant and no buyers in the market, it increases the risk of a crash significantly.  I'm willing to accept that, given the Irish love for property, people are more likely here to try and ride out the storm and not sell their investment properties and you could be right about there being no crash but you have to accept that the longer this goes on and the higher prices go, the more likelihood there is of them coming crashing down in the future.  Blindly saying that there is no chance of a crash is unrealistic and over-optomistic.


----------



## Duplex

I can’t see any evidence of a shortage of housing in Ireland. If there were a shortage rents would be rising, but rents are actually falling (in real terms) and that’s in the face of record short term guest worker demand.  

What I find amazing about this unsustainable bubble is the banks short term view, they know that the bubble is unsustainable and that their super normal profits are equally untenable even in the medium term; yet they continue to lend money in a high risk market.  I appreciate that much of the risk is securitised and spun off but the head honchos surly know that trees don’t grow to the sky.   

My reading of the situation is that the guys with their hands on the easy credit taps are pretty much all short timers with one eye on the golden clock and their winters playing golf in Spain (or Cape Verde even).  So when the train hits the buffers its going to be on someone else’s watch.

I don’t see a soft landing this year my guess is that Euro rates won’t rise much above 3%-3.5% (the prospects of a yield curve inversion in the Euro Bond market are increasing).  I can still see 15%+ rises this year and that should be sufficient to bring the country to the brink of  debt induced demand destruction. 

You really have to view Irish property prices from the prospective of a Chinesse/Indian/Indonisian/Brazilian/E. European production line worker, they could tell you a thing or two about the value of money.


----------



## Neffa

Just saw this [broken link removed]

------------


*Investors increase property stakes *
24/02/2006 - 14:26:55 

A new survey conducted by EBS Building Society and estate agents Gunne Residential shows that 63% of property investors intend to increase their bricks and mortar portfolio within the next five years. 

The survey revealed that 80% of respondents invested in property because they believe it is a safer option than other forms of investment. 

The research was conducted among 200 property investors, with 41% of respondents owning one investment property, 26% owning two and 22% owning four or more. Some 73% of respondents said they invested in property to provide a pension for themselves.
[broken link removed]​
Some 14% of respondents bought their property in Dublin city centre, 34% in the rest of Leinster, 24% bought in Munster, 17% in Connacht or Ulster, 10% elsewhere in Europe. 

Of those questioned, 64% said that the rents they receive are adequate to cover their expenses.

About one third have also invested 10,000 or more into a private pension scheme and 28% in stocks and shares. 

Ms Dara Deering, head of mortgages at EBS Building, told *The Evening Echo*: “There is a high level of confidence among property investors.” 

------------

I find the contradition in this article simply reinforces the gap between expectations and underlying trends. There is a high level of confidence amongst investors but 36% of investors are *already* not covering their expenses, and still they say property is a safe investment. What on earth will they do if/when interest rates rise? Unless you have incredibly deep pockets, you cannot "hold out" forever if the market goes against you.


----------



## Glenbhoy

> Neffa:
> OK - just checked on this - the UK's average house price in Jan reported by Nationwide (largest UK Building Society) was £158K. Your earnings figure is roughly right - it is about £23K so that makes the ratio 6.9. Source: UK CSO and the Nationwide data is at [broken link removed]


Neffa, justt found where I got my figures from - got to say I always trust the beeb!!
http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/houses.stm

All these stats are a bit irrelevant anyway, and sure the fact there's so much variance means they all have to be taken with a pinch of salt!


----------



## beattie

I find the contradition in this article simply reinforces the gap between expectations and underlying trends. There is a high level of confidence amongst investors but 36% of investors are *already* not covering their expenses, and still they say property is a safe investment. What on earth will they do if/when interest rates rise? Unless you have incredibly deep pockets, you cannot "hold out" forever if the market goes against you.

Agree that it is worrying that 36% of investors are unable to cover expenses at such low repayment levels but there is still a high number of relatively young investors who have never experienced even moderate rates. I do not believe that a 'get out clause' of higher rents will suffice in future as with 80k+ units coming onstream every year for the next 3-4 years rents will at best stagnate in real terms and will probably fall. I expect vacancy times will increase (especially beyond the Pale) further eroding yields. The real question IMO is what ECB rate will cause would be investors to pause.

Also is there any figures on loan defaults on buy to let mortages. It seems that you can get this sort of information from the papers in the UK from time to time but alas our media never seems to uncover negative information about the property market.


----------



## askalot

Neffa said:
			
		

> Just saw this
> Ms Dara Deering, head of mortgages at EBS Building, told *The Evening Echo*: “There is a high level of confidence among property investors.”



Is that the same high level of confidence as displayed by investors a few years ago as they piled into tech stocks? Surely the lesson from the bursting of that bubble is that eventually fundamentals will come into play and correct the market.

The housing market is different to the stock market in that there are no quarterly results to spook investors, unless you count the various market reports by vested interests like banks, building societies and estate agents. All seems a bit Enron-like for my taste!


----------



## sandycove

Neffa said:
			
		

> I'll need to look into the wage comparisons a bit further and find the data.
> 
> On areas, I agree it is very hard to do a comparison but Fulham and Chiswick are very accessible, family oriented redbrick areas with good schools. They are further away from the centre (30-40 mins by tube) than Ranelagh is, but London's centre is so much bigger that you cannot use geographic distance as a simple comparison. The nearest (nice) residential areas are always 30 mins at least from the centre in London.
> 
> I think what you can do is say "how much does a comparably sized home cost in a sought-after area with similar demographics" and that is what I based my analysis on.


 
Neffa,

I don't think that you are drawing a fair comparison.  A friend of mine recently bought 3500sq ft house in Ranelagh for €2.8million in Ranelagh.  His sister purchased a 2200sq ft house in Earls Court 8 years ago for £1.5 million.  Relative to the overall size of the cities, Ranelagh and Earls Court are equidistant from the centre of the city.


----------



## dam099

sandycove said:
			
		

> Neffa,
> 
> I don't think that you are drawing a fair comparison. A friend of mine recently bought 3500sq ft house in Ranelagh for €2.8million in Ranelagh. His sister purchased a 2200sq ft house in Earls Court 8 years ago for £1.5 million. Relative to the overall size of the cities, Ranelagh and Earls Court are equidistant from the centre of the city.


 
I don't know that 2 houses of totally different sizes purchased 8 years apart is of any use as a comparison either.


----------



## Neffa

sandycove said:
			
		

> Neffa,
> 
> I don't think that you are drawing a fair comparison. A friend of mine recently bought 3500sq ft house in Ranelagh for €2.8million in Ranelagh. His sister purchased a 2200sq ft house in Earls Court 8 years ago for £1.5 million. Relative to the overall size of the cities, Ranelagh and Earls Court are equidistant from the centre of the city.


 
Not sure what to make of this - it is hard to do a comparison 8 years apart! In 1998 (i.e. 8 years ago) - 2000 sqft houses were selling in Richmond/ Chiswick/ Fulham/ Islington etc. for about £600K then so it must be an extraordinary house and be worth upwards of £3m (London more or less doubled in the last eight years, even after the 10% fall in 2005-06). 

I don't think it is about the distance from the centre, it is about aspirational/upmarket places to live and how much they cost. Dublin does appear to be more expensive for a mid-sized family house amd the rental values trail the mortgage payments significantly.

For instance, look what €1m would buy in Fulham - a very upmarket London area: Bear in mind this is the real price, not an AMV or Guide:

http://www.findaproperty.com/agent.aspx?agentid=0236&opt=prop&pid=394498

Or in Chiswick:

http://www.findaproperty.com/agent.aspx?agentid=4817&opt=prop&pid=314071&photo=3#photo

Would you get something remotely comparable in Dublin for a similar sum?


----------



## Amygdala

I am going to try to dip my toe in this very heated debate..... firstly Loki your suggesion that 3 bed semi D's will be divided into 2 or more independent units is hard to see. If you are drawing a parallel between these and for example Georgian Houses, I believe these to be fundamentally different for too many reasons...such as structurely and with mordern building regulations/standards. But I do understand your arguments with regards to the changing social issues, but they are also based on on a non-responsive govermental policy.                   I also understand the pro-bubble arguments, but also believe that the markets are learning from previous crashes so that the past precipitating factors are widely studied and therefore can be avoided and so  growth maybe sustained in the short to medium future .
              I suppose  the net result of this post is non-contributary but one of complete besumement at something that can not be modelled and only explained after the event has occured.
And when i graduate in the summer as a doctor in dublin and faced with predicted increases of 8% over the period it would take my girlfriend and I to save for a deposit( 100% mortgage is never a good idea), I will most likely emmigrate out of exasperation, rather than be someone who can not recognise worth as opposed to previous definitions of value that depend on irrationality of buyers.

( I realise that this post smacks of sour grapes of a person who missed the last "definite" boat to some, but this sentiment could signal the next reason to leave Ireland.)


----------



## extopia

Well if doctors can't afford to buy houses then property is definitely overvalued. Case closed!


----------



## bankrupt

extopia said:
			
		

> Well if doctors can't afford to buy houses then property is definitely overvalued. Case closed!


 
Amen to that!  

This is exactly the point - the very people who should be most encouraged to stay in the country are being squeezed.  

It seems to me that if you think the status quo is acceptable then you do not appreciate the damage that we are inflicting upon ourselves.   Regardless of whether you think there will be a "soft landing" or not, the fact is that the current situation penalises our most important asset, our educated workforce.   

Looks like we should all become builders, nothing else is worth a damn.


----------



## askalot

extopia said:
			
		

> Well if doctors can't afford to buy houses then property is definitely overvalued. Case closed!



Yep. We'll be a nation of builders and landlords!


----------



## Glenbhoy

> they know that the bubble is unsustainable and that their super normal profits


Supernormal profits mean supernormal bonuses!!


----------



## Marie

Duplex writes: _"What I find amazing about this unsustainable bubble is the banks short term view, they know that the bubble is unsustainable and that their super normal profits are equally untenable even in the medium term; yet they continue to lend money in a high risk market. I appreciate that much of the risk is securitised and spun off but the head honchos surly know that trees don’t grow to the sky. 

My reading of the situation is that the guys with their hands on the easy credit taps are pretty much all short timers with one eye on the golden clock and their winters playing golf in Spain (or Cape Verde even). So when the train hits the buffers its going to be on someone else’s watch."_

I read in my newspaper today (The Guardian) that here in the UK because first-time buyers have virtually given up trying to get onto the property ladder (and we are talking about a situation where it's been a 'buyer's market' for the past 18 months!!!) banks and financial institutions are changing their loan criteria to stimulate the 'buy to let' market which was virtually dead in the water by _raising_  the amount they will loan to speculators from 2million sterling to 10 million sterling and raising the allowed number of properties they will fund - from 2 to 10.  Younger members of my family who had lived abroad for years returned to Ireland recently anticipating property-prices had peaked and would shortly become sufficiently 'real' for them to purchase.  I think if the Irish property market follows the trajectory of the UK (and there is no reason it will not - it's globalising capitalism we're talking about here!) that is unlikely and I agree with the trainee medic and the above posters on the profound damage this will cause in the medium/long term to the social fabric.


----------



## beattie

If the government was serious about tackling this issue they could do two immediate things which would lead to a more socially cohesive situation.
A) Introduce taxes with respect to land hoarding in areas which have been zoned residential, that would increae supply.
B) Reintroduce the extra stamp duty taxes on investors that were present for a year about 4-5 five years ago.

I doubt that either of these measures will be introduced by the present government and I would also doubt that a FG/Lab coalition would do so either IMHO


----------



## askalot

beattie said:
			
		

> If the government was serious about tackling this issue they could do two immediate things which would lead to a more socially cohesive situation.
> A) Introduce taxes with respect to land hoarding in areas which have been zoned residential, that would increae supply.



Really? In the past we did have a supply problem but that is not the case now. There are plenty of really badly designed and badly built one and two bedroom apartments for ftbs and 'investors'.



			
				beattie said:
			
		

> B) Reintroduce the extra stamp duty taxes on investors that were present for a year about 4-5 five years ago.


 
I agree but I don't see any of the political parties having the courage to do this.


----------



## Loki

newbie said:
			
		

> I am going to try to dip my toe in this very heated debate..... firstly Loki your suggesion that 3 bed semi D's will be divided into 2 or more independent units is hard to see. If you are drawing a parallel between these and for example Georgian Houses, I believe these to be fundamentally different for too many reasons...such as structurely and with mordern building regulations/standards. But I do understand your arguments with regards to the changing social issues, but they are also based on on a non-responsive govermental policy.


 I used georgian houses as an example. Go to London and look at the vitorian estates. Some are close to a complete split in every house. IT just happens to be house stock in the location. This isn't so much a theory as a reality happening now. 7 on my road alone from a house built in the 50s. Are big property build prior to the current was the 70-80s and these houses are being changed . All the corner sites are being used, back gardens are being built on. Georgian houses are hugely different but that isn't the point the point is people didn't think there way of life would change so radically. 
People here are focusing on economics and the construction industry (mostly the economics of it) and not property. I think if you are going to talk property prices you need to talk about property stock and who uses it. 
You people buying a house will be a sacrifice this society will make. Ireland has the highest home ownsership in the world the next is Italy yet they have a falling population size. I can see this giving before house prices as that is the super annomoly not the price. People here are making the assumption people must buy. The gloabalisation aspects of our economy seem to be ignored in the property section except for the economic effects. 

All the property baddly built now may mean people will dismiss owning property built after 2001. Then supply and demand may change. I beleive it will be congestion that will effect the market. Many areas are so far away that public transport will be unviable kids raised in cars will not be will to commute long distances.

As for the ability for a dcotor to buy a property straight out of college. Look around the world and be amazed that in other countries this is also the case and they have not collapsed. Look at TV and see how many people rent why is this relevant ? It would be so unrealistic to have them afford a house that even in situation comedies they won't streach that far. Scrubs have them still renting and they are fully qualified. As for  taking the free education and then leaving, you won't get you much sympathy from me. I can see why you would do it and that stopping you going is in our best interest but I don't use it as a gauge for property prices.


----------



## extopia

When you talk about houses being "split" do you mean development of the site (e.g. more buildings in the garden) or subdivision of the house itself? There's no doubt about the former, but I see little or no evidence of suburban semi-D's being turned into two family houses, at least not officially. Bedsits, maybe, but "apartments"?


----------



## gearoidmm

Interesting article in one of the Sunday papers yesterday (sorry, can't remember which one) saying that AIB are beginning to be concerned that perhaps their loose lending practices may have contributed to the rise in property prices and that it may be unsustainable!

On the other side of things, the Sunday Independent reported that a house in Blackrock was sold last March for E850,000 and had sale agreed last week for E1.43 million. Now they didn't mention whether or not any work had been done to improve the house but that seems unbelievable.


----------



## Calina

gearoidmm said:
			
		

> Intereesting article in one of the Sunday papers yesterday (sorry, can't remember which one) saying that AIB are beginning to be concerned that perhaps their loose lending practices may have contributed to the rise in property prices and that it may be unsustainable!



Sorry I missed that. I had a dust up with the mortgage guy in my local AIB sometime ago because he basically said they wouldn't introduce 100% mortgages because he felt they'd only serve to drive up prices - I told him that actually, I didn't think that was the bigger problem, the rot went back to when they started loosening the salary multiples. He actually agreed with me, somewhat reluctantly, I felt.


----------



## Loki

extopia said:
			
		

> When you talk about houses being "split" do you mean development of the site (e.g. more buildings in the garden) or subdivision of the house itself? There's no doubt about the former, but I see little or no evidence of suburban semi-D's being turned into two family houses, at least not officially. Bedsits, maybe, but "apartments"?



I am talking about the split in terms of houses.  As I said there are 7 on my road with 5 in the recent years . If you can find a corner  garden in any of the estates now  it is rare. Back gardens are getting houses now too. They aren't besits. A 3 bed house with two reception room becomes two places very easily, the box room becomes the kitchen, one bedroom a sitting room and the other a bedroom, downstairs, change a reception room to a bedroom  add an extention for a bathroom and you are done. They become two household houses not family property that is the point. Families can't afford them  hence change of use. 
People are mostly retired and heading towards 90 and death so their children in their 60s are selling to developers or spliting themselves. Thoses bought by families or couples are bought by people well into their 30s and not FTBs. The people renting in the area are a lot younger but working professionals. The reason they are there is because of travel times they have no plans to buy as they are accepting they can't buy and have quality of life. The view of renting and owning will change.
It is not going to happen everywhere but it is something people aren't considering. The property market changes but people are ignoring it and only looking at economics. 
There are no official figure for this change so it is being ignored. The reason for no figures is it there is no application needed.


----------



## Calina

Loki said:
			
		

> As for the ability for a dcotor to buy a property straight out of college. Look around the world and be amazed that in other countries this is also the case and they have not collapsed. Look at TV and see how many people rent why is this relevant ? It would be so unrealistic to have them afford a house that even in situation comedies they won't streach that far. Scrubs have them still renting and they are fully qualified.


The problem I have with this is that immediately someone tries to prove something by saying "look at TV", they lose a certain amount of credibility with me. 

If you looked around the world, you would also realise that in most other countries where renting is prevalent, the relationship between tenant and landlord is a lot more mature and regulated. Although security of tenure has improved radically in the past while, it's fair to say that in my experience, quite a lot of landlords in Ireland are extremely well up on their rights and are totally convinced that they have few if any obligations. It's not that they don't know there are rules - they just think that they don't apply to them. I had someone try to give me all of 14 days notice to move out of a house he wanted to sell, claiming I'd no written lease (that would be the lease that was signed when I moved in, along with the provision for extension, along with legal requirements compelling him to give me 43 days notice none of which he appeared to think applied to him). He is not the only one I had this type of problem with. 

If you looked around the world, you would understand that American television does not reflect the world at large. In fact, I've lived in several other countries, and yes, rent is very common in some of them. But the cost of acquiring an entry level apartment is much, much more reasonable too. Brussels is a case in point. Even Paris is a case in point. An entry level box in Ireland, in the suburbs with little or no public transport costs almost a quarter of a million euro. This is not the case in many other cities in Europe. And where it is, the rental market is not as screwed up as it is here.


----------



## Neffa

Loki said:
			
		

> I used georgian houses as an example. Go to London and look at the vitorian estates. Some are close to a complete split in every house. IT just happens to be house stock in the location. This isn't so much a theory as a reality happening now. 7 on my road alone from a house built in the 50s. Are big property build prior to the current was the 70-80s and these houses are being changed . All the corner sites are being used, back gardens are being built on. Georgian houses are hugely different but that isn't the point the point is people didn't think there way of life would change so radically.
> People here are focusing on economics and the construction industry (mostly the economics of it) and not property. I think if you are going to talk property prices you need to talk about property stock and who uses it.
> You people buying a house will be a sacrifice this society will make. Ireland has the highest home ownsership in the world the next is Italy yet they have a falling population size. I can see this giving before house prices as that is the super annomoly not the price. People here are making the assumption people must buy. The globalisation aspects of our economy seem to be ignored in the property section except for the economic effects.
> 
> All the property baddly built now may mean people will dismiss owning property built after 2001. Then supply and demand may change. I beleive it will be congestion that will effect the market. Many areas are so far away that public transport will be unviable kids raised in cars will not be will to commute long distances.
> 
> As for the ability for a dcotor to buy a property straight out of college. Look around the world and be amazed that in other countries this is also the case and they have not collapsed. Look at TV and see how many people rent why is this relevant ? It would be so unrealistic to have them afford a house that even in situation comedies they won't streach that far. Scrubs have them still renting and they are fully qualified. As for taking the free education and then leaving, you won't get you much sympathy from me. I can see why you would do it and that stopping you going is in our best interest but I don't use it as a gauge for property prices.


 
Loki - you are right about London - large swathes of the 4-5 bed Victorian houses in London are converted and many houses left unconverted are being extended via loft conversions and the like. However, I don't see how this applies to Dublin - the housing stock is mostly non-period and not particularly suited to conversion to apartments unless you knock-down and re-build. I also don't really see the connection between this and prices in the market.


----------



## Calina

Loki said:
			
		

> There are no official figure for this change so it is being ignored. The reason for no figures is it there is no application needed.



Does this require planning permission - turning one house into two apartments?


----------



## Amygdala

I would like to respond to the comment below eventhough it is not in keeping with the thread



			
				Loki said:
			
		

> As for taking the free education and then leaving, you won't get you much sympathy from me.


 
1. Free 3rd level has been available to all for some years ( just like when second level eduaction was made free...and when did that stop being refered to as "free"). It is a sign of progress. If you want a knowledge based economy then have free eduaction.

2. I hope also that this sentiment is shared with your family members who have,is or will benefit from free third level and that it is not only reserved for prospective tennants.


----------



## jdork

newbie said:
			
		

> 1. Free 3rd level has been available to all for some years



Once you pay the registration fee of 700/ 800 / 900 euro.


----------



## Loki

Calina said:
			
		

> The problem I have with this is that immediately someone tries to prove something by saying "look at TV", they lose a certain amount of credibility with me.


 I used an easy digestable source. You don't like it doesn't make you right. I know doctors in the US and I know where they lived when starting out. How are you going to know or reference that?


			
				Calina said:
			
		

> If you looked around the world, you would also realise that in most other countries where renting is prevalent, the relationship between tenant and landlord is a lot more mature and regulated. etc...


 So we are never going to mature? Why assume the price is the only thing that has to give. How do renting rule mature, obviously time and conditions. I think the current situation will mean this will happen to some extent. People are ignoring it, by saying it isn't here doesn't mean it isn't coming.


			
				Calina said:
			
		

> If you looked around the world, you would understand that American television does not reflect the world at large. In fact, I've lived in several other countries, and yes, rent is very common in some of them. But the cost of acquiring an entry level apartment is much, much more reasonable too. Brussels is a case in point. Even Paris is a case in point. An entry level box in Ireland, in the suburbs with little or no public transport costs almost a quarter of a million euro. This is not the case in many other cities in Europe. And where it is, the rental market is not as screwed up as it is here.


 I don't know Brussels very well but I do know the state it is in from being there. A lot of very run down property in a very large city indicates that there is no shortage of property in the place so that would explain why it cheap. I disagree with you on Paris for prices based on what I looked at buying. Again the city also has no shortage with many run down properties. Try and find a run down property in Dublin city is extremely difficult and the ones you find are normally be sat on by investors. That also doesn't even mention employment rates in these cities. When people are working things cost more. If you live in Paris or Brussels the property is just as unaffordable to you as if you lived here. I don't think people who ignore the high employement here and ignore the low employment in other places as very credible


			
				Neffa said:
			
		

> Loki - you are right about London - large swathes of the 4-5 bed Victorian houses in London are converted and many houses left unconverted are being extended via loft conversions and the like. However, I don't see how this applies to Dublin - the housing stock is mostly non-period and not particularly suited to conversion to apartments unless you knock-down and re-build. I also don't really see the connection between this and prices in the market.


 Not what I know and see. Lots of 2 bed victorian houses have been converted not just the big ones. Bear in mind the largest percentage of houses in England is Victorian as she was in power a long time. The property doesn't need to be period it is to do with location. Property built between 50s-80s is easily convertable in Dublin. The 70s houses are more likely not to be in fairness due to building materials and construction (like present housing). I have seen 5 old corporation terrace houses converted in Donnycareny to two households. If they can do it to those houses they can do any. No need to knock down houses to do this.



			
				Calina said:
			
		

> Does this require planning permission - turning one house into two apartments?


 Not in most areas but importatnly not do Dublin City Council plus 40sqm can be built without planning. That is a lot of space to add and in many cases half the house. By the way these would be flats as they would be entire floors where appartments actually only means a section of a floor or building

[broken link removed]

This is the type of house I see being converted. If you imagine the 4th bedroom not being there you can see the original house. Still as is very eay to convert into 2 two bed places as it currently stands. The doorway and stairs can eaisly be sorted out. The top place could convert the attic also making it a 3 bed. If you got the house beside it you could make it into 5 places easily with relatively little work. Some houses have back lanes taht mean the back can be changed to maybe just a different entrance or another build. _People seem to miss the fact we have such low density housing as our housing stock, this has to change for our own good and I would say as an inevitability. The rent from two places make that a viable investement and resale value also. Two friends purcahsing, siblings or an investor might buy this place after or before conversion. As I said this is not a case of can they do it, it is a case of they are doing it and what it's effect will be on proeprty. 5% on my road but there is a larger portion going to spread?


----------



## walk2dewater

Spiralling out of control property prices in Ireland are being caused by:

Buyers that expect never to be burned and sellers that know this.  No collective memory of results of previous speculative behaviour or consequences of over-extending on debt.  Related to the Irish trait of "Ah sure-ism" and fatalism

....compounded by a lack of honest and 2-sided information.  The Irish media is complacent and uncritical of the views of the vested interests. The opinions of "property economists", who's salaries are paid by estate agents and mortgage lenders, are reproduced verbatim in the property sections and passed off as factual, sober analysis (which miraclously always arrives at the same conclusion)

... and aided and abetted by the continuing loosening of lending standards at banks, the so-light-to-be-non-existant regulation of lenders practices, political incontinence and widespread fraudulent behaviour such as unreported rental income and undeclared debt by borrowers

But it's mainly the mania of buyers borrowing whatever to accept whatever price is offered, no questions asked.

The rest of us, our economic security and our families well-being are being held hostage by these factors.

Yet some of us sit around and think this won't end badly?

WTTW


----------



## Duplex

1. The US economy is teetering on the brink, with a sharp slowdown in the housing market; continuing falls in productivity and incomes, an inverted yield curve and a deficit ceiling fast approaching, not to mention rising oil prices, MNC labour off shoring and a cripplingly expensive war in Iraq, oh and a dollar that looks as much in demand as a pack of Danish bacon in a Tehran market.    Can anyone provide me with a reasoned explanation as to how Ireland will not catch a lot of flack if the US economy goes into recession?


2. I read a report about lawyers in California brushing up on their case law from the last crash in preparation for a plethora of civil actions against appraisers (valuers) and banks as the housing bubble deflates.  In Ireland I wonder if our wigged friends in the Law Library are at this moment licking their lips at the prospects of a stampede of disillusioned bubble ‘victims’ seeking ‘justice’.   

_What you loose on the swings you gain on the roundabouts_


----------



## extopia

Calina said:
			
		

> Does this require planning permission - turning one house into two apartments?



It most certainly does. Turning a single family dwelling into a two-family dwelling, or into flats or apartments constitutes a change of use of the building. This requires PP, regardless of whether the house is extended or not.


----------



## Calina

extopia said:
			
		

> It most certainly does. Turning a single family dwelling into a two-family dwelling, or into flats or apartments constitutes a change of use of the building. This requires PP, regardless of whether the house is extended or not.



That's what I thought myself. But Loki appears to think otherwise.



			
				Loki said:
			
		

> Not in most areas but importatnly not do Dublin City Council plus 40sqm can be built without planning. That is a lot of space to add and in many cases half the house. By the way these would be flats as they would be entire floors where appartments actually only means a section of a floor or building


----------



## Neffa

Loki said:
			
		

> .. So we are never going to mature? Why assume the price is the only thing that has to give. How do renting rule mature, obviously time and conditions. I think the current situation will mean this will happen to some extent. People are ignoring it, by saying it isn't here doesn't mean it isn't coming.


 
I'm coming closer to understanding your argument, but I'm afraid I'm no closer to agreeing with you.

I don't get the connection between splitting houses and prices. Even if you can split houses, I don't see why it drives up prices. It did not have that effect in the UK. It simply produced "new" flats in areas which had mainly houses.

You keep saying "why does price have to give?". Prices cannot keep growing at 8%+ if incomes are growing at 4-5% if interest rates are constant. If interest rates are rising and the market is highly priced by historical averages, then the gap between price growth and salary growth should be zero or negative. Clearly it is not at present as people believe that it is a sure thing and will only go up so will accept the higher prices, but basic economics dictates it should be. At some point, first-time buyers simply dry up - they rent or in the worst case will emigrate to countries with more attractive situations. People can twist details on mortgage applications and so on to drive up the amount they can borrow, but it can only go on so long. This imbalance is not sustainable. 

I think the earlier poster who postulated we were in "Giffen good" territory made a very valid point.


----------



## Loki

extopia said:
			
		

> It most certainly does. Turning a single family dwelling into a two-family dwelling, or into flats or apartments constitutes a change of use of the building. This requires PP, regardless of whether the house is extended or not.


No change of use it is still residential property. Change of use is a graden into a car park space or a house into a business. A residential house into a residential property requires no change of use. Unless a city official told you that I'll beleive the people in the planning department who told me. Either way the governement want to increase density and palnning not to be blocked hence the 40sqm planning exemption. 



			
				walk2dewater said:
			
		

> But it's mainly the mania of buyers borrowing whatever to accept whatever price is offered, no questions asked.


Do you have other super human powers besides the ability to read minds? You don't know this, you think this and no report or expert advise can say this is true. You can't know why people are willing to pay prices. Maybe it is becasue they think it is worth the money and they maybe right or wrong. Why they think it is worth the money is pure speculation as is any reason you believe the house prices are too high.  Try to understand what you are saying is  your belief and not fact. You may be proved right but what you are saying is wild speculation as you are taking two of your opinions of why things are happening and drawing conclusions from them. Big differnce to using facts and speculating on those effects. I don't no anybody who panic bought as it takes too long to buy. People were told the same 6 years ago and if people listened they would have been boned


----------



## Neffa

Loki said:
			
		

> Do you have other super human powers besides the ability to read minds? You don't know this, you think this and no report or expert advise can say this is true. You can't know why people are willing to pay prices. Maybe it is becasue they think it is worth the money and they maybe right or wrong. Why they think it is worth the money is pure speculation as is any reason you believe the house prices are too high. Try to understand what you are saying is your belief and not fact. You may be proved right but what you are saying is wild speculation as you are taking two of your opinions of why things are happening and drawing conclusions from them. Big differnce to using facts and speculating on those effects. I don't no anybody who panic bought as it takes too long to buy. People were told the same 6 years ago and if people listened they would have been boned


 
Of course we cannot read people's minds, but we can talk to them and get their opinions! Since I returned to Ireland, I've had the "property conversation" with a lot of people. And if I ask people why they bought, an overwhelming majority will say that "it's only going to go up", "Renting is dead money", "Ah, sure they've been saying there'll be a crash for years - I'm getting in now when I can", "I was afraid of being left behind" or words to that effect. If you ask them about perceived risks, the only risk they see is about waiting and getting priced out. Unsuprisingly, only a small minority believe that there is any risk of a fall because frankly it is a pretty unpallatable message to hear.

So I don't think any of us claim to be mind-readers, we are reporting what we hear people say, so I think it is a reasonable stance/opinion to have.


----------



## hmmm

On one side of this discussion we have statistics, economics, anecdotal evidence and the laws of supply and demand. On the other we have someone who believes that some sort of magic house splitting arrangement will prop up house prices (that's a new line to me) and nothing else. 

If I could figure out a way to leverage myself into a position which relies on a fall in house prices over the next 2-5 years I would.


----------



## roryodonnell

Prices should have stablised about 18-24 months ago.  But the demand out there from investors is pushing it up.  The most recent purchases will have no increase in value for 5-7 years.  It may increase marginally up until the summer, but after that it will remain flat.  These "investors" will get nervious over the xmas period and may decide to sell then.  So, the storm will come early next year, say March 16th 2007 when the ECB puts the base rates up to 3.5. (5 year fixed = 5.8 - 6.5, variable = 5.25 - 6. or just over 3000pm on a 500k mortgage @5.5 over 25 years).


----------



## Loki

Neffa said:
			
		

> I'm coming closer to understanding your argument, but I'm afraid I'm no closer to agreeing with you.


You don't have to agree with me. I see what people are saying and I understand it and I would say I understand it better than them in most cases. People assuming to know why things are happening and not looking at the whole picture doesn't lead to a rounded view.


			
				Neffa said:
			
		

> I don't get the connection between splitting houses and prices. Even if you can split houses, I don't see why it drives up prices. It did not have that effect in the UK. It simply produced "new" flats in areas which had mainly houses.


I think you missed the point. People are saying house prices can't keep going up. I say they can because of two reasons.
1) The houses will no longer be lived and owned by single families. . 
2) Supply and demand close to amenities will keep property going up in many areas. 

Splitting house is just a natural evelution of that. As is renting in areas not normally rented. I live in an area as close to Dublin as Rathgar except Northside are you going to speculate the economics of Ireland about the house prices and development of the area or what is there and happening. People are spliting the houses and I gave you the type of house it is happening to. Are you just going to deny this as happening and state some economists theory  of what might happen instead? 5% on my road and growing versus a belief and a reading of signs of property crash revelations.  People on my road in their 90s are dying their children are selling to developers or renting out the property. A market change why refuse to look at these details?



			
				Neffa said:
			
		

> You keep saying "why does price have to give?". Prices cannot keep growing at 8%+ if incomes are growing at 4-5% if interest rates are constant. etc...


You are still on the assumption that everybody will be buying. Say if prices keep going up  and income doesn't why are you assuming people must buy? Why won't the super normal property ownership drop? Maybe the nature of the property will give. Maybe the prices will give. Maybe the prices of certain areas or distances will give only. Maybe a combination will happen is what I say and if you want to buy you can do if you do so correctly. 
Why do peope keep thinking prices will drop and set of a huge price crash? It is such a simple belief for a really complex issue. THe economists have been wrong for 10 years in my eyes but people will except 6 years.  The people fighting this arguement won't consider any other additional information that will and does effect the market. I know the arguments and I have heard them better explained than many here.  I have not really said they are untrue but I certainly do point out where people are making assumptions. People are making it a belief like religion not a scientific analysis of the facts and _possible_ out comes intead they state it like fact. 6 years of being wrong how can people defend that by saying they will be eventually right. What would you say if in 4 years it doesn't happen? A decade of economists being wrong or a decade of over priced property. THe drop would need to be something like 200%+ to be an issue for somebody 6 years ago in Dublin at least plus the rent paid over that time.


----------



## gearoidmm

Loki said:
			
		

> . THe drop would need to be something like 200%+ to be an issue for somebody 6 years ago in Dublin at least plus the rent paid over that time.


 
That's all very fine, but the issue isn't whether people who bought 6 years ago made money, we all know that they did.  The issue is what is going to happen in the future and by extension, is now a good time to buy as an investor.  With the highly leveraged state of many investors and new home owners, even a small drop would be significant for them and for anyone getting into the market right now.


----------



## Calina

Loki said:
			
		

> You are still on the assumption that everybody will be buying. Say if prices keep going up and income doesn't why are you assuming people must buy? Why won't the super normal property ownership drop? Maybe the nature of the property will give. Maybe the prices will give. Maybe the prices of certain areas or distances will give only. Maybe a combination will happen is what I say and if you want to buy you can do if you do so correctly.
> Why do peope keep thinking prices will drop and set of a huge price crash? It is such a simple belief for a really complex issue. THe economists have been wrong for 10 years in my eyes but people will except 6 years. The people fighting this arguement won't consider any other additional information that will and does effect the market. I know the arguments and I have heard them better explained than many here. I have not really said they are untrue but I certainly do point out where people are making assumptions. People are making it a belief like religion not a scientific analysis of the facts and _possible_ out comes intead they state it like fact. 6 years of being wrong how can people defend that by saying they will be eventually right. What would you say if in 4 years it doesn't happen? A decade of economists being wrong or a decade of over priced property. THe drop would need to be something like 200%+ to be an issue for somebody 6 years ago in Dublin at least plus the rent paid over that time.


Loki, you accuse a lot of people of making baseless assumptions, and yet, this is full of maybes too. It also is not underpinned by anything other than your anecdotal evidence, something which you are reluctant to accept from those who oppose your view point. Your primary support in favour of your position appears to be that "people have been wrong for six years, therefore they will probably continue to be wrong". 

Secondly, if prices keep on going up, and people can't afford them, at some point, you run out of purchasers. If there are people willing to sell, and no people willing to buy, the prices come down. If the number of people willing to sell continues to increase, and the numbers of people willing to buy does not increase, then prices start to fall faster. 

Regardless of how you split properties - and incidentally, although the Dublin local authorities are mute on the subject, both Sligo Borough and Clare County Council explicitly claim that planning permission is required for this on their website [broken link removed] [broken link removed] so the question is not quite so clear cut - this is still inescapable. Additionally, to some extent, if you split houses into smaller accommodation units - you are increasing supply...which also should, normally, lead to a fall off in prices. 

You provide absolutely no evidence to support how the splitting of property would lead to stable or increased prices. The point about access to amenities is valid, but is equally not dependent on split properties. 

You should also understand that for property prices to stay high, or continue rising, you need an excess supply of buyers over sellers. If people aren't buying...then realistically, prices will be falling

That's why I have trouble with this: 



			
				Loki said:
			
		

> You are still on the assumption that everybody will be buying. Say if prices keep going up and income doesn't why are you assuming people must buy? Why won't the super normal property ownership drop?


----------



## walk2dewater

Loki said:
			
		

> You can't know why people are willing to pay prices. Maybe it is becasue they think it is worth the money and they maybe right or wrong. Why they think it is worth the money is pure speculation as is any reason you believe the house prices are too high.


 
It's pretty easy to INFER what was going on in the minds of buyers at Adamstown few weeks ago is it not?  Why do you think they were queuing up overnight and taking WHATEVER PRICE the developer/sales agent was plucking out of the air?

Activity at Adamstown was not due to special or discounted prices, the developers there were ratcheting property prices to a HIGHER level.  Yet do you seriously think Adamstown buyers were buying because they liked the prices or the rental yields?

This is not sober, considered buying activity, this is FEAR.


----------



## extopia

Loki said:
			
		

> No change of use it is still residential property. Change of use is a graden into a car park space or a house into a business. A residential house into a residential property requires no change of use. Unless a city official told you that I'll beleive the people in the planning department who told me.



Wrong. Planning Permission is required for this kind of development. Here's a document you might want to take a look at: 

Doing Work Around The House published by the Dept. of the Environment.

Converting a house into flats (even only 2 flats) is NOT exempted development.

I quote:

_13. Can I carry out internal alteration, external repairs
and maintenance?

You can carry out any internal alteration you wish as long
as you do not alter the domestic use of the house.
External works of repair, maintenance and improvement
such as painting or replastering do not need planning
permission so long as they do not materially affect the
external appearance, thus rendering the appearance
inconsistent with neighbouring buildings. You may need
approval for certain external alteration e.g. a new
connection to a sewer.

*This exemption does not apply* to protected structures,
nor *to the subdivision of a house into flats or granny flats.
Planning permission must be obtained for such works.*
_


----------



## Neffa

Loki said:
			
		

> You don't have to agree with me.
> 
> I see what people are saying and I understand it and I would say I understand it better than them in most cases. People assuming to know why things are happening and not looking at the whole picture doesn't lead to a rounded view.
> 
> I think you missed the point. People are saying house prices can't keep going up. I say they can because of two reasons.
> 1) The houses will no longer be lived and owned by single families. .
> 2) Supply and demand close to amenities will keep property going up in many areas.
> 
> Splitting house is just a natural evelution of that. As is renting in areas not normally rented. I live in an area as close to Dublin as Rathgar except Northside are you going to speculate the economics of Ireland about the house prices and development of the area or what is there and happening. People are spliting the houses and I gave you the type of house it is happening to. Are you just going to deny this as happening and state some economists theory of what might happen instead? 5% on my road and growing versus a belief and a reading of signs of property crash revelations. People on my road in their 90s are dying their children are selling to developers or renting out the property. A market change why refuse to look at these details?
> 
> 
> You are still on the assumption that everybody will be buying. Say if prices keep going up and income doesn't why are you assuming people must buy? Why won't the super normal property ownership drop? Maybe the nature of the property will give. Maybe the prices will give. Maybe the prices of certain areas or distances will give only. Maybe a combination will happen is what I say and if you want to buy you can do if you do so correctly.
> Why do peope keep thinking prices will drop and set of a huge price crash? It is such a simple belief for a really complex issue. THe economists have been wrong for 10 years in my eyes but people will except 6 years. The people fighting this arguement won't consider any other additional information that will and does effect the market. I know the arguments and I have heard them better explained than many here. I have not really said they are untrue but I certainly do point out where people are making assumptions. People are making it a belief like religion not a scientific analysis of the facts and _possible_ out comes intead they state it like fact. 6 years of being wrong how can people defend that by saying they will be eventually right. What would you say if in 4 years it doesn't happen? A decade of economists being wrong or a decade of over priced property. THe drop would need to be something like 200%+ to be an issue for somebody 6 years ago in Dublin at least plus the rent paid over that time.


 
With the greatest respect , myself and others have laid out arguments involving supply and demand, interest rates, international comparisons, samples of customer buying behaviour, renting vs. buying cost comparisons and other data sources to show how our opinions are based on a wide range of analytical factors ......yet you keep coming back to the fact that we're not being scientific!

Meanwhile, you provide me with two scientific factors to counter my "religion":

(1) Houses converting into two will drive up prices - I accept you showed me a house where this could be possible but I've not seen the inside and I have no idea of how practical it is. I've also no idea of the latent economic value you can extract. Will converting them into four make the prices even higher?  

(2) People will pay a premium to live near amenitities - I entirely accept this, but that does not drive price growth, just price differentials. A flat/house in Dublin 6 near the Luas will be worth more than the same property transported 30 miles from central Dublin with no facilities- no question. It does not ensure price growth, however.

I applaud your foresight in buying many years ago and you have no doubt done very well from that - well done and good luck. I did not as I was not here at the time and I am in the position (like others in Ireland) of watching from the sides at a market which I think is toppy and can only be sustained if we have the present state of full employment, low interest rates, low inflation, stable US economy, slow EU economy, high immigration, low emigration and widespread expectation of property price growth. My case (which I think I've argued ad nauseum) is that this is unlikely to be the case and we'll see a correction and instability in the market. 

I assume that everyone must buy because every property must be owned - owner, landlord, developer who built it. If prices rise and incomes do not, who can afford to pay the price? Will a rational investor be able to sit on property for 10+ years whilst rent lags interest costs? Will the huge appetite to buy be sustained if the growth slackens in the market?

If you think that keeping investing in the current market at current prices is going to bring you real wealth over the next 10-20 years, then good luck and I hope it works for you. I have real concerns so I will wait and see how the market changes. Each to their own!


----------



## Neffa

hmmm said:
			
		

> On one side of this discussion we have statistics, economics, anecdotal evidence and the laws of supply and demand. On the other we have someone who believes that some sort of magic house splitting arrangement will prop up house prices (that's a new line to me) and nothing else.
> 
> If I could figure out a way to leverage myself into a position which relies on a fall in house prices over the next 2-5 years I would.


 
You can - just rent.


----------



## Duplex

Lokii 

You do need planning permission for a change of use of one dwelling house to two or more dwellings, the development does not fall under the permitted development provisions of the Development Acts. If the property is listed you also require listed buildings consent and any building works will require building control consent from the local authority. 

I am at a loss to understand how increasing the number of dwellings in a particular area by splitting existing units would have an impact on prices. Rational/Perfect market theory would suggest that an increase in supply will impact on the price of a product, (everything being equal.)

Now if you were to suggest to me that you base your theory of price increases on your understanding of behavioural economics and that the perfect market theory is hogwash, your argument would have more credence, but such an assertion would be a tact acknowledgement that a bubble exists in the Irish housing market.

My contention is that a bubble exists, ipso facto. 

PS
plaudits to all concerned for an excellent discussion on an issue that is so deserving of cool calm debt. (sorry Freaudian slip Debat) ;


----------



## walk2dewater

Someone I know said today , "if [property] prices crash we've all F*&ked".

This is another of those 'Ah sure-isms' I seem to constantly hear... Ah sure if there's a crash...

Fact is only a few of us will be truly ruined. We're NOT 'all in this together'. Those that are highly leveraged when the "buyers walkout" occurs and sellers start the long, price-cutting process, will be handed their financial heads on a plate.

Most of us will muddle through, the biggest impact will not come from falling property prices per se, but the wider economic fall out of a crash in the demand to PURCHASE property. That's what a crash really is, it's destruction of DEMAND TO PURCHASE property. 

Imagine the economy going from building a whopping 80k units a year to a point where there's ZERO starts in the space of say 6-12mths. Will all those brickies, roofers and labourers from Warsaw continue to rent houses in Ireland? Will the restaurants need all those immigrant staff? Will they even stay open? Will estate agents, auctioneers, mortgage lenders, appraisers, surveyors, solicitors, and related firms have need for all that staff, what about THEIR car payments, THEIR mortgage payments?

How will the big mortgage lenders react to a spate of defaults on mortgages and consumer loands? How will the government react, will they have the tax revenue to help? Will our college grads once again seek greener fields abroad?

What about additional external shocks unrelated to our domestic problems?

Those that take steps to protect themselves now will have better odds of managing this recession.

There is a silver lining:
Traffic will probably get lighter. Unemployed parents will get to spend more time with their kids rather than putting them in creches. Our pollution emissions will fall. Shopping centres will be less hectic. Urban sprawl will be stemmed, social infrastructure (local sports, having time for neighbours, car pooling out of necessity, binding together of communities etc) will have the time to catch up with the hastily built physical infrastructure

And the number one benefit of a crash is: Cheaper house prices.

WTTW


----------



## Neffa

A number of us have been in a long dialogue with Loki on the direction of the market. Is there anyone else who believes growth is still very likely and can put forward reasons why? It has been a good debate so far and it would be good to have other readers involved


----------



## owenm

this says it all really...

http://en.wikipedia.org/wiki/Irish_Property_Bubble


----------



## dam099

Loki said:
			
		

> THe drop would need to be something like 200%+ to be an issue for somebody 6 years ago in Dublin at least plus the rent paid over that time.


 
A 200% drop from the current price is mathematically impossible unless prices move into the negative, the maximum in theory is probably 100%.

If a house has increased 200% over its original price since 6 years ago just a 67% decrease from the current price would bring you back to the same price it was originally.


----------



## Glenbhoy

> A number of us have been in a long dialogue with Loki on the direction of the market. Is there anyone else who believes growth is still very likely and can put forward reasons why? It has been a good debate so far and it would be good to have other readers involved


I concur, fair play to Loki for fighting his/her corner, but it's amazing that no-one else will give him/her a hand - is it my imagination or is there not a property investment section out there?  I would have thought that if any of those guys could spare a few moments from their pursuit of a global property empire they could give us some of their thoughts.
To Loki, am I right in saying that your rationale concerning changing the use of the housing stock is essentially that people will pay more for a house because they intend to split it up and sell it on as 2/3 units, thus the sum of the whole is less than the individual parts? ie I am willing to buy a house for 600k as I can make 4 units worth 200k each?


----------



## Loki

Some people seem to think I beleieve prices will just keep going up. I don't I beleive the market will change quite radically. I believe the prices will change as a result. As has been said I beleive the sum of the whole will be less than the parts.  People mentioned a price differential which should have been a term I used as I beleive this is what will radically change due to increasing commuting times ,fuel prices,car costs,lack of ammenities and socail problems.  THe demographics are changing and will continue to do so. More single people less families.  The home ownsership percentage will drop at least 10% and level close to EU averages.
[broken link removed]
Less people will own more of the countries property. Children will inherit property and/or be given property by their parents. Buying on your own will be the perserve of the rich. Social affordable housing will exist but a public/private partnership will be more likely with big business building and managing such property. 
I am talking a bigger picture and focusing more on the socail and property stock and natural progression. It uses a lot less assumptions about why people bought property  and how they will react to a price change. I think it is possible that people will react as said but I think that is only likely in part of the market. Instead of a crash and a soft landing I perfer to look at it more like a bumping landing or emergency landing. It wouldn't take much for the governmemnt to effect any sudden price change. Reduce stamp duty  for those that have paid stamp duty in the last 10 years on an upgrade house. Suddenly all the people who wanted to buy have property suitable for FTBs. Make down sizing  from a large family home have a pension benifit now the other people who can upgrade with less stamp duty buy up these houses. Increase capital gains on property sales keeping the investors in the market. It maybe all reactive but I don't know if they have similar plans . 
As for planning permission Dublin City Council told me otherwise and their planning regulations govern where I live. Even if I was misinformed it would not be difficult  to get planning. Very easy to get lots of planning and not expensive. They are under orders to get density up. The house I showed was also pre 63 but I can't remeber if that only counts on property already rented out. There are lots of this housing stock within the M50 which I think  has limited supply now and more so in a few years especially as the new hosuing involves so much travel and cost. 

Dam099 I was talking 200% from the original purcahse price as  beleive or not I understand basic maths.

People are not talking about the direction of the market  they are talking about economics and how they beleive it will effect the ability of people to buy then how people will react. It assumes things like people are pabnic buying and panic sell. Yet somebody else posted up data saying people are buying for a pension which isn't short term returns. Some assume that means selling the property but why does it not mean for the rental income. I know people with just one extra house and they plan to rent it out forever or  in my mothers case she bought a smaller house to rent but plans to downsize there in about 10 years. There are alot of smart people investing in property  most see little value right now directly in returns but other returns. I know people who bought for kids,retirement and pension yet all people talk about here is speculative and I think that is too simple a view. 

As I said I don't beleive what people think will effect the market if it happens. I disagree on how people reckon people will react mostly based on the fact it misses a ton of reasons and other factors that will effect the property stock. I am looking beyond 2-5 years also. There are also opposing economic theories with classical economists saying a crash and other economists saying a soft landing. People here sound like those without property or unhappy with what they have so is this why you are all so negative?
Those outside would of course be hoping for a drop so a portion of you maybe really just agreeing on this grounds. Maybe people should state where they are in the market when stating there view. 
I own 2 and manage a further 4 properties


----------



## extopia

Loki said:
			
		

> As for planning permission Dublin City Council told me otherwise and their planning regulations govern where I live. Even if I was misinformed it would not be difficult  to get planning.



Dublin City Council (or any other council) do not have authority to ignore the Planning Acts. They are charged with enforcing the act on a local level. If someone told you you don't need planning permission to convert a single family house into multiple units they were plain wrong, or perhaps they misunderstood your question. Did you get this in writing? If so let us know what it says.

As to whether it would be difficult to get planning, that depends on many things. Perhaps your neighbours will object. Perhaps there are problems with infrastructure or parking in your area. Perhaps the area is already sufficiently developed. Or perhaps not. But you have to go through the process. It's always a good idea to have a chat with a planning officer before you make your application as they can tell you straight off what kind of problems you might encounter or whether your proposed development has a reasonable chance of securing permission. 

Loki, I know this issue is only part of your argument but if you want to be credible, you need to get the basics right.


----------



## Loki

extopia said:
			
		

> Loki, I know this issue is only part of your argument but if you want to be credible, you need to get the basics right.


 I used to work in the planning department and my father did for 25 years. I think I might know a little more on the subject than you. I can assure you certain things are easy to get no matter who complains. Widening a drive way for example warrants little problem. There are concerns but very few and easily done. What are the rules and what the reality is are different. How much involvement do you have in property and construction? As I mentioned pre63 building also what do you know about the exemption there? 
The basics are not rules but ways of getting things done.


----------



## extopia

I realise that planning issues are not the central thrust of this thread but I have to respond.



			
				Loki said:
			
		

> I used to work in the planning department and my father did for 25 years. I think I might know a little more on the subject than you.



Possibly. But there is no evidence of this from the information you are posting here.



			
				Loki said:
			
		

> What are the rules and what the reality is are different. How much involvement do you have in property and construction?



I'd prefer not to get into too much detail here, if you don't mind. I own property. I have been engaged in the planning process on my own behalf a number of times. I also worked in an architectural practice (admittedly quite some time ago) and made a large number of planning applications on behalf of small clients, mostly domestic modifications and extensions.



> As I mentioned pre63 building also what do you know about the exemption there?



If you worked in the planning department you should know that the pre-63 exemption applies to houses that were _subdivided_ prior to 1963, not houses that were _built_ prior to 1963. Just because a house is of this period does not mean you can convert it to apartments or flats without permission.


----------



## Loki

extopia said:
			
		

> I realise that planning issues are not the central thrust of this thread but I have to respond.


My last response on the subject is very simple. You are wrong it can and is being done with little on no hassle. You don't need to beleive me on how it gets done but I beleive it will happen more. I know what can be done from direct experence. There are ways and means which I will not go into other than to say it isn't bribery as many would assume just a bending of rules. I gave an example of house that such work could be done. It is a very small part of my arguement and is a technical detail that is insugnifficant. No further need for discussion on it.


----------



## walk2dewater

Loki said:
			
		

> People here sound like those without property or unhappy with what they have so is this why you are all so negative?


Another popular statement of the property pumpers.  People predicting lower prices are apparently "begrudgers" or "jealous" etc.  Personally I don't need a property crash for any personal or financial reasons.  I've owned property as well as virtually all other asset classes.  Currently I am ZERO directly exposed to property, just as I am to US$ or US$ assets.

Like I said before, many people have excessive emotional and psychological stakes riding on the Irish property market.  This is because they are highly leveraged and will face ruin if the market goes against them.  It is THEM who begrudge young Irish people cheap property prices.  THEY very much need to sell on for higher prices in the future.

WTTW


----------



## extopia

Loki said:
			
		

> It is a very small part of my arguement and is a technical detail that is insugnifficant. No further need for discussion on it.



I take it then that you are not disputing my claims. 

I never said that this kind of conversion could not be done - I am just pointing out that it cannot be legally done without planning permission.

Unauthorised development is illegal, plain and simple. 

Loki, perhaps you could enlighten us as to the "ways and means" and "bending of rules" (and legality of same) to which you refer, in the interests of gaining some credibility in this area.


----------



## Loki

walk2dewater said:
			
		

> Another popular statement of the property pumpers. People predicting lower prices are apparently "begrudgers" or "jealous" etc. Personally I don't need a property crash for any personal or financial reasons. I've owned property as well as virtually all other asset classes. Currently I am ZERO directly exposed to property, just as I am to US$ or US$ assets.


JUst becasue it has been said before does not make it untrue. People here have referred to the fact they can't buy and from their view outside the market gives them insight. It is a valid point to ask is that why people here are so negative. Zero direct exposure? Does that mean you live on the streets? According to people here rent is direct link to price so that is a direct enough link. If you live in a house you own you are directly linked.  I never mentioned jealousy or begrudgery so you can't accuse me of saying that.  It is natural for people to hope things will change to make their life or dreams possible that isn't begrudgery that is hope.


			
				walk2dewater said:
			
		

> Like I said before, many people have excessive emotional and psychological stakes riding on the Irish property market. This is because they are highly leveraged and will face ruin if the market goes against them. It is THEM who begrudge young Irish people cheap property prices. THEY very much need to sell on for higher prices in the future.


If people are so involved why does that not effect those not in the market?  I am going to go with the view not everybody is out to get each other and jealous of everybody else but hoping for a sistuation that makes things beter for themselve and probably not understanding how that may negatively effect others. Insensitive or unaware rather than intentionally not looking to punish others or get something from the backs of the bruised. 

I don't know why you would assume such negitive views are driving peoples' views but most people are connected accross the market through family and friends. Why not have a positive thought for the day on me


----------



## gearoidmm

http://www.rte.ie/news/2006/0228/housing.html

Latest permanenttsb index shows house prices rising by 1.2% nationally in January.  This means that the annual rate of increase has been rising steadily for the past 7 months and at 10.6% is now in double figures again for the first time in over a year.  House prices are currently increasing (for the past 2 months) at an annual rate of 14.4%.

What looked like a nice soft landing in the middle of last year has disappeared with the advent of 100% mortgages.  The central bank warned around christmas that a rise in property inflation could be disastrous as property was already overvalued by all traditional measurements and the highr it went the further it was likely to fall.

[broken link removed]

Still can't make up my mind what I think is going to happen here but the signs are ominous (or great if you bought a house last July and have seen its value increase by 7.9% since then!).


----------



## walk2dewater

Loki said:
			
		

> Zero direct exposure? Does that mean you live on the streets? According to people here rent is direct link to price so that is a direct enough link.


No I don't live on the street I live in a very nice, terraced house in the city centre for which I pay 60% of what it would cost to conventional mortgage.  I also negotiated a 5% discount of the rent for paying 6mths in advance.  If I owned it or had a mortgage on it I'd be directly linked.  I have neither.  My money is invested elsewhere, outside of property, mainly in, base and precious metal shares, gold bullion, oil/natgas shares and mostly in Cdn$ short-term bonds.  Also have some exposure to Japanese shares and India.



			
				Loki said:
			
		

> If you live in a house you own you are directly linked. I never mentioned jealousy or begrudgery so you can't accuse me of saying that. It is natural for people to hope things will change to make their life or dreams possible that isn't begrudgery that is hope.
> 
> If people are so involved why does that not effect those not in the market? I am going to go with the view not everybody is out to get each other and jealous of everybody else but hoping for a sistuation that makes things beter for themselve and probably not understanding how that may negatively effect others. Insensitive or unaware rather than intentionally not looking to punish others or get something from the backs of the bruised.
> 
> I don't know why you would assume such negitive views are driving peoples' views but most people are connected accross the market through family and friends. Why not have a positive thought for the day on me


I really havent a clue what you're saying, but I generally get the impression you either havent read my posts or are misinterpreting them.

My last post made the point that people promoting higher property prices are actually the ones promoting 'doom and gloom'.  Higher prices from here forward is in fact the PESSIMIST view in my opinion, it is truly a gloomy outcome if prices become x15, x20 average salaries.  The ability to buy a cheap, well-built place of your own is a good thing for society, surely, is it not?

WTTW


----------



## walk2dewater

Also, I might add, I've done very well recently with my investments, have you checked the price of gold or base metals lately?  Of course I would like to own my property again, more for psychological rather than economic reasons.

But not at these prices.  I will wait for the sale.


----------



## gearoid

I'm intrigued at the property comparison with European capitals as I could currently own a 2-bed apartment outright (i.e bought entirely on savings) in the centre of Brussels whereas I would be stretching myself to own a 2-bed apartment in Adamstown far from the centre of Dublin.

According to international salary comparisons in my line of work, Belgium pays better. 

Unfortunately I have no particular gra for Belgium but it does outline the insanity of the whole situation here...

I made the mistake of staying out of the property market for various reasons in the late 90's and early 00's. I've spent my time saving to ensure I'm not totally priced out of things here but baulked at the poor value for money available in the property market.

I like the somewhat tongue-in-cheek argument of self-perpetuation raised before. It is that we are importing 1000's of builders from Eastern Europe to build houses for investment purposes to be rented to 1000's of builders from Eastern Europe. Last invester in will suffer in what seems to me somewhat of a pyramid scheme.

Is it not the case that years of future incomes are being spent now due to over lax lending policies and low interest rates. Once interest rates rise my guess is that we catch what is now called "Dutch Disease" in 2008/2009 once the SSIA splurge ends. This is a deflationary shock with years of sub-par consumer spending and investment. Cue sane property prices hopefully.

Gearoid


----------



## Loki

walk2dewater said:
			
		

> I really havent a clue what you're saying, but I generally get the impression you either havent read my posts or are misinterpreting them.
> 
> My last post made the point that people promoting higher property prices are actually the ones promoting 'doom and gloom'. Higher prices from here forward is in fact the PESSIMIST view in my opinion, it is truly a gloomy outcome if prices become x15, x20 average salaries. The ability to buy a cheap, well-built place of your own is a good thing for society, surely, is it not?


I certainly have not misrepresented what you said. Your opinion of what people assuming prices will go up being a pessimists view is hillarious. What is good for society is of no importance when talking about this what is happening or may happen. Things change neither good nor bad just different. If you assume people must buy houses and accept they can't then you are the pessimist. The first problem is people don't have to own property our culture is changing this could be part of it. I would also like to point out that many young people stayed at home when they couldn't buy when unemployment was high. THe same is still the case just for different reasons. A fall in marriage rates maybe seen as bad for society but others would say at least we don't have people trapped in marriage. 
The economic reason of owning a home as you get older is really important. How much gold will you need to provide an income to pay rent as inflates? 

One mans junk is another mans gold. As I pointed out it depends on how you look at you are teh pessimists to assume people are doing everything out of meaness. 
"It is THEM who begrudge young Irish people cheap property prices. THEY very much need to sell on for higher prices in the future."
This is a negative and pessimistic view of why people want house prices to go up. It assumes a negative intent and a negative need. Lighten up. 
"I hope my house price goes up so I can retire early. "So in your world that means the person is promoting doom and gloom that prices will go up! You are saying they are the pessimist. 
You made a decission to remove yourself from property and foreign currencies. That is fine but that does not suit most people and if you did it in the last 6 years and plan to live in ireland maybe that is not such a good idea. You are assume a negative will happen which is the pessimist's view.
I am assuming changes will happen neither negative nor positive. This is not a misrepresentation of what you have said but maybe you meant something else? 



			
				gearoid said:
			
		

> Cue sane property prices hopefully.
> 
> Gearoid


A positive view from sombody hoping to get into the Irish market


----------



## walk2dewater

"You are assume a negative will happen which is the pessimist's view."

So when I shorted MSFT and made money I was a pessimist?  If by purchasing a Put on the S&P500 for August 2006 makes me money then I'm a pessimist?  If the doctor says stop smoking it may kill you he's a pessimist?  If I think it's going to rain and I bring an umbrella I'm a pessimist?  In fact, if the weatherman says it's going to rain, he's a pessimist, is he?

I think you're confusing pessimism with having an opinion based on facts and having the knowledge and balls to make wise decisions.

As the cliche goes, "I change my mind when the facts change, what do you do sir?".

If I though Irish property was good value, I'd be all over it.  Facts as I SEE THEM, is that its ripe for a nasty fall.

And I stand by my assertion that further price increases in Irish property represents a gloomy, doomy world for the younger generation.  What a horrible outcome if todays youngsters have to get into debt x15, x20 their incomes just to own a roof over their head.

WTTW


----------



## gearoid

Loki,
Sorry about this, but sane property prices for me would mean a 20-30% fall! 

Why should anyone pay 300k for a poorly built 2-bed apartment far from anywhere where they have to pay a 1000 euro plus a year maintenance charge?

I think the current boom is a disaster for this economy in the future.

I don't want to get into what seems to be to be a bit of a spat but I do tend to the walk2dewater's point of view more than yours.
Gearoid


----------



## Loki

walk2dewater said:
			
		

> If I though Irish property was good value, I'd be all over it.  Facts as I SEE THEM, is that its ripe for a nasty fall.


"A tendency to stress the negative or unfavorable or to take the gloomiest possible view:"
If prices crash this is a bad thing nobody  thinks this will be good. You beleive this negaitve is going to happen. 


http://dictionary.reference.com/search?q=pessimist


			
				walk2dewater said:
			
		

> And I stand by my assertion that further price increases in Irish property represents a gloomy, doomy world for the younger generation. What a horrible outcome if todays youngsters have to get into debt x15, x20 their incomes just to own a roof over their head.


That is nice but this is not symantics this is your view that people are doing this with intent and begrudgery as  you said.. THis is not casue and effect of warning about smoking  may kill you but an assumption why people want prices to go up or down.  You are assuming the worst in people that is not a positive view and as you can't know what people are thinking you are assuming the worst. THis is a pessimist view. Not a point of debate. Everyone else here has talked about people *hoping* their house go up in value with eternal optomisim. You are simply wrong to say people hoping prices go up are pessimists becasue you can't know their intent and ignore a crash is a negative thing. You can argue their view has negative effects but you don't know intent and assume the worst.

This is all I will say on this point now. You can beleive  what you want but there are some things that are simply wrong or right and not a point of view.


----------



## Loki

gearoid said:
			
		

> Loki,
> Sorry about this, but sane property prices for me would mean a 20-30% fall!
> 
> Why should anyone pay 300k for a poorly built 2-bed apartment far from anywhere where they have to pay a 1000 euro plus a year maintenance charge?
> 
> I think the current boom is a disaster for this economy in the future.
> 
> I don't want to get into what seems to be to be a bit of a spat but I do tend to the walk2dewater's point of view more than yours.
> Gearoid



I know but you are positively hoping you can afford and not negatively hoping  that people will be ruined so you can buy. Or did I get you wrong?

The actual problem with the market is not the point just the assumption of intent. 
Somebody hoping for something they think is positive is not a pessimits' view even if their wish is bad for others.


----------



## extopia

Loki said:
			
		

> If prices crash this is a bad thing nobody  thinks this will be good.



You are forgetting about the people who can't afford to buy houses TODAY. A fall in prices would be welcomed by them.


----------



## gearoid

Loki said:
			
		

> I know but you are positively hoping you can afford and not negatively hoping  that people will be ruined so you can buy. Or did I get you wrong?
> 
> The actual problem with the market is not the point just the assumption of intent.
> Somebody hoping for something they think is positive is not a pessimits' view even if their wish is bad for others.



I'd like to pay less for an apartment/house than I would have to now. I suppose that if this situation were to come to pass then a lot of people would be living on negative equity. I'm formulating a view on a market, not wishing people ill.  But, if house prices did fall considerably, I would have a much smaller mortgage proportionally. I suppose I'd be less worried about an investor losing their shirt than someone buying their PPR and suffering negative equity. My guess is I will eventually buy from a distressed investor letting to a group of Polish builders who are all headed back to Poznan! At the end of the day you have to look at it from your own personal viewpoint.


----------



## Loki

extopia said:
			
		

> You are forgetting about the people who can't afford to buy houses TODAY. A fall in prices would be welcomed by them.


It is a bad thing for the country nobody thinks otherwise. The extent of the damage is only what people would debate. If a person thinks what the want is positive then they aren't pessimists that simple. They have to think it is a bad thing. 
I forgot nothing I just didn't think you were going to say something so ... (actually I can't say something polite as you appear to be a troll at this point) 

Think what you like but you are either a troll or just unable to understand a standard English word. I really can't be bothered explaining it anymore and can not stay polite to somebody claim such a ridiculous use of a word and simply incorrect.


----------



## walk2dewater

extopia said:
			
		

> You are forgetting about the people who can't afford to buy houses TODAY. A fall in prices would be welcomed by them.


 
Exactly, of course it would be.  And it would be welcomed by future generations also.  No one WANTS to pay these outrageous prices.  I wish for todays youngsters a future of cheap, well-built, efficient, safe, housing that is close to amenities and transportation services.  Do we want poor housing costing many multiples of salaries, with inevitablely ownership concentrated in just a few hands?  I think not, that used to be called Colonalism.  Lower prices is a GOOD thing!


----------



## walk2dewater

Loki said:
			
		

> It is a bad thing for the country nobody thinks otherwise. The extent of the damage is only what people would debate. If a person thinks what the want is positive then they aren't pessimists that simple. They have to think it is a bad thing.
> I forgot nothing I just didn't think you were going to say something so ... (actually I can't say something polite as you appear to be a troll at this point)
> 
> Think what you like but you are either a troll or just unable to understand a standard English word. I really can't be bothered explaining it anymore and can not stay polite to somebody claim such a ridiculous use of a word and simply incorrect.


 
You sound like one of those people who's got an enormous emotional, not to mention financial stake in HIGH Irish property prices.

I can sense it in your responses, you cannot accept the overwhelming evidence of overvaluation and the consequences, and are prepared to argue at every step of the way.

Perhaps your retirement will be delayed?  Perhaps you've quit working for a salary because you think "you've made it" with property.  If so, too bad.  At least you still have left to reduce your exposure.


----------



## beattie

Loki said:
			
		

> It is a bad thing for the country nobody thinks otherwise. The extent of the damage is only what people would debate. If a person thinks what the want is positive then they aren't pessimists that simple. They have to think it is a bad thing.


 

I too don't view it as a bad thing if there was a correction in prices, true the economy would suffer and many would be left in negative equity but is it better for people to take on unrealistic loans at record low interest rates when there will be trouble once rates go up again. I haven't seen any recent reports which would indicate that rates will not be going north of 3% in a 6-12 month timeframe. Remember the ECB has one remit: to control inflation and if they view they it is getting too far above there target of 2% they will raise rates.


----------



## Loki

beattie said:
			
		

> I too don't view it as a bad thing if there was a correction in prices, true the economy would suffer and many would be left in negative equity but is it better for people to take on unrealistic loans at record low interest rates when there will be trouble once rates go up again.


Let me be 100% clear a *crash* is a bad thing no matter what. You have a differernt view of that fine. I am not talking about a price correction but *crash.

*The use of the word* pessimist *is incorrect and not open for deabte. It has a definition or a definitive meaning. The constant missuese of the word is what bothers me not the belief in future events as it is all speculative.  Walk2dewater is using the word repeatedly incorrectly. He is doing this as either a wind up or ignorance. As I posted a definition I will go with as a wind up as indicated by his further digs at me about being emotional invested in property. I dislike people using words incorrectly is all. 

All I have been saying is correcting the definition and understanding of what is a pessimistic view is. It depends on your point of view and not what outcome people think will happen. I wasn't really expressing any views but people seem to think I was. 

A crash is bad for the economy is  standard view and should be avoided if possible. I do not believe there will be a crash so debating whether it is good or bad with me is pointless that was not what I was saying. Read back and you will see my view about what will happen and what was being said.


----------



## roryodonnell

What is the difference between a downward daily "correction" and a crash?


----------



## bearishbull

a fall in house prices would be bad in short run but good in long run. prolonged periods of house price rises causes capital and taleted employees to be drawn away from productive industries both indigineous and foreign ,it causes an over reliance on construction sector and related industries of banking/estate agency/etc,it reduces peoples disposable income and makes an economy less competitve. also because young couples both have to work and commute long distances  and cant be involved in community etc  society suffers as a whole

people seem not to realise that renting isnt now dead money.
you can rent for the same price as an interest only mortgage,the amount you save on not repaying a mortgage can be invested in a pension with great tax benefits that instantly increases by by substansial amount depending on your tax rate.pensions return 10% a year ,you will at end of 30 years of doing this have substansial extra in your pension fund approximately equivalent to the price of a house at that time or even more.
when you take on a mortgage you are effectively "renting" the money to buy a house with and banking on the belief that house prices will always rise,that is a dangerous assumption.


----------



## walk2dewater

roryodonnell said:
			
		

> What is the difference between a downward daily "correction" and a crash?


 
Call it whatever you like.  I have outlined the "event" that is pending in earlier posts so won't describe the reasons or mechanism here.  In my opinion, the "event" will be minimum 3 years long, likely much longer.  It will involve periods of price drops, base forming, then massive gaps down;  typical behaviour in bear markets.  The tail end will record slower price falls than the beginning.

Some properties will find buyers only with massive discounts and will sit on the market for months and month on end, others will fair better.  In terms of the general market, I think 50% fall overall is a reasonable minimum. That would only get us back to 2002 prices, which remember were double those of 1997.

By the bitter end, "property investment" will be a sour phrase with loaded connotations, and will be wildly out of favour.


----------



## extopia

Loki said:
			
		

> If a person thinks what the want is positive then they aren't pessimists that simple.



Huh? I don't understand...



			
				Loki said:
			
		

> (actually I can't say something polite as you appear to be a troll at this point)
> 
> Think what you like but you are either a troll or just unable to understand a standard English word. I really can't be bothered explaining it anymore and can not stay polite to somebody claim such a ridiculous use of a word and simply incorrect.



Sorry, don't understand this either. What exactly are you trying to say? 

I take it you consider me a troll because I pulled you up on your lack of understanding of the planning laws and how they apply to the subdivision of houses?

(By the way, I still don't understand your point about house subdivision and how this relates to property values. Around where I live, and in many other parts of the inner suburbs, older houses that used to be in flats are in fact returning to single family use more often than the other way around. If someone wants to rent or buy smaller accomodation than a house there are plenty of small apartments available).


----------



## roryodonnell

walk2dewater said:
			
		

> Call it whatever you like. I have outlined the "event" that is pending in earlier posts so won't describe the reasons or mechanism here. In my opinion, the "event" will be minimum 3 years long, likely much longer. It will involve periods of price drops, base forming, then massive gaps down; typical behaviour in bear markets. The tail end will record slower price falls than the beginning.
> 
> Some properties will find buyers only with massive discounts and will sit on the market for months and month on end, others will fair better. In terms of the general market, I think 50% fall overall is a reasonable minimum. That would only get us back to 2002 prices, which remember were double those of 1997.
> 
> By the bitter end, "property investment" will be a sour phrase with loaded connotations, and will be wildly out of favour.


 
I agree completely.  As one poster said before, I can't wait to hear all the complaints on Joe Duffy, giving out about the fact that they weren't told property prices would drop, that the government should do something about it.


----------



## Calina

roryodonnell said:
			
		

> I agree completely. As one poster said before, I can't wait to hear all the complaints on Joe Duffy, giving out about the fact that they weren't told property prices would drop, that the government should do something about it.



Oh God I don't think I could take that...no really I couldn't. Couldn't we just get Marian Finucane back on LiveLine for just one big property whinge day instead?


----------



## derryman

takers for a 1050sqft three bed semi - all mod cons in D16 Rathfarnham?

€0.5million serious offers only (you deal with the stamp duty additionally)


----------



## Neffa

More evidence of an overheated market....

Source: Breakingnews.ie


*Huge growth in mortgage lending *
28/02/2006 - 12:35:44 

Mortgage lending continued to grow at a massive rate last month with the Central Bank revealing an increase in borrowing of €1.5bn – the strongest January on record.

Despite an expected drop in the New Year, the annual rate of growth climbed to a new height of 28.8% in the first few weeks of 2006. This compared with 28.5% in December.

The unprecedented lending figures come as new a survey showed that the average price of a home for a first time buyer has topped €250,000.

According to the Permanent TSB/ESRI index, house prices overall rose by 1.2% last month, similar to the increases recorded in the final three months of 2005.

House prices for first-time buyers went up 0.7% in January, with the average price paid now at €251,281.
[broken link removed]​ 
The annual rate of growth in January moved up to 10.2% from 9.3% in December. Permanent TSB has already predicted a growth rate of around 10% for 2006.

The Central Bank said mortgage lending remained strong last month but the traditional January effect was evident, with the monthly increase falling to €1.5bn from the record €3.5bn in December. And it also revealed lending by finance houses increased by just over €3.4bn, or 1.3%, to €262.2bn in January.

The monthly bulletin showed residential mortgages increased by €1.6bn, overdrafts were €117m higher and loans up to and including one year grew by €182m. 

--------------------------

We have borrowing growing at 29%, prices expected to grow at 10% and salaries (the thing which most people use to pay for all of this, either via mortgage payments or rent payments) growing at 5% (or thereabouts), in a market where interest rates are about to start their upward growth once more..........

So I think this puts to bed all the "it is based on fundamentals" nonsense you hear some of the bank/estate agent economists saying. It is based on slack credit, funding huge market demand, enabling high price growth in an environment of huge expected price rises - "I better get in before it goes up even more"

I think that is as close to the definition of a bubble as you can imagine.


----------



## Neffa

walk2dewater said:
			
		

> Call it whatever you like. I have outlined the "event" that is pending in earlier posts so won't describe the reasons or mechanism here. In my opinion, the "event" will be minimum 3 years long, likely much longer. It will involve periods of price drops, base forming, then massive gaps down; typical behaviour in bear markets. The tail end will record slower price falls than the beginning.
> 
> Some properties will find buyers only with massive discounts and will sit on the market for months and month on end, others will fair better. In terms of the general market, I think 50% fall overall is a reasonable minimum. That would only get us back to 2002 prices, which remember were double those of 1997.
> 
> By the bitter end, "property investment" will be a sour phrase with loaded connotations, and will be wildly out of favour.


 
Excellent post imho - just as the current market is driven by expectations of rises which are way out of kilter, the market in a crash is driven by fear of further falls which are in general way out of kilter too, but it pushes prices down even further. 

People in Ireland find this hard to believe, but when I was working in the UK in 1991-97 everyone believed you were mad to buy property because of the carnage it had wrought in people's finances through the crash period. Those expectations/fear drove it down and it took a long time to recover. Many people had their fingers burnt badly.

BTW, I do agree with Loki on one thing! All-up, a crash puts an economy through a lot of pain and it will be a tough period. It is better in the long-run to have sensible asset prices but the 5-10 yr effect is messy following a crash.


----------



## owenm

Their is a lot of talk about figures and surveys by vested interests, i.e. PTSB house price index is not exactly an independent or all encompassing source. The dept of the environments web site contains data for house prices based on loans paid on a quarterly basis. The data for Q4 should be out in the next few weeks - for an unbiased set of figures.
http://www.environ.ie/DOEI/DOEIPub.nsf/wvNavView/RegularPublications?OpenDocument&Lang=en#I2


----------



## gearoidmm

> I am looking for some advice. I am currently a first time buyer and looking to purchase my first home. I am currently working in Dublin and houses prices are unreal. I currently have 25K in savings and my SSIA is expiring May 2007 where I contributed to the maximum amount 254 euro per month. I would like to buy now before houses prices increase…. But the problem is where…. I was thinking about kildare/Meath. Any advice


 
From another thread in this website. This says it all really about the expectations of the general public.


----------



## derryman

Hey don't knock it - that's a €45k deposit - enough for a €0.5 million 3 bed semi @ 92% LTV - just a little matter of a basic salary in six figures now - two recently qualified 26yo accountants getting it on should sort that....


----------



## Loki

gearoidmm said:
			
		

> From another thread in this website. This says it all really about the expectations of the general public.



I think everybody knows that is what some people are hoping 
And others are hoping this


			
				gearoidmm said:
			
		

> I'd like to pay less for an apartment/house than I would have to now. I suppose that if this situation were to come to pass then a lot of people would be living on negative equity. I'm formulating a view on a market, not wishing people ill. But, if house prices did fall considerably, I would have a much smaller mortgage proportionally.



People are wishing for the property market to change not so much on fact or analysis but the hope of what they think is going to happen. Unless you have a survey of what people are ALL thinking one persons comment used as a gauge is a bit too much. 

There is definitly an element of peoples' beliefs been driven by the situation they are in. Some people side with the view that they think will suit them best in the event.  

When people ignore possible impacts to their theory it becomes a problem.  Lets face it some people just aren't smart enough to truely analise the information so they take their cue from somebody else. People stating beliefs as fact is a prime example.  It is simple wrong to say* it is *a property bubble as it can be only true if there is a crash. Like the weatherman can't tell you the wether next year but he can tell you what the storm was like yesterday.  The weatherman is more scientific than an econonomist and he isn't consider to be accurate why an economist?

Definitions of *Property bubble* on the Web:
 [SIZE=-1]A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic indicators, *followed by rapid decrease* that can result in many owners holding negative equity (a mortgage debt higher than the value of the property).
[/SIZE]Not a bubble untill there is a rapid decrease. No rapid decrease no buuble. 

Now people claiming that we are currently in a bubble are either ill informed, stupid or beliving other people who are also wrong. You can point to as many indicators to suggest this is a bubble but only time can tell prior to that it is speculation. People are free to suggest why there will be drop but to say the investor *will panic *causing  ahuge devaluation is a big assumption becasue many suggest all investors are specultive and easily scared. I am not picking holes in peoples' arguements more pointing out what people are saying is too solid and ridgid a belief. Losts of factors are not being considered.


----------



## walk2dewater

Loki said:
			
		

> people claiming that we are currently in a bubble are either ill informed, stupid or beliving other people who are also wrong.


 
Fine, that's your opinion and you're welcome to it.


----------



## bearishbull

Loki said:
			
		

> Now people claiming that we are currently in a bubble are either ill informed, stupid or beliving other people who are also wrong.


 
the thing is its not possible to say for sure untill a bubble bursts. damien kiebard a normally very positive bullish economist who writes in the sunday times and has called the irish economy very well over the years has said there is a bubble in asset prices here,i'll beleive him over your vague ill informed analysis anyday.


----------



## roryodonnell

Loki said:
			
		

> Definitions of *Property bubble* on the Web:
> [SIZE=-1]A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic indicators, *followed by rapid decrease* that can result in many owners holding negative equity (a mortgage debt higher than the value of the property).
> [/SIZE]Not a bubble untill there is a rapid decrease. No rapid decrease no buuble.


 
Rapid increases on valuations of property...............check
Unsustainable levels relative to incomes.................check
Rapid decrease in prices resulting in neg. equity.......please wait


----------



## Loki

walk2dewater said:
			
		

> Fine, that's your opinion and you're welcome to it.



It's not an opinion it is a matter of definition and fact. You can't point to a dog and say it is a cat it is a dog.  
Define a property bubble where a sudden price movement downward is not part of it if you beleive  the definition I provided is wrong. You are more than welcome to say my definition is wrong and provide an alternative but it is certainly not an opinion. Although you did quote my opinion of people mis using the term.


----------



## walk2dewater

*Moderator note: *quoted reference to a previous gratuituous profanity removed.

-- _ClubMan_ 

He's being doing that most of the thread.. again in my opinion 

Loki appears like one of those people who has so much riding on being able to sell their property on for a higher price in the future.  Psychologically they cannot accept the idea that prices will fall because it is financially and emotionally ruinous to them.  So they twist and turn and squirm out of any counter-point to their passionately held view, making up progressively wierder and convoluted arguements as to why prices cannot fall.

The Brits nicely sum it up, "Pride before a Fall"

WTTW


----------



## Loki

roryodonnell said:
			
		

> Rapid increases on valuations of property...............check
> Unsustainable levels relative to incomes.................check
> Rapid decrease in prices resulting in neg. equity.......please wait



The point is you can't tell the future and therfore are making up that it is a bubble untill that happens. It is not a bubble untill a crash plain and simple no matter who says it


			
				bearishbull said:
			
		

> the thing is its not possible to say for sure untill a bubble bursts. damien kiebard a normally very positive bullish economist who writes in the sunday times and has called the irish economy very well over the years has said there is a bubble in asset prices here,i'll beleive him over your vague ill informed analysis anyday.



AS I said untill there is an event it isn't a bubble all other is speculation. It is not a case of being sure it is a case of it isn't untill a crash Damien Kibert is also a radio presenter and heavily involved in the media world. His job is to entertain more than to be an economist at this point. You know nothing of my background and experience


			
				roryodonnell said:
			
		

> You are starting to talk from your anus Loki.
> 
> You said it is a bubble only if house prices sunddenly fall, correct?
> So if they do fall in the near future, then we HAVE been in a bubble, correct?
> 
> So how do you know prices won't fall (relative to the recent increases) in the near future?


 Actually when prices fall we will have had a bubble and be in a crash.

Note I have not insulted one person directly  yet  a few of you have made personal insults try to be civil and understand when a term is being missused and attack that not me for pointing it out


----------



## derryman

Obvious apologies for interrupting a private party, but sometimes the real world commentary does get in the way.  

Three bed semis are getting sold for half a million plus in D16 today , starry eyed couples are getting desperately endebted (but happy to live here) to achieve this - that is the reality - but hey the world goes on.  

Coming over from the FOOL UK side, they have been wishing a financial housing meltdown upon their fellow citizens (all fall in a flowing tide) for three years , dispite interest rates doubling, IRAQ war involvement, a third term by a party with a really dubious accounting belief (keep borrowing, pay out all) etc, but you know something it still has not happened - that's the problem, prices are set in the margin of the market and the chancer sellers and dubious buyers are still in love - dispite the signs all around

LOKI - well done for defending the indefensible - never heard that angle
Guys - get a life - either invest and pray or don't invest and be happy

Where do I stand - on the edge, about to cash in or do I hold on for 10% more - Ireland was a grime place in the early eighties and you could get a D4 big house for 100k - pity we all had to live in london / yonkers then.


----------



## roryodonnell

Didn't mean to offend Loki.  Sorry.

The theme of this thread is the "future price of Irish properties".

We can all sit back and with hindsight say, yes, there was a bubble for the last 5 years or so.  I think most people on this thread seem to think house prices can't rise much more relative to incomes (one of the portents of a bubble as you agree to).

Anyway, apologies again.  Is there any chance you can enlighten us as to your "background and experience"


----------



## Loki

*Moderator note: *quoted reference to a previous gratuituous profanity removed.

-- _ClubMan_ 


> He's being doing that most of the thread.. again in my opinion
> 
> Loki appears like one of those people who has so much riding on being able to sell their property on for a higher price in the future. Psychologically they cannot accept the idea that prices will fall because it is financially and emotionally ruinous to them. So they twist and turn and squirm out of any counter-point to their passionately held view, making up progressively wierder and convoluted arguements as to why prices cannot fall.
> 
> The Brits nicely sum it up, "Pride before a Fall"
> 
> WTTW


 I have accepted prices will fall you on the other had  seem to have a problem understadning that some things have definitions and can never seem to provide a alternative definition when asked. 

You just squirmed out of the second definition I asked you for. You appear to be unable to understand definitions either. Instead making up that my correction on terms are a pychological issue I have becasue you assume I am at risk from a crash. 

Define property bubble so it can be named without a price driop and keep your comments on the issue


----------



## walk2dewater

derryman said:
			
		

> Guys - get a life - either invest and pray or don't invest and be happy


or invest in gold, oil, natgas, C$/CHF, US$ Puts, S&P500 puts, US Builder Puts, or cash- yes cash is an asset class, though you wouldn't think it in Ireland at the moment- and be VERY HAPPY INDEED


----------



## CCOVICH

Keep this civil or this thread will be locked and people will be banned.  This thread has been going for ages, but the tone has been lowered in the past few days.

Don't question the moderation on this and don't have me repeating myself.

Thanks.


----------



## ivuernis

Loki said:
			
		

> Definitions of *Property bubble* on the Web:
> [SIZE=-1]A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in the valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic indicators, *followed by rapid decrease* that can result in many owners holding negative equity (a mortgage debt higher than the value of the property).
> [/SIZE]Not a bubble untill there is a rapid decrease. No rapid decrease no buuble.


 
Loki, you cannot seriously disagree that the property market since the late 90's resembles the inflationary period of a property bubble. As the saying goes: 

"If it looks like an elephant, walks like an elephant, and has "I’m an elephant" tattooed to its rump, the odds are overwhelmingly in favor of its not being a duck-billed platypus."




			
				Loki said:
			
		

> Now people claiming that we are currently in a bubble are either ill informed, stupid or beliving other people who are also wrong. You can point to as many indicators to suggest this is a bubble but only time can tell prior to that it is speculation.


 
To say people who believe we are currently experiencing a property bubble are ill-informed, stupid or believing other people is both rude and a gross generalisation. Everyone is entitled to an opinion and the majority of opinions on this thread have been backed up be solid knowledge and reasoning of economics. 

I remember Warren Buffet being pillared for avoiding the dot-com boom back in the 90's. People thought he was falling behind the times. He admittedly said he didn't invest in companies he didn't understand but he obviously understood enough to know the numbers didn't add up. There was a "paradigm-shift" taking place, it was the "new-economy" and the old rules didn't apply anymore but in the end it turned out that the did and then the market woke up to this fact and look what happened. Warren Buffet is now making similar noises about property markets being over-heated. Is he ill-informed? I very much doubt it. Is he stupid? Most certainly not. Am I for listening to his (and others with equally sound track records) reasoning? I don't think so. It's just his and other people's arguments are more compelling to me than those of the people who say prices won't drop or there'll be a "soft-landing".


----------



## Duplex

I agree with Loki, that we will not know irrefutably that the Irish property market has experienced a speculative bubble, until it has crashed.   

But then if I was considering taking a walk somewhere in the west of Ireland and noticed that dark menacing clouds were cascading in from the west and that the wind was up and that the weather forecast on the radio had just issued a storm warning for my location, and the cows had begun to lie down in the fields etc.

I’d bring an umbrella.


----------



## Calina

Loki, leaving aside the semantic argument of Bubble or not Bubble, do you really think it is viable to assume that everything will be okay until it crashes (and then we know retrospectively that it wasn't okay)? I would consider that as head burying beneath the sand. 

The bubble exists. You just don't recognise it until it bursts. Hence "bubble" metaphor. 

And incidentally, while you may claim not to have insulted anybody here, you did say that anyone who said there was a bubble was stupid and ill informed. You also accused them of not recognising possible impacts on their theories. I'd have to say that you are every bit as guilty of that last sin as other people here. 

If house prices continue to rise as facilitated by what I consider to be highly negligent banking and inertia on the part of the government, then I think when a correction does come, it will be altogether worse than if it had come four years ago. The greater the rise, the greater the fall, the greater the fall, the greater the long term impact. 

I'm concerned at reports that up to 40% of newly completed units are lying empty with their owners either unable to rent them, or assuming that capital gains will make it worth their while. In the former, it says something about excess supply in the rental market, and in the latter, it suggests gambling. What no one has highlighted is that what has made asset crashes worse in the past is the high level of debt taken out to finance their purchases. This is true of tulips, South Sea stocks and stocks in 1929. People didn't just lose their own money, they lost money they didn't actually already have.


----------



## Neffa

derryman said:
			
		

> Obvious apologies for interrupting a private party, but sometimes the real world commentary does get in the way.
> 
> Three bed semis are getting sold for half a million plus in D16 today , starry eyed couples are getting desperately endebted (but happy to live here) to achieve this - that is the reality - but hey the world goes on.
> 
> Coming over from the FOOL UK side, they have been wishing a financial housing meltdown upon their fellow citizens (all fall in a flowing tide) for three years , dispite interest rates doubling, IRAQ war involvement, a third term by a party with a really dubious accounting belief (keep borrowing, pay out all) etc, but you know something it still has not happened - that's the problem, prices are set in the margin of the market and the chancer sellers and dubious buyers are still in love - dispite the signs all around
> 
> LOKI - well done for defending the indefensible - never heard that angle
> Guys - get a life - either invest and pray or don't invest and be happy
> 
> Where do I stand - on the edge, about to cash in or do I hold on for 10% more - Ireland was a grime place in the early eighties and you could get a D4 big house for 100k - pity we all had to live in london / yonkers then.


 
Nice to get another viewpoint on the board. You're right that many people in the UK have wished a price crash - I have to say that prices have certainly softened but they've not crashed. 

They are certainly not going up in London now - falling slowly (like -1 to -2%) in most areas. It is too early to say that the threat of a crash has gone away, but equally a slightly negative trend for another 2-3 years would see a fall, but this would be a -20% fall in real terms (-2% with inflation at 2%) over that period. That seems like a pretty plausible scenario.

BTW, we had our house in London valued 14 months apart (March 2004 vs. July 2005). It had fallen 13% in that time.


----------



## kane3000

Loki, a bubble is defined as a thin membrane filled with fluid. It is defined in real-time as it exists - not after it bursts. It has three physical modes growth, stagnation and collapse during which it may be termed a bubble.

Once it has collapsed completely it is no longer a bubble.

The asset analogy is based on this.


----------



## Theo

roryodonnell said:
			
		

> _[edited by DrMoriarty — see above]_ You said it is a bubble only if house prices sunddenly fall, correct?
> So if they do fall in the near future, then we HAVE been in a bubble, correct?
> 
> So how do you know prices won't fall (relative to the recent increases) in the near future?


_[edited by DrMoriarty — see above]_ 
To answer your question to loki, how do you know prices will fall?
You and your co-horts seems to be so sure of yourselves that there is almost a level of semi-mocking of those trying to get their foot on the ladder, through intoducing quotes here from another thread. I believe you can make your point without resorting to emotion.

The truth is nobody knows exactly what is going to happen. We can speculate and give reasons for a price crash of 50% or we can give reasons why there will be a smooth landing or we can give reasons why property prices will continue to soar. These are only opinions and I can see all sides of the argument so why take them and yourselves so seriously?
I gave my opinion earlier in this thread somewhere, personally i believe that domestic residential property is over-valued, and a correction (long period of stagnation to allow true value to catch up) shall take place in about 3-5 years time. This will co-incide with increases in interest rates to 4-5% (from current 2.25%) and improvement in Eurozone economy. I don't share the extremely pessimistic views here of minimum 50% decreases simply because there is a steady supply of FTBs in the forthcoming future and the population of Ireland, and particularly Dublin, is set to increase substantially. However, increasing housing supply in Ireland over the coming years should see a stop to 20% price increases and there probably will be a small element of inexperienced property people (investors and FTBs alike) who will decide to sell at the first sign of trouble, no doubt egged on by the scaremongering of some of our friends here on AAM.
HOWEVER, I qualify what i say by adding that there are any number of other things that can happen in the meantime that could be good or bad for property prices. What if tax rates are harmonised across Europe?
What if Germany doesn't recover in the next 3-5 years? What if anything?
I can understand why some here might think a major correction with significant repurcussions (spelling?) for our economy is in the making but I truly hope you are wrong - judging by the tone of some of the contributors, we'll have to put up with the "I told you so" thread for years to come.


----------



## Loki

derryman said:
			
		

> LOKI - well done for defending the indefensible - never heard that angle


Lets get something straight, I do not beleive the property prices and market will continue as is. People are mixing up where I am pointing out the missuse of the term "property bubble" with my belief of the development of the property market in this country. If you want to talk about that I suggest you look back and read what I think instead of claiming something that requires the ability to know the future. 
The fact people assume my views and savagely attack a view I don't have suggests you aren't going to listen to any view that oppose your current one. 

Note the view that seems to be so popular here is the one prevelant in the media whcih I would think far to many people use to form their opinions without thinking


----------



## Neffa

Loki said:
			
		

> Lets get something straight, I do not beleive the property prices and market will continue as is. People are mixing up where I am pointing out the missuse of the term "property bubble" with my belief of the development of the property market in this country. If you want to talk about that I suggest you look back and read what I think instead of claiming something that requires the ability to know the future.
> The fact people assume my views and savagely attack a view I don't have suggests you aren't going to listen to any view that oppose your current one.
> 
> Note the view that seems to be so popular here is the one prevelant in the media whcih I would think far to many people use to form their opinions without thinking


 
Loki,

I've seen very little discussion in the media that property is over-priced and/or heading for a fall. For instance, the Tribune had a feature a couple of weeks back on the rental imbalance - the fact that renting the same house is so much cheaper than buying it - but did not discuss if that meant anything for selling prices. 

The Economist is the only publication which has been bold enough to say the market is over-priced, and David McWilliams. Most others say it is set for growth, based on fundamentals etc.


----------



## walk2dewater

Theo said:
			
		

> The truth is nobody knows exactly what is going to happen. .... These are only opinions and I can see all sides of the argument so why take them and yourselves so seriously.


 
Who's taking it personal?  I take my opinions seriously, that's why I put my money where my mouth is.  As I see it, the bears arguments have resoundingly won the day on this thread.  But we'll have to wait and see if they've won the day in the real world...

...although in the UK the worm has definitely turned...

Right now, today, with few exceptions, UK property is not finding buyers unless the seller offers a discount, either unfront in the initial offer or later...

Also BTW, if anyone's interested I'm going to post my ideal investment portfolio as a new thread, in the next few days.  I'd be interested in starting a debate on where the best returns are going forward.

WTTW


----------



## CCOVICH

walk2dewater said:
			
		

> Also BTW, if anyone's interested I'm going to post my ideal investment portfolio as a new thread, in the next few days. I'd be interested in starting a debate on where the best returns are going forward.


 
Please remember to keep it general-discussion of individual shares is forbidden by the Posting Guidelines.


----------



## bearishbull

the problem with the belief that prices will only keep rising is that it ignores the what ifs that frequently occur in all economies.

what if interest rates hit 5-6%?

what if supply start exceeding demand?(theres loads of land already zoned and approved for development and plenty more room to build out or up)

what if multinationals start leaving for cheaper cost base economies(even gradute jobs will  be under threat)?

what if people start accepting that renting isnt that bad when you can save money over a mortgage and invest it in a tax efficient manner every month?

what if US economy goes into recession?

what if unemployment in ireland increases?

what if the euro falls substantially?

what if all the foreign workers decide ireland isnt so great and move on to greener pastures?(rental demand fall substanially?)

what if a few of the above happen at once??

basically it wouldnt take very much in this globalised interconnected world economy or in the domestic economy to rock the boat and affect housing market,we are just lucky that things have gone so smoothly for us for last decade or so.
people will say theres equal evidence supporting both sides of the argument but there isnt,theres far more evidence of overvaluation than of undervaluation so the balance has tipped infavour of those who are bearish on the housing market. by historic levels housing is vastly overvalued relative to income rental yields etc and incomes are only increasing by 5% and population by 2% so how can there be much validity in the argument that prices *could *rise much more unless there is a massive speculative element involved? if we accept massive speculative investment and that people are buying because they think it will only rise and are not concerned about low rental income i think its fair to say we are far more likely to be in an overvalued market rather than a fairly priced one and in overvalued markets bubbles are much more likely to be in existence but of course untill it happens we cant be sure .

people seem to treat the most informed experts who previously predicted a crash that didnt happen as cranks but eventually even the boy who cried wolf was right. the weather man predicts weather which nevers occurs as forecasting can have errors because the weather is a complex system like the housing markets/economies but does that mean you never listen to the weather man again because, maybe theres a hurricane on the way!


----------



## Loki

Neffa said:
			
		

> Loki,
> 
> I've seen very little discussion in the media that property is over-priced and/or heading for a fall. For instance, the Tribune had a feature a couple of weeks back on the rental imbalance - the fact that renting the same house is so much cheaper than buying it - but did not discuss if that meant anything for selling prices.
> 
> The Economist is the only publication which has been bold enough to say the market is over-priced, and David McWilliams. Most others say it is set for growth, based on fundamentals etc.



I think the media heavily reported on the Economists views and every time a bank or such give warning. David Mac Williams is on TV every day so what He says is heavily reported along with the like of Damien Kibert. Just look at all the reports people procuced on this thread to use as "proof" this is a bubble.  THe radio is constatnly reporting warnings of a drop or crash. THe fact they also report actual facts such as increases does not dimish the fact that they always point out an impending crash  is beleived by many traditional economists.

*Bearishbull
*Notice all the what ifs and the fact economists have been wrong for over 6 years. Eventually they will be right but that doesn't make it expert opinion just playing the odds of inevitability. At what point do you say economists are simple wrong? 
I made many point about the property stock reuse,  demographic change, price differentional and social matters that I don't beleive I have read an economist talk about yet. An economist  that fails to look at all the avilable data  to base his conclusions would never make an accurate description of future possibilities but may predict the same out come. Read back on the thread and you might see some points that economists might be ignoring as a way to make their own view of the world fit.  Local knowledge is normally important


----------



## beattie

bearishbull said:
			
		

> the problem with the belief that prices will only keep rising is that it ignores the what ifs that frequently occur in all economies.
> 
> what if interest rates hit 5-6%?
> 
> what if supply start exceeding demand?(theres loads of land already zoned and approved for development and plenty more room to build out or up)
> 
> !


 
I believe that these are the two most critical questions that have to be addressed when discussing the future price of property in Ireland (not saying that the other questions are not valid)

It looks like the last int rate rise in Dec did nothing to arrest the increase in values, will the one coming tomorrow have a similar effect? Personally I believe that this will remain the case until the ECB hits 3%, I would be suprised if that passes without causing a ripple or two

With regards to the supply I feel that the point made earlier where many 2nd properties lies vacant is a clear pointer to oversupply. I believe that it was David McWilliams who said that we are building more units than Germany did after WW2 and I would imagine that there was a clear requirement in that instance.

I see that in Sandyford a month or two before Xmas there was on average about ten 2 bed properties advertised on daft on a daily basis and now it can be about 20-25 (and there is no let up in the building activity here)


----------



## CCOVICH

Folks-keep it on topic please and stop making remarks on each other.  I don't want to have to make this point again.


----------



## Neffa

beattie said:
			
		

> I believe that these are the two most critical questions that have to be addressed when discussing the future price of property in Ireland (not saying that the other questions are not valid)
> 
> It looks like the last int rate rise in Dec did nothing to arrest the increase in values, will the one coming tomorrow have a similar effect? Personally I believe that this will remain the case until the ECB hits 3%, I would be suprised if that passes without causing a ripple or two
> 
> With regards to the supply I feel that the point made earlier where many 2nd properties lies vacant is a clear pointer to oversupply. I believe that it was David McWilliams who said that we are building more units than Germany did after WW2 and I would imagine that there was a clear requirement in that instance.
> 
> I see that in Sandyford a month or two before Xmas there was on average about ten 2 bed properties advertised on daft on a daily basis and now it can be about 20-25 (and there is no let up in the building activity here)


 
Has anyone got a link to data to show this "empty property" rate? It has been much discussed on the board but I've not seen any 3rd party data.


----------



## redo

It would also be informative to finds out how many apartments that have been purchased in the last 2 years or so that are up for sale.


----------



## IFA

*My story on Dublin property*

Bought moderate 4 bed semi detached house in West Dublin suburbs 1988, and sold it late last year for over ten times what I paid for it. I was commuting for 1 hour ten mins into and out of work in Dublin 2 each day.

Made a decision to move to city centre, D2, walk to and from work 12 mins each way. Saving nearly ten hours a week commuting. Charge my time by the hour. Making lots more income. Saving this in my pension fund.

Put the sale of property money on deposit. Getting 3% return gross, 2.4% net of DIRT. Rates on the way up. A nice nest egg.

Really upmarket apartment I liked would cost €1.0m. Could not afford it. Well I could have borrowed most of it but no way was I going to have a mortgage of over €500k.I would not sleep at night.

Rent is €1,700 a month. Includes service charge insurance and upkeep landlord replaces anything that goes wrong. First time ever in my life renting. 

The simple maths:

To buy apartment, assume 100% loan interest only and stamp duty, not realistic as I would use a deposit but shows true cost of money:

€1.0m + 9% = €1.09M, interest at say 3.75% = €3406 mth. 

And interest rates are going up.

Why in my right mind would I buy? This is the best deal I ever got in my life. Let the landlord redecorate, refurbish, pay the service charge, replace the dishwasher when its broken, clean the windows, take away the rubbish, so this is what renting is all about, not too bad at all. I really like it!

Special exit clause: have the mortgage free country cottage on one acre which cost 1/3 of the Dublin semi d price a year ago, and will go there when I am finished renting in five or six years time. 

Advising my clients to lighten up on Dublin property. Use my own story as an example.


----------



## Marie

Neffa said:
			
		

> Has anyone got a link to data to show this "empty property" rate? It has been much discussed on the board but I've not seen any 3rd party data.


 
The statistics for empty and/or 'unaccounted-for' property in the RoI in a highly reputable academic independent survey done about a year ago was that one-third (1/3) of housing stock was empty or otherwise unaccounted for.  The relevant link is posted on an earlier discussion of the Irish property market on AAM about a year ago.


----------



## redo

http://www.smh.com.au/news/national/slump-hits-home/2006/02/06/1139074171442.html?page=fullpage

http://www.boards.ie/vbulletin/showthread.php?t=2054889213


----------



## Neffa

Thanks Redo - Anyone seen this? It is referenced in the Sydney Morning Herald property article link in Redo's post.

http://www.demographia.com/dhi-ix2005q3.pdf

It is a comprehensive analysis of housing price/income in several markets around the world - Dublin is ranked as "severely unaffordable" in price terms (although more affordable than London, but prices have fallen there since the article was written).

Interesting stuff, although their median household income figure for London looks low - don't know the other markets well enough to comment so perhaps the data is a bit iffy - not sure.


----------



## Loki

*Re: My story on Dublin property*



			
				IFA said:
			
		

> Bought moderate 4 bed semi detached house in West Dublin suburbs 1988, and sold it late last year for over ten times what I paid for it etc...


It is not like you are some genius and are smarter than everybody else. Your house went up in value and you used the money. YOu cashed in a huge asset and minimised your risk as far as you are concerned. Congrats on doing well. You have something for retirement  if other people don't buy and rent all their lives at some point they won't be working so  how will they afford rent? 
How much was your mortgage before? Are you paying more now? I am guessing you are as €1700 sounds like a lot more than your mortgage would have been including replacing appliances and routine maintainece. THe figures you used to show the value of money were too unrealitic considering as not many people here are talking about 100% mortgages for 1million. Try using average house price to give a fair illistration. I don't disagree with the point to note. I still think buying the right property at the right price is possible in the market and still be relaitively safe all things considered.
*
Neffa*

THe affordability report is vaguely interesting but not exactely condeming of Ireland. It is interesting to see comparisons as many people claim we are directly linked to world property prices. I find it a bit hard to see how they can really make an accurate calculation. For example Boston is there but it is actually BostonMA-NH. SO that to me means a city and two states. THere is more than one city in MA.  In fact Boston is a very small area and I find in different countries they define areas differently to us.  Artane is Dublin here but in th US they may call it a town and not included in figures. Is it the greter Dublin area includeing Kildare etc.. or just the city centre or county.

THe fact that the price differential is  apparetntly reducing between Dublin and the rest which I think is how things might really happen.  People outside of Dublin (other cities also ton an extent) will lose the most money on their property in the event of a turn as they will probably be less desirable due to travel times. WHen the buyer can choose they chose something with small commutes


----------



## Calina

Loki,

that report stated Dublin was seriously unaffordable by international standards. Not only that, it also highlighted that new builds are comparatively small by comparison to Australia, New Zealand and the US. I wouldn't actually call its view of the property market in Ireland an overwhelming endorsement either. 

In any case, I want to make it clear that I now have a severe problem understanding what your position on future movements in the Irish property market. In summary I think it's this: They will stay stable or continue to rise within the Dublin city area, and they will fall everywhere else including the commuter belt. To increase supply within Dublin, many houses will be subdivided. 

Is this the case?


----------



## Loki

Calina said:
			
		

> Loki,
> 
> that report stated Dublin was seriously unaffordable by international standards. Not only that, it also highlighted that new builds are comparatively small by comparison to Australia, New Zealand and the US. I wouldn't actually call its view of the property market in Ireland an overwhelming endorsement either.
> 
> In any case, I want to make it clear that I now have a severe problem understanding what your position on future movements in the Irish property market. In summary I think it's this: They will stay stable or continue to rise within the Dublin city area, and they will fall everywhere else including the commuter belt. To increase supply within Dublin, many houses will be subdivided.
> 
> Is this the case?



To me housing sizes are really determined by climate, historical housing, labour costs, material costs, waste costs (here not the US for sure). Compare spanish properties or at least other countries in Europe one with a similar climate would be good for house sizes. 

You haven't quite got the view but it is close. I don't think they will be stable as such just not a massive crash more like a bumpy landing with casualties. Certain property will retain value and keep increasing mostley those with cheaper  living such as those not requiring long commurtes. This will make older proeprties worth more converted than as is.  iam not saying this is the only outcome but part of a natural and historial change in property stock. Effectively it is how buildings learn as they age. If people ignore the effect this will have how can they get an accurate picture? People quote other examples to indicate their view have happened in other places yet are only using economic gauges and ignore a big bit of the property market namely the property itself.

Other things ignore or dismissed by many seem to be
1) THe effect of SSIAs
2) People buying property for long term investement  such as pension or to give to their children
3) Government intervention of any sort
4) THe fact we don't have control over the interest rates unlike every other place that has had a a crash and attempts to control via such methods. (Not 100% on that but can somebody give an example of a country that didn't have control when a crash happened)
5) Demographic changes 

I am by no means saying I know what will happen (unlike many here) but if people ignore all other possible factors and focus on interest rate growth, rent returns and a belief in over valuation I think they aren't thinking about the issue. Many people who are insisteing on a crash here are hoping for it so they can afford or that they can get a good bargin. Nothing wrong with that as a reason but if they are also ignoring anything and everything that hope will happen they aren't any different from those who say it will just keep going up.  Many won't even expect the definition  of a term they insist on using, that is not a educated or a deduced view.


----------



## Duplex

The New York Times has a nice article on the merits/demerits of bubbles.



http://www.nytimes.com/2006/03/01/business/01leonhardt.html?_r=1&oref=slogin


----------



## micheller

Rates have increased to 2.5%, does anyone think this will have any impact on starry eyed borrowers?


----------



## Loki

micheller said:
			
		

> Rates have increased to 2.5%, does anyone think this will have any impact on starry eyed borrowers?



It isn't much really  and everybody knew it was coming as early as last year. Th eoverall increase this year will be 1% and probably the same will happen the year after. No surprise at all.


----------



## beattie

Loki said:
			
		

> It isn't much really and everybody knew it was coming as early as last year. Th eoverall increase this year will be 1% and probably the same will happen the year after. No surprise at all.


 
If this transpires to be true it will be interesting to see how many people who took out their loans at 2% will be able to cope with rates at 4%. The banks say they stress test for a 2% rise in interest rates.


----------



## redo

beattie said:
			
		

> If this transpires to be true it will be interesting to see how many people who took out their loans at 2% will be able to cope with rates at 4%. The banks say they stress test for a 2% rise in interest rates.



You also have to remember that these are the ECB base rates.  You can probably add 1-1.5% on top of those rates from competitive lenders.


----------



## micheller

I know that it's no surprise..I'm just wondering (hoping?) if any of this can slow the property juggernaut...


----------



## redo

http://news.ft.com/cms/s/e728076c-a9ce-11da-96ea-0000779e2340.html

*Eurozone property prices rose 7.7 per cent in the first half of 2005, leading Jean-Claude Trichet, the president of the ECB, to argue that tighter monetary policy may be needed to contain a property “bubble”, as well as to fight inflation.*


----------



## Calina

micheller said:
			
		

> I know that it's no surprise..I'm just wondering (hoping?) if any of this can slow the property juggernaut...



Don't think it's enough pain at the moment.


----------



## soma

Actually what I find most interesting about today's developments at the ECB, is the fact that Trichet said they actually contemplated a 0.50% increase.


----------



## Duplex

Rising rates in the Euro Area add a little more to the risk side of the equation.

Any risk analysis of the Irish property market might include the following

1. Sustainability of American deficit spending.

2. The impact of a slowing property market on American GDP

3. The Continuing conundrum of the ‘Inverted Yield Curve’ on Treasury Bills.

4. The sustainability of debt accumulation by Irish Consumers.

5. The degree of reliance on the construction sector for growth in Ireland.

6. The impact of falling competitiveness on Irish industry/ employment in relation to a growing     trend towards manufacturing and services outsourcing.

7. The ‘Yield Squeeze’ impact on property investors in light of rising borrowing costs.

8. Systemic Shock Middle East regional conflict, Oil shock, Bird Flu are among the current issues exercising the minds of the chattering classes.      

9. Credit Crunch, brought on by some of  combination of increased risk premiums for mortgage backed securities, hedge fund implosion causing cross defaults, or a dollar shock.

10. Employment shock, as a result of the downsizing/closure of a large Irish based employer.

11. Sentiment swing away from a particular investment fashion.

12. Government intervention, taxation policies that might favour one type of investment over another.

13. Falling rents, demand destruction and the present exploitation of future demand by builders. 

There is the possibility that the Trade/ Business Cycle has been confined to history by the emergence of a new class of bureaucrat employing macroeconomic finesse unseen before in history.  If this is the case we have nothing to worry about.


----------



## beattie

soma said:
			
		

> Actually what I find most interesting about today's developments at the ECB, is the fact that Trichet said they actually contemplated a 0.50% increase.


 
That is very interesting, didn't expect that. That would have thrown the cat among the pigeons as an expected rate of 3% by year end would have probably had to be revised upwards


----------



## Calina

beattie said:
			
		

> That is very interesting, didn't expect that. That would have thrown the cat among the pigeons as an expected rate of 3% by year end would have probably had to be revised upwards



I get the impression this is by way of a light hint for next time...


----------



## Neffa

Duplex said:
			
		

> The Continuing conundrum of the ‘Inverted Yield Curve’ on Treasury Bills.


 
Duplex, 

What exactly is this, and what is the implication for interest rates or other variables?

Thanks.

Neffa


----------



## Eurofan

Calina said:
			
		

> I get the impression this is by way of a light hint for next time...



I got that feeling too. While the standard "not the start of a series of ex-ante rate hikes" was rolled out Trichet has stated on many occasions that he is proud of the ecbs status as 'most predictable' central bank. Surprises aren't good for the market he suggests so they are very careful to give big hints at what direction they are going.


----------



## CCOVICH

An inverted yield curve means that long-term rates are lower than short-term rates and can imply an impending recession.  An alternative view is that demand for long-dated bonds is keeping long-term rates low.


----------



## soma

Marc Coleman, whom I would normally classify as a moderate property bull (genuinely believes in the fundamentals causing the price increases), has an interesting article in today's Irish Times. 

It's not an outright bear-ish article but the 'tone' of the article is a little peculiar for him.

Not sure of the posting regulations here but a  small snippet:



> To summarise: last summer the OECD thought our property market was overvalued by 15 per cent.
> 
> The Central Bank of Ireland agreed but fretted that admitting as much would scare the market. The Central Bank governor then said that house price growth was moderating, but added that he would be concerned about any resumption in double-digit house price inflation.
> 
> But that - thanks to runaway growth in mortgage lending - is precisely what is actually happening.


----------



## Duplex

> Duplex,
> 
> What exactly is this, and what is the implication for interest rates or other variables?
> 
> Thanks.
> 
> Neffa


 
This explains yield curves pretty well, check Bloomberg for latest yield info.


http://fixedincome.fidelity.com/fi/FIHistoricalYield?refpr=obrfi12


----------



## Loki

soma said:
			
		

> To summarise: last summer the OECD thought our property market was overvalued by 15 per cent.
> 
> The Central Bank of Ireland agreed but fretted that admitting as much would scare the market. The Central Bank governor then said that house price growth was moderating, but added that he would be concerned about any resumption in double-digit house price inflation.
> 
> But that - thanks to runaway growth in mortgage lending - is precisely what is actually happening.



I always wonder about certain types and styles of reporting. For example there the reporter is telling us what was behind the reasoning of what the banker govener said. That is beyond speculatiing what the bank was doing but telling you why with certainty. He then goes to tell us that there intent failed. Generally after reading something like this you get the general impression that the bank is a a lot more worried than if the facts were reported on and the specultive opinions was more defined as opinion. 

I guess if the article was an opinion piece that is fine but it seems to be more and more in reports these days.


----------



## Duplex

> Marc Coleman, whom I would normally classify as a moderate property bull (genuinely believes in the fundamentals causing the price increases), has an interesting article in today's Irish Times


. 



> It's not an outright bear-ish article but the 'tone' of the article is a little peculiar for him.


 

I suppose any property bull worth his salt and looking to 'protect' the sustainability of present valuations would be keen to avoid a short sharp final manic stage in the cycle.


----------



## redo

roryodonnell said:
			
		

> Prices should have stablised about 18-24 months ago.  But the demand out there from investors is pushing it up.  The most recent purchases will have no increase in value for 5-7 years.  It may increase marginally up until the summer, but after that it will remain flat.  These "investors" will get nervious over the xmas period and may decide to sell then.  So, the storm will come early next year, say March 16th 2007 when the ECB puts the base rates up to 3.5. (5 year fixed = 5.8 - 6.5, variable = 5.25 - 6. or just over 3000pm on a 500k mortgage @5.5 over 25 years).


From the Indo today

[FONT=Verdana, Arial] PROPERTY investors and second-home buyers may have ultimately shot themselves in the foot if interest rates continue to climb, the OECD warned last night. 
 The small but growing number of buy-to-let investors could be in for a nasty surprise if interest rates rise while rents remain static or fall, the economic think tank predicted in its latest report which was released yesterday. 
  "With property investors taking such an active part in the market, the question is to what extent have they have driven up house prices. 
  "Attracted by the substantial capital gains and small carrying costs, many investors have entered the buy-to-let market, possibly displacing first-time buyers and contributing significantly to housing demand and house prices," the OECD said in its report released yesterday. 
  "The main concern - and another indication of overshooting prices - is the growing divergence between property prices and the income derived from rent. 
  Indeed, rents actually fell from 2002 to early 2005. The position of those in the buy-to-let segment of the market will continue to be sustainable only if interest rates stay low. 
    "However, if mortgage rates were to rise, many of these investment positions would be loss making," it said. 
  Moreover, it warned that Ireland's overvalued housing market could also have serious implications for the financial stability of the country. 
  A slowdown, for example, in the expected growth rate of disposable incomes could result in a substantial drop in house prices, the report warned. 
  "This would be particularly difficult for households that are highly leveraged in the buy-to-let and secondary home markets," it noted. 
  "The current levels of rents is not adequate to cover debt service costs for new or very recent investors so their financial position will be squeezed if prices do not rise as fast as they had hoped. Even if house prices level off, there is a potential macroeconomic and financial stability issue that could arise from decline in residential construction," it warned. 
[/FONT]


----------



## Loki

I think the most interesting thing is the fact Rory states his views as fact and positively right and going to happen while the article points out things to be weary of. The rport strgely mentions details like"growing number on investors" yet provides no proof or figures. Not saying it isn't like that but an accurate picture of the Irish property market would be nice for all involved. A lot of people point to anicdotal evidnce hints to say they are right.


----------



## beattie

Since it is possible now after yesterdays ECB decision to get an after tax yield of 2.76% (gross rate of 3.45 with Northern Rock) will this cause a lower amount of buy to lets to be bought this year as yields from rental property are continuing to fall


----------



## soma

beattie said:
			
		

> Since it is possible now after yesterdays ECB decision to get an after tax yield of 2.76% (gross rate of 3.45 with Northern Rock) will this cause a lower amount of buy to lets to be bought this year as yields from rental property are continuing to fall


Beattie - You're making the fatal assumption that Irish Property Speculators (I know of very few Property *Investors*) act rationally.

Most buy-to-let amateur landlords appear to believe that 'yields' are things you encounter only when you're driving.. ;-)

I recently saw that 'show me the money' program for the 1st time with the (for me, kinda unbearable) Eddie Hobbs. There was a couple (in the south west somewhere I think..) who had an "investment" property (which was referred to several times as the retirement nest-egg) which was bringing in €700/mth in rent and the mortgage was €1500/mth.

Sweet.. This post will be deleted if not edited immediately.

And the worst part (altho I admit I only watched the 1st half of the program - couldnt really take any more of either the presenter or the couple) was that Hobbs never brought this up as perhaps not such a prudent financial transaction.. (the couple were struggling with their cashflow). They had some decent equity in the property and could have sold it for an income producing asset but sure that'd be thinking..

While Loki will probably whine about anecdotal evidence, I currently know two amateur speculators (altho of course they think they are 'investors') currently making a loss on their buy-to-let properties - altho neither of them are anywhere near as bad as the above. Throw in the fact that a report quoted earlier in this thread (apologies I cant remember which one/the name..) said only 64% of buy-to-let owners said their rents covered their expenses.. this does not bode well.


----------



## Loki

beattie said:
			
		

> Since it is possible now after yesterdays ECB decision to get an after tax yield of 2.76% (gross rate of 3.45 with Northern Rock) will this cause a lower amount of buy to lets to be bought this year as yields from rental property are continuing to fall


Well as we don't actually know what effect the investors are having  speculating on the effects of  the change in an unknown quantataive effect seems pretty difficult to do. 

I think people overrate the investors effect and the reason for purcashes.  I know a lot of  people in the market whom bought years ago for pensions and increased their protfolio as prices rose. It still seems pretty risky thing to do right now but over 10-20 years the massive risks some people estimate disapear. A good buy  will make you a return given time.


----------



## Duplex

Its all about the investment horizon Soma;  do you honestly think that Irish property investors haven’t literally spend seconds pouring over DCF spread sheets, undertaking highly complex portfolio analysis, and other assorted, ahhh..... do dahs ?  

Its long term fractional analysis of yield spreads at the furthest reaches of modern investment appraisal that we are witnessing here matey.

Ya cant beat long term, it both soothes the need to engage the rational faculties and transports the day of reckoning to some unspecified date in the future, powerful stuff.


----------



## Calina

Loki said:
			
		

> A good buy  will make you a return given time.



True. But you can only really identify a good buy with the benefit of hindsight.


----------



## SteelBlue05

Calina said:
			
		

> True. But you can only really identify a good buy with the benefit of hindsight.


 
Not true, you can identify most good buys up front. If you even stick to the ol' "location, location, location" principal you'll identify most good buys quite easily.


----------



## Loki

SteelBlue05 said:
			
		

> Not true, you can identify most good buys up front. If you even stick to the ol' "location, location, location" principal you'll identify most good buys quite easily.


Completely agree there. Buy a house beside airport land don't be surprised when the airport expands, not hindsight but foresight. Buy a house close to a college and hospital you can rent to students and hospital staff unlikely the college and hospital will close even in the long term.


----------



## soma

SteelBlue05 said:
			
		

> Not true, you can identify most good buys up front. If you even stick to the ol' "location, location, location" principal you'll identify most good buys quite easily.


That is a gross over-simplification if you are speaking as an investor rather than an owner occupier.

There is *no guarantee* that for example houses in the most sought after suburbs such as d4, blackrock, ranelagh etc (which currently have prices in the stratosphere) will still be selling for the same or greater than (inflation-adjusted) amount in 10 years.


----------



## Duplex

Its not location, location, location its yield, yield, yield.


----------



## askalot

All these 'pension nest egg' properties will have to be sold sometime in the future so as to actually realise their currently assumed value. When this happens, in the next 10 - 20 years, the market will be flooded with one and two bedroom apartments that an ageing population will have no interest in.

So if there is a price correction within the next 2 - 4 years it will be the first of several.


----------



## Loki

soma said:
			
		

> While Loki will probably whine about anecdotal evidence, I currently know two amateur speculators (altho of course they think they are 'investors') currently making a loss on their buy-to-let properties - altho neither of them are anywhere near as bad as the above. Throw in the fact that a report quoted earlier in this thread (apologies I cant remember which one/the name..) said only 64% of buy-to-let owners said their rents covered their expenses.. this does not bode well.


The thing is I know many bigger investors (5+ properties) and on most of their properties they are getting 90% of the rental income on properties by haveing loss making properties. Own 3 properties outright then buy 2 other properties with mortgages and you get intrest relief on all your rental income. You don't even need to rent out the property to be making profit. Even is 64% is right what level of not reaching? 10% or


----------



## soma

Loki said:
			
		

> Buy a house close to a college and hospital you can rent to students and hospital staff unlikely the college and hospital will close even in the long term.


*Assuming* you can actually get a *yield* out of those properties that beats even a deposit account.


----------



## Loki

soma said:
			
		

> *Assuming* you can actually get a *yield* out of those properties that beats even a deposit account.



Actually I am assuming that over time property increases in value in a 10-20 like I said and thonce you own it the income is all profit. Some of you guys seem to forget as time goes on you own more of the property untill you own it all. So "yield", if you want to look at it that way, can drop but in real terms to the person be increasing. Owning an asset that gives a return is the "yield" some people are looking at. Look at the long term not the short sight of there willl be a crash today or tomorrow.


----------



## SteelBlue05

soma said:
			
		

> That is a gross over-simplification if you are speaking as an investor rather than an owner occupier.


 
Well it was only in response to an equally simplified statement.


----------



## Loki

soma said:
			
		

> That is a gross over-simplification if you are speaking as an investor rather than an owner occupier.
> 
> There is *no guarantee* that for example houses in the most sought after suburbs such as d4, blackrock, ranelagh etc (which currently have prices in the stratosphere) will still be selling for the same or greater than (inflation-adjusted) amount in 10 years.



Who said they were good buys. A good buys is not the most expensive thing on the market. It is the best value and the best potential of a return that is a good buy. THere are no guarantees for anything other than death


----------



## soma

Loki said:
			
		

> Who said they were good buys.


The guy who said it was as easy as "location, location, location".



			
				SteelBlue05 said:
			
		

> If you even stick to the ol' "location, location, location" principal you'll identify most good buys quite easily


So I picked some nice locations..



			
				soma said:
			
		

> suburbs such as d4, blackrock, ranelagh


..in one of which I rent a lovely 3 bed house for a fraction of the purchase cost, and write the rent off as a business expense, investing the money saved.


----------



## Duplex

A report on the only very long term analysis of property prices I'm aware of (in Amsterdam) shows an annual return of 0.3% pa over a 350 year period. 


[broken link removed]


----------



## SteelBlue05

soma said:
			
		

> The guy who said it was as easy as "location, location, location".


 
No, I didnt make reference to any location that was listed in other posts, mine was a general comment.


----------



## Neffa

Duplex said:
			
		

> Ya cant beat long term, it both soothes the need to engage the rational faculties and transports the day of reckoning to some unspecified date in the future, powerful stuff.


 
Brilliant!


----------



## redo

Loki said:
			
		

> THere are no guarantees for anything other than death



And Taxes.


----------



## Marie

Loki said:
			
		

> Actually I am assuming that over time property increases in value in a 10-20 like I said and thonce you own it the income is all profit. Some of you guys seem to forget as time goes on you own more of the property untill you own it all. So "yield", if you want to look at it that way, can drop but in real terms to the person be increasing. Owning an asset that gives a return is the "yield" some people are looking at. Look at the long term not the short sight of there willl be a crash today or tomorrow.


 
It interests me greatly that this myth is so persistent and that most people committing themselves to responsibility for paying off _huge _sums ("mortgages") seem unable to understand a basic fact of life.  It is this.  If a person wants/desires/needs 'something' (lets say 'a property') and has no money with which to buy it s(he) can _at an additional cost _("interest") use someone else's money short-term to acquire the object of desire.

To be even more explicit, if I take a mortgage today to purchase a 400K house and next year sell that house on for 500K _my profit IS NOT 100K!!!  _It is not a matter of whether people want a home or 'an investment'; it is more fundamental.  Individuals who have not taken the time to really look into the way this _particular market operates _(for that is what it is!) will be disappointed when their anticipated "profit" of 100K begins to shrink when they deduct a long list of items - cost of purchasing, cost of selling, cost of renovating, cost of insuring, cost of securing, cost of maintenance, cost of taxes, _COST OF INTEREST _for the term of ownership and the last but not least 'deduction' - percentage rise in cost of not only this, but _ALL OTHER PROPERTY!_At that stage the punter says "Ah shure I'll do it all myself and settle the tax-bill in a few years.  _Then _it's all clear profit.  Then what is not figured into the equation are the many many hours of work involved in owning, managing and maintaining a structure.  

What a number of contributors above have said which is not really being picked up is that there is a 'myth' that Ireland has at long last followed the leprechaun to the end of the rainbow and found a great big sack of houses all made of gold.  Fairytales of treasure and wealth at rainbow's end were moral tales warning of self-deception laziness and greed and pointers to the reality that life is struggle, resources are scarce and all we can be certain of are death and taxes.


----------



## askalot

Marie said:
			
		

> It interests me greatly that this myth is so persistent and that most people committing themselves to responsibility for paying off _huge _sums ("mortgages") seem unable to understand a basic fact of life.  It is this.  If a person wants/desires/needs 'something' (lets say 'a property') and has no money with which to buy it s(he) can _at an additional cost _("interest") use someone else's money short-term to acquire the object of desire.


Great post Marie. 

Lots of investors have been tempted by 5 - 10 year interest only mortgages on the basis that the property is _obviously_ going to be worth more by then. 

Apparently we here in Ireland have very special houses - they're the only ones in the world that can't devalue! In fact, of all the potential areas an investor could put their money, Irish property is the one, _the only one_, that's a sure fire bet.


----------



## beattie

askalot said:
			
		

> Apparently we here in Ireland have very special houses - they're the only ones in the world that can't devalue! In fact, of all the potential areas an investor could put their money, Irish property is the one, _the only one_, that's a sure fire bet.


 
Well said, if you were to pick up a copy of our broadsheets you would swear that property is a one way bet. How come our media are quick to print when someone makes a killing on a property but there is hardly a mention of any investors who were finding it difficult to meet their repayments when the ECB rate was at 2%.


----------



## gearoid

Marie said:
			
		

> Fairytales of treasure and wealth at rainbow's end were moral tales warning of self-deception laziness and greed and pointers to the reality that life is struggle, resources are scarce and all we can be certain of are death and taxes.


 
Yes, good post Marie, but I felt you lost the run of yourself a little at the end ! We are one of the richest countries in the World so I don't think we can complain too much compared to the 90% of the planet in infinitely poorer circumstances.  

On the broader issue of whether we are squandering our new found wealth, I like this article from the IMF. 

http://www.imf.org/external/pubs/ft/fandd/2003/03/ebra.htm

It posits that asset bubbles will replace currency appreciation in areas experiencing a sudden localised inflow of wealth where they share a common currency with other poorer regions.

It covers the transfer of wealth from productive to non-productive sectors and the hollowing out of the manufacturing base and seeks to provide some general macroeconomic remedies.

Sound familiar? 

The new found wealth in our case is not Dutch oil or Spanish gold but the F.D.I from the US etc, and the loose lending practices of the banks.

We are spending our future wealth now in one big unproductive binge.


----------



## Chamar

askalot said:
			
		

> Apparently we here in Ireland have very special houses - they're the only ones in the world that can't devalue! In fact, of all the potential areas an investor could put their money, Irish property is the one, _the only one_, that's a sure fire bet.



That's the part I can't fathom. In truth none of us know where property prices are going to go but I just don't understand why there is this belief that Irish property is some sort of special case & that people seem unable to acknowledge that property as an asset class _can_ fall. Just as it did in Germany, Japan, Boston etc - more mature economies than ours.


----------



## bearishbull

gearoid said:
			
		

> We are one of the richest countries in the World so I don't think we can complain too much compared to the 90% of the planet in infinitely poorer circumstances.


 
lots of economic commentators/media say this but in reality we have a high GDP per capita for last decade or less,many countries like uk usa germany etc have had high GDP for decades/centuries! its like saying you are rich because you have a high salary say 100k,if your spending most of your salary on consumer goods and on inflated house prices it doesnt make you rich. rich countries have high quality infrastructure and investments in productive assets  shares etc.  if we have this level of GDP per capita for decades then we will be rich,yes our income(gdp) is high at present but its only been for a few years so far.


----------



## extopia

Couldn't agree more. Ireland is exhibiting classic "nouveau riche" behaviour - all our income seems to be going into cars, houses and expensive holidays. And borrowing. It seems the "richer" we are, the more debt we're prepared to take on. Hopefully we will eventually develop the vision to create an infrastructure that future generations will be proud of. Think of the vision that created the Brooklyn Bridge or the London Underground. So far we've got a couple of pedestrian bridges and a few miles of tram tracks (replacing a much smaller system than we ripped up only, what, 30-odd years ago?)


----------



## Eurofan

I've long felt that in years to come we'll look back on this as "the wasted years" where surplus upon surplus was pissed down the drain with little or nothing to show for it in the long term.

A genuine scandal in my honest opinion but we, the voting public, have only ourselves to blame in the end of the day.

Preposterious house prices included my better half and I see more and more reason to look further afield for our future lives and i don't think we're alone.


----------



## bearishbull

Eurofan said:
			
		

> I've long felt that in years to come we'll look back on this as "the wasted years" where surplus upon surplus was pissed down the drain with little or nothing to show for it in the long term.
> 
> A genuine scandal in my honest opinion but we, the voting public, have only ourselves to blame in the end of the day.
> 
> Preposterious house prices included my better half and I see more and more reason to look further afield for our future lives and i don't think we're alone.


agreed , when i have enough i'll move abroad to a country with better weather lifestyle etc and buy a home outright and work little!!!


----------



## ClubMan

extopia said:
			
		

> Couldn't agree more. Ireland is exhibiting classic "nouveau riche" behaviour - all our income seems to be going into cars, houses and expensive holidays. And borrowing. It seems the "richer" we are, the more debt we're prepared to take on.


 While I'm sure that some people are doing this I'm not so sure that most are. If you have any hard evidence to the contrary though I'd be glad to read it.

I don't hold with the pessimistic outlook/analysis outlined in the previous two posts to be honest.


----------



## bearishbull

ClubMan said:
			
		

> While I'm sure that some people are doing this I'm not so sure that most are. If you have any hard evidence to the contrary though I'd be glad to read it.
> 
> I don't hold with the pessimistic outlook/analysis outlined in the previous two posts to be honest.


 
we are spending our income(as a nation)to a great extent on expensive houses and imported cars clothes holidays etc which are all unproductive.construction is a massive element of irish economy and as david mc williams points out today any slowdown there has a negative multiplier effect throughout the economy,combined with the slowdown in consumer spending by consumers who feel less wealthy as house price rises slow or fall and you have problems.
the multinationals wont be here forever and we dont have any great indigenous companies or industries competing on world stage to keep the party going.
 basically we're spending too much on living now and consuming and not invested in the long term productivity of the economy through increased spending on r&d education and development or irish companies that can compete on world markets .
do we just wanna  be a tax haven for multinationals and one big construction site?


----------



## Marie

bearishbull said:
			
		

> we are spending our income(as a nation)to a great extent on expensive houses and imported cars clothes holidays etc which are all unproductive.construction is a massive element of irish economy and as david mc williams points out today any slowdown there has a negative multiplier effect throughout the economy,combined with the slowdown in consumer spending by consumers who feel less wealthy as house price rises slow or fall and you have problems.
> the multinationals wont be here forever and we dont have any great indigenous companies or industries competing on world stage to keep the party going.
> basically we're spending too much on living now and consuming and not invested in the long term productivity of the economy through increased spending on r&d education and development or irish companies that can compete on world markets .
> do we just wanna be a tax haven for multinationals and one big construction site?


 
I agree and don't understand how the criticism of 'negativity' can be levelled at a perspective which recognises the reality of an economy where present everyday existence - including a place in which to exist! - is already _costing future labour_ (the mortgage mechanism).  To make that clearer, perhaps the language needs to change slightly and "I/we bought a house in 2001" etc. changed to "I/we _bought a mortgage_ etc."  The real 'cost' then comes into view.  Eventual home _ownership_ depends on a raft of other economic factors, including continuing employment, artificially-low interest-rates and rate at which inflation in cost of other goods and services - such as utilities - increases. 

There are dangers in the situation where - as earlier posters point out - conspicuous-consumption 'life-style' _("We're RICH - RICH I tell you!")_ floats without strong moorings in some secure production base.  Is it not an anomaly that property is the prize and goal when the construction industry is the production base?  Seems a bit circular and dangerous to some observers including myself.


----------



## tyoung

Davy's put the Irish savings rate at 15%. This is very high relative to other countries with real estate booms(UK, US, Australia) and would suggest that there is a cushion that could be tapped if interest rates rose significantly. A crash seems unlikely more like a long period of flat prices in real terms.
 Regards


----------



## bearishbull

tyoung said:
			
		

> Davy's put the Irish savings rate at 15%. This is very high relative to other countries with real estate booms(UK, US, Australia) and would suggest that there is a cushion that could be tapped if interest rates rose significantly. A crash seems unlikely more like a long period of flat prices in real terms.
> Regards


that savings rate is high partly because of the ssia's and need to save for alarge mortgage deposit, lets see what the saving rate is like in 2007/8. i think theres a lot of older people that save a lot but most young people i know save little ,with priavte sector credit growing at 30% per annum and due to hit 400billion in next two years savings will decrease.


----------



## thewatcher

tyoung said:
			
		

> Davy's put the Irish savings rate at 15%. This is very high relative to other countries with real estate booms(UK, US, Australia) and would suggest that there is a cushion that could be tapped if interest rates rose significantly. A crash seems unlikely more like a long period of flat prices in real terms.
> Regards


 
I would contend that in general the over 40's have money coming out their ears and the over 20's soon enough won't have a pot to piss in.There will be major repercussions for the economy if this is not addressed in the future .


----------



## Eurofan

thewatcher said:
			
		

> I would contend that in general the over 40's have money coming out their ears and the over 20's soon enough won't have a pot to piss in.There will be major repercussions for the economy if this is not addressed in the future .


It certainly will if large numbers of the latter decide to up sticks and seek greener pastures elsewhere. Seeing as the expanded EU is available nowadays the options are a great deal wider than the UK/USA of old.

To keep things on topic i know of _no-one_ recently who would have bought without the expectation of double digit property growth that will permit them to then trade-up in a few years.

I'd love to see a survey done on what percentage of the under 30s who've bought with the intention of doing just that.

The ingrained notion in many Irish that property is a never-ending 'wealth creator' is the biggest problem. When that stalls(never mind crashes) the sudden realisation that you can't afford to move out of the crappy starter home you told yourself you'd have made €50k on by now will sharply bring the reality of 30 and 35 year mortgages to the fore.


----------



## soma

beattie said:
			
		

> Well said, if you were to pick up a copy of our broadsheets you would swear that property is a one way bet.


Something interesting I noticed yesterday, I picked up both the Sunday Business Post & Sunday Tribune. In fairness to the SBP it had at least four articles that were bear-ish in the area of house prices/reliance of economy on a single sector - construction/the irish addiction to credit. The Tribune had zip, in fact most of it's 'business' section was property 

Not that the SBP are entirely trustworthy - last week they ran a large piece on the probable effects of interest rate increases and two of the 'economists' were from estate agents (!!) and one from a mortgage bank


----------



## Loki

Marie said:
			
		

> It interests me greatly that this myth is so persistent and that most people committing themselves to responsibility for paying off _huge _etc...


You misunderstood what I said and then descirbed a particular slanted view. If you invest into a pension scheme you are risking your future on the markets. Instead of doing that you put the money into a house even with the asset floating on the wave of inflation and other factors rent would generally stay inline with inflation giving a good return. Each rent check is income and a return and then there is also the appreciation of the property. Over a long period of time 20-30 property generally goes up , not for sure but compared to most things pretty good. Some people buy a smaller house close to services they think they will need in old age and rented it untill they decide to down size and then rent the bigger family house. Not everybody can do  things like this but in the right locations. So say if you get a mortgage for an investment poperty even if you subsidise the rent for say €200 a month (i.e. 5% of your income) if you bought a few years ago your current mortgage so your current mortgage is €600 a month (15%) now somebody (same income)who buys now might take pay €1000 (25%) for his house. Now if that is 20% income on 2 houses vs 25% income 1 house. Now if the market crashes the first guy is still in better shape. So some of this talk of investors panicing why would they? Say if they can't rent as people say you can lower rents and still be doing better than the 2nd guy. If you buy the right property you should be sheltered. After 20 years the 1st guy can borrow on the equity of his investment to pay of his mortgage and get extra rent relief on his rental property. Eventually the mortgages are gone 1st guy has had an extra 5% all his life and a rental proeprty for a pension plus the same as the other guy and maybe more.
There are places where this can fail certainly but over the long period property has a tendencey to go up in the same way they have a tendency to cycle through highs and lows. 


			
				Marie said:
			
		

> To be even more explicit, if I take a mortgage today to purchase a 400K house and next year sell that house on for 500K _my profit IS NOT 100K!!! _


I think you should have explained what you think the profit is then did all those costs go over €10k. Obviously there are costs but effectively €100k is profit in simple terms if it is an investment property but your home is only different if you  can plan to buy in the same market. People move,downsize etc...  so it can be profit. Certain parts of the market rise quicker than others so if you time it right you can win. 

I'd guess you don't own an investement property and I 'd guess you might not own at all. What you have said is not untrue but you are only looking at one small element of the market. The population is aging so the older people are looking at their futures in a different way. I get the belief in people being lazy and looking to get rich quickly through little work but using your money wisely is just smart. Some people are calculating thier risks and deciding what is best for them. Some will do it wrong and win anyway some will do it right and get it wrong or vise versus.  It doesn't make  them money grabing are lazy. I think you are being a bit too self righteous considering it is all speculation  and you don't really know the intent of everybody. 
There are a lot of people here who want prices to go down here but they appear to only have one view of the market. It is a really complex and forever changing.


----------



## soma

Loki said:
			
		

> It is a really complex and forever changing.


Loki this is the point that myself & others on this board would like to make to property speculators in this country. The *problem* is that the vast majority do not see this and are spoon fed the notion of the one way property bet.

Yes there are savvy property investors out there who know the game and are playing it well but they really are in the minority - the stats of 42% of 'investors' owning only one investment property and only 64% currently covering their costs thru rent are testament to that.


----------



## Neffa

Loki said:
			
		

> You misunderstood what I said and then descirbed a particular slanted view. If you invest into a pension scheme you are risking your future on the markets.


 
...as you are with property - it is not different - you are risking your future on property prices, inflation, interest rates etc. etc. 



			
				Loki said:
			
		

> Instead of doing that you put the money into a house even with the asset floating on the wave of inflation and other factors rent would generally stay inline with inflation giving a good return.


 
And what about the interest rates of the underlying loan. Marie made a great point - people take on a mortgage rather than buy a property so the behaviour of the interest rate is as important as the asset price. 

Let's look at the effect of a 1.5% rise in interest rates (a possible net effect over the next 18 months) would have:

€350K interest only mortgage at 3.35%/month = 980
€350K interest only mortgage at 4.85%/month =  1410

Increase of 43.8% in outgoings - not sure that an inflationary rent increase would cover this!



			
				Loki said:
			
		

> So say if you get a mortgage for an investment poperty even if you subsidise the rent for say €200 a month (i.e. 5% of your income) if you bought a few years ago your current mortgage so your current mortgage is €600 a month (15%) now somebody (same income)who buys now might take pay €1000 (25%) for his house. Now if that is 20% income on 2 houses vs 25% income 1 house. Now if the market crashes the first guy is still in better shape.


 
Yes, if you managed to buy some time ago when things were cheaper, then your mortgage is lower and you are less exposed. You are in fact making the exact point which I and others have made in earlier posts - anyone buying now as an "investment" has to have a very careful look at what they are taking on because the market is expensive. People who bought 5+ years ago are in a better position. However, my sense is that many who bought 5+years ago have remained active in the investor market and have continued to buy so at least some of their portfolio is heavily exposed.




			
				Loki said:
			
		

> So some of this talk of investors panicing why would they? Say if they can't rent as people say you can lower rents and still be doing better than the 2nd guy. If you buy the right property you should be sheltered. After 20 years the 1st guy can borrow on the equity of his investment to pay of his mortgage and get extra rent relief on his rental property. Eventually the mortgages are gone 1st guy has had an extra 5% all his life and a rental proeprty for a pension plus the same as the other guy and maybe more.
> There are places where this can fail certainly but over the long period property has a tendencey to go up in the same way they have a tendency to cycle through highs and lows.


 
A lower rent means the potential for a bigger loss every month. This will dampen the demand for investor property and will in turn dampen price growth. Investors will panic because their "one way bet" will go sour and they will suddenly feel much less positive that the capital appreciation will offset the rental gap per month. Bear in mind that the rental gap is real cash which must be paid, but the capital appreciation can only be obtained if you sell - and if a number of people choose to sell at similar times because they face the same situation - then that will induce a fall.

Loki - you may have the benefit of a number of investment properties bought years ago which have low mortages and you are making a profit every month - good for you. If 40% of new builds are going to investors today, then the last 3 years must have seen a substantial number of investors enter the market at relatively high valuations. They will certainly have problems given the interest rate calculation above - you may not, so good luck to you.


----------



## redo

Eurofan said:
			
		

> * The ingrained notion in many Irish that property is a never-ending 'wealth creator' is the biggest problem. When that stalls(never mind crashes) the sudden realisation that you can't afford to move out of the crappy starter home you told yourself you'd have made €50k on by now will sharply bring the reality of 30 and 35 year mortgages to the fore.*



Yes, this is the biggest danger to the first time buyers.


----------



## Loki

Neffa said:
			
		

> ...as you are with property - it is not different - you are risking your future on property prices, inflation, interest rates etc. etc.


 That was my point to an extent. If you have the money putting into a house or a pension there are risks the difference is rent will stay more inline with inflation while other investment returns have a finite return generally.




			
				Neffa said:
			
		

> And what about the interest rates of the underlying loan. Marie made a great point - people take on a mortgage rather than buy a property so the behaviour of the interest rate is as important as the asset price.
> 
> Let's look at the effect of a 1.5% rise in interest rates (a possible net effect over the next 18 months) would have: etc....


 You made more than an assumption here. You don't havce to buy an investment property with an interest only mortgage. IN fact I suggested a regular mortgage as I said the investor would own the 2 nd property not the profit. 


			
				Neffa said:
			
		

> Yes, if you managed to buy some time ago when things were cheaper, then your mortgage is lower and you are less exposed. You are in fact making the exact point which I and others have made in earlier posts - anyone buying now as an "investment" has to have a very careful look at what they are taking on because the market is expensive. People who bought 5+ years ago are in a better position. However, my sense is that many who bought 5+years ago have remained active in the investor market and have continued to buy so at least some of their portfolio is heavily exposed.


 Your assumption of interest only mortgage effects everything else you are saying. An investment property for many people is still very reachable as I said. You are assuming people have no nest eggs too. You know some people bought 10 years ago so the risk to them is very low. It is is all still very easy for many people in the market. THe idea is you own a 2nd house that rental income provides a pension. I can't remember but in a recent study of new investors was it 40% siad pension investment?




			
				Neffa said:
			
		

> A lower rent means the potential for a bigger loss every month. This *will* dampen the demand for investor property and *will* in turn dampen price growth. Investors *will* panic because their "one way bet" *will* go sour and they *will *suddenly feel much less positive that the capital appreciation *will* offset the rental gap per month.


You know you should address your language as unless you can tell the future you are speculating . You are extremely negative on further price rises which is fine but stop stating your views as what is going to happen. You are extremely dismiss of any explanation or thinking for a price rise and you force intent on why people are doing things. Try thinking long term and with an open mind. The only people ever caught off gaurd are those who refuse to listen to ALL the details and think they know what is going to happen. 


			
				Neffa said:
			
		

> Loki - you may have the benefit of a number of investment properties bought years ago which have low mortages and you are making a profit every month - good for you. If 40% of new builds are going to investors today, then the last 3 years must have seen a substantial number of investors enter the market at relatively high valuations. They will certainly have problems given the interest rate calculation above - you may not, so good luck to you.


 what you ignored was my figure and used your own choice of what I was suggesting and then made up other figures to boalster your view. 43% increase in costs, just vails the way I described it. What new portion of the salary is that plus you relied on it being interest only. 
I can't remember are you wishing to buy at some point or just generally just against the principle that house prices could go up? 

You do understand that you don't know what is going to happen and what is a big risk for some people now is equally not much of a risk to others due to circumstances?


----------



## redo

Loki said:
			
		

> That was my point to an extent. If you have the money putting into a house or a pension there are risks.
> 
> 
> You made more than an assumption here. You don't havce to buy an investment property with an interest only mortgage. IN fact I suggested a regular mortgage as I said the investor would own the 2 nd property not the profit.
> Your assumption of interest only mortgage effects everything else you are saying. An investment property for many people is still very reachable as I said. You are assuming people have no nest eggs too. You know some people bought 10 years ago so the risk to them is very low. It is is all still very easy for many people in the market. THe idea is you own a 2nd house that rental income provides a pension. I can't remember but in a recent study of new investors was it 40% siad pension investment?
> 
> 
> 
> You know you should address your language as unless you can tell the future you are speculating . You are extremely negative on further price rises which is fine but stop stating your views as what is going to happen. You are extremely dismiss of any explanation or thinking for a price rise and you force intent on why people are doing things. Try thinking long term and with an open mind. The only people ever caught off gaurd are those who refuse to listen to ALL the details and think they know what is going to happen.
> what you ignored was my figure and used your own choice of what I was suggesting and then made up other figures to boalster your view. 43% increase in costs, just vails the way I described it. What new portion of the salary is that plus you relied on it being interest only.
> I can't remember are you wishing to buy at some point or just generally just against the principle that house prices could go up?
> 
> You do understand that you don't know what is going to happen and what is a big risk for some people now is equally not much of a risk to others due to circumstances?



If the demand for houses as investments falls, the relative price of *will *fall.  This is economic fact.  If you throw an apple in the air it will fall, unless our sun explodes and destroys the earth, but I can't be sure, as it is in the furture.


----------



## Neffa

Loki said:
			
		

> You made more than an assumption here. You don't havce to buy an investment property with an interest only mortgage.


 
No, you don't have to, but I challenge you to show anyone on this board a house which you could buy in the Dublin area/commuter belt at the present time where you could cover the rent through a normal repayment mortgage. Post the link to the sale advertisement with the price and the Daft.ie (or other source) proving the rent. The Irish Times have looked at the "investment case" for numerous houses in their supplement and they have to use an interest-only mortgage for any kind of positive yield.



			
				Loki said:
			
		

> You know you should address your language as unless you can tell the future you are speculating . You are extremely negative on further price rises which is fine but stop stating your views as what is going to happen. You are extremely dismiss of any explanation or thinking for a price rise and you force intent on why people are doing things. Try thinking long term and with an open mind. The only people ever caught off gaurd are those who refuse to listen to ALL the details and think they know what is going to happen.


 
I've backed up my *opinions* with a wealth of data, so I feel entitled to say what will happen. I cannot be sure of anything, nor can you, but I can present my logic and conclusions. Otherwise there would be no point in debating anything. I think I have logic and data to explain why I don't think certain arguments hold water. 



			
				Loki said:
			
		

> I can't remember are you wishing to buy at some point or just generally just against the principle that house prices could go up?


 
I own property in the UK and in Ireland.  I will buy again in the future, but only if I think it is a good time to do so and I hope it is abundantly clear that I think it is not at present as I think current prices and the expectations driving them are inflated. My properties are rented and I am renting in Dublin now, sitting on a cashpile waiting for a better chance to buy.


----------



## askalot

Loki said:
			
		

> THe idea is you own a 2nd house that rental income provides a pension. I can't remember but in a recent study of new investors was it 40% siad pension investment?


How many people will want to deal with tenants and the up keep of the property when they reach their late seventies? Not many hence we will see a glut of property on the market and that's going to drive prices down.

New 'investors' who think one investment property will provide a good pension may end up being disappointed. Any sort of pension with 20 years contributions would beat the return from one or two properties. This year the average managed fund saw 20 - 23 per cent growth. Over the past six years they've averaged 5 - 6 per cent and that is during a slump in the market.

You'll notice how there is less hype about the great return on pensions over the last couple of years - this is because they are regulated and have to paint a true picture of risk/reward to the investor. This is in stark contrast to estate agents and their 'economists'.


----------



## owenm

is it reasonable to assume large volumes of people bought investment properties with interest only mortgages and that the bank will only allow this for the medium term (  up to 6 years)
. If so what happens when these have to be converted to normal mortgages and the yield turns negative, will we see substantial numbers of them turning negative at each interest rate increase?


----------



## Loki

redo said:
			
		

> If the demand for houses as investments falls, the relative price of *will *fall. This is economic fact. If you throw an apple in the air it will fall, unless our sun explodes and destroys the earth, but I can't be sure, as it is in the furture.


Yes but of course you are speculating that the investors are the reason for the current  high price and that they will stop investing.  It is not an inevitability like gravity.


			
				Neffa said:
			
		

> No, you don't have to, but I challenge you to show anyone on this board a house which you could buy in the Dublin area/commuter belt at the present time where you could cover the rent through a normal repayment mortgage. Post the link to the sale advertisement with the price and the Daft.ie (or other source) proving the rent. The Irish Times have looked at the "investment case" for numerous houses in their supplement and they have to use an interest-only mortgage for any kind of positive yield.


THere are you just need to know what you are doing as an investor. Buy a house and convert it into  seperate places and extend and you could get your mortgage payments and more. It is worth buying a hotel and a shjopping chain to do similar on a bigger scale. The other point which is the one I have been making is it doesn't have to to be a good investment in the long term. THis is common economic practice in all types of market to buy a loss making item on speculation of the long term. What the media say is opinion based on opinion know the facts yourself. 


			
				Neffa said:
			
		

> I've backed up my *opinions* with a wealth of data, so I feel entitled to say what will happen. I cannot be sure of anything, nor can you, but I can present my logic and conclusions. Otherwise there would be no point in debating anything. I think I have logic and data to explain why I don't think certain arguments hold water.


I can back my opinion with the bible but it doesn't make God real. It is belief . You aren't presenting logic you are stating opinion as fact. As I said I suggest you reajust your language. I can use your data to prove my opinion are just poke holes in how it is not accurate. You have made your choices based on your opinion so I can see why you would be affraid to listen to other views.


			
				Neffa said:
			
		

> I own property in the UK and in Ireland. I will buy again in the future, but only if I think it is a good time to do so and I hope it is abundantly clear that I think it is not at present as I think current prices and the expectations driving them are inflated. My properties are rented and I am renting in Dublin now, sitting on a cashpile waiting for a better chance to buy.



Sitting on cash is certainly considered a bad idea in the current market. In fact if you are sitting on cash and are wrong you would loose value. I guess it would be pretty hard to face the idea that you might be wrong and that you lost money by not listening to people. Taking an  a risk and loosing is one thing but to loose money through inaction sounds more unplesant. 

If buying property,think long term and add value. Don't buy property and hope you are doing the right thing but be sure that you have no control over what happens.


----------



## Loki

askalot said:
			
		

> How many people will want to deal with tenants and the up keep of the property when they reach their late seventies? Not many hence we will see a glut of property on the market and that's going to drive prices down.
> 
> New 'investors' who think one investment property will provide a good pension may end up being disappointed. Any sort of pension with 20 years contributions would beat the return from one or two properties. This year the average managed fund saw 20 - 23 per cent growth. Over the past six years they've averaged 5 - 6 per cent and that is during a slump in the market.
> 
> You'll notice how there is less hype about the great return on pensions over the last couple of years - this is because they are regulated and have to paint a true picture of risk/reward to the investor. This is in stark contrast to estate agents and their 'economists'.


There are management companies you can hire and some people have children who take these things on as it is their pension plan too. It is actually how a lot of property is moved around. Family proeprty isn't always home. 

A pension fund invested in by your average person set up 30 years ago would certainly give you less than a house. Plus the rent was well over the the mortgage as time went on. I used an example a situation where things remained relatively constant. The truth is money changes value. €200 could easily move from 5% to 1% or less of your income.  At some point you are likely to get a profit before you pay off the mortgage. 
What has the average pension fund increase been  in the last 10 years or even 5? Are they close to property?


			
				owenm said:
			
		

> is it reasonable to assume large volumes of people bought investment properties with interest only mortgages and that the bank will only allow this for the medium term ( up to 6 years)
> . If so what happens when these have to be converted to normal mortgages and the yield turns negative, will we see substantial numbers of them turning negative at each interest rate increase?



Why? What do you know that makes you able to say that? I think it is reasonable to believe people won't panic sell property. You are wrong on the mortgages as you can get them for 10 years so I'll take your assumption in the same vain.  You are also assuming there that rents will not go up.


----------



## redo

Loki said:
			
		

> Yes but of course you are speculating that the investors are the reason for the current  high price and that they will stop investing.  It is not an inevitability like gravity.



No, the demand for houses comes from many sectors, including investors.  I am simply saying that any fall in demand, (from investors) *will* have an effect on the relative prices or house price inflation, if you will.


----------



## Loki

redo said:
			
		

> No, the demand for houses comes from many sectors, including investors. I am simply saying that any fall in demand, (from investors) *will* have an effect on the relative prices or house price inflation, if you will.



No your are wrong it is still may. You don't know if investors demand  is reduced by punative government intervention that also encourages others. It is not "will" when you are talking speculation it is "I think" "it may".


----------



## Loki

Neffa said:
			
		

> So you can say "it is considered" -


yep
http://dictionary.reference.com/search?q=considered

it is not an inevitablity like "will" is


----------



## Neffa

Loki said:
			
		

> Sitting on cash is certainly considered a bad idea in the current market. In fact if you are sitting on cash and are wrong you would loose value. I guess it would be pretty hard to face the idea that you might be wrong and that you lost money by not listening to people. Taking an a risk and loosing is one thing but to loose money through inaction sounds more unplesant.
> 
> If buying property,think long term and add value. Don't buy property and hope you are doing the right thing but be sure that you have no control over what happens.


 
How is your first statement "Sitting on cash is certainly considered a bad idea in the current market" any different from my assertion that prices are high? It's your belief/opinion - just like mine. You came down like a ton of bricks when I say anything like that but you do so yourself! 

My cash is in equities which have gone up 43% in the last three years. Very happy with that return, thanks.  If that constitutes inaction, count me in.  

I listen to people and make my own judgements based on all perspectives. I think that is precisely what "investors" who buy property with a shortfall in monthly payments relative to rent are failing to do. They are being seduced with the idea that it never falls and are not seeing the risky situation they are in. If you are making a profit, good for you. If you are not, think hard before "investing".


----------



## redo

Loki said:
			
		

> No your are wrong it is still may. You don't know if investors demand  is reduced by punative government intervention that also encourages others. It is not "will" when you are talking speculation it is "I think" "it may".



That's a bit strong.  Do you understand what I'm trying to convey?  I refine it furthur for you, if demand falls,  the price will fall also.  Simple economics.


----------



## askalot

Loki said:
			
		

> A pension fund invested in by your average person set up 30 years ago would certainly give you less than a house. Plus the rent was well over the the mortgage as time went on. I used an example a situation where things remained relatively constant. The truth is money changes value. €200 could easily move from 5% to 1% or less of your income. At some point you are likely to get a profit before you pay off the mortgage.
> What has the average pension fund increase been  in the last 10 years or even 5? Are they close to property?



The return for the last 10 years is 190 per cent.
The return for the last 15 years is 850 per cent.


----------



## Duplex

As famous economist John Kenneth Galbraith writes in his book "A Short History of Financial Euphoria":

"Those who had been riding the upward wave decide now is the time to get out. Those who thought the increase would be forever find their illusion destroyed abruptly, and they, also, respond to the newly revealed reality by selling or trying to sell. And thus the rule, supported by the experience of centuries: the speculative episode always ends not with a whimper but with a bang."


----------



## Loki

redo said:
			
		

> That's a bit strong. Do you understand what I'm trying to convey? I refine it furthur for you, if demand falls, the price will fall also. Simple economics.


No still wrong. Economics is a theory not inevitability. 


			
				Neffa said:
			
		

> How is your first statement "Sitting on cash is certainly considered a bad idea in the current market" any different from my assertion that prices are high? It's your belief/opinion - just like mine. You came down like a ton of bricks when I say anything like that but you do so yourself!



Becasue I didn't say it *would* happen. I certainly did not come down on you like a ton of bricks. I never stated my opinion/beleif about your actions. I commented on how it may effect your stance and viament proclamations about future events. You aren't sitting on cash you are gambling on the open market just to be clear.

If all you did was listen to people and comment that would be fine but you don't It appears you can't even see the difference between warning of dangers and considering people fools for not taking your slant. 43% increase is less than a property in Dublin increased in 3 years. So  you have been wrong so far. With tax benifits it is worth me having a large mortgage too so I get more tax back over my property.


----------



## redo

Loki said:
			
		

> No still wrong. Economics is a theory not inevitability.
> 
> 
> Becasue I didn't say it *would* happen. I certainly did not come down on you like a ton of bricks. I never stated my opinion/beleif about your actions. I commented on how it may effect your stance and viament proclamations about future events. You aren't sitting on cash you are gambling on the open market just to be clear.
> 
> If all you did was listen to people and comment that would be fine but you don't It appears you can't even see the difference between warning of dangers and considering people fools for not taking your slant. 43% increase is less than a property in Dublin increased in 3 years. So  you have been wrong so far. With tax benifits it is worth me having a large mortgage too so I get more tax back over my property.



Gravity is also a *theory.  *If one was selling a house and there was no demand, what would one do in order to sell it?


----------



## Loki

askalot said:
			
		

> The return for the last 10 years is 190 per cent.
> The return for the last 15 years is 850 per cent.



A bit surprised but I think I better be fairer how much a pension do you get compared to a rental return after a simlar time. My may gets 5k from property  a month and it cost her £10 a month(average) she bought in 1980.


----------



## SteelBlue05

Loki said:
			
		

> No still wrong. Economics is a theory not inevitability.


 
If demand falls then price will fall eventually, thats inevitable. You might think its a basic theory but it is factual based on a open market place.


----------



## Loki

redo said:
			
		

> Gravity is also a *theory.  *If one was selling a house and there was no demand, what would one do in order to sell it?


 Gravity is not a theory it is quantifiable force. In those precise circumstance you could say it will not sell. Of course that is not what you have said and does not apply to the real world especially when you are adding intent to the people involved. Economics is more like weather reports than a map.

http://en.wikipedia.org/wiki/Gravity


----------



## redo

Loki said:
			
		

> Gravity is not a theory it is quantifiable force. In those precise circumstance you could say it will not sell. Of course that is not what you have said and does not apply to the real world especially when you are adding intent to the people involved. Economics is more like weather reports than a map.
> 
> http://en.wikipedia.org/wiki/Gravity



But for arguments sake, would not conceed that if one wanted to sell, they would reduce the price in order to sell it?


----------



## Loki

SteelBlue05 said:
			
		

> If demand falls then price will fall eventually, thats inevitable. You might think its a basic theory but it is factual based on a open market place.


It is a theory based on fact but not inevityable. In extreme made up situations yes you can make an ineviatble situation. In real life  people are stating what "will" happen on top of another "will" on another "will" combined with intent . This is simple wrong, *if you have a theory of what might happen you state it as so not fact. *


----------



## Loki

redo said:
			
		

> But for arguments sake, would not conceed that if one wanted to sell, they would reduce the price in order to sell it?



For arguments sake I would say it is completely rediculious to state  opinion over speculative matters  as fact. The arrogance to claim intent of entire sections of the market combined with prediction what will happen in world politics and economics as fact is remarkable. 

If demand reduces it will have an effect what that effect and reactions based on that effect are complete and utter speculation. Lots of factors  to consider and a narrow view of possibilities means you are closed minded


----------



## bearishbull

pension returns from irish pension funds are 10% per year *AVERAGE* over last ten years,add in the large tax benefits and its a great investment now when house price increases are uncertain and rental yields etc are so bad. if you want a risk free pension you can invest in one that buys bonds etc and you will get less return but add in the extra from tax benefits and it still a very good investment.
my brother and a few friends are renting a new 3 bed apartment in sandyford for 1350euro a month(16200 a year) that is "valued " at circa 500k! on an *interest only* mortgage that costs 19250 per year now and would cost  22k a year if ecb interest rates hit 3.25% in next year!,this cant be considered a good investment unless the buyer justs wants capital gains but incomes arent rising much and supply is catching demand so where are these capital gains gonna come from in the long run???


----------



## redo

Loki said:
			
		

> *If demand reduces it will have an effect *


So reduced demand *will* have an effect on prices? 

How do you know, are you speculating?


----------



## Loki

bearishbull said:
			
		

> pension returns from irish pension funds are 10% per year *AVERAGE* over last ten years,add in the large tax benefits and its a great investment now when house price increases are uncertain and rental yields etc are so bad. if you want a risk free pension you can invest in one that buys bonds etc and you will get less return but add in the extra from tax benefits and it still a very good investment.


Well as I keep mentioneing not an interest only mortgage for a very specific reason I think you are just repeating yourself and ignoring the point.  The speculative nature of interest only is one way to attempt to make money. A houses as a pension is another differnt one with less risks and financially viable for many people in the market currently. You do realise somepeople get all the tax breaks on investment property as if it was a pension?


			
				redo said:
			
		

> So reduced demand *will* have an effect on prices?
> 
> How do you know, are you speculating?



No I am not speculating. I did not state what would happen therefore did not speculate what the effects would be. You just aren't good enought to catch me out and my point is well made. 

http://dictionary.reference.com/search?q=speculation


----------



## redo

Loki said:
			
		

> No I am not speculating. I did not state what would happen therefore did not speculate what the effects would be. You just aren't good enought to catch me out and my point is well made.



You did not *speculate *what the possible effect of reduced demand would have on prices but you did say reduced demand *will* have an effect.

You are stating this as fact; reduced demand *will* have an effect.


----------



## soma

This post will be deleted if not edited immediately lads lay off the semantics - its making this thread cluttered alot less interesting to read - the next one to post a link to dictionary.com gets a slap ;-)


----------



## askalot

Um.... very interesting!

http://dictionary.reference.com/search?q=loki


----------



## bearishbull

a troll??


----------



## redo

redo said:
			
		

> You did not *speculate *what the possible effect of reduced demand would have on prices but you did say reduced demand *will* have an effect.
> 
> You are stating this as fact; reduced demand *will* have an effect.



You know you should address your language as unless you can tell the future you are speculating


----------



## Loki

redo said:
			
		

> You know you should address your language as unless you can tell the future you are speculating



You do realise I have been saying I have been speculating and that what is being said here is specultive. Therfore yes I have been speculating and not stating my opinion as fact which was my point.  My language has been a lot more percise than yours as you lost the whole point of what was being siad. You also have to resort to repaeting things I said


----------



## Loki

askalot said:
			
		

> Um.... very interesting!
> 
> http://dictionary.reference.com/search?q=loki



http://en.wikipedia.org/wiki/Loki

Continuely tortured and dangerous like fire


----------



## askalot

Loki said:
			
		

> http://en.wikipedia.org/wiki/Loki
> 
> Continuely tortured and dangerous like fire



The definition of vainity...... looking yourself up on wikipedia!


----------



## Loki

askalot said:
			
		

> The definition of vainity...... looking yourself up on wikipedia!


Becasue I am a norse God and was unaware of the fact the name meant something?  

The definition of vanity is

http://dictionary.reference.com/search?q=vanity


----------



## redo

Loki said:
			
		

> You do realise I have been saying I have been speculating and that what is being said here is specultive. Therfore yes I have been speculating and not stating my opinion as fact which was my point.  My language has been a lot more *percise* than yours as you lost the whole point of what was being siad. You also have to resort to repaetingthings I said



Ok, now we are now getting somewhere.  You have previously said that reduced demand would effect the price, but would not speculate how, ie reduced or higher prices etc.  



			
				Redo said:
			
		

> No, the demand for houses comes from many sectors, including investors. I am simply saying that any fall in demand, (from investors) *will* have an effect on the relative prices or house price inflation, if you will.





			
				Loki said:
			
		

> No your are wrong it is still may. You don't know if investors demand is reduced by punative government intervention that also encourages others. It is not "will" when you are talking speculation it is "I think" "it may".





			
				Loki said:
			
		

> If demand reduces it *will* have an effect what that effect and reactions based on that effect are complete and utter speculation. Lots of factors to consider and a narrow view of possibilities means you are closed minded



You don't mind if I resort to repeating some of your previous statements for clarity.


----------



## Loki

redo said:
			
		

> Ok, now we are now getting somewhere. You have previously said that reduced demand would effect the price, but would not speculate how, ie reduced or higher prices etc.
> 
> You don't mind if I resort to repeating some of your previous statements for clarity.


You are just plain stupid at this point. I am not agreeing with you at any point on this. Saying there will be an effect is not the same as speculating what that  effect  is. I said people should stae they are speculting about effects. I am done you want to think you won something feel free. Your opinin is not fact and is speculation. go back to the start and read why it was said and about what. I will not bother responding to any more on how people are mistating their opinion as fact.


----------



## askalot

Loki said:
			
		

> You are just plain stupid at this point. I am not agreeing with you at any point on this. Saying there will be an effect is not the same as speculating what that effect is. I said people should stae they are speculting about effects. I am done you want to think you won something feel free. Your opinin is not fact and is speculation. go back to the start and read why it was said and about what. I will not bother responding to any more on how people are mistating their opinion as fact.



Maybe you could put that dictionary to good use and start checking your spelling. Drivel is one thing but misspelt drivel is unbearable.


----------



## redo

Loki said:
			
		

> You are just plain stupid at this point. I am not agreeing with you at any point on this. Saying there will be an effect is not the same as speculating what that  effect  is. I said people should stae they are speculting about effects. I am done you want to think you won something feel free. Your opinin is not fact and is speculation. go back to the start and read why it was said and about what. I will not bother responding to any more on how people are mistating their opinion as fact.



This thread is about the *future price of irish properties.*  It is all speculation.  People here are using facts and statistics to augment their points of view.  You continually state that people are *wrong or stupid* when they express their views legitimately.  I don't think that this board is reaps any benefit whilst you are a member.  I urge the admin to give to a ban of a week so that we may continue airing our views.


----------



## Loki

redo said:
			
		

> Gravity is also a *theory.  *I


Wrong.


----------



## askalot

redo said:
			
		

> This thread is about the *future price of irish properties.* It is all speculation. People here are using facts and statistics to augment their points of view. You continually state that people are *wrong or stupid* when they express their views legitimately. I don't think that this board is reaps any benefit whilst you are a member. I urge the admin to give to a ban of a week so that we may continue airing our views.



Seconded.


----------



## Loki

askalot said:
			
		

> Seconded.


Is that becasue you feel better after saying my spelling was wrong and my views a drivel. Glass, stones, live, throw, shouldn't, houses,those, who, live, in. Put into a sentence


----------



## ivuernis

Can we add an poll to this thread so people can indicate whether they are say (a) bullish, (b) undecided, or (c) bearish on the future price of Irish property? 

I've grown weary trying to follow the thread lately since it's snowballed into a semantics debate.


----------



## redo

Maybe a more simplisitic idea would be to vote on the following

> 15% increase
5 to 15 % increase
0 to 5% increase
-5% to 0% increase 

you get the drift.


----------



## CCOVICH

Firstly, most of the recent trouble in this thread appears to be caused by new members.  This thread had been running without any need for moderation until recently.

Secondly, we don't do temporary bans on AAM.  It's permanent or nothing at all.

Thirdly, if somone breaks a Posting Guideline, we will moderate as we see fit.  You can use the 'Bad Post' icon in the top right hand corner of a post if it is in bad taste, insulting etc.

Fourthly, AAM is not a democracy.  So it doesn't matter how many votes we (the Mods and Admins) get from members, we can choose to ignore them if we wish.

So let me finish by saying this:

Cop on to yourselves, respect each others opinions, don't get so worked up about this issue, and abide by the Posting Guidelines.

I won't lock this thread-it is one of the more popular ones on AAM.  But I will ban (permanently) anyone who questions the moderation policy or breaches the Posting Guidlines.

I trust that I am being clear.  If anyone has a problem with anything I have said, take it up directly with _Brendan_, but I doubt that you will get much change out of him.


----------



## redo

redo said:
			
		

> This thread is about the *future price of irish properties.*  It is all speculation.  People here are using facts and statistics to augment their points of view.  You continually state that people are *wrong or stupid* when they express their views legitimately.  I don't think that this board is reaps any benefit whilst you are a member.  I urge the admin to give to a ban of a week so that we may continue airing our views.



However, I do enjoy this debate and would feel that without loki's presence this board/thread would have a detremental effect on the full analysis of the topic.  But no name calling please and perhaps instead of stating that *your wrong *etc, please can we replace with *I don't agree*


----------



## Loki

redo said:
			
		

> However, I do enjoy this debate and would feel that without loki's presence this board/thread would have a detremental effect on the full analysis of the topic. But no name calling please and perhaps instead of stating that *your wrong *etc, please can we replace with *I don't agree*



*Somethings are simply wrong without any opinion.* A definitition  is that, corrections must be made. Opinion is left alone by me but pestering people is unacceptable. If a words or term has a definition there can be only counter defintion no more belief in opinion over fact. Somepeople state things that are untrue and are simple incorrect they will be called on this by me if that means I get banned fair enough.


----------



## redo

Loki said:
			
		

> _Gravity is also a *theory.  *I_
> Wrong.



You have me on this.  Gravity itself is a measurable force but there are theories as to why is exists.  This was the intended meaning, "The theory of Gravity"

Similarily, economics is measurable and there are many classic theories on its effects.


----------



## redo

Fact; 8 out 10 cats prefer whiskers.


----------



## Loki

redo said:
			
		

> You have me on this. Gravity itself is a measurable force but there are theories as to why is exists. This was the intended meaning, "The theory of Gravity"
> 
> Similarily, economics is measurable and there are many classic theories on its effects.


Without going into all of it there are many theories of gravity so you would need to state which one.

Economincs tries objectively to predict and explain consequences of choices. The big thing is any rules or theory of economics is not percise it is a general fuzzy logic. Strangely it is a social science yet does not include how social structures change very much

On the overall front. Property is a risk but for many people an extra property is a smallish risk over the long term and may not balk at a a drop or intrest rate hikes.


----------



## Duplex

Loki you never respond to my posts; but here goes.  

There is a whole branch of economics which deals with what you describe as the cultural context, ie Behavioural Economics, most notably the Austrian School.  Behavioural economics seeks to explain such issues as rising capital values in the face of falling revenues, market booms and busts and investor behaviour.

It is argued that classical economic theory takes little account of human behaviour.


----------



## redo

Loki said:
			
		

> Without going into all of it there are many theories of gravity so you would need to state which one.
> 
> Economincs tries objectively to predict and explain consequences of choices. The big thing is any rules or theory of economics is not percise it is a general fuzzy logic. Strangely it is a social science yet does not include how social structures change very much
> 
> On the overall front. Property is a risk but for many people an extra property is a smallish risk over the long term and may not balk at a a drop or intrest rate hikes.


I think the buy-to-let market is over exposed at the moment.  There are some people who only own one (investment) property (professionals living at home for example).  The most recent purchasers may find, in the comming months, that there is too much supply and the potenial tennants will tend to gravitate (no pun intended) toward properties better serviced by transport etc,  e.g. Apartments in town.  In my opinion, they would have to reduce their rental prices to make their properties more attractive to offset any negativity of their properties' location, if not town based.

Another factor which is not taken into account in the generic house price inflation index that get banded around all the time is famaily homes.  While apartments and duplexes may have a nominal growth of around 3 - 5%, the bigger 4 bed and 3 bed semi d's are surging ahead.  And it is precisely thses properties that "investors" are snapping up


----------



## redo

PS.  I think the Theory of Gravity is beyond the scope of this thread


----------



## beattie

redo said:
			
		

> I think the buy-to-let market is over exposed at the moment. There are some people who only own one (investment) property (professionals living at home for example). The most recent purchasers may find, in the comming months, that there is too much supply and the potenial tennants will tend to gravitate (no pun intended) toward properties better serviced by transport etc, e.g. Apartments in town. In my opinion, they would have to reduce their rental prices to make their properties more attractive to offset any negativity of their properties' location, if not town based.


 
Agree with the above, rental prices in many places which are not well serviced are quite high. As new supply comes on board I believe that real rental prices will fall in the order of 4-5% per year for the next 3-4 years. In my view rent is still quite high here (in Dublin) when compared to other cities such as Stockholm. Previous threads have alluded to places such as Portlaois where 3 beds which used to generate 750pm are now returning less that 500pm. Why would an investor with one property keep such a place?


----------



## Calina

Loki said:
			
		

> On the overall front. Property is a risk but for many people an extra property is a smallish risk over the long term and may not balk at a a drop or intrest rate hikes.


And if they do balk at interest rate hikes and a downward movement in prices, what happens then?

I get kind of lost with your analysis sometimes. There seems to be an awful lot of maybes. Maybe people see it as a small risk, maybe people will hold out. 

You need a lot of faith in people to rely on those maybes though. 

For me, the interesting question is do we or do we not have oversupply at the moment. Assuming that most people here are centring their interest on the investment market, which does, let's face it, appear to be the case, there is some scope to believe that there is excessive supply in some sections of the market. There are some statistics suggesting that 1) up to 40% of recently completed property remains empty and 2) rents are static and dropping. 

These two indicators suggest to me that the rental market is massively oversupplied - even allowing for the influx of workers we have here at the moment. 

The primary purpose of a house is for it to be lived in. It is not to make money. I think we have lost sight of that reality. If 40% of recently completed property is lying empty then we have collectively gotten some sums wrong.


----------



## bearishbull

rents are generally staying flat over last few years,if there was such massive immediate demand for housing why havent rents risen?? if rents arent rising in the current economic environment imagine if all the foreign workers werent here renting !! rents of 3 bed houses are'nt even rising in line with inflation/income growth,this tells me things arent as house prices would lead you to beleive.


----------



## CCOVICH

redo said:
			
		

> PS. I think the Theory of Gravity is beyond the scope of this thread


 
So why bring it up in the first place?

Or the '8 out of 10 cats etc.' comment.

Stick to the original topic.


----------



## redo

redo said:
			
		

> I think the buy-to-let market is over exposed at the moment.  There are some people who only own one (investment) property (professionals living at home for example).  The most recent purchasers may find, in the comming months, that there is too much supply and the potenial tennants will tend to gravitate (no pun intended) toward properties better serviced by transport etc,  e.g. Apartments in town.  In my opinion, they would have to reduce their rental prices to make their properties more attractive to offset any negativity of their properties' location, if not town based.
> 
> Another factor which is not taken into account in the generic house price inflation index that get banded around all the time is famaily homes.  While apartments and duplexes may have a nominal growth of around 3 - 5%, the bigger 4 bed and 3 bed semi d's are surging ahead.  *And it is precisely these properties that "investors" are snapping up*



Read - And it is precisely these properties (Apartments and multi story duplexs that "investors" are snapping up


----------



## derryman

lads - you've convinced me - I'm gonna take that €0.25million profit (after CGT/costs) on the D16 three bed semi I bought during the last "shivers" in late 2001 - buy when its wobbly - sell with a smidgeon in it for paddy last


----------



## redo

CCOVICH said:
			
		

> So why bring it up in the first place?
> 
> Or the '8 out of 10 cats etc.' comment.
> 
> Stick to the original topic.



It was in the conext of economic theories.  Loki was saying theories were not fact, and I used it as an example.


----------



## redo

Please delete cat comment.  Title of topic will be observed in future


----------



## redo

redo said:
			
		

> Please delete cat comment.  Title of topic will be observed in future


Delete this one too.


----------



## askalot

bearishbull said:
			
		

> rents are generally staying flat over last few years,if there was such massive immediate demand for housing why havent rents risen?? if rents arent rising in the current economic environment imagine if all the foreign workers werent here renting !! rents of 3 bed houses are'nt even rising in line with inflation/income growth,this tells me things arent as house prices would lead you to beleive.



I think flatlining or falling rents won't be enough to tip the market over the edge. Alot of first time investors have gone into it blinded by double digit growth and as long that continues they'll stay in the 'game'. Over supply and banks tightening their lending are the things to watchout for.

We may have reached over supply already as many of the properties being built seem aimed at investors and rising interest rates are going to make them think twice. 3 and 4 bed semis will be a bit more resilient.


----------



## redo

askalot said:
			
		

> I think flatlining or falling rents won't be enough to tip the market over the edge. Alot of first time investors have gone into it blinded by double digit growth and as long that continues they'll stay in the 'game'. Over supply and banks tightening their lending are the things to watchout for.
> 
> We may have reached over supply already as many of the properties being built seem aimed at investors and rising interest rates are going to make them think twice. 3 and 4 bed semis will be a bit more resilient.



What may also happen with the recent (and future) interest rate hikes is that investors disposable income will be reduced.  Many of these recent investors were at their limit already and may now re-evaluate their postion.  

As said in previous posts, a sudden surge in supply will dampen house price growth and may lead potential purchasers to adopt the "wait and see" approach.  Up until now, they could not afford to take this position and may have artificially increased the underlying demand/prices they were seeking to avoid.


----------



## redo

House prices spirals can go up aswell as down.


----------



## bearishbull

askalot said:
			
		

> I think flatlining or falling rents won't be enough to tip the market over the edge. Alot of first time investors have gone into it blinded by double digit growth and as long that continues they'll stay in the 'game'. Over supply and banks tightening their lending are the things to watchout for.
> 
> We may have reached over supply already as many of the properties being built seem aimed at investors and rising interest rates are going to make them think twice. 3 and 4 bed semis will be a bit more resilient.


 
yes but rents that arent going higher in line with wage inflation and house price rises indicate supply isnt that far from demand, as i said earlier rents for even the supposed in higher demand 3/4 bed semi's arent rising much if any.


----------



## Neffa

bearishbull said:
			
		

> yes but rents that arent going higher in line with wage inflation and house price rises indicate supply isnt that far from demand, as i said earlier rents for even the supposed in higher demand 3/4 bed semi's arent rising much if any.


 
We're renting a 4-bed and still paying about 60% of the equivalent mortgage cost of owning it. 

Cannot comment on the other sectors but from the postings here it looks like it may extend throughout the food chain


----------



## Neffa

ivuernis said:
			
		

> Can we add an poll to this thread so people can indicate whether they are say (a) bullish, (b) undecided, or (c) bearish on the future price of Irish property?
> 
> I've grown weary trying to follow the thread lately since it's snowballed into a semantics debate.


 
Excellent idea.

Can I also ask if anyone is bullish that they state their cases why? Aside from Loki, no-one has really come forward for that point of view and I'd really welcome some inputs on that side. 

I'm bearish, btw! (I'm sure that didn't surprise many of you).


----------



## askalot

bearishbull said:
			
		

> yes but rents that arent going higher in line with wage inflation and house price rises indicate supply isnt that far from demand, as i said earlier rents for even the supposed in higher demand 3/4 bed semi's arent rising much if any.


Sure. Friends of ours have had to leave Ireland on a work posting for a year and are renting out their 4 bed semi in a well serviced area of south dublin. It took a good 2 mths to get tenants and they had 150 per month knocked off the rent. 

Based on the rent they were actually able to get, anybody buying the house for an investment, using a 15% deposit, would have to make up a shortfall of 200 euro per month on a mortgage for the remaining 85%. And that's with an interest only mortgage.

And every .25% increase in mortgage rates would add 107 euro to the shortfall.


----------



## Neffa

askalot said:
			
		

> Sure. Friends of ours have had to leave Ireland on a work posting for a year and are renting out their 4 bed semi in a well serviced area of south dublin. It took a good 2 mths to get tenants and they had 150 per month knocked off the rent.
> 
> Based on the rent they were actually able to get, anybody buying the house for an investment, using a 15% deposit, would have to make up a shortfall of 200 euro per month on a mortgage for the remaining 85%. And that's with an interest only mortgage.
> 
> And every .25% increase in mortgage rates would add 107 euro to the shortfall.


 
Is the 200/month shortfall after the two recent rises or is it now 414 per month?


----------



## walk2dewater

ivuernis said:
			
		

> _I've grown weary trying to follow the thread lately since it's snowballed into a semantics debate. _


 
Or, ever decreasing circles of progressive ridiculousness?

...lets see, it waddles like a duck, quacks like a duck, floats like a duck... hmmm, but we've never had ducks around these parts, and we really really really dont like ducks... hmmm, so it must be a .............

no definitely not a duck...


----------



## Duplex

Now here’s the rub.  

Many people have identified that investors/speculators seem oblivious to the poor rental yields achievable in the market at present.  It seems that participants are happy to subsidise their properties with out of pocket money.  My explanation for this is a widespread expectation of continuing capital growth that will compensate the investor for their shortfall in rental income (albeit a notional compensation given that a sale has to take place in order to receive any capital gain).

The market at the moment is driven by a widespread, self-enforcing demand loop.  The greater the demand the more prices rise, the more prices rise the greater the demand.


Everyone is crowded around the roulette table, all chips in, ‘all in on black !’ (sound of spinning roulette wheel)  black it is horrrrrahhhy ! again    , ‘all in on black !’ (sound of spinning roulette wheel)  black it is; horrrrrahhhy. etc.

I still think that the market will collapse under its own weight, but not for a while yet.


----------



## jpd

Make sure you're not standing underneath when it does!


----------



## redo

Duplex said:
			
		

> Now here’s the rub.
> 
> Many people have identified that investors/speculators seem oblivious to the poor rental yields achievable in the market at present. It seems that participants are happy to subsidise their properties with out of pocket money. My explanation for this is a widespread expectation of continuing capital growth that will compensate the investor for their shortfall in rental income (albeit a notional compensation given that a sale has to take place in order to receive any capital gain).
> 
> The market at the moment is driven by a widespread, self-enforcing demand loop. The greater the demand the more prices rise, the more prices rise the greater the demand.
> 
> 
> Everyone is crowded around the roulette table, all chips in, ‘all in on black !’ (sound of spinning roulette wheel) black it is horrrrrahhhy ! again , ‘all in on black !’ (sound of spinning roulette wheel) black it is; horrrrrahhhy. etc.
> 
> I still think that the market will collapse under its own weight, but not for a while yet.


 
I agree with that.

I'd also add that alot of these investors have no medium to long term strategy.  They only can see or are only projecting, short term gains.  

They are banking on the market to rise (as outlined above) in order to be within reaching distance of a home, or least, have enough money for a deposit.  There is absolutely nothing wrong with this.  However, they also must take into account, the liquitity of property is not the best and could takes anywhere up to 6 months to sell.  If there was a slight downturn in the property market, you could probably double that figure.

Another category of recent investors that are at risk are the ones who chose property because "it pays for itself, it doesn't cost a thing".  Investors in the buy-to-let market are comforted by the fact that it can be rented out.  And if that does not work out, "Sure, I can always sell it" .  They have "worked" out the figures and "estimate" they would earn an extra 100 euro a month for doing nothing.  Many in this category fail to realise that they have to pax income tax on the total amount of rent received and not on the difference between the rent and the mortgage.  I suspect many of these could not cope for 6 months without any rent, before being forced to sell up at a discount to guarentee a quick sale.

Another section of investors would be the foreign property investors.  They ones who clap themselves on the back for getting guarenteed rental income for 3 years, which in effect they fund themselves by paying over inflated prices.


----------



## Neffa

redo said:
			
		

> Many in this category fail to realise that they have to pax income tax on the total amount of rent received and not on the difference between the rent and the mortgage. I suspect many of these could not cope for 6 months without any rent, before being forced to sell up at a discount to guarentee a quick sale.


 
Just to be clear - you only pay tax on the profit after interest costs, not the total rental income.


----------



## delgirl

redo said:
			
		

> Many in this category fail to realise that they have to pax income tax on the total amount of rent received and not on the difference between the rent and the mortgage.


Whew, am I glad I'm reasonably well informed when it comes to property investment - otherwise I think I'd be off to slit my wrists!


----------



## Duplex

> Another section of investors would be the foreign property investors. They ones who clap themselves on the back for getting guarenteed rental income for 3 years, which in effect they fund themselves by paying over inflated prices.


 


It’s hard to judge the overseas investment market.  The Costa’s market in Spain is probably the most mature market, but I read a couple of weeks ago that prices had fallen by a as much as 30% from the peak (Sunday Times  Ireland Property Supplement).  Seasonal rental income never seemed sufficient to cover the carrying costs of Spanish holiday property, the market seems pretty thin at present with massive inventories and supply still coming on stream.  I have anecdotal information suggesting that vendors are finding it difficult to get agents to accept instructions on second hand units.  My main concern would be mortgage equity released from a bubbly Irish market disappearing into an equally bubbly market in Spain.

Bulgaria seems to have a much shorter season than Spain but a similar capacity to crank up housing production.  I wonder what would have happened in Ireland in 1971 if we had thousands of  Europeans looking to buy flats around our coast ? Would we have built like the clappers as well?, until we had satisfied all the demand and then some ?


----------



## askalot

Neffa said:
			
		

> Is the 200/month shortfall after the two recent rises or is it now 414 per month?


That's after the two recent increases. Luckily for them, they actually bought the house ten years ago and so have a surplus of about 1,000 per month! 

See that was the time to buy. And it is also a pretty good indication of how far off the scale prices have gone.


----------



## Chamar

I would just like to say that driving around Co. Wexford today I was amazed by the amount of "for sale" signs that I passed and also new developments in the relative sticks. Not a very good statistical analysis I know!


----------



## redo

From todays indo

*The hills are green far away, but overseas investments might not match the hype*

  WANNABE 'property millionaires' have been warned to watch out - the overseas property investment sector is rife with scammers. 
  Along with the dodgy scams, the sector is also awash with perfectly legal ploys designed to extra large sums from investors who stand to gain little if anything.

 And the Irish are gaining an international reputation as 'property patsies'. 
    One property market expert told  _Your Money_ this week: "There are three prices for overseas property - the price for the locals, the price for overseas buyers, and the price for the Paddies."

 The selling of apartments for investment is unregulated. So little wonder that supposedly high-yielding properties have often turned into loss-making properties when unrealistic claims about rental yields, capital appreciation and the likes of vandalism and maintenance are factored in.  Consumer activist and founder of the  consumer advice website, _*www.askaboutmoney.com **Brendan Burgess*_, maintains the overseas property investment market is exhibiting signs of a bubble.  "There is a buying frenzy going on out there, and it is a bubble - just like the dotcom or tulip bubbles. People think they should go off and borrow money to buy property.  "But just like any bubble, people at the moment are not looking at the yield and how it relates to the asset. And when that happens, they will be scammed."  Mr Burgess added that some people were breaking every rule in the book. They are buying properties without going to the location, and they are seeking advice from those selling the property instead of independent counsel.

 One property expert conceded: "A lot of people are being taken to the cleaners and they don't know it. The chickens will come home to roost when they find out the rents are not up to it, or that they paid too much."  He said people were trusting selling agents when they make fairytale promises about the rents that can be commanded.

  Often Irish people are borrowing money to buy abroad by remortgaging their Irish home. They are then taking out interest-only mortgages to pay for the foreign investment venture.  Prospective buyers overseas are strongly advised to talk to a variety of estate agents in the area they are considering buying in, and checking out the likes of cost per square metre in the area.  The following are some of the ways property buyers are finding themselves shortchanged.

*Hidden margin for property seller:*

  Investors are being sold apartments at inflated prices. What happens is the property company approaches the developer of an apartment block. The property company offers to sell the entire block.  The property company buys up the apartment units for say €220,000 each and gives the developer between €22,000 per unit upfront.  Developers find it attractive as they get rid of the entire block at a stroke, albeit at a heavy discount.  The apartments are then sold off to Irish investors at a profit of €51,000 per apartment for the selling company. This profit margin for the selling agent is hidden from the buyer.  Property adviser Diamuid Condon warned: "These people are ot breaking any laws. They are using their bulk buying power to take a cut on the price, but this type of thing is inflating the British apartment market, which means the apartments will not be that saleable." 

* Rent guarantee ploy:*

  Another twist on the buy-to-let phenomenon is the way 'guaranteed rents' are used to lure in investors. Investors are typically offered a guaranteed rental income for two years.  But this 'rent guarantee' has been built into the purchase price of the apartment.  In other words, people are paying for the rent guarantee with their own money. And the rental income is taxable. Again, it is not illegal, but poor value.

*   Advertising apartments at a 25pc discount:*

  An old favourite of property sellers in an overheated market is to offer overseas properties at a huge discount, usually 25pc.  "The launch price of €300,000 represents a 25pc discount to market value of €400,000," is a fairly typical sales pitch.  Remember: if it sounds too good to be true, it probably is too good to be true.

*Landbanking:*

  Landbanking involves buying land on the promise or hope that it will be rezoned. Plots are sold for around €10,000. But only later does the investor find out that the land can never be rezoned as it is on the side of a mountain or it is green-belt (protected) land.
*
  Property education seminars:*

 This involves spending €3,700 and going off to a seminar on property buying. After that, you are offered discounts on properties that have been bulk bought. Commissions of 20pc per unit for the sellers are not untypical. 

* Syndicated buying: 

*   This is where prospective property investors pay to join a syndicate. Typical upfront payments are between €12,000 and €15,000. In return, the buy-to-let syndicate then offers 'discounts' on properties. 


 Property advisers say the best way to avoid being scammed and get good value is to source your own property, do plenty of homework, and seek independent advice


----------



## CCOVICH

Please note the Posting Guidlines re. the reproduction of articles.

Would it be an idea for someone to start a thread on the Irish investing in overseas properties and the pros/cons?


----------



## CCOVICH

CCOVICH said:
			
		

> Would it be an idea for someone to start a thread on the Irish investing in overseas properties and the pros/cons?


 
I see that Ric has obliged.

Any commentary/opnion/facts on overseas property in that thread please.


----------



## soma

Neffa said:
			
		

> We're renting a 4-bed and still paying about 60% of the equivalent mortgage cost of owning it.
> 
> Cannot comment on the other sectors but from the postings here it looks like it may extend throughout the food chain


Believe me Neffa that percentage gets even better the more "exclusive" an area you rent in. Im currently renting a 3-bed in one of those areas for a rather tasty *47%* of the cost if you bought with with a 90% mortgage over 30 years. (Obviously that doesnt even include upkeep costs, interest rates hikes, the opportunity cost of having that massive 10% deposit locked up in a non-liquid asset)


----------



## bearishbull

soma said:
			
		

> Believe me Neffa that percentage gets even better the more "exclusive" an area you rent in. Im currently renting a 3-bed in one of those areas for a rather tasty *47%* of the cost if you bought with with a 90% mortgage over 30 years. (Obviously that doesnt even include upkeep costs, interest rates hikes, the opportunity cost of having that massive 10% deposit locked up in a non-liquid asset)


 
yeah ,its not a good time to bed one of those prestige properties,friends have a 3 bed in ranelagh valued at 800k for 1600 a month(cash in hand).i cant beleive how many are still buying in at these prices,maybe they think things cant go wrong or that they will get out in time with a big capital gain.the sooner "investors"  realise that unless you bought before 2004 you are taking a big gamble the better.


----------



## redo

Also, property "investors" seem to be buying anything, miles out of Dublin.  The only trueism in the property market is _*Location, Location, Location.*_


----------



## Duplex

I’ve attached (below) a first hand account of a realtor’s quest to buy a new house for clients in Sacramento California.  It seems that home builders are discounting heavily, and this is before the spring ‘season’.   These guys (the builders) must be working off fat margins if the can take a hit of 20% on a new build.  

Has anyone any thoughts on the sudden jump in the American Bond (Treasury) market yesterday.  Though the yield curve remains inverted, it seems that some commentators are predicting that the Yen carry trade will be impacted by a rise in Yen rates in the near future.
(The carry trade makes money by borrowing cheaply in Japan and investing in Dollar debt which has a higher yield).    The jump in 10 year bonds is likely to add to the cost of borrowing in the US. 

 I still can’t figure what the Fed is up to, the new Chairman is about to stop reporting one measure of money supply M3, he has made remarks in the past about printing more dollars (hence liquidating lots of American debt), The Chinese, Japanese and Saudi’s it seems are still buying dollar debt, the US Senate has yet to vote to increase the debt ceiling above $8.2 trillion.  The US housing market has slowed very quickly, inventories are at all time highs so the demand for credit seems to be slowing. 

Anyone with a guess where the US economy is heading?  








[broken link removed]


----------



## glendale

The quaterly Daft report is now availabile from [broken link removed]

It seems rents are slightly up, House prices up and yeilds down.
Their house price index is based on asking price rather than selling price so it should be an early indicator of any changes in the market.

Interestingly they say that while the spending of the SSIA money will attract more renters to work in Ireland on the other hand some SSIA money will be used to buy investment property thus increasing supply.


----------



## bearishbull

Duplex said:
			
		

> I’ve attached (below) a first hand account of a realtor’s quest to buy a new house for clients in Sacramento California. It seems that home builders are discounting heavily, and this is before the spring ‘season’. These guys (the builders) must be working off fat margins if the can take a hit of 20% on a new build.
> 
> Has anyone any thoughts on the sudden jump in the American Bond (Treasury) market yesterday. Though the yield curve remains inverted, it seems that some commentators are predicting that the Yen carry trade will be impacted by a rise in Yen rates in the near future.
> (The carry trade makes money by borrowing cheaply in Japan and investing in Dollar debt which has a higher yield). The jump in 10 year bonds is likely to add to the cost of borrowing in the US.
> 
> I still can’t figure what the Fed is up to, the new Chairman is about to stop reporting one measure of money supply M3, he has made remarks in the past about printing more dollars (hence liquidating lots of American debt), The Chinese, Japanese and Saudi’s it seems are still buying dollar debt, the US Senate has yet to vote to increase the debt ceiling above $8.2 trillion. The US housing market has slowed very quickly, inventories are at all time highs so the demand for credit seems to be slowing.
> 
> Anyone with a guess where the US economy is heading?
> 
> 
> 
> 
> 
> 
> 
> 
> [broken link removed]


 
he wont print loads of dollars,increasing money supply would increase inflation(i assume he's a monetarist) and decrease dollar,higher inflation would require higher interest rates and higher rates would hit economic growth.the reason he talked about printing money was to stop defaltion which was feared a while back,deflation is what had such a bad effect during the great depression.


----------



## soma

glendale said:
			
		

> Their house price index is based on asking price rather than selling price so it should be an early indicator of any changes in the market.


What's interesting in the current market is that the asking prices are 'phrased' 
in a way that displays the real price IMO.

A House that you see with an asking price of 350-360 seems to be code for "up to 381k" etc.

A friend went along to a 2-bed house in donaghmede (sp?) a few months back. The asking price was 330k. Himself & his girlfiend bid *straight away* 381k (an amazing 51k leap) because "it will end up there anyway". (they had already been out-bid on other houses about a dozen times, I kid you not).

Just to show the level of interest/madness [delete as appropriate], a bid of 382k came in. (I shudder at the thought of breaking that stamp duty threshold of 7.5%..). However my friend's bid of 381 was accepted as he + his girlf were FTBs who wanted to move quickly whereas the other party were in a property chain.

What I think will be interesting to see when the inevitable slowdown ocours is.. I wonder what will be the 'acknowledged' price of his house.. will it be the asking (330k).. the eventual (381k), somewhere in between, or higher/lower.


----------



## ivuernis

soma said:
			
		

> Just to show the level of interest/madness [delete as appropriate], a bid of 382k came in. (I shudder at the thought of breaking that stamp duty threshold of 7.5%..). However my friend's bid of 381 was accepted as he + his girlf were FTBs who wanted to move quickly whereas the other party were in a property chain.


 
If there were no other FTBs bidding perhaps the seller would've accepted a bid less than the 381k in the interest of a quick sale rather than the 382k bid, but they'll never know now since they jumped in with an initial bid of 381k. 

I know of people who've done the same and I can't understand it (well I can understand it but the logic of it seems flawed). They are making value assessments based on stamp duty thresholds rather than a value estimation based on the property, location, etc.


----------



## beattie

glendale said:
			
		

> The quaterly Daft report is now availabile from [broken link removed]
> 
> It seems rents are slightly up, House prices up and yeilds down.
> Their house price index is based on asking price rather than selling price so it should be an early indicator of any changes in the market.
> 
> Interestingly they say that while the spending of the SSIA money will attract more renters to work in Ireland on the other hand some SSIA money will be used to buy investment property thus increasing supply.


 
What I found interesting was that they indicated that rents actually dropped from January to February but they said that this was due to seasonal factors. I am at a loss to try and think what these factors are. Also I think that this report is quite disappointing as it is not as granular as previous ones, I was particularly looking to the Sandyford area to see what the TTL was.


----------



## redo

ivuernis said:
			
		

> If there were no other FTBs bidding perhaps the seller would've accepted a bid less than the 381k in the interest of a quick sale rather than the 382k bid, but they'll never know now since they jumped in with an initial bid of 381k.
> 
> I know of people who've done the same and I can't understand it (well I can understand it but the logic of it seems flawed). They are making value assessments based on stamp duty thresholds rather than a value estimation based on the property, location, etc.


 
I did more or less the same a few weeks ago.  Made a bid on the property on 860 and then next day upped it to 895.  I was hoping to scare the competition away as I loved the house.  After a week or two, I realised that I scared the wrong people away, ie the people who were going to drop out away and left the serious bidders in the game.  I would hate to be doing it again as we have gone sale agreed on a house around 2 weeks ago.


----------



## redo

It had an asking price of 800k and went eventually for 1,035k


----------



## askalot

The average return on pensions over the last 15 years was 850%.

And as always you have to bear in mind that past performance is just that; in the past. But if we take that as a benchmark, it follows that if property outperforms stocks over the next 15 years then the 'average' 450,000 euro investor property will be worth more than 3,825,000 euro in 15 years time.

So will 2 bedroom apartments in Dublin be selling for 4 million or more by 2021? If you answer yes and feel confident in your answer then you should take the plunge!

Personally I think the figure shows the insanity of the current property investor frenzy.


----------



## walk2dewater

Duplex said:
			
		

> Anyone with a guess where the US economy is heading?


 
Sideways?  I have been an active investor coming on two decades now and right this minute I am utterly stumped as to where to put my money.  I can't believe Im heading to 20% in gold... but I am.. cos its about all that makes any sense to me... above ALL I really hope the US avoids outright recession.  I hope and pray the 'muddle through' scenario occurs, cos I think if US economy goes -ve it won't be minor or short-lived... it'll trigger so many 'corrections' all over the bl00dy place

Duplex, tell me everythings OK with the US economy


----------



## Neffa

redo said:
			
		

> It had an asking price of 800k and went eventually for 1,035k


 
Redo, I'm very curious since you've told us you've bought something very recently. This thread is mostly bearish but I assume you are optimistic about future price growth - it would be great to hear more about your views.

Cheers

Neffa


----------



## redo

It was a family home for a new baby, not an investment.  About 8-10 years ago, alot of people were commenting on the prices of houses.  "You'd be mad to pay that much etc".  6-8 years ago, I bought a home for myself, to basically get on the ladder.  I'm glad I did.  However, if you think back to that time 8-10 years ago, you would probably think one had gone completly lula if they said they were investing in property, save for the people who had inherited houses or large sums of money.

The main reason that there are so many investors out there is due to the banks' willingness to throw money at you.  In todays market, I find this hard to understand,  5 years ago, yes I could understand it.  But in todays' market?  

Dan McLauglin et al, are facing a dilemma.  They probably see the market slowing down over the next couple of months, maybe years.  Previously, when their lending practices were very tight, property investment was the place to be.  They don't want to be seen as contradictory, on the one hand saying that the outlook for the property market is good, yet, reducing their exposure to the property maket with tighter money supply and more cautious lending practices.  It is the banks that are controlling the market now, and they know it.  It won't be long now before the banks start offering 50 year "Family Mortgages".  

These banks know, sure *IF* the property market collapses, and we can't sell the houses by mortagage defaulters, in a declining market, the Government will bail us out, like the last time.


----------



## tiroileain

redo said:
			
		

> These banks know, sure *IF* the property market collapses, and we can't sell the houses by mortagage defaulters, in a declining market, the Government will bail us out, like the last time.


 
How would the government bail us out? What happened last time?


----------



## ubiquitous

> These banks know, sure IF the property market collapses, and we can't sell the houses by mortagage defaulters, in a declining market, the Government will bail us out, like the last time.



Regardless of who is in power next time there is a recession, the Government will be one of the worst hit - as their income from stamp duty, CGT and VAT on discretionary purchases will plummet. 

The Govt weren't too interested in stumping up even comparitively modest sums to bail out lossmaking Eircom shareholders so I wouldn't be hopeful that they would want to bail out stricken property investors even if they had the finances to do so.


----------



## redo

I meaning was that the Government would bail out the banks, via legislation or the likes.   I was speaking in first person from the banks point of view.


----------



## ubiquitous

> I meaning was that the Government would bail out the banks, via legislation or the likes.



State aids to individual businesses or industry sectors have been outlawed by the EU ever since the Single European Act came into force in the early 1990's. As a result at least one European government (Belgium, if I remember correctly) has been powerless to stop its own national airline from going bust.

EU competition law now also prohibits governments from using legislation as a means to prop up or protect businesses or industries.

None of this legislative framework was in place when the State rescued AIB from the ICI crisis in the mid 1980s


----------



## Duplex

WTTW 

My impression is that the general global rise in interest rates is possibly reactive to some inflationary pressure building in western economies, possibly specifically targeted at asset bubbles.  

The move by the Bank of Japan to raise rates for the first time in a decade is, it seems, the most significant piece of news on the money markets in some years.  I’ve attached a couple of informative articles, one by Stephen Roach Chief Economist of Morgan Stanley which give some good background as to the likely causes of the Japanese shift in policy.

I’d be keeping my eye on the American housing market which, as you know, has sustained the American economy in the wake of the Dot Com bust in 2000. As the market slows equity release and consumer spending will be hit, I’m afraid I can’t see the US or us escaping unscathed.  I still see this tightening, as short term; inflationary pressures are not great (if they were Japan wouldn’t have (effectively) 0% interest rates) nevertheless the banks will want to know that the medicine has worked. 

As for investment advice what about a flat in Budapest, they seem to be an excellent hedge against any possible global economic scenario.  

http://money.cnn.com/2006/03/03/news/international/chinasaving_fortune/


[broken link removed]


----------



## beattie

Duplex said:
			
		

> WTTW
> 
> My impression is that the general global rise in interest rates is possibly reactive to some inflationary pressure building in western economies, possibly specifically targeted at asset bubbles.
> 
> The move by the Bank of Japan to raise rates for the first time in a decade is, it seems, the most significant piece of news on the money markets in some years. I’ve attached a couple of informative articles, one by Stephen Roach Chief Economist of Morgan Stanley which give some good background as to the likely causes of the Japanese shift in policy.
> 
> I’d be keeping my eye on the American housing market which, as you know, has sustained the American economy in the wake of the Dot Com bust in 2000. As the market slows equity release and consumer spending will be hit, I’m afraid I can’t see the US or us escaping unscathed. I still see this tightening, as short term; inflationary pressures are not great (if they were Japan wouldn’t have (effectively) 0% interest rates) nevertheless the banks will want to know that the medicine has worked.
> 
> 
> 
> http://money.cnn.com/2006/03/03/news/international/chinasaving_fortune/
> 
> 
> [broken link removed]


 
Will the ECB have to track a move upwards in US rates or could they allow the differential between US & ECB rates to widen? If they follow the former this could cause some ripples to be felt here sooner than some had expected


----------



## ivuernis

beattie said:
			
		

> Will the ECB have to track a move upwards in US rates or could they allow the differential between US & ECB rates to widen? If they follow the former this could cause some ripples to be felt here sooner than some had expected


 
I guess they would like to keep them within a certain range of the FED rate. If the FED rate continues to rise but the ECB rate doesn't then this makes the Dollar a more attractive investment than the Euro and affects the exchange rate between the two currencies which would have a knock-on affect on imports and exports and the Eurozone economy. 

Interesting article from The Guardian last week on the ECB and FED's different approach on raising interest rates... 
http://business.guardian.co.uk/notebook/story/0,,1721263,00.html


----------



## walk2dewater

ivuernis said:
			
		

> I guess they would like to keep them within a certain range of the FED rate. If the FED rate continues to rise but the ECB rate doesn't then this makes the Dollar a more attractive investment than the Euro and affects the exchange rate between the two currencies which would have a knock-on affect on imports and exports and the Eurozone economy.
> 
> Interesting article from The Guardian last week on the ECB and FED's different approach on raising interest rates...
> http://business.guardian.co.uk/notebook/story/0,,1721263,00.html


 
Sentiment hangs on interest rate EXPECTATIONS, not rates per se.  Currently we're at "they won't go higher than 4%" stage.  Imagine the effect when we switch to "they're going to 4% earlier than we thought, they're aint stopping there, and the hikes are getting more frequent".  How many nouveau landlords with under water 'investments' are going to get cold feet then?


----------



## bearishbull

ivuernis said:
			
		

> I guess they would like to keep them within a certain range of the FED rate. If the FED rate continues to rise but the ECB rate doesn't then this makes the Dollar a more attractive investment than the Euro and affects the exchange rate between the two currencies which would have a knock-on affect on imports and exports and the Eurozone economy.


yes inflation would be affected by a weaker euro which would occur if rates were much lower than usa.the ecb's primary objective is to control inflation even at expense of higher growth.


----------



## Duplex

A caveat this is a very much a humble opinion. 

The principle concern and remit of the ECB is price stability, so I assume that they will address interest rate policy with the aim of maintaining inflation/deflation within their target range. 

I don’t think that the money markets would be massively surprised if the Fed went to 5% the question is are they targeting signs of inflation in the broader economy (no in my opinion, incomes growth is pitiful in the US) or are the Fed looking at the housing bubble, (I know asset bubbles are ‘supposed’ to be outside their remit btw).  The dollar yield curve remains inverted, the Euro curve has risen, but nothing drastic seems apparent on the horizon.  

It may be the case that the actions of the Bank of Japan will eventually push Euro rates beyond 3.5 to 4% but that would be an absolute maximum in a global deflationary environment IMHO.   The general consensus seems to be that the liquidity party is over (and just when everyone was starting to have fun).  

Interest rates and bond rates are intriguing (believe me) but that is because they are transparent quantifiable figures with nice graphs etc. The Big Daddy of global economics is   what the British call the Trade Cycle and the Americans the Business Cycle.  Economic history is a tale of growth followed by retraction.  

Sometimes (foolishly) I get the impression that governments and central bankers would like to give the impression that they have somehow mastered the cyclical swings of growth and decline, but of course they haven’t.   I see interest rate policy as reactive, behind the curve.  It’s what interest rates are reacting too that’s important.



http://www.bloomberg.com/markets/rates/germany.html


I’ve attached the Bloomberg Rate and Bonds data which makes for interesting reading.


----------



## beattie

Duplex said:
			
		

> .
> 
> I don’t think that the money markets would be massively surprised if the Fed went to 5%


 
I was watching CNBC last last and they had an analyst from HSBC on indicating that the Fed going to 5.5% was nearly a given.


----------



## Duplex

Well it looks like the Fed are targeting the bubble.  A bursting bubble like that seen in Japan, Singapore, Hong Kong etc. can have a verty long term impact a short sharp shock may be what the Fed is aiming for.


----------



## Loki

Duplex said:
			
		

> Well it looks like the Fed are targeting the bubble. A bursting bubble like that seen in Japan, Singapore, Hong Kong etc. can have a verty long term impact a short sharp shock may be what the Fed is aiming for.


Weren't the other crashes at least partially caused by attempts by banks to control the market? Of course it can be argued that what happens in the american market would effect here but the topic is Irish Property Prices.  Instead of debating that why aren't people saying if the crash happens in the US the effect will be what here? 
The ECB actions maybe a bit more important to us. Of course it still can't be called a bubble untill it sharply falls but many people like to exagerate. I noticed  recently that reporters now say "exhibits signs of a bubble". I would put this down to the fact they know it isn't a bubble by definition unless a crash happens


----------



## ivuernis

Loki said:
			
		

> Weren't the other crashes at least partially caused by attempts by banks to control the market? Of course it can be argued that what happens in the american market would effect here but the topic is Irish Property Prices. Instead of debating that why aren't people saying if the crash happens in the US the effect will be what here?


 
Obviously the ECB's actions are more directly important to us here in Ireland than the Fed's actions, but it's the Fed's aggressive interest rate hikes of late that are having some affect on the ECB decision to put up rates aswell, thus affecting us indirectly.


----------



## ivuernis

Loki said:
			
		

> Of course it still can't be called a bubble untill it sharply falls but many people like to exagerate.


 
It's a bubble until it bursts after which it is no longer a bubble.


----------



## Duplex

_LOKI_


_"I can calculate the motions of heavenly bodies, but not the madness of people."
_-Issac Newton 1721, after being ruined by the South Sea Bubble.


----------



## Loki

Duplex said:
			
		

> _LOKI_
> 
> 
> _"I can calculate the motions of heavenly bodies, but not the madness of people."
> _-Issac Newton 1721, after being ruined by the South Sea Bubble.


SO lets get this straight Issac Newton admitted he could not predict what would happen in a market and  people here keep claiming they can! 
i
vuernis

You still can't *call* (and be correct) it a bubble untill after a crash as it isn't a bubble till that happens. The fact there is no longer a bubble at that point means nothing. 

People can't agree on where the bubble started so effectively people mean high prices that they beleive will be proved to be a bubble. To a certain extent it is a bit like saying the hare will win the race not the dogs.


----------



## gearoidmm

Just when I thought we had settled into an interesting discussion on the effect of monetary policy tightening in Japan and the US on ECB interest rates (and indirectly on their effect on house prices), we're back to semantics again


----------



## ivuernis

Loki said:
			
		

> You still can't *call* (and be correct) it a bubble untill after a crash as it isn't a bubble till that happens. The fact there is no longer a bubble at that point means nothing.


 
A crash could happen with or without a bubble preceding it, so using the post-crash criteria as proof of the existence of a preceding bubble is not valid.


----------



## ivuernis

gearoidmm said:
			
		

> effect of monetary policy tightening in Japan and the US on ECB interest rates (and indirectly on their effect on house prices),


 
As the main remit of the ECB is to curb inflation then I think the trend for the eurozone will be higher interest rates (how much and how fast is open to debate) even without the added Japanese and US interest rate rises because medium and long term trends for energy prices are upwards and this is going to fuel (no pun intended) inflation. 

There may be a short-term drop in certain energy prices but the medium and long term energy prices can only keep pushing inflation upwards which may necessitate further interest rate increases. Even if rising energy prices don't lead to higher interest rates they will hit people in the pocket thus putting a curb on spending especially those in the car-dependent commuter belts. 
 



			
				gearoidmm said:
			
		

> we're back to semantics again


 
I know. And I know I complained about it previously too, but this time I couldn't let it go... sorry!


----------



## Loki

gearoidmm said:
			
		

> we're back to semantics again


It isn't semantics  because to say it is a bubble is a claim of actual events. It has a definition which requires certain events to happen.  If you were to say an explosion just happened when somebody lput a fire work on the table  you would be  either  
a) Lying
b) Wrong
Not a matter of semantics as people aren't arguing the meaning of the word they are claiming it has happened which it hasn't


----------



## Neffa

There was a supplement with the Irish Times yesterday with a commentary from HOK on residential and commercial prices. 

One of the things which really threw me was that they claim that for the average purchase in Ireland for residential, only 65% is actually borrowed. This seems incredibly low to me - if it were true, then the risk of negative equity in the event of a correction would be much lower.

Can anyone explain/back this up? Is it equity withdrawal funding investment purchases being counted as "deposit" money? Or are large deposits common and not reported much?

....and I'm not getting drawn into the semantics debate again.....!


----------



## bearishbull

Neffa said:
			
		

> There was a supplement with the Irish Times yesterday with a commentary from HOK on residential and commercial prices.
> 
> One of the things which really threw me was that they claim that for the average purchase in Ireland for residential, only 65% is actually borrowed. This seems incredibly low to me - if it were true, then the risk of negative equity in the event of a correction would be much lower.
> 
> Can anyone explain/back this up? Is it equity withdrawal funding investment purchases being counted as "deposit" money? Or are large deposits common and not reported much?
> 
> ....and I'm not getting drawn into the semantics debate again.....!


 
its an average ,i wouldnt read too much into it,obviously if you trade up to a bigger more expensive house and have large amount of equity in old home you may only need a mortgage for 50% of new houses price.


----------



## tiger

bearishbull said:
			
		

> its an average ,i wouldnt read too much into it,obviously if you trade up to a bigger more expensive house and have large amount of equity in old home you may only need a mortgage for 50% of new houses price.


 
Yes, I would see a no. of things here:
- people who bought 10+ years ago & are now doing equity releases to buy cars or consolidate other loans are probably included.
- a person who does an equity release to buy an investment property probably shows up as 2 50% mortgages rather than 1 90% mortgage.
- people who are buying property at €400-500K upwards are probably trading up & have significant equity.


----------



## Loki

tiger said:
			
		

> - people who are buying property at €400-500K upwards are probably trading up & have significant equity.



Isn't the average house price in Dublin about €400 (€380)? I wouldn't think that price range is the big group trading up. 

I don't disagree with the sentiment. Many people buying  have money and as I suggested before  borrowing on the equity of your house and buying a second property if your mortgage is low enough is a small liability for many. I know people who own 3 properties with badish yields (at the start) but paid out less than their neighbour did  for their home on the same street.  Now they get income from their property reducing their own home mortgage. It has risks but  if it works you can end up very well off.


----------



## Duplex

Back to semantics again, sorry.   

There is only one way to ‘release’ equity from an asset that is by selling it, i.e. you don’t pay interest on equity.  ‘Equity release’ (marketing flannel phrase) is a loan/debt secured against the notional value of the asset; you will pay interest on this debt. 


PS
I’m watching a sample housing estate approx. 20 miles from Dublin. Large estate built in the late 90’s early 00’s, uniform housing type.    My comparable evidence is showing an average 23.5% increase in asking prices yoy.


----------



## tiger

Loki said:
			
		

> Isn't the average house price in Dublin about €400 (€380)? I wouldn't think that price range is the big group trading up.


 
Don't have my back of envelope with me, but I think if you look at it from the bottom up, the most money most first time buyers would be able to get would be for a €400K property, or a little higher.  e.g. dual income of €80K, max monthly mortgage payments of 40% of disposable income, spread over 35 years.  (I think the banks stress test by an additional 2% also).


----------



## Loki

tiger said:
			
		

> the most money most first time buyers would be able to get would be for a €400K property, .


But FTBs aren't the only people buying houses so what does that have to do with it? People buying buying are people buying. I find it strange how everybody here assumes from the lowest level. One minute the investors are increasing prices and the next the only people buying  property are FTBs! Not saying you tiger but it seems to be the way



			
				Duplex said:
			
		

> Back to semantics again, sorry.
> 
> There is only one way to ‘release’ equity from an asset that is by selling it, i.e. you don’t pay interest on equity. ‘Equity release’ (marketing flannel phrase) is a loan/debt secured against the notional value of the asset; you will pay interest on this debt.
> 
> 
> PS
> I’m watching a sample housing estate approx. 20 miles from Dublin. Large estate built in the late 90’s early 00’s, uniform housing type. My comparable evidence is showing an average 23.5% increase in asking prices yoy.


That would be semantics but as that is what it is called by the banks you understand what I am saying  unlike a bubble that is a claim of an actual event happening. A property bubble has a scientifc definition. The financial aspect is you can do it and make money with a relatively small risk. These maybe the investors people complain about pushing up the price.  You can have tow families with the same income with one family paying more on their mortgage for one house than somebody who owns 4 houses. Even if prices crash the guy with 4 houses is better off in the long run in all likely events.

Asking prices are not what they will sell the house at but what price they market the houses at to sell it. They range from 20% below expected price to 20% above. It depends on what level of the market you are buying. Some estate agents will tell you what it is as a rule of thumb they use.


----------



## redo

http://www.propertybubble.com/


----------



## Calina

Loki said:
			
		

> People buying buying are people buying.


Illuminating




			
				Loki said:
			
		

> Asking prices are not what they will sell the house at but what price they market the houses at to sell it. They range from 20% below expected price to 20% above. It depends on what level of the market you are buying. Some estate agents will tell you what it is as a rule of thumb they use.


I'm not really interested in what some estate agents do - but I will say this - if someone wants to sell a property at 275KE and advertises it at "offers in excess of 230KE" to draw the punters in then I think they're lying. 

And I don't much like liars. The fact that it might be standard practice doesn't make me like it any more.


----------



## tiger

Loki said:
			
		

> But FTBs aren't the only people buying houses so what does that have to do with it?


 
That's what I was saying, using my "calculations" most people buying at the €400-500K up level would have to be trading up or have equity/resources from somewhere else.

I think threads are getting crossed here


----------



## Loki

Calina said:
			
		

> Illuminating


lol typing estate




			
				Calina said:
			
		

> I'm not really interested in what some estate agents do - but I will say this - if someone wants to sell a property at 275KE and advertises it at "offers in excess of 230KE" to draw the punters in then I think they're lying.
> 
> And I don't much like liars. The fact that it might be standard practice doesn't make me like it any more.


That's nice but what you think about the world you live in really means nothing. It isn't lying but misleading at worst. As I said the estate agents will tell you so not exactely lying.  
You have to live in this world and you proably won't get a chance at another so I suggest you deal with it as is instead of objecting to somthing based on what you think is right.  Life will be very unhappy for you otherwise. Sometimes you have to change not the world. WHat are you going to do when you buy? Sounds like you will just be extra stressed


----------



## Loki

tiger said:
			
		

> That's what I was saying, using my "calculations" most people buying at the €400-500K up level would have to be trading up or have equity/resources from somewhere else.
> 
> I think threads are getting crossed here



My point is the people buying don't need to be upgrading  but I see what you are saying.


----------



## Theo

Calina said:
			
		

> Illuminating
> 
> 
> 
> I'm not really interested in what some estate agents do - but I will say this - if someone wants to sell a property at 275KE and advertises it at "offers in excess of 230KE" to draw the punters in then I think they're lying.
> 
> And I don't much like liars. The fact that it might be standard practice doesn't make me like it any more.


 
I appreciate you don't like this practice, but by those standards, every advertisement you see around you is a lie. 

What you describe as a lie, I see as salesmanship and every salesperson worth their salt knows they have to "fake it till they make it".

Sorry if you don't like it, but that's just the way it is.

Anyway, i am going off topic here.


----------



## CCOVICH

Let's keep it on topic.


----------



## walk2dewater

CCOVICH said:
			
		

> Let's keep it on topic.


 
we're on topic? oh right, the Future Price of Irish Properties. Hmm I'd say, up a lot this year, up some more next year etc, etc until the ECB takes away our smarties... then a bit of a national tantrum, by which time we might just have the most expensive, smallest and most hastily built houses in the world, followed by an excruiating process of prices winding back to x3 or x4 average incomes ... and a country full of a lot of very upset and indebted people...

ok, back to it's-not-a-bubble-until-after-it-bursts-and-even-then-it-was-never-a-bubble-cos-real-bubbles-are-in-baths debate


----------



## sonar

walk2dewater said:
			
		

> Hmm I'd say, up a lot this year, up some more next year etc,


 
You're darn toutin' they will.

In fact, I already pushed prices up 5% on a street in Dublin in just a couple of hours last week.

I found a house I really liked that had one bidder and a vendor close to agreeing the sale price. I started moving the bid upwards. After it had gone 5% higher than the record sale price for that street, I was outbid again and at that point I "walked away"

On reflection, I realised it was so easy for me - Mr Nobody on the phone (no id required) - to push this price up significantly. Demand and supply my a***. There's nothing beats the combination of frenzied-manipulated buyers and profit-crazed banks !

I lost out on the house but maybe in some small way I helped move house prices closer to the breaking point.


----------



## Calina

sonar said:
			
		

> You're darn toutin' they will.
> 
> In fact, I already pushed prices up 5% on a street in Dublin in just a couple of hours last week.
> 
> I found a house I really liked that had one bidder and a vendor close to agreeing the sale price. I started moving the bid upwards. After it had gone 5% higher than the record sale price for that street, I was outbid again and at that point I "walked away"
> 
> On reflection, I realised it was so easy for me - Mr Nobody on the phone (no id required) - to push this price up significantly. Demand and supply my a***. There's nothing beats the combination of frenzied-manipulated buyers and profit-crazed banks !
> 
> I lost out on the house but maybe in some small way I helped move house prices closer to the breaking point.


Was at a viewing today where the "latest offer" went up 18 thousand euro in the space of about ten minutes. Walked away because I've slightly different definitions of "turnkey condition" and "you can just move right in" plus other issues relating to the property. 

Not sure I understand people any more. Time was, if you were interested in buying somewhere, you went and looked at it, and then went away and thought about it, the pros and the cons. Today, apparently was the first viewing, and there was a bidding war in operation already. 

It doesn't strike me that common sense, as such, is being applied. You look at somewhere for five minutes and decide, yeah, you'll fling a few hundred thousand at it. 

There wasn't anything special about the place, it was just a two bedroomed apartment in the middle of acres of housing estate. 

So, my latest feeling on future movements of property prices: it looks to me as if collectively, a lot of people are not approaching this with any sense of rationality. This state of affairs could last for quite a long time because there is no accounting for the will of man and woman with mortgage approval. But it cannot last indefinitely. By the time it comes to an end though, I might have skipped the country. I'm seeking the logic in staying somewhere with a woefully inadequate transport - either personal or public - infrastructure, bloody expensive and average quality (at best) sprawled out housing, where it _rains_ as well...and I'm not finding it. It must be hidden somewhere but darn it to hell, I just can't see it.


----------



## Eurofan

Calina said:
			
		

> So, my latest feeling on future movements of property prices: it looks to me as if collectively, a lot of people are not approaching this with any sense of rationality.


Your analysis parallels exactly the way we've been thinking for a while now. No-where in the purchase of property today are the 'normal' questions being asked about suitability of the property/location/amenities for your particular life.

Instead all that seems to matter is A/Will i get mortgage approval and B/Can i commute to work from there.

Anything else is largely irrelevant since we'll trade up in a few years time and make a bomb on it.



			
				Calina said:
			
		

> This state of affairs could last for quite a long time because there is no accounting for the will of man and woman with mortgage approval. But it cannot last indefinitely. By the time it comes to an end though, I might have skipped the country. I'm seeking the logic in staying somewhere with a woefully inadequate transport - either personal or public - infrastructure, bloody expensive and average quality (at best) sprawled out housing, where it _rains_ as well...and I'm not finding it. It must be hidden somewhere but darn it to hell, I just can't see it.



Snap again. We're reasonably well traveled and there are plenty of options out there. Our priority is quality of life; the ridiculous level of house prices, appauling infrastructure, woeful health care and high cost of living mean we are definately looking elsewhere. Oh and the weather too 

'On topic' though during a recent conversation with friends who've recently bought somewhere they really don't like 'to get on the ladder' the possibility of stagnation in the market or even slight neg equity came up. Like many sub-30s buying starter homes in todays market they're no intention of staying in the property more than a few years and then trading up.

If that became an impossiblity due to a market correction they happily provided the solution "we'd toss the keys back to the bank and get on the next plane out of here". I doubt they'd be alone.


----------



## Duplex

You’d be surprised how common the ‘midnight flit’ was in London in the early 90’s, especially among Irish buyers


----------



## beattie

After reading some of the recent posts I am further convinced that the only thing to restore some sense of normality is a large increase in interest rates (3.5%+). People are happy to take on ridiculous levels of debt just to get a foothold and then trade up. I thought the increase in housing stock was going to provide some long needed balance but some investors are happy to top up the difference between the rent and the monthly repayments as capital appreciation is still going strong. I notice that there is an increase in the 100% mortgage ads on the tv over the past couple of weeks. It would be interesting to get some data from an 'insider' on who exactly are buying these investments.  The party will go on for some time methinks


----------



## tiroileain

> I might have skipped the country. I'm seeking the logic in staying somewhere with a woefully inadequate transport - either personal or public - infrastructure, bloody expensive and average quality (at best) sprawled out housing, where it _rains_ as well...and I'm not finding it. It must be hidden somewhere but darn it to hell, I just can't see it.


You've hit the nail on the head for me there. I've already left. Buying something in Ireland just didn't make sense to me. Like many I missed the boat a few years ago, and the size of any potential purchase (in Dublin) got a lot smaller. I had no intention of living in the 'burbs in a city with an extremely poor transport system among other social problems. Other "cities" in Ireland just don't have the choice of employment in my field (IT), and prices (e.g. Galway) have also gotten out of hand anyway. I've no idea if there will be a major correction in the market, but I won't be surprised if there is. I think that a lot of people who have stretched themseleves with a large mortgage will feel the pinch in the years to come. Higher interest rates, and more expenses (children, etc.) in a relatively low inflation environment that won't erode mortgage debt so quickly. 

Ireland is a "richer" country now, but paradoxically homes are getting smaller, and having a family less affordable. This is despite higher (inflation adjusted) wages, more flexible borrowing terms, lower interest rates, lower unemployment, and often two people paying a mortgage. This is capitalism at it's best, a sudden change to a rich hierarchy with the nouveax riche landowners and developers and associates at the top sipping champagne bought with the profit paid by plankton on 1 bedroom apartments bought for €280K in some "luxury" development somwhere in Blanchardstown. I just couldn't bring myself to top up those champagne glasses though.

The mechanics of supply and demand. It's interesting. It's because there is more money about, property has been squeezed skywards to the maximum (or have we got more to go). I see it in my own field (IT Contractor charging daily rates). I'm lucky that it pays so well, for what seems to me to be so little work. Supply and demand, that's capitalism for ya!


----------



## Loki

Things I have heard about the market are quite funny some times. I know a few people who commonly use the last known guide price for a road as how much the property went for. THen when a second property comes up and the offer price is less or more they use that to indicate prices. If they then hear an actual price they claim a huge rise. The misunderstanding of the fact some estate agents use a higher or lower % on the guide to drum up bussiness is ignored. 
I know from experience that it can be very difficult to find out what a house sold for. Hearing it throught the grapevine can also be dead wrong. How are people finding out the prices houses went for?
If you are looking to spent 317k you need to look at houses under offer at 290k and maybe lower. A lot of people don't beleive this and get very frustrated with the market. I also know a lot of people that would sacrifice travele distance to do no DIY on the house too. You have got to admit high expectations are part of the problem too as people move further out for "better" value and then wonder why nothing else is there.


----------



## Loki

I meant to ask this the other day. What effect do you think the shootings in areas have on property? Coolock had two heavily reported shootings in the last few weeks. 
Clontarf had one too but I doubt that would have an effect as Coolock had a really bad name before anyway and it was local people involved.


----------



## walk2dewater

Loki said:
			
		

> I meant to ask this the other day. What effect do you think the shootings in areas have on property? Coolock had two heavily reported shootings in the last few weeks.
> Clontarf had one too but I doubt that would have an effect as Coolock had a really bad name before anyway and it was local people involved.


 
Hmm I think the lower tone of the area might push houses from 12 times average gross salaries to say, 11.9999999.  But that's just my opinion and I base it on absolutely no evidence whatsoever.  Although, you just might get a more positive spin if you ask someone who makes a living selling houses.

But of course any dip in price is just an opportunity to "buy in for the long-term" cos eventually only 0.00001% of the population will have enough salary to actually afford a house cos "prices always go up in the long-term" and "ah sure, renting is dead money" etc.

I say ta hell with the crime level and buy now or "you'll never get yerself on the ladder".

Et cetera


----------



## Duplex

Any agent will be pricing ahead of the last comparable sale in this market.  Like I say I’m seeing about 23% increase yoy in a sample estate about 20 miles from Dublin; much of this increase coming in the last two to three months.  SSIA’s, rate tightening and a rush of buyers looking to buy before they are priced out forever are driving the market presently.  I believe that the market is consuming future demand in a short hectic highly competitive buying period. 

I guess that I’ll see prices rise in my sample area by as much as 30% before the end of the year.   Yields are, needless to say, falling, the accidental investor seems to becoming more prevalent, i.e. a buyers retaining their previous home and using equity to purchase a new home.   No doubt we’ll see a renewed interest from the investment market when the magnitude of the boom seeps into the collective consciousness, adding to the frenzy.   

Over the next few months we will hear and read growing signs of unease in the media, emanating from commentators and politicians.  The banks will continue to assuage concerns by reference to their predictions of continued mass immigration and future economic growth.



_"A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way, along with his fellows, so that no one can really blame him"._
*- John Maynard Keynes*


----------



## Loki

Duplex said:
			
		

> Any agent will be pricing ahead of the last comparable sale in this market. Like I say I’m seeing about 23% increase yoy in a sample estate about 20 miles from Dublin; much of this increase coming in the last two to three months. SSIA’s, rate tightening and a rush of buyers looking to buy before they are priced out forever are driving the market presently. I believe that the market is consuming future demand in a short hectic highly competitive buying period.
> 
> I guess that I’ll see prices rise in my sample area by as much as 30% before the end of the year.


From my experience estate agents certainly do not price ahead of the market based on the last price. Some agents guide price below the expected and others above.  I have seen houses on the same road and the same design  vary 25k (10%) between agents and then sell well above both asking and I beleive very similar prices but it's hard to find out.*

How are you finding out the actual selling price? 

*I would like to see this data available to everybody as I think it would control the market as people wouldn't rely on  estate agents (vested interest) on the value of property. IN the US I have friends who can look at the prices all houses have gone for in the last 20 years. Very easy to tell estimate yourself what your house is worth.


----------



## Duplex

It would be nice to have a Multiple Listings Service in Ireland similar to the States, but transparency in any market runs contrary to ‘professional’ interests.   Prices increase because a premium is attached to previous transaction evidence (however nebulous), in a market where demand exceeds supply.


----------



## ninsaga

I have been watching 4 separate properties in Cork over the last month ...each of them are currently on offer for greater than 10% of the original asking price right now. In most of these cases there is still a bidding war going on. An Auctioneer I know was also telling me that he had 5 people bidding on one particular property this week alone... he was like a trader in Wall Street..... an offer was no sonner upped & someone else was bettering it each time) 

To emphasise on a prev post.... most of these bids are done on one 10 min viewing & then there is a must have... (must be all the money floating around Cork at the moment as a result of the pyramid schemes   )

ninsaga


----------



## redo

I think there is a lack of quality homes out there.  Pre high density legistation houses with gardens are the ones generating the highest interest. I think the higer density houses are being snapped up by FTB and noob investors, lower density houses, by people trading up.  I though the Government was moving away from the Ballymun type planning.


----------



## Duplex

A little investment piece, for the gloomier souls out there.

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B5F7FA1A7%2DEEC4%2D42BA%2DAD26%2DAA18C450E892%7D&siteid=mktw&dist=


----------



## Loki

ninsaga said:
			
		

> To emphasise on a prev post.... most of these bids are done on one 10 min viewing & then there is a must have... (must be all the money floating around Cork at the moment as a result of the pyramid schemes   )
> 
> ninsaga



I think that is really unfair to say and highly dubious how you would know this. Most people do a lot of research on an area before looking at a house in the first place. After looking for a while you know what type of house you want. If you focus on areas you tend to see a lot of repeats of design so views are generally an inspection of the particulars of that house which is really superficial. People are not buying on this inspection but a surveyors report.
I am speaking from experience of looking at property and been involved in buy over 6 houses.


			
				redo said:
			
		

> I though the Government was moving away from the Ballymun type planning.



Ballymun failed not because of the building but bad management of tenants. Families could insist on a house and as a result many vacant units existed and as the families wouldn't move in  the lower people on the lists were moved in. That meant many people with social problem (junkies, menatlly ill, alcoholics) were moved in making a bad situation worse. 

The dislike of high rise whether founded are not compounded with the ability to get a house (in the early days) meant people living there hated the place. 

Private housing in high density is a completely different model IMHO. I do think there will be problems but not to the extent of Ballymun. The Ballymun towers had very large places (3 beds) a lot bigger than modern builds, central  underfloor heating  so actually in a way better built than today. 

I mean no offense to either of you but some people are talking about a property market with little or no experience  and no history of the market. You could be just generalising but they are quite a deal more complex than you are saying. How long have/were you looking?


----------



## bearishbull

redo said:
			
		

> I think there is a lack of quality homes out there. Pre high density legistation houses with gardens are the ones generating the highest interest. I think the higer density houses are being snapped up by FTB and noob investors, lower density houses, by people trading up. I though the Government was moving away from the Ballymun type planning.


 
theres nothing intrinsically wrong with high density,see america uk europe japan,it makes sense to have high density in cities to facilitate services and public transport.we have one sixth the density of england and i dont see any lack of green space and houses with gardens there.


----------



## redo

Loki said:
			
		

> Ballymun failed not because of the building but bad management of tenants. Families could insist on a house and as a result many vacant units existed and as the families wouldn't move in  the lower people on the lists were moved in. That meant many people with social problem (junkies, menatlly ill, alcoholics) were moved in making a bad situation worse.
> 
> The dislike of high rise whether founded are not compounded with the ability to get a house (in the early days) meant people living there hated the place.
> 
> Private housing in high density is a completely different model IMHO. I do think there will be problems but not to the extent of Ballymun. The Ballymun towers had very large places (3 beds) a lot bigger than modern builds, central  underfloor heating  so actually in a way better built than today.
> 
> I mean no offense to either of you but some people are talking about a property market with little or no experience  and no history of the market. You could be just generalising but they are quite a deal more complex than you are saying. How long have/were you looking?



I'm not really entering into the failure/success element per se but rather when the Government took the Ballymun towers down they did mention the need to get awat from high density / high rise developments.  However I am not sure in which context this was meant, ie Social housing or housing in general.


----------



## redo

bearishbull said:
			
		

> theres nothing intrinsically wrong with high density,see america uk europe japan,it makes sense to have high density in cities to facilitate services and public transport.we have one sixth the density of england and i dont see any lack of green space and houses with gardens there.



Agreed.  Maybe I should have been more specific, meaning high density in the burbs.  Most new (and affordable) developments contain a mixture of apartments and duplexes.  In my humble option, these dwellings are "entry level" properties, and as said above, it is precisely the opposite types of houses, second hand with (any size) gardens, that are the focus of large bidding wars and exceeding the asking prices.

When the time comes for these recent and current purchasers to trade up, to larger homes, the situation could get even worse.  FTB buyers of these low density homes could be a thing of the past (maybe similar to period homes).


----------



## Loki

redo said:
			
		

> I'm not really entering into the failure/success element per se but rather when the Government took the Ballymun towers down they did mention the need to get awat from high density / high rise developments. However I am not sure in which context this was meant, ie Social housing or housing in general.


 The government say anything that is popular and sound bite like. I think either way that is certainly the government talking from both sides of their mouth.


			
				redo said:
			
		

> In my humble option, these dwellings are "entry level" properties, and as said above, it is precisely the opposite types of houses, second hand with (any size) gardens, that are the focus of large bidding wars and exceeding the asking prices.



I still not sure why people keep using the asking price (guide price really) as proof of some crazy bidding war. The guide price is not what people expect to sell the house for in fact they will probably not sell th ehouse for anything less than 110% of the guide price. It's fundemental of what the price means now.


----------



## Eurofan

redo said:
			
		

> When the time comes for these recent and current purchasers to trade up, to larger homes, the situation could get even worse.  FTB buyers of these low density homes could be a thing of the past (maybe similar to period homes).


An interesting point, i could never understand the rush for high density in this country. Perhaps in some city areas granted but in the suburbs it's absurd to cram in hundreds of duplexs/apartments to a site surrounded by tens of thousands of hectares of green field.

Naturally ftbs don't mind since they figure they won't be living there any length of time.

To my mind it's the ftbs that are driving the market and they (not even the amateur investor/speculators) are the ones that will bail out fastest when growth stalls.

We chatted about this last night and of the dozen or so people we know personally who've bought as ftbs *none* see themselves in those properties in 5 years time, in fact most plan to 'cash in' in 3 years or less.

This is the worry, while we talk about investors in the market the simple fact is _almost every ftb buying today is doing so as an investment_ not as a home.


----------



## redo

Eurofan said:
			
		

> An interesting point, i could never understand the rush for high density in this country. Perhaps in some city areas granted but in the suburbs it's absurd to cram in hundreds of duplexs/apartments to a site surrounded by tens of thousands of hectares of green field.
> 
> Naturally ftbs don't mind since they figure they won't be living there any length of time.
> 
> To my mind it's the ftbs that are driving the market and they (not even the amateur investor/speculators) are the ones that will bail out fastest when growth stalls.
> 
> We chatted about this last night and of the dozen or so people we know personally who've bought as ftbs *none* see themselves in those properties in 5 years time, in fact most plan to 'cash in' in 3 years or less.
> 
> This is the worry, while we talk about investors in the market the simple fact is _almost every ftb buying today is doing so as an investment_ not as a home.



As an investment for a deposit on a better home.  But when the time comes for them to trade up, they will be swamped with the competition.  You could even see gazumping on the second hand market raise its ugly head.


----------



## ninsaga

Loki said:
			
		

> ......I mean no offense to either of you.....



........none taken Loki

I can say for sure on the houses that I have been tracking over the last few weeks the majority of the bids were done based upon 1 viewing. I was discssing this with ann auctioneer I know who echoed this.

Granted...these do not go to 'sold' status until accessed by a surveyor of course.

ninsaga


----------



## Eurofan

redo said:
			
		

> As an investment for a deposit on a better home.  But when the time comes for them to trade up, they will be swamped with the competition.


I'm thinking more of the problems that will transpire when the required double digit growth doesn't appear that they _need_ to pull off the trade-up.

The standard of the vast majority of starter homes that i've seen is very poor (and that's being generous). Imagine suddenly realizing after being there a few years that far from making a killing by now and 'moving on up' that if you tried to sell today you'd be lucky to cover your costs to date. So what now? Stay for years more in an area/property that you was supposed to be a 'starter' home or try to bail out quickly when you're not going to lose out.

The so-called 'soft-landing' that many are hoping for will create the above scenario in many many first home owners lives.

You're then left with future ftbs... why would they 'invest' such huge sums of money into such a property when there's little or no growth in the market?

Hence i don't really believe there can be a soft landing at least not in the lower end of the market, and since it's they that are largely supporting the boom the ramifications will be felt at all levels.

As things slow the first group who realise that they're having difficulty shifting the property they 'invested' in 2 or 3 years ago with a decent profit will silently drop their asking price rather than be stuck in a 'starter' home they don't want to be in.

It wouldn't take much for that to snowball...


----------



## Calina

Eurofan said:
			
		

> The standard of the vast majority of starter homes that i've seen is very poor (and that's being generous). Imagine suddenly realizing after being there a few years that far from making a killing by now and 'moving on up' that if you tried to sell today you'd be lucky to cover your costs to date. So what now? Stay for years more in an area/property that you was supposed to be a 'starter' home or try to bail out quickly when you're not going to lose out.


A key question for me when looking at properties is this "In the event of unforeseen problems, is it such a big deal to be living here for five or ten years, or more, or, am I going to grow out of this property in a shorter term than that?" I really think a lot of people aren't actually honestly considering that question. Otherwise _no_ one would be buying the fiascos otherwise known as one bedroomed apartments. I'm convinced many of them are designed by people who are absolutely safe in the knowledge that they will never, _ever_ have to live in them. 

Interesting that you suggest that problems will start at entry level. The last article I read on France, where they're rather concerned about their property market, suggested that problems would start from the top...but that entry level property would hold its value for a little while longer. They're more or less expecting a crash because a crash has historically followed record numbers of new builds and they're at that stage now.


----------



## microsquid

Just a note on that central register of house prices idea... I know for a fact it's law in Holland, part of the land registry and transfer of deeds process, that the price of the house (and land/ leasehold) is put on a published register. It's now available online (can't find the site right now).

Does anyone see this being enforced Europe-wide as part of competition/ fairness law, or are there too many vested interests in keeping it under wraps?

Would having such a register help have a calming effect on the house prices, or would it, in effect, aid the bidding war as people log in, find the last price of the house and go 'OK I'll bid at +5% of that and I'll be sure to have it'

MS


----------



## Loki

I was saying before that I thought houses will end up being split

[broken link removed]

Does anybody know if this house was always built like this or changed later. It looks like a regular house chnaged if you ask me and I think there might be more coming.

The Sunday Business post yesterday pointed out that more people will be down sizing. Where people have been saying  some housese can only be sold to thoses up grading the SBP suggested a portion is or should be people downsizing in the area. 1.2mill house down size to 600k etc...

I think the central register would just keep people informed right now you have to "trust" the agents asking prices to gauge the house value.


----------



## Duplex

Looks like a conversion to me Loki.  Still cant understand the split theory you propagate as far as the market is concerned.??


----------



## owenm

It's a Granny flat.... such "Conversions" have been around for a long time.

What is different:     that it is being offered for sale on it's own.
What is mad:           the asking price


----------



## extopia

Well I suppose if you've already sold the back garden to developers you might as well start selling the upper floor.

Think this kind of deal would require pretty tight legal supervision. Who's responsible for repairing the roof for example?


----------



## MugsGame

I've seen a few house splits around East Wall/North Strand.


----------



## extopia

MugsGame said:
			
		

> I've seen a few house splits around East Wall/North Strand.



Well they are all over the place in older houses - landlords have been doing it for years, sometimes with and sometimes without planning permission. Certainly lots in E. Wall/N. Strand/Fairview/Drumcondra all right (not to mention Rathmines).

This kind of two family house thing is not typical in the Irish market. Maybe in the future, you never know. Lots of work to be done setting rules (and laws) about who pays for what maintenance etc.


----------



## jpd

It was pretty common in a lot of suburbs in London when I lived there in the 70s & 80s - it's a question of supply and demand, I presume. 

If the buyers/renters can't afford a whole house and there's a shortage of appartments then it would seem like an obvious way to met the demand for 1 or 2 bedroom accommodation. Not so sure that it will be the case in Dublin, as there seem sto be a lot appartments being built, but this may not be the case in all areas.


----------



## extopia

I suspect you're right. Why buy a granny flat when you can get a purpose built apartment, as opposed to a split suburban (or urban) building, with all the compromises that entails?


----------



## Neffa

extopia said:
			
		

> I suspect you're right. Why buy a granny flat when you can get a purpose built apartment, as opposed to a split suburban (or urban) building, with all the compromises that entails?


 
I lived in several houses in London which had been converted like this and it was never a great experience. Sound-proofing and room layout was always compromised. 

A purpose built unit would be better but London did/does not have anything like the land available for development relative to Dublin (save for Docklands) so the amount of new apartment building was very low indeed. Conversions were/are common.

Anyway, back to the topic  . I don't get why this will drive up prices. I think it will increase the supply of units in certain areas, but I don't see it affecting prices that much. Does anyone other than Loki see how it will?


----------



## extopia

I suspect it could drive prices down in some ways. These conversions could reduce the value of the original untouched houses surrounding them by overpopulating residential streets not designed for apartments/flats. This is why many residents associations tend to oppose this kind of development.


----------



## kane3000

From what I understand I don't think Loki has suggested that this behaviour would drive up prices, I think the point is that if prices don't change, the way people live will....giving rise to these alternative living unit formats.


----------



## extopia

The option of living in half a house has been around for decades. I think in these circumstances people would be happier to rent.


----------



## Loki

I think some people misunderstood what I was saying. I think there will be an _increase_ in this type of conversion  and that they will be _sold _as opposed to rented out.  The reason this will happen is there will be more single people. While yes there are appartments around there could be a shortage of such properties close to services and work. This one just happened to be the first I saw for sale. Purpose built appartments may remain more desirable but considering some building standards a split house may be more solid and roomier and therfore more desirable. 
I just think this is part of what will happen in the property market. It allows property to go up in value as the seperated house can be worth more than the whole. People are running out gardens to build houses on  and 5% of the houses on my road are now split with 80% in the last 5 years. I think it is happening with young couples doing it with parents transforming family houses. Very few FTB can afford to buy in my area but they might be able to buy half a house. Some areas will always be more desirable


----------



## Duplex

Loki I think that Mr Reality will have come knocking long before the great splitting phenomena takes a grip.


----------



## Loki

Duplex said:
			
		

> Loki I think that Mr Reality will have come knocking long before the great splitting phenomena takes a grip.


Look I am telling you a factor that I don't believe is being considered about the housing market. You want to talk about what happens in the US property market and how it will effect prices here. I want to talk about what is actually happening in the property market here. You want to ignore what I say fine but don't riddiule it becasue you don't know what is going to happen!!
THe reality is somebody is selling a unit split from a house and people already said it wouldn't happen here. It is and an example is provided. Want to point to a house price in the US and link hoe it is actually effecting the house price on my road as opposed to a theory about how it might?
I suggest a factor that will effect house prices in Ireland as it will effectthe housing stock. Many people here are only talking economics and forget the actual market is in houses/property so what effects the housing stock is actually really important. Peopla are using the belief house prices can't keep going up. I am providing a plausable factor that can allow prices in areas to continue to go up.


----------



## Duplex

What you are suggesting is that houses can be split into flats.  If a house is worth say €700,000 and can be split to form two self contained flats each worth say €400,000 then the house is worth €800,000.  Take away the cost of conversion say €50,000 and the house is worth €750,000 fine.  But the economics of splitting only applies in certain areas.  Loki prices are rocketing at the moment there is no need to go splitting to add value.  


We have enough zoned land to accommodate over 300,000 new homes in Ireland, more than enough to accommodate low cost immigrants who will come to work here and rent accommodation from us.  Lets hope some savvy businesses don’t figure that it might be cheaper to move the jobs to where these people come from


----------



## Loki

Duplex said:
			
		

> We have enough zoned land to accommodate over 300,000 new homes in Ireland, more than enough to accommodate low cost immigrants who will come to work here and rent accommodation from us. Lets hope some savvy businesses don’t figure that it might be cheaper to move the jobs to where these people come from



I didn't suggest that. I said housing could keep rising  due to the housing stock changing. I also suggested that you can reduce your liability when buying for investemnt if you consider the ability to add value. The figure you used are on the small scale if the margins get bigger people will do it. investors may do it to increase reantal yield. 

You seem to be missing what I am saying about supply and demand. THere is enough room in Donegal to provding housing for all those who want a house. Why does that not matter? Becasue it is Donegal and people want to live close to work and services. The supply of houses in Dublin and other centres of work is limited.  I believe a bigger price differential will happen between Dublin and the rest of the country . That actually makes it more likely that people will live in smaller (maybe converted) property due to high costs. London is a prime example of what could happen, low amount of purpose built high density housing in victorian times. THe victorian housing was converted when higher density was needed. ROme, New York and Paris already had a huge stock of high density housing from the start so it didn't do the same. Ireland had a housing boom in the 70s and 80s but it is low density. I think it makes logical sense to see these houses being changed. I am seeing it happen with the bigger older houses (40s,50s) a lot quicker than before and being done by developers straight after purcahse. 

It is a factor some people ignore when mentioned and others choose not to beleive as possible. Fine if you think it will have little impact but to deny it just means you made your opinion regardless of the facts.


----------



## bearishbull

Loki said:
			
		

> I didn't suggest that. I said housing could keep rising due to the housing stock changing. I also suggested that you can reduce your liability when buying for investemnt if you consider the ability to add value. The figure you used are on the small scale if the margins get bigger people will do it. investors may do it to increase reantal yield.
> 
> You seem to be missing what I am saying about supply and demand. THere is enough room in Donegal to provding housing for all those who want a house. Why does that not matter? Becasue it is Donegal and people want to live close to work and services. The supply of houses in Dublin and other centres of work is limited. I believe a bigger price differential will happen between Dublin and the rest of the country . That actually makes it more likely that people will live in smaller (maybe converted) property due to high costs. London is a prime example of what could happen, low amount of purpose built high density housing in victorian times. THe victorian housing was converted when higher density was needed. ROme, New York and Paris already had a huge stock of high density housing from the start so it didn't do the same. Ireland had a housing boom in the 70s and 80s but it is low density. I think it makes logical sense to see these houses being changed. I am seeing it happen with the bigger older houses (40s,50s) a lot quicker than before and being done by developers straight after purcahse.
> 
> It is a factor some people ignore when mentioned and others choose not to beleive as possible. Fine if you think it will have little impact but to deny it just means you made your opinion regardless of the facts.


 
higher density is required so existing houses is being knocked down and higher rise is being built and on new sites larger apartment blocks will be built.no one is saying existing houses wont be changed into multiple units just that this in its self wont add to prices of houses.people buying homes arent stupid,if a "half house" costs  a lot more than half an identical full house then they wont buy it! if anything increasing the number of smaller units will allow people to downsize from larger houses and free up space for larger families and increase total number of units in housing stock and lower prices. the previous poster pointed out theres 300,000 units of zoned land available in ireland and this will increase,theres plenty of room to expand in dublin ,have you ever looked at an aerial photo of dublin city?? its remarkably low rise and lacking density but this is being addressed by planners and in next ten year we'll have far greater densities in dublin with greater supply and this will impact prices if they havent already been affected by interest rates economy etc.


----------



## extopia

Split houses are for renters. Always have been, will stay that way in my opinion. I really don't see the issue here. And I don't see any evidence that single family homes are being split and sold as multiple units by developers after purchase. (Such activity requires planning permission, by the way). 

Perhaps these houses are being split and RENTED by landlords, with or without planning permission. That is another story.

Again - there is no need to buy half a house when you can buy an apartment. I don't see any advantage whatsoever. Apartments are being built in EVERY area of Dublin (and most smaller towns too).

The theory is interesting, but holds no water.


----------



## redo

extopia said:
			
		

> Again - there is no need to buy half a house when you can buy an apartment. I don't see any advantage whatsoever. Apartments are being built in EVERY area of Dublin (and most smaller towns too).



Location, Location, Location.


----------



## Loki

bearishbull said:
			
		

> higher density is required so existing houses is being knocked down and higher rise is being built and on new sites larger apartment blocks will be built.no one is saying existing houses wont be changed into multiple units just that this in its self wont add to prices of houses.etc...



First off  I have a theory which has historical and factual evidence. It happened in London and I see it happening in Dublin Development within Dublin is limited on how high it will be. The undeveloped land around Dublin is mostly owned by a realitvely small group of developers. THe arial phots of dublin normally have it so clearly market what can be built on and what can't so I think I'll use a map to decide. *I have not said that house price will go up as a result of splitting I have said this can allow prices to continue to rise.  *Some people will buy a large house they beleive they can split later in their life.
  As for people being stupid I hate to break it to you they are. People are buying houses in areas that have no services and require 3-4 hour commutes and no schools for an expanding family. A fully decorated and finished property sells for a lot more than one not, the half house would be a finished property. THe split houses have the ability extend which appartmnets don't, Parking is more likely, and a personal garden is likely. Considering the NIMBYs in ireland I think you will find a lot of building won't get built in many areas. Commuting times in Dublin will increase one way ofr the other and old neighbourhoods have better public transport links. How do you know the number of  "units" zoned? Land gets zoned property has planning granted for it. There is a limited supply of housing in Dublin and there always will be as it is a finite space. The large areas of dublin are housing estates which are not being knocked down to build high density housing. People downsizing may decide to live in and split their houses which I would guess is the case in the link I provided. Only half the house is for sale so it is a reality. The density in Dublin will increase we agree on that. You have hope that the planners will;1)plan it correctly 2)have their plan implemented correctly. 
If you can point to  a large scale planning that involved multiple developers and owners that has worked here you might have a point, know of any?
I think differently but unlike you I am not stating it as fact.  
Can you tell me what houses are being knocked down that provide a large enough footprint to build an high density appartment block on? Are they destroying whole estates?
Do you think people are going to desire to live in small appartments  that are being built to poor standrads?


----------



## microsquid

*Re: AIB might be the straw that broke the camels back*

Was anyone else horrified at the radio ad for interest only mortgages for FTB this morning? 
Choose life, choose half-a-life, choose debt forever...

MS


----------



## beattie

*Re: AIB might be the straw that broke the camels back*



			
				microsquid said:
			
		

> Was anyone else horrified at the radio ad for interest only mortgages for FTB this morning?
> Choose life, choose half-a-life, choose debt forever...
> 
> MS


 
I have been horrified by the recent trends in mortgage advertising as well as I can see the effect it is having on the less financial saavy people out there. So many people have no idea that there repayments could take a serious hike if the German economy recovers and are in a rush to get on the ladder at any cost. Still I suppose bonuses will be good this year in the banking industry


----------



## gearoid

Loki said:
			
		

> The undeveloped land around Dublin is mostly owned by a realitvely small group of developers.



On a relatively light-hearted note...

Looking at Google Earth. The majority of undeveloped land within a 3 mile radius of Dublin city centre is "owned" by the members of Elm Park, Milltown and Castle golf clubs.

As a member of a relatively large non-golf sports club in a prime location I have occasionally day-dreamed about someone offering me 100k to join a sports club in Naas so they can build a sky-scraper on our grounds!

I know that this will never be the case but I'd have to think about it for at least a second or two before making my mind up...

Finally, can we can stop the discussion of Loki's splitting theory? I among many just don't see it and it is beginning to clog up the thread. Loki, can we agree to differ with you and move on? One granny flat doesn't make a summer.


----------



## Eurofan

gearoid said:
			
		

> Finally, can we can stop the discussion of Loki's splitting theory? I among many just don't see it and it is beginning to clog up the thread.


I concur.

So then, is it just me or are we starting to see more and more articles pointing out the impossibility of future massive appreciation? (bar the usual vested interests who are continuing to sing happy tunes).

For reasons i've pointed out before i see a 'soft landing' as an impossiblity, i.e. the markets massive reliance on ftbs buyings 'starter homes'.

If house price rises stagnate alone then you'll find many ftbs finding it hard to justify buying those 'starter homes' when they realise they won't be able to sell on for a profit in a few years (why would they?).


----------



## ivuernis

Eurofan said:
			
		

> So then, is it just me or are we starting to see more and more articles pointing out the impossibility of future massive appreciation? (bar the usual vested interests who are continuing to sing happy tunes).


 
Yes, there is a lot more bearish commentary now but a lot of people still believe prices won't ever drop. 

 


			
				Eurofan said:
			
		

> If house price rises stagnate alone then you'll find many ftbs finding it hard to justify buying those 'starter homes' when they realise they won't be able to sell on for a profit in a few years (why would they?).


 
Agreed, if prices stagnate what's the rush for FTBs any longer. The panic would then be over and all of a sudden the number of buyers about starts to decrease. And this isn't going to have any affect on prices!?!

Also, if prices stagnate it may also be a signal to many investors in the capital appreciation game to cash-in before prices fall. And why wouldn't they. If prices stagnate they ain't going to wait around in the hope they'll go up again. No, they'll bail before prices begin to drop. 

Hmmm... soft-landing. I don't think so. Either up or down me thinks and it can't keep going up forever.


----------



## Marie

Hmmmm!  Not so sure about that!   First-time buyers here in the UK began to withdraw about two years ago though actual sale-prices for residential properties dropped by 10 - 15% in some areas as the market 'flattened'.  Renting became prudent and economic in the circumstances.  Soooooooo that clever-clogs financial sector has now "upped" the limit of its lending to investors (from 2million to 10 million) and "upped" the number of investment properties they will finance for any one investor (from 2 to 10).  Though there is a subtext in this thread that 'someone, somewhere' will suffer badly and be left with egg on his face it certainly won't be the banks; it is unlikely to be the astute experienced investors with plenty of capital; it appears to be the 'ordinary' folk of low and middle income - families with young children, couples starting out, older adults needing to shift from a four-bedroom family home with large garden to a smaller more manageable retirement bungalow.  What does suffer is the common good (remembering the  posting of the young medic earlier in this thread, who will move abroad after training as he can't afford a home in Ireland).....and, of course, the 'sinking' of energy and money into this sector in preference to developing health, education and social amenity and a viable sustainable economic base fitted to the size and nature of the Republic.


----------



## redo

Marie said:
			
		

> Hmmmm!  Not so sure about that!   First-time buyers here in the UK began to withdraw about two years ago though actual sale-prices for residential properties dropped by 10 - 15% in some areas as the market 'flattened'.  Renting became prudent and economic in the circumstances.  Soooooooo that clever-clogs financial sector has now "upped" the limit of its lending to investors (from 2million to 10 million) and "upped" the number of investment properties they will finance for any one investor (from 2 to 10).  Though there is a subtext in this thread that 'someone, somewhere' will suffer badly and be left with egg on his face it certainly won't be the banks; it is unlikely to be the astute experienced investors with plenty of capital; it appears to be the 'ordinary' folk of low and middle income - families with young children, couples starting out, older adults needing to shift from a four-bedroom family home with large garden to a smaller more manageable retirement bungalow.  What does suffer is the common good (remembering the  posting of the young medic earlier in this thread, who will move abroad after training as he can't afford a home in Ireland).....and, of course, the 'sinking' of energy and money into this sector in preference to developing health, education and social amenity and a viable sustainable economic base fitted to the size and nature of the Republic.



Quite correct.  The typical profile of a property investor 10-15 years ago was somebody who was mega rich with a lot of capital.  Now we have STB's and any old joe soap becomming investors.  It all smacks of a pryamid scheme now.  The economists for the EA and banks doing the recruiting.  "Invest now while you can and earn money for doing nothing (captial appreciation) "


----------



## Petal

Hi guys, just reading through this looong thread. I'm in the process of buying a house. Will cost me a good 380K or so. I'll pay mortgage for the next 35 years at around 1700 Euros per month given the current interest rates. At the moment I'm paying 1100 Euros rent. 
One of the main reasons why I want to buy a house is that the rental market here is so unsecure. I can be thrown out of the house with one month notice, my rent can be increased on a yearly basis. I am not allowed to change anything in the house and I'm subject to dealing through the management company for any kind of repairs or replacements I need which is rather painful. So for the extra payment I will get my own four walls which I can paint whatever way I want, I can knock them down if I want. I'll sit on whatever couch I want, I can plant whatever plants I want and eventually my kids will have something to get them a good start in life. Now all that considered I don't think it's such a bad decision to go and buy?
I also remember what chore it was to find a place to rent, you always have plenty of people turning up and it's a nightmare getting a good place. And with this buying frenzy and the influx of people from the new EU accession countries I can't imagine that renting in Dublin will get any easier or any cheaper.
I think investors and builders should really be hit harder. Everytime I look at a house there is some investor turning up, pushing the prize beyond affordability and I actually know of some builder guy who buys up houses and then lets out the rooms for 200 Euro per week. And people are desperate enough to pay that. There should be legislation put in place to protect tenants' rights or make the whole rental market way more regulated. I think most people, like myself, just don't like the instability and uncertainty of rental property and if you have kids you just don't want to be subject to your landlords moods and mercy....
So that's my two cents here...


----------



## redo

Petal said:
			
		

> Hi guys, just reading through this looong thread. I'm in the process of buying a house. Will cost me a good 380K or so. I'll pay mortgage for the next 35 years at around 1700 Euros per month given the current interest rates. At the moment I'm paying 1100 Euros rent.
> One of the main reasons why I want to buy a house is that the rental market here is so unsecure. I can be thrown out of the house with one month notice, my rent can be increased on a yearly basis. I am not allowed to change anything in the house and I'm subject to dealing through the management company for any kind of repairs or replacements I need which is rather painful. So for the extra payment I will get my own four walls which I can paint whatever way I want, I can knock them down if I want. I'll sit on whatever couch I want, I can plant whatever plants I want and eventually my kids will have something to get them a good start in life. Now all that considered I don't think it's such a bad decision to go and buy?
> I also remember what chore it was to find a place to rent, you always have plenty of people turning up and it's a nightmare getting a good place. And with this buying frenzy and the influx of people from the new EU accession countries I can't imagine that renting in Dublin will get any easier or any cheaper.
> I think investors and builders should really be hit harder. Everytime I look at a house there is some investor turning up, pushing the prize beyond affordability and I actually know of some builder guy who buys up houses and then lets out the rooms for 200 Euro per week. And people are desperate enough to pay that. There should be legislation put in place to protect tenants' rights or make the whole rental market way more regulated. I think most people, like myself, just don't like the instability and uncertainty of rental property and if you have kids you just don't want to be subject to your landlords moods and mercy....
> So that's my two cents here...



http://www.prtb.ie/


----------



## beattie

Petal said:
			
		

> I also remember what chore it was to find a place to rent, you always have plenty of people turning up and it's a nightmare getting a good place. And with this buying frenzy and the influx of people from the new EU accession countries I can't imagine that renting in Dublin will get any easier or any cheaper.


 
I also remember that it was quite an ordeal but the pendulum has swung back in favour of the tenant in recent times. Many landlords are now not increasing rents on a yearly basis if they have good tenants which means in real terms your rent will decrease. Have a look around and see the amount of properties which will come on stream in the next 6-12 months which should further tip the balance in favour of the tenant IMO


----------



## daveirl

Trouble ahead in the US? http://bigpicture.typepad.com/comments/2006/03/coming_soon_mor.html


----------



## Mininv

Petal said:
			
		

> I think most people, like myself, just don't like the instability and uncertainty of rental property and if you have kids you just don't want to be subject to your landlords moods and mercy....
> So that's my two cents here...


 
As redo has pointed out with that link, that's no longer the case. The government have now legislated to give tenants security of tenure. If you've been in your property for six months, you're more than likely entitled to a four year lease.

Yes, FOUR YEARS. Automatically. The landlord is only allowed to kick you out for a set number of reasons (damage, bad behaviour, etc). Even if he claims he needs it for one of his family/renovations, etc, he has to specify who, for how long, etc - and when the period is up, you're entitled to rent it again. If he lies to you, and you've already found somewhere else, you're entitled to a hefty bit of compensation.

Not only that, but the relevant Act specifies the obligations of tenant and landlord so there's no room for a landlord to mess you about.

Have a look at the Residental Tenancies Act 2004 - it really is, from the tenant's point of view - a good piece of legislation which enough people dont seem to know about.


----------



## bearishbull

redo said:
			
		

> Quite correct. The typical profile of a property investor 10-15 years ago was somebody who was mega rich with a lot of capital. Now we have STB's and any old joe soap becomming investors. It all smacks of a pryamid scheme now. The economists for the EA and banks doing the recruiting. "Invest now while you can and earn money for doing nothing (captial appreciation) "


actually i know several men personally and have heard of many more in their 50's who bought property 15 years ago or more even thought they had ordinary jobs,one is an engineer in aer lingus and another two are gardai! one of these gardai lives in castlenock and has 9 properties around dublin! the aerlingus engineer also could afford to send all four of his kids to private schools and his wife could stay at home fulltime all on a semi state salary,try and do that nowadays! back then the rent actually covered the whole mortgage and even the dogs in the street knew that property could only go up. a friend of a friend works for one of the big mortgage lenders and was on an average salary throughout the 1990's but got mortgages through his job and now is sitting on several properties worth a few million in total! all these lucky accidental millionaires creates anger in young talented people nowadays struggling to get even their first home when if they had of been born ten years earlier they could have had a few properties no problem.


----------



## Howitzer

Not necessarilly, I know if I'd been born 10 years earlier I'd have had to emigrate. That's IF I could afford the air fare.

The world doesn't just revolve buying and selling property. Some people in certain countries would do anything just for a job and in fact many rural people simply abandon their land in 3rd world countries and head to the cities in search of a new life. 20 years ago people may have considered doing the same here.


----------



## JohnnyBoy

I know it's "how long is a piece of rope",but anybody prepared to put any ballpark time frame on the bubble busting?.Only reason ,I ask is that 2 friends of mine are considering emigrating as they can't afford a shed in Cork city & I'm trying to reassure them/keep them in country!


----------



## Neffa

JohnnyBoy said:
			
		

> I know it's "how long is a piece of rope",but anybody prepared to put any ballpark time frame on the bubble busting?.Only reason ,I ask is that 2 friends of mine are considering emigrating as they can't afford a shed in Cork city & I'm trying to reassure them/keep them in country!


 
Very tough to call. I think the fundamentals look pretty bad now but the huge SSIA cash injection may sustain the optimism a little longer so I would say it will take until mid-to-late 2007 before you see market sentiment change. 

However, it could happen more quickly if we have base rates of more than 3.5% by year-end or if there are crashes in overseas markets.

Tell your friends to rent in the meantime  then look late next year.


----------



## gearoidmm

> I know it's "how long is a piece of rope",but anybody prepared to put any ballpark time frame on the bubble busting?.Only reason ,I ask is that 2 friends of mine are considering emigrating as they can't afford a shed in Cork city & I'm trying to reassure them/keep them in country


 
I understand the arguments re houses being overvalued in this country and I agree.  There are a lot of arguments being put forward for why house prices will drop and they make sense, I've been saying the same for a couple of years now.

Why then, did the prices not drop substantially in the UK over the last 18 months?  There was no crash - just a stagnation which appears to be reversing itself.  Similarly, the Netherlands had a house prices boom at the same time as us but they had a recession in 2002.  Again, there was no drop in prices despite what many commentators saw as significant overvaluation.  Are we going to see a similar defying of logic here?


----------



## walk2dewater

JohnnyBoy said:
			
		

> I know it's "how long is a piece of rope",but anybody prepared to put any ballpark time frame on the bubble busting?.Only reason ,I ask is that 2 friends of mine are considering emigrating as they can't afford a shed in Cork city & I'm trying to reassure them/keep them in country!


 
IMHO this is not just a "bubble" like we had in the nasdaq circa 2000.  This is something fundamental to our economy and psyche, and we'll end up in outright recession when the market turns sour here.  So your friends might not have jobs or even want to live here when it "bursts".

You'll know the worm has turned when buyers will be able, but more importantly WILLING, to wrangle discounts from sellers.  You'll know the corner has turned when properties sit on the market for months one end, and only shift when the seller concedes a cut in price.  I certainly dont see that happening in 2006, perhaps not even in 2007.  Ireland is entering the truly manic spike portion of this... we're "going Japanese" if you like...

My advice to anyone unfortunate to be caught in the headlights of this massive run-up in prices is to stay renting, save and learn how and where to invest in alternate ways (gold, energy, commodities).

It angers me that older Irish people, the property lottery winners as I call them, cannot see the misery that this madness is inflicting on the younger generation 

sorry, rant over!!


----------



## Howitzer

gearoidmm said:
			
		

> Why then, did the prices not drop substantially in the UK over the last 18 months? There was no crash - just a stagnation which appears to be reversing itself. Similarly, the Netherlands had a house prices boom at the same time as us but they had a recession in 2002. Again, there was no drop in prices despite what many commentators saw as significant overvaluation. Are we going to see a similar defying of logic here?


 
Interest rates. 

In the UK they control their own rates and at the first sign of instability in the housing market they lobbed 1/4 of a point off.

In Holland they reached their point where prices couldn't go any higher in 2002 but interest rates weren't rising so the market was able to adjust and people simply pulled back their spending on everything else.


----------



## ivuernis

JohnnyBoy said:
			
		

> I know it's "how long is a piece of rope",but anybody prepared to put any ballpark time frame on the bubble busting?.


 
The $64,000 question eh!

You asked so here goes... late 2007/early 2008. 

All the SSIA money will have been unleashed and probably spent by then... the final binge perhaps.
Interest rates will probably be at least 4% in the ECB by then.
Another 80,000-120,000 housing units will have been built... eventually supply will start to meet demand.
Oil and gas prices will almost certainly continue to rise affecting the costs of many things and most importantly pushing up inflation.
This is by no means an authoritative or definitive list, just my take on things but to back it up I've decided to sell this year and rent for the short-term and see how it all pans out in the next 12-18 months. 




			
				JohnnyBoy said:
			
		

> Only reason ,I ask is that 2 friends of mine are considering emigrating as they can't afford a shed in Cork city & I'm trying to reassure them/keep them in country!


 
Where are your friends thinking of emigrating to? Property prices in many english-speaking western economies are over-inflated too.


----------



## bearishbull

the dutch have more of a reason to have high price rise theres feck all land there! we have six times more land per person in ireland!we even have six times more land per person than england! even with their boom i dont think dutch house prices are anywhere near our prices.because we ahve so much land in ireland and room in dublin to build up in the future in the long run supply WILL exceed demand and this will cause prices to fall independent of other factors like economy affordabilty etc.


----------



## ADK

theres not much land left to build on in dublin thats why land costs are so high me thinks


----------



## redo

ivuernis said:
			
		

> Interest rates will probably be at least 4% in the ECB by then.
> Another 80,000-120,000 housing units will have been built... eventually supply will start to meet demand.
> Oil and gas prices will almost certainly continue to rise affecting the costs of many things and most importantly pushing up inflation.



If the US were to attack Iran that would push oil prices even further, the ECB would have to fend off energy prices/inflation by rising rates even further say a base 0f 4.5 - 5 %

I personally think that there is too much supply at the moment but it's really hard to get an accurate picture.  However, I think the real danger is the demand reducing and not the supply increasing.  Too much supply may lead to a stablisation of prices, reduced demand, will cause them to fall.  The demand will eventually fall when prices level off after the ECB rate kicks in and there are even murmurs about the ECB lifting rates again in May.

I don't think the SSIA's will have too much of an effect, the effect will be mainly driven by FTB's who have used the scheme in order to get a deposit for a new house.  The noob investors will probably use the SSIA money for cars, holidays etc as they already have an investment (property) and want to take some kind of dividend.


----------



## ivuernis

redo said:
			
		

> If the US were to attack Iran that would push oil prices even further, the ECB would have to fend off energy prices/inflation by rising rates even further say a base 0f 4.5 - 5 %



Absolutely they would go higher. However, it may not even take a US attack on Iran for this to happen. If tensions escalate further in this stand off then the Iranians may just take some of their supply off the market thus using it as an economic weapon if sanctions were applied against it. 

I purposely left out any scenarios like this though as these are hard to predict. The ones I did give are all likely though. 




			
				redo said:
			
		

> I personally think that there is too much supply at the moment but it's really hard to get an accurate picture. However, I think the real danger is the demand reducing and not the supply increasing. Too much supply may lead to a stablisation of prices, reduced demand, will cause them to fall. The demand will eventually fall when prices level off after the ECB rate kicks in and there are even murmurs about the ECB lifting rates again in May.


 
World supply and demand are about evenly matched at the moment. There is no spare capacity really to increase production. All predictions are for demand to continue to rise and for supply to eventually start to decrease. When and by how much supply falls by is a whole other debate though.


----------



## gearoidmm

Remember that there will be a sharp fall in inflation in August/September.  At the moment, core inflation is low and the rise is almost totally accounted for by the rise in energy prices.  Inflation is calculated on a yearly basis and oil prices have actually fallen slightly since August last year.  As a result, year-on-year inflation probably will nosedive in August removing from the ECB one of the core rationals for their recent interest rate hikes.

There are some who suggest that, for this reason, the ECB interest rate rises have little to do with inflation and more to do with asset prices and getting back to 'normal' levels.  The inflation rate is being used to justify the rate rises to politicians


----------



## SteelBlue05

gearoidmm said:
			
		

> There are some who suggest that, for this reason, the ECB interest rate rises have little to do with inflation and more to do with asset prices and getting back to 'normal' levels.


 
So what are 'normal' levels?


----------



## Howitzer

gearoidmm said:
			
		

> There are some who suggest that, for this reason, the ECB interest rate rises have little to do with inflation and more to do with asset prices and getting back to 'normal' levels. The inflation rate is being used to justify the rate rises to politicians


 
Yeah, I'd suspect that's a bit closer to the bone. There seems, in my opinion, to be serious concerns of an asset bubble bursting in an economy with an ageing population (Eurozone). The repercussions from when this happened in Japan are fairly obvious.


----------



## gearoidmm

SteelBlue05 said:
			
		

> So what are 'normal' levels?


 
Who knows - whatever Jean-Claude thinks I suppose


----------



## Duplex

> the dutch have more of a reason to have high price rise theres feck all land there! we have six times more land per person in ireland!we even have six times more land per person than england! even with their boom i dont think dutch house prices are anywhere near our prices.because we ahve so much land in ireland and room in dublin to build up in the future in the long run supply WILL exceed demand and this will cause prices to fall independent of other factors like economy affordabilty etc.


 
Bearishbull




The Dutch introduced generous income tax breaks to encourage owner occupation in order to get away from the social model of housing provision.  Owner occupation accounts for approx 50% of the market at present, the government is looking at a target of 70%.  Housing output is a healthy 90,000 units p.a.


----------



## ivuernis

gearoidmm said:
			
		

> Remember that there will be a sharp fall in inflation in August/September. At the moment, core inflation is low and the rise is almost totally accounted for by the rise in energy prices. Inflation is calculated on a yearly basis and oil prices have actually fallen slightly since August last year. As a result, year-on-year inflation probably will nosedive in August removing from the ECB one of the core rationals for their recent interest rate hikes.


 
Yes, oil prices (crude) have fallen from their highest value last year, but they had risen quite sharply from a lower base. Assuming prices stay around their current level then the average price for this year will actually be higher than the average for last year so I cannot see a sharp fall in inflation. Also gas prices have risen sharply also of late.


----------



## gearoidmm

Inflation isn't generally calculated on an average basis.  Although the central banks do release average figures for each year, they keep an eye on the monthly rate.  If the rate was 6% in January and 2% in December, the yearly average would be ~4%.  The bank would be much more inclined to reduce rates at an inflation rate of 2% than 4%.

Similar to the effect of a large increase in the duty on cigarettes here a few years ago - it added 1% to the inflation rate at a time when inflation was rising anyway.  Then, a year later, when the effect of that sharp rise disappeared, inflation dropped by a corresponding amount (leading to much self-congratulation on the part of the politicians).


----------



## bearishbull

ivuernis said:
			
		

> Absolutely they would go higher. However, it may not even take a US attack on Iran for this to happen. If tensions escalate further in this stand off then the Iranians may just take some of their supply off the market thus using it as an economic weapon if sanctions were applied against it.
> 
> I purposely left out any scenarios like this though as these are hard to predict. The ones I did give are all likely though.
> 
> 
> 
> 
> World supply and demand are about evenly matched at the moment. There is no spare capacity really to increase production. All predictions are for demand to continue to rise and for supply to eventually start to decrease. When and by how much supply falls by is a whole other debate though.


 
the iranians dont supply open markets much they have deals with china and other i believe who are backing them against america so i cant see them cutting supply to their supporters.


----------



## bearishbull

gearoidmm said:
			
		

> Remember that there will be a sharp fall in inflation in August/September. At the moment, core inflation is low and the rise is almost totally accounted for by the rise in energy prices. Inflation is calculated on a yearly basis and oil prices have actually fallen slightly since August last year. As a result, year-on-year inflation probably will nosedive in August removing from the ECB one of the core rationals for their recent interest rate hikes.
> 
> There are some who suggest that, for this reason, the ECB interest rate rises have little to do with inflation and more to do with asset prices and getting back to 'normal' levels. The inflation rate is being used to justify the rate rises to politicians


 
inflation in eurozone is affected by value of euro,oil doesnt have to rise and it can still affect inflation if euro declines against other currencies,central bankers are raising rates around the world which rises the value of their currencies and lowers the relative value of euro. if everyone else is rising interest rates eurozone will have to too.


----------



## bearishbull

SteelBlue05 said:
			
		

> So what are 'normal' levels?


in an economy growing at 2% its normally 4-5%.look at uk its growing at close to eurozone at present(2.5%) and their rates are still at 4.5%.usa is growing at 3% and rates are 200basis points higher than that there too.


----------



## Loki

bearishbull said:
			
		

> because we ahve so much land in ireland and room in dublin to build up in the future in the long run supply WILL exceed demand and this will cause prices to fall independent of other factors like economy affordabilty etc.





			
				gearoidmm said:
			
		

> Remember that there will be a sharp fall in inflation in August/September.



Can you guys tell me who will win the 3:30 in Cheltnum today seeing as you can see the furture? 

Unbelievable arrogance without any facts stated.

Bear> Name where there is room!
You claimed some figure for units zoned in Ireland yet never stated how you knew the number of units when only land is zoned and planning tells you what houses may be built. DId you get zoned and permission mixed up?
Riddicule any view that doesn't agree with yours yet state your views as fact. 
All these houses that can be built in Dublin where is all the sewage works and the like going to go? The rules changed we can't dump it on another council area. You never stated where all these appartments were being built on knocked down houses
Fine to have an opinion but you run away scared when asked for facts. 
I have a fair knowledge of city planning guides and EU regulations. I would love to see where and what you are talking about to see if it is even possible under current laws and regulations. Green spaces in Dublin or very important and it will be interesting to see how much planning persmission will actually be granted for what remains.


----------



## bearishbull

Loki said:
			
		

> Can you guys tell me who will win the 3:30 in Cheltnum today seeing as you can see the furture?
> 
> Unbelievable arrogance without any facts stated.
> 
> Bear> Name where there is room!
> You claimed some figure for units zoned in Ireland yet never stated how you knew the number of units when only land is zoned and planning tells you what houses may be built. DId you get zoned and permission mixed up?
> Riddicule any view that doesn't agree with yours yet state your views as fact.
> All these houses that can be built in Dublin where is all the sewage works and the like going to go? The rules changed we can't dump it on another council area. You never stated where all these appartments were being built on knocked down houses
> Fine to have an opinion but you run away scared when asked for facts.
> I have a fair knowledge of city planning guides and EU regulations. I would love to see where and what you are talking about to see if it is even possible under current laws and regulations. Green spaces in Dublin or very important and it will be interesting to see how much planning persmission will actually be granted for what remains.


the 300,000 figure is zoned yes.
where is there room? the room is above our heads.we have to and will build up and fill in spaces in the city which arent green areas
theres room to build higher in many areas of dublin,planners are going for higher density eg new 30 storey tower at heuston station etc,theres many old factories and sites being knocked down and developed and many other locations that can be developed.smaller lower density office blocks/development will be knocked down and developed and the amount of housing and densities will increase a lot in dublin.this wont happen overnight but in next 20 years we will have a much higher skyline,this *has* to happen if the government wants the economy to prosper as dublin is the centre of the economy,every other country in the world manages to fit many millions of people into area's not much bigger than dublin too


----------



## gearoidmm

bearishbull said:
			
		

> in an economy growing at 2% its normally 4-5%.look at uk its growing at close to eurozone at present(2.5%) and their rates are still at 4.5%.usa is growing at 3% and rates are 200basis points higher than that there too.


 
That's fair enough if interest rates could be directly linked to GDP growth. The ECB tells us, however, that their main aim is price stability and without rising inflation, they have no excuse for raising rates much more than their current level.


----------



## bearishbull

gearoidmm said:
			
		

> That's fair enough if interest rates could be directly linked to GDP growth. The ECB tells us, however, that their main aim is price stability and without rising inflation, they have no excuse for raising rates much more than their current level.


But.. inflation isnt only consumer price inflation, asset price inflation is a concern for them too,they realise that house prices have been booming in france spain and other areas which isnt justified by economic growth there.


----------



## Loki

bearishbull said:
			
		

> the 300,000 figure is zoned yes.


Proof? As I said property is not zoned by anybody so that is why I doubt the figure as it doesn't make sense.


			
				bearishbull said:
			
		

> where is there room? the room is above our heads.we have to and will build up and fill in spaces in the city which arent green areas


Where have they knocked down 


			
				bearishbull said:
			
		

> theres room to build higher in many areas of dublin,planners are going for higher density eg new 30 storey tower at heuston station etc,theres many old factories and sites being knocked down and developed and many other locations that can be developed.smaller lower density office


Again *you can tell the furure* how do you *know* what the planners will do.?
Currently Dublin has  a height limit and that restricts supply. THe insdustrial sites need to be re-zoned from industrial to residential. The industrail sites I have seen changed are no higher than the original building in th sub-urbs


			
				bearishbull said:
			
		

> blocks/development will be knocked down and developed and the amount of housing and densities will increase a lot in dublin.this wont happen overnight but in next 20 years we will have a much higher skyline,this *has* to happen if the government wants the economy to prosper as dublin is the centre of the economy,every other country in the world manages to fit many millions of people into area's not much bigger than dublin too



For any of your vision to happen population needs to keep increasing and Irish mentatlity of home ownership needs to change. Dublin has to remain as the centre or Irish employment anything else that must happen for your vision? Your opinion of what has to happen is restricted to one vision of the future. Irish people are opposed to high rise and appartment living as general view.


----------



## beattie

Loki said:
			
		

> Irish people are opposed to high rise and appartment living as general view.


 
Do Irish people want to live in an area that might be high rise but near to a Luas/QBC/Metro (if it is ever built admittently) or do they want to commute from the likes of Gorey/Carlow/Athlone. I think the planners have realised the folly of their 'planning strategy' over the past decade and are now granting high rise developments (in Stillorgan/Sandyford anyway).

Also bear in mind that we are attracting 50k immigrants per year and as far as I can tell most of them come from countries where high rise doesn't generate tremors in people


----------



## askalot

Loki said:
			
		

> For any of your vision to happen population needs to keep increasing and Irish mentatlity of home ownership needs to change. Dublin has to remain as the centre or Irish employment anything else that must happen for your vision? Your opinion of what has to happen is restricted to one vision of the future. Irish people are opposed to high rise and appartment living as general view.



Have you not previously posted numerous, oh so numerous, replies that detail why, in the future, houses will be split into multiple living spaces?


----------



## bearishbull

Loki said:
			
		

> Proof? As I said property is not zoned by anybody so that is why I doubt the figure as it doesn't make sense.
> 
> Where have they knocked down
> 
> Again *you can tell the furure* how do you *know* what the planners will do.?
> Currently Dublin has a height limit and that restricts supply. THe insdustrial sites need to be re-zoned from industrial to residential. The industrail sites I have seen changed are no higher than the original building in th sub-urbs
> 
> 
> For any of your vision to happen population needs to keep increasing and Irish mentatlity of home ownership needs to change. Dublin has to remain as the centre or Irish employment anything else that must happen for your vision? Your opinion of what has to happen is restricted to one vision of the future. Irish people are opposed to high rise and appartment living as general view.


the attitude to apartment living is changing,we actually have a very low amount of aprtments in dublin approx 14% of dwellings in dublin are apartments. we have a population density of 1200 per square kilometre in greater dublin but in greater london its 4500 per square kilometre,we have to and are moving towards this higher density. the planners councills and governement have signalled intent to create high rise in dublin,eg the PD's wanna develop around the docks past IFSC and in port,sean dunne is developing jurys site for high rise/high density because of this move to higher density.the politicans know they have to build up in dublin and this is gonna happen over next decade.


----------



## Calina

Loki said:
			
		

> I have a fair knowledge of city planning guides and EU regulations. I would love to see where and what you are talking about to see if it is even possible under current laws and regulations.


A couple of pages ago you had to be told that planning permission was required for the house splitting which you seem to be so sure will prevent housing price meltdown, so I have to say, I'm not convinced about your knowledge in the area of planning. 

You also implied that to increase density, planning regulations might be, oh circumvented. I'm having some problems marrying that with your most recent posts. 

Dublin is a mess. Splitting semiDs is not going to fix that mess. Building five and six storey apartment blocks would go a long way towards alleviating it. But it needs to be done in line with public transport and traffic planning. 

Currently, there is a shocking disparity between average income and average house prices in Dublin. I don't believe this is sustainable. When the boiling point comes is, of course, currently a mystery to us all. But I will say this, whether it comes or not, infrastructural problems in Dublin will continue to exist and will continue to need addressed at some stage.


----------



## Glenbhoy

I look at this whole sorry mess that is a disaster waiting to happen and I ask myself - 'what can the government do now to avert disaster?'  - I can't see any obvious solutions - can anyone else?  What should they have done over the past 5/6 years that could have prevented us getting close to 'popping point' ie. when the bubble bursts!


----------



## redo

Glenbhoy said:
			
		

> I look at this whole sorry mess that is a disaster waiting to happen and I ask myself - 'what can the government do now to avert disaster?'  - I can't see any obvious solutions - can anyone else?  What should they have done over the past 5/6 years that could have prevented us getting close to 'popping point' ie. when the bubble bursts!



Correct, threre is no win-win solution for the Government really.  The report presented to the Dept of Environment last week suggested a tax on holiday and second homes which was good idea in theory but probably wouldn't get the Gov reelected.


----------



## askalot

Glenbhoy said:
			
		

> I look at this whole sorry mess that is a disaster waiting to happen and I ask myself - 'what can the government do now to avert disaster?' - I can't see any obvious solutions - can anyone else? What should they have done over the past 5/6 years that could have prevented us getting close to 'popping point' ie. when the bubble bursts!



One of the prime factors in the house price bubble has been interest rates that are too low for our economy. When we handed over responsiblity for setting rates to the ECB we sealed our fate; our economy had not 'converged' with Germany's or France's so we were doomed to live with rates out of whack with the real world as lived in Ireland.

If we had kept rates around 5 - 6 percent over the past 8 years we would not be in this mess nor would it have stunted our growth.


----------



## Loki

askalot said:
			
		

> Have you not previously posted numerous, oh so numerous, replies that detail why, in the future, houses will be split into multiple living spaces?



I stated nothing as FACT and WILL happen. I have only said splitting is a factor not considered. 



			
				bearishbull said:
			
		

> the attitude to apartment living is changing,we actually have a very low amount of aprtments in dublin approx 14% of dwellings in dublin are apartments. we have a population density of 1200 per square kilometre in greater dublin but in greater london its 4500 per square kilometre,we have to and are moving towards this higher density. the planners councills and governement have signalled intent to create high rise in dublin,eg the PD's wanna develop around the docks past IFSC and in port,sean dunne is developing jurys site for high rise/high density because of this move to higher density.the politicans know they have to build up in dublin and this is gonna happen over next decade.


Again you avoid answering the quaestion asked. WHere and what is zoned? Where are they knocking down property that is getting planning for high rise bar maybe 3-4 developments? Not enough to make the whole city change a factor I agree but not a sudden sweeping change accorss the city. Most appartmnet living in DUblin is rented and has a transient population. Signal intent does not mena the planners are and will do things you stated as definte.  WHat is the height of these high density buildings?


			
				Calina said:
			
		

> A couple of pages ago you had to be told that planning permission was required for the house splitting which you seem to be so sure will prevent housing price meltdown, so I have to say, I'm not convinced about your knowledge in the area of planning.


Look you need planing permission to put in a driveway or make it larger. Dublin city Council have never ever made somebody reverse it in a building estate. There are the rules and how the system works in Ireland. You know the rules I know the system.  You want to think you know how it works good for you but what have you ever got built?



			
				Calina said:
			
		

> Currently, there is a shocking disparity between average income and average house prices in Dublin. I don't believe this is sustainable. When the boiling point comes is, of course, currently a mystery to us all. But I will say this, whether it comes or not, infrastructural problems in Dublin will continue to exist and will continue to need addressed at some stage.


As many people don't really understand the effect of averaging property prices in a market where the most expensive property in the country is located I think using those values is misleading. THe belief that people must own their houses is part of  the problem and complaint about wages not matching. 

THe problem I have with marrying views is one minute people are saying there will be a crash due to economic pressure world wide. THen they still think  Dublin will be getting mass imigration (why are they still coming) people will still build property (for who) and people will change their mentality suddenly to live in appartment( yet everybody is commenting on how baddly built  they are). 

WE don't know what is going to happen so stop stating your views as fact and discuss the possible out comes and how they interact instead of stating one possibilty and refusing to listen to other possibilities


----------



## Neffa

gearoidmm said:
			
		

> Why then, did the prices not drop substantially in the UK over the last 18 months? There was no crash - just a stagnation which appears to be reversing itself. Similarly, the Netherlands had a house prices boom at the same time as us but they had a recession in 2002. Again, there was no drop in prices despite what many commentators saw as significant overvaluation. Are we going to see a similar defying of logic here?


 
Prices have dropped by 15-20% in parts of London and the SE - the asking prices have moved only a little but there is real haggling potential in the market for the first time in years. E.g. Friends tried to buy a 4-bed in Barnes, SW London - asking £980K - EA told them "off the record" that they'd sell for £900K and they eventually got it for £820K. Our house in London was valued twice in a 15 month period and fell about 15% during that time.

Also, the UK - in my opinion - had less distance to fall to achieve some kind of correction - the SE of England had already started to slow down in price growth in 2004 and this has continued into 05-06. 

The UK also has (it seems to me) a relatively lower instance of "hold on to your first place, let it out and buy your next place" relative to Ireland.


----------



## gearoidmm

Loki said:
			
		

> WE don't know what is going to happen so stop stating your views as fact and discuss the possible out comes and how they interact instead of stating one possibilty and refusing to listen to other possibilities
> 
> ....Unbelievable arrogance without any facts stated.


 
This thread is all about opinion and speculation. Nobody is claiming to predict the future but they are trying to make a judgement on what they think might happen based on the economic and social climate. There are some who believe prices will fall, some who believe stagnation is possible and others who think they will continue to rise. Your constant heckling and berating of other posters and their opinions is adding nothing to the debate. There are many commentators in the media and real estate industry who belive that the doomsayers anre being overly pessimistic and that this boom will roll on for years. They offer cogent analysis as to why they think this will happen, whether one agree with them or not.

Your idea of debate seems to revolve around calling everyone else fabricators and fools and it makes it very hard not to get caught up in a slinging match. I appreciate hearing the opposing view and I agree with some of you points but it would be nice if it you could answer some of the questions others have posed (Duplex for example) rather than resorting to the catch all 'no-one is stating facts'.


----------



## gearoidmm

Neffa said:
			
		

> Prices have dropped by 15-20% in parts of London and the SE - the asking prices have moved only a little but there is real haggling potential in the market for the first time in years. E.g. Friends tried to buy a 4-bed in Barnes, SW London - asking £980K - EA told them "off the record" that they'd sell for £900K and they eventually got it for £820K. Our house in London was valued twice in a 15 month period and fell about 15% during that time.


 
This has not been reflected in the official figures (including asking prices and prices on completion).  In fact, the last 2 months there has been a significant rise in prices in the SE.  There is no evidence of panic selling and in fact there are a lot fewer houses on sale in the London area than there were a year ago as people wait for prices to rise again.

I wonder is this stagnation a possible model for what will happen here rather than a crash?


----------



## kane3000

Why oh why would anyone in their right mind buy a 4-bed semi for €3m ??

You could have a castle in the countryside with enough left over for a helicopter to fly you to the city - what is going on???

-----Irish Independent 16-03-06----------------------------------------

€3m price tag on 4-bed city semi a sign of boom times 

WITH a price tag that is expected to jump above €3m at auction today this modest family semi detached home (left) is likely to prove beyond the grasp of most young newly-weds. 
But given that near neighbours include top chef Patrick Guilbaud and the Argentinian Embassy, auctioneers Lisney are expecting no shortage of interest in this Dublin property. 
Number 13 Ailesbury Drive, Donnybrook was built in the early 1950s and when the bidding starts today the advised minimum value for the four bedroom, 2020 sq feet house, with a 92-foot rear garden, will be €2.5m. 
But such prices are intended merely to get matters off the ground and industry observers expect it to eventually sell for a considerably higher price. 
It is all far removed from the property market of the mid 1990s. In 1995 the highest price reached at auction in the first half of that year was less than £700,000 for a six-bedroom, semi-detached, three-storey house at 51 Ailesbury Road. 
Anyone doubting how zany property prices have become should read the latest auction results. 
Just last week another semi-detached home in nearby Sandymount had an advised minimum guide of €5m. But at auction the Edwardian home in Park Avenue sold for €9m, a far cry from the £54,695 paid for it in 1974. 
That property was not unique as another home in Dublin also sold last week for over €5m. A four-bedroom detached house in Glenageary sold for €6.4m


----------



## Howitzer

gearoidmm said:
			
		

> This has not been reflected in the official figures (including asking prices and prices on completion). In fact, the last 2 months there has been a significant rise in prices in the SE. There is no evidence of panic selling and in fact there are a lot fewer houses on sale in the London area than there were a year ago as people wait for prices to rise again.
> 
> I wonder is this stagnation a possible model for what will happen here rather than a crash?


 
Interest rates. Interest rates. Interest rates.

At the first sign of weekness in the UK housing market, which was feeding into consumer spending, or the lack thereof, interest rates were descreased. The Irish house boom 'appears' to be reaching a peak at a time when the ECB has just started a cycle of raising rates, and won't stop cos a few investors/ftb's in Ireland are losing their shirts.


----------



## gearoidmm

Howitzer said:
			
		

> Interest rates. Interest rates. Interest rates.
> 
> At the first sign of weekness in the UK housing market, which was feeding into consumer spending, or the lack thereof, interest rates were descreased. The Irish house boom 'appears' to be reaching a peak at a time when the ECB has just started a cycle of raising rates, and won't stop cos a few investors/ftb's in Ireland are losing their shirts.


 
They were decreased, yes, but only by 0.25% and they were still 2% higher than they were a couple of years earlier.  0.25% didn't really put all that much more money into people's pockets although I suppose it did ease people's fears about continuing rate rises. Commentators in the UK had (like the irish equivalents) been talking about the crash that would come when interest rates rose and FTBs were priced out of the market.  FTBs are to a great extent now out and interest rates are higher but no crash.

There doesn't seem to be all that much analysis out there to explain this.


----------



## walk2dewater

gearoidmm said:
			
		

> This thread is all about opinion and speculation. Nobody is claiming to predict the future but they are trying to make a judgement on what they think might happen based on the economic and social climate. There are somewho belive prices will fall, some who believe stagnation is possible and others who think they will continue to rise. Your constant heckling and berating of other posters and their opinions is adding nothing to the debate. There are many commentators in the media and real estate industry who belive that the doomsayers anre being overly pessimistic and that this boom will roll on for years. They offer cogent analysis as to why they think this will happen, whether one agree with them or not.
> 
> Your idea of debate seems to revolve around calling everyone else fabricators and fools and it makes it very hard not to get caught up in a slinging match. I appreciate hearing the opposing view and I agree with some of you points but it would be nice if it you could answer some of the questions others have posed (Duplex for example) rather than resorting to the catch all 'no-one is stating facts'.


 
I returned to Ireland over 2 yrs ago.  When I arrived I decided not to buy a property and rent instead.  The economics simply didnt 'add up' in my view.  When asked "why dont I buy?", I presented my case for this, and I was almost universally disagreed with.  When I defended my view, and presented my analysis of the situation, I was branded a "doom-monger", a "begrudger", a "pessimist" and found myself on the receiving end of a lot of venom.  I quickly learned to keep my mouth shut.  It seems to me that there is an profound vested interest on the part of many people to keep prices rising, and any other perspective is shouted down with a lot of anger.  This is a nasty and insidious aspect of life here, one that has been exposed by this speculative frenzy in property.

WTTW


----------



## Loki

gearoidmm said:
			
		

> This thread is all about opinion and speculation. Nobody is claiming to predict the future but they are trying to make a judgement on what they think might happen based on the economic and social climate. etc...


THey aren't speculating they are stating that things will happen with certainty. My point is people are not speculating they are stating it as fact.


			
				gearoidmm said:
			
		

> Your idea of debate seems to revolve around calling everyone else fabricators and fools and it makes it very hard not to get caught up in a slinging match. I appreciate hearing the opposing view and I agree with some of you points but it would be nice if it you could answer some of the questions others have posed (Duplex for example) rather than resorting to the catch all 'no-one is stating facts'.


I ask for people to provide details of FACTS they state. THey are calling me a fool. Asking me questions I have not answered? I think you will find there are a ton of questions I have asked that people stating facts never answered. THe whole use of the term property bubble is a classic of people not knowing the difference between fact and speculation.


----------



## Howitzer

gearoidmm said:
			
		

> There doesn't seem to be all that much analysis out there to explain this.


 
Good vibes?

I think that the amount of new builds in the UK last year was only about 150,000. About twice the number here for a population 12 times the size. I don't have the source to hand but I'm sure I can dig it out.

And interest rates in the UK didn't actually increase by much (1.25%  bottomed out at 3.5% July 03, rose to 4.75% Sept 04 according to a wee graph on bbc.co.uk). Also the economy there is still very strong and wasn't affected by the slowdown as construction didn't account for much of the economies total output (unlike here).


----------



## Neffa

gearoidmm said:
			
		

> They were decreased, yes, but only by 0.25% and they were still 2% higher than they were a couple of years earlier. 0.25% didn't really put all that much more money into people's pockets although I suppose it did ease people's fears about continuing rate rises. Commentators in the UK had (like the irish equivalents) been talking about the crash that would come when interest rates rose and FTBs were priced out of the market. FTBs are to a great extent now out and interest rates are higher but no crash.
> 
> There doesn't seem to be all that much analysis out there to explain this.


 
I'm not sure the interest rate changes in the UK really affected things that much. I really think a lot of the gentle slowdown rather than crash in the UK is down to the affordability factor. Earlier on in this thread I showed there is a marked difference between the ratio of house prices/earnings in the UK and in Ireland. So when the "correction" started to happen in the UK, there is less inflation in the market and less pressure for prices to fall. Remember, you can buy a nice 4-bed period house in London with a decent garden, near transport links and decent schools for about £650K (€1m). It is much higher than that in Dublin.

And in response to Loki's point earlier, I do think that the 50K annual immigrants forever stuff you hear in the press will eventually start to taper off because the cost of living will become too high and people will go to the next hot spot instead. I work in a large US multinational here and we are bringing quite a few staff at all levels from abroad into Ireland and the huge cost of property is proving quite an issue in getting people here who plan to settle as opposed to rent for a few years and leave again.


----------



## gearoidmm

Howitzer said:
			
		

> Good vibes?
> 
> And interest rates in the UK didn't actually increase by much (1.25% bottomed out at 3.5% July 03, rose to 4.75% Sept 04 according to a wee graph on bbc.co.uk.


 
Sorry, should have checked my figures more carefully.  I thought they had gone lower.  I stand corrected.


----------



## Howitzer

So a jump of 50% in rates (3.5 - 4.75) stopped the market.

The equivelent here would be to bring rates to 3% which is forecast for this year, possibly 3.5%. I'm gonna wait till May and see what the ECB says then, if rates go up then, well, goodnight.


----------



## bearishbull

the economy in the uk is still quite strong and there a large amount of first time buyers waiting to enter the market(first time buyers fell to a 30 year low in  uk last year as they are priced out) so price falls may be cushioned by them .the average age of a FTB in uk is early 30's ,i'd say its a lot younger here .


----------



## redo

keth said:
			
		

> Everyone here is talking about the almost immediate future of the house prices/value etc. The larger future (10 years plus, not the next 2-5 years) will see house prices rise, even if they do stagnate, even dip in the near interim.
> 
> We may or may not be in the midst of speculative inflation, but real inflation will prevail as it always has and will ultimately raise the price of property over the longer term. Someone correct me, but inflation by it's very definition can only go up in the long term.
> 
> There are those that believe everyone will suddenly run screming and sell if the value of their house doesn't perform. Property for 99% of people are not shares in the market.
> 
> Personally, I think we are starting to suffer from a little paranoia given the interest rate rise.
> 
> Keth.
> 
> Sadly, and I don't mean to be personal, but it's usually the sad loser trotsky-ites who havn't a penny to buy a house who ring their hands at the thoughts of a market collapse, as if they'll have the rich pickings when the time comes for everyone else to sell.


At little bit of sense at last (please don't flame me Loki, it's only an opinion)


----------



## ivuernis

keth said:
			
		

> Everyone here is talking about the almost immediate future of the house prices/value etc. The larger future (10 years plus, not the next 2-5 years) will see house prices rise, even if they do stagnate, even dip in the near interim.


 
I would be less optimisitic about the longer-term future (10+ years) than the near-term. We may ride it out for another while in the near-term but I think the big problems lie further down the line. We'll pay tomorrow for our profligacy today. 




			
				keth said:
			
		

> Sadly, and I don't mean to be personal, but it's usually the sad loser trotsky-ites who havn't a penny to buy a house who ring their hands at the thoughts of a market collapse, as if they'll have the rich pickings when the time comes for everyone else to sell.


 
Would you blame them in today's market?


----------



## gearoidmm

> Everyone here is talking about the almost immediate future of the house prices/value etc. The larger future (10 years plus, not the next 2-5 years) will see house prices rise, even if they do stagnate, even dip in the near interim.
> 
> We may or may not be in the midst of speculative inflation, but real inflation will prevail as it always has and will ultimately raise the price of property over the longer term. Someone correct me, but inflation by it's very definition can only go up in the long term.
> 
> There are those that believe everyone will suddenly run screming and sell if the value of their house doesn't perform. Property for 99% of people are not shares in the market.
> 
> Personally, I think we are starting to suffer from a little paranoia given the interest rate rise.
> 
> Keth.


 
There is nothing inevitable about inflation although it is the more likely scenario

[broken link removed])

http://www.gold-eagle.com/editorials_04/riley041504.html

That said, I tend to agree with you


----------



## walk2dewater

keth said:
			
		

> Sadly, and I don't mean to be personal, but it's usually the sad loser trotsky-ites who havn't a penny to buy a house who ring their hands at the thoughts of a market collapse, as if they'll have the rich pickings when the time comes for everyone else to sell.


 
So now we can add "sad trotsky-ites who havent a penny" to the list of put downs to those who see lower house prices as a good thing. The "sad trotsky-ites", "begrudgers", the "doom-mongers" who want to see low cost housing, are feared by those who want to keep house prices high.

The 'sad trotsky-ites' are mainly our young people, who today are supposed to pay x3 the price of what a home cost not 9yrs ago.

Let me repeat lower house prices ARE A GOOD THING.  Ask any 24yr old.

Fumble in the greasy til, indeed.


----------



## Duplex

Why have houseprices fallen for nearly fifteen years in Germany and Japan. Why because of deflation, the Germans and Japanese are witnessing the impact of a new global economy where highly qualified workers in the world’s most populous nations get paid 10% of the going rate in the west.  The Americans, Brits and Irish have decided to forgo future consumption for current(non productive)asset inflation, it’s a choice. 

By the way I still house prices in Ireland rising by at least 20% this year so more economically beneficial inflation.


----------



## Loki

walk2dewater said:
			
		

> Let me repeat lower house prices ARE A GOOD THING.  Ask any 24yr old.
> 
> Fumble in the greasy til, indeed.


And a 24year old looking to buy a house is so objective. It is quite apparent that what people want means nothing other than that. It doesn't make it good. Let me give an example more cheaper drugs *ARE A GODD THING* ask a 24 year old junkie.
A really lame argument


----------



## bearishbull

general consumer inflation is near inevitable and a little of this is good for and economy but for assets like houses theres no guarantee,house prices in germany japan etc are lower now than they have been on previous 2 decades.
i too would be more worried about house prices in 10+ years time as our economy is quite vunerable ,we import everything for consumption (cars clothes food etc) and produce little outside of the multinational sector and invest far too little in r&d.
when many of the multinationals leave for better value locations and the construction part of GDP slows or decreases and interest rates are much higher  and graduate service jobs move to asia/eastern europe we're fecked! really though,whats gonna drive irish economy in 10+ years time? the construction sector and related mortgage/finance sector are driving a lot of growth, talk of a knowledge based economy is a pipe dream we are hoping for but the nordic countries have achieved.we lack industriousness and rely on foreign multinationals consumer spending and house building to power our economy,this is not sustainable and many informed economists are saying so. unemployment ,interest rates, and gdp growth can only get worse from now on and this will impact economy/ property market.

p.s on news today it said inflation rose to 3.3 percent in ireland,europe uk and america have inflation of 2% so we are becoming even less competitive.


----------



## Carpenter

I believe Ben Dunne made some comments on the whole subject today, I didn't hear him myself- did anyone catch it?


----------



## Duplex

Might I add that I have no objection to the predatory nature of the banking and construction industry in Ireland. These sectors are seeking to maximise their returns, as they should; we live in a capitalist system which has proven to be the most efficient and beneficial method of employing both natural and human resources. What I object to is the presumption of a fairytale happy ending for Ireland given global and domestic circumstances. Please credit some people with a modicum of intelligence and accept that we understand how capitalism works. 

Their are sheep to be sheared, so shear them, but don’t start on the bears.


----------



## ivuernis

Carpenter said:
			
		

> I believe Ben Dunne made some comments on the whole subject today, I didn't hear him myself- did anyone catch it?


 
No, but someone told me he was on the News-at-One on RTE. I guess you'll be able to hear it on the website once it's updated with today's show when it's over. 

[broken link removed]


----------



## ivuernis

Loki said:
			
		

> And a 24year old looking to buy a house is so objective. It is quite apparent that what people want means nothing other than that. It doesn't make it good. Let me give an example more cheaper drugs *ARE A GODD THING* ask a 24 year old junkie.
> A really lame argument


 
That's a really lame comparison Loki. Is a property-speculator with sufficient asset-backed liquidity who's pricing same 24-year old out of the market any more objective? 

Affordable housing would benefit almost everyone unlike the current situation which is breaking the financial backs of a large proportion of the young workforce in this country.


----------



## Loki

bearishbull said:
			
		

> general consumer inflation is near inevitable and a little of this is good for and economy but for assets like houses theres no guarantee,house prices in germany japan etc are lower now than they have been on previous 2 decades.


I think the people in th former East Germany might disagree there. Isn't Japan recovering  from a huge massive crash?
Both have had massive political turmoil I think it is very suspect using them as example.


----------



## Duplex

Loki said:
			
		

> Isn't Japan recovering from a huge massive crash?


 
Quite


----------



## beattie

Loki said:
			
		

> I think the people in th former East Germany might disagree there. Isn't Japan recovering from a huge massive crash?
> Both have had massive political turmoil I think it is very suspect using them as example.


 
What huge turmoil did Japan suffer?


----------



## tiger

beattie said:
			
		

> What huge turmoil did Japan suffer?


Found this short summary with the help of google.
http://www.stock-market-crash.net/nikkei.htm

Basically speculation on property & the stockmarket lead to a crash in 1991 which resulted in the Nikkei losing over 75% of its value and property values falling for 14 straight years


----------



## Duplex

[broken link removed]

Hong Kong



Japan


----------



## Calina

tiger said:
			
		

> Found this short summary with the help of google.
> http://www.stock-market-crash.net/nikkei.htm
> 
> Basically speculation on property & the stockmarket lead to a crash in 1991 which resulted in the Nikkei losing over 75% of its value and property values falling for 14 straight years


So what you're suggesting is that speculation in property was one of the direct causes of the crash in Japan, not a _result_ of said crash?


----------



## Loki

So does this mean people agree that using Germany and Japaneese prices to show prices stay down is a bad example.

*ivuernis
*
The point I was making is peopledesires are only a sign of their desires not good or bad. You are dead right in saying an investor is equally useless to use just becasue of their desires. The points of fact are all that should be used. Speculation on these facts is fine as speculation.


----------



## ivuernis

Carpenter said:
			
		

> I believe Ben Dunne made some comments on the whole subject today, I didn't hear him myself- did anyone catch it?


 
Here's the link (requires Real Player)

[broken link removed]

It's at the end of the segment, he basically says current property prices are unsustainable and a lot of people don't think they could ever drop. He was talking in relation to people who lost money when the invested in some of Patrick Gallagher's failed ventures.


----------



## ivuernis

Loki said:
			
		

> *ivuernis*
> 
> The point I was making is peopledesires are only a sign of their desires not good or bad. You are dead right in saying an investor is equally useless to use just becasue of their desires. The points of fact are all that should be used. Speculation on these facts is fine as speculation.


 
You said that just because somebody wants something does not make it good. Sometimes it does though... I would argue that people wanting affordable property is a good thing. People wanting property prices to rise is not a good thing though. 

Granted, for the former to be satisfied NOW would require current property owners to lose money... this is the bind we find ourselves in 21st Century Ireland.


----------



## bearishbull

keth said:
			
		

> .
> 
> As for the doom mungerers. either buy up or shut up please, and let the rest of us who had the courage and wherewithall to buy either way back in the late 1990's or more recently, to enjoy our fruits.


 
this is a debate thread ,if you have a problem with opinions that you dont share you shouldnt be here and definietly not telling people to shut up.

"enjoy your fruits" ? you are sitting on a paper profit and if you sell to move  evey other property has gone up similarly in value, the only people who benefit from rampant house price increase are investors/those with more than one property or those selling their homes and moving to a cheaper country and the banks/estate agents/mortgage industry. so enjoy your fruits which will rot in time.


----------



## Howitzer

keth said:
			
		

> Do these same people really think that as soon as the ballon starts leaking (even with the SSIA's coming on stream, and a strong economy abounding) that everyone will run screaming begging that their house be bought at a fraction of the cost paid for it.
> 
> If any type of downturn occurs, most people will hang onto what they have and wait for the next inexorable rise as is the longtime nature of natural inflation. The doom mungerers scenario of property ripe for the picking is naive to say the least and a fitting vision for anyone who's never held down a mortgage or anytype of responsibility.


 
Simply judging from the 2 closest boom property markets to us, UK and Holland, prices only stopped rising when they were unaffordable to new buyers. This is market forces at work. You're absolutely right that people will always try and hold onto their property no matter what. In both the UK and Holland there was an immediate fall in consumer spending once house prices reaching their peak as people could only afford either to hold their house or spend as before: keeping house always comes out on top. 

In that scenario prices only fall when people holding onto their property are forced into selling. The worry is that the current Irish market is quite exposed in this respect because of the amount of people employed directly or indirectly through the housing sector itself, and due to the fact that we're are at the start of an increasing interest rate cycle over which we have no control. The people who were waiting to buy will be similarly effected and so unable to purchase. Freefall.


----------



## Loki

ivuernis said:
			
		

> You said that just because somebody wants something does not make it good. Sometimes it does though... I would argue that people wanting affordable property is a good thing. People wanting property prices to rise is not a good thing though.
> 
> Granted, for the former to be satisfied NOW would require current property owners to lose money... this is the bind we find ourselves in 21st Century Ireland.


The qualification for it being good was that somebody wants it. Not a valid qualification just opinion dressed up. FIne to state your opinion but that is waht it is not fact. FOr exampl you think it is a good thing if prices drop but you are saying "People wanting property prices to rise is not a good thing though. " as fact state it as opinion.


----------



## bearishbull

*Re: Bearish Bull - BullS**T*



			
				keth said:
			
		

> Bearishbull,
> 
> Paper profits???
> 
> You are talking bull! I've bought and sold sveral times on paper profit and my current property is anything but paper. Obviously you are still living in your bedroom.


im not talking about you im talking about all the people you are talking about enjoying their fruits. im sure the most recent purchase you made was higher than your first purchase and had increased at similar rate to the first purchase did.


----------



## walk2dewater

keth said:
			
		

> I'm surprised no one has a placard naming the day the world ends. It's ironic, but most people waiting for the collapse are those without a roof of their own above their heads. These are the doom mungerers and professors of the bubble bursting.
> 
> Do these same people really think that as soon as the ballon starts leaking (even with the SSIA's coming on stream, and a strong economy abounding) that everyone will run screaming begging that their house be bought at a fraction of the cost paid for it.
> 
> If any type of downturn occurs, most people will hang onto what they have and wait for the next inexorable rise as is the longtime nature of natural inflation. The doom mungerers scenario of property ripe for the picking is naive to say the least and a fitting vision for anyone who's never held down a mortgage or anytype of responsibility.
> 
> As for the doom mungerers. either buy up or shut up please, and let the rest of us who had the courage and wherewithall to buy either way back in the late 1990's or more recently, to enjoy our fruits.


 
Again I OBJECT to anyone with a view, or god forbid a desire, that prices will fall from current levels, being put down and talked about as being nasty individuals.  I obviously break your small-minded, stereotype.  I have a roof over my head in Dublin, I rent it.  I own other 'roofs over my head' in Canada and Honduras, and throughout my life I've owned several other 'roofs over my head'.

I feel sadness for whats happening in this country today.  Yes, a sharp correction in prices scr*ws recent buyers, putting them in neg equity, but it benefits our children and their children who havent bought yet.  The vast majority of homeowners will by-and-large be unaffected when this mania unwinds.  Life will go on, they will live in their homes, the associated recession will pass, the key difference is house prices will be substantially lower

Give me on straight answer here:  Tell me why are high property prices a good thing?  Who benefits from houses costing x3 what they did 9yrs ago?  Why should we as a society aspire to high and ever-spiralling-beyond-incomes prices for property?


WTTW


----------



## Calina

keth said:
			
		

> I guess by Trotski-ite I mean those who are almost 'unwilling' to take the chance that most other hard working people have. These same people are adamant about their stance almost believing that a low cost house is their right. Did we forget that we're living in a free market (almost) and that the persuit of dreams via money and profit is permitted, neigh, encouraged
> 
> How many people out there have made massive amounts of money on their house or houses. And why shouldn't they? More power to them, and to those that havn't, that is a pity, but come on?
> 
> We are not living in a communist society where all are equal weather we like it or not. Everyone has the right to speculate, appreciate and recooperate.
> 
> If you feel so strongly, join the socialist party.
> 
> Keth.



You're right, we live in a free market, and right now, people who own houses are benefitting. But I'd be surprised if many people would be hollering about how wonderful a free market is if the number of buyers dried up into nothing. Remember, you can only cash in your chips if someone wants to buy them.


----------



## soma

Keth, I don't know where to start man, that's alot of vitriol you've been throwing around.

If you think the typical property bear in Ireland some kind of student hippie type then you are falling into a stereotype yourself, that of someone who has something nice but is paranoid that 'the proles' are out to get them & take what they have. 

Also, if you think the concern re:the property market is solely about house prices or affordability you are sorely mistaken. Some people like myself, who hope to further establish & expand businesses, see a massive opportunity going a begging at the moment. 

Instead of a strong economy here we're building a paper tiger by fooling ourselves into thinking we're producing real things in our economy. We're not, we're playing around with WWII-level cheap monopoly money on credit and somehow convincing ourselves that the economy is driving forward.

It's not that "cheap houses" are good for the economy, it's that when people have a 'reasonable' amount of money left in their pockets after paying their mortgage - then there's a better chance of that person ploughing some of that cash into a new business, thus helping the economy in the long run. The guy who is commuting four hours to work to live in ballyno-where and struggling to make ends meet and is exhausted all the time is never going to establish anything.

The reason why property bears cant just 'pay up or shut up' is that alot of us see a direct correlation between an inflated asset bubble [if you are honest with yourself - it's inflated - no one in their right minds could value a house in a frankly dangerous area of dublin (we all know the areas I mean) at a quarter of a million euros, yet this happens) and a tanked economy.


----------



## Duplex

*Nothing endures but change.
*- Heraclitus


----------



## redo

Duplex said:
			
		

> *Nothing endures but change.
> *- Heraclitus


And national borders, particularly in the middle east


----------



## Neffa

keth said:
			
		

> I guess by Trotski-ite I mean those who are almost 'unwilling' to take the chance that most other hard working people have. These same people are adamant about their stance almost believing that a low cost house is their right. Did we forget that we're living in a free market (almost) and that the persuit of dreams via money and profit is permitted, neigh, encouraged
> 
> How many people out there have made massive amounts of money on their house or houses. And why shouldn't they? More power to them, and to those that havn't, that is a pity, but come on?
> 
> We are not living in a communist society where all are equal weather we like it or not. Everyone has the right to speculate, appreciate and recooperate.
> 
> If you feel so strongly, join the socialist party.
> 
> Keth.


 
Wow - strong stuff!

I think you've got the wrong end of the stick here, certainly for my own position. I own property in Ireland and in the UK which are rented out but were bought a long time ago so that the income comfortably covers the costs.  I also have investments in the form of equities sitting to draw on if I wish to buy a property in Ireland and have a large mortgage approved to do so. I don't begrudge anyone who has made money from property - I have done so myself handsomely from our UK property already and fair play to yourself and others who have done so too, possibly on a greater scale than myself. 

I lived through a property crash in the UK and saw the before and after effects. My view is that Ireland is close to the tipping point of the property market so that there may (see Loki, I did not say will  ) a correction and that would present more attractive buying opportunities in 1-3 years time. So I am renting in a very nice area, biding my time, trying to improve my cash position so that I am in the best possible situation. I am speculating, but from a different perspective from yourself

Some other observations on the fact that comments have been made that "I'll ride out any downturn" - while it is true that in the UK most people simply held tight and did not sell, there were forced sales in the form of repossessions across the market (FTB's, top-end of the market, BTL etc.), people died, got divorced, were made redundant, had more kids etc. etc. - point is - not everyone can stay in the same house for many years as their circumstances change and they have to move. Properties always come onto the market even when the market is weak due to these factors, and the market was further surpressed in London because people were terrified it would fall further.

In Ireland, the situation may be exacerbated by the fact that BTL seems to be higher than in the UK (therefore the economy is more sensitive to property income) and also a lot of the tax take is associated with housing (employment, stamp duty, VAT etc.). So any downturn would produce a multiplier effect in the economy which would in turn hit house prices hard. If you believe that, then wait and see when you can buy. If you don't, go ahead and buy if you think you're getting good value.

Or ask yourself this - if the price of houses in Ireland is very high by international standards AND the house you own is growing faster than your household income when interest rates are rising, does that not strike you as a bit unsustainable?

You pays your money, you takes your choice


----------



## thewatcher

soma said:
			
		

> Keth, I don't know where to start man, that's alot of vitriol you've been throwing around.
> 
> If you think the typical property bear in Ireland some kind of student hippie type then you are falling into a stereotype yourself, that of someone who has something nice but is paranoid that 'the proles' are out to get them & take what they have.
> 
> Also, if you think the concern re:the property market is solely about house prices or affordability you are sorely mistaken. Some people like myself, who hope to further establish & expand businesses, see a massive opportunity going a begging at the moment.
> 
> Instead of a strong economy here we're building a paper tiger by fooling ourselves into thinking we're producing real things in our economy. We're not, we're playing around with WWII-level cheap monopoly money on credit and somehow convincing ourselves that the economy is driving forward.
> 
> It's not that "cheap houses" are good for the economy, it's that when people have a 'reasonable' amount of money left in their pockets after paying their mortgage - then there's a better chance of that person ploughing some of that cash into a new business, thus helping the economy in the long run. The guy who is commuting four hours to work to live in ballyno-where and struggling to make ends meet and is exhausted all the time is never going to establish anything.
> 
> The reason why property bears cant just 'pay up or shut up' is that alot of us see a direct correlation between an inflated asset bubble [if you are honest with yourself - it's inflated - no one in their right minds could value a house in a frankly dangerous area of dublin (we all know the areas I mean) at a quarter of a million euros, yet this happens) and a tanked economy.


 
I couldn't have said it better myself !


----------



## ivuernis

It's a [broken link removed] in one of the most desirable areas in Dublin, but still at [broken link removed] (plus another €0.34m for stamp duty alone!) at the end of the day it is still a just a 4-bed semi-d with a converted garage.


----------



## bearishbull

ivuernis said:
			
		

> It's a [broken link removed] in one of the most desirable areas in Dublin, but still at [broken link removed] (plus another €0.34m for stamp duty alone!) at the end of the day it is still a just a 4-bed semi-d with a converted garage.


 
yeah thats mad. i cant see how that area can be that much better than similar areas close to the city ,its financial madness from an investment point of view,i hope the buyers get the extra few million they paid back in increased satisfaction/feelings of prestige! this purchase really epitomises the emotional over th rational,people obviously feel they will get a massively increased sense of worth and social standing by buying such properties,but eventually they will realise that prestige materialism etc are all fickle unimportant concepts in the greater scheme of things or maybe they wont and will find hapiness in the hands of consumerism!


----------



## extopia

Well, it's probably worth at least a million to have Patrick Gilbaud as a neighbour, right?  

This was hyped up in the Indo and other places too. But what if Patrick decides to cash in and move on?


----------



## Duplex

A little perspective; 12 bedroom mansion in Orange County New York.  




> Orange County New York, €4,500,000
> Stately "Georgian" mansion perched on 3 acres with lake frontage to Tuxedo Lake. Incredible estate built in 1920 for John Harris of Smith, Barney, Harris Co. boasts all the original detail of the period. Beautiful moldings, 13 firep laces, grand scale rooms. Historic District, private gated community, 2,000 acres with 3 private lakes only 38 miles to NYC. Additional 3.1 lake front lot also available MLS # 386343.


</SPAN> 




http://www.weichert.com/search/realestate/PropertyListing.aspx?P=5568666&countyid=34514


----------



## Neffa

Duplex said:
			
		

> A little perspective; 12 bedroom mansion in Orange County New York.
> 
> 
> </SPAN>
> 
> 
> 
> 
> http://www.weichert.com/search/realestate/PropertyListing.aspx?P=5568666&countyid=34514http://www.weichert.com/search/realestate/PropertyListing.aspx?P=5568666&countyid=34514http://www.weichert.com/search/realestate/PropertyListing.aspx?P=5568666&countyid=34514


 
Hey, Duplex, you know this board doesn't like international comparisons - Ireland is different, after all  

How about this six bed period house in the heart of Notting Hill in London for the same amount?

http://www.findaproperty.com/agent.aspx?agentid=1410&opt=prop&pid=008293&photo=2#photo


----------



## Jack The Lad

Throw my hat in here....

I've put my money where my mouth is and sold my two investment properties 2 & 4 months ago... after paying back mortgage and Cap Gains, I had doubled my initial investment in three years. Ok, so I possibly may lose out on further gains over the next couple of years, or I may not... I don't care. Fact is I'm done, I've made my money and now I'm investing elsewhere. There's no need to bring it right down to the wire. 

And for the record.... I hope there isn't a downturn...


----------



## Laurie

Neffa said:
			
		

> Hey, Duplex, you know this board doesn't like international comparisons - Ireland is different, after all
> 
> How about this six bed period house in the heart of Notting Hill in London for the same amount?
> 
> http://www.findaproperty.com/agent.aspx?agentid=1410&opt=prop&pid=008293&photo=2#photo


 
Hey, Neffa, you know some people on this board can't do currency conversions!l 

Since when is €2,500,000 = *£*2,650,000?


----------



## Eurofan

Laurie said:
			
		

> Hey, Neffa, you know some people on this board can't do currency conversions!l
> 
> Since when is €2,500,000 = *£*2,650,000?


If you'd clicked the other link you'd have noticed the property in fact _sold_ for €3.75 million, well over the guide of €2.5 million.

So it's roughly bang on. I know which property i'd prefer


----------



## extopia

Unfortunately it all depends on where you want to live...


----------



## Neffa

Laurie said:
			
		

> Hey, Neffa, you know some people on this board can't do currency conversions!l
> 
> Since when is €2,500,000 = *£*2,650,000?


 
Errr...when the property *sold* for €3.75m, or really €4.09m with stamp 
duty @ 9%.

The London house is £2.65m, or €4.01m with stamp duty @ 4%. 

So pretty much the same. And yes, in response to the other post it does depend on where you'd like to live but both houses are in the very high end of the international executive market and the Dublin example looks poor value by comparison. And getting back to the thread topic, I think provides further evidence that the market here is very, very expensive indeed.


----------



## Laurie

Neffa said:
			
		

> Errr...when the property *sold* for €3.75m, or really €4.09m with stamp
> duty @ 9%.
> 
> The London house is £2.65m, or €4.01m with stamp duty @ 4%.
> 
> So pretty much the same. And yes, in response to the other post it does depend on where you'd like to live but both houses are in the very high end of the international executive market and the Dublin example looks poor value by comparison. And getting back to the thread topic, I think provides further evidence that the market here is very, very expensive indeed.


 
Oops! Sincerest apologies Neffa  !


----------



## Duplex

An intersting article on the 'investment' market in Arizona; might shed some light on the future of the Irish market.

http://money.cnn.com/magazines/fortune/fortune_archive/2006/03/20/8371785/index.htm


----------



## Loki

I really don't think much of the comparisons people are using. First off the most exclusicve residency in any country should be compared with like. THe arizona desert is not exactely the same as the capital city of a European country. A house in the outer suburbs of New York is not tha same as a house in the most exclusive area in the Capital of Ireland during a record low level of unemployment. Before somebody puts in the smug "well everybody thinks Ireland is _different_" What you are comparing is not close. What can you buy in the west of Ireland For €3.75mil? I think you can buy a former mansion estate.  
All this talk of comparing is really pointless as you aren't comparing you are just showing what can be bought for the same money in other countries. There is no comparison in the properties and the location. You need show like with like.


----------



## redo

Loki said:
			
		

> I really don't think much of the comparisons people are using. First off the most exclusicve residency in any country should be compared with like. THe arizona desert is not exactely the same as the capital city of a European country. A house in the outer suburbs of New York is not tha same as a house in the most exclusive area in the Capital of Ireland during a record low level of unemployment. Before somebody puts in the smug "well everybody thinks Ireland is _different_" What you are comparing is not close. What can you buy in the west of Ireland For €3.75mil? I think you can buy a former mansion estate.
> All this talk of comparing is really pointless as you aren't comparing you are just showing what can be bought for the same money in other countries. There is no comparison in the properties and the location.You need show like with like.



Loki, we know this are apples and oranges comparisons with regard to location.


----------



## Eurofan

Loki said:
			
		

> All this talk of comparing is really pointless as you aren't comparing you are just showing what can be bought for the same money in other countries. There is no comparison in the properties and the location. You need show like with like.


You convieniently left out the London property in your complaint about not comparing like for like, or would such a comparison really highlight the preposterious levels Irish property has reached.

When some media reporting has been on the edge in the last few months i've finally seen the first of what will doubtless will an increasing number of very negative articles with regard to property investment in Ireland.

Kathleen Barrington is the first journalist to have the balls (how ironic) to print "When the sums in housing don't add up" in yesterdays SBP. While focusing on a particular property amongst the quotes used were "The only basis on which this investment makes sense is if rental income grows at a truely phenomenal pace, if there is development potential for another property or if the investor flogs the property to an even bigger mug down the line."

Lets face it... Ireland is not that 'different' to any other market and there's not point kidding ourselves that it is. €4 million for that property (inc stamp) is nothing short of sheer insanity, it's well past 'irrational exuberance' at this stage.


----------



## Loki

Eurofan said:
			
		

> You convieniently left out the London property in your complaint about not comparing like for like, or would such a comparison really highlight the preposterious levels Irish property has reached.



How well do you know London? I don't know it that well (lived there for 6 months) the only reason I did mentioned it. I don't know the area to compare. I know Orange County New York Is not New York, New York. I know Las vegas is  in the desert. 
I noticed you just brushed off my comments yet never actually defended an obvious bias in the comparisons.



			
				Eurofan said:
			
		

> Lets face it... Ireland is not that 'different' to any other market and there's not point kidding ourselves that it is. €4 million for that property (inc stamp) is nothing short of sheer insanity, it's well past 'irrational exuberance' at this stage.


Supply and demand. The exclusive property in each country has the highest prices becasue of the social status. Go to the monopoly board in each capital city and find a house for sale on each of the top property roads. Compare them and you might be closer.


----------



## ivuernis

Eurofan said:
			
		

> Kathleen Barrington is the first journalist to have the balls (how ironic) to print "When the sums in housing don't add up" in yesterdays SBP. While focusing on a particular property amongst the quotes used were "The only basis on which this investment makes sense is if rental income grows at a truely phenomenal pace, if there is development potential for another property or if the investor flogs the property to an even bigger mug down the line."


 
Is it on the SBP website by any chance? Didn't get the SBP yesterday.


----------



## ivuernis

ivuernis said:
			
		

> Is it on the SBP website by any chance? Didn't get the SBP yesterday.


 
Should've googled it before I posted the request

"When the sums in housing don’t add up" by Kathleen Barrington

*[broken link removed]*


----------



## Calina

ivuernis said:
			
		

> Should've googled it before I posted the request
> 
> "When the sums in housing don’t add up" by Kathleen Barrington
> 
> *[broken link removed]*



thanks for that...I had a cursory look for it and didn't happen on it.


----------



## soma

Eurofan said:
			
		

> Kathleen Barrington is the first journalist to have the balls (how ironic) to print "When the sums in housing don't add up" in yesterdays SBP.


I really was glad to see someone take that brutal "worth the investment?" Irish Times Column to heel. I'd love to see the stats on the go/no-go ratio of verdicts they have given on properties - anytime I have taken a look at the column *everything* reviewed has been given the green light as a good long term 'investment' even though the majority are 'junk' properties (rent doesnt cover monthly outlay).


----------



## beattie

ivuernis said:
			
		

> "When the sums in housing don’t add up" by Kathleen Barrington
> 
> *http://tinyurl.com/mjr6e*http://tinyurl.com/mjr6e


 
Well written article, not too sure if many of these investors will take notice of it though. Interest rates will have to go to 3.5% before anything changes in this market IMO. I know people who are happy to supplement their rental income as property will always go up. 
It would be interesting to see what sort of yields these new apartments on the quays are making. Looking at daft it looks like some of them are finding it hard to get tenants


----------



## redo

beattie said:
			
		

> Well written article, not too sure if many of these investors will take notice of it though. Interest rates will have to go to 3.5% before anything changes in this market IMO. I know people who are happy to supplement their rental income *as property will always go up*.
> It would be interesting to see what sort of yields these new apartments on the quays are making. Looking at daft it looks like some of them are finding it hard to get tenants


Here comes Loki


----------



## Loki

beattie said:
			
		

> Well written article, not too sure if many of these investors will take notice of it though. Interest rates will have to go to 3.5% before anything changes in this market IMO. I know people who are happy to supplement their rental income as property will always go up.
> It would be interesting to see what sort of yields these new apartments on the quays are making. Looking at daft it looks like some of them are finding it hard to get tenants



Vaguely well written if you ask me. The premise that somebody would buy a house on this road to rent it out at average house rental prices seems to be flawed to start with. THe arguement is valid  but bad examples and sensationalised. It is about investemnt that nobody in their right mind would make. It is not the same as an investment in a 2 bed appartment or even close. Very poor example if you ask me


----------



## ivuernis

beattie said:
			
		

> Well written article, not too sure if many of these investors will take notice of it though. Interest rates will have to go to 3.5% before anything changes in this market IMO. I know people who are happy to supplement their rental income as property will always go up.
> It would be interesting to see what sort of yields these new apartments on the quays are making. Looking at daft it looks like some of them are finding it hard to get tenants


 
Agreed, I think the example given was an extreme one. It's the people who are down at the lower end of the rental sector who are taking a hit of maybe 10-20% a month on the difference between the mortgage and rent who will suffer most if things go sour.


----------



## Howitzer

Loki said:
			
		

> Vaguely well written if you ask me. The premise that somebody would buy a house on this road to rent it out at average house rental prices seems to be flawed to start with. THe arguement is valid but bad examples and sensationalised. It is about investemnt that nobody in their right mind would make. It is not the same as an investment in a 2 bed appartment or even close. Very poor example if you ask me


 
Absolutely. 

Still, I don't think many first time investors (fti's?) are actually doing the Maths and maybe extreme examples are required to drill home the message, after all it's the extreme positive examples that have got them on board in the first place (10-20% yoy increases).


----------



## redo

Loki said:
			
		

> Vaguely well written if you ask me. The premise that somebody would buy a house on this road to rent it out at average house rental prices seems to be flawed to start with. THe arguement is valid  but bad examples and sensationalised. It is about investemnt that nobody in their right mind would make. It is not the same as an investment in a 2 bed appartment or even close. Very poor example if you ask me



I agree with you Loki.  The example figures supplied do not make financial sense.  Why would you invest in somthing that would be out performed by cash in the bank.  It really is a STUPID example, deserving of The Sun or the like.


----------



## soma

redo said:
			
		

> I agree with you Loki.  The example figures supplied do not make financial sense.  Why would you invest in somthing that would be out performed by cash in the bank.  It really is a STUPID example, deserving of The Sun or the like.


Yeah I mean who would invest in something with a negative yield.. oh wait.. roughly 35% of Irish property "investors".

Personally I don't see the example as extreme - I know someone currently purchasing a place for 1.3m, planning to rent it for one year (obviously at a negative yield) and fully intends to flip it for 1.9m after that year. This type of activity is covered by her comment "or if the investor flogs the property to an even bigger mug down the line."

In the current market, I think there's every chance this guy will find that mug in 12 months time.


----------



## Loki

Howitzer said:
			
		

> Absolutely.
> 
> Still, I don't think many first time investors (fti's?) are actually doing the Maths and maybe extreme examples are required to drill home the message, after all it's the extreme positive examples that have got them on board in the first place (10-20% yoy increases).


FTIs normally can do this as their mortgages are so much cheaper than other people on the same road and/or wages. 
I think if you have to make such riddiculious examples to make a point I think it is close to lying.


----------



## gearoidmm

redo said:
			
		

> I agree with you Loki. The example figures supplied do not make financial sense. Why would you invest in somthing that would be out performed by cash in the bank. It really is a STUPID example, deserving of The Sun or the like.


 
But isn't that the point people have been trying to make here for the last few months.  Rental yields are negative in Ireland at the moment so that the only reason for investing in a BTL property is if you plan to sell it on for more later (or if you are in it for the long haul and think rents are going to increase significantly in the next few years and cover the mortgage).  This is exactly the rational that people have been presenting for why property prices might fall.


----------



## redo

soma said:
			
		

> I know someone currently purchasing a place for 1.3m, planning to rent it for one year (obviously at a negative yield) and fully intends to flip it for 1.9m after that year.



I'd call that extreme.


----------



## gearoidmm

Loki said:
			
		

> FTIs normally can do this as their mortgages are so much cheaper than other people on the same road and/or wages.
> I think if you have to make such riddiculious examples to make a point I think it is close to lying.


 
The point is that it wasn't a property sceptic who made up this example but in fact it was the property supplement of the Irish Times and they were trying to sell it as a good idea!


----------



## Howitzer

Loki said:
			
		

> FTIs normally can do this as their mortgages are so much cheaper than other people on the same road and/or wages.
> I think if you have to make such riddiculious examples to make a point I think it is close to lying.


 
Yeah it's pretty hard to justify.

At the end of the day (getting back to original thread) the likelihood of prices increasing is determined by the ability, and the desire, of the market to keep buying property. It doesn't matter one iota whether the business case is justified using whatever metric you care to rely on.


----------



## Calina

Loki said:
			
		

> FTIs normally can do this as their mortgages are so much cheaper than other people on the same road and/or wages.



Can you provide back up for this statement? Why is it so much cheaper for FTIs than for other people?


----------



## beattie

soma said:
			
		

> - I know someone currently purchasing a place for 1.3m, planning to rent it for one year (obviously at a negative yield) and fully intends to flip it for 1.9m after that year. This type of activity is covered by her comment "or if the investor flogs the property to an even bigger mug down the line."
> 
> In the current market, I think there's every chance this guy will find that mug in 12 months time.


 
I would not like to be caught in this particular pyramid scheme


----------



## Howitzer

Calina said:
			
		

> Can you provide back up for this statement? Why is it so much cheaper for FTIs than for other people?


 
Well IF they're using their PPR as leverage and there's a fair amount of equity in it, which there should be, then the LTV ratio on the investment should be pretty low = cheaper interest rate.


----------



## ivuernis

soma said:
			
		

> Personally I don't see the example as extreme - I know someone currently purchasing a place for 1.3m, planning to rent it for one year (obviously at a negative yield) and fully intends to flip it for 1.9m after that year.


 
So, even after paying stamp duty, negative yield, etc. they still expect to make a 400k plus profit? I'd call that optimistic in the extreme. 

Out of curiosity, are they borrowing most of the €1.3m or is it cash in the bank?


----------



## Neffa

Loki said:
			
		

> The exclusive property in each country has the highest prices becasue of the social status. Go to the monopoly board in each capital city and find a house for sale on each of the top property roads. Compare them and you might be closer.


 
I don't think it is only true for exclusive property - it looks to me (from examples I've already posted) that it applies to the family home market too - the €1m market is hardly exclusive in Ireland anymore but it buys you more in most areas of London. It is just another pointer to me that it is unlikely that the market has a lot of growth left in it, particularly when interest rates are rising.


----------



## soma

redo said:
			
		

> I'd call that extreme.


redo - I must have a habit of hanging out with 'extreme' people then! *lol* (I sound like the X-Games..) cos I know of two other situations like this (one also in dublin, one in the southwest).

Anyways I see this kind of madness left, right & centre and these examples only differ in the amount of money involved, not necessarily the relative hit someone is taking. I think I posted here a while back about a couple on 'show me the money' taking a hit of €700 a month on their 'investment' property - ouch!


----------



## Neffa

Anyone see Rabobank.ie's view on property investment - a welcome view in the sea of "it only ever goes up"

[broken link removed]


----------



## soma

ivuernis said:
			
		

> So, even after paying stamp duty, negative yield, etc. they still expect to make a 400k plus profit? I'd call that optimistic in the extreme.
> 
> Out of curiosity, are they borrowing most of the €1.3m or is it cash in the bank?


The problem ivuernis is that I cant even begin to talk logically about things like this to the parties involved - they just roll their eyes - they've heard all the 'doom and gloom' (as they would say) for years.

Most of the 1.3m will be an interest only loan secured against existing investment properties. Talk about a house of cards..


----------



## ivuernis

Neffa said:
			
		

> Anyone see Rabobank.ie's view on property investment - a welcome view in the sea of "it only ever goes up"
> 
> [broken link removed]


 
The tide seems to be turning w.r.t. to commentry on the property market. A lot are becoming hawkish (or more hawkish) by the week. David McWilliams in the SBP and Indo, Damien Kiebard and Jill Kirby in the Sunday Times, Ben Dunne on the radio during the week to name just a few.


----------



## Eurofan

ivuernis said:
			
		

> The tide seems to be turning w.r.t. to commentry on the property market.


I agree. While there's been an undeniable irrational exuberance for some years now i think even the most bullish commentator is waking up to the fact that the numbers just don't make sense anymore.


----------



## bearishbull

yes everyone knows theres little if any value in dublin but whats gonna tip it over? 
people are obviously still able to afford the properties as banks are still giving them loans and they are stressed to 2% increase in rates.
obviously they cant go up much more as wages arent going up by anywhere near enough,if immigration slows there will be less demand and if rates rise there will be less demand.

the banks stress individuals to 2% but i wonder do they also factor in the effects on the economy as a whole,rates rise then consumers spend less which slows economy which slows economic growth job creation etc which impacts on house prices which then further feeds into consumer spending(if your house goes down in value you  feel less wealthy and spend less).


----------



## dam099

Neffa said:
			
		

> Anyone see Rabobank.ie's view on property investment - a welcome view in the sea of "it only ever goes up"
> 
> [broken link removed]


 
While I would tend to agree to a large extent with the sentiment in that article Rabobank have their own agenda too in that AFAIK they are not in the mortgage lending business in Ireland but they do market a series of stock based funds and deposit accounts that are competing with property for the publics investment euros.


----------



## Marie

Saturday's Guardian (financial section) carried a report on Gartmore's Irish Growth Fund (in a piece titled "Your Life in Their Hands") 

It reports Ireland built 1.15m new houses last year, consumer spending soared at its fastest rate ever; more than two million more temporary workers from Poland and Latvia came. 


Britain built around 150,000 new homes last year in a country with a population of 60million. 

Ireland built 77,000 in a country of 4million

The Irish building project is equivalent to a  building programme of 1.15million new homes in the UK!

Britain has taken 345,000 workers from the new EU accession countries since May 2004 (easily absorbed in the existing 60 million population).

Ireland has taken in 150,000 in that time - _equivalent to 8% of the entire workforce. _

Last year the Irish economy grew by 4.5%. This year it's forecast to grow at 5%, compared with 2.25% in the UK.  

However the share price on Gartmore's Irish Growth Fund is a modest 20.6% making 298.3% over three years.  "Once you strip out Elan, you find that Irish equities performed broadly the same as other European exchanges". 

SSIA's coming onstream will be equivalent to 20% of all Irish consumer spending.
 More fuel to boil the pot!


----------



## bankrupt

Came across this:

http://www.netcastdaily.com/broadcast/fsn2006-0318-2.asx

(Recorded interview with this book's author: "The second great depression 2007-2020")

Yikes! This guy is full of doom and gloom, he's calling a complete slump in 2007 with current high house prices and debt levels as a key precursor. He's talking about the US but it sounds pretty familiar.

Anyway, would be interested to know if people here think he's a crank or not.

Discussed on Housepricecrash.co.uk: 
[broken link removed]


----------



## Glenbhoy

I'm actually a bit shocked by you all, I just don't understand how ye can't see the factors which will keep the Irish property market bouyant for eternity (and yet ye all think ye are financially savvy). 
In fact to quote Mark Fitzgerald chairman of Shery Fitz  when speaking at a Dublin Chamber of Commerce breakfast last week:
"The flow of international property profits back to Ireland and inherited wealth will be significant factors in the long-term property market. 
Irish Investors have done very well abroad and ultimately these profits will find their way back to Ireland"
He went on to speak about the net immigration of 50,000 .........


----------



## Duplex

bankrupt said:
			
		

> Came across this:
> 
> http://www.netcastdaily.com/broadcast/fsn2006-0318-2.asx
> 
> (Recorded interview with this book's author: "The second great depression 2007-2020")
> 
> Yikes! This guy is full of doom and gloom, he's calling a complete slump in 2007 with current high house prices and debt levels as a key precursor. He's talking about the US but it sounds pretty familiar.
> 
> Anyway, would be interested to know if people here think he's a crank or not.
> 
> Discussed on Housepricecrash.co.uk:
> [broken link removed]


 

All I’d say is that his hypothesis is plausible, however I would argue that the recession (well he says depression) he suggested could be deflationary as much as inflationary.  The two most recent recessions in modern post industrial economies (Germany and Japan) have been deflationary.  Many commentators argue that if the Housing bubble was stripped from US GDP figures the country would have witnessed a recession starting a couple of years ago.  One thing is for sure, we are approaching a fork in the road for the global economy.


----------



## ivuernis

They are building in Dubai like there is no tomorrow...
http://forum.skyscraperpage.com/showthread.php?t=101057

The rapid scale of construction is unbelievable, probably only matched in a few of the largest Chinese cities.


----------



## onekeano

soma said:
			
		

> The problem ivuernis is that I cant even begin to talk logically about things like this to the parties involved - they just roll their eyes - they've heard all the 'doom and gloom' (as they would say) for years.
> 
> Most of the 1.3m will be an interest only loan secured against existing investment properties. Talk about a house of cards..



Soma - they are shoe shine boys these friends are they?

Roy


----------



## Eurofan

onekeano said:
			
		

> Soma - they are shoe shine boys these friends are they?
> 
> Roy


As long as they're not looking for stock market tips then we're grand


----------



## gearoidmm

ivuernis said:
			
		

> They are building in Dubai like there is no tomorrow...
> http://forum.skyscraperpage.com/showthread.php?t=101057
> 
> The rapid scale of construction is unbelievable, probably only matched in a few of the largest Chinese cities.


 
Those pictures are amazing.  What's really interesting is what happened last week:

[broken link removed]

The Dubai stock market lost 30% of its value in the space of a week and it would have been more only that locals stepped in to buy stocks to prop up prices.  There is a suggestion that this may undermine house prices in Dubai (although there is an equally valid point that it may cause prices to rise further as people withdraw money from the equity market and put it into property).  The reason for this crash, it has been suggested, is because of the Bank of Japan's decision last week to stop flooding the economy with cheap money.  Investors had been borrowing from Japan at ridiculous interest rates and investing in emerging market stock markets all over the world and now that the money supply is being cut off, they are withdrawing their money from these markets.

The point is that some here have suggested that Ireland is a special case and Irish factors will sustain the boom no matter what and that commenting on what is happening in other countries is meaningless in an Irish context.  What happened last week in Dubai proves that wrong and I wonder if this is the first sign that asset bubbles are going to start deflating globally.


----------



## Loki

gearoidmm said:
			
		

> The point is that it wasn't a property sceptic who made up this example but in fact it was the property supplement of the Irish Times and they were trying to sell it as a good idea!


Who Started listening to real estate agents and believed them? A property supplement is effectively property porn written by the advertisers. Show me any property ad and I can pick on most points and rip it to shreds.


			
				Calina said:
			
		

> Can you provide back up for this statement? Why is it so much cheaper for FTIs than for other people?


Many FTI bough their home a while ago. This means they have equity they can borrow on if they buy another and rent it out with a differential and pay the difference their mortgage can easily be less than somebody who bought a year or 2 later. It appears that people do it for this reason in part, basically it is possible. 
Many people are only considering financial aspect of property on its own. People buy for their children in the future, a downsize property for the future. The profit on the property is making more consider it but what some people fail to see is your kids can't live in shares. Maybe the shares will be worth as much as a house but if they are not you have no where to live. If your rent yield changes to positive in the 30 year term you probably will get dividents from your property. There are risks but most people can understand property but shares and the gambling involved there are hard for most.



			
				Neffa said:
			
		

> I don't think it is only true for exclusive property - it looks to me (from examples I've already posted) that it applies to the family home market too - the €1m market is hardly exclusive in Ireland anymore but it buys you more in most areas of London. It is just another pointer to me that it is unlikely that the market has a lot of growth left in it, particularly when interest rates are rising.



1 mil houses are owned by what percentage of the population? DO you think it is 50% or 5%? It is exclusive in my eyes. Supply and demand. A small portion of the property in Ireland is top end and fewer again in Dublin and fewwer again that are in certain areas with good reputations. Some areas don't really have rental property in them so how do you judge the value of the property? THe same way you do it anywhere else see what people will pay. London isn't a pointer here becasue it isn't here. How do you live in a large exclusive London property when you work in Ireland? Top game and scale are all local. Dublin has a small amount of exclusive property historically and that reduced over time. Location,location, location is what property is about not rental yields.


----------



## Duplex

Location, location, location is not, repeat not, what property (investment) is about.  Property investment is about maximising the return on capital employed, i.e. it’s about yield.  Location is a function of value but the main determinant is return (yield).

Would you place your money in one bank in preference to another, because of its location?, or would you base your choice of bank on the interest that they’ll pay on your capital?


----------



## redo

A bit simplistic there Duplex.


----------



## Duplex

redo said:
			
		

> A bit simplistic there Duplex.


 
Explain.

I’ll challenge Loki.  

You find an ‘investment’ property anywhere in Ireland and I’ll provide a comparable property that offers a better yield, i.e. earns more money, and comfortably pays for its self.


----------



## redo

Duplex said:
			
		

> Explain.



I can only think that equating the location of an bank, to the location of property was an off the cuff comparison.  Of course, one would not decide to invest money in a bank based solely on its location, or even purely on the interest rate they offer.  There are many factors involved.  Minimum term, mimimum amount required etc.  However a lot of people are keen to invest money in the Isle of Mann and Jersey.  These are location based investments.

I believe the property game is all about location.  If you want to disagree, fine.


----------



## walk2dewater

redo said:
			
		

> I can only think that equating the location of an bank, to the location of property was an off the cuff comparison. Of course, one would not decide to invest money in a bank based solely on its location, or even purely on the interest rate they offer. There are many factors involved. Minimum term, mimimum amount required etc. However a lot of people are keen to invest money in the Isle of Mann and Jersey. These are location based investments.
> 
> I believe the property game is all about location. If you want to disagree, fine.


 
Yield is net income divided by current market value, usually expressed on an annual basis. E.g. a bond with a market value of €1000 that pays the owner €100 in annual dividends has a 10% yield.

Location begets the market value and rental income potential, hence begets the yield. If you believe that location matters more than yield, then it implies you expect asset appreciation to matter more than rent. And of course, it seems just about every property investor in Dublin believes the primacy of location (appreciation) over yield (rent). They believe the ability to sell the asset on for a higher price in the future is the prime reason for owning it, hence the often remarked "yield doesnt matter" and all that matters is "location, location, location".

Fools and their borrowed money...


----------



## Loki

Duplex said:
			
		

> Location, location, location is not, repeat not, what property (investment) is about. Property investment is about maximising the return on capital employed, i.e. it’s about yield. Location is a function of value but the main determinant is return (yield).
> 
> Would you place your money in one bank in preference to another, because of its location?, or would you base your choice of bank on the interest that they’ll pay on your capital?



As I said it isn't all about money, why do you find this so hard to understand. If you live in Dublin and want to down size in your area, owning a house in another country isn't going to help you get the house if they aren't matched in price.If you want to give your child a house close to you in the future and not have to leave the country how is your investment elsewhere going to help if Irish prices out perform again in a 10 year period?*
What you fail to see is it is not about money only.  *How easy is it to manage a property in a country other than the one you live in? Your peace of mind is worth money. There are other returns on property than money and location is a big factor.
I'm not sure if you just don't bother reading what I say or you just like to dismiss any other view than yours. I'll bullet point for you.
Reasons why people may buy an investmnet property
1) Rent as an income (now or later)
2) A place to down size to (or up size to)
3) A future home for their children
4) A speculaion on price rises

Now you seem to only accept that  4 is the reason people buy now with people hoping 1 will happen along the way. I am giving you other possible reasons, location being a factor in both of them. If you want to dismiss those other reason do so but don't just ignore them and keep saying the same things over and over agian.



			
				Duplex said:
			
		

> You find an ‘investment’ property anywhere in Ireland and I’ll provide a comparable property that offers a better yield, i.e. earns more money, and comfortably pays for its self.



Find me a house that I can buy so that when my mother is older I can move her closer to me so she can be independent. I would like to get about 10% yield but I'll  pay €100 to catch up on any rent shortfall. 

My brother mean while wants a place close DCU for his son in the future. The idea is he can rent it out until the son will most likely need to go to Dublin then.

Investment is not just money. You keep going on about how investors are stupid becasue of yields yet the returns I am talking about seem to just pass you by. Try to think about the subject instead of trying to force people to believe your view is the only right one. At what point did you decide house prices were too much?  Do experts agree with you? How many websites are you going around preaching your set view?


----------



## redo

walk2dewater said:
			
		

> Yield is net income divided by current market value, usually expressed on an annual basis. E.g. a bond with a market value of €1000 that pays the owner €100 in annual dividends has a 10% yield.



I nevered entered the debate that locatation is better that yield.  Investment is all about yield.  I agree



			
				walk2dewater said:
			
		

> And of course, it seems just about every property investor in Dublin believes the primacy of location (appreciation) over yield (rent). They believe the ability to sell the asset on for a higher price in the future is the prime reason for owning it, hence the often remarked "yield doesnt matter" and all that matters is "location, location, location".
> 
> Fools and their borrowed money...



This is exactly one of my points.  These "investors" are buying property in ANY location they can afford, purely thinking that ALL properties will increase.  While this may presently be true in the current market, it won't always be the case and may lead to localised property downturns.


----------



## Loki

walk2dewater said:
			
		

> Yield is net income divided by current market value, usually expressed on an annual basis. E.g. a bond with a market value of €1000 that pays the owner €100 in annual dividends has a 10% yield.


That is a funny way to work out rent yield. Current market value doesn't effect my rent yield! If that is what you think rent yield should be worked out on investros you would have me losing money when I am not.That is Vodoo economics


----------



## Duplex

More voodoo economics coming at ya Loki.

You suggest that many investors are happy to forego yield in return for intangible benefits, relating to specific locations ( I could argue that there is no such thing as intangible value).

You are arguing the case of ‘physic value’ in relation to specific locations, which I would agree is a factor in the owner occupier market.  However the physic value element of the price of an investment does not yield a return other than a purely speculative one based on historic market preferences. ( i.e. not a fixed income contractural  return; rent).   

A professional property investor will seek a sound building with a secure legal title, occupied by a tenant who offers a good covenant, where the passing rent is close to open market rent or where the possibility of a review is in the offing and where prospects of further rental growth are good.  You may argue that the Irish investment market does not work in the conventional mode, and you are possibly right, but that does not mean that hundreds of years of collective landed investment theory and practice should be confined to the bin.  (Very far from it)  

As far as yield is concerned.
Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth. 


Redo my explanation was possibly simplistic but you understand what I’m trying to get at, I’m sure.


----------



## Howitzer

Duplex said:
			
		

> As far as yield is concerned.
> Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth.


 
Yield is the current rent divided by the price you BOUGHT at. For someone, like Loki I'm sure, who bought ages ago their yeild's will still be very high. For new investors it'll be sh1t.


----------



## walk2dewater

Loki said:
			
		

> Current market value doesn't effect my rent yield!


 
Yield is the ratio between what what an assets pays out and what an asset is worth.


----------



## walk2dewater

Howitzer said:
			
		

> Duplex said:
> 
> 
> 
> 
> As far as yield is concerned.
> Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth.
> 
> 
> 
> 
> 
> 
> Yield is the current rent divided by the price you BOUGHT at. For someone, like Loki I'm sure, who bought ages ago their yeild's will still be very high.
> 
> 
> 
> 
> Valid point.  To be specific, I'm talking CURRENT yield then; current rent/current market value. This is the standard definition.
> 
> But none of this hair splitting matters, Dublin property barrons live in their own economic universes.
> 
> Click to expand...
Click to expand...


----------



## Duplex

Yield is the relationship between current rental value and current market value described as a percentage.  

Like Walktothewater says; in Ireland it seems local custom prevails.


----------



## Loki

Duplex said:
			
		

> More voodoo economics coming at ya Loki.
> 
> You suggest that many investors are happy to forego yield in return for intangible benefits, relating to specific locations ( I could argue that there is no such thing as intangible value).


 I never said they were intangable you did. These are tangable values the same way location from the city centre is. 





			
				Duplex said:
			
		

> A professional property investor will seek a sound building with a secure legal title, occupied by a tenant who offers a good covenant, where the passing rent is close to open market rent or where the possibility of a review is in the offing and where prospects of further rental growth are good.


 Who said these people were proffessional property investors, in fact how many professional property investors are there? Most do it as a side subject. 


			
				Duplex said:
			
		

> As far as yield is concerned.
> Yield is calculated by employing the current passing rent and the current open market value, how else could you make an analysis of the performance of the original investment and any subsequent capital growth.


 You see the problem there is you can use it to make analysis of the over all market but forget that property is not purely an asset it has a use in itself. You also ignore the reality of financial situations live in. You can't give your kids some shares and say live in that. 


			
				walk2dewater said:
			
		

> I'm talking CURRENT yield then; current rent/current market value. This is the standard definition.


No that is current MARKET rent yields. My rent yield is by what I am paying and what I am recieving. Not great on definitions. If you are using rent yields in your way as I said you would be saying many investors are not getting a return from their property which is simply not true. I think you guys are mixing up economic theory and book keeping and getting a very warped view of the world.

You two guys don't know what yield means.

[broken link removed]


----------



## Calina

Loki said:
			
		

> I never said they were intangable you did. These are tangable values the same way location from the city centre is.



Loki, 

again, I'm having some difficulty following you. Are you saying location in the city centre is a tangible value?


----------



## Duplex

So the difference between what you paid for the asset and the current market value, is devoid of any return?  Loki I understand where you are coming from but I would suggest that the market looks at an investment based on current rents and capital values.  You seem to be employing a yield analysis based on the purchase price which is not helpful in comparative investment analysis.  I’ll not trouble you on this subject again.


----------



## Calina

Loki said:
			
		

> Who said these people were proffessional property investors, in fact how many property investors are there? Most do it as a side subject.


From a tenant/landlord point of view this is one of the biggest, if not THE biggest problem in the rental market - landlords who do not have a clue what they are doing, do it on the side, have little or no concept of their obligations under law and believe they have rights which exist only in their imaginations. 



			
				Loki said:
			
		

> You see the problem there is you can use it to make analysis of the over all market but forget that property is not purely an asset it has a use in itself. You also ignore the reality of financial situations live in. You can't give your kids some shares and say live in that.


I would venture to say that the vast majority of investors are interested in its revenue generating properties, not its utility, after all, they don't exploit its utility functions.



			
				Loki said:
			
		

> No that is current MARKET rent yields. My rent yield is by what I am paying and what I am recieving. Not great on definitions. If you are using rent yields in your way as I said you would be saying many investors are not getting a return from their property which is simply not true. I think you guys are mixing up economic theory and book keeping and getting a very warped view of the world.
> 
> You two guys don't know what yield means.
> 
> [broken link removed]


Finally, from the point of view of guesstimating where Irish property prices are going to go, I would hazard a guess that rental yields based on historical purchase prices are pretty irrelevant to anyone considering buying today. Yield calculations based on current market value (assuming market value and purchase price are roughly equivalent, although that's not always a given) are somewhat more relevant to the pleb with the moolah who's coughing up for the investment property, fulltime professional landlord or investor on the side. In other words, your rental yield doesn't matter to future movements of property prices.


----------



## Duplex

If anyone likes graphs here's a bunch on the UK property market. It would be nice to have this type of data on the Irish market.


[broken link removed]


----------



## walk2dewater

Loki said:
			
		

> If you are using rent yields in your way as I said you would be saying many investors are not getting a return from their property


 
Well spotted Loki.  If the net revenue from your property divided by the market value of the property is less than inflation then you are receiving a negative real return.  In plain English:  Your net worth is decreasing.  That's why my capital is elsewhere.

Why would I sink €300,000 of my wealth into an asset and get out €8,000/year net?  My capital is in precious and base metals, oil, natgas, and canadian dollar bonds.  My yield on assets has been vastly higher than Dublins property owners for several years now.  That's why I rent and allow the owner of the property I live in carry the bag.

But Dublins property barons dont see it that way.  The reason I suspect is most of these players don't actually have liquid capital, rather they have property equity only, leveraged through debt.  When you're playing around with leveraged debt funny money and prices are going up up up, who cares what the yield is.

Who cares that is, until those IOUs start coming in fast and heavy and the market eats you alive.


----------



## Neffa

As I think we're about to go into the world of semantic arguments again  , perhaps we should try to get back on topic.

The Irish Times reports today that the signals from the ECB are for a further .75% increase in ECB rates by end-2006 based on increasing recovery in the German market and concerns about inflation. 

That would mean a BTL investor would see their financing costs for a typical €350K interest-only loan rise from about €950 pcm to circa €1330pcm in a 12 month period. This is bound to start hurting some people in the market soon. 

Oddly enough, we saw a property round the corner from us come up for sale last week - it was a nice 4-bed period house which was being renovated to be offered for rental - it is now for sale (weirdly mid-way through refurbishment) because of a "change of circumstances". I wonder if the anticipated rises are starting some to re-think.


----------



## Neffa

Meant to post this earlier - this is an OECD paper looking at the state of the property market in about 20 countries including Ireland - makes for pretty scary reading, particularly the Irish position on price/rent and price/income relative to other markets.

[broken link removed]


----------



## bearishbull

Duplex said:
			
		

> If anyone likes graphs here's a bunch on the UK property market. It would be nice to have this type of data on the Irish market.
> 
> 
> [broken link removed]


 
well that graph does look bad and the situation is bad but not as bad as that graph illustrates.
you would have to allow for demographic changes and changes in real income but it would still indicate house prices are significantly overvalued in historic terms and well out of line with long term trends.


----------



## Neffa

Duplex said:
			
		

> If anyone likes graphs here's a bunch on the UK property market. It would be nice to have this type of data on the Irish market.
> 
> 
> [broken link removed]


 
Have a look here - a paper from the economics team at Trinity:

[broken link removed]


----------



## bearishbull

current rental yields are good indicators of current value in the market. a falling yield indicates decreasing value from an investment basis and is indicative that something is wrong with the normal rental-purchasing relationship


----------



## Duplex

Thanks Neffa for the OECD and TCD links, I’ve read the TCD research previously, and yes very bearish.  I believe that the author is now editor of Business and Finance btw, see it pays to be bearish.   I wont start on the UK market Bearishbull, just to say that that site is worth a browse has some stats on Northern Ireland (six counties).


----------



## Nermal

walk2dewater said:
			
		

> Why would I sink €300,000 of my wealth into an asset and get out €8,000/year net?


 
The point is that in many cases it's not you sinking the €300,000, it's the bank. When you can get a bank to lend you multiples of your income at 3% to invest in 'base metals, oil, natgas, and canadian dollar bonds', then that'll be a fair comparison.


----------



## hmmm

Nermal said:
			
		

> The point is that in many cases it's not you sinking the €300,000, it's the bank. When you can get a bank to lend you multiples of your income at 3% to invest in 'base metals, oil, natgas, and canadian dollar bonds', then that'll be a fair comparison.


 Interesting perspective and one that's shared by many property investors who've discovered leverage for the first time. It's wrong though - the bank is essentially renting you a sum which they will have secured on an asset. As long as the asset you are investing the sum in increases in value at a rate higher than the rent you pay on the sum borrowed, you're in the money. If the market turns you get to find out that you do actually owe 300k and the bank will want it back.


----------



## bearishbull

[FONT=Arial, Verdana, Arial]*from todays indo.*[/FONT]
[FONT=Arial, Verdana, Arial]*Flatley eyes 5pc stake in BoI but warns of bubble*[/FONT]


[FONT=Verdana, Arial]
Ailish 
O'Hora 
BOSTON-based billionaire Tom Flatley is considering the purchase of up to 5pc in Bank of Ireland, Ireland's second biggest bank, industry sources said yesterday. 
Mr Flatley, who is worth $1.3bn, confirmed to the _Irish Independent _that he is looking at "taking a position" in an Irish company but would not comment directly on buying into Bank of Ireland. 
Investment advisers to Mr Flatley were in Dublin last week to look at the potential of him taking a position in Bank of Ireland. 
Since divesting of much of his massive property portfolio in the US in recent years, the Co Mayo-born tycoon is believed to have a substantial cash war chest in search of a solid Irish investment. 
A 5pc stake in Bank of Ireland at current prices would cost just under €750m, based on yesterday's closing price of €15.41 per share. 
Mr Flatley said that Bank of Ireland is "a terrific bank and will be a player in the future". 
It is understood that he would take a stake in Bank of Ireland as an investment rather than a controlling position and could buy up to 5pc of the Bank's shares. 
Mr Flatley, who left Kiltimagh in Co Mayo when he was 18 and made his fortune mainly in the construction/real estate sectors in the US, said: "Why wouldn't I want to invest in an Irish company? I should have done it way back but I didn't have the time." 
In a wide ranging interview due to be published in this newspaper on Thursday, Mr Flatley ruled out investing in property in Ireland at current prices. In a stark warning from a billionaire property mogul, Mr Flatley said it was "too expensive" and warned that a "correction" in the Dublin housing market is on the cards. 
"When the correction comes, it will hit hard," he said. "I read the Irish papers from time to time and am shocked at the prices in Dublin." 
He added that during his development years he went through four down times, and when it comes to property "no tree grows to the sky". 
"I've watched the corrections in the past take place every ten or 12 years, and we've now gone 16 years in the US," he said. 
He added that he is thrilled with the performance of the Irish economy but he would be happier if things slowed down. 
"I really do worry about the Dublin property market and I believe it is more vulnerable than any market I know." 
According to Mr Flatley, areas in the US like California, Massachusetts and the east and west coasts where prices have accelerated the most are on a par with increases in the likes of Galway, but the Dublin market is in a league of its own. 
He added that one of the problems in Ireland is that interest rates are now dictated by Europe. 
"You have a bit of a problem here because your Alan Greenspan (the former chairman of the Federal Reserve) is in Brussels and you are now part of the European Union. 
"It's just a matter of when the correction will be. 
"Three years ago I would have said it was coming next year."
[/FONT]


----------



## Nermal

hmmm said:
			
		

> Interesting perspective and one that's shared by many property investors who've discovered leverage for the first time. It's wrong though - the bank is essentially renting you a sum which they will have secured on an asset. As long as the asset you are investing the sum in increases in value at a rate higher than the rent you pay on the sum borrowed, you're in the money. If the market turns you get to find out that you do actually owe 300k and the bank will want it back.


 
where am I wrong? i just stated that the only way most people get leverage is on property. 
walk2dewater stated that he had 300K invested in commodities and that it had outperformed the same amount invested in property over the past few years. fair enough, but with 300K in deposit & interest payments i could have a lot more exposure to property than he had to commodities. and a lot more gains to show for it.


----------



## Neffa

bearishbull said:
			
		

> [FONT=Arial, Verdana, Arial]*from todays indo.*[/FONT]
> [FONT=Arial, Verdana, Arial]*Flatley eyes 5pc stake in BoI but warns of bubble*[/FONT]
> 
> 
> [FONT=Verdana, Arial]
> Ailish
> O'Hora
> BOSTON-based billionaire Tom Flatley is considering the purchase of up to 5pc in Bank of Ireland, Ireland's second biggest bank, industry sources said yesterday.
> Mr Flatley, who is worth $1.3bn, confirmed to the _Irish Independent _that he is looking at "taking a position" in an Irish company but would not comment directly on buying into Bank of Ireland.
> Investment advisers to Mr Flatley were in Dublin last week to look at the potential of him taking a position in Bank of Ireland.
> Since divesting of much of his massive property portfolio in the US in recent years, the Co Mayo-born tycoon is believed to have a substantial cash war chest in search of a solid Irish investment.
> A 5pc stake in Bank of Ireland at current prices would cost just under €750m, based on yesterday's closing price of €15.41 per share.
> Mr Flatley said that Bank of Ireland is "a terrific bank and will be a player in the future".
> It is understood that he would take a stake in Bank of Ireland as an investment rather than a controlling position and could buy up to 5pc of the Bank's shares.
> Mr Flatley, who left Kiltimagh in Co Mayo when he was 18 and made his fortune mainly in the construction/real estate sectors in the US, said: "Why wouldn't I want to invest in an Irish company? I should have done it way back but I didn't have the time."
> In a wide ranging interview due to be published in this newspaper on Thursday, Mr Flatley ruled out investing in property in Ireland at current prices. In a stark warning from a billionaire property mogul, Mr Flatley said it was "too expensive" and warned that a "correction" in the Dublin housing market is on the cards.
> "When the correction comes, it will hit hard," he said. "I read the Irish papers from time to time and am shocked at the prices in Dublin."
> He added that during his development years he went through four down times, and when it comes to property "no tree grows to the sky".
> "I've watched the corrections in the past take place every ten or 12 years, and we've now gone 16 years in the US," he said.
> He added that he is thrilled with the performance of the Irish economy but he would be happier if things slowed down.
> "I really do worry about the Dublin property market and I believe it is more vulnerable than any market I know."
> According to Mr Flatley, areas in the US like California, Massachusetts and the east and west coasts where prices have accelerated the most are on a par with increases in the likes of Galway, but the Dublin market is in a league of its own.
> He added that one of the problems in Ireland is that interest rates are now dictated by Europe.
> "You have a bit of a problem here because your Alan Greenspan (the former chairman of the Federal Reserve) is in Brussels and you are now part of the European Union.
> "It's just a matter of when the correction will be.
> "Three years ago I would have said it was coming next year."
> [/FONT]


 
Huge contradiction here - he believes in the long-term story of the BoI but is bearish on property. Yet the bank is hugely exposed to the property bubble here so effectively by buying into the bank he is buying into the property market - doesn't make sense to me.


----------



## Neffa

Nermal said:
			
		

> where am I wrong? i just stated that the only way most people get leverage is on property.
> walk2dewater stated that he had 300K invested in commodities and that it had outperformed the same amount invested in property over the past few years. fair enough, but with 300K in deposit & interest payments i could have a lot more exposure to property than he had to commodities. and a lot more gains to show for it.


 
The point is that the positive aspect of a leveraged purchase holds true providing the assets purchased increase in value. If they fall in value or the cost of servicing the interest increases, then the negative aspects of a leveraged purchase could kick in - forced closures or negative equity. I think that w2dw was making the point that leverage appears to be considered a one-way bet for amplifying returns, but given the focus of this thread on future values of Irish property and the general bearish stance that most posters have shown, there is a  risk that the leveraged position could cause a lot of pain on a market downturn and/or rate rises.


----------



## Duplex

Not only is this guy a awesome dancer , he seems to know a little about property investment. He made reference to the Boston market in that report, which has seen the second highest growth in prices the US after San Diego. The market has turned now so it seems.







> *Massachusetts home prices fall
> The number of homes sold in Massachusetts dropped a whopping 21 percent in January compared with a year ago, the largest year-to-year decrease in monthly home sales in a decade. As a result, home values have begun to soften. Statewide, they actually fell slightly in January compared with a year ago.
> Such pressures are forcing a rising number of homeowners to erase their debts by forfeiting their homes. Foreclosure filings in the county that includes Boston nearly doubled in January from a year ago, ForeclosuresMass. says.
> Homeowners "call us and are heartbroken," says Robert Pulster, executive director of the Ecumenical Social Action Committee, which works with Boston residents on the brink of losing their homes. "They thought it was their dream."
> *


 





http://www.csmonitor.com/2006/0321/p01s02-ussc.html


----------



## Duplex

Neffa said:
			
		

> Huge contradiction here - he believes in the long-term story of the BoI but is bearish on property. Yet the bank is hugely exposed to the property bubble here so effectively by buying into the bank he is buying into the property market - doesn't make sense to me.


 
Much of the mortgage risk is repackaged by the banks and sold on the money markets as mortgage backed securities.  Still a slight contradiction depends when and at what price he buys I guess.


----------



## bearishbull

Duplex said:
			
		

> Much of the mortgage risk is repackaged by the banks and sold on the money markets as mortgage backed securities. Still a slight contradiction depends when and at what price he buys I guess.


 
i think its more a case of he wants to own a chunk of an "oirish" company more for sentimental reasons than anything else.forgeting about his interest in bank of ireland he is a property billionaire and has seen it all before and reckons the correction is on the cards.investors,ignore at your peril!


----------



## bearishbull

p.s it says he interested in a 750million stake when he;s worth 1.3 billion. no billionaire investor is gonna stick half his money into one share in a small exposed market. i reckon the Bank of ireland part of the story is nonsense ,he probably was bragging to the people in the old country how well he ahd done in america and could theoretically buy a chunk of the bank of ireland.


----------



## Neffa

bearishbull said:
			
		

> p.s it says he interested in a 750million stake when he;s worth 1.3 billion. no billionaire investor is gonna stick half his money into one share in a small exposed market. i reckon the Bank of ireland part of the story is nonsense ,he probably was bragging to the people in the old country how well he ahd done in america and could theoretically buy a chunk of the bank of ireland.


 
I think that would make far more sense.


----------



## Duplex

Neffa said:
			
		

> I think that would make far more sense.


 
Agreed


----------



## dam099

walk2dewater said:
			
		

> Well spotted Loki. If the net revenue from your property divided by the market value of the property is less than inflation then you are receiving a negative real return. In plain English: Your net worth is decreasing. That's why my capital is elsewhere.


 
Thats not true. Revenue is only part of the return there is also capital appreciation. If your property's market value is increasing in line with inflation then your net worth is not decreasing. 

Of course many investors are making the assumption that prices will always increase and knowingly buying properties on which they will make rental losses even at todays low rates based on that expectation of price increases which might not be the wisest move.


----------



## dam099

Duplex said:
			
		

> Much of the mortgage risk is repackaged by the banks and sold on the money markets as mortgage backed securities. Still a slight contradiction depends when and at what price he buys I guess.


 
The mortgage risk to the balance sheet might be repackaged and sold on but how about the risk to profits or even just profit growth of a correction in the property market? The PE ratio for a growing company is normally much better than that of a stagnant one (all the many other factors being equal) so there would be a risk to the share price if the profits suddenly stopped growing (and certainly if they fell).


----------



## walk2dewater

dam099 said:
			
		

> Thats not true. Revenue is only part of the return there is also capital appreciation. If your property's market value is increasing in line with inflation then your net worth is not decreasing.
> 
> Of course many investors are making the assumption that prices will always increase and knowingly buying properties on which they will make rental losses even at todays low rates based on that expectation of price increases which might not be the wisest move.


 
And well spotted Dam099 

rent and asset value changes... do you know that almost all of the gains in holding assets be they property, shares, bonds, machinery, brands, etc is from the rent that flows from them.. the "Economic Rent" to use the economists term... wealth is derived from the productive or use value of something [an asset], from innovation and productivity and creation of new or improved versions of assets.... that's not to say that you can't speculate and make a fortune buying and selling, riding the boom and bust trends... I do it myself with reasonable success... but I know it's a shell game.. I know where the real game is... and I know that there's no way property prices in Ireland today reflect anything remotely close to their "economic rent"

So what we have in Ireland is a market in property that is based on the expectation of capital appreciation purely and simply... cos rents are real negative and, ah sure well, who cares about the rent when prices only go up... all that matters is location and keepin them immigrants coming in... ah yes the magical one-way express ride to the pot of gold at the end of the Irish property rainbow... magical capital appreciation, all we have to do is sit around and wait to sell our property on to someone else for more money than we paid for... couldnt be easier... sure isnt it our God given right?


----------



## beattie

Yes it does seem to be an extraordinary situation that he would buy into a bank which had such a huge exposure to the property market. He might have to reconcile his opinions with those of some of the banks spokespeople who continously talk up the market


----------



## Neffa

From Breakingnews.ie this morning:

http://www.breakingnews.ie/2006/03/22/story250432.html

*Warning about debt and rising interest rates *
22/03/2006 - 09:19:28 

The Money Advice and Budgeting Service has reportedly warned that many people could find themselves struggling to make ends meet in the event of further interest-rate rises.

Reports this morning said a significant number of people seeking help from the service were earning more than the average industrial wage of €30,000.

Some of these people are reportedly being forced to cut back on food and heat because they are struggling with repayments on mortgages and personal loans.

The Central Bank has been warning for several months about the high levels of debt in Ireland and the effect this could have in the event of an economic slowdown.

This morning's reports said the MABS was now warning that expected increases in interest rates during the rest of this year could leave many people unable to meet their day-to-day living expenses.


----------



## Neffa

And another from BreakingNews. Was this guy always bearish or is this a change of stance?

*Economist warns about risks of house price 'correction' *
22/03/2006 - 10:10:56 

Friends First economist Jim Power has said overdependence on the property market is placing the Irish economy in a vulnerable position.

In his latest quarterly outlook, Mr Power says the Irish economy is currently performing strongly, with GNP growth of between 4.4% and 4.9% expected for 2006 and 2007.

He also says consumer spending is back at Celtic Tiger levels due to rising salaries, the imminent maturing of Special Savings Incentive Accounts and an increasing level of borrowing.

However, Mr Power says the housing market is a real cause for concern, with any "correction" in house prices likely to have a substantial negative effect on the economy.


----------



## ivuernis

Neffa said:
			
		

> From Breakingnews.ie this morning:
> 
> http://www.breakingnews.ie/2006/03/22/story250432.html
> 
> *Warning about debt and rising interest rates *
> 22/03/2006 - 09:19:28
> 
> The Money Advice and Budgeting Service has reportedly warned that many people could find themselves struggling to make ends meet in the event of further interest-rate rises.
> 
> Reports this morning said a significant number of people seeking help from the service were earning more than the average industrial wage of €30,000.
> 
> Some of these people are reportedly being forced to cut back on food and heat because they are struggling with repayments on mortgages and personal loans.
> 
> The Central Bank has been warning for several months about the high levels of debt in Ireland and the effect this could have in the event of an economic slowdown.
> 
> This morning's reports said the MABS was now warning that expected increases in interest rates during the rest of this year could leave many people unable to meet their day-to-day living expenses.


 
Most people think they will be able to absorb a rise in ECB interest rates to 3-4% and I think most people will. However, what many people fail to factor into such a scenario is a rise in other essential commodities, such as home heating oil, gas, petrol, etc. We have seen how both oil and gas have steadily risen in the past couple of years. These new commodity price levels are not temporary high prices but more likely a new base level from which further prices rises are likely. A combination of further price rises in these commodities and a projected ECB rate of 3-4% could act as the trigger to reign back property prices rather than just a straight interest rate hike on its own. And of course the people who will most likely be hit the worst are those in the commuter belt who are wholly dependent on car transport to commute. For the money we are spending (and the profits being made) on property in this country all new builds should come with compulsory solar panels, wind generators and/or other energy saving devices. I cannot see any long-term value in most of our badly planned and unsustainable property development.


----------



## beattie

Neffa said:
			
		

> *Warning about debt and rising interest rates *
> 22/03/2006 - 09:19:28
> 
> The Money Advice and Budgeting Service has reportedly warned that many people could find themselves struggling to make ends meet in the event of further interest-rate rises.
> 
> Reports this morning said a significant number of people seeking help from the service were earning more than the average industrial wage of €30,000.
> 
> Some of these people are reportedly being forced to cut back on food and heat because they are struggling with repayments on mortgages and personal loans.
> 
> The Central Bank has been warning for several months about the high levels of debt in Ireland and the effect this could have in the event of an economic slowdown.
> 
> This morning's reports said the MABS was now warning that expected increases in interest rates during the rest of this year could leave many people unable to meet their day-to-day living expenses.


 
Many people are taking out loans on the basis that the salaries will increase by a large amount further down the line. I would think that they  are also not factoring in 'rainy day' scenarios so they are borrowed up to the hilt and thus are extremely vunerable to the interest rate rises which have recently arrived and the ones which are in the pipeline. 

If a large amount of people are finding themselves in this situation there has to be serious questions about the lending policies (if there are such things!!!) of our financial institutions. Shouldn't our central bank be doing some sort of trawl on this and taking action if dubiuos practices are in place?


----------



## walk2dewater

It's like watching a motorway pile-up in slow motion...


----------



## bearishbull

theres very little statistics in the MABS story,i'd say for now its laregly anecdotal but if theres increased levels in statisitcis i'd be concerned. people do think things will stay rosey for a long long time but we all know economies dont work like this.i'd like to see  a macro model of 4% base rates ,a slowdown in america and oil consisitantly over 60dollars .foriegn firms based in ireland account for nearly 90% of our exports,when even a chunk of them decide to move on to cheaper cost bases then we're fecked.


----------



## soma

Seems to be a more detailed report of Power's comments:



			
				The Irish Times said:
			
		

> Warning against 'irrational exuberance' in property
> 
> The Irish economy is overly dependent on the housing sector and the Government should act to quell growing signs of irrational exuberance among consumers, a leading economist warned today.
> In his latest quarterly outlook, Friends First economist Jim Power said that while the economy on track for another strong performance in 2006, a correction in house prices would severely damage consumer confidence and would undermine the overall economy.
> 
> "There is no doubt that the economy is performing strongly, but this performance is over reliant on the housing market which is exerting an inordinate influence on the overall health of the Irish economy," warned Mr Power.
> Mr Power said Irish consumers' "incredible willingness to borrow" is being fuelled by rising salaries, the prospect of maturing SSIA funds and low income taxes.
> Echoing the phrase made famous by Alan Greenspan before the dot.com crash Mr Power warned that "Consumer spending is on fire and there is strong evidence of irrational exuberance.
> "Against this background it is not surprising that inflationary pressures are starting to re-emerge and it would now be prudent for Government to tighten fiscal policy. However the political cycle militates against this," said Mr Power.
> Mr Power explained that the lopsided growth in favour of the construction sector has made the economy vulnerable to any downturn which could be triggered by a sharp hike in interest rates.
> In the final quarter of 2005 construction activity accounted for 12.7 per cent of total employment. Total output from the sector was valued at €30 billion in 2005 or 19 per cent of GDP.
> 
> The size of the mortgage market has grown from under €25 billion in 2000 to €100 billion in January 2006, this has contributed to strong growth in financial services sector employment.
> "Many house purchasers are taking on mortgages at the upper end of their comfort zone. Between December 2005 and 2006, interest rates are likely to increase by 1 per cent.
> According to Mr Power, a large number of the companies quoted on the Irish stock exchange are also heavily influenced by and dependent on the health of the housing market and housing related activities. These include; AIB, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Grafton Group, Abbey, IFG Group, Kingspan Group, McInerney Holdings, Readymix and to an extent CRH.
> Any serious setback for the Irish housing market would have a significant negative knock-on effect for these companies and consequently for Irish pension funds and private equity holdings.
> "Our policy makers need to ensure that a sustainable indigenous economy is created alongside the housing sector and the public sector. An economy cannot grow on the basis of the public sector and the housing market indefinitely," warned Mr Power.
> 
> © 2006 ireland.com


----------



## Neffa

bearishbull said:
			
		

> theres very little statistics in the MABS story,i'd say for now its laregly anecdotal but if theres increased levels in statisitcis i'd be concerned. people do think things will stay rosey for a long long time but we all know economies dont work like this.i'd like to see a macro model of 4% base rates ,a slowdown in america and oil consisitantly over 60dollars .foriegn firms based in ireland account for nearly 90% of our exports,when even a chunk of them decide to move on to cheaper cost bases then we're fecked.


 
I agree - such an insight would be really interesting. I also wonder what would happen to the economic story if rising rates caused construction to slow down significantly - unemployment would rise and the general economy would surely suffer with knock-on effects on house prices.


----------



## soma

bearishbull said:
			
		

> people do think things will stay rosey for a long long time but we all know economies dont work like this.


There's a report out today (article posted below) from 'NCB Brokers' basically saying that all will be rosy in the economy for the next 15 years. I took a quick look at their website just to see if they were owned by one of the usual suspects.. but do they do appear to be largely independent.

Now.. let's say we've had 15 years of a economic boom already.. (personally I see the 'real' boom having finished 3-4 years ago and we've just been 'faking it' thru credit since, but I digress..).. and these guys are predicting another 15 years of growth.. that's 30 years straight growth uninterrupted by recession. Is it just me or is that extremely unlikely in a free-market economy..? Has this ever been achieved before..? (_Maybe Germany post WWII..?_) It just seems remarkably unlikely, at least to me.



			
				The Irish Times said:
			
		

> NCB predicts 15 more years of economic growth
> 
> Ireland's burgeoning population of young affluent consumers should ensure that Ireland's economic growth over the next 15 years will be the envy of Europe, according to new research by NCB stockbrokers.
> In a major new study titled _2020 Vision_, NCB economists Dermot O'Brien and Eunan King point to the demographic dividend which should ensure that demand for houses, cars and services will remain buoyant in the near term.
> The Irish baby boom which was later than other countries spans the years between 1971 and 1983 when 900,000 babies were born. This age group which is the biggest single cohort is now entering its period of maximum consumption and will have a major influence on shaping of Irish economic and social policy in the years ahead, according to NCB.
> NCB estimates that when immigration is added to the Ireland's high birth rate, Ireland's population will exceed 5.3 million by 2020 with immigrants accounting for 20 per cent of the population.
> The next 15 years will be marked by a high levels of consumption which, alone, could amount to 2.75 per cent in GDP growth. However the tide will turn after 2020 with the greying of the baby boom generation and pension costs will take up a greater slice of GDP.
> Crucially for the economy, NCB estimates that productivity growth of 4 per cent is possible as higher skilled service workers replace those in manufacturing. However this forecast is based on optimistic assumptions of the widespread use of IT and a flexible labour market.
> Immigrant labour will be a central pillar of future growth and NCB's research shows that contrary to common perception most immigrants are employed in high-skilled sectors. The research based on CSO data shows that 65 per cent of immigrants are in high-skilled jobs compared to 60 per cent of the native population yet the majority of immigrants are still working in jobs below their qualifications.
> Against such a positive backdrop it is not surprising that NCB expects demand for housing to remain strong though the market should cool from its current levels. NCB expect the housing market to peak at 11 per cent this year before falling to 6 per cent in 2007 and landing softly on low single digits thereafter.
> Some economists have been puzzled by the apparent conundrum between surging employment growth, which has overtaken overall economic growth, implying a fall in productivity.
> However, Mr O'Brien and Mr King believe that Ireland's growth rates have been underestimated and events in the real economy point to a more robust level of activity than is borne out in the official statistics. NCB believes that the GDP growth figures will be eventually revised upwards to 6 or 6.5 per cent.


----------



## ivuernis

soma said:
			
		

> There's a report out today (article posted below) from 'NCB Brokers' basically saying that all will be rosy in the economy for the next 15 years. I took a quick look at their website just to see if they were owned by one of the usual suspects.. but do they do appear to be largely independent.
> 
> Now.. let's say we've had 15 years of a economic boom already.. (personally I see the 'real' boom having finished 3-4 years ago and we've just been 'faking it' thru credit since, but I digress..).. and these guys are predicting another 15 years of growth.. that's 30 years straight growth uninterrupted by recession. Is it just me or is that extremely unlikely in a free-market economy..? Has this ever been achieved before..? (_Maybe Germany post WWII..?_) It just seems remarkably unlikely, at least to me.


 
The study seems to be based on a very narrow set of criteria, mainly population growth and immigration sustaining things. So we're going to have 1.06 million immigrants in Ireland by 2020? I've nothing against it, just can't see it happening. Not a mention of interests rates or the global economy. 

Why don't these economists put in some real effort and give us something with real forethought and insight into where the Irish and world economies are heading, rather than just lazily extrapolating current trends to 2020 and arriving at said rosy conclusions, which is neither difficult or useful is it?


----------



## daveirl

Thing I don't get about the immigration thing is that people say x amount of people come in 2005, so then by 2020 the amount of people will be 15*x.

People don't seem to take into account that a substantial amount of the new immigrants won't stay.


----------



## Neffa

daveirl said:
			
		

> Thing I don't get about the immigration thing is that people say x amount of people come in 2005, so then by 2020 the amount of people will be 15*x.
> 
> People don't seem to take into account that a substantial amount of the new immigrants won't stay.


 
And the other thing all these straight line forecasts seem to forget to include is how expensive it will be to live here relative to other economies where immigrants could go. If Germany recovers and you can live & work there for a much lower cost than the costs of living in Ireland, why come here? Remember, people have a choice on where to go for their stint abroad - we are very strong at the minute, but how NCB can say that outperformance will continue for 15+ years is (as Loki would say) Voodoo Economics at its finest.


----------



## bearishbull

they seem to be saying that consumption of houses cars etc will drive the economy-where will the money come for this?
seems very simplistic analysis. doesnt address foreign multinationals and competitiveness and inevitable slowdown in construction sector and the knock on effects in economy. 
pharmaceuticals and technology are two biggest exporting sectors- whose to say they will stay?
we have a poor indigenous export sector,we cant rely on consumption of houses cars etc to grow our economy forever,we have to start creating real long term wealth through real high value added goods and services ,the thing is every other country is trying to get these value added jobs too and most are lower cost than us.
i cant beleive any economist would asssume 15 years of economic prosperity in a small open economy that is highly vunerable to any external shocks.


----------



## Glenbhoy

The study by NCB did not appear to be very scientific, it seemed to set 2000 as Year 0, and extrapolate immigration from that point onwards, this seems simplistic in the extreme.  It makes no mention of the reason as to why many immigrants come here (namely to work in construction, to build houses to rent to themselves), and what they will do if demand eases off in that sector (save to say that the number of immigrants they predict coming in will mean there is continued demand for 65,000 new builds per annum).  In addition they have by all accounts predicted economic growth of approximately 6% p.a, this seems extraordinarily high for a 15yr time scale, especially as mentioned above, in a small economy which is probably highly susceptible to the vagaries of our various major markets such as the Eurozone, UK and US.  Essentially they seem to be saying that:
Population will grow to over 5m, this increase in population will require new housing, thus keeping the construction industry strong.
These new immigrants, coupled with the spendng power of the natives (property rich) will rush off to buy new cars and any other high value consumer goods they can get their hands on (I want a PS3 myself, on a 56inch rear projection tv).  However, given that we don't actually manufacture cars or most consumer goods here, this may not be as beneficial to the economy as is suggested.  In fact the congestion caused by double the amount of cars may actually restrict economic growth through lost man hours!
All in all, it's completely dependent on another 1m people immigrating and staying here, which may happen, but chances are.....


----------



## ivuernis

It was good to hear George Lee basically rubbishing the NCB study on Morning Ireland today.


----------



## Duplex

ivuernis said:
			
		

> It was good to hear George Lee basically rubbishing the NCB study on Morning Ireland today.


 

The NCB like most financial products sales people have to paint pretty pictures and tell nice happy ending fairytales to shift product.  The thing is that I am starting to doubt the financial cop on of Irish people in general. (The Liberty Paradox).


----------



## walk2dewater

C'mon really.  Does anyone take that NCB thing seriously.  Surely it's damaging to their credibility, a bad marketing move I would say.


----------



## soma

ivuernis said:
			
		

> It was good to hear George Lee basically rubbishing the NCB study on Morning Ireland today.


Well I thought he was very, and irresponsibly, soft/cavalier about it on the RTE news @6 last night.

The report was essentially presented (on the news) as fact - I later met several property-bull acquaintances who saw it as some sort of proof that there was 15 years left in the property boom


----------



## Duplex

Look, if the government took out centre page spreads in all the national papers, and broadcast half hour long public information programmes at prime time warning of irrational exuberance; it would make not one iota of difference, to the run away train of a property market.  The Pope could turn up at Dublin airport beseeching and begging the people of Ireland to get a grip and it would have no effect.

Daniel O’ Donnell and Dana could do a sleep in for rationality and nothing would happen. Markets don’t react to risk they react to fear.  The bubble will burst before people begin to see sense.   I’ve noticed that the media have become slightly more bearish of late, possibly thinking that it was time to call a stop to the general silliness, but it’s not that simple. 
Prices will rise this year by 20% plus maybe more in the last great manic rush. 

The banks want to sheer the last few sheep before rising rates and unsustainable debt growth delivers the inevitable slap down.


----------



## ivuernis

soma said:
			
		

> Well I thought he was very, and irresponsibly, soft/cavalier about it on the RTE news @6 last night.


 
I didn't see the 6 o'clock news last night but on Morning Ireland he essentially didn't give it much endorsement, although phrased as diplomatically as possible. I imagine there are different editorial policies on the Six-One and Morning Ireland which might have affected the reportage. 





			
				soma said:
			
		

> The report was essentially presented (on the news) as fact - I later met several property-bull acquaintances who saw it as some sort of proof that there was 15 years left in the property boom


 
It's amazing what people will believe when you tell them what they want to hear. At lunch in my office today the report was mentioned in passing, in a kind of "yippee, 15 more years of the Celtic Tiger" without anybody questioning the validity of the claims made or the lack of discussion on factors which could derail such an assessment. I was going to jump in with my 2 cents, but decided not to bother as the conversation quickly moved on to more mundane topics.


----------



## Chamar

walk2dewater said:
			
		

> C'mon really. Does anyone take that NCB thing seriously. Surely it's damaging to their credibility, a bad marketing move I would say.



I agree. It just shows what the so-called experts know. Its like a bunch of chimps sat around the table and decided to occupy themselves with this for a while.


----------



## ivuernis

Duplex said:
			
		

> Prices will rise this year by 20% plus maybe more in the last great manic rush.


 
Where does it project prices to rise by 20% plus this year? I thought the general projections were for more in the 10-12% range, or are we expecting a big jump once the SSIAs come onstream? As bad as 10-12% is, 20% just sounds nuts to me.


----------



## ivuernis

walk2dewater said:
			
		

> C'mon really. Does anyone take that NCB thing seriously. Surely it's damaging to their credibility, a bad marketing move I would say.


 
I don't think anybody with a reasonable bit of knowledge and some bit of a questioning mind will take the NCB report at face value, however, many people will. More fools them though.



			
				Chamar said:
			
		

> I agree. It just shows what the so-called experts know. Its like a bunch of chimps sat around the table and decided to occupy themselves with this for a while.


 
Which worries me even more. If this is what the so-called experts come up with how is our everyday Joe rationalising things. The answer can only be that there is no rationalising going on. Some people are in for a nasty shock if things go sour.


----------



## Glenbhoy

NCB don't actually say 20% this year, but I'm with Duplex on this one, I do think the general feelgood factor of the SSIA's and the fear that there'll never ever be another opportunity to buy a 3 bed semi (as propounded by virtually all vested property interests over the past 6 months) may well cause appreciation to be at hitherto unheard of levels.  I feel however by early next year, a bit of reality may come back to the market, with the SSIA bonus almost gone, interest rates of at least 33% higher, people may start to take stock.  I think that this will the last push over the precipice, it's like some of the very worst dotcom flotations in early 2000, manic stuff at the time.


----------



## Duplex

ivuernis said:
			
		

> Where does it project prices to rise by 20% plus this year? I thought the general projections were for more in the 10-12% range, or are we expecting a big jump once the SSIAs come onstream? As bad as 10-12% is, 20% just sounds nuts to me.


 
I’ve seen with my own eyes yoy rises of over 20% in a ‘test bed’  400 unit estate twenty miles from Dublin;  I’ve watched this place for two years.  Prices in Dublin rose by 1.5% last month, possibly more (PTSB figures).   This is the last great run up, the final manic stage, study your bubbles folks.  Heuristic reasoning and cognitive dissonance be dammed.  Liberty Schemes all round, paddy is making his bid for the first page in the chapter entitled ‘Financial Manias’ in the economic text books.

Take photographs, keep a diary, cut out press clippings, buy a scrapbook; this is one you’ll want to tell the grandkids about when they ask you, ‘What did you do Grandad/Granny when the big crash happened’


----------



## daveirl

ivuernis said:
			
		

> Where does it project prices to rise by 20% plus this year?


I don't think it does but what I believe Duplex is saying is that like all bubbles the rising prices accelerate towards the end of the bubble. If you wanted to gamble on this you could probably short AIB/BOI for a year?


----------



## ivuernis

Duplex said:
			
		

> I’ve seen with my own eyes yoy rises of over 20% in a ‘test bed’ 400 unit estate twenty miles from Dublin; I’ve watched this place for two years. Prices in Dublin rose by 1.5% last month, possibly more (PTSB figures). This is the last great run up, the final manic stage, study your bubbles folks. Heuristic reasoning and cognitive dissonance be dammed. Liberty Schemes all round, paddy is making his bid for the first page in the chapter entitled ‘Financial Manias’ in the economic text books.


 
It's going to be a crying shame when all this goes nova, not just for us but the next generation too. Unparalleled prosperity in this country for the last 10 years and nothing of real value to show for it. They'll be studying us in Psychology 101 as well as Economics 101 for years to come!


----------



## Duplex

The good news is that property prices in Japan (well Tokyo) have risen (after falling for fifteen years).

Well when I think about it this might not be good news, the BOJ might think again on 0% interest rates, and crush the carry trade.   




> TOKYO, March 23 (Reuters) - Land prices in Tokyo rose in 2005 for the first time in 15 years as Japan's steady economic recovery led to strong consumer demand for condominiums and voracious demand from investors seeking commercial land, a government survey showed on Thursday.
> Although nationwide prices slid for the 15th straight year and stood at one-third of their early-1990s peaks, the pace of decline in both residential and commercial land prices slowed in the year through Jan. 1, the survey showed.


 
http://today.reuters.com/investing/financeArticle.aspx?type=economicNews&storyID=uri:2006-03-23T080127Z_01_TKV002535_RTRIDST_0_ECONOMY-JAPAN-LAND.XML&pageNumber=1&summit=


----------



## walk2dewater

ivuernis said:
			
		

> It's going to be a crying shame when all this goes nova, not just for us but the next generation too. Unparalleled prosperity in this country for the last 10 years and nothing of real value to show for it. They'll be studying us in Psychology 101 as well as Economics 101 for years to come!


There will be carnage, this wont be a mild little recession and then back on to 5% GDP growth and 10% property price growth. A generation will come of age over the course of this next recession and they will be defined by it. 

There will be fingers pointing everywhere. I would imagine Sinn Fein getting significant seats in the Dail and FF been reduced to minor status, a 180 in migration flows, our infrastructure build-out will be scaled back enormously due to less pressure of roads, rail and airports and less tax money to fund it. The Aer Lingus IPO will be seen as the worst possible timing. There will be fields with rows and rows of unsold cars sitting in them (happened in UK in 1990s). Debt will be a shameful thing to admit to, rather than the badge of honour it appears to be today.

But within crisis there’s opportunity. For the investment savvy with the know-how and the right brokerage accounts there will be a massive opportunity to short the likes of AIB and BoI, but you’re timing will have to be spot on. People with no debt and lots of cash will have opportunities to make investment decisions of a lifetime.


----------



## tyoung

Walkdewater or anybody
 What assets would act as a hedge if property implodes?  I do not want to short  stocks  or own  any time limited  financial asset.
Thanks
TYoung


----------



## Howitzer

tyoung said:
			
		

> What assets would act as a hedge if property implodes? I do not want to short stocks or own any time limited financial asset.


 
Cash


----------



## daveirl

You should go back to the start of this thread the progression to the current state of ultra-bearishness is interesting to watch.

Regardless I'm happy my job is going to be relatively unscathed. The company I work for does pretty much no business in Ireland.


----------



## Duplex

Howitzer said:
			
		

> Cash


 
Yeah, too soon to guess what happens here or in the States.

Have a look at Toll Brothers the biggest US builder, just for information.

http://finance.google.com/finance?q=toll&btnG=Search


----------



## Howitzer

Duplex said:
			
		

> Yeah, too soon to guess what happens here or in the States.
> 
> Have a look at Toll Brothers the biggest US builder, just for information.
> 
> http://finance.google.com/finance?q=toll&btnG=Search


 
Err, summary? Financial pages are bit like Centra sandwiches, hard to digest.


----------



## ivuernis

daveirl said:
			
		

> You should go back to the start of this thread the progression to the current state of ultra-bearishness is interesting to watch.


 
I think the graph plotting the increasing bearishness quotient might be a mirror to the increasing levels of prices and indebtedness we are getting into as a country. 




			
				daveirl said:
			
		

> Regardless I'm happy my job is going to be relatively unscathed. The company I work for does pretty much no business in Ireland.


 
I'm in a similar position but my job is subject to influences from external factors... I'm not discounting a slump there at the same time as it hits here, but I'm hoping it won't happen, at least not at the same time anyway.


----------



## daveirl

ivuernis said:
			
		

> I'm in a similar position but my job is subject to influences from external factors... I'm not discounting a slump there at the same time as it hits here, but I'm hoping it won't happen, at least not at the same time anyway.


Yeah similar here I'd be in trouble if there is a global drop in consumer spending but if it's localised I'd be fine. Even if it's global hopefully things won't be too bad.


----------



## walk2dewater

In response to "what to do with your money", heres what I've sent posters who've pm'd me:
******************************************************
I am 55% in canadian debt (bonds of various durations and types), 25% in equities and about 20% in prec metals. The 25% in equities mainly in canadian tar sands energy, pipelines and utilities, metals, banks, some general exposure to Germany and Japan, and some international healthcare/pharma. Apart from the latter I have virtually nil exposure to the US currency or economy. Despite the run-up, gold might just be THE win-win asset at the moment. Im thinking of pushing % of gold to 30% or more. This time last year I was almost 100% in hard commodities and prec metals, not now.
*****************************************
The 55% bit in canadian bonds includes a far whack of just plain cash sitting in a money market fund.  I am really grasping these days.  In 15yrs+ of active investing, I really am not sure at all what is going to happen.  I think cdn cash, very-near cdn cash and gold are looking like my preferred assets, even though I admit theres a certain contradiction there.


----------



## ivuernis

walk2dewater said:
			
		

> There will be carnage, this wont be a mild little recession and then back on to 5% GDP growth and 10% property price growth. A generation will come of age over the course of this next recession and they will be defined by it.


 
Do you think it will happen here in Ireland in isolation though? I'm inclined to think external factors will bring it down here in Ireland, rather than it being an isolated event here in Ireland. Of course, our credit/debt mania of recent years will ensure that when it does happen it will be felt particularly hard here. 



			
				walk2dewater said:
			
		

> People with no debt and lots of cash will have opportunities to make investment decisions of a lifetime.


 
I'm hoping to be in the debt-free/cash-in-hand situation within the next 3-6 months. I got burnt in the dot-com boom... nothing major but enough to hurt. I was young and not long out of college and got caught up in the mania a little bit and what seemed like a quick buck. Suffice as to say it was an expensive but valuable lesson learnt. If nothing else, it will be a change to go against the herd-mentality and see the reaction of people when I tell them I out of this property nonsense before I get burnt again. I suspect a few will tell me I'm mad but my instinct and reading of the situation tell me I'm making the right decision.


----------



## daveirl

ivuernis said:
			
		

> I'm hoping to be in the debt-free/cash-in-hand situation within the next 3-6 months. I got burnt in the dot-com boom... nothing major but enough to hurt.


I was chatting to a guy on my break just there and we were discussing the 15 years of growth thing and he mentioned that he knows people in his local who are having a pissing contest with who owns the most houses but as he said it reminds him of the dotcom. He was down in his brokers and people without a clue were coming in looking to buy x or y because they read it in the paper. He decided to get out at that point! The parallels are everywhere between this and the dotcom mania!


----------



## ivuernis

walk2dewater said:
			
		

> equities mainly in canadian tar sands energy


 
A winner with current high prices no doubt, but a short-term drop in oil prices could hit their profitability as will the precarious situation with North American gas which is the main requirement to heat the tar sands. Hell, they've even considered building a dedicated nuclear plant to generate the electricity to heat the tar sands when they run out of gas to do it. Canada gets royally screwed by NAFTA agreement.



			
				walk2dewater said:
			
		

> I'm thinking of pushing % of gold to 30% or more.


 
I'll definitely go into gold, maybe 5% as an insurance policy, my fear would be the gold price could go either way.


----------



## Duplex

Howitzer said:
			
		

> Err, summary? Financial pages are bit like Centra sandwiches, hard to digest.


 
Well if you compare the performance of the general Dow index to Toll Bros. over two years; it sheds some light on the markets expectations for the construction sector in the States.  I just posted that link as a thought provoker.

The economic climate is very cloudy at present. The Fed say they will continue tightening rates, however the yield curve is inverted on long dated Bonds.  The Fed (today) stopped reporting M3 money supply data, and Burntcake (or whoever) has said previously that he will revert to the printing presses to prevent a deflationary recession in the States.  Many commentators believe that the Fed is intervening in the stock and money markets in an attempt to micro manage the slowing US economy.   

The US deficits are beginning to cause concern in Japan by far the biggest creditor nation, and what the Chinese will do (apart from securing 50% of the worlds manufacturing capacity) is anyone guess.   Stock markets in the Middle East are yo-yoing at the merest hint of rising rates in Japan.

There is a lot of money sloshing about the world at present looking for a safe haven, is it gold, bonds, shares (which ones), is it real estate (no) or maybe it’s a ball in the Liberty Pyramid in Cork.    Hey maybe NCB do have all the answers.


----------



## walk2dewater

ivuernis said:
			
		

> Do you think it will happen here in Ireland in isolation though? I'm inclined to think external factors will bring it down here in Ireland, rather than it being an isolated event here in Ireland. Of course, our credit/debt mania of recent years will ensure that when it does happen it will be felt particularly hard here.
> 
> 
> 
> I'm hoping to be in the debt-free/cash-in-hand situation within the next 3-6 months. I got burnt in the dot-com boom... nothing major but enough to hurt. I was young and not long out of college and got caught up in the mania a little bit and what seemed like a quick buck. Suffice as to say it was an expensive but valuable lesson learnt. If nothing else, it will be a change to go against the herd-mentality and see the reaction of people when I tell them I out of this property nonsense before I get burnt again. I suspect a few will tell me I'm mad but my instinct and reading of the situation tell me I'm making the right decision.


 
If you makes you feel any better I lost US$15,000 in one day, one afternoon actually.  And yes it was a tech stock....


----------



## ivuernis

daveirl said:
			
		

> I was chatting to a guy on my break just there and we were discussing the 15 years of growth thing and he mentioned that he knows people in his local who are having a pissing contest with who owns the most houses but as he said it reminds him of the dotcom. He was down in his brokers and people without a clue were coming in looking to buy x or y because they read it in the paper. He decided to get out at that point! The parallels are everywhere between this and the dotcom mania!


 
Reading things like this just re-affirms my decision. As you say we've been here before in the dot-com era but people just don't want to see the parallels. It's different this time/here. Sure it is! We're special in some unfathomable way aren't we!!

I won't feel a bit sorry for people with multiple properties if they get burnt but I will feel sorry for FTBs who've only recently bought. Most of them feel trapped between a rock and a hard place w.r.t. property prices. It's not an unreasonable aspiration to want to own a house to raise a family in but it shouldn't have to involve risking your financial future. The sad thing is these people will probably be hit the hardest.


----------



## walk2dewater

ivuernis said:
			
		

> A winner with current high prices no doubt, but a short-term drop in oil prices could hit their profitability as will the precarious situation with North American gas which is the main requirement to heat the tar sands. Hell, they've even considered building a dedicated nuclear plant to generate the electricity to heat the tar sands when they run out of gas to do it. Canada gets royally screwed by NAFTA agreement.
> 
> 
> 
> I'll definitely go into gold, maybe 5% as an insurance policy, my fear would be the gold price could go either way.


 
Well I'm not exactly delighted with my portfolio either.  And yes, 30% or more invested in prec metals would have seemed madness to me only a few years ago.  I think the odds are for a 'muddle through' scenario globally so I'm hoping I'll 'muddle through' also.


----------



## ivuernis

Duplex said:
			
		

> Many commentators believe that the Fed is intervening in the stock and money markets in an attempt to micro manage the slowing US economy.


 
My knowledge on this is vague at best, but isn't that one of the reasons given as to why the Fed is ceasing publication of the M3 numbers as the M3 minus M2 figure goes some way to showing how much "repurchase agreements" the Fed is putting into the system and thus influencing the markets?


----------



## bearishbull

wait till the chinese fully float their currency ,it will rise and we will be importing inflation from there and our currencies may be negatively affected by strengthening yuan.wonder when will international investors start buying the yuan as a reserve currency....


----------



## conor_mc

tyoung said:
			
		

> Walkdewater or anybody
> What assets would act as a hedge if property implodes? I do not want to short stocks or own any time limited financial asset.
> Thanks
> TYoung


 
Been thinking about this one, and I stress that I'm not a learned investor by any stretch of the imagination but....

If the hypothesis is that rising interest rates are a major risk to the Irish propert market, would it not make sense to invest in the market which is driving the interest rate rises, i.e the recovering German economy?


----------



## dam099

walk2dewater said:
			
		

> In response to "what to do with your money", heres what I've sent posters who've pm'd me:
> ******************************************************
> I am 55% in canadian debt (bonds of various durations and types), 25% in equities and about 20% in prec metals. The 25% in equities mainly in canadian tar sands energy, pipelines and utilities, metals, banks, some general exposure to Germany and Japan, and some international healthcare/pharma. Apart from the latter I have virtually nil exposure to the US currency or economy. Despite the run-up, gold might just be THE win-win asset at the moment. Im thinking of pushing % of gold to 30% or more. This time last year I was almost 100% in hard commodities and prec metals, not now.
> *****************************************
> The 55% bit in canadian bonds includes a far whack of just plain cash sitting in a money market fund. I am really grasping these days. In 15yrs+ of active investing, I really am not sure at all what is going to happen. I think cdn cash, very-near cdn cash and gold are looking like my preferred assets, even though I admit theres a certain contradiction there.


 
For someone who is so down on the risks of property and a major recession your own portfolio is not exactly low risk itself.

a) Very high concentration in one market (Canadian)
b) FX risk of concentration in CAD (unless you live in Canada?)
c) Prec metals are doing very well right now but gold for example underperformed significantly in the last few decades (I suppose thats also a case for considering it undervalued). Some of the other precious metals derive a significant amount of their demand from tech manufacturing and could be vulnerable in a slowdown.
d) Canada is in large part a commodity based economy and your other investments include equities in commodity companies and precious metal so you are highly exposed to commodities, demand for which could decline in a major recession.

Not saying your strategy is definitely wrong, only time will tell, but its definitely risky.


----------



## dam099

bearishbull said:
			
		

> .wonder when will international investors start buying the yuan as a reserve currency....


 
Not until they are sure the Chinese are done playing silly buggers with their FX rates which could be quite some time i.e they will need a track record of fully floating for a while.


----------



## bearishbull

conor_mc said:
			
		

> Been thinking about this one, and I stress that I'm not a learned investor by any stretch of the imagination but....
> 
> If the hypothesis is that rising interest rates are a major risk to the Irish propert market, would it not make sense to invest in the market which is driving the interest rate rises, i.e the recovering German economy?


 
diversified investment in german bluechips that have significant sales abroad would be worthwhile,even during the supposed bad patch in european economy german companies such as siemans basf linde sap and many other performed well as they export huge amounts of high value proucts from germany and plants around the world so you get exposure to growth in asia and around world,plus german equities are quoted in euro so theres no currency risk on them.


----------



## tyoung

Off topic I know
I'm holding a fair amount of cash. In stocks i've bought healthcare,foods and some technology as I think they're relatively interest rate insensitive. I've cut my exposure to emerging markets. I think interest rates are going to 5.5% in the US(the average for the 90's) and over 4% in europe so cash seems to make sense.
I think bonds are overpriced. I share concerns about the dollar but I don't know enough about the Canadian dollar etc to venture into the currency markets.
 I own the Japan ETF though it's had a good run last year. Buying German stocks means buying into the US/China boom which I think is fragile.
 I've followed the discussions on gold but (sadly)never bought any. I think gold will really come into it's own when central banks start to cut interest rates in response to a global slowdown.
Regards


----------



## walk2dewater

dam099 said:
			
		

> For someone who is so down on the risks of property and a major recession your own portfolio is not exactly low risk itself.
> 
> a) Very high concentration in one market (Canadian)
> b) FX risk of concentration in CAD (unless you live in Canada?)
> c) Prec metals are doing very well right now but gold for example underperformed significantly in the last few decades (I suppose thats also a case for considering it undervalued). Some of the other precious metals derive a significant amount of their demand from tech manufacturing and could be vulnerable in a slowdown.
> d) Canada is in large part a commodity based economy and your other investments include equities in commodity companies and precious metal so you are highly exposed to commodities, demand for which could decline in a major recession.
> 
> Not saying your strategy is definitely wrong, only time will tell, but its definitely risky.


 
To yesterday I'm up ~70% in about 18 months 

Bragging aside though Im not actually adding to my positions at the minute, right now just keeping them and/or moving to cash and gold.  But long-term (5yrs?), my love of all things Canadian stems from:

Conservative estimates put 333b barrels of oil in the canadian tar sands, vs. say 285b in all of Saudi.  The issue is tar sands oil is profitable only at oil prices north of US$35/bbl.  And 333b is very conservative, no one has a clue
India and China AND the USA are competing amongst themselves for Canadian dollars.  There is a wall rupees, yuans and US greebbacks heading to Canada, not just for oil, but for nickel, copper, zinc, gold, uranium-- you name any hard or soft commodity (besides tropical fruit!) and Canada HAS it in spades
I think the Can$ is going to par with the US$ within min 2yrs and thereafter heading to 1.1
The women in Vancouver are stunning
Anyway, werent we talking about house prices?


----------



## onekeano

walk2dewater said:
			
		

> Conservative estimates put 333b barrels of oil in the canadian tar sands, vs. say 285b in all of Saudi.  The issue is tar sands oil is profitable only at oil prices north of US$35/bbl.  And 333b is very conservative, no one has a clue





W2W - can you thro some more light on this? Are you recommending a particular stock?

Roy


----------



## Neffa

So there seems to be a consensus here that the amateur investor holding a few or many properties is the market segment most at risk when rates rise further and/or economic activity wobbles. I realise highly-geared FTB's are at risk too but the effect is dramatically magnified when many properties are involved.

Does anyone know what %age of the housing stock they own, or what the average number owned is?


----------



## ivuernis

walk2dewater said:
			
		

> Conservative estimates put 333b barrels of oil in the canadian tar sands, vs. say 285b in all of Saudi. The issue is tar sands oil is profitable only at oil prices north of US$35/bbl. And 333b is very conservative, no one has a clue


 
Whilst there may be more potential oil in Canada's Athabasca tar sands than Saudi Arabia's oil reserves (themselves probably overstated) the problem with the tar sands is getting the oil out. It is essentially a mining process taking about 1-2 tonnes of the tar sands to produce a single barrel of oil. 

The three main disadvantages with producing oil from the tar sands are:
1. It requires LOTS of natural gas to heat the water mixed into the sands to separate the tar from the sands. 
2. HUGE amounts of water is required for this process. 
3. It is environmentally VERY destructive. 

As North American gas rises in price (and it will!) it will also push up the price threshold at which mining and processing the tar sands into oil becomes profitable. 

At the moment the tar sands produce about 1 million barrels of oil per day. Sounds a lot, but the world produces 80+ million barrels of oil a day. At best the maximum production from the tar sands will be 3-5 million barrels per day and that 5-15 years in the future by which time depletion of conventional oil will probably be far greater than the maximum production available from the tar sands. 

Tar sands are held up by some as the panacea to offset conventional oil depletion but the truth is they won't in any meaningful timeframe and when the time comes when production of oil from tar sands exceeds production of conventional oil the world's economy will have long since tanked. 

I'm not discounting the tar sands as an investment though... many people have high hopes they will bridge the energy divide and this may sustain them until such time when it becomes obvious that production cannot be ramped up enough to do this. 




			
				walk2dewater said:
			
		

> Anyway, werent we talking about house prices?


 
Back to the business at hand


----------



## joe sod

"[FONT=Arial, Verdana, Arial]*One million immigrants to fuel boom for 15 years*[/FONT][FONT=Verdana, Arial][/FONT]*Report predicts 5m population,6pc annual growth and 3m cars*

Brendan Keenan 
Group Business Editor 
A MILLION immigrants over the next 15 years could swell the population to more than five million by 2020 and keep the economy and the housing market booming. 
The foreign-born population is probably at 400,000 already, and makes up one in eight of the workforce. 
In a major new long-term forecast, NCB Stockbrokers say the fastest-growing sectors of the economy will be the savings industry, hotels and restaurants, cars and computers as Ireland's baby boomers reach prime earning and spending age from now to 2020. 
The optimistic outlook emerges from a new analysis of the population on which NCB's economists worked with the Central Statistics Office. 
Among the findings are: 
 The population will grow by almost a third and immigrants could make up one in five of residents by 2020. 
 The number of cars on the road will almost double to 3m. An extra 700,000 dwellings will be needed to house the expanding population of working age. 
 The Irish economy will far outstrip the rest of the EU, with the potential to grow by more than 5pc a year over the period. 
"Ireland's labour force structure is radically different from the rest of the EU," said NCB chief economist Dermot O'Brien. 
"Theirs is going to decline over the next 40 years, and at an accelerating pace, while ours continues to increase." 
The report argues that better economic prospects in Ireland will draw in more immigrants, and this in turn will spur faster growth. 
"We expect immigration to account for half the population growth between now and 2020," said NCB economist Eunan King. 
The new analysis challenges the perception that most immigrants are employed in building or semi-skilled areas like meat processing. 
Instead, the biggest proportion are working in professional jobs. Less than 10pc of unskilled workers are foreign-born, compared with 15pc of professionals. 
"The immigrants coming here have more third-level qualifications than the Irish-born population," Mr King said. "That is adding to the productivity of the economy. But there is no doubt the numbers we are forecasting will have significant implications for all aspects of society." 
The present immigrant population is made up more of family units than single people, the research finds. 
The average size of an immigrant household is just under three people - not much different from that of the Irish-born population. Only in Dublin and Cork cities did the report find a significantly larger number of single-person households. 
Based on their forecasts, NCB see continued strong demand for housing. Over 40pc of the 100,000 immigrant households in 2002 were in rented accommodation. But 34pc were buying on a mortgage, which was not much less than the 38pc of Irish families. 
Forecasts 
"We expect the demand for housing to be about 65,000 units per year until 2015, then slowing to 55,000 a year until 2020," Mr O'Brien said. 
He sees no reason for house prices to fall, although prices should slow to the same rate as incomes - 5pc to 7pc a year - if the market is to stabilise. 
"I do not see what could threaten the housing market. 
"The eurozone cannot support interest rates much above 4pc so there is no danger there. 
"We have already seen the resilience of the Irish economy after the global downturn in 2001, when employment just kept on growing." 
Even if immigration slowed to zero, the country will need more than 40,000 new houses a year. 
And the growth in population of working age means the number of cars on the road will rise by at least 600,000, and probably by 1.5 million, the report says."



Another attempt to talk up the economy using immigration as the saviour of everything. Why hasn't any other country taught of this all you have to do is have very high immigration and the economy booms. Ireland is such a clever little country to have discovered this. I especially like the this piece

"
The new analysis challenges the perception that most immigrants are employed in building or semi-skilled areas like meat processing. 
Instead, the biggest proportion are working in professional jobs. Less than 10pc of unskilled workers are foreign-born, compared with 15pc of professionals. "

Rather than saying what proportion of immigrants is working in unskilled compared to skilled jobs which would show up the truth that the vast majority are working in unskilled areas. The statistics are turned around to show the immigrants percentage of the total workforce working in skilled and unskilled areas. There are far more workers in ireland working in unskilled jobs than in the professions. So 10% of unskilled workers is going to be a much higher figure than 15% of professionals. This is another example of using statistics to mislead people.


----------



## beattie

The property market was dealt with on the Dunphy show just now. Didn't get to catch it all as I had to get into work but it didn't sound like the typical Irish media analysis of the property market. I expect to hear a few auctioneers in the short term waxing on about the bouyancy of the market. They basically rubbished the NCB report as well.


----------



## owenm

bearishbull said:
			
		

> wait till the chinese fully float their currency ,it will rise and we will be importing inflation from there and our currencies may be negatively affected by strengthening yuan.wonder when will international investors start buying the yuan as a reserve currency....



This could actually be Irelands long term salvation if a meltdown occurs, 'importing inflation' can also be termed increased competitiveness and lead to a scenario where we actually start to manufacture something here in Ireland again.


----------



## ivuernis

According to the European Forecasting Network the ECB will raise rates by about 0.5% by the middle of next year and will rise further again after that. This means the rate will likely be 3.25% by end 2007 assuming a 0.25% rise every 6 months. It will be interesting to see how the ECB proceed in the next 6 months then and whether they raise the rate sooner. If the economic rebound in the Eurozone continues it would not be unrealistic to see a 0.25% every 3 months (as they have done already in Dec and Mar) instead of every 6 months giving a rate of 4% by end 2007.


----------



## soma

ivuernis said:
			
		

> According to the European Forecasting Network the ECB will raise rates by about 0.5% by the middle of next year


That does seem a conservative estimate - and would leave the ECB lagging significantly behind the FED rate for quite a while - I'm not sure I see that happening. 

At the other end of the scale some of the estimates are a 0.75% raise before end 2006.


----------



## walk2dewater

ivuernis said:
			
		

> According to the European Forecasting Network the ECB will raise rates by about 0.5% by the middle of next year and will rise further again after that. This means the rate will likely be 3.25% by end 2007 assuming a 0.25% rise every 6 months. It will be interesting to see how the ECB proceed in the next 6 months then and whether they raise the rate sooner. If the economic rebound in the Eurozone continues it would not be unrealistic to see a 0.25% every 3 months (as they have done already in Dec and Mar) instead of every 6 months giving a rate of 4% by end 2007.


 
Read what the ECB are saying in their March bulletin (linked posted above).  I'd prefer that as my basis for rates expectations not the guys at the EFN.


----------



## bearishbull

joe sod said:
			
		

> "[FONT=Arial, Verdana, Arial]*One million immigrants to fuel boom for 15 years*[/FONT]*Report predicts 5m population,6pc annual growth and 3m cars*
> 
> Brendan Keenan
> Group Business Editor
> A MILLION immigrants over the next 15 years could swell the population to more than five million by 2020 and keep the economy and the housing market booming.
> The foreign-born population is probably at 400,000 already, and makes up one in eight of the workforce.
> In a major new long-term forecast, NCB Stockbrokers say the fastest-growing sectors of the economy will be the savings industry, hotels and restaurants, cars and computers as Ireland's baby boomers reach prime earning and spending age from now to 2020.
> The optimistic outlook emerges from a new analysis of the population on which NCB's economists worked with the Central Statistics Office.
> Among the findings are:
> The population will grow by almost a third and immigrants could make up one in five of residents by 2020.
> The number of cars on the road will almost double to 3m. An extra 700,000 dwellings will be needed to house the expanding population of working age.
> The Irish economy will far outstrip the rest of the EU, with the potential to grow by more than 5pc a year over the period.
> "Ireland's labour force structure is radically different from the rest of the EU," said NCB chief economist Dermot O'Brien.
> "Theirs is going to decline over the next 40 years, and at an accelerating pace, while ours continues to increase."
> The report argues that better economic prospects in Ireland will draw in more immigrants, and this in turn will spur faster growth.
> "We expect immigration to account for half the population growth between now and 2020," said NCB economist Eunan King.
> The new analysis challenges the perception that most immigrants are employed in building or semi-skilled areas like meat processing.
> Instead, the biggest proportion are working in professional jobs. Less than 10pc of unskilled workers are foreign-born, compared with 15pc of professionals.
> "The immigrants coming here have more third-level qualifications than the Irish-born population," Mr King said. "That is adding to the productivity of the economy. But there is no doubt the numbers we are forecasting will have significant implications for all aspects of society."
> The present immigrant population is made up more of family units than single people, the research finds.
> The average size of an immigrant household is just under three people - not much different from that of the Irish-born population. Only in Dublin and Cork cities did the report find a significantly larger number of single-person households.
> Based on their forecasts, NCB see continued strong demand for housing. Over 40pc of the 100,000 immigrant households in 2002 were in rented accommodation. But 34pc were buying on a mortgage, which was not much less than the 38pc of Irish families.
> Forecasts
> "We expect the demand for housing to be about 65,000 units per year until 2015, then slowing to 55,000 a year until 2020," Mr O'Brien said.
> He sees no reason for house prices to fall, although prices should slow to the same rate as incomes - 5pc to 7pc a year - if the market is to stabilise.
> "I do not see what could threaten the housing market.
> "The eurozone cannot support interest rates much above 4pc so there is no danger there.
> "We have already seen the resilience of the Irish economy after the global downturn in 2001, when employment just kept on growing."
> Even if immigration slowed to zero, the country will need more than 40,000 new houses a year.
> And the growth in population of working age means the number of cars on the road will rise by at least 600,000, and probably by 1.5 million, the report says."
> 
> 
> 
> Another attempt to talk up the economy using immigration as the saviour of everything. Why hasn't any other country taught of this all you have to do is have very high immigration and the economy booms. Ireland is such a clever little country to have discovered this. I especially like the this piece
> 
> "
> The new analysis challenges the perception that most immigrants are employed in building or semi-skilled areas like meat processing.
> Instead, the biggest proportion are working in professional jobs. Less than 10pc of unskilled workers are foreign-born, compared with 15pc of professionals. "
> 
> Rather than saying what proportion of immigrants is working in unskilled compared to skilled jobs which would show up the truth that the vast majority are working in unskilled areas. The statistics are turned around to show the immigrants percentage of the total workforce working in skilled and unskilled areas. There are far more workers in ireland working in unskilled jobs than in the professions. So 10% of unskilled workers is going to be a much higher figure than 15% of professionals. This is another example of using statistics to mislead people.


about a day or two late there mate! have you been readin this thread or what?


----------



## ixus

I'm 24, finished college last year and went straight into a good, stable job starting on approx 25K pa (Your average grad wage).

I'm currently renting in a 1 bed in Rathfarnham in a decent apartment and it's a nice area. Looking at myhome.ie the apartment could be valued at between €330K and €370K ( probably leaning  towards €370K). 

Now, if I was to purchase this apartment for €340K on a 25 year mortgage at 3.7% it would cost me a little over €1,700 pm. ( according to http://www.jeacle.ie/mortgage/ie/ ) 
Currently rentals are costing me about €950 pm. (Think it's a bit much at that too.)
When my landlord bought this place in the late '90's he paid around £50K for it. If he asked me to put in a bid  for it tomorrow, I could honestly say the most I would offer for it would be €170K. 
€170K at the rates specified above would leave me with a mortgage of roughly €870 pm. To me, this would be value for my money.

I think the market's terrible in terms of value for money.
And for those of you who might say "you see it this way because you're on the outside looking in as a FTB"! I can see both sides as my parents have been fortunate enough to buy at the right time ( late '90's & early '00's) and reap the rewards of capital gains and rental income.

I've made my mind up, now the real thing that interests me is what can I do while I wait for the property market to correct itself?


----------



## ivuernis

walk2dewater said:
			
		

> Read what the ECB are saying in their March bulletin (linked posted above). I'd prefer that as my basis for rates expectations not the guys at the EFN.


 
I agree, I think the EFN predictions are definitely on the conservative side. 

However, people listening to this will at first be a little worried when then hear interest rates are going to rise, but then we they hear the actual prediction of 0.5% by middle of 2007 they'll quickly revert and the mania will continue for another while.


----------



## Neffa

ivuernis said:
			
		

> According to the European Forecasting Network the ECB will raise rates by about 0.5% by the middle of next year and will rise further again after that. This means the rate will likely be 3.25% by end 2007 assuming a 0.25% rise every 6 months. It will be interesting to see how the ECB proceed in the next 6 months then and whether they raise the rate sooner. If the economic rebound in the Eurozone continues it would not be unrealistic to see a 0.25% every 3 months (as they have done already in Dec and Mar) instead of every 6 months giving a rate of 4% by end 2007.


 
If this is true - the EFN's view is for much less aggressive hikes than other commentators have postulated - then I would imagine that any softness in the Irish market is going to come from BTL stress with IO mortgages, not from individual mortgage holders. 

An increase from 2% base Nov-05 to 4% base end-07 would see the cost of a €500K loan (as an example covering say 2 BTL properties) rise from €1300pcm to about €2150pcm. 

The impact on a repayment mortgage is lower due to the "cushioning effect" of paying down the capital (for the same amount it rises from 2500 to about 3000). Providing employment remains stable and there is no further stress in the system, that should be bearable for most.

So the future of the market (imho) depends on the ability of the BTL brigade to service these loans and their appetite to hold onto empty property because capital appreciation is a one-way bet. 

Question is - what %age of the market do they represent?


----------



## ivuernis

ixus said:
			
		

> I've made my mind up, now the real thing that interests me is what can I do while I wait for the property market to correct itself?


 
If you have any debt get that paid off first and foremost and then aim to stay debt-free. If you don't need a car don't be tempted to get one, waste of money if you can get by without one. Rent one on occasion if you need to. Read and learn as much as you can on global economics and markets and where things might be headed. Don't get suckered by quick-buck investment advertisements. Save as much as you can afford to, invest it wisely! Don't put it into anything risky! Something secure with a reasonable rate of return. Maybe a small percentage (5-10% in gold) as an insurance bet. As your salary increases you might then be in a position to diversify a bit more. 

Enjoy your 20's, have fun and prepare for your 30's!


----------



## Howitzer

Neffa said:
			
		

> Question is - what %age of the market do they represent?


 
Well if you have a look at the other forum categories - Mortgages, Investments - There seem to be an awfull lot of homeowners trying to do the 'smart' thing of holding onto their old property when they move house. In effect becoming accidental BTL investors, and so ending up with really massive mortgages. I'd have said these people were taking inappropriate risks.


----------



## ivuernis

Neffa said:
			
		

> So the future of the market (imho) depends on the ability of the BTL brigade to service these loans and their appetite to hold onto empty property because capital appreciation is a one-way bet.


 
At some stage a proportion of the BTL brigade will decide to cut and run. I would if I was in that position, highly leveraged and banking on capital appreciation. 

The question is will something like this combined with interest rates rising a little bit faster than anticipated cause sufficient numbers of BTL's to sell that prices begin to reflect this by either stagnating or dropping a small amount? If nothing else, it would be very interesting to see the psychological effect of this on the market given the continual growth we've become used to and expected over the last 10 years.


----------



## Howitzer

ivuernis said:
			
		

> At some stage a proportion of the BTL brigade will decide to cut and run. I would if I was in that position, highly leveraged and banking on capital appreciation.


 
I think it'll be much harder to predict what'll happen with the BTL brigade simply because so many are new to investing in general and are what I would call 'accidental investors'. How many Eircom 'investors' lost their shirt because they didn't sell when the stock was up 25%, whilst all the pros made a killing.

Have you ever played poker with people who don't really know what they're doing? 

Conventional wisdom just goes out the window.


----------



## walk2dewater

Howitzer said:
			
		

> Have you ever played poker with people who don't really know what they're doing?


 
That's a nice analogy. I'd add, playing poker with borrowed money and the expectation that "in the long-run" the right cards always show up


----------



## Howitzer

Well judging by the Rental Yields thread not many professional landlords would buy anything in Dublin at the moment (bar S23, S50, which are completely different), whilst anyone who has 50K in equity on their existing property thinks it's the only game in town. I know who's opinion I'd listen to.


----------



## bearishbull

i wonder if a lot of FTB's are/have entered the market earlier than they would normally do as "i wont be able to afford it if i wait" ,so buying at 26 rather than at 30,in UK the average age of a FTB is 33 ,i'd say its far lower in ireland.
Maybe the stress testing the banks claim to do will will now cause a drop in FTB's ,with base rates heading for 4% by 2008 equalling mortgage rates of around 5.25% banks should be stress testing with mortgage rates +2% by middle/late 2007.how many FTB's would be able to afford a mortgage with a stress test rate of 7.25% ??


----------



## ixus

ivuernis said:
			
		

> Read and learn as much as you can on global economics and markets and where things might be headed.



This is probably my main aim at the moment. Have started by reading Sunday Business sections, Financial Times, askaboutmoney, www.thisismoney.com , a bit of Investopedia and CNBC. A small start, but a start nonetheless. also, I read economy sector reviews on different sectors.

Would appreciate any pointers / books / links other people have found interesting / informative.

Also, would like to see more discussion on this board like what W2DW has introduced in the more recent posts on this topic. 

Apologies for straying off topic.


----------



## redo

Howitzer said:
			
		

> Have you ever played poker with people who don't really know what they're doing?



When playing poker, if you don't know who the sucker is, IT'S YOU !


----------



## Glenbhoy

> about a day or two late there mate! have you been readin this thread or what?


I  think what the poster was doing was pointing out how Brendan Keenan the business editor of the Indo had thoroughly endorsed the report.


----------



## Glenbhoy

> i wonder if a lot of FTB's are/have entered the market earlier than they would normally do as "i wont be able to afford it if i wait" ,so buying at 26 rather than at 30,in UK the average age of a FTB is 33 ,i'd say its far lower in ireland.


My own anecdotal evidence suggests definitely.  Almost all my younger colleagues are buying/obsessed with buying (mid 20's onwards), which is fair enough, but, personally I think it's a bit lifestyle restricting - but it is a lifstyle choice, and it's their choice.  
It's a fairly difficult position that FTB's are in, all they see are prices going up and up, so they make a judgement call, that they've got to get on the ladder asap.
Obviously, when i was that age (6/7 yrs ago), the banks would have laughed me back out of the bank, 2.5 times your salary and probably a 15% deposit, not to mention fees!!


----------



## tiger

Glenbhoy said:
			
		

> My own anecdotal evidence suggests definitely. Almost all my younger colleagues are buying/obsessed with buying (mid 20's onwards), which is fair enough, but, personally I think it's a bit lifestyle restricting - but it is a lifstyle choice, and it's their choice.
> It's a fairly difficult position that FTB's are in, all they see are prices going up and up, so they make a judgement call, that they've got to get on the ladder asap.
> Obviously, when i was that age (6/7 yrs ago), the banks would have laughed me back out of the bank, 2.5 times your salary and probably a 15% deposit, not to mention fees!!


 
I think this is a good point.  Bullish property analysts always point to the positive demographics & inward flow of immigrants.  Daft.ie seems to be crediting the sustaining of rent levels to the inflow of eastern europeans.  If they were to return or start going to other countries instead (e.g. a recovering Germany), rents would drop.  With low enough rents, the mid 20s buyers we have now would sit it out until their 30s before buying, even if the market was declining, causing a shift back in the house buying demographic.

When it comes to property prices I believe 2 things apply:
- supply & demand, with the FTB being the foundation of the demand "ladder"
- location.  We talk in general terms about prices going up & down, but some areas & property types will benefit or suffer more for given events than others.


----------



## ivuernis

Big rant on property, NCB report, etc. on Joe Duffy show at the moment.


----------



## Duplex

Worth watching what’s happening in the States.  The Florida market has seen a lot of buying by investors over the past three years.  In Ireland it seems impossible to get any meaningful data on market composition and performance.  I think that the large investment market in Ireland will add considerably to volatility when the market turns.

Yields are not supporting current investments, however capital growth is presently compensating for the income shortfall.  What happens when prices stop rising? My guess is a steady rise in inventory as investors seek to lock in any capital gain before the pain of holding costs bite to deeply.    It’s interesting to note the mass of unsold inventory in the Spanish Costas, and the fall in prices there over the past year.

*Florida Year on Year Sales Declines Feb 2005 to Feb 2006*

*Houses * *  Condos*
-24%,               -50%..Daytona Beach
-25%,               -27%..Fort Lauderdale
-9%,                -44%..Fort Myers-Cape Coral
+6%,                -38%..Fort Pierce-Port St. Lucie
-21%,               -48%..Fort Walton Beach
-6%,                 +35%..Gainesville
-1%,                  na….Jacksonville
-11%,               -38%..Lakeland-Winter Haven
-36%,               -64%..Melbourne-Titusville-Palm Bay
-21%,               -20%..Miami
-47%,               -50%..Naples
-3%,                  na….Ocala
-16%,               +95%..Orlando
-32%,               -56%..Panama City
-20%,               +8%..Pensacola
-16%,             -  90%..Punta Gorda
-42%,               -44%..Sarasota-Bradenton
+11%,              -35%..Tallahassee
-29%,              -10%..Tampa-St. Petersburg-Clearwater
-22%,              -14%..West Palm Beach-Boca Raton 






http://biz.yahoo.com/prnews/060323/flth001.html?.v=52


----------



## SLAPPY

I'm witnessing the mess unfolding in Florida first hand.   There are alot of similarities to the Ireland market as most of the investors have been investors/speculators hoping to make a quick buck.  It could be a long painful ride to the bottom here.   Interest rates are only climbing higher and foreclosures are on the rise.   The point I want to make is that things can turn very quickly.   Only a few months ago, people were sleeping in lines to get in on the next pre-construction project.  

http://www.palmbeachpost.com/business/content/business/epaper/2006/03/24/a1c_homesales_0324.html


Here's a great bubble blog for anyone intrested.

http://thehousingbubbleblog.com/


----------



## owenm

If it does go Japanese, I don't think history will be kind to the government or Ahern, and people will remember "developers in the FF tent at the Galway races"


----------



## ivuernis

owenm said:
			
		

> If it does go Japanese, I don't think history will be kind to the government or Ahern, and people will remember "developers in the FF tent at the Galway races"


 
All together now.... 

I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so


----------



## beattie

Look whats happening across the pond at the moment

http://biz.yahoo.com/ap/060324/economy.html?.v=10


----------



## Duplex

Bubbles are for bathtubs, so it seems. Anyone want to buy a condo to flip in Florida, well here's your site. 



http://www.condoflip.com/

Or mayne not

http://www.daft.ie/searchinternational.daft?search=Search+%BB&s[continent_id]=2&s[mnp]=&s[mxp]=&s[bd_no]=&s[search_type]=international_sale&offset=90&limit=10&search_type=international_sale&offset=0


----------



## SLAPPY

Flippers will soon be Floppers....or Billionaires


----------



## thewatcher

owenm said:
			
		

> If it does go Japanese, I don't think history will be kind to the government or Ahern, and people will remember "developers in the FF tent at the Galway races"


 
And so it shouldn't be,they've as much to answer for as the banks lax lending policy's have.


----------



## bearishbull

thewatcher said:
			
		

> And so it shouldn't be,they've as much to answer for as the banks lax lending policy's have.


thing is they know they f00ked it up but are afriad to do anything now as a)election is near and b)any correction would be/will be horrendous and would be blamed on governemtn,if anything happens after next election they reckon they will get away with blaming all the banks and other property related industries.


----------



## SLAPPY

It's like trying to stop a bunch of Lemmings from jumping off the cliff.  Just let them jump.


----------



## ivuernis

Letter from... Dublin, another view from across the water on our economic boom in today's Observer.


----------



## bearishbull

[broken link removed]


----------



## thewatcher

bearishbull said:
			
		

> [broken link removed]


 
I'm surprised that made it through uncut,in fairness to her she couldn't have made it any clearer !.


----------



## Howitzer

ivuernis said:
			
		

> Letter from... Dublin, another view from across the water on our economic boom in today's Observer.


 


> Feverish property speculation echoes that of Thatcher's loadsamoney Britain.


 
That sent a shudder down my back.


----------



## CCOVICH

bearishbull said:
			
		

> [broken link removed]



Note our  on posting links.

The post without some form of commentary or opinion may be deleted.


----------



## bearishbull

CCOVICH said:
			
		

> Note our  on posting links.
> 
> The post without some form of commentary or opinion may be deleted.


i assumed people who read this thread would have at this point have known my opinion on the issue but if not then i reitterate that i beleive prices are highly overvalued and this article is a further sign of the increasingly bearish snetiment in the media.


----------



## SLAPPY

Remember in real estate or stocks... bulls and bears get rich. Pigs get slaughtered. Buying high is OK because someone will buy Higher. Buying Higher is OK, because someone will buy Highest. But, if you buy Highest, you're the one left holding the bag with no one else to sell to.

My wife‘s parents, unfortunately, owned real estate throughout the 1980's in the Dallas, Texas area. In the early 80's house prices raised dramatically, financing was insane and construction quality was horrible. Only 60 months later, in the mid-80's, entire blocks of housing set empty and vandalized. Lenders would do anything to dump their REO's. Several brand new housing developments purchased on speculation sat empty for years and were eventually bulldozed as they became too expensive to maintain by the banks who now owned them (true story, I swear). Homeowners were foreclosed upon by the thousands and home sellers went to the closing table with thousands to avoid foreclosure. Take it from the painful and bankrupt experiences of past generations, housing can definitely crash. 

There are people who say Dublin isn’t in a housing bubble - I say it could be the mother-of-all-bubbles that future generations will use as a reference for irrational investment. I’m putting my apartment up for sale next week and will rent (for less than I pay monthly now) for the next few years. Hopefully it will sell quickly and I won’t get left holding the bag.


----------



## Mininv

Interesting story I heard locally. Latest phase of a popular development near me was due to come on stream. All the previous phases sold off the plans in hours, with a lot of advance enquiries to the estate agent. This latest phase wasnt doing the business in terms of advance enquiries. So our estate agent hero paid some people to queue overnight before the 'release' of Phase 3, and arranged for coverage of this in the local paper. The houses sold out in a few days.

This isnt a friend of a friend story either. I personally know someone who was paid to do this.

15 years of boom stil to come, eh?


----------



## beattie

Our leaders daughter has dropped the price of her pad in Dublin.....

http://www.unison.ie/irish_independent/stories.php3?ca=184&si=1588800&issue_id=13860


----------



## Neffa

thewatcher said:
			
		

> I'm surprised that made it through uncut,in fairness to her she couldn't have made it any clearer !.


 
I think the interesting point in the article is that _as long as the average price grows by 18% by the end of 2007 (11% then 7%)_, affordability remains ok. So anything less than that and quite a number of buyers will end up in difficulty. So even though property is at an all-time-high and interest rates are rising, we're ok if we grow by 18% (!) Self-inflating bubble, anyone?


----------



## ivuernis

In the Irish Indo on Saturday it reported that Irish Buyers to splash €8 billion on foreign properties in 2006, up from €6 billion in 2005. 

The amounts of money leaving the country, largely financed on the back of Irish property values I'd imagine, are truly staggering. Our lust for property seems to know no bounds.


----------



## ivuernis

Listening to Saturday's Marian Finucane show on the web now. She interviews Eunan King (co-author of the NCB study that came out last week) and Jim Power (Friends First economist). 

The interview starts at 55m 30s into the show.

[broken link removed]


----------



## beattie

Mininv said:
			
		

> Interesting story I heard locally. Latest phase of a popular development near me was due to come on stream. All the previous phases sold off the plans in hours, with a lot of advance enquiries to the estate agent. This latest phase wasnt doing the business in terms of advance enquiries. So our estate agent hero paid some people to queue overnight before the 'release' of Phase 3, and arranged for coverage of this in the local paper. The houses sold out in a few days.
> 
> This isnt a friend of a friend story either. I personally know someone who was paid to do this.
> 
> 15 years of boom stil to come, eh?


 
Quite interesting to see, if this is a widespread practice I think supply could have caught up with demand about 18 months earlier than I had projected


----------



## Marie

I'd say that's accurate!  Eighteen months ago I was in a quandary on whether to sell a West Dublin three-bed semi I inherited a 50% interest in, or buy out my sibling, rent it out as an investment property for four years and retire to it.  The universal advice from professionals, family, neighbours was "You can't go wrong.  The rent will cover your 50% mortgage.  Money for old rope etc., etc."  However I was very very lucky to encounter an _honest estate agent _who was straight with me, said the rental market was on the turn, the realities of the work involved in landlording at a distance (I live UK at present) and was honest about growing voids.  I sold up and was uncertain for months as I watched prices climb and observed the continuing upbeat media and financial sector views.   Here, in what is deepening into the second 'crash' in 20 years, houses sit empty for 6 months to a year and sell in the end reduced by up to 20% of the asking-price and hundreds of buy-to-lets are sitting empty and unlet for 12 - 18 months at a stretch and there are signs of serious economic recession with the announcement last week of about 2,000 health service jobs to be cut in the immediate future.


----------



## woods

I was listening to a lady on "Talk To Joe" last week and she brought something to my attention. People are bidding on several houses at once and waiting to see which one they get. This habit alone would serve to push up prices. Can you imagine a scene where you have 4 houses for sale and 4 buyers. The each fight for every house and push the prices up on all houses and the sellers are laughing all the way to the bank.
She suggested a buyers strike.


----------



## CCOVICH

Marie said:
			
		

> However I was very very lucky to encounter an _honest estate agent _who was straight with me, said the rental market was on the turn, the realities of the work involved in landlording at a distance (I live UK at present) and was honest about growing voids.


 
I would have thought that it was in the estate agent's own interest to tell you that 'now is a good time to sell'-that's how they make their money-right?


----------



## CCOVICH

woods said:
			
		

> She suggested a buyers strike.


 
Ha!

If only people were that rational/smart.


----------



## Calina

I'm on strike. Unfortunately, I can't get anyone else to join in.

I do reckon though that the relaxation of the salary multiples has a lot to answer for in terms of rising house prices.


----------



## Howitzer

Calina said:
			
		

> I'm on strike. Unfortunately, I can't get anyone else to join in.


 
I'm with you. Was going to buy but double digit price increases against rising interest rates don't make sense to me.

Everyone together now, I'M SPARTACUS!


----------



## Glenbhoy

I've joined ye!!  
If you remember about 20 pages back I asked what someone in my position should do - sell up now and buy the place which will suffice me for the next 10yrs, or stay where I am, enjoy that I live in a relatively handy location in a nice spacious apartment.  My question was based on the premise that prices (for the type of property I want) will probably rise another 15-25% this year, and that even if there is a 'correction' will it actually reduce prices below current levels.  I still can't answer this (as most people can't), but in general, I do detect a lot more bearish sentiment out there, and feck it, I'd rather not be financially stretched paying a mortgage at my limits, for a dwelling which would not be in my ideal location (Ailesbury Road or nothing don't you know).  It's a gamble like everything else - but I do like a punt (Harrington for the masters at 50/1 btw).


----------



## redo

Glenbhoy said:
			
		

> I've joined ye!!
> If you remember about 20 pages back I asked what someone in my position should do - sell up now and buy the place which will suffice me for the next 10yrs, or stay where I am, enjoy that I live in a relatively handy location in a nice spacious apartment.  My question was based on the premise that prices (for the type of property I want) will probably rise another 15-25% this year, and that even if there is a 'correction' will it actually reduce prices below current levels.  I still can't answer this (as most people can't), but in general, I do detect a lot more bearish sentiment out there, and feck it, I'd rather not be financially stretched paying a mortgage at my limits, for a dwelling which would not be in my ideal location (Ailesbury Road or nothing don't you know).  It's a gamble like everything else - but I do like a punt (Harrington for the masters at 50/1 btw).



Mike Weir and Olazabal look good too.


----------



## casca

Hi, Its all doom and gloom.  Tell me , if the population is supposed to increase in the next few years and considering we and immigrants all want houses, why should there be a slump.  Anyway, if the economy loses its shine and immigrants go home to maybe a "take off" in their own countries , houses will become cheaper for the next generation.  .


----------



## ivuernis

casca said:
			
		

> Hi, Its all doom and gloom.


 
Bearish would be more appropriate. Doom and gloom implies that most of the posters here are of a negative disposition, whereas most of us look at the property market and don't see how the economics add up any longer to make property either value for money or a good investment. 

If everyone was only allowed to buy the one house there might very well be no problem, but as property is now a major investment for many people the fundamentals of the market changes and property becomes in a sense just another tradable stock and like all stocks they are subject to the whims of the market. 




			
				casca said:
			
		

> Tell me , if the population is supposed to increase in the next few years and considering we and immigrants all want houses, why should there be a slump.


 
Many possible reasons, a few being...
- higher interest rates
- higher inflation
- higher energy prices
- economic downturn (either local, regional or global)
- increased competition from lower cost economies




			
				casca said:
			
		

> Anyway, if the economy loses its shine and immigrants go home to maybe a "take off" in their own countries , houses will become cheaper for the next generation. .


 
And you'd have another generation sitting on negative equity perhaps, and if property prices did drop that would not necessarily make them affordable... see previous points on reasons why it might go pear shaped.


----------



## Theo

Marie said:
			
		

> However I was very very lucky to encounter an _honest estate agent _who was straight with me, said the rental market was on the turn, the realities of the work involved in landlording at a distance (I live UK at present) and was honest about growing voids. I sold up and was uncertain for months as I watched prices climb and observed the continuing upbeat media and financial sector views. Here, in what is deepening into the second 'crash' in 20 years, houses sit empty for 6 months to a year and sell in the end reduced by up to 20% of the asking-price and hundreds of buy-to-lets are sitting empty and unlet for 12 - 18 months at a stretch and there are signs of serious economic recession with the announcement last week of about 2,000 health service jobs to be cut in the immediate future.


 
I would agree with CCOVICH earlier remark about this honest estate agent.  If you're so unwilling to believe one person's hype about the property market, then why are you so quick to believe a person's pessimism wothout doing your own research?

Although it depends on where your 3 bed semi was, I would say its highly likely you have lost substantial sums of money by selling out too early.  How much would that 3 bed semi be worth in today's market.

Also, my experience of the UK market is not yours.  I own 3 BTLs over in the UK and achieve 13-15% rental yields before tax (cash yields, not gross yields so these are directly comprable to deposit rates) and I have also achieved 25% capital gains (again , received these in cash from the bank tax free when i re-financed) in a priod ranging 6-12 months.  There is a significant shortgae of housing supply in the UK over the next 10-15 years.

There is opportunity in prperty for anyone that bothers to look, and ignores all the hype on either side of the argument.  true, it is harder to find good deals today than yesterday but they exist.


----------



## Duplex

The Spanish property market has slowed considerably of late and some commentators are now predicting that prices will begin to fall across Spain in the coming years.   The fate of the Spanish market may shed some light on the probable outcome for the Irish market.  Interestingly Spain (and Finland)  has recently announced that it will relax its restrictions on migration from new EU member states; its worth watching the impact that this policy reversal will have on their property market, given that the Ace in the Hole played by Irish Banks is continuing immigration.



*



The beginning of the end for Spain's real estate bubble?
Interest rate rises and falling consumer spending will prompt a fall in housing prices

El Pais Spain | I. DE LA VEGA 

One of the key factors that has driven house prices up over the last decade is buyers' conviction that prices cannot fall. Evidence suggests otherwise. In some areas of Japan prices have been falling since 1992, and have now reached half their 1991 value. Prices in London fell by up to 45 percent between 1988 and 1995. Paris experienced a similar readjustment between 1991 and 1998. Bernardos says that in Spain, between 1991 and 1997, prices fell in real terms by an accumulated 20 percent. A hike in interest rates will hit consumer spending, and squeeze jobs. "These trends won't be immediately obvious. Interest rates will hit 3.5 percent this year, but the impact of this rise won't be felt for six months. Prices could fall by five percent in the second half of 2007, by six percent in 2008, and by seven percent in 2009."

Bernardos also points out that during Spain's previous property boom, between 1986 and 1991, there was no speculation. Today, he says, price adjustments will only come when there is an economic downturn and speculators turn their attention to other sectors.

Click to expand...

*
[broken link removed]


----------



## Neffa

Duplex,

What was the scary thing you mentioned on (I think) lending practices on another thread over the weekend? You teased us with the information  , but I've not seen anything else. 

Can you spill the beans?


----------



## Neffa

Theo said:
			
		

> Also, my experience of the UK market is not yours. I own 3 BTLs over in the UK and achieve 13-15% rental yields before tax (cash yields, not gross yields so these are directly comprable to deposit rates) and I have also achieved 25% capital gains (again , received these in cash from the bank tax free when i re-financed) in a priod ranging 6-12 months. There is a significant shortgae of housing supply in the UK over the next 10-15 years.


 
Hi, 

Slightly OT - but how do you get your cash out tax-free out of the UK properties - you will have to pay CGT on any sale, I would have thought? If you take it out as equity withdrawal, do you bank the eventual CGT charge? I have a house rented out in London and therefore any tax issues are very interesting!


----------



## Duplex

Gross rental yields are just below 6% in England at present. Net yields are anyone’s guess.

I’ve seen stuff selling at 4% gross for new build, netting 2% after service charges, management and voids. There are good yielding investments in the UK however these are typically in secondary markets. 





> *Quarterly figures from Landlord Mortgages have revealed rental yields in England have fallen to 5.87per cent - their lowest in three years.
> 
> *


 

http://firstrung.co.uk/articles.asp?pageid=NEWS&articlekey=829&cat=44-0-0



Yes Neffa; I’ve kept you in suspense long enough. Thought my little anecdote of financial euphoria would hardly raise an eyebrow in Ireland anymore. I am reliably advised that a house placed for sale on the market for €315,000 ( modern 3 bed semi about 1,200 sq ft)
was purchased by the first person who viewed, they having made an offer on the spot of €335,000., no competing bids. I’ve checked and the tone now (after this sale) for similar properties in the area is (you guessed it) €335,000. The subject property is sale agreed for about 12 days.


----------



## Theo

Hi Neffa

Yes, ultimately when you sell, there is CGT, but currently Irish residents only subject to Irish CGT on sales of UK property.  (and is attractive at 20%)

I use the bank proceeds for further investing - not necessarily property, and always careful to be sure that the interest on these loans is being paid for by someone else.


----------



## Glenbhoy

http://www.askaboutmoney.com/showthread.php?t=6188&page=2

Theo, have a look at the link above - it deals with CGT implications for non-res investors in the UK, you are probably correct with your asssertions, I'm just wondering is there any possibility that UK revenue would consider your properties as a trade?


----------



## Theo

Thanks for that Glenbhoy.  
On the trade thing, I deal directly with the Inland Revenue myself and they have not raised this issue with me. I would say it is more likely to be an issue with a person who is flipping high volumes of property as this type of person is clearly not interested in providing accomodation needs to certain areas.


----------



## bearishbull

Theo said:
			
		

> I would agree with CCOVICH earlier remark about this honest estate agent. If you're so unwilling to believe one person's hype about the property market, then why are you so quick to believe a person's pessimism wothout doing your own research?
> 
> Although it depends on where your 3 bed semi was, I would say its highly likely you have lost substantial sums of money by selling out too early. How much would that 3 bed semi be worth in today's market.
> 
> Also, my experience of the UK market is not yours. I own 3 BTLs over in the UK and achieve 13-15% rental yields before tax (cash yields, not gross yields so these are directly comprable to deposit rates) and I have also achieved 25% capital gains (again , received these in cash from the bank tax free when i re-financed) in a priod ranging 6-12 months. There is a significant shortgae of housing supply in the UK over the next 10-15 years.
> 
> There is opportunity in prperty for anyone that bothers to look, and ignores all the hype on either side of the argument. true, it is harder to find good deals today than yesterday but they exist.


 
can you show me a house anywhere in uk for sale now(on a website we can view) that has a rental tield of 13-15% ?? and you borrow in sterling? mortgage rates around 6% there.


----------



## Duplex

Below is a graph of the supply of properties for sale in the US. It suggests to me that the market has peaked. Any thoughts?



http://photos1.blogger.com/blogger/4037/910/1600/Housing-inventory-SA.jpg


----------



## bearishbull

http://www.rte.ie/business/2006/0328/germany.html
ecb expected to raise rates next month raher than later by .25% and then again in august


----------



## walk2dewater

bearishbull said:
			
		

> http://www.rte.ie/business/2006/0328/germany.html
> ecb expected to raise rates next month raher than later by .25% and then again in august


 
Yeap, rates are going up faster and higher than most are currently expecting... read their March bulletin


----------



## Theo

No, i can't show you a property on a website.  I could show you one if you were prepared to spend a morning over there and view some.  I didn't use the web when i purchased my BTLs.  I spent 2 weeks in the market looking at dozens of places.

Naturally I borrow in sterling and 3 year fixed rates are available today at 4.85%.


----------



## CCOVICH

And here I was thinking that this thread was about the *Future price of Irish properties!*


----------



## beattie

bearishbull said:
			
		

> http://www.rte.ie/business/2006/0328/germany.html
> ecb expected to raise rates next month raher than later by .25% and then again in august


 
I thought a rise was expected in May? If it comes a month earlier than expected this could be a sign of things to come. Listen to what Bernanke says tonight, if it is on the hawkish side then this only furthers the case for a quicker upward movement by the ECB


----------



## Howitzer

beattie said:
			
		

> I thought a rise was expected in May? If it comes a month earlier than expected this could be a sign of things to come. Listen to what Bernanke says tonight, if it is on the hawkish side then this only furthers the case for a quicker upward movement by the ECB


 
There's no mention in that article of raising rates in April.

The markets had factored in a rates rise in June, with May being a possibility if the figures dictated. I would imagine that these figures suggest a May rise is 75% certain now.


----------



## soma

CCOVICH said:
			
		

> And here I was thinking that this thread was about the *Future price of Irish properties!*


Well it is but....... in case anyone is interested, the BBC have done an undercover investigation of UK Estate Agents, makes for some interesting reading:

http://news.bbc.co.uk/1/hi/magazine/4826444.stm

Did anyone see the programme..?


----------



## Neffa

Theo said:
			
		

> No, i can't show you a property on a website. I could show you one if you were prepared to spend a morning over there and view some. I didn't use the web when i purchased my BTLs. I spent 2 weeks in the market looking at dozens of places.
> 
> Naturally I borrow in sterling and 3 year fixed rates are available today at 4.85%.


 
Still a bit OT - why borrow in sterling when euro rates are lower  ? The currency hedge is not that great. Our loan in the UK is in sterling at a very low fixed rate (with heavy cancellation costs, hence why I am sticking with it) but I could save £200+ pcm at a stroke by putting it into euro.


----------



## Neffa

soma said:
			
		

> Did anyone see the programme..?


 
Yes, I did. It was very damning on a number of agents, especially Foxtons who already had a less-than-glowing reputation in the London market. I once posted a complaint about them on a UK message board and head their lawyers call me about it straight away. Their practices included dodgy paperwork, phantom "other bidders", inflated valuations etc. etc.

None of the stuff was that surprising to me. Not sure how much of it is relevant to Ireland, mind you. Not bought here yet, so others can judge more easily than me.

Scariest bit was a mortgage broker who created an entire fraudulent credit history and a fake passport for an unemployed applicant to make it look like they were in a £50,000+ p.a. job. I suspect he will go to jail for what he did. I did find that bit to be really shocking.


----------



## CCOVICH

soma said:
			
		

> Well it is but....... in case anyone is interested, the BBC have done an undercover investigation of UK Estate Agents, makes for some interesting reading:
> 
> http://news.bbc.co.uk/1/hi/magazine/4826444.stm
> 
> Did anyone see the programme..?



Plenty of discussion on one of the many other threads we have on AAM.


----------



## Marie

Theo said:
			
		

> Hi Neffa
> 
> Yes, ultimately when you sell, there is CGT, but currently Irish residents only subject to Irish CGT on sales of UK property. (and is attractive at 20%)
> 
> I use the bank proceeds for further investing - not necessarily property, and always careful to be sure that the interest on these loans is being paid for by someone else.


 
It remains to be seen what your portfolio will realise if/when they sell at less than you purchased them for.  Incidentally interest on loans is never being 'paid for by someone else'!  Whether deferred as interest-only the _borrower_ pays and it is disingenuous to suggest otherwise.

Regarding your remarks about shortage of housing stocks.......the financial institutions, estate agents and local councils getting 'backhanders' from developers operate as enthusiastically this side of The Pond as the other!


----------



## Theo

Neffa said:
			
		

> Still a bit OT - why borrow in sterling when euro rates are lower  ? The currency hedge is not that great. Our loan in the UK is in sterling at a very low fixed rate (with heavy cancellation costs, hence why I am sticking with it) but I could save £200+ pcm at a stroke by putting it into euro.


 
Very simply, I'm not prepared to accept the risk that is inherent in borrowing in a currency different from the asset base.  For me, property is a long term game and over the long haul, things like currency tend to even themselves out.  My opinion is that I would be effectively speculating/gambling/betting by borrowing in euros to buy sterling assets.


----------



## Theo

Marie said:
			
		

> It remains to be seen what your portfolio will realise if/when they sell at less than you purchased them for. Incidentally interest on loans is never being 'paid for by someone else'! Whether deferred as interest-only the _borrower_ pays and it is disingenuous to suggest otherwise.


 
Well, actually, no, it doesn't remain to be seen what my portfolio will realise. 
In addition to the 13-15% cash yield I currently receive, I have also realised 25% of the purchase price on all 3 BTLs through re-financing the properties.
As you may know, selling is not the only way to exit a property - refinancing is also an extremely attractive way to get your money back (and it has the added benefit of being tax free).

Its an old adage but you make your money the day you buy, and not the day you sell.

I disagree with your belief that interest is never being paid by someone else. I would never borrow on any other basis (that includes car loans, credit cards, any other loans). The fact is that on each of my borrowings, I have not paid a penny in interest since the day I drew them down. This is more than handsomely covered by the rents I receive( in the case of property borrowings). I'm not being disingenous, I'm not emotional at all about it, I'm simply stating a fact.

You, it seems , are the one introducing emotion into your thread. I don't know why you are worked up about it but maybe you could let me know?



			
				Marie said:
			
		

> Regarding your remarks about shortage of housing stocks.......the financial institutions, estate agents and local councils getting 'backhanders' from developers operate as enthusiastically this side of The Pond as the other!


 
Yes, I'm sure there are cowboys and people with agendas everywhere. My earlier question to you was, why are you so unwilling to believe one side of the argument and so quick to believe another without checking the facts for yourself. I can respect both points of view, as long as they are based on fact, and not on what you would seem to want to believe.

Again, if I may ask, why are you so worked up over it? If I were you, I'd check the facts for myself and not just believe what I want to believe or what I hear or what the crowd is saying - everybody's different, for some property doesn't suit at all and a crash may very well be round the corner. For others, it may be the perfect vehicle, as they willl know how to manage the risks involved.

As to the orignal question in this thread, what about the future price of Irish property prices? I really don't know and I don't think anyone does. I happen to believe that prices in Dublin (I can only speak for Dublin as I do not know the market outside of Dublin) are overvalued and I base this on the rents currently achievable. It indicates that there is a lot of waht I would call speculation and gambling going on.

Please do not introduce emotion into your responses, this should be a civil debate about the issue at hand, don't you think?

best

t


----------



## CCOVICH

Theo said:
			
		

> As to the orignal question in this thread, what about the future price of Irish property prices? I really don't know and I don't think anyone does. I happen to believe that prices in Dublin (I can only speak for Dublin as I do not know the market outside of Dublin) are overvalued and I base this on the rents currently achievable. It indicates that there is a lot of waht I would call speculation and gambling going on.
> 
> Please do not introduce emotion into your responses, this should be a civil debate about the issue at hand, don't you think?


 
Indeed.  Most of what has been posted in this thread lately seems to have little (if any) relevance to the topic at hand.  It would be preferable to see these issues duscussed in separate threads-we would rather see that than tangents appearing in what has already become quite an unwieldy thread.

By all means, discuss the property market here and elsewhere-this isn't an attempt to stifle views that are expressed for one direction or another-but please try and keep threads reaonably on topic and easy for others to follow.

Thanks.


----------



## Neffa

So back OT, then  

Has anyone seen any figures on the age and size (value) of Irish mortgages? I've seen some stats from the UK and from the US on the average number of loans and their size in the last few years (very alarming for the US where many large mortgages are less than 3 years old).

It seems to me that one of the critical factors in how the owners (not investors) will react to interest rate rises is basically linked to loan age - assuming older loans are lower and are at a lower ltv than newer loans. Newer loans will have a much more marked affordability change as interest rates rise.

I'm not including investors as it seems to me from earlier analysis in this thread that many people who bought with IO mortgages to cover rent in the last few years are going to face a tough time in Ireland as interest rates rise in the coming quarters. I'm trying to work out if this effect extends to owners as well.

BTW, a house in our street- where we rent - has just come up for sale. It is pretty much identical to our rented property. The repayment mortgage we'd pay to own it is just under twice the rental we currently pay (it is 96% higher than our rent)  .


----------



## walk2dewater

Neffa said:
			
		

> So back OT, then
> 
> Has anyone seen any figures on the age and size (value) of Irish mortgages? I've seen some stats from the UK and from the US on the average number of loans and their size in the last few years (very alarming for the US where many large mortgages are less than 3 years old).
> 
> It seems to me that one of the critical factors in how the owners (not investors) will react to interest rate rises is basically linked to loan age - assuming older loans are lower and are at a lower ltv than newer loans. Newer loans will have a much more marked affordability change as interest rates rise.
> 
> I'm not including investors as it seems to me from earlier analysis in this thread that many people who bought with IO mortgages to cover rent in the last few years are going to face a tough time in Ireland as interest rates rise in the coming quarters. I'm trying to work out if this effect extends to owners as well.
> 
> BTW, a house in our street- where we rent - has just come up for sale. It is pretty much identical to our rented property. The repayment mortgage we'd pay to own it is just under twice the rental we currently pay (it is 96% higher than our rent)  .


 
But ah sure you're throwing money away renting --- LOL (tongue firmly in cheek)

True story:  2yrs ago I asked colleague if I rented a 500sqft, 1-bed apartment in city centre for one euro a month or bought it with mortgage for €X millions, which would make more financial sense.  After a little pause, person said "buying it, renting is ALWAYS dead money".  I rest my case.


----------



## Calina

Neffa said:
			
		

> BTW, a house in our street- where we rent - has just come up for sale. It is pretty much identical to our rented property. The repayment mortgage we'd pay to own it is just under twice the rental we currently pay (it is 96% higher than our rent)  .


I assume that's based on the asking price? If you bear in mind it will probably go for 10-15% higher than that again...you're probably looking at more than double. I did these maths a couple of weeks ago too.


----------



## soma

More bear-ish talk creeping it's way into the media:



			
				The Irish Times said:
			
		

> Davy raises concerns about Dublin house prices
> By Cathal Hanley     Last updated: 29-03-06, 11:37
> 
> Davy stockbrokers has added its voice to the siren calls that Dublin house prices are now fully detached from reality by claiming that prices are heading for 100 times their rental income.
> 
> According to research conducted by Davy economist Roassa White, since April 2001 house prices are up 52 per cent on average nationwide but rents are down 2 per cent. As a result, yields have been driven down to unprecedented depths.
> 
> "Something does not feel right" Mr White writes.
> 
> "A line frequently trotted out by estate agents is that 'buy-to-let investors are not worried about rental yield; they are in it for the long haul of capital appreciation'. That is fundamentally unsound investment advice," according to Mr White.
> 
> "In the long run, the value of any asset is dependent on the income it provides. In the property market, capital appreciation is theoretically a function of rental return."
> 
> The Irish property market has heated up significantly in recent months. In the Dublin market, prices are now rising at an annualised 20 per cent lick, up from only 3 per cent less than a year ago.
> 
> Mr White adds that persistently low rents refute the theory that supply shortages are leading to rocketing prices in "desirable areas" of Dublin. "If that was the case, residential rents would be rising rapidly, but they are not," he says.
> 
> "The proposition that scarcity of land close to the city-centre makes residential property a low-risk investment is not supported by evidence from other countries. Moreover, property is a risky asset, like equities, corporate bonds and commodities. Net yields of 1.5 per cent, which are commonplace in Dublin, look ridiculous compared with a risk-free rate of 3.5 per cent on ten-year gilts," according to Mr White.
> 
> "It is better to compare residential property to a similar risky asset like the ISEQ index, which has an earnings yield of 7 per cent. Not only that, but Irish listed companies' profits are growing three times as quickly as rents in Dublin" he adds.
> 
> "To us, this looks like boundless optimism," the report concludes.
> 
> The report warns that as supply in Dublin remains plentiful in the near term and rents remain under pressure the fundamentals suggest that it will be an
> 
> adjustment in prices, rather than rents, that will eventually bring valuations down to more realistic levels.
> 
> © 2006 ireland.com


----------



## bearishbull

you see the "rent is dead money" brigade cant see that the interest on your mortgage is rent for the use of the money. if your rent is less than or equal to the interest element on an interest only mortgage then it makes sense to rent in the short to medium term untill renting becomes more expensive. interest rates are going much higher over next 18 months which makes renting even more attractive relative to the landlords rent(or mortgage interest as they call it).


----------



## Neffa

Calina said:
			
		

> I assume that's based on the asking price? If you bear in mind it will probably go for 10-15% higher than that again...you're probably looking at more than double. I did these maths a couple of weeks ago too.


 
Yep, I factored a 15% uplift in, but mind you it could be much higher. Really seems crazy to me that such a gap could exist between renting and buying. Something is going to have to give - either rental prices have to go up or selling prices have to go down. I know which one I'm betting on


----------



## bearishbull

Neffa said:
			
		

> Yep, I factored a 15% uplift in, but mind you it could be much higher. Really seems crazy to me that such a gap could exist between renting and buying. Something is going to have to give - either rental prices have to go up or selling prices have to go down. I know which one I'm betting on


 
if supply keeps growing by 80k units a year i dont think rents are gonna rise much


----------



## Glenbhoy

> you see the "rent is dead money" brigade cant see that the interest on your mortgage is rent for the use of the money. if your rent is less than or equal to the interest element on an interest only mortgage then it makes sense to rent in the short to medium term untill renting becomes more expensive. interest rates are going much higher over next 18 months which makes renting even more attractive relative to the landlords rent(or mortgage interest as they call it).


That's an excellent explanation - must print it out and distribute it as a flyer in the city centre!!


----------



## tiger

bearishbull said:
			
		

> you see the "rent is dead money" brigade cant see that the interest on your mortgage is rent for the use of the money. if your rent is less than or equal to the interest element on an interest only mortgage then it makes sense to rent in the short to medium term untill renting becomes more expensive. interest rates are going much higher over next 18 months which makes renting even more attractive relative to the landlords rent(or mortgage interest as they call it).


 
Good point.
In addition you don't have as much costs around insurance, maintenance and so on.  You also have more flexibility about moving if your circumstances change, but this is offset by lack of security of tenure (I've heard of people buying because they were sick of moving every year they had been renting).


----------



## walk2dewater

3 points, which I've made before, but hey, why not again:

1/
I reckon there's a certain element of the population that simply cannot/will not (take your pick) accept that property investments can go against them, and I mean badly against them.  No amount of rational analysis will ever diminish their convictions.  I'd say these people will have to face real losses, and real financial hardship before they will challenge their beliefs.  Even then, the gap between belief and reality might be so much they still won't accept it even as the baliff prizes the front door keys of their buy-to-let from their hands... ("the long-term, the long-term... arrraghhh").  Belief that property is a one-way bet is on a religious scale here.  I have seen the anger and psychosis of people when you question the "religion"; you are nothing but a heretic, a "begrudger", "doom-monger" etc, because you too don't believe in the "truth" about property.  Scarey.

2/
Normally speculation is not an issue, I make a fair bit of my income from speculating, it's a fact of life in the free market and more power to anyone who does well.  But property IS special and should have special regulation like other essentials.  We deny speculation on water, food, petrol etc.  why not shelter?  Property speculation affects us all far more than share or bonds or commodity prices.  We as a society have not controlled the speculation in this vital necessity of life with the result that prices are x3, approaching x4, what they were not 9yrs ago.  We're talking about SHELTER here, not pieces of paper or electrons on your pc monitor.  I believe that quality, low-cost, safe, well-serviced accommodation, should be a basic right in a developed country, not something vunerable to mania

3/
The transfer of wealth from young to old via the property market over the last 10-15yrs is shameful, and rather than bragging about their luck, some of todays 50yr olds could do with being a little more circumspect about their nouveau wealth.

ALL IN MY OPINION of course....


----------



## smree

bearishbull said:
			
		

> you see the "rent is dead money" brigade cant see that the interest on your mortgage is rent for the use of the money. if your rent is less than or equal to the interest element on an interest only mortgage then it makes sense to rent in the short to medium term untill renting becomes more expensive. interest rates are going much higher over next 18 months which makes renting even more attractive relative to the landlords rent(or mortgage interest as they call it).



The flaw with this argument is that interest on a mortgage will come to an end when the mortgage is paid and you then own the property whereas if you're renting you don't stop paying rent after 20/30 yrs and the property is never yours.

There is no right or wrong with the buy or rent argument because it's not as simple as that and individual circumstances and wants need to be looked at. In the area where I'm living rents and mortgage repayments are still very similar. In my case it made more financial sense for me to buy a couple of years ago as I'd rented with other people for 10 yrs and had hit the stage where I wanted a place for myself. I looked around at 1 bed apartments to rent and the rent I would be paying at the time was more then the mortgage I'm paying for a 2 bed apartment at the moment. I had also began to think about my long term future and what would suit me when I retired and I didn't want to be still renting I wanted to have my own home that I could do whatever I wanted with. 

Others of you might be happier sharing and renting with other people and investing any money saved in other areas which will provide for your future.

I think whether to rent or buy is very much down to the individual and none of us can predict what exactly is going to happen with the property market and when.


----------



## Theo

bearishbull said:
			
		

> you see the "rent is dead money" brigade cant see that the interest on your mortgage is rent for the use of the money. if your rent is less than or equal to the interest element on an interest only mortgage then it makes sense to rent in the short to medium term untill renting becomes more expensive. interest rates are going much higher over next 18 months which makes renting even more attractive relative to the landlords rent(or mortgage interest as they call it).


 
I can underatand why you may thinks so, Bearishbull, but you should also note that generally when interest rates go up, so too does rent (charged to tenants, that is).  And Smree is also correct to point out that at the end of it all, there is an asset to show for it (unless of course, you believe that property is something that mankind doesn't need anymore).  Surely that cannot be ignored?


----------



## conor_mc

bearishbull said:
			
		

> you see the "rent is dead money" brigade cant see that the interest on your mortgage is rent for the use of the money. if your rent is less than or equal to the interest element on an interest only mortgage then it makes sense to rent in the short to medium term untill renting becomes more expensive. interest rates are going much higher over next 18 months which makes renting even more attractive relative to the landlords rent(or mortgage interest as they call it).


 
There definitely is a flaw in that argument, and that is that it only deals with the here-and-now.

Rough example, I have a 200k approx mortgage. With a theoretical 5% interest rate over its entire lifetime and not accounting for mortage interest relief, interest over the 35 year term would be about €200k (I'd consider that to be conservative enough). That's 420 monthly repayments.

If I were to rent for the next 35 years instead of buying when I did, I'd have to do so at an average rent of 200k/420 = €475 per month for it to be more worthwhile than buying my own home.

The key flaw in your theory, I believe, is this part - "if your rent is less than or equal to the interest element on an interest only mortgage ". I'd argue that, as someone looking for a home to live in as opposed to investing, the rent would need to be less than or equal to the average interest repayment on an annuity mortgage over its full lifetime.

Oh, and I also get to live in my house after the mortgage is paid off. That's gotta be worth another 10-25 years rent.... at least I hope so!!!! Not to mention the monetary value to my offspring when the house is sold after I've shuffled off this mortal coil....


----------



## walk2dewater

The emotional arguments, "but I want to paint the walls polka dot" etc. etc. are valid. If you are willing to pay through the nose to buy via mortgage, take on the enormous asset risk, and you derive massive enjoyment from the 'ownership' factor, then fine, who am I to disagree. It's your neck.

But don't justify a financial argument using today's figures. They don't add up, not remotely.

What if I could predict the future and tell you house prices will fall generally 50% peak (say 2008) to trough (say 2012) from where there are today? How would your desire to own be then? Oh, right, but THAT couldnt happen?

It always seems to come back to the same place: people religiously believe that property prices cannot fall in any material way in Ireland. House prices are not 5%, 10%, 20% over-valued, they are MASSIVELY overvalued


----------



## bearishbull

smree said:
			
		

> The flaw with this argument is that interest on a mortgage will come to an end when the mortgage is paid and you then own the property whereas if you're renting you don't stop paying rent after 20/30 yrs and the property is never yours.


falw with your argument is that if the differentials continued to exist from now on for rest of your life the renter would be saving money every month for rest of his life and if he invested this saved money and left it for say 50 years or longer it would be worth more than a house due to compound returns based on long term historical returns.
for comparing renting to buying you should ignore the capital repayments and just look at interest element,the capital repayment is equivalent to savings which the homeowner has decide to invest in bricks ,as the capital amount decreases obviously the interest decreases but the decreases only occur due to other payments(capital repayment) which renters dont face.
the mortgage interest comes to an end because you repaid the capital amount which added to interest element is double  current rents,if in theory you continued renting and renting was still cheaper than the interest element of a house you would save money every month for beyond the 20/30 term of a mortgage in same way people save on mortgage repayments when their mortgage is paid. if interest on an interest only mortgage on a particular house costs 25k a year and you can rent for 17k a year you save 8k  a year on the interest *alone *(there are houses near me with these figures)*. *if you saved the money you didnt have to pay on a mortgage and invested it over the period of a normal mortgage in a diversified portfolio you would have a similar sum to the value of the house the buyer owns but you have less risk due to diversification .obviously most people want to own at some stage and thats possible when prices are more reasonable.


----------



## conor_mc

walk2dewater said:
			
		

> The emotional arguments, "but I want to paint the walls polka dot" etc. etc. are valid. If you are willing to pay through the nose to buy via mortgage, take on the enormous asset risk, and you derive massive enjoyment from the 'ownership' factor, then fine, who am I to disagree. It's your neck.
> 
> But don't justify a financial argument using today's figures. They don't add up, not remotely.
> 
> What if I could predict the future and tell you house prices will fall generally 50% peak (say 2008) to trough (say 2012) from where there are today? How would your desire to own be then? Oh, right, but THAT couldnt happen?
> 
> It always seems to come back to the same place: 99% of people religiously believe that property prices cannot fall in any material way in Ireland. House prices are not 5%, 10%, 20% over-valued, they are MASSIVELY overvalued


 
I'm not sure how my previous post reflected the point of view you're dismissing there w2dw, I do believe I was dealing in simple facts which stand on their own relating to monthly costs, before I even mentioned less tangible benefits once the mortgage has been paid. 

And the simple fact is that a house _owned_ (i.e mortgage paid up) is an asset, _having_ to pay rent (ie no home owned so no other alternative) is a liability. I don't think that the value of the house comes into it at all. Even if the house was worth €1 in 35 years time, I fail to see how renting can work out cheaper over the length of a mortgage and on into our twilight years.

I do agree that house prices are way over-valued, don't get me wrong, but then I bought my house two years ago. My point is that I can't see how renting long-term beats mortgaging over the long-term?


----------



## bearishbull

conor_mc said:
			
		

> There definitely is a flaw in that argument, and that is that it only deals with the here-and-now.
> 
> Rough example, I have a 200k approx mortgage. With a theoretical 5% interest rate over its entire lifetime and not accounting for mortage interest relief, interest over the 35 year term would be about €200k (I'd consider that to be conservative enough). That's 420 monthly repayments.
> 
> If I were to rent for the next 35 years instead of buying when I did, I'd have to do so at an average rent of 200k/420 = €475 per month for it to be more worthwhile than buying my own home.
> 
> The key flaw in your theory, I believe, is this part - "if your rent is less than or equal to the interest element on an interest only mortgage ". I'd argue that, as someone looking for a home to live in as opposed to investing, the rent would need to be less than or equal to the average interest repayment on an annuity mortgage over its full lifetime.
> 
> Oh, and I also get to live in my house after the mortgage is paid off. That's gotta be worth another 10-25 years rent.... at least I hope so!!!! Not to mention the monetary value to my offspring when the house is sold after I've shuffled off this mortal coil...


 
im sure if a house was 200k as in your example based on todays rent to price ratios you would get a house for 475 a month or less but you wouldnt have the risk that your asset falls in price.
if a person rented for 35 year as you said and the savings per month on buying remained the same and that person saved the money they didnt have to spend on mortgage in something else with less risk they would have a large sum in assets too! equivalent to or greater than your house value.

yes you get to live in your house after the mortgage is paid off but you paid for that house during the lifetime of mortgage through extra repayment in the form of interest repayment higher than rent and capital repayment that you could have invested elsewhere with less risk! the person who rented for the same period still saves money on what it would have cost to buy (assuming ratio of cost of buying to rent stays same) after the mortgage period of the buyer is up and has a large investment in assets(if they saved and didnt spend it on a more enjoyable lifestyle in their young years rather than sacrificing things for a home to own when they're old and grey and boring)

you seem to forget that over a period of 30 years using current figures on the savings on renting the renter will have significant extra disposable income every month to invest elsewhere and create assets equal to or exceeding value of a house and not have the expenses of buying /owning a house such as maintenance insurance stamp duty etc.


----------



## bearishbull

conor_mc said:
			
		

> I'm not sure how my previous post reflected the point of view you're dismissing there w2dw, I do believe I was dealing in simple facts which stand on their own relating to monthly costs, before I even mentioned less tangible benefits once the mortgage has been paid.
> 
> And the simple fact is that a house _owned_ (i.e mortgage paid up) is an asset, _having_ to pay rent (ie no home owned so no other alternative) is a liability. I don't think that the value of the house comes into it at all. Even if the house was worth €1 in 35 years time, I fail to see how renting can work out cheaper over the length of a mortgage and on into our twilight years.
> 
> I do agree that house prices are way over-valued, don't get me wrong, but then I bought my house two years ago. My point is that I can't see how renting long-term beats mortgaging over the long-term?


conor your not living in finacial reality given the current figures on rent  investment returns elsewhere etc. your just assuming a house is a good investment in todays climate.


----------



## bearishbull

a house is a form of forced saving ,you have to pay your mortgage or you get repossesed.if the renter can adopt a similar attitude to saving as a mortgage payer and use tax effiecnt ways to invest the mony he saves by renting he too can accumulate a large asset but not in form or bricks and morter which are currently overvalued as even you say!

yes if you find the interest paid on a 30 year mortgage plus stamp duty and other costs of owning(insurance maintenence etc) is less than the rent for same period then buy but your asset can still devalue especially in todays environment. the value of the home at the end of that 30 year period is simply accumulated savings/assets which the renter could also chose to accumulate through other asset classes or spend more on his lifestyle travelling haveing fun etc!!


----------



## Glenbhoy

Basically there always emotive reasons for wanting to own property, leaving these aside, what Bearishbull is pointing out is that:
If the interest element of your mortgage repayment is greater than the amount you pay in rent, it may make more financial sense to rent rather than to buy - unless you also feel there will be capital appreciation in excess of the return you could get from investing the capital element of your mortgage repayment.


----------



## Theo

bearishbull said:
			
		

> falw with your argument is that if the differentials continued to exist from now on for rest of your life the renter would be saving money every month for rest of his life and if he invested this saved money and left it for say 50 years or longer it would be worth more than a house due to compound returns based on long term historical returns.
> for comparing renting to buying you should ignore the capital repayments and just look at interest element,the capital repayment is equivalent to savings which the homeowner has decide to invest in bricks ,as the capital amount decreases obviously the interest decreases but the decreases only occur due to other payments(capital repayment) which renters dont face.
> the mortgage interest comes to an end because you repaid the capital amount which added to interest element is double current rents,if in theory you continued renting and renting was still cheaper than the interest element of a house you would save money every month for beyond the 20/30 term of a mortgage in same way people save on mortgage repayments when their mortgage is paid. if interest on an interest only mortgage on a particular house costs 25k a year and you can rent for 17k a year you save 8k a year on the interest *alone *(there are houses near me with these figures)*. *if you saved the money you didnt have to pay on a mortgage and invested it over the period of a normal mortgage in a diversified portfolio you would have a similar sum to the value of the house the buyer owns but you have less risk due to diversification .obviously most people want to own at some stage and thats possible when prices are more reasonable.


 
However, you are assuming that rent charges remain fixed over the period.  Rent increases as interest rates increase and also increase with inflation.  The market will not allow you to enjoy 8k p.a. in savings indefinitely - otherwise we'd all be doing it and investing the 8k somewhere else.  Thank God for capitalism!

And, walk2dewater, we (well, I do anyway) get your argument that you believe property is MASSIVELY overvalued and that the end is nigh.  You've made the point loads of times.  You appear to be a person who remembers the bad old days as you keep reminding us.  You are also clearly someone who has stayed away from property, possibly as a result of that experience.  Could it be simply co-incidence that you spew out your apparent anger and frustration towards property buyers as you do?

I agree with you that property is not a one way bet and that it does fall, sometimes severely in value.  I am aware of a family that was evicted by their bank on Christmas Eve in the early 80's during the bad times.  I am aware of another person who simply posted the keys to their house to the bank before doing a runner around the same time.

But, over time, property can be a rewarding investment - as long as you keep the greed out of it.  And that is the problem today I believe, greed has clouded the judgement and has people making decisions that are not based on numbers.  Since it appears you may also be a sesoned investor in other areas, perhaps this is what also angers you to see people make decisions like this.


----------



## bearishbull

Theo said:
			
		

> However, you are assuming that rent charges remain fixed over the period. Rent increases as interest rates increase and also increase with inflation. The market will not allow you to enjoy 8k p.a. in savings indefinitely - otherwise we'd all be doing it and investing the 8k somewhere else. Thank God for capitalism!
> 
> And, walk2dewater, we (well, I do anyway) get your argument that you believe property is MASSIVELY overvalued and that the end is nigh. You've made the point loads of times. You appear to be a person who remembers the bad old days as you keep reminding us. You are also clearly someone who has stayed away from property, possibly as a result of that experience. Could it be simply co-incidence that you spew out your apparent anger and frustration towards property buyers as you do?
> 
> I agree with you that property is not a one way bet and that it does fall, sometimes severely in value. I am aware of a family that was evicted by their bank on Christmas Eve in the early 80's during the bad times. I am aware of another person who simply posted the keys to their house to the bank before doing a runner around the same time.
> 
> But, over time, property can be a rewarding investment - as long as you keep the greed out of it. And that is the problem today I believe, greed has clouded the judgement and has people making decisions that are not based on numbers. Since it appears you may also be a sesoned investor in other areas, perhaps this is what also angers you to see people make decisions like this.


 
rents cannot in long term increase greater than inflation plus real wage gains otherwise it would eat up an ever increasing amount of incomes and no one could buy or rent! yes rent will increase but so too will your wages due to inflation and productivity gains as has happened over last century where rents have always been a certain percentage of average income in the aggregate.


----------



## Theo

bearishbull said:
			
		

> rents cannot in long term increase greater than inflation plus real wage gains otherwise it would eat up an ever increasing amount of incomes and no one could buy or rent! yes rent will increase but so too will your wages due to inflation and productivity gains as has happened over last century where rents have always been a certain percentage of average income in the aggregate.


 
And wouldn't that mean higher house prices also?


----------



## conor_mc

bearishbull said:
			
		

> conor your not living in finacial reality given the current figures on rent investment returns elsewhere etc. your just assuming a house is a good investment in todays climate.


 
Not at all - a house is NOT a good investment in _todays_ climate. But it could well be in 2,5 or 10 years time if/when there's a correction in the market.

I just don't see how the current housing bubble can survive another 30 years to maintain the conditions which are currently so favourable to renting to make it competitive with actually buying your own home, when looked at over a 30-year timeframe, unless the landlord is MASSIVELY subsidising the cost of his investment for the next 30 years!!!! That's the very bubble we all agree is not sustainable. So rent may be an option in the short-term, maybe even the medium term, but long-term I still can't see how it can work out, assuming that some sort of collective common sense will kick in at some stage and investors will actually try to make a profit on their investments.... at the renters expense of course!


----------



## soma

Theo said:
			
		

> Rent increases as interest rates increase and also increase with inflation.


A Massive generaliation and it's complete rubbish - Real rents fell between 2001 & 2005 and anyone who has lived in e.g. Dublin can testify that real inflation (not government adjusted figures) during that time has been significant.

Rents rise and fall based on supply & demand - that's pretty much it. If my landlord upped my rent and realised I could rent around the corner without paying the increase, I'd move. If I couldnt do this (i.e. the supply was limited) then I'd have to pay up.

Personally, while I think Dublin is an expensive place to live, I think the rents are really good value.



			
				Theo said:
			
		

> You are also clearly someone who has stayed away from property, possibly as a result of that experience.  Could it be simply co-incidence that you spew out your apparent anger and frustration towards property buyers as you do?


He's explained his position several times, although I appreciate you're a relatively late contributor to this (mammoth) thread.

As for 'anger & frustration' his comments seem pretty collected & rational to me.


----------



## Theo

soma said:
			
		

> A Massive generaliation and it's complete rubbish - Real rents fell between 2001 & 2005 and anyone who has lived in e.g. Dublin can testify that real inflation (not government adjusted figures) during that time has been significant.


 
Not a massive generalisation at all - its actually an historical fact and makes complete sense. No commercial landlord is going to sit back and watch their costs eat into their revenues. And the uncommercial ones will sell at the first sign of trouble and rent instead. That's the cycle and that's how it goes.

You coveniently forgot to note that 2001-2005 was at a time of unprecedented low interest rates of 2%. You'll find that rents won't be hanging around at 2001-2005 levels much longer. In fact, Daft recently reported an increase in Dublin rents.


----------



## soma

conor_mc said:
			
		

> Not at all - a house is NOT a good investment in _todays_ climate. But it could well be in 2,5 or 10 years time if/when there's a correction in the market.


So we'll put you under the 'bear' column then.. Man the bulls must be getting lonely over there..



			
				conor_mc said:
			
		

> assuming that some sort of collective common sense will kick in at some stage and investors will actually try to make a profit on their investments.... at the renters expense of course!



Oh really..? Investors start dumping their properties to take a profit (you cant be suggesting just randomly jacking up rents as market forces prevent that), thus increasing the supply in the market and pushes down rents, and this somehow affects renters negatively..? Hmm.. I think you and a few others could do with a copy of Economics 101..


----------



## Theo

soma said:
			
		

> He's explained his position several times, although I appreciate you're a relatively late contributor to this (mammoth) thread.
> 
> As for 'anger & frustration' his comments seem pretty collected & rational to me.


 
I'm sure walk2dewater can answer for himself (or herself?) - i'm looking forward to a response.


----------



## conor_mc

soma said:
			
		

> So we'll put you under the 'bear' column then.. Man the bulls must be getting lonely over there..
> 
> Oh really..? Investors start dumping their properties to take a profit (you cant be suggesting just randomly jacking up rents as market forces prevent that), thus increasing the supply in the market and pushes down rents, and this somehow affects renters negatively..? Hmm.. I think you and a few others could do with a copy of Economics 101..


 
If investors start to "dump" their properties, surely that's gonna _decrease_ the supply in the rental market, thereby pushing up rents, no? Is that not Economics 101 or was there a misprint in my copy? 

Incidentally, the "profit" I was talking about referred to making a few quid after paying the mortgage, covering costs etc rather than dumping the property. I can't see how bearishbulls assertion that he can rent for less than the cost of an IO mortgage for the next 30 years can stand up to scrutiny unless the current bubble exists for 30 years and investors subsidise his rent by making up the difference between their income on the property and their outgoings.

I think we all agree that there's a bubble, and it's gonna burst sometime in the future. Bearishbull can short the market and rent til that happens and then buy his own home, and he'll do better than anybody buying into the market now, but that doesn't mean he'd do better to rent instead of buy for the remainder of his life imo.


----------



## soma

Theo said:
			
		

> Not a massive generalisation at all - its actually an historical fact and makes complete sense.


And wages don't increase by inflation, thus negating any rises..? 



			
				Theo said:
			
		

> No commercial landlord is going to sit back and watch their costs eat into their revenues.


No *rational* landlord would, but seeing as 35% of irish "investors" say that their rents don't cover their expenses, rational thinking has gone out the window.



			
				Theo said:
			
		

> And the uncommercial ones will sell at the first sign of trouble and rent instead. That's the cycle and that's how it goes.


..and mass selling has no effect on supply & demand thus no effects on rents.. really..



			
				Theo said:
			
		

> You coveniently forgot to note that 2001-2005 was at a time of unprecedented low interest rates of 2%.


I did no such thing. You said rents rise along with interest rate rises and inflation. Seeing as it was a time of low interest rates, I simply pointed out that even significant inflation could not stop real rents dropping.



			
				Theo said:
			
		

> You'll find that rents won't be hanging around at 2001-2005 levels much longer.


Hah.. I'll take that bet no problem. So what's going to drive up rents..? Have you looked around lately..? Have you seen the absolute shed-load of new apartment blocks..? We have supply coming out of our ears (with the bulls, if you believe them, predicting another 80k builds a year for 15 years).



			
				Theo said:
			
		

> In fact, Daft recently reported an increase in Dublin rents.


..and if I remember correctly it was not greater than inflation.. therefore.. ;-)


----------



## ubiquitous

Theo said:
			
		

> Could it be simply co-incidence that you spew out your apparent anger and frustration towards property buyers as you do?



Please attack the argument - not the poster...


----------



## walk2dewater

conor_mc said:
			
		

> My point is that I can't see how renting long-term beats mortgaging over the long-term?


 
Hypothetically:  If I said you can rent your house for €1 a year for the rest of your life, or pay €100 million now for it via a mortgage for 30yrs which would be better?  Even though after 30yrs you own and make no more payments (but would still pay €1/yr for rent), would it make sense to 'buy'?  Would renting be 'dead money' in this example?


----------



## ivuernis

conor_mc said:
			
		

> If investors start to "dump" their properties, surely that's gonna _decrease_ the supply in the rental market, thereby pushing up rents, no? Is that not Economics 101 or was there a misprint in my copy?


 
Not unless some of the renters buy the properties being "dumped", thus reducing the number of renters. Supply and demand also comes into play for renters and not just rental properties in such a scenario.


----------



## soma

conor_mc said:
			
		

> If investors start to "dump" their properties, surely that's gonna _decrease_ the supply in the rental market, thereby pushing up rents, no? Is that not Economics 101 or was there a misprint in my copy?


Conor, if you interpreted my phrase "dump" as meaning strapping several sticks of dynamite to their properties and blowing them up then your argument stands.

However, back in the land of Economics 101, when these properties are dumped (in the the "sold" meaning, not so much the 'explosive' meaning ;-) ) then these properties are back on the market thus increasing the housing stock (read supply) once again. Supply is the renters best friend.


----------



## ubiquitous

conor_mc said:
			
		

> If investors start to "dump" their properties, surely that's gonna _decrease_ the supply in the rental market,



not if they sell to other investors...


----------



## conor_mc

soma said:
			
		

> Conor, if you interpreted my phrase "dump" as meaning strapping several sticks of dynamite to their properties and blowing them up then your argument stands.
> 
> However, back in the land of Economics 101, when these properties are dumped (in the the "sold" meaning, not so much the 'explosive' meaning ;-) ) then these properties are back on the market thus increasing the housing stock (read supply) once again. Supply is the renters best friend.


 
How? Surely increasing the housing stock only serves to dampen the housing market? You're assuming that these dumped properties will be bought up by other investors who'll put them straight back onto the rental market. But what if the investment-property mania we see now doesn't last, Joe Public gets his fingers burnt and won't go near it again due to psychological scarring a la eircom Professional investors can't buy up all the ex-investment stock because the same event which burned Joe Public's fingers means that they no longer have the equity in their portfolio's to finance all these purchases.

I can see how dumping them might decrease the demand side of the rental market if potential renters now found that buying was affordable. Indeed, that's my very assertion that at some stage in the next 30 years somethings gotta give which would disprove bearishbulls idea that to rent for the rest of his life and invest the difference is better than buying because he's assuming he can rent for less than the cost of buying. Maybe today he can, but that's due directly to landlords subsidising rental income to cover the mortgage on the assumption that they'll make their money in capital appreciation and house prices can only go one way. They're wrong, some will learn the hard way, they'll leave the market, and houses will become more affordable generally.


----------



## thewatcher

ubiquitous said:
			
		

> not if they sell to other investors...


 
or the renters...I've just sold my property and taken a nice few quid on it, i'm now going to feed off one of these auld speculators for a while.I can now rent a house in a far superior area,for far far less than it would cost me to pay a mortage on the same property.I will buy again the problem for the speculators is if prices begin to drop,how long will the renters hold out until they begin to buy ?it could be a freefall.


----------



## conor_mc

thewatcher said:
			
		

> or the renters...I've just sold my property and taken a nice few quid on it, i'm now going to feed off one of these auld speculators for a while.I can now rent a house in a far superior area,for far far less than it would cost me to pay a mortage on the same property.I will buy again the problem for the speculators is if prices begin to drop,how long will the renters hold out until they begin to buy ?it could be a freefall.


 
Bingo! This man gets my point.


----------



## Duplex

It’s difficult and possibly wrong to draw sweeping conclusions as to the motivations of Irish investors in the residential property market.  However I find it hard to believe that falling rental yields are attracting investors at present.  I believe that the rapid rise in capital values witnessed over the past few months is the main driver in the investment market.  

The acid test, as to the fundamental soundness of the market, will come when prices stop appreciating at current rates.  If the market is truly driven by ‘investment’ demand the market will stabilise and continue to grow, in response to occupier (tenant) demand.  If the market is speculative the market will fall as ‘investors’ anticipated returns will no longer be meet by rising capital values.


----------



## soma

conor_mc said:
			
		

> Bingo! This man gets my point.


A minute ago your point was renter's we're going to experience pain with rising rents and now your point is you agree with the guy selling to go rent.. perhaps we should give you a moment to pause and un-twist your knickers..


----------



## redo

Duplex said:
			
		

> It’s difficult and possibly wrong to draw sweeping conclusions as to the motivations of Irish investors in the residential property market.  However I find it hard to believe that falling rental yields are attracting investors at present.  I believe that the rapid rise in capital values witnessed over the past few months is the main driver in the investment market.
> 
> The acid test, as to the fundamental soundness of the market, will come when prices stop appreciating at current rates.  If the market is truly driven by ‘investment’ demand the market will stabilise and continue to grow, in response to occupier (tenant) demand.  If the market is speculative the market will fall as ‘investors’ anticipated returns will no longer be meet by rising capital values.



This is correct.  Many investors remember how much there parents bought their houses for 30 years ago.  8K, 12k or thereabouts.  Professional investors don't limit themselves to property, but are attracted by the highest returns.  Current BTL "investors", are "clever" enough to know that property will ALWAYS rise, and in 30 years time will be mega rich.  

Presently, servicing these assets are just about manageable, but when rates rise, or their circumstances change (baby, marrage etc) they won't be able to afford them.  All these BTL investors would be better off by putting money into a pension fund.  (Idiots)


----------



## Neffa

I think there is also a lifestyle choice in this. When we moved back here, I had a choice of a number of housing options, including:

1. Renting a decent sized period house in one of the nicest areas of town, walking distance to good schools and 20 mins drive from work. Easy access to nice restaurants, cafes etc. Put a decent chunk of my income (with employer subsidy) into pension. Plan to buy in the event of a downturn or in the absence of a downturn (which I doubt won't happen, but I'll include it for the sake of completeness) keep renting and eventually buy (with pension lump sum) when I retire somewhere further out when I don't need to commute any more. We have a house in London which we can eventually sell to help with this.

or, for the same monthly commitment

2. Buy a new-build box with a small garden in an estate 60 mins drive from work with schools bursting at the seams to cope with the influx of new pupils somewhere on the Dublin commuter belt. Be car-bound for everything - shopping, eating out etc.

or, for roughly twice the monthly commitment

3. Buy period house as per (1) above, forget about pension and hope for no interest rate rises. Hope for capital appreciation to make it come good in the end.

So I chose option (1). 

The most amazing thing for me in all of this is when I explain my logic to people who are buying now and settling for the 2+ hours/day in traffic they still think I am mad, btw. "What about the long term, you need to own" they say..... . At what cost, I say.


----------



## Theo

walk2dewater said:
			
		

> Hypothetically: If I said you can rent your house for €1 a year for the rest of your life, or pay €100 million now for it via a mortgage for 30yrs which would be better? Even though after 30yrs you own and make no more payments (but would still pay €1/yr for rent), would it make sense to 'buy'? Would renting be 'dead money' in this example?


 
A ludicrous question - and bears no resemblance to the market, much like your argument that the world will end.


----------



## hmmm

Duplex said:
			
		

> However I find it hard to believe that falling rental yields are attracting investors at present.  I believe that the rapid rise in capital values witnessed over the past few months is the main driver in the investment market.


I think you're bang on the money there, and it has all the hallmarks of a pyramid scheme for a lot of these investors. There are three types of people I see buying property
1. The professionals who won't get burned (maybe)
2. The naive (buy now or you'll never get in, rent is dead money, prices always go up etc etc)
3. Those who believe they will grab a quick buck and get out before a fall

My landlord is a #3 I know - it's the same as a pyramid scheme, people think they're smarter than the rest and will be able to get out at the right time. I really think that when prices fall (after the odd dead cat bounce or two) that the bottom will fall out of the market as many investors scramble to sell.


----------



## ivuernis

Neffa said:
			
		

> "What about the long term"


 
Most people wouldn't know the meaning of "long term" if it came up and bit them on the face. The expectation is that the status quo will continue in some shape or form well into the future save the minor downturn here and there.


----------



## conor_mc

soma said:
			
		

> A minute ago your point was renter's we're going to experience pain with rising rents and now your point is you agree with the guy selling to go rent.. perhaps we should give you a moment to pause and un-twist your knickers..


 
No it wasn't. My point was that bearishbull might today be able to rent a property for a fraction of what it would cost to pay a mortgage on it, but that's due to two things....

1) house prices being hugely inflated

and

2) landlords subsidising the renter in the belief that capital appreciation will make up for it.

You've kinda sidetracked the discussion with your economics 101 comments, but my original point was that long-term renting could not be cheaper than buying over a long-term due to the fact that, except in a bubble of "irrational exhuberance", landlords have to turn a profit.

Either the rents go up in a big way (unlikely) or the prices come down, one way or the other, the current criteria for making renting more profitable than buying i.e. rent costs less than IO mortgage, can't be sustained for the lifetime of a mortgage.

Put another way for bearishbull - overall, would renting for the past 9-10 years have been cheaper than buying?


----------



## ivuernis

Theo said:
			
		

> A ludicrous question - and bears no resemblance to the market


 
An exaggeration of the truth perhaps, but the argument is at which point does it become economically senseless to buy when renting is the more attractive alternative. 
 


			
				Theo said:
			
		

> much like your argument that the world will end.


 
Events, dear boy. Events.

I'm not saying the world will end, but unexpected events (and even foreseeable events that are largely ignored) always have the capacity cause serious repercussions.


----------



## thewatcher

hmmm said:
			
		

> I think you're bang on the money there, and it has all the hallmarks of a pyramid scheme for a lot of these investors. There are three types of people I see buying property
> 1. The professionals who won't get burned (maybe)
> 2. The naive (buy now or you'll never get in, rent is dead money, prices always go up etc etc)
> 3. Those who believe they will grab a quick buck and get out before a fall
> 
> My landlord is a #3 I know - it's the same as a pyramid scheme, people think they're smarter than the rest and will be able to get out at the right time. I really think that when prices fall (after the odd dead cat bounce or two) that the bottom will fall out of the market as many investors scramble to sell.


 
If prices begin to fall and you have just taken out a 12month lease,he will be stuck with you though.


----------



## thewatcher

conor_mc said:
			
		

> No it wasn't. My point was that bearishbull might today be able to rent a property for a fraction of what it would cost to pay a mortgage on it, but that's due to two things....
> 
> 1) house prices being hugely inflated
> 
> and
> 
> 2) landlords subsidising the renter in the belief that capital appreciation will make up for it.
> 
> You've kinda sidetracked the discussion with your economics 101 comments, but my original point was that long-term renting could not be cheaper than buying over a long-term due to the fact that, except in a bubble of "irrational exhuberance", landlords have to turn a profit.
> 
> Either the rents go up in a big way (unlikely) or the prices come down, one way or the other, the current criteria for making renting more profitable than buying i.e. rent costs less than IO mortgage, can't be sustained for the lifetime of a mortgage.
> 
> Put another way for bearishbull - overall, would renting for the past 9-10 years have been cheaper than buying?


 
I think we're all in agreement more or less as to the current state of the irish property market though,the longterm renting versus buying is a different issue really.


----------



## conor_mc

walk2dewater said:
			
		

> Hypothetically: If I said you can rent your house for €1 a year for the rest of your life, or pay €100 million now for it via a mortgage for 30yrs which would be better? Even though after 30yrs you own and make no more payments (but would still pay €1/yr for rent), would it make sense to 'buy'? Would renting be 'dead money' in this example?


 
I'd offer you my current months mortgage repayment for a 750-year lease.... whats your point?


----------



## Theo

soma said:
			
		

> And wages don't increase by inflation, thus negating any rises..?


 
Great if they do. That means full employment, which is good for higher house prices.



			
				soma said:
			
		

> No *rational* landlord would, but seeing as 35% of irish "investors" say that their rents don't cover their expenses, rational thinking has gone out the window.
> 
> 
> ..and mass selling has no effect on supply & demand thus no effects on rents.. really..


 
Rational = commercial
my point is that its likely that the majority of the 35% (if that figure is accurate, i am in no position to dispute it as I do not have the figures) you speak of will sell up and rent, this includes homeowners. This happens each time , most recently in London. Therefore, no. of renters goes up, property prices go down, rent goes up, yields go up. This is an established pattern in property cycles. 

The person who was renting waiting for the market to turn will likely not buy at this point because prices are falling and everyone is panicking. 



			
				soma said:
			
		

> I did no such thing. You said rents rise along with interest rate rises and inflation. Seeing as it was a time of low interest rates, I simply pointed out that even significant inflation could not stop real rents dropping.
> 
> 
> Hah.. I'll take that bet no problem. So what's going to drive up rents..? Have you looked around lately..? Have you seen the absolute shed-load of new apartment blocks..? We have supply coming out of our ears (with the bulls, if you believe them, predicting another 80k builds a year for 15 years).


 
There has been no significant inflation between 2001-2005. Ask walk2dewater, he/she'll tell you what real inflation feels like.

As surely as interest rates are rising, so too are rents. To answer your question, it will be driven by demand and the economic choices made by (rational) landlords. Demand from those getting out of property and renting, demand by the new baby boomers, demand by immigrants, and demand from people like your good self.


----------



## conor_mc

thewatcher said:
			
		

> I think we're all in agreement more or less as to the current state of the irish property market though,the longterm renting versus buying is a different issue really.


 
Agreed. Thread has wandered a bit......


----------



## bearishbull

conor_mc said:
			
		

> Put another way for bearishbull - overall, would renting for the past 9-10 years have been cheaper than buying?


obviously not.but we are talking about now and the future.for last few years the numbers havent stacked up.ten years  ago i was doin my junior cert so i cant remember what rent was like compared to mortgages 

as for my points on renting versus buying obviously things will change and this anomaly wont last in medium/long term which raises the question how will it change? theres only 2 ways it can happen, rents rise substantially or prices fall ,i cant see rents rising much with the massive building happening-80k a year for ten more years=another 800k houses! "raise the rents!!" 
i am talking about at this moment and untill the change happens it does not make financial sense to buy,even if your house rises ten percent in year after buying this only covers stamp duty and the extra mortgage repayments above rent payments.then inflation is at 3% so take 3% away from any increase in value and the difference between renting and mortgage is around 2-3% of value of home so every year as it stands your houses has to rise by more than 6% in order to "make a profit".


----------



## bearishbull

so if the bulls are right and property keeps on rising for a few more years and then stabilises and remains flatish and rents dont rise substantially it makes sense to keep renting with the rent/mortgage differential and invest the money in tax efficient investment fund.
 if the bears are right then it makes sense to rent untill houses are more reasonably priced and again invest the savings.

the only way it would make sense to buy now is if property was certain to increase by 6+%(to account for inflation and differential between buying and renting) for life of mortgage and during this time  not fall at all as a fall would trigger panic selling and self perpetuating downward cycle. with wages not rising much more than 5% and interest rates rising can anyone really see prices rising by 6%+ in nominal terms for next 30 years?

of course this ignores the intangiable benefits of "owning me own property" which to me is close to nil but to others(mainly the female ) is substanial


----------



## walk2dewater

conor_mc said:
			
		

> I'd offer you my current months mortgage repayment for a 750-year lease.... whats your point?


 
Well my point is: Renting is not always worse than buying. My example was hypothetical (and ridiculous) but proves the point elegantly. When it costs so much to 'own' one is better off renting. Think about that, because I am convinced many many people simply don't believe that. Many people believe that you should buy REGARDLESS of the price once the monthly payment can be met, and that renting is ALWAYS dead money. This is faulty logic.

IMHO a certainty of a severe fall in prices, makes renting in Dublin supremely better than 'owning'. In my view, there's simply no contest.

But what about the intangible benefits of 'owning your own home'. Sorry, not worth it, I'll accept the shame of the renter 

I presume someone is going to call me a "begrudger" etc. Well lets head that off. I own property, in two countries (not ireland), love having my own property, and I could afford to buy a modest place outright in Dublin. But I don't. I rent. Because prices here make no sense to me.


----------



## thewatcher

http://www.rte.ie/news/2006/0329/housing.html

It should be remembered these are the people pushing house prices further and further up,taking first time buyers to the pin of their collar because of their Interest only mortgages.
They should have been taken out of the market long ago,whose that other socalist in the the Dail again i mean apart from joe higgins.


----------



## askalot

[FONT=Verdana, Arial]The party is slowly coming to an end. The US Federal Reserve raised rates (again) bringing them to 4.75pc and they may not have yet reached their peak. There now seems to be an expectation that the ECB will raise rates quicker than was thought at the beginning of the year with the next increase coming in May. [/FONT][FONT=Verdana, Arial]We could end the year with an ECB rate of 3.25pc, up from 2pc at the beginning of December 2005.[/FONT] This would bring mortgage rates to over 4pc and add around €200 to the monthly cost of a €300,000 mortgage.  
[FONT=Verdana, Arial]
[/FONT]
[FONT=Verdana, Arial]I think the big slowdown is coming over the hill. It's probably only 15 months away which means that anybody buying now should be aware that they are buying at the top of the market and so they really, really need to love the property!
[/FONT]


----------



## walk2dewater

askalot said:
			
		

> [FONT=Verdana, Arial]they really, really need to love the property!
> [/FONT]


 
Indeed.  If you've got the money, have lots more money, don't care about resale and simply have to have it.  Then by all means Mr. O'Reilly!  I suspect that was the case in Ailesbury road where someone paid that record price for a semi-d.  Words "Money" "no" "object" come to mind.  I have a very modest property in Honduras.  It's mine, I love it.  If the market would only offer me €1 for it, so be it, I wouldnt lose much sleep, it aint for sale.

The heavily geared are going to get creamed by a pincher movement, first the slow boil as 'the truth about rates' emerges, second the inability to sell without a sweetener when buyers dry up.  Then we start the long, bumpy descent down the slope of hope;  more and more vendors, fewer and fewer buyers.

I highly doubt our Celtic Tiger will survive the trauma of it all.


----------



## askalot

walk2dewater said:
			
		

> I suspect that was the case in Ailesbury road where someone paid that record price for a semi-d.



The sale of that semi-d may well be the moment we will look back on in two years time and go..."ah, so that's when the bubble started to rupture!"


----------



## Chamar

askalot said:
			
		

> The sale of that semi-d may well be the moment we will look back on in two years time and go..."ah, so that's when the bubble started to rupture!"




I was thinking the very same thing a couple of days ago.


----------



## redo

roryodonnell said:
			
		

> Prices should have stablised about 18-24 months ago. But the demand out there from investors is pushing it up. The most recent purchases will have no increase in value for 5-7 years. It may increase marginally up until the summer, but after that it will remain flat. These "investors" will get nervious over the xmas period and may decide to sell then. So, the storm will come early next year, say March 16th 2007 when the ECB puts the base rates up to 3.5. (5 year fixed = 5.8 - 6.5, variable = 5.25 - 6. or just over 3000pm on a 500k mortgage @5.5 over 25 years).


 


			
				askalot said:
			
		

> The party is slowly coming to an end. The US Federal Reserve raised rates (again) bringing them to 4.75pc and they may not have yet reached their peak. There now seems to be an expectation that the ECB will raise rates quicker than was thought at the beginning of the year with the next increase coming in May. [FONT=Verdana, Arial]We could end the year with an ECB rate of 3.25pc, up from 2pc at the beginning of December 2005.[/FONT] This would bring mortgage rates to over 4pc and add around €200 to the monthly cost of a €300,000 mortgage.
> [FONT=Verdana, Arial]
> [/FONT]
> [FONT=Verdana, Arial]I think the big slowdown is coming over the hill. It's probably only 15 months away which means that anybody buying now should be aware that they are buying at the top of the market and so they really, really need to love the property![/FONT]



[FONT=Verdana, Arial]Snap[/FONT]


----------



## JohnG

askalot said:
			
		

> [FONT=Verdana, Arial]...[/FONT][FONT=Verdana, Arial]We could end the year with an ECB rate of 3.25pc, up from 2pc at the beginning of December 2005.[/FONT] This would bring mortgage rates to over 4pc and add around €200 to the monthly cost of a €300,000 mortgage. [FONT=Verdana, Arial][/FONT]


 
I wonder how many people realise that the real cost of this interest rate change is €300.  By that I mean that after 5 years the mortage balance owed will be more than €6,000 higher due to the increase in interest rates.  

The real impact of a 1.25% increase in interest rates on a €300,000 loan is €312.50 per month, but the mortgage payment only goes up by €200 per month and the difference gets added to the loan balance!


----------



## walk2dewater

Ah but sure JohnG you're forgeting something, sure you have to buy since renting is "dead money", not to mention socially embarrassing and you can paint your walls polka-dot and do all sorts of DIY (with an equity loan of course), besides it doesnt matter what you pay/borrow, I repeat _doesnt matter what you pay/borrow_, because in "the long-term" etc etc etc...

[a concise summary of what I've been hearing since I returned to Ireland 2yrs ago]


----------



## daveirl

madisona said:
			
		

> converted garage extension in Cork (with its own seperate enterance ) that recently went for €240,000


Saw that, and it wasn't even in a very desirable area. The article in the Examiner even questioned whether this would be our broom closet.


----------



## bearishbull

even with all this bearish sentiment in the media i reckon it will take a crash to convince most people tha property can in fact go down and is a guarunteed raod to riches,it reminds me of the pyramid schemes down in cork where its all over the media but people still put cash in and untill it all crashes people will think "i'll be alrite jack".


----------



## extopia

*Re: Tulips*



			
				madisona said:
			
		

> In Holland during first part of the 17th century, especially in 1636-37..... etc.



Probably best to attribute the source of this wikipedia article, madisona.

http://en.wikipedia.org/wiki/Tulip_mania


----------



## Neffa

*Re: Tulips*



			
				madisona said:
			
		

> In Holland during first part of the 17th century, especially in 1636-37.
> demand for tulip bulbs reached such a peak that enormous prices were charged for a single bulb.
> 
> By 1636, tulips were traded on the stock exchanges of numerous Dutch towns and cities. This encouraged trading in tulips by all members of society, with many people selling or trading their other possessions in order to speculate in the tulip market. Some speculators made large profits as a result.
> 
> Some traders sold tulip bulbs that had only just been planted or those they intended to plant (in effect, tulip futures contracts). This phenomenon was dubbed windhandel, or "wind trade",
> 
> In February 1637 tulip traders could no longer get inflated prices for their bulbs, and they began to sell. The bubble burst. People began to suspect that the demand for tulips could not last, and as this spread a panic developed. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid. Thousands of Dutch, including businessmen and dignitaries, were financially ruined.
> 
> Attempts were made to resolve the situation to the satisfaction of all parties, but these were unsuccessful. Ultimately, individuals were stuck with the bulbs they held at the end of the crash—no court would enforce payment of a contract, since judges regarded the debts as contracted through gambling, and thus not enforceable in law.


 
Even though I am very bearish on property prices here, I think that comparisons with tulips or the Japanese property bubble are probably over-stated. At the peak of the boom in Japan, the land around the Royal Palace in Tokyo was worth more than the entire real estate of Canada. Whilst I think we are in a frothy market, I don't think we are quite in that territory. 30%+ overvalued perhaps, but not multiples of the long-run value.

What may "catch" the market as it falls will be a function of how many cash buyers are sitting waiting to buy. As renting becomes more common, the renters should be in a good position to buy and potentially stabilise the market.


----------



## jpd

Quite right. An  interesting question is when will those cash buyers/renters buy ?
If the market starts falling, would you buy when it fell 5% and then watch it fall a further 5% or 10% ? 
Would you wait for it to fall 10% and then jump in ?

IMHO I think the market will over-react and prices will over-correct the current over-valuation (whatever it is:  10%, 20% or 30%). It will look like free-fall for awhile - quite exciting to watch from the sidelines but not if you are caught up in it.


----------



## walk2dewater

*Re: Tulips*



			
				Neffa said:
			
		

> What may "catch" the market as it falls will be a function of how many cash buyers are sitting waiting to buy. As renting becomes more common, the renters should be in a good position to buy and potentially stabilise the market.


 
Sorry that's not how true busts play out.  The bottom is reached when no one wants to buy, when everyone you meet seems to say renting is smarter than buying, when the last property magazine disappears from the shelf, when the property supplements are replaced by some other fad, when people are so sick of property that they vow "never again", in other words, when there is a complete washout of bullish sentiment and annual housing completions are next to zero.  There will be very very few cash buyers waiting to buy at the bottom, EVEN if it makes economic sense to buy.  There are several books on the subject here's one: 
http://www.amazon.co.uk/exec/obidos/ASIN/0470821523/qid=1143710155/sr=1-2/ref=sr_1_2_2/202-0255429-7416632


This is the psychology of boom and bust, the emotional cycle of greed and fear.  Today's price action (up) is PURELY sentiment based, no basis in economics whatsoever.


----------



## conor_mc

bearishbull said:
			
		

> obviously not.but we are talking about now and the future.for last few years the numbers havent stacked up.ten years ago i was doin my junior cert so i cant remember what rent was like compared to mortgages
> 
> as for my points on renting versus buying obviously things will change and this anomaly wont last in medium/long term which raises the question how will it change? theres only 2 ways it can happen, rents rise substantially or prices fall ,i cant see rents rising much with the massive building happening-80k a year for ten more years=another 800k houses! "raise the rents!!"
> i am talking about at this moment and untill the change happens it does not make financial sense to buy,even if your house rises ten percent in year after buying this only covers stamp duty and the extra mortgage repayments above rent payments.then inflation is at 3% so take 3% away from any increase in value and the difference between renting and mortgage is around 2-3% of value of home so every year as it stands your houses has to rise by more than 6% in order to "make a profit".


 
I think we're broadly in agreement then, despite our debate.... the circumstances that currently make renting a sensible option for some areas won't last forever unless the bubble sustains itself..... but what goes up must come down.

If I were looking for a house atm, I wouldn't buy either.


----------



## conor_mc

*Re: Tulips*



			
				walk2dewater said:
			
		

> Sorry that's not how true busts play out. The bottom is reached when no one wants to buy, when everyone you meet seems to say renting is smarter than buying, when the last property magazine disappears from the shelf, when the property supplements are replaced by some other fad, when people are so sick of property that they vow "never again", in other words, when there is a complete washout of bullish sentiment and annual housing completions are next to zero. There will be very very few cash buyers waiting to buy at the bottom, EVEN if it makes economic sense to buy. There are several books on the subject here's one:
> http://www.amazon.co.uk/exec/obidos/ASIN/0470821523/qid=1143710155/sr=1-2/ref=sr_1_2_2/202-0255429-7416632
> 
> 
> This is the psychology of boom and bust, the emotional cycle of greed and fear. Today's price action (up) is PURELY sentiment based, no basis in economics whatsoever.


 
The _eircom _effect....???

To be honest, I disagree that we'll see those depths of despair, purely by virtue of the fact that the demographics of the country will maintain a certain level of demand, even if it's only in the second-hand market for the most part.

The real risk to the market is the amateur investor who gets spooked. There will still be plenty of people waiting in the wings to make a smart, long-term, _sustainable _investment when this thing bottoms out.


----------



## redo

*Re: Tulips*



			
				conor_mc said:
			
		

> The _eircom _effect....???
> 
> To be honest, I disagree that we'll see those depths of despair, purely by virtue of the fact that the demographics of the country will maintain a certain level of demand, even if it's only in the second-hand market for the most part.
> 
> The real risk to the market is the amateur investor who gets spooked. There will still be plenty of people waiting in the wings to make a smart, long-term, _sustainable _investment when this thing bottoms out.



Remember all the financial advisers cautioning people not to borrow to buy the shares?


----------



## Neffa

*Re: Tulips*



			
				walk2dewater said:
			
		

> Sorry that's not how true busts play out. The bottom is reached when no one wants to buy, when everyone you meet seems to say renting is smarter than buying, when the last property magazine disappears from the shelf, when the property supplements are replaced by some other fad, when people are so sick of property that they vow "never again", in other words, when there is a complete washout of bullish sentiment and annual housing completions are next to zero. There will be very very few cash buyers waiting to buy at the bottom, EVEN if it makes economic sense to buy. There are several books on the subject here's one:
> http://www.amazon.co.uk/exec/obidos/ASIN/0470821523/qid=1143710155/sr=1-2/ref=sr_1_2_2/202-0255429-7416632
> 
> 
> This is the psychology of boom and bust, the emotional cycle of greed and fear. Today's price action (up) is PURELY sentiment based, no basis in economics whatsoever.


 
Not sure I agree with this from my personal experience - in the UK crash of 1989/90 which bears some similarity to our situation here, the worst fall was about 40-45% from the peak and people still bought/sold through that period. The number of transactions halved and many watched from the sidelines - but there were still transactions. Not all buyers disappear - people will still need buy/sell due to family circumstances, deaths, divorce, marriage, job moves etc. 

I'm just reacting to the idea that there will be a tulip-style catastrophic drop of say 80% in prices all-round. Just don't see that happening - if it did, mortgage costs would drop to something like 10% of average income which I don't think is remotely likely.


----------



## soma

jpd said:
			
		

> It will look like free-fall for awhile - quite exciting to watch from the sidelines but not if you are caught up in it.


If it was a 'textbook' crash (and that's a big If) prices would fall for a while, then there would be one or two rebounds (during which the bulls announce "it was only a blip - we're on the way back up") but then during these rebounds investors use this time to try to escape with their shirts (they've just been thru quite a scare) and this then triggers the free-fall which lasts until a full correction has occoured.

As a real-world example, my Dad (a broker in N.Y.) saw the dot-bomb coming and got entirely out of tech stocks and avoided the initial carnage. But then he mis-timed the bottom of the market (one of the small rebounds I mentioned above) and tried to buy 'low'. Little did he know the stocks had another 50% to fall.. he got badly burned. At the moment he is a fully paid-up subsriber to the global property bubble theory & has just sold up all the family houses in N.Y. except the main residence. He has told me that if I try to buy anything in Ireland he'd be on the next plane over to shoot me first *lol* :-D


----------



## conor_mc

soma said:
			
		

> If it was a 'textbook' crash (and that's a big If) prices would fall for a while, then there would be one or two rebounds (during which the bulls announce "it was only a blip - we're on the way back up") but then during these rebounds investors use this time to try to escape with their shirts (they've just been thru quite a scare) and this then triggers the free-fall which lasts until a full correction has occoured.
> 
> As a real-world example, my Dad (a broker in N.Y.) saw the dot-bomb coming and got entirely out of tech stocks and avoided the initial carnage. But then he mis-timed the bottom of the market (one of the small rebounds I mentioned above) and tried to buy 'low'. Little did he know the stocks had another 50% to fall.. he got badly burned. At the moment he is a fully paid-up subsriber to the global property bubble theory & has just sold up all the family houses in N.Y. except the main residence. He has told me that if I try to buy anything in Ireland he'd be on the next plane over to shoot me first *lol* :-D


 
He'd be right too!

The difference I'd see between the dot-bomb and a property crash is that, once corrected, property still offers decent long-term value.

An awful lot of tech stocks were nothing but hot air.... people will always need houses, but they won't always need to buy their fruit online or whatever....


----------



## walk2dewater

To be crystal clear:  I'm taking about the _prices_ of property.  Life will go on.  People will do what people always do.  The sky isnt going to fall, and the sun will still rise and set every day.  All the new infrastructure and housing stock will remain exactly where it is 

IMHO prices in Ireland are MASSIVELY overvalued and prices will over-react to the downside as is typical of manias.  But I realise I am in a minority within a minority on this issue!

But ultimately the future is bright, i.e. an abundance of CHEAP property in Ireland.


----------



## walk2dewater

soma said:
			
		

> If it was a 'textbook' crash (and that's a big If) prices would fall for a while, then there would be one or two rebounds (during which the bulls announce "it was only a blip - we're on the way back up") but then during these rebounds investors use this time to try to escape with their shirts (they've just been thru quite a scare) and this then triggers the free-fall which lasts until a full correction has occoured.


 
Exactly.  Some call it the 'slope of hope'.  The bottom is not reached until every drop of bullish sentiment is wiped out.  Ironically, the economics of ownership make compelling sense at this point, but few have the stomach for it.


----------



## Duplex

So we have a broad consensus that a speculative bubble exists in the Irish property market?

Would it be controversial to suggest that the price of housing will return to a level supported by fundamentals?  For instance what if yields in the investment market rose to say 6 or 7%, still low by historic standards?  I believe that such a scenario is highly likely, but the increase in yields will be as a result of falling capital values, rather than inflation in rents.


----------



## Calina

walk2dewater said:
			
		

> But ultimately the future is bright, i.e. an abundance of CHEAP property in Ireland.


I can just see it - 10 years down the line there'll be agents in Poland, Bulgaria, Cape Verde and Croatia selling cheap property in Ireland. 

I'm not sure how far down the prices are going to do. I'm not altogether sure that percentage falls are meaningful at the moment as the figure on which they'll be calculated is currently unknown. When I hear "there'll be a 50% drop in property prices" I can't actually visualise that without knowing 50% of what. So I don't want to speculate on percentage falls. 

I do think that there is no indication of sanity in the market at the moment. I realise buying a home is an emotional purchase, but it is the choice of home itself should be the emotional bit, not the actual fact of owning anything at all. Why buy something unsuitable - you'll never be at home in it anyway, and if the market shifts negatively which it looks like it probably will, you'll be stuck in it, hating it and unable to move. 

And yet I saw one person advising that people buy unsuitable stuff, just so that they have something. I cannot see the sense in it.


----------



## Duplex

Calina said:
			
		

> I can just see it - 10 years down the line there'll be agents in Poland, Bulgaria, Cape Verde and Croatia selling cheap property in Ireland.
> 
> I'm not sure how far down the prices are going to do. I'm not altogether sure that percentage falls are meaningful at the moment as the figure on which they'll be calculated is currently unknown. When I hear "there'll be a 50% drop in property prices" I can't actually visualise that without knowing 50% of what. So I don't want to speculate on percentage falls.
> 
> I do think that there is no indication of sanity in the market at the moment. I realise buying a home is an emotional purchase, but it is the choice of home itself should be the emotional bit, not the actual fact of owning anything at all. Why buy something unsuitable - you'll never be at home in it anyway, and if the market shifts negatively which it looks like it probably will, you'll be stuck in it, hating it and unable to move.
> 
> And yet I saw one person advising that people buy unsuitable stuff, just so that they have something. I cannot see the sense in it.


 
Well my guess as to where the support level lies in the market is; when the gross yield achievable reflects all finance and holding costs with a  premium, say 2-3% to reflect sector risk.  You could construct an equated yield  (for analysis purposes) based on the rate achievable on long dated bonds (10 year German Euro)  say 3.80% add sector risk say 2.5% = an equated yield of 6.30%.   So my stab in the dark is that gross yields will at some stage in the foreseeable future, reach somewhere in the region of 7%.

I love speculating.


----------



## Neffa

Duplex said:
			
		

> Well my guess as to where the support level lies in the market is; when the gross yield achievable reflects all finance and holding costs with a premium, say 2-3% to reflect sector risk. You could construct an equated yield (for analysis purposes) based on the rate achievable on long dated bonds (10 year German Euro) say 3.80% add sector risk say 2.5% = an equated yield of 6.30%. So my stab in the dark is that gross yields will at some stage in the foreseeable future, reach somewhere in the region of 7%.
> 
> I love speculating.


 
What would prices have to fall by from today's levels for this to be true?


----------



## bearishbull

when any correction occurs many investors will be afraid to get back in with falling values wiping out any rental yield even if its a relatively  highish yield.
if you were valuing a house in dublin as an investor what price would you be prepared to pay for a 3 bed home pulling in 15k in rent (as most average 3 beds are now) with values not rising much or only in line with inflation? i wouldnt pay  over 195k in such a scenario and if prices were falling i wouldnt pay over 150k.thats provided i could be reasonably sure of renting-any correction would hit construction workers and consumer spending and therefore less workers would be coming to and renting in dublin.


----------



## ivuernis

Isn't there a large number of investor-owned unoccupied/unrented properties (mainly apartments I'd imagine) in Ireland at the present time all banking on capital appreciation. 

Are there reliable figures for the number of these properties. This is creating an artificial demand by removing certain properties from the market (either from FTBs or renters). 

In the event of a fall in property prices I'd imagine the off-loading of these properties would have positive knock-on effects on both the supply of properties to buy and properties to rent whilst at the same time leading to further reductions in the cost of property to buy and reducing rental yields at the supply increases.


----------



## Howitzer

ivuernis said:
			
		

> Isn't there a large number of investor-owned unoccupied/unrented properties (mainly apartments I'd imagine) in Ireland at the present time all banking on capital appreciation.


 
This is anecdotal at best. I've rented for quite a while and I've never witnessed the phenomenon of empty, rentable, units. Holiday homes are obviously different.


----------



## walk2dewater

Using Duplexs' 7% theory.  So about €157,142 for what rents for €1000/mth today (assuming 11 x 1000).  I'd add another 20% loss due to the "fear overshoot" at the bottom where nothing shifts, so let's say €125,714 final settling price...

€125,714 for the place I rent.  Chr1st I think it's market value is 1/2million minimum.  Yikes.  75% fall.


----------



## bearishbull

walk2dewater said:
			
		

> Using Duplexs' 7% theory. So about €157,142 for what rents for €1000/mth today (assuming 11 x 1000). I'd add another 20% loss due to the "fear overshoot" at the bottom where nothing shifts, so let's say €125,714 final settling price...
> 
> €125,714 for the place I rent. Chr1st I think it's market value is 1/2million minimum. Yikes. 75% fall.


nah i'd say the floor would be 200k for the average house in dublin which is near 400k so 50% from here and more if they keep rising for next several years.


----------



## Glenbhoy

Posted by Walkdewater:


> But ultimately the future is bright, i.e. an abundance of CHEAP property in Ireland


Maybe the future's bright for some, but I don't think gloating at the extent of many people's missfortune is the right attitude either, a lot of people may be badly affected by such a crash, this will run the whole gamut from FTB's, through amateur investors to the big builders (who will be burnt more than most as they are the most leveraged of all).  Of course FTB's will get most of or sympathy, but you've also got to spare a thought for the amateur who has remortgaged to buy the investment property. 
As for the equlibrium price, it's very difficult to know -  I don't subscribe to the total crash theory as propounded by some,  I feel that property is overvalued here, but not by that much looking at historical norms.  This country has changed signficantly over the past 20yrs, and I don't expect total regression.
I tend to agree with duplex, rents will not increase, if anything they'll decrease (2 factors, increased supply and decreased demand as migrants involved in construction no longer need accommodation) and eventually property prices will come in around the 7% yield mark.


----------



## Loki

Duplex said:
			
		

> So we have a broad consensus that a speculative bubble exists in the Irish property market?


No you don't. State how  you know the current prices  are directly linked to speculative investors!   


			
				Duplex said:
			
		

> Would it be controversial to suggest that the price of housing will return to a level supported by fundamentals? For instance what if yields in the investment market rose to say 6 or 7%, still low by historic standards? I believe that such a scenario is highly likely, but the increase in yields will be as a result of falling capital values, rather than inflation in rents.



I was recently in Rome with my extended family. We spoke about property and I put forward the arguemnt about rent yields being negative on new purchases and for many it is actually cheaper to rent then buy due to prices. I was then reminded  that it is how it has been in Italian cities for about 20 years.  Italy is the next country to us on the world home ownership level (below by about 10-15%)

Now they live in a 2 bed apartment. The parents are in one room and the children, brother and sister in ther 20s live at home sharing the other bed room as small as a boxroom.  

Now if the "fundemnetals" were applied the children would move out right? Now I am not saying Ireland is unique but am I to take it Italy is? I admit I don't know that much about the italian market but I do remember the fact it was cheaper to rent than buy for the majority of the population for a long time and still is apparently. Social housing has something to do with it.


----------



## ivuernis

Howitzer said:
			
		

> This is anecdotal at best. I've rented for quite a while and I've never witnessed the phenomenon of empty, rentable, units. Holiday homes are obviously different.


 
There's 3 in my block of 18 apartments, they've been left idle for 2 years now.


----------



## SteelBlue05

walk2dewater said:
			
		

> Using Duplexs' 7% theory. So about €157,142 for what rents for €1000/mth today (assuming 11 x 1000). I'd add another 20% loss due to the "fear overshoot" at the bottom where nothing shifts, so let's say €125,714 final settling price...
> 
> €125,714 for the place I rent. Chr1st I think it's market value is 1/2million minimum. Yikes. 75% fall.


 
you would need to account for buillding costs, i.e. if a house costs 200k to build then you are unlikely to see it being sold for less than that.


----------



## Duplex

They would fall by about 40-50% if my theory is valid.  

Example 2 bedroom flat.  current market value say          €280,000

Rental income €1,000 pm =                                          €12,000 pa

Net income after service charges, voids, etc.                   €10,000 pa


Net initial yield                                                             3.5%


If we analyse this income stream at a net yields of say

4.5%= market value €222,222

5.5%=market value   €181,181

6.5%=market value   €153,138

7.5%=market value   €133,333



This assumes that rents remain at or about current values, and that void periods are similar to existing, which as Bearishbull suggests may not necessarily be the case if we have an economic cascade effect from a housing bubble bust.


----------



## redo

Loki said:
			
		

> No you don't. State how  you know the current prices  are directly linked to speculative investors!
> 
> 
> I was recently in Rome with my extended family. We spoke about property and I put forward the arguemnt about rent yields being negative on new purchases and for many it is actually cheaper to rent then buy due to prices. I was then reminded  that it is how it has been in Italian cities for about 20 years.  Italy is the next country to us on the world home ownership level (below by about 10-15%)
> 
> Now they live in a 2 bed apartment. The parents are in one room and the children, brother and sister in ther 20s live at home sharing the other bed room as small as a boxroom.
> 
> Now if the "fundemnetals" were applied the children would move out right? Now I am not saying Ireland is unique but am I to take it Italy is? I admit I don't know that much about the italian market but I do remember the fact it was cheaper to rent than buy for the majority of the population for a long time and still is apparently. Social housing has something to do with it.


Please lets not start, which came first, the bubble or the crash thing


----------



## Loki

redo said:
			
		

> Please lets not start, which came first, the bubble or the crash thing


What I have said is not even close to correcting the misuse of language.
How do people know that the house prices are high soley because of speculative purcashing?
If the Fundementals are so important then how did italy manage without them?
See no question of is there a bubble or will there be a crash? I guess if you ignore everything I say and make up what you think I am saying you might miss information. A blinkered idea whether proved right or wrong is not they way I like to live I like to know the facts. I don't know much about the historical italin property market or the current one for that matter


----------



## walk2dewater

Glenbhoy said:
			
		

> Posted by Walkdewater:
> 
> Maybe the future's bright for some, but I don't think gloating at the extent of many people's missfortune is the right attitude either,


 
I'm gloating? Gimme a break. Re-read some of my early posts, I neither need nor want a crisis in Ireland. I post here due to, depending on the day, either my fascination or disgust with the bizarre Irish property mania. Do not blame the messenger, blame those that bid prices up.


----------



## SteelBlue05

Duplex said:
			
		

> They would fall by about 40-50% if my theory is valid.
> .


 
You need to account for different levels of house prices e.g. a house valued today at 300k is not going to decrease to 150k as you need to account for re-build costs and peoples affordability levels.


----------



## redo

Loki said:
			
		

> What I have said is not even close to correcting the misuse of language.


Agreed, but let not go there anyway.



			
				Loki said:
			
		

> How do people know that the house prices are high soley because of speculative purcashing?


Increased demand has an upward pressure on prices.  However, it it not SOLEY.  I agree


----------



## Duplex

Loki

I’m not familiar with the Roman market I’m afraid. I base my analysis on historic yields which were in excess of double digits in the past in the Irish residential market. I believe that markets adjust to reflect true risk over time.  For instance the market in Split in Croatia has seen rising yields as investors became aware of the fundamental value of investment incomes.  




*



16:36 - 29 March 2006 - A decline in real estate prices was recorded in Croatia last year in almost all districts as the decline reached as much as 50% in the city of Split, Croatia Today reports. 

Click to expand...

* 



[broken link removed]


----------



## Loki

redo said:
			
		

> Agreed, but let not go there anyway.
> 
> 
> Increased demand has an upward pressure on prices.  However, it it not SOLEY.  I agree



Ok then how do you know the extent of the effect? I mean I could just state any of the other reasons and say that is the main casue. I am not into this makea a wild statemnet that people agree on but have no proof.  Lots of people used to think the sun rotated around the earth. The evidence proved them wrong!


----------



## Duplex

SteelBlue05 said:
			
		

> You need to account for different levels of house prices e.g. a house valued today at 300k is not going to decrease to 150k as you need to account for re-build costs and peoples affordability levels.


 
Steel, cost and value are two different things. Nevertheless I would imagine that we will see some deflation in the cost of construction if a housing bust occurs.


----------



## redo

Loki said:
			
		

> Ok then how do you know the extent of the effect? I mean I could just state any of the other reasons and say that is the main casue. I am not into this makea a wild statemnet that people agree on but have no proof.  Lots of people used to think the sun rotated around the earth. The evidence proved them wrong!



Stop picking on me please


----------



## Neffa

Loki said:
			
		

> Ok then how do you know the extent of the effect? I mean I could just state any of the other reasons and say that is the main casue. I am not into this makea a wild statemnet that people agree on but have no proof. Lots of people used to think the sun rotated around the earth. The evidence proved them wrong!


 
What would you consider proof?


----------



## Loki

Duplex said:
			
		

> Loki
> 
> I’m not familiar with the Roman market I’m afraid. I base my analysis on historic yields which were in excess of double digits in the past in the Irish residential market. I believe that markets adjust to reflect true risk over time. For instance the market in Split in Croatia has seen rising yields as investors became aware of the fundamental value of investment incomes.


ANd this tells us that the market is over priced becasue of speculator  in this country how?
I can point to the wave that hit Tialand and say it will happen here but it won't as the conditions are not the same. 
Many FTBs buyers are buying what is built here so I don't see how the specultors are the main cause and I have also stated many are not short term specultors from my experience which is the real danger. If none of the specultors back out of the market there wouldn't be a crash right? I mean that is the basis of most of the crash theories. People get scared and sell say if they don't what would happen. How many speculators are needed to panic to cause the crash? Is there another cause I am missing?


----------



## bearishbull

i think the fact that yields are so low and still an asset price is rising at 10-20% is an indicator of specualtion in any market.question is what are they speculating on? speculating that they will get out before the bust? speculating that demand for housing wont be met despite the massive supply being constructed every year? speculating that ncb's predictions will come true?


----------



## SteelBlue05

Duplex said:
			
		

> Steel, cost and value are two different things. Nevertheless I would imagine that we will see some deflation in the cost of construction if a housing bust occurs.


 
Well yes, but I was making the point that you need to account for cost when throwing out such broad theories like "prices will decrease by 40-50%".


----------



## Loki

Neffa said:
			
		

> What would you consider proof?



Figures stating year on year the amount of investors in the market for starters.

*Redo
*If you don't want to be picked up on what you are saying don't post or only talk with people who agree with you. I am not "picking" on you if anything you are dismissive of me


----------



## Loki

bearishbull said:
			
		

> i think the fact that yields are so low and still an asset price is rising at 10-20% is an indicator of specualtion in any market.question is what are they speculating on? speculating that they will get out before the bust? speculating that demand for housing wont be met despite the massive supply being constructed every year? speculating that ncb's predictions will come true?



I see what you are saying but a _possible_ indicator does not make it fact.  If you remove that as an indicator the points of argument you have are good but fall apart and are again based on so many maybes.


----------



## Duplex

Steel I have guessed at a figure based on my own ‘theory’, prices may fall further than 50% they did in Japan which is much more densely populated than Ireland. Prices fell last year by 13% in New York. 

Loki I appreciate what you’re saying however markets are not populated by rational players, they react to sentiment; fear, panic, euphoria.





> *Psychologist Elizabeth Kubler-Ross suggested the process of grieving has five distinct stages. In a somewhat analogous fashion, participants in the housing bubble will pass through five emotional stages: euphoria, doubt, denial, disillusion, realism.
> 
> Kubler-Ross's five stages were: denial, anger, bargaining, depression, and acceptance. As people grieve the losses of their paper profits, or more tragically, the loss of their homes or entire equity, they may well pass through these very human feelings along the way.
> 
> My list is somewhat different, as it starts with the essential emotional building-block of any bubble: euphoria. This is the sense of empowering glee as prices rise, seemingly inexorably, as the participants re-calculate their ever-rising wealth--and all without any application of labor! (Or recently, any deployment of capital, either.)
> 
> This stage can be seen in the chart of KB Homes, a company which is a good proxy for the large residential builders. The euphoria is visible in the sharp rise of the stock price from mid-2004 to mid-2005.
> 
> The decline (which I marked for emphasis) from this peak is the doubt/denial stages. As doubt about the housing bubble grows, the stock price falls. Then, as denial kicks in, the price recovers--but importantly, never to the previous high. This "lower highs, lower lows" is the classic stock market definition of a downtrend.
> 
> A similar battle between doubt and denial plays out in the media every month when housing prices, inventory and sales figures are released. Every lower number spurs doubt, and every stabilizing number elicits denial: everything is OK, prices are stabilizing, etc.
> 
> At some tipping point, denial gives way to full-blown disillusion. As declines in prices and sales and fast-rising inventories become inescapable trends, the flimsy walls of denial participants have constructed give way, and they become disillusioned with their real estate investments. Some decide to hang on, others decide to bail, and still more stop looking at the very real estate section they used to open first, when their net worth was rising by the month.
> 
> As the declines continue unabated, year after year, participants finally make a realistic appraisal of the situation: housing was a bubble, and the deflation seemingly lasts forever. Investors give up and sell in disgust, banks give up the ghost and go bankrupt or sell their portfolios of non-performing mortgages for pennies on the dollar, and the ranks of working realtors thins to those few with connections to lenders, who are still dumping their foreclosed properties.
> 
> When nobody in their right mind would consider buying real estate as an investment, the bottom will finally be reached. Unfortunately, all this takes a long time. That we are just in the very first stages of the decline are apparent in articles such as this one from The Wall Street Journal: Back To Reality, about the quickening slide in vacation home values.
> *


http://www.oftwominds.com/blog.html


----------



## gearoidmm

Loki said:
			
		

> Figures stating year on year the amount of investors in the market for starters.


 
A figure has been quoted (to be honest I can't remember the source) that 40% of properties in Ireland at the moment are being bought as second homes and BTLs.  

Combine this with the fact that up to 1/3 of 'investors' are subsidizing their tenants to live in their properties and I think you can call this a speculative market.


----------



## Loki

Duplex said:
			
		

> Loki I appreciate what you’re saying however markets are not populated by rational players, they react to sentiment; fear, panic, euphoria.



Well obviously not, as I am still asking how do you know speculators are  keeping the prices high here?

Even if you can some how prove that  you have to assume a portion of these will not panic and have to speculate about the effect of this. To say once A happen an unknown quantity of X will panic and casue a hughe price crash. It is all speculative but what you are saying and using as indicators is not close to accurate. THe idea is not to make wilder and wilder speculitvie commnets but to gather data and make a informed speculitive view.  You need to accurately draw comparisons not show an example of a crash and it's outcome and call that proof of what will happen here. 

I stopped coming here for a while becasue people going on about financial terms  and calling it an indicator kept getting it wrong. People didn't even know what yield was yet siad it indicated the maket would crash. There are people here understandably hoping for a crash because the believe it will help them. THere are others hoping for continuel growth to reassure them their huge debt is worth it. It is easy to get these people to agree with their own  rosy view. 

I know your view it is clear but if you are going to say something state how it is relevant to Ireland. Economic theory is only good if you can prove what you are saying matches the theory and always remember it is theory  not fact and if you miss *some* the information you will apply the wrong theory. Property has differnt qualities to consumer items and this must be considered.


----------



## Duplex

Who turned off the lights? 


Loki I hope that you’re not trying to wind me up.  Do you think anyone wants to see people suffer because of this madness?  Go and complain to the directors of the banks that are happily exploiting the gullible and sacrificing our country’s future for their short term gain.  

If and when this bubble does burst I will do my bit to make sure that some of these cynical b******s suffer as well.  (by reference to due legal process,)


----------



## Neffa

Loki said:
			
		

> Well obviously not, as I am still asking how do you know speculators are keeping the prices high here?


 
Equally, how do you know that they are not?

Some reasons for me to believe speculation (which for me equates to non-rational investment) is rife: 

1. Since I came back from the UK, I have been amazed at how many people talk about property as the right/only long-term investment, have multiple homes, tell you that it is their new pension etc. "The best time to buy is now", "Agh sure it will only go up". "Stocks and shares are very risky - put your money in bricks and mortar" I did not hear such generally positive sentiment in the UK market. I firmly believe that it is deeply-set in the pysche of Irish people that property is all that counts.
2. Advertisements on national radio for investment in Turkey/Dubai/Cape Verde islands etc. etc. - You don't get that in the UK, which is hardly a bearish market on property.
3. International property investment exhibitions in Dublin - a new event and where the signs are that it is the new Gold Rush - read the Investment forums on this site and you'll see people investing in places they've never been to and don't understand the local taxation market.
4. Low rental yields and gap between rental prices and purchase prices while investors still buy based on "the long term"
5. Significant numbers of empty properties in new builds being held for capital appreciation

etc. etc.


----------



## Neffa

Duplex said:
			
		

> Loki I hope that you’re not trying to wind me up. Do you think anyone wants to see people suffer because of this madness? Go and complain to the directors of the banks that are happily exploiting the gullible and sacrificing our country’s future for their short term gain.
> 
> If and when this bubble does burst I will do my bit to make sure that some of these cynical b******s suffer as well. (by reference to due legal process,)


 
Just out of interest, how would you do this? Unless the Central Bank forces them through compliance to show that they are stress-testing applicants then I can't see what the come-back is. The banks are not advertising that the boom will go on - I think you'd have a hard time pinning anything on them.


----------



## Neffa

Loki said:
			
		

> Many FTBs buyers are buying what is built here so I don't see how the specultors are the main cause and I have also stated many are not short term specultors from my experience which is the real danger. If none of the specultors back out of the market there wouldn't be a crash right? I mean that is the basis of most of the crash theories. People get scared and sell say if they don't what would happen. How many speculators are needed to panic to cause the crash? Is there another cause I am missing?


 
Yep - like the UK in 1989, it just gets too expensive and FTB's cannot make the numbers work. Demand/belief fell off and the rest, as they say, is history. The UK crash in 1989 happened without any real BTL/speculator element.


----------



## askalot

Glenbhoy said:
			
		

> I feel that property is overvalued here, but not by that much looking at historical norms.



Not by much? 

Can you please point me to the historical norm that supports average house prices at over ten times the industrial wage. Or the norm where the average monthly repayment is 45% of take home pay and that's when interest rates are at record lows. We are all floating on a sea of cheap credit that's about to get more and more expensive. 

Start swimming!


----------



## bearishbull

was on the dart this afternoon and there must have been ten people out of twenty reading the property supplements in times etc. starting to feel a lot like mania /a fad/an obsession.i've given up discussing it with my friends who are like myself 25 and are taking interest only mortgages for somewhere in meath. 
when enough people beleive something will keep going up for considerable future it will keep going up once its still affordable(affordable does not neccessarily mean worth the price though!),in the same way once something spooks a lot of the people who beleive prices can only go up things then go in reverse and the same people beleive things will continue going down once they've dropped say 5%,its human nature and herd behaviour and is why pyramid schemes still work despite being around for a hundred years and everyone being "aware " of them.


----------



## Glenbhoy

> *Posted by Askalot:*
> Can you please point me to the historical norm that supports average house prices at over ten times the industrial wage. Or the norm where the average monthly repayment is 45% of take home pay and that's when interest rates are at record lows. We are all floating on a sea of cheap credit that's about to get more and more expensive


Or perhaps you could point out which country you are referring to with your numbers?
I think you've got to consider household income, then you can safely halve all the numbers above.  As I pointed out previously, there's very little difference in here and the UK in terms of multiples and affordability, likewise with the states and canada and we have'nt exactly introduced 150yr mortgages yet either.
Agreed there are definitely certain areas/addresses where the numbers make absolutely no sense, but in general, I would'nt put values much more than 25-30% overvalued.


----------



## bearishbull

Glenbhoy said:
			
		

> Or perhaps you could point out which country you are referring to with your numbers?
> I think you've got to consider household income, then you can safely halve all the numbers above. As I pointed out previously, there's very little difference in here and the UK in terms of multiples and affordability, likewise with the states and canada and we have'nt exactly introduced 150yr mortgages yet either.
> Agreed there are definitely certain areas/addresses where the numbers make absolutely no sense, but in general, I would'nt put values much more than 25-30% overvalued.


i think thats not enough,i think it has to drop by at least 35% to offer "value" which is a 50% overvaluation based on current income and rent levels and on predicted interest rate levels circa end 2007.


----------



## askalot

Glenbhoy said:
			
		

> Agreed there are definitely certain areas/addresses where the numbers make absolutely no sense, but in general, I would'nt put values much more than 25-30% overvalued.



25-30% overvaluation - a mere trifle! Mind you I suppose most things in this sainted isle are 20-30% overvalued.


----------



## Glenbhoy

Maybe Bearishbull, but what I look at mostly is net household income and the ability to service a mortgage with that.
Working on a reverse basis and presuming that this is really a Dublin property thread despite its' title 
Average Dublin income - €35K per person
70% of FTB's are couples therefore the average gross household income is approximately €50K ie 70% of 70K (Does anyone else think that's pretty low?).  Average Net income is thus 80% of 50K = 40K, banks will allow 35% affordability, possibly 40% thus 16K allowed to service the mortgage, this will service a loan of 300K over 35 years (after tax relief) at 5%.  As average Dublin property is approx 380K at present, then this only represents a drop of approx 20%.


----------



## walk2dewater

bearishbull said:
			
		

> when enough people beleive something will keep going up for considerable future it will keep going up


 
Nail on head.  Imagine, you don't lift finger and your wealth is rising exponentially day after day, week after week... you have regular, positive reaffirmation that this all 'makes sense'... dissenters are dismissed as heretics and unsavoury "begrudgers" by experts and elders... it makes you feel better about your commuting, long work days, time away from family... getting on that crowded DART at 7:30am with a smile on your face... one day, you'll have made it, thanks to 'bricks and mortar'.. you can never lose...

This mania is very very compelling, drawing in even the not-so dimwitted.  Who would want the burden of going against that 'feel good' drug?


----------



## Glenbhoy

> 25-30% overvaluation - a mere trifle! Mind you I suppose most things in this sainted isle are 20-30% overvalued.


Agreed, but in the overall context sure a couple of hundred K is nothing anymore!!


----------



## Loki

walk2dewater said:
			
		

> Ok, so you havent a clue.  Anyone else know why my rent is SOOOOO cheap?


I have a clue my mother never put up her rent as she feels guilty. AS she owns the house it is all profit so she doesn't mind letting the tenants save to buy for themselves. As a child I remember helping a tenat move into their new house. You see some landlords are nice!


----------



## conor_mc

The mentality of the amateur investor - a personal viewpoint...

Bought a house two years ago, took out a 92% mortgage of just under €200k. Now have over €100k worth of equity. A couple of months ago I was thinking about how to sort out some other financial issues, nothing major, just clear a loan maybe before my SSIA is due rather than clear it out of my SSIA. It dawned on me that my house had been making €1000 a week since I owned it. Think about that for a second.... in 2 years I've gone from scrimping and saving for a deposit to having a hundred grand in equity, just ready to be utilised. It's easier to make money when you have money, right?

Now, the only way I can put this €100k to work is to remortgage and invest in a second property... which will make another €1,000 a week and I'll have some sucker paying the mortgage for me, right? Okay, I know the gravy train won't last forever, but a smash-and-grab on the market might work, get in and get out in a 12-18 months, at the current rate the price will have risen €50k or so, making a conservative profit of €20k after stamp duty, CGT etc...... can't go wrong....

That was me two months ago. That's the mindset which drives the amateur investor, I believe. Rapid capital appreciation in your PPR and looking for some way to cash in on it.


----------



## Berni

bearishbull said:
			
		

> is there anyway of ignoring certain posters on askaboutmoney?



Yes indeed! top of the page, "user cp" link, last option on the list.


----------



## Loki

walk2dewater said:
			
		

> Ok, so you havent a clue.  Anyone else know why my rent is SOOOOO cheap?



I have a clue. My mother feels guilty when she raises the rent so she doesn't. SHe always hopes the tensaant will bea bale to save and buy a place themself. AS a child I remeber helping a tenant move to their new house. Some landlords are nice and as they own the property the rent is mostly profit so they don't care. Be grateful and stop thinking it is an indicator the market will crash.
THe other fact is some places will always be better residential homes than rental property and are worth as such. THis is how the property market is regardless of economics.


----------



## Loki

walk2dewater said:
			
		

> Ok, so you havent a clue.  Anyone else know why my rent is SOOOOO cheap?


l


----------



## ivuernis

Howitzer said:
			
		

> It's just a strange oul debate when there's only one poster who seems to represent the majority out there. I mean where are all the other property bulls?


 
"We swallow greedily any lie that flatters us, but we sip only little by little at a truth we find bitter." ~Denis Diderot


----------



## Loki

?
?


----------



## ionapaul

If you want to read comments from some posters who definitely DO NOT agree with the majority who post in this thread, simply navigate over to the 'Location, Location, Location' section of this forum and read the comments from those good folks who have bought apartments in some development in Stepaside...positively crowing about the apartments not being built yet, and they are making a couple of grand a week with the price rises!  Every one of them planning to move out of these soon-to-be €500k 'starter homes' within a few years.  We will see a national price rise of 20% this year?  No-one talks about anything but property anymore...


----------



## Calina

walk2dewater said:
			
		

> Ok, so you havent a clue.  Anyone else know why my rent is SOOOOO cheap?


Very few people competing with you to rent that property. Have you had to fight anyone off with your keys lately?

The impact of rental yield on future property purchase prices seems to be negligible at the moment. I really can't be a gambler by nature because I have to say if I were a property investor, I'd like the rental income to be covering both the interest and capital repayment at least. I don't want to take a loss for 30 years (because we're in this for the long term) and then make an unpredictable profit in 30 years.


----------



## Glenbhoy

> Loki
> And for 20 year in Italy it was cheaper to rent than buy yet they have the second highest home ownsership in the world. I am experience increased rent yields not less


Where do you get these figures from?  

I would also like to see a few more dissenting voices on here, perhaps a red rag is required??


----------



## Loki

walk2dewater said:
			
		

> Ok, so you havent a clue.  Anyone else know why my rent is SOOOOO cheap?


hello


----------



## Loki

Neffa said:
			
		

> Equally, how do you know that they are not?


 I am not saying they are casuing anything so I don't have to prove they are doing anything. THe onus is on you.


			
				Neffa said:
			
		

> Some reasons for me to believe speculation (which for me equates to non-rational investment) is rife:
> 
> 1. Since I came back from the UK, I have been amazed at how many people talk about property as the right/only long-term investment, have multiple homes, tell you that it is their new pension etc. "The best time to buy is now", "Agh sure it will only go up". "Stocks and shares are very risky - put your money in bricks and mortar" I did not hear such generally positive sentiment in the UK market. I firmly believe that it is deeply-set in the pysche of Irish people that property is all that counts.
> 2. Advertisements on national radio for investment in Turkey/Dubai/Cape Verde islands etc. etc. - You don't get that in the UK, which is hardly a bearish market on property.
> 3. International property investment exhibitions in Dublin - a new event and where the signs are that it is the new Gold Rush - read the Investment forums on this site and you'll see people investing in places they've never been to and don't understand the local taxation market.
> 4. Low rental yields and gap between rental prices and purchase prices while investors still buy based on "the long term"
> 5. Significant numbers of empty properties in new builds being held for capital appreciation
> 
> etc. etc.


 I see lots of car ads for very expensive cars and show rooms, actually masses of advertisement. Why? High ticket items generate huge profits but small %. Lots of advertisement money pumped into a very small market. So anything with advertisement is explained that way. ANy talk of it can be put down to the same just like cars. Magazines about it are property porn as our the shows.

4.Low rent yields would suggest it isn't a speculators market as there is little profit in it. How do you know there are investors? Any figures

5. Where? How many? A percentage maybe? Are you mixing up the holiday home estates. 

Everything you have said is anecdotal at best. You might call it proof  but it isn't. 



			
				Neffa said:
			
		

> Yep - like the UK in 1989, it just gets too expensive and FTB's cannot make the numbers work. Demand/belief fell off and the rest, as they say, is history. The UK crash in 1989 happened without any real BTL/speculator element.


 What? How much did the prices "crash" by then? How do you know the casues? I mean basing it on what figure or is it another throw away comment? I just like proof to what people say as often ther is none and you get "I over heard this in the pub" type comments.


----------



## Neffa

Loki said:
			
		

> What? How much did the prices "crash" by then? How do you know the casues? I mean basing it on what figure or is it another throw away comment? I just like proof to what people say as often ther is none and you get "I over heard this in the pub" type comments.


 
I'll give you one more answer, then I'll stop - I think you are determined to refute any evidence anyone gives you. I don't think these exchanges are going anywhere - we supply data, you say "that's not proof" and we go full circle. This is a speculative discussion and no-one can bring facts forward from the future but we can point to trends and similarities in the market today from previous crashes which make many of us on this thread think that we are heading for a similar state again.

So - final answer on your point - I lived in England for about 20 years, including the period of the crash in 89. During my time there, I rented and bought and sold property. I also know many hundreds of people who bought/sold during that time in many areas of the country. I know the price history (this is in the public domain in England - you can see by postcode the transaction price of all properties) of every house we looked at to buy and how it had fallen during the crash and recovered since. I read the papers, I can do research. The fact is that prices fell by 40-45% over the 12-18 months after the crash. If you are interested, you can see the detail with a quarter-by-quarter breakdown of prices, affordability and so on for each UK region at www.nationwide.co.uk. That will clearly show that affordability in SE England in late 1989 was at its all time worst position since 1957. So I think it is a reasonable view that the market became too expensive for the average buyer to make their monthly payments and the market corrected because buyers simply could not afford the stretch any longer. Hence my view that affordability and lack of faith in upward price movement crashed the market. Just like tulips did, just like tech stocks etc. etc.


----------



## Loki

Neffa said:
			
		

> I'll give you one more answer, then I'll stop - I think you are determined to refute any evidence anyone gives you. I don't think these exchanges are going anywhere - *we supply data*, you say "that's not proof" and we go full circle. This is a speculative discussion and no-one can bring facts forward from the future but we can point to trends and similarities in the market today from previous crashes which make many of us on this thread think that we are heading for a similar state again.


Where is this data? You didn't state any data you pointed out things that _*may*_ indicate. That is opinion and I explained how what you said can be dismissed by an equally logical opinion. You can bring facts in and show how they prove you point but you haven't when I asked. Maybe there is proof on this thread but it is very long so what proof is there now. You listed 5 anecdotal points all of which I answered you decided instead of defending your points to blame me for not beliving you. Do you understand that?


			
				Neffa said:
			
		

> So - final answer on your point - I lived in England for about 20 years, including the period of the crash in 89. During my time there, I rented and bought and sold property. I also know many hundreds of people who bought/sold during that time in many areas of the country. I know the price history (this is in the public domain in England - you can see by postcode the transaction price of all properties) of every house we looked at to buy and how it had fallen during the crash and recovered since. I read the papers, I can do research. The fact is that prices fell by 40-45% over the 12-18 months after the crash. If you are interested, you can see the detail with a quarter-by-quarter breakdown of prices, affordability and so on for each UK region at www.nationwide.co.uk. etc...


Can you actually give a more direct link I have no idea where this data is on that site.  I still don't see how that will prove what you said. Markets move a lot especially based on local employment. I think that will prove more usefull to indicate local house prices. THe way I remeber house crashes in the UK is they were about employment *and *the speculators had come out of the market. Is that not as reasonable if not more reasonable as assuming FTBs got scared?


----------



## walk2dewater

Neffa said:
			
		

> I'll give you one more answer, then I'll stop - I think you are determined to refute any evidence anyone gives you. I don't think these exchanges are going anywhere - we supply data, you say "that's not proof" and we go full circle. This is a speculative discussion and no-one can bring facts forward from the future but we can point to trends and similarities in the market today from previous crashes which make many of us on this thread think that we are heading for a similar state again.
> 
> So - final answer on your point - I lived in England for about 20 years, including the period of the crash in 89. During my time there, I rented and bought and sold property. I also know many hundreds of people who bought/sold during that time in many areas of the country. I know the price history (this is in the public domain in England - you can see by postcode the transaction price of all properties) of every house we looked at to buy and how it had fallen during the crash and recovered since. I read the papers, I can do research. The fact is that prices fell by 40-45% over the 12-18 months after the crash. If you are interested, you can see the detail with a quarter-by-quarter breakdown of prices, affordability and so on for each UK region at www.nationwide.co.uk. That will clearly show that affordability in SE England in late 1989 was at its all time worst position since 1957. So I think it is a reasonable view that the market became too expensive for the average buyer to make their monthly payments and the market corrected because buyers simply could not afford the stretch any longer. Hence my view that affordability and lack of faith in upward price movement crashed the market. Just like tulips did, just like tech stocks etc. etc.


 
Neffa, the believers within the Church of Property don't listen to evidence from heretics.  Thank god burning at the stake was banned a few years ago.

This report (i.e more "begrudgerism" and "doom-mongering" this time by meddling foreigners at Fitch Ratings) suggests that Ireland's economy is the 2nd most precarious after Iceland's, who incidentally have had to jack their rates up to 11.5% to protect their currency.
http://data.cbonds.info//comments/15643/Ba..._060206_ENG.pdf


----------



## Calina

Loki said:
			
		

> I am not saying they are casuing anything so I don't have to prove they are doing anything. THe onus is on you.
> I see lots of car ads for very expensive cars and show rooms, actually masses of advertisement. Why? High ticket items generate huge profits but small %. Lots of advertisement money pumped into a very small market. So anything with advertisement is explained that way. ANy talk of it can be put down to the same just like cars. Magazines about it are property porn as our the shows.
> 
> 4.Low rent yields would suggest it isn't a speculators market as there is little profit in it. How do you know there are investors? Any figures
> 
> 5. Where? How many? A percentage maybe? Are you mixing up the holiday home estates.
> 
> Everything you have said is anecdotal at best. You might call it proof  but it isn't.
> 
> What? How much did the prices "crash" by then? How do you know the casues? I mean basing it on what figure or is it another throw away comment? I just like proof to what people say as often ther is none and you get "I over heard this in the pub" type comments.


Loki, 

Regarding one point: rents are, at best, static, and falling vis a vis inflation. Renting now costs a lot less than it did 4 or 5 years ago. In general, this usually implies that demand has fallen vis a vis supply and this in the face of a working population increasing due to a large influx of immigrant labour. As demand clearly hasn't fallen, then by definition, the supply of rental accommodation must have shot up. Someone has to be buying property to let it because it's not appearing like magic. But the cost of servicing the debt on that property now often exceeds the rental income on that property, so there is no immediate interest in buying it, other than to assume that there will continue to be capital appreciation. 

Personally I call that gambling, but some people call it speculating on the property market. 

That's one point.

Regarding no 5 - there are reports that up to 40% of new builds are "unaccounted for" in terms of occupation. I realise of course that I could be wrong, but I work on the assumption that they are either unlet, or not registered as being let and not owner occupied. I assumed - someone with more knowledge in that industry can correct me - that most holiday homes would be described as owner occupied. As far as I'm aware, the bulk of building completed in the last year was in urban non-holiday areas so I can't see how holiday homes would account for very much of the property unaccounted for anyway. 

While the onus may well be on Neffa to prove her position, it is not true to say there is no onus on you. In truth, you must prove your position too. An absence of proof for the opposing view does not automatically infer that your position is proven. If I am not mistaken, your view is that there will be no property crash, based on the following: people might subdivide houses into multioccupancy units, based on well they did it with Georgian houses and twenty-year olds share rooms in their parents' appartments in Rome. 

To be honest, I find this less compelling than any of Neffa's supporting argument to say the least. I'd also add that I find your contributions difficult to follow and unclear on occasion which adds to my finding it ironic to seeing you nitpick about language, meaning and the abuse of same.


----------



## Howitzer

Calina said:
			
		

> To be honest, I find this less compelling than any of Neffa's supporting argument to say the least. I'd also add that I find your contributions difficult to follow and unclear on occasion which adds to my finding it ironic to seeing you nitpick about language, meaning and the abuse of same.


 
Whilst I'd have to agree with all of your points I'm always more compelled to read any of L's points, not because I agree with them but because I don't. Nearly everyone on this thread disagrees with L but property prices still increase by the day. Unless L himself is buying property hand over fist there must be tens of thousands of other people out there who share his general stance.

How can everybody on this thread be virtually unanimous in their bearish viewpoint on property but be so out of touch with what the market says? It kind of smacks of "we're smarter than youism".


----------



## Loki

Calina said:
			
		

> Loki,
> 
> Regarding one point: rents are, at best, static, and falling vis a vis inflation. Renting now costs a lot less than it did 4 or 5 years ago. In general, this usually implies that demand has fallen vis a vis supply and this in the face of a working population increasing due to a large influx of immigrant labour. As demand clearly hasn't fallen, then by definition, the supply of rental accommodation must have shot up. Someone has to be buying property to let it because it's not appearing like magic. But the cost of servicing the debt on that property now often exceeds the rental income on that property, so there is no immediate interest in buying it, other than to assume that there will continue to be capital appreciation.


A logical assumption but I have also heard rent has gone up and have experience of it. So to state rent is static is questionable. *I am getting MORE rent now. *I am not on my own, people I work with are complaining rent has gone up. Lower yield can be used to say that the investors are not entering the market too. Rent costs have not exceeded rental income for many people only some which is what people here are missing. THere is also more than one reason to invest in property.


			
				Calina said:
			
		

> Personally I call that gambling, but some people call it speculating on the property market.


I would agree if that is what people are doing but how do you know? THe indicators being used by people here can indicator other things too. What so sure?

That's one point.


			
				Calina said:
			
		

> Regarding no 5 - there are reports that up to 40% of new builds are "unaccounted for" in terms of occupation. I realise of course that I could be wrong, but I work on the assumption that they are either unlet, or not registered as being let and not owner occupied. I assumed - someone with more knowledge in that industry can correct me - that most holiday homes would be described as owner occupied. As far as I'm aware, the bulk of building completed in the last year was in urban non-holiday areas so I can't see how holiday homes would account for very much of the property unaccounted for anyway.


If there is areport I'll read it. If there is not I won't believe it as I have seen no signs of it. It is a very ambigious claim and flies in the face of the people in the property ques.


			
				Calina said:
			
		

> While the onus may well be on Neffa to prove her position, it is not true to say there is no onus on you. In truth, you must prove your position too. An absence of proof for the opposing view does not automatically infer that your position is proven. If I am not mistaken, your view is that there will be no property crash, based on the following: people might subdivide houses into multioccupancy units, based on well they did it with Georgian houses and twenty-year olds share rooms in their parents' appartments in Rome.


I never said it was fact and said it will be a factor that nobody is considering. I used it to point out people are talking economics and ignoreing the property stock in the market. I also provided evidence of somebody appearing to sell a property as I described. 
I don't claim my view is right I am asking for evidence on a belief so I can understand and make up my own mind. People will agree with a view if it suits them whether there is proof or not. Remebr the sun does not rotate around the earth


			
				Calina said:
			
		

> To be honest, I find this less compelling than any of Neffa's supporting argument to say the least. I'd also add that I find your contributions difficult to follow and unclear on occasion which adds to my finding it ironic to seeing you nitpick about language, meaning and the abuse of same.


I am sure it is very easy for you to agree with a supporting view. If you find if difficult to understand people it is normally becasue they are saying something you are not used to thinking about or in a way you are not used to thinking. Disliking me or anything else doesn't make me wrong. Neffes argument has no facts or data. I ask for a basis and I am the bad guy? People here truely just want to talk to people who agree with them and not the facts.


----------



## Neffa

Howitzer said:
			
		

> How can everybody on this thread be virtually unanimous in their bearish viewpoint on property but be so out of touch with what the market says? It kind of smacks of "we're smarter than youism".


 
Because I think most people are not going through the (painful) analysis we are going through. Most people are doing this on emotion and gut feel rather than detailed analysis. Frankly, sometimes I wish I could just go ahead and buy as it would be easier than having to think of reasons not to do it! 

99.99% of people in Ireland think "Property is my pension" etc. etc. etc. etc. - these views have been well-trotted out in this thread so far. The cheapest credit Ireland has ever seen makes borrowing easy. And because the bulk of the market have only ever seen growth and nothing else, demand rises and the momentum continues on prices. And it will continue to do so, until it gets toppy, when the reverse psychology will kick in. 

You won't see any change until the interest rate rises bite and that won't be until this time next year. So we'll probably continue to be out of line until then.


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## ivuernis

Howitzer said:
			
		

> How can everybody on this thread be virtually unanimous in their bearish viewpoint on property but be so out of touch with what the market says? It kind of smacks of "we're smarter than youism".


 
Are you saying the bears are out of touch just because prices are still increasing or because we don't know the market well enough?

Plenty of individuals and groups who know the market quite well have issued continual warnings about the unsustainability of the property market.


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## bearishbull

as i said earlier the price increases are at present a self fufilling cycle,people dont mind paying more as they assume they will be able to sell it for much more in future and also that they will definitely be earning more in future,obviously theres other factors at play(strong demand,immigration,affordabilty) but its this part that is so dangerous,i'd love to see a survey done of a hundred first time buyers on their beleifs and predictions for the future of the property market,obviously because they are buying they feel prices will keep going up or at least not fall but what makes them so certain (their property belief system) that prices will continue on and upward trajectory.
i think when the many investors in the market who are keeping rents low by accepting paltry yields see prices slowing to less than 3% growth (so no growth after inflation) they will exit market causing a downward movement.


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## Howitzer

ivuernis said:
			
		

> Are you saying the bears are out of touch just because prices are still increasing or because we don't know the market well enough?


 


			
				Neffa said:
			
		

> 99.99% of people in Ireland think "Property is my pension"


 
I'm bearish on quite a few of the causal effects of the property boom, notably interest rates. However property as an investment class seems to defy analysis. It just seems strange that there are so few dissenting views on this forum to the future price of Irish property (ie: all negative) whilst Joe Public can't get enough of it. 

It's just a strange oul debate when there's only one poster who seems to represent the majority out there. I mean where are all the other property bulls?


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## walk2dewater

If there's soooooo much demand for housing how come I can rent a small but beautiful terraced house in south city centre for €1,000/mth????  The place could fetch, I'm guessing, €500k - €1m depending on which way the winds blowing.

Demand is confined to PROPERY FOR SALE, property for rent is cheap as chips.

[Has anyone seen price of gold (or zinc) this week?]


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## bearishbull

ivuernis said:
			
		

> Are you saying the bears are out of touch just because prices are still increasing or because we don't know the market well enough?
> 
> Plenty of individuals and groups who know the market quite well have issued continual warnings about the unsustainability of the property market.


 
you see the vast majority of people dont have a clue about investment and how to value assets and just assume things will just keep going up if they have been going up for last twenty years.ask a hundred random people in the street what rental yields are in dublin or whats the ratio of average income to average house prices and they will look at you with a blank stare,its only when these sort of people start questioning the constant rise in prices that market sentiment changes significantly.the media has a big part to play too,if the sentiment remains bearish for long enough people will become less optimistic and chances of a correction becomes more real.


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## Howitzer

bearishbull said:
			
		

> i'd love to see a survey done of a hundred first time buyers on their beleifs and predictions for the future of the property market,obviously because they are buying they feel prices will keep going up or at least not fall but what makes them so certain (their property belief system) that prices will continue on and upward trajectory.


 
Started a thread on this "FTB's v Interest Rate Rises". Most FTB's seemed more relieved than anything as the rises in the first 1/4 of this year are giving them a bit of breathing space. Even though the interest rate rises do appear to be of concern 'as long as the prices keep going up, I'm all right Jack'.


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## Loki

walk2dewater said:
			
		

> If there's soooooo much demand for housing how come I can rent a small but beautiful terraced house in south city centre for €1,000/mth???? The place could fetch, I'm guessing, €500k - €1m depending on which way the winds blowing.
> 
> Demand is confined to PROPERY FOR SALE, property for rent is cheap as chips.
> 
> [Has anyone seen price of gold (or zinc) this week?]



And for 20 year in Italy it was cheaper to rent than buy yet they have the second highest home ownsership in the world. I am experience increased rent yields not less. 

I also don't beleive the majority of people in Ireland beleive prices can only go up. It's only people who are convinced they will go down or the crash is coming that say the entire country expects rises.


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## walk2dewater

Howitzer said:
			
		

> It's just a strange oul debate when there's only one poster who seems to represent the majority out there. I mean where are all the other property bulls?


 
The bulls are being "proactive" [speculating] about the "long-term" [until they can't flip debt anymore]. They're out there getting on with their lives [debt fueled] and have no time for moaners and whingers [independent thinkers] who are afraid to grow up [subsidise 50yr old early retirees].


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## Howitzer

walk2dewater said:
			
		

> The bulls are being "proactive" [speculating] about the "long-term" [until the can't flip debt anymore]. They're out there getting on with their lives [debt fueled] and have no time for moaners and whingers [independent thinkers] who are afraid to grow up [subsidise 50yr old early retirees].


 
I was going to say the same thing [without the square brackets].


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## bearishbull

Howitzer said:
			
		

> Started a thread on this "FTB's v Interest Rate Rises". Most FTB's seemed more relieved than anything as the rises in the first 1/4 of this year are giving them a bit of breathing space. Even though the interest rate rises do appear to be of concern 'as long as the prices keep going up, I'm all right Jack'.


a friend of mine has a interest only mortgage , i dont think he realises that since he first got his mortgage a year ago untill the projected rates of close to 5% next year his repayment will have risen 66%!! ,he too thinks "prices will only rise so it doesnt bother me if my repayment rises" ,people then say ah 5% is nothing i remember when rates where 14% etc but this is nonsense as inflation rates were much higher(many times even higher than interest rates) at those times which reduced you real mortgage debt independent of repayments.


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## walk2dewater

Loki said:
			
		

> And for 20 year in Italy it was cheaper to rent than buy yet they have the second highest home ownsership in the world. I am experience increased rent yields not less.
> 
> I also don't beleive the majority of people in Ireland beleive prices can only go up. It's only people who are convinced they will go down or the crash is coming that say the entire country expects rises.


 
Right.  But why does my home which is worth 500k-€Xm  rent for €1,000/mth?  Maybe I should send my question in to Edel Morgan at the Irish Times property Q&A section, I'm sure she knows... oh hang on I know... my landlords in it for the "long-term"...


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## walk2dewater

Howitzer said:
			
		

> I was going to say the same thing [without the square brackets].


 
LOL!


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## Neffa

Howitzer said:
			
		

> I'm bearish on quite a few of the causal effects of the property boom, notably interest rates. However property as an investment class seems to defy analysis. It just seems strange that there are so few dissenting views on this forum to the future price of Irish property (ie: all negative) whilst Joe Public can't get enough of it.
> 
> It's just a strange oul debate when there's only one poster who seems to represent the majority out there. I mean where are all the other property bulls?


 
Read the property for investment forums - there's a ton of them there and you can see the thinking which drives them. I've a feeling this forum is "the dark side" so they don't come here - save for Loki.


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## Duplex

*Extraordinary Popular Delusions And The Madness Of Crowds*
*By Charles MacKay*
*1841*




*



In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members

Click to expand...

* 

http://www.litrix.com/madraven/madne001.htm#1


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## Neffa

Central Bank has just reported lending figures for Feb:

- up 29.4%, highest in a single month since March 2000
- €5.6bn growth in month
- €268bn total Private Sector Credit, roughly half attributable to households 
- €102.5bn mortgage lending


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## Howitzer

Neffa said:
			
		

> I've a feeling this forum is "the dark side" so they don't come here - save for Loki.


 
Well then fair play to him for sticking his neck out.


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## Loki

walk2dewater said:
			
		

> Right. But why does my home which is worth 500k-€Xm rent for €1,000/mth? Maybe I should send my question in to Edel Morgan at the Irish Times property Q&A section, I'm sure she knows... oh hang on I know... my landlords in it for the "long-term"...


The point is  why are you obssed with rent yields when obviously under some situations they don't matter and the situation can go on for decades. According to people here it has an instant effect and means the market MUST crash and that it IS a  bubble. THere is proof that it is not. 
People here can only see property investment one way and never consider the property stock and only economics with one theory aand isnsit on forcing a fit without proof. 
ASk for proof and you get riddiculed.

I have yet to understand how advertising of foregin holiday homes indicates that investors here are pushing up prices in this market. Yet that is what is being siad and people agreed with it. You want to say I am the crazy one living in a dream world I think you should look around at what people are actually are saying and stop agreeing with each other becasue you all think in the same outcome. Try using  facts instead of magical insight


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## bearishbull

is there anyway of ignoring certain posters on askaboutmoney?


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## walk2dewater

Loki said:
			
		

> The point is why are you obssed with rent yields when obviously under some situations they don't matter and the situation can go on for decades. According to people here it has an instant effect and means the market MUST crash and that it IS a bubble. THere is proof that it is not.
> People here can only see property investment one way and never consider the property stock and only economics with one theory aand isnsit on forcing a fit without proof.
> ASk for proof and you get riddiculed.
> 
> I have yet to understand how advertising of foregin holiday homes indicates that investors here are pushing up prices in this market. Yet that is what is being siad and people agreed with it. You want to say I am the crazy one living in a dream world I think you should look around at what people are actually are saying and stop agreeing with each other becasue you all think in the same outcome. Try using facts instead of magical insight


 
Ok, so you havent a clue.  Anyone else know why my rent is SOOOOO cheap?


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## Howitzer

walk2dewater said:
			
		

> Ok, so you havent a clue. Anyone else know why my rent is SOOOOO cheap?


 
Ever see Kingpin?


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## langball

"In 2006 the Irish market is set to explode!"

[broken link removed]

- in that case i am glad i cashed out my chips


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## Duplex

*ex·plode* 
_v._ *ex·plod·ed,* *ex·plod·ing,* *ex·plodes *
_v._ _intr._

To release mechanical, chemical, or nuclear energy by the sudden production of gases in a confined space: The bomb exploded.
To burst violently as a result of internal pressure.
To shatter with a loud noise: The vase exploded into tiny pieces when it hit the floor.


----------



## CCOVICH

This thread seems to have run it's course.  I see no reason to leave it open as there appears to be very little new added on the topic at hand and there is too much bickering going on.

If anyone wants to start a new thread that deals with certain issues raised in this one they are free to do so, but we won't tolerate the sort of tangents and irrelevant or unnecessary posts we have seen here of late.


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