# House Prices - Rise indefinately or steady off?



## piggy (22 Jun 2004)

This has been something that has been bothering me for a while now. Please excuse whatever naivety lies in this post.

Back in the early 70's my father bought his house for £5,400. Let's just say for arguments sake that it's worth 500k now. I'd say it could be worth more but that figue will do.

That means it's value has approxiamtely been multiplied by 100!!

As far as I can see there are two schools of thought on house prices:

*A)* They will continue to rise. Period. You can't go wrong with a house. Best investment you will ever make.

or

*B)* The bubble will eventually burst.

I don't believe in B personally. 
However, house prices surely can't keep rising like they have done over the past 30 years. Can they? To even suggest that said house might be worth 3 million at some stage seems ridiculous.
Wages have already dramatically slipped behind house prices...to such an extent that now banks are basing mortgages on disposable income and lending up to 4-5 times salary in some cases. 30 year mortgages are the norm. Surely it can't go on indefinately???

My own theory is that houses at the higher end of the market 700k to 1 million+ will eventually steady off.
Starter houses (say 300k) will be where the real increases will be found. Buy your new house in new estate. As the surrounding area matures over the years so will the value of the house/apartment.


There has to be a cap on house prices at some stage. Anyone any thoughts?


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## legend99 (22 Jun 2004)

*..*

Hey piggy,
People with specialist knowledge of the housing markets, senior economists, auctioneers with years in industry seem to disagree every other day so it seems to be a case of guessing. I find reading economists that they are generally very accurate after the event!!!

I would be thinking that at some stage there will simply have to be a slowdown. Otherwise I don't see where people can get the cash. Having said that, I thought that 3 years ago when I lived in Dublin....and its just kept going...

I guess in the long term you'd expect blips and ups and downs but in general you'd think they would keep or slightly increase their value. To be honest, I personally think that if there was a massive economic slump, saying Intel pull out of Kildare, IBM close etc etc that the banking system as a whole here could face chaos....bankruptcy etc. Will that happen...who knows.

However, they said that the stock market would always gain long term. Looking at this, because of the tech bubble in late nineties the Dow Jones is still down over 5 years. I have also read some interesting stuff recently saying that past economic cycles are no longer applyable currently or in the future due to the overall fundmentals changing So no guarantee things will continue to rise long term....

But tis all guess work and I'm probably talking and quoting through me This post will be deleted if not edited to remove bad language....

So on a more important note, hows the house/pool table purchase coming along?!!!
I was thinking...ye need to find a budget for an outside hot tub in the back garden....ye'd be legends with the ladies if you had a chat up line that included....would you like to go for a dip in my hot tub?????!!!!!

And as well as that you could have an AAM party in your back so we could all give it a go!


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## RevJamesFlynn (23 Jun 2004)

*Re: ..*

Piggy,

As a man who lived through the tech boom of the late 90s, I can assure you that the one thing I learnt is that when it comes to markets, the only thing you can trust is your own judgement.  

Back at the height of the tech boom, every financial magazine and every commentator was talking about the "new economy", that "it's all about productivity".  Essentially, the best brains of Wall Street were talking utter cr*p.  The only sources that I noticed called the tech bust correctly were those with a long-term view: Warren Buffet and the Economist Mag.

I've no idea where the Irish property market will go.  I've certainly been wrong for long enough now to know that I've sweet F A insight into this particular market.

But from living here again I suspect that most Irish people no longer view property as a "market" at all; the property boom has gone on for so long, they just think that it will always rise.

And perhaps it will.  The Dublin property market now however for me resembles more and more the "women empowering women" pyramid scheme - it's the last ones in who will pay.

I prefer to sleep soundly at night however, so I've cashed in my chips and bought a cheaper place.   Could turn out to be a very stupid move, but it suits me.

But a (sincere) best of luck to the remaining players . . .

 -- James


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## piggy (23 Jun 2004)

*Re: ..*

*I was thinking...ye need to find a budget for an outside hot tub in the back garden....ye'd be legends with the ladies if you had a chat up line that included....would you like to go for a dip in my hot tub?????!!!!!

And as well as that you could have an AAM party in your back so we could all give it a go!* 

Having enough money to buy a fridge will be hard enough!!
Pool table is on the back-burner right now too  

Anyway, if I did have a hot tub I'm not sure it would be such a good idea to invite all the AAM-ers. Someone would inevitably bring up politics and start the whole thing off  

*I can assure you that the one thing I learnt is that when it comes to markets, the only thing you can trust is your own judgement.* 

I totally agree James. No one can predict accurately what will happen...I'm just interested in what people generally think. I suppose I like my own idea and was looking for feedback on whether people agreed with it or not, to some extent.

You both make some interesting points though.


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## THE MACHINE (24 Jun 2004)

*Property...*

Piggy ..." some banks loan up to 7 times salary " ...which banks / brokers are these ...???


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## piggy (24 Jun 2004)

*Re: Property...*

Where did I say 7?  

I didn't mean to say that much. Some of the more aggressive lenders will go to 4 to 5 times. Ulster Bank being one of them.


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## househunter1 (24 Jun 2004)

> My own theory is that houses at the higher end of the market 700k to 1 million+ will eventually steady off.



The opposite to that is happening the the mo. Starter houses are not increaseing by a huge amount due to the large supply, especially second hand, while large houses in established areas are making better gains, du to a more limited supply. I think this trend will continue into the future, as the pope's generation upgrade over the next 5-10 years.

As regards long term trends, the current boom is due predominantly to demographics.  There are 45k students doing the leaving cert now compared to 60k 5-10 years ago. This will represent reduced demand 10 years down the line. 

Personally I'm not really interested in speculation much and this is as far as I'd go. Whats the point / need anyway. People I know now buying houses are taking their time, getting some discount, and buying in the areas they want to live, as they know the high costs of property transactions make switching very expensive, especially when you're not gaining huge amounts of equity over short periods of time in you home like before.


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## N0elC (24 Jun 2004)

I got a mortgage of IR£214k on a salary of £35k from BOI four years ago, my little sis got a mortgage of IR£120k on a salary of IR£20k at the same time.

It's all about the business case you put forward to them at the time. 

Personally, I'm glad we both took the risk when we did !


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## gimmie (25 Jun 2004)

*House prices*

What happens when interest rates rises, Germany economy is getting better and in the UK there is going to be at least 3 more rate rises before Christmans, which will dampen down the market.


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## Repaymentator (28 Jun 2004)

*Re: House prices*

People that bought early enough in the nineties were in the right place at the right time. They benefited from rapid economic growth while we were catching up with the EUs richest countries.  The baby boom generation had to be housed as they didn't emigrate en mass. There was also a huge lag between supply and demand before construction caught up.  These gains are never to be seen again within the foreseeable future.

I think the best bet for the future are family friendly properties in well located mature areas. The construction boom has been in high density first time properties so that there's a generation that will be trying to move up to a level where there's still a supply shortage. There are far more wealthy people now that can aspire to this standard of housing.


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