Current public sentiment towards the housing market?

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Duplex said:
Imagine the surprise if The Irish Times started to refer to the Irish housing market as a bubble.
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Never underestimate the ability of an Irish newspaper to say one thing in its 'main' section while its 'property' section appears on the face of it to be driven by quite a disparate set of editorial 'values' .

The Irish Times would never do that though, they believe in consistency !
 
2Pack said:
Never underestimate the ability of an Irish newspaper to say one thing in its 'main' section while its 'property' section appears on the face of it to be driven by quite a disparate set of editorial 'values' .

The Irish Times would never do that though, they believe in consistency !
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But whats this?, investors selling up (dumping), the word cynical used by the Irish Times in the same sentence as property. Have they seen the light.

PS
Who do these investors expect to buy these properties?

Not only is there likely to be an over supply of apartments in some areas of Dublin, but some investors are now selling off their rental properties, reckoning that they have seen the best of the buoyant market. Other investors are planning to consolidate their portfolios by selling all their bits and pieces to buy one decent investment. Top of the wish list at the moment will be one of the AIB or Bank of Ireland branches which are about to hit the market at prices generally between €5 million and €9 million. Imagine the cachet of owning your local branch? No trouble in raising a loan for your daughter's new car after that. The banks are hoping to capitalise on the runaway commercial investment market, so expect a feeding frenzy over the coming months. The more cynical among us wonder why, if the branches are such good buys, that the banks have chosen to offload them at this stage. Remember Eircom.
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RugbyBoy said:
more bad news frm the US - but it won't happen here. Ireland is unique;)

http://business.timesonline.co.uk/article/0,,8210-2332487,00.html
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Interesting line:

However, people do not join a wave of selling when prices fall: most simply sit tight. Furthermore, the US market is a vast, diversified one, nothing like as dominated by a single, frothy urban market in the way the UK is affected by London.
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Err, I would have thought extending the logic of this to Ireland and Dublin is self evident. The UK is a large and diversified market compared to here.
 
In the Sunday Times, Irvin Stelzer in his American letter made the point that some commentators in the US housing business may be deliberatly talking up the housing crash in order to frighten the Fed to start dropping interest rates. With lower rates, they could then start selling "affordability", "soft landing", "good time to buy again" etc.

Should the Fed actually start dropping rates, it's harder to see the ECB continuoulsy rising rates, which could prevent a significant fall in housing prices here in Ireland. However Stelzer thought that the Fed would remain more woried by inflation and wouldn't drop rates in the short term.
 
Persius said:
Should the Fed actually start dropping rates, it's harder to see the ECB continuoulsy rising rates, which could prevent a significant fall in housing prices here in Ireland.
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If the Fed do this (which I agree could happen) - then the US Dollar is toast, and this will simply lead to a host of other problems which will trickle/flood down to Ireland.
 
Persius said:
In the Sunday Times, Irvin Stelzer in his American letter made the point that some commentators in the US housing business may be deliberatly talking up the housing crash in order to frighten the Fed to start dropping interest rates. With lower rates, they could then start selling "affordability", "soft landing", "good time to buy again" etc.

Should the Fed actually start dropping rates, it's harder to see the ECB continuoulsy rising rates, which could prevent a significant fall in housing prices here in Ireland. However Stelzer thought that the Fed would remain more woried by inflation and wouldn't drop rates in the short term.
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I think the Fed will hold for now and maybe cut next year in response to emerging signs of a recession. (Interest rates fall during a recession.) I think that low interest rates wont sort out the structural problems in the US economy, in the same way low rates failed to prevent a deflationary recession in Japan.
 
But my dear chaps, the prime driver in the Irish housing market will be the purest of local oversupply, the Fed/ECB/Inflation/Exchange Rates equation is secondary and energy costs are tertiary and for another thread surely.

Ben Bernanke gets no notice out the Back of Ballivor ...I sez now unto yiz all !
 
2Pack said:
Never underestimate the ability of an Irish newspaper to say one thing in its 'main' section while its 'property' section appears on the face of it to be driven by quite a disparate set of editorial 'values' .

The Irish Times would never do that though, they believe in consistency !
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Well this morning they seem to be beginning news management of the forthcoming crash, I mean soft landing. And if even the banks are now predicting a "material slowdown".....

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Lumpsum said:
the banks are now predicting a "material slowdown".....

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I had one of those 'material slowdowns' once. I drove my car into the back of an Audi, the guy driving it was livid, balling and spitting. Sez I "sure tis only a material slowdown ya big fool".
 
Hello all. Fascinating thread – keep it up!

I was pretty bullish on the market up to recently but a few things (including this thread!) have made me reassess my views:
When the banks started using ‘ability to repay’ calculations rather than the traditional salary multiples, the resultant 6-10 time multiples were ‘justified’ by the incredibly low interest rate environment. But the corollary is also true: in a rising rate environment the ‘ability to repay’ calculations must result in lower salary multiples being offered – I would suggest 5x is still generous.

When we bought our 1st house (4/5 years ago) we were on ordinary junior-level salaries (banking and law) and the bank lent us around 4 times our joint income to buy the house. Typical starter home – D8, 2-bed ex-council house 15min walk to town.
These are now selling for 450k which, based on 5x salary, would require an excellent salary for a single person or 2 good salaries. It is not remotely affordable to typical FTBs (junior-level salaries have not doubled in the last 4 years!) and is also not attractive for investors as they rent for only 900-1200pm.

And things don’t get any easier at the other end of the market. My wife and I had to go for a 35yr (I know, I know!) mortgage in order to be able to afford our home (last year). We decided to go for it because it’s the area we always wanted (D6), close to town, Luas, shops, schools etc and we’ll be here for at least 10 years. We could barely afford it, our salaries are at the high end of the scale and the mortgage is still only around 75% of house’s current ‘value’ so who could we sell it to if its ‘value’ keeps on increasing?

So I think the time has come to cash in the profit on our 1st house. It will enable us to reduce our mortgage to 60%, 20 years (saving a fortune in interest) with manageable repayments (even when rates go to 5%).
I know a lot of people who are in the same position and thinking of selling their investment properties (usually their 1st homes) in order to take profits and insulate themselves somewhat from any price correction.
Just hope to get it done before the crash happens!!

Sorry for length of post - 1st time and all that... need to hone my editing skills!!
 
BigM said:
So I think the time has come to cash in the profit on our 1st house.
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Great post BigM. Nearly everyone I know who moved up the "ladder" in the past few years didn't sell their first or second homes. We were encouraged to hang on to ours when trading up also. I've noticed that a lot of the hangers-on are thinking about letting go of their investment property to bank the amazing returns achieved, realising that the market now looks like it's weakening. There's also quite a bit of hassle renting out property and life appears more straighforward when you have a healthier financial situation and no letting headaches.

It's a bit like Who wants to be a millionaire? All of the lifelines have been spent and the next question is impossible, it's too much of a gamble to keep going.

A lot of the selling pressure over the next year will come from hangers-on letting go IMO.
 
If this sort of thing can happen in the past couple of years when house prices went crazy, I suspect there will be a lot of similar stories in the near future.

True story (numbers approximate and I'm estimating buying/selling expenses and cgt):

The guy Purchased house for investment in 2004 (South Dublin City) 450k + 7.5% stamp duty + expenses = 486k.

Landlord intended to rent it out but house needed complete refurbishment. This was done over the two years but the ongoing work meant vacant periods as tenants refused to stay in the house with the work overruns and builders, decorators etc marching through it.

Cost of refurbishment (including an extension) = 120k.

Tenants were numerous (new arrivals - pack 'em in) enough for periods of time to cover the bulk of interest rate payments.

So total cost 486k + 120k = 606k.

The construction work did not go smoothly and there was much conflict with builders, tenants and neighbours. The landlord and
his wife both have jobs with young kids in a creche. His wife had a near nervous breakdown and missed time from work.

Now the house is back on the market - asking price 640k. Neighbours don't think it will get this price as similiar priced properties in the area are sitting with no buyer interest.

Let's assume it does fetch 640k
Selling costs = 5k. CGT = 6k.

So if he's lucky he walks away with a profit of about 20k for a two year nightmare.
 
whathome said:
A lot of the selling pressure over the next year will come from hangers-on letting go IMO.
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Definately. The amount of posts relating to this sort of scenario over the last 3 months has been huge.

The tax liabilities which a lot of these people have will be interesting. Brokers and Bank Managers advising people to take out new mortgages and hold onto their existing properties seems to be a pretty close parallel to the Bank Managers advising clients to take out off shore accounts in the 80s.
 
Howitzer said:
The tax liabilities which a lot of these people have will be interesting. Brokers and Bank Managers advising people to take out new mortgages and hold onto their existing properties seems to be a pretty close parallel to the Bank Managers advising clients to take out off shore accounts in the 80s.
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Concurr. I would even suggest there's a conspiracy going on.
 
I would never take a Bank Manager's advice when it came to buying or selling property! It's not his/her role...their role is finance and I assume they would always suggest you held on to old property because it means two mortgages. More money for them!!
 
Remix said:
If this sort of thing can happen in the past couple of years when house prices went crazy, I suspect there will be a lot of similar stories in the near future.

True story (numbers approximate and I'm estimating buying/selling expenses and cgt):

The guy Purchased house for investment in 2004 (South Dublin City) 450k + 7.5% stamp duty + expenses = 486k.

Landlord intended to rent it out but house needed complete refurbishment. This was done over the two years but the ongoing work meant vacant periods as tenants refused to stay in the house with the work overruns and builders, decorators etc marching through it.

Cost of refurbishment (including an extension) = 120k.

Tenants were numerous (new arrivals - pack 'em in) enough for periods of time to cover the bulk of interest rate payments.

So total cost 486k + 120k = 606k.

The construction work did not go smoothly and there was much conflict with builders, tenants and neighbours. The landlord and
his wife both have jobs with young kids in a creche. His wife had a near nervous breakdown and missed time from work.

Now the house is back on the market - asking price 640k. Neighbours don't think it will get this price as similiar priced properties in the area are sitting with no buyer interest.

Let's assume it does fetch 640k
Selling costs = 5k. CGT = 6k.

So if he's lucky he walks away with a profit of about 20k for a two year nightmare.
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Funny thing is that the PTSB/ESRI would report that such houses have increased in 'value' by 40%.

"So house prices continue to increase at phenomenal rates, get in now, or you'll miss the boat. Quick!"
 
CelloPoint said:
Funny thing is that the PTSB/ESRI would report that such houses have increased in 'value'
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Next months PTSB/ESRI report will generate a lot of headlines. I don't think it will show prices falling yet because of the four month time-lag but the size of the drop from the previous month will surprise a lot of people.
 
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