Current public sentiment towards the housing market?

[liteweight]

Most BIK mortgages are worth it at the moment I think, if they're 3% fixed.............

I'd say you're right. At 4% the BIK might be worth more to an individual. As long as the ECB rate stayed within spitting distance of the 3%, ... BIK is 42% (depending on salary), and they could claim TRS relief also which made wit worthwhile not to avail of the perk.

Perhaps we'll see them availing of the perk plus borrowing extra for "home improvements", which will see them nicely positioned to buy up any future bargains on the market. As it was in the beginning...is now...and ever shall be..etc.etc.

 

[The Pool Boy]

I had been considering trading up recently and indeed am looking at a development at the weekend, but probably now just looking to be nosy.

My mortgage is paid but it would take about €250-€300k to buy into this development on top of my own house. I just figured that agreeing to buy a house now at top dollar would be risking my equity as I would be dependent on selling my house at it's "current" value. I'd be rightly screwed if I bought and had to drop the asking price on my house....

I'm sure plenty of others were thinking of trading up and are now holding on.....at least I have room for an extension if needs be. In fact, I've noticed 3 applications for extensions in my estate in the last week.

It'll be interesting to gauge demand on Saturday for what is a lovely development but is aimed at the higher end of the market.

 

[baby_tooth]

property ladder....where do ppl get off on this rubbish....

it appears that ppl fail to realise that this ladder is only a reflection of ppl's willingness to pay.

if ppl don't pay, it drops till it sells on the margin, to extract the extra euro value.


what i can't understand is that ppl seem to be doing all these calcs to establish yields without using any sort of a discount rate on their forcasted gains (capp appreciation) as well as the lending cost interest rates...


"will use the investment as me pension"...now that will be interesting indeed.

ireland is a credit bomb waiting to implode..the wise money is on holding out buying anything in this basket case country where asset priec outstrips its utility, but it seems to be typical irish behaviour is to overpay for a below standard service / product on everything....

law-
health
public transport
private transport
civil service
telecommunications

and by the largest degree---

housing stock.

as a young person, ie: a person who the older generation will stick around to pay their pensions as well as the wages of the doctors that "look" after them and the guards that protect their investment properties in the future.....and yet they also expect me to pay up to and over the odds on top of their future expectations on housing costs.

excuse the rant but the more "educated" and well travelled youth of today won't fall into this for very much longer....

romantic ireland is well and truely gone!!

 

[whizzbang]

romantic ireland is well and truely gone!!

...It's with OLeary in the grave.

 

[whizzbang]

I known plenty of Jimmy Gardas that bought multiple properties when the mortgage was fully covered by the rent back in late eighties and most of nineties. one garda i know from castleknock (big house there) retired at 55 and has ten properties and lives off his public sector pension. It was all about timing, and now is the worst time to buy for last 30 years.

has he been smart enough to offload a few at the top of the market?

 

[darex]

what i can't understand is that ppl seem to be doing all these calcs to establish yields without using any sort of a discount rate on their forcasted gains (capp appreciation) as well as the lending cost interest rates...

babytooth - prehaps you could translate what you mean by "discount rate on their forcasted gains"

 

[baby_tooth]

no prob.

ppl about the place are saying if my house increase from x to x+y, then i have made a gain of y. This y has been, including here, discounted back to todays worth by using interest rates.

Interest rates should only be used to calculate the total cost of the mortage, ie: the net cashoutflows.

The future gains from buying now are a function of what else you could have bought, namely the opportunity cost. this is all relative to risk.

Thing is to figure a rate at which to discount back.
I for one, being opptomistic would use a ROI based upon one of the property dependant bodies in Ireland, or the one with the most exposure. Personally, would consider it some where BoI and Anglo, this is to take account for the uncertainity involved.

These co: would give a roughish approx of the returns one would expect from property.

Now, factor in the cost of servicing the debt....

if total cashflows are +ve then its worth investment, else walk away.

I have done this on a few places, and it's not the best of value to be had... yields are relative to all this.

Ya have to take into account the long term forecast of the opportunity cost...

 

[Duplex]

no prob.

ppl about the place are saying if my house increase from x to x+y, then i have made a gain of y. This y has been, including here, discounted back to todays worth by using interest rates.

Interest rates should only be used to calculate the total cost of the mortage, ie: the net cashoutflows.

The future gains from buying now are a function of what else you could have bought, namely the opportunity cost. this is all relative to risk.

Thing is to figure a rate at which to discount back.
I for one, being opptomistic would use a ROI based upon one of the property dependant bodies in Ireland, or the one with the most exposure. Personally, would consider it some where BoI and Anglo, this is to take account for the uncertainity involved.

These co: would give a roughish approx of the returns one would expect from property.

Now, factor in the cost of servicing the debt....

if total cashflows are +ve then its worth investment, else walk away.

I have done this on a few places, and it's not the best of value to be had... yields are relative to all this.

Ya have to take into account the long term forecast of the opportunity cost...

Constructing an appropriate discount rate is the problem in the Irish market. I pretty sure however that the appropriate rate is at least twice current net rental yields on residential property.

 

[baby_tooth]

Constructing an appropriate discount rate is the problem in the Irish market. I pretty sure however that the appropriate rate is at least twice current net rental yields on residential property.

well take boi -- play on irish property mkt - a little safer though as retail banking pulls down its risk weighting

anglo - little riskier - bank rolling large "speculative" devolpments.

if BOI returns 11% pa (as well as far superior liquidity) would expect irish property to at least retun this given stickiness and lack of liquidity...and let us not forget inflation, 11% year on year...growing at the rate of inflation.

If you do the IRR on a house....at this discount rate, wonder what required yeild would come out at

Ya could use perpetutis to price it, one starting now and one starting year after the mortage ends...

 

[Rico]

Do not think there is cause for panic and a crash is certainly not a definite.

a) Vacant housing in Longford or wherever is usually nothing more than a little tax haven which saves a significant investor so much tax on all their rental income they don't care if they are occupied or not. Plenty of affluence to support holiday homes which may be visited once or twice a year. The areas of relevance are urban and busy towns where there is strong demand for rentals and where people want to live.

b) Interest rates even with a rise of 2% are still historically low, majority of homeowners have equity in houses and with the economy buoyant now and over the past few years a significant number of people do not have huge mortgages. If you can contribute to an ssia you can pay this amount to cover additioal repayment needed with interest rate rise when ssia ends and cut back on a few luxuries if needed.

c) Strong economic conditions despite the negatives we are not totally dependent on construction and it doesnt grind to a halt overnight plent y of structural and commercial activity, with very different demograhics to ten years ago, mobile young population, relatively attractive country to live in, single parents,separations divorces all require homes. Growing population.

d) Property has always had strongest attraction to Irish people and homeownership and improving/trading up activity will continue.

In conclusion prices need a correction, no doubt and have to when the price of money goes up but do not believe a collapse will happen particularly on sentiment alone.

 

[Rico]

Do not think there is cause for panic and a crash is certainly not a definite.

a) Vacant housing in Longford or wherever is usually nothing more than a little tax haven which saves a significant investor so much tax on all their rental income they don't care if they are occupied or not. Plenty of affluence to support holiday homes which may be visited once or twice a year. The areas of relevance are urban and busy towns where there is strong demand for rentals and where people want to live.

b) Interest rates even with a rise of 2% are still historically low, majority of homeowners have equity in houses and with the economy buoyant now and over the past few years a significant number of people do not have huge mortgages. If you can contribute to an ssia you can pay this amount to cover additioal repayment needed with interest rate rise when ssia ends and cut back on a few luxuries if needed.

c) Strong economic conditions despite the negatives we are not totally dependent on construction and it doesnt grind to a halt overnight plent y of structural and commercial activity, with very different demograhics to ten years ago, mobile young population, relatively attractive country to live in, single parents,separations divorces all require homes. Growing population.

d) Property has always had strongest attraction to Irish people and homeownership and improving/trading up activity will continue.

In conclusion prices need a correction, no doubt and have to when the price of money goes up but do not believe a collapse will happen particularly on sentiment alone.

 

[Rico]

Do not think there is cause for panic and a crash is certainly not a definite.

a) Vacant housing in Longford or wherever is usually nothing more than a little tax haven which saves a significant investor so much tax on all their rental income they don't care if they are occupied or not. Plenty of affluence to support holiday homes which may be visited once or twice a year. The areas of relevance are urban and busy towns where there is strong demand for rentals and where people want to live.

b) Interest rates even with a rise of 2% are still historically low, majority of homeowners have equity in houses and with the economy buoyant now and over the past few years a significant number of people do not have huge mortgages. If you can contribute to an ssia you can pay this amount to cover additioal repayment needed with interest rate rise when ssia ends and cut back on a few luxuries if needed.

c) Strong economic conditions despite the negatives we are not totally dependent on construction and it doesnt grind to a halt overnight plent y of structural and commercial activity, with very different demograhics to ten years ago, mobile young population, relatively attractive country to live in, single parents,separations divorces all require homes. Growing population.

d) Property has always had strongest attraction to Irish people and homeownership and improving/trading up activity will continue.

In conclusion prices need a correction, no doubt and have to when the price of money goes up but do not believe a collapse will happen particularly on sentiment alone.

 

[whathome]

...

Rico's post from July 14th:

Don't believe a crash is about to happen. In the last ten years house prices have been catching up with incomes. Even an interest rate of 5% is still a relatively low rate. An average mortgage repayment of €1,600 is still comfortably affordable for average earning couple. A majority of people have significant equity in their houses. With a strong economy and culture strong on home ownership, its difficult to see a collapse, there is too much momentum and disposal income. Given recent performance of stock markets there is still a strong sentiment for investing in property. Even if it drops 10% alot of people still will have had serious appreciation. The days for fast capital appreciation seem to be past. Sure alot of things can happen, economy can recess etc the sky can fall in, but it is a just as valid that property prices may just plateau as in the UK over the past few years. The value of property stock is still way above the value of debt.

You really like to repeat yourself don't you! We'll be looking forward to hearing from you again in another three months

 

[blindjustice]

hooray - a bullish post!
or three!
doesnt convince me though

I too have literally bet my PPR on a crash




(if it were to level off why would you not sell up and rent for a while - and re-enter the market later - this would suit people who have bought the infamous "starter home/apartment" who plan on "moving up the ladder". why not take the money now - if it crashes you could lose big if you do this you protect yourself - at a small risk , a risk that you percieve.)

 

[whathome]

hooray - a bullish post!

If only it included something new

 

[Rico]

Apologies for the repetition in posts above,accidental error, nothing intended, just giving my views if thats okay with you whathome. I

 

[Panzraam]

I am bearish overall in the medium to long term, but I don’t think anybody should dismiss Rico's comments out of hand. The UK situation is in many (or at least some) ways similar to Ireland and despite BOE base rates of 4.75% there has been no collapse. It may take an external shock to Ireland to finally push the market over the edge, otherwise it may simply continue for a long period with lower or no price increases and lower levels of activity in the market. A major crash can really only happen with a major increase in unemployment and its not easy that easy for me to see that in the short term.

In the medium term lower levels of construction will lead to a reduction in those employed in that industry but as a lot of those people are immigrants who rent I cant see that effecting demand for housing. Investors have already shown themselves more than willing to put up with 1.5% - 2.0% returns provided they own asset they believe will appreciate in the long run.

IMO we are looking at a long slow deflation of the bubble rather than a pop. Sorry for those who were looking forward to gloating over their home owning friends/collegues but this isnt going to be so clear cut.

 

[conor_mc]

a) Vacant housing in Longford or wherever is usually nothing more than a little tax haven which saves a significant investor so much tax on all their rental income they don't care if they are occupied or not. Plenty of affluence to support holiday homes which may be visited once or twice a year.

Affluence based on property values.... have a look at the growing private credit figures. We're not as affluent as we like to think.

b) Interest rates even with a rise of 2% are still historically low, majority of homeowners have equity in houses and with the economy buoyant now and over the past few years a significant number of people do not have huge mortgages.

Firstly, equity is irrelevant in the context of enticing FTB's into the market. Secondly, by its definition a speculative property bubble isn't based on homeowners having two shillings to rub together, it's based on exaggerated demand from people looking to make a quick buck. These people buy houses purely in order to sell them later at a higher price. These specuvestors will leave the market if the EA's predictions of 3% per annum price rises are true. Since Sherry Fitz themselves reckon 40% of last years property was bought up by "investors", expect to see a significant drop in demand for houses.

c) Strong economic conditions despite the negatives we are not totally dependent on construction and it doesnt grind to a halt overnight plent y of structural and commercial activity, with very different demograhics to ten years ago, mobile young population, relatively attractive country to live in, single parents,separations divorces all require homes. Growing population..

See SFA comments during the week about the rest of the economy (the useful bit!) being in recession while construction gives us "6% growth" comfort-blanket headlines. Check out the declining balance of trade too, while you're at it.

Oh, and re our young population, have a look at how the birth rate fell from 1980 onwards....

d) Property has always had strongest attraction to Irish people and homeownership and improving/trading up activity will continue.

In conclusion prices need a correction, no doubt and have to when the price of money goes up but do not believe a collapse will happen particularly on sentiment alone.

This is the bit where I don't have facts or figures to debate, because sentiment is based on that strangest of things called human nature.

However, don't be surprised if the very strong attraction of owning property becomes revulsion in equal measure once the cliches are blown apart. Remember how eircom has pschologically scarred the general populace, frightening them off shares for 7 years now. Pensions crises (here and in the UK) during the 80's and 90's have plenty of people throwing their eggs in the property basket.

We Irish have long memories when we've been wronged by our investments.

 

[whathome]

Do not think there is cause for panic and a crash is certainly not a definite.

a) Vacant housing in Longford or wherever is usually nothing more than a little tax haven which saves a significant investor so much tax on all their rental income they don't care if they are occupied or not. Plenty of affluence to support holiday homes which may be visited once or twice a year. The areas of relevance are urban and busy towns where there is strong demand for rentals and where people want to live.

Plenty of vacant properties evident in non tax haven and holiday home areas.

b) Interest rates even with a rise of 2% are still historically low, majority of homeowners have equity in houses and with the economy buoyant now and over the past few years a significant number of people do not have huge mortgages. If you can contribute to an ssia you can pay this amount to cover additioal repayment needed with interest rate rise when ssia ends and cut back on a few luxuries if needed.

The problem isn't who's going to have to sell, it's who's going to buy?

c) Strong economic conditions despite the negatives we are not totally dependent on construction and it doesnt grind to a halt overnight plent y of structural and commercial activity, with very different demograhics to ten years ago, mobile young population, relatively attractive country to live in, single parents,separations divorces all require homes. Growing population.

The construction sector accounts for 23% of the country's GDP, compared to an average of about 12% in the EU. That is a dependency.

Falling birth rates in the 80's mean that demographics are going to start working against the housing market.

d) Property has always had strongest attraction to Irish people and homeownership and improving/trading up activity will continue.

Only while prices are rising. Watch that attraction turn to horror and repulsion as the myth disintegrates.

 

[Neffa]

Do not think there is cause for panic and a crash is certainly not a definite.


b) Interest rates even with a rise of 2% are still historically low, majority of homeowners have equity in houses and with the economy buoyant now and over the past few years a significant number of people do not have huge mortgages. If you can contribute to an ssia you can pay this amount to cover additioal repayment needed with interest rate rise when ssia ends and cut back on a few luxuries if needed.

Well, fair play to you for coming on here - we don't get many bulls.

I could pick you up on all four points, but it is (b) I disagree with the most.

Yes, interest rates are low but our mortgage payments to income ratio by year-end 2006 will be at the highest level for 20 years (>40% for many couples according to recent figures). This would be ok if we were at the top of an interest rate cycle but we're in the opposite place .

And, our mortgage debt is the amongst the highest in the world on a per capita basis and is growing twice as fast as our neighbours (who get lots of press for personal debt) in the UK.

So while it is true that a lot of fortysomething/fiftysomethings have huge equity and are not strapped (and are probably funding their SSIA's), the generation behind is leveraged to their nether regions and are starting to struggle bigtime.