Current public sentiment towards the housing market?

[liteweight]

I don't believe that most FTBs can rent cheaply in an area they want to live in. Rents may be decreasing of late but they are still an expensive outlay especially in Dublin. What happens to all theses renters if an investor pulls out and decides to sell? Rent is dead money whether we like it or not and I think it is this perception that drives people to get on the property ladder and not greed as you suggest. There is also the fact that if you rent, by and large, you live with a landlord's colour schemes, facilities on offer etc. This becomes even more of an issue when one has children.

Having said that, the advice I would give my children is to rent in an area they like, rather than buy somewhere way outside Dublin. This advice is based on things like how their lifestyle would suffer, their mental state (spending 2 or perhaps more hours driving just to get to and from work) and their outlay i.e. motoring costs, fast food cos too tired to cook by the time they get home. It's not that I don't believe they should make sacrifices to get what they want.

Another point I would like to make is that a lot of people who put their money into property did so based on the advice of professional advisors. While in previous posts the big banks in Ireland are accused of shafting people in a recession, your attitude is exactly the same i.e. you feel sorry for people in negative equity but what can be done...it's inevitable.

Anyway, the point I would like to make is, that not everyone is driven by greed and I feel that that is a huge assumption to make. Many ordinary, everyday people will be affected by a property crash and not only in terms of their property devalueing....jobs lost as the economy goes down etc. I think a crash would be a catastrophe for Ireland and to wish it so that we can get back on our feet sooner is ludricrous.

 

[bearishbull]

A soft landing is nothing of the kind...it means that prices don't correct rationally, and it is only a conduit for suggesting to people that in fact, it will all be okay when they wonder about the wisdom of what they have done.

The point is, property in this country is disproportionately costed vis a vis available salary income. That cannot continue, and unless it falls significantly or we suddenly have massive salary inflation, we are in an unhealthy position.

Property market matching salary growth is highly unlikely. We're lucky to scrabble 3% a year out of IBEC in national wage discussions - the employers do not want to pay out any more money in salaries than they can get away with and if they could cut it, they would. So the only other mechanism for getting a more reasonable balance between average salaries and house prices is for the latter to fall.

Great post. Interestingly i read that German workers willingly reduced their wages by 4% last year , they got paid the same but increased hours,thats why their export sector is booming and they are the number one exporter in world again, can you imagine irish unions accepting paycuts/freezes to control costs/competitiveness/inflation? I think the sooner we have a correction the better for the long term health of the economy,we will realise we have to develop a world class export sector with large indigenous component and not rely on multinationals who transfer price and assemble goods here for tax reasons.

 

[Calina]

I don't believe that most FTBs can rent cheaply in an area they want to live in. Rents may be decreasing of late but they are still an expensive outlay especially in Dublin. What happens to all theses renters if an investor pulls out and decides to sell? Rent is dead money whether we like it or not and I think it is this perception that drives people to get on the property ladder and not greed as you suggest. There is also the fact that if you rent, by and large, you live with a landlord's colour schemes, facilities on offer etc. This becomes even more of an issue when one has children.

Current fact: the rent on the house I live in would be about 400E a month less than the mortgage on the least expensive house I can afford. That house, that I can afford is in Portlaoise or Slane (choose whichever you like) which are both, in empty roads, an hour at least from where I work. In the rush hour I wouldn't like to estimate. The house I rent is 5 minutes drive from where I work in north county Dublin.

If investors pull out and sell, there are two main possibilities: 1) he sells to another investor, in which case rental supply stays the same or 2) he sells to a person who wants to live in the house in which case rental supply goes down one, but down the chain, so too does tenant supply.

There seems to be a surfeit of investment property out there at the moment, and that's on the basis of 80,000 people a year in the country. I think the mess will occur when we realise we have built a lot of accommodation which no one needs and, further more, because capital appreciation has slowed down or vanished, no one wants. Then we'll start hearing "No one told me..."

In any case, what is truly dead money is the excess amount of money you pay in mortgage interest over the rent you would pay on the same property. In other words, if the mortgage interest exceeds rent, then you're better off renting. Incidentally, I don't believe rent is totally dead money. I'm paying for a service. I've done it in quite a few other countries and there hasn't been any major difficulty with the idea that you pay someone for the use of their premises. It's not like you rent a house and then don't live there.

 

[walk2dewater]

I don't believe that most FTBs can rent cheaply in an area they want to live in. Rents may be decreasing of late but they are still an expensive outlay especially in Dublin. What happens to all theses renters if an investor pulls out and decides to sell? Rent is dead money whether we like it or not and I think it is this perception that drives people to get on the property ladder and not greed as you suggest. There is also the fact that if you rent, by and large, you live with a landlord's colour schemes, facilities on offer etc. This becomes even more of an issue when one has children.

Having said that, the advice I would give my children is to rent in an area they like, rather than buy somewhere way outside Dublin. This advice is based on things like how their lifestyle would suffer, their mental state (spending 2 or perhaps more hours driving just to get to and from work) and their outlay i.e. motoring costs, fast food cos too tired to cook by the time they get home. It's not that I don't believe they should make sacrifices to get what they want.

Another point I would like to make is that a lot of people who put their money into property did so based on the advice of professional advisors. While in previous posts the big banks in Ireland are accused of shafting people in a recession, your attitude is exactly the same i.e. you feel sorry for people in negative equity but what can be done...it's inevitable.

Anyway, the point I would like to make is, that not everyone is driven by greed and I feel that that is a huge assumption to make. Many ordinary, everyday people will be affected by a property crash and not only in terms of their property devalueing....jobs lost as the economy goes down etc. I think a crash would be a catastrophe for Ireland and to wish it so that we can get back on our feet sooner is ludricrous.

LW I know you are well-meaning. Unfortunately well-meaning doesnt cut it. Economic reality is being imposed on Ireland by external forces, cos we are proving unable to manage ourselves. This process will happen whether we throw our toys out of the pram screaming "but rent is dead money" or not. We are not in splendid isolation anymore, we are a recently inducted member of the rich-world economies club. We've accepted the trappings of this with open arms, but seem intent on not living up to the billing as an advanced economy. Membership however will be swiftly revoked if we continue with our Albania-esque property pyramid scheme much longer.

And THAT would be a far greater catastrophe for Ireland

 

[bearishbull]

I don't believe that most FTBs can rent cheaply in an area they want to live in. Rents may be decreasing of late but they are still an expensive outlay especially in Dublin. What happens to all theses renters if an investor pulls out and decides to sell? Rent is dead money whether we like it or not and I think it is this perception that drives people to get on the property ladder and not greed as you suggest. There is also the fact that if you rent, by and large, you live with a landlord's colour schemes, facilities on offer etc. This becomes even more of an issue when one has children.

.

Do you not follow the news? Rents are same now as in 2001 and rents in Dublin are among cheapest in european capital cities according to the recent mercer executive price survey.

Im sure most landlords will let you decorate a house in your own way once you consult him and arrange to have it changed back if necessary before your lease is up.

As for people buying property for their pension i have no sympathy, cant they that because we are building so many houses (100k) a year! by the time they are retired there will be a massive over supply of housing and the demographics will have changed so there may be too few buyers/renters

 

[Calina]

Great post. Interestingly i read that German workers willingly reduced their wages by 4% last year , they got paid the same but increased hours,thats why their export sector is booming and they are the number one exporter in world again, can you imagine irish unions accepting paycuts/freezes to control costs/competitiveness/inflation? I think the sooner we have a correction the better for the long term health of the economy,we will realise we have to develop a world class export sector with large indigenous component and not rely on multinationals who transfer price and assemble goods here for tax reasons.

Thanks.

I worked in Germany. They probably had the time to spare. It's not such a massive overtime culture the way here is. Additionally, that deal will have been agreed with the workers unions. Not only that but they probably were working towards the future at government level rather than exploiting the here and now. I must check actually - when I lived there, if you wanted to buy a house or an apartment, you had to have a deposit of about 30% (not the piffling little 8% that was required here) of the purchases price. I wonder if that changed.

TBH, we had a lot of so called boom years here and only in taxes was much return passed on to the employees. No matter how good things are, IBEC never want to pay anyone anything, end of story.

In any case, I agree totally with you on the world class export sector - it's one of my bug bears about Anglo-Saxon economic thinking at the moment (the UK and the US have massive trade deficits, but it doesn't matter because they're "service economies" but their debt profile is irrelevant) - we're going the same way and we really need to re-assess how things are done here before we get into real trouble. People will remind you about unemployment in France and Germany though if you point these things out to them.

 

[bearishbull]

P.S Liteweight , Do you think the rent on a mortgage(Ie; interest) is dead money? Do you realise house prices must increase by around 50% in real terms just to break even on the purchase of a house?

 

[thewatcher]

Another point I would like to make is that a lot of people who put their money into property did so based on the advice of professional advisors. While in previous posts the big banks in Ireland are accused of shafting people in a recession, your attitude is exactly the same i.e. you feel sorry for people in negative equity but what can be done...it's inevitable.

It was the financial institutions that threw the lending guidelines out the window a long time ago,aided by the mostly passive central bank when we were all set for a soft landing.

Anyway, the point I would like to make is, that not everyone is driven by greed and I feel that that is a huge assumption to make. Many ordinary, everyday people will be affected by a property crash and not only in terms of their property devalueing....jobs lost as the economy goes down etc. I think a crash would be a catastrophe for Ireland and to wish it so that we can get back on our feet sooner is ludricrous.

It was a property pusher SSB that said we "hoped" for a crash,i don't think i've ever seen any bear on this site wish for a crash,all anyone has done is look at the fundamentals and draw their own conclusions.

 

[bearishbull]

Thanks.

I worked in Germany. They probably had the time to spare. It's not such a massive overtime culture the way here is. Additionally, that deal will have been agreed with the workers unions. Not only that but they probably were working towards the future at government level rather than exploiting the here and now. I must check actually - when I lived there, if you wanted to buy a house or an apartment, you had to have a deposit of about 30% (not the piffling little 8% that was required here) of the purchases price. I wonder if that changed.

TBH, we had a lot of so called boom years here and only in taxes was much return passed on to the employees. No matter how good things are, IBEC never want to pay anyone anything, end of story.

In any case, I agree totally with you on the world class export sector - it's one of my bug bears about Anglo-Saxon economic thinking at the moment (the UK and the US have massive trade deficits, but it doesn't matter because they're "service economies" but their debt profile is irrelevant) - we're going the same way and we really need to re-assess how things are done here before we get into real trouble. People will remind you about unemployment in France and Germany though if you point these things out to them.

People talk of unemployment in france and germany but 90% of workers have jobs and excellent wages/pensions/wprking conditions, the european economy has to change to compete on world stage but they are doing quite well at present in spite of high labour costs. Being unemployed isnt so bad in europe as social welfare is very good and housing cheap so if your partner or family member is working one wage can usually support more people than here in ireland/uk, also the french workers in private sector are the most productive in the world!

 

[Marie]

What riles me is the sheepishness of people lead into debt slavery for the price of a humble piece of land and an assortment of p poor building materials. The fact that this tardy charade has been foisted on people on so many occasions makes the farce only more exasperating. The whole bubble adds not one whit to the advancement of society.

Duplex, all - I feel this is the crux of it. Nobody is maliciously savouring the prospect of a crash (and a crash there will be, have no doubt about that!). It is rather a wish for an end to the craziness around property which grew to a cultural myth in Ireland during the last 10 years and knocked all logic and reason out of the equation and previous posters have articulately distinguished between (a) this phenomenon and (b) investment and (c) buying a home. The point is that all three categories have been infected with the crazy mythology........which was promulgated (because it was in their own various interests!!) by government, estate agents and lending establishments.

Whilst the coming reversal will bring property prices into more logical relationship with income and value what it will not do is roll back the damage to culture, community and environment. One of the initial spurs to the property 'boom' was the amenity of small-scall, relatively unspoilt clean environments with community values and engagement. Unfortunately these have been lost (or more hopefully, temporarily submerged?) under the concrete.

Now the recklessness and acquisition-at-any-cost frenzy are lessening the real de-valuation will become apparent and may perhaps feed into the property downturn, contributing to its accelleration. As you say, folks will begin to be a great deal more critical of shabbily-built, sunless boxes with postage-stamp-size gardens in soulless mega-estates in the a***hole of beyond if they are viewing a potential home-for-life.

 

[room305]

I don't believe that most FTBs can rent cheaply in an area they want to live in. Rents may be decreasing of late but they are still an expensive outlay especially in Dublin.

Nonsense. Rents may be an expensive outlay but compared to the cost of a mortgage they're laughable. I'm undecided at the moment but am seriously weighing up the possibility of selling my home and renting, having seen what is on offer at ridiculously low prices in good areas.

What happens to all theses renters if an investor pulls out and decides to sell?

Well assuming the landlord is a legal one then you will get sufficient notice etc. This should give you ample time to rent a new home. As Calina pointed out, for someone to sell, someone else must buy.

Rent is dead money whether we like it or not and I think it is this perception that drives people to get on the property ladder and not greed as you suggest.

"Rent is dead money" is the greatest misconception ever. Unless you actually have the full cost of the house upfront you either rent the property or you rent the money to purchase the property. Currently renting the property looks a much better deal than renting the money.

It is a combination of greed and fear that is driving most people to buy property they cannot afford. Fear that they will miss out and greed for future appreciation.

There is also the fact that if you rent, by and large, you live with a landlord's colour schemes, facilities on offer etc. This becomes even more of an issue when one has children.

Which is fair enough, however with a good landlord this can be negotiable. I've only ever rented in student type places in Dublin but I am well aware in other areas of the country where landlords have been very accomodative about allowing tenants to decorate, buy their own furniture etc.

Having said that, the advice I would give my children is to rent in an area they like, rather than buy somewhere way outside Dublin. This advice is based on things like how their lifestyle would suffer, their mental state (spending 2 or perhaps more hours driving just to get to and from work) and their outlay i.e. motoring costs, fast food cos too tired to cook by the time they get home. It's not that I don't believe they should make sacrifices to get what they want.

Sound advice.

Another point I would like to make is that a lot of people who put their money into property did so based on the advice of professional advisors.

Working for whom though? I doubt any independent pensions advisor ever said - "No, no, don't take out a pension, are you mad? Buy an overpriced house in Dublin, it's the safest bet."

While in previous posts the big banks in Ireland are accused of shafting people in a recession, your attitude is exactly the same i.e. you feel sorry for people in negative equity but what can be done...it's inevitable.

What can be done? It is inevitable now. Anything done at this point stands more chance of making things worse.

Anyway, the point I would like to make is, that not everyone is driven by greed and I feel that that is a huge assumption to make. Many ordinary, everyday people will be affected by a property crash and not only in terms of their property devalueing....jobs lost as the economy goes down etc. I think a crash would be a catastrophe for Ireland and to wish it so that we can get back on our feet sooner is ludricrous.

Perhaps not everyone was driven by greed, for many it was simply herd behaviour. I stand by that most were but maybe I just mix with the wrong people ;-)

A crash could well be a catastrophe for Ireland but it is unavoidable. If you have any suggestions for avoiding it they would be most welcome. It is simply too late at this stage to do anything about it.

A country can only increase in wealth by increasing its exports or decreasing its imports. We are in fact doing the opposite and it is not until the housing mania recedes that we will notice this.

 

[Calina]

Im sure most landlords will let you decorate a house in your own way once you consult him and arrange to have it changed back if necessary before your lease is up.

The problem in Ireland is not so much the redecoration issue - although it's a bit aggravating - it's that despite recent changes to the law, you're still at the mercy of a landlord who might want you out for whatever reason.

Currently, after six months, you're entitled to stay in a property for 4 years, with a couple of key exceptions - ie, landlord wants to sell, landlord wants to move into property for self or for member of family. Then they have to give you statutory notice of up to 56 days, depending on how long you were in the property.

Because capital appreciation is such an attraction for a lot of investors, the freedom to dump out a tenant with 56 days notice in order to sell is a major problem. I'm speaking from personal experience here - landlords who were previously alright to deal with can become extremely nasty and make your life absolutely hell, despite "A tenant is entitled to reasonable enjoyment of their home" provisions in existing legislation. Usually I get out as soon as possible because my life is not worth the stress of someone else trying to sell a house.

So even if you think you can live in a house for four years, there's a chance you mightn't be able to because of the profile of a lot of investors in Ireland at the moment. (actually if I want anyone to take a burning in property, these would be the ones). In that case, for a lot of people, redecorating is not a top priority because it's easier to leave the magnolia there than redecorate a house back to it just as you are a) getting the deposit and rent together for a new house or b) trying to start off in your own.

A lot of issues there would be rectified if exceptions to the Part 4 tenancy were removed. I strongly believe that if landlords want to sell investment properties are occupied by tenants, they should have to sell them as occupied tenant unaffected. That might, additionally, have cooled down some of the investment/speculator driven increases, but I guess it's too late for that now.

 

[Calina]

People talk of unemployment in france and germany but 90% of workers have jobs and excellent wages/pensions/wprking conditions, the european economy has to change to compete on world stage but they are doing quite well at present in spite of high labour costs. Being unemployed isnt so bad in europe as social welfare is very good and housing cheap so if your partner or family member is working one wage can usually support more people than here in ireland/uk, also the french workers in private sector are the most productive in the world!

Just so that we are absolutely clear on this - I totally agree with you. I've lived in Germany and in France, and I have also read recent comparisons between them, Sweden and the UK. Statistically, Europe is far more productive per employee than the US, for example. And by choice, I would prefer a society along French or Germany lines than the current set up in Ireland.

What troubles me is that there is a lot of short termism in the "my economy is better than yours" game and that is why I point out that if you try to have this conversation with a lot of people, they will point out that France and Germany have 10% unemployment whereas Ireland, the UK and America have 5% unemployment. It is a single statistic and going forward, it is not something you can build on. On the other hand, manufacturing and export out put are something you can build on, and France and Germany have this to spare. France has a deficit at the moment, but it is circa 1/3 that of the UK, and it's falling.

Just to come back on topic though, property prices in France are starting to rise again, in the last six months - driven by FTBs and foreigners. Sounds kind of familiar. As France is a far bigger economy, I'm inclined to think that movements there could have more sway with respect to interest rate considerations...I must see what is happening in Germany there...

 

[Marie]

I don't believe that most FTBs can rent cheaply in an area they want to live in. Rents may be decreasing of late but they are still an expensive outlay especially in Dublin. What happens to all theses renters if an investor pulls out and decides to sell? Rent is dead money whether we like it or not and I think it is this perception that drives people to get on the property ladder and not greed as you suggest. There is also the fact that if you rent, by and large, you live with a landlord's colour schemes, facilities on offer etc. This becomes even more of an issue when one has children.

Hi Liteweight

I often wonder if the alleged thousands of euro 'profit' from property price increases over the past decade are quoting the gain before or after capital gains tax based on the increase in market price has been paid to the government. Investor/speculators who brag about their huge profits gained 'without lifting a finger' appear to be basing this on the gross-before-tax, rather than the net after-tax-and-costs, increase. Incidentally, property ownership entails a great deal more financial outlay than mortgage alone; house upkeep and everyday maintenance costs are substantial annual outlay.

 

[thewatcher]

Anyway, the point I would like to make is, that not everyone is driven by greed and I feel that that is a huge assumption to make. Many ordinary, everyday people will be affected by a property crash and not only in terms of their property devalueing....jobs lost as the economy goes down etc. I think a crash would be a catastrophe for Ireland and to wish it so that we can get back on our feet sooner is ludricrous.

LW, this http://www.askaboutmoney.com/showthread.php?t=31943 is what you are dealing with and i am not just picking on this person, this demand is widespread.Until the investor driven demand is curbed the potential for a crash further increases.

In the event of a crash if anyone was to suggest that taxpayers money should be used to bail out the likes of this carry on,i would seriously have to consider my position within ireland inc.
Everyone is entitled to 1 house in my book,after that your're on your own.

 

[room305]

Incidentally, property ownership entails a great deal more financial outlay than mortgage alone; house upkeep and everyday maintenance costs are substantial annual outlay.

Interesting point Marie. In the breathlessness accompanying oft quoted statistic from the TSB/ESRI house price index, that the average house has increased 270% in the past ten years, it often overlooked that in the same period the ISEQ index rose 230%.

Given the amount of leverage required to get invested in property and the other incidental costs involved, I often wonder if a basket of Irish bluechips would have proved a better buy over that ten year period.

 

[bearishbull]

Interesting point Marie. In the breathlessness accompanying oft quoted statistic from the TSB/ESRI house price index, that the average house has increased 270% in the past ten years, it often overlooked that in the same period the ISEQ index rose 230%.

Given the amount of leverage required to get invested in property and the other incidental costs involved, I often wonder if a basket of Irish bluechips would have proved a better buy over that ten year period.

If you reinvested the dividends you would make even more than property over last 5/10/15 years, ya see people forget that companies/shares will always out perform property in long term because companies are the ones that make the profits and pay the incomes that pay for the properties, if property outperformed companies in long term the property couldnt be paid off as company profits /incomes wouldnt be sufficient to pay an ever greater debt burden for property.

 

[ivuernis]

Blame game hots up over eurozone inflation fears


A Housing Bubble in Europe?
http://www.businessweek.com/investor/content/jun2006/pi20060626_425094.htm

 

[Calina]

a correction in house prices could have severe effects, as the recent Dutch example shows.

Know anything about this? I don't read Dutch and am not so well up on happenings there as France or Germany.

 

[walk2dewater]

Blame game hots up over eurozone inflation fears

It's all there isn't it? Could the signs be any clearer. The Germans will not stand for inflation, houses price inflation or any other erosion of the value of THEIR D.Mark/Euro. This is exactly why the Swiss stayed out of the eurozone, they feared the less prudent European members would beggar them.

I'll say it again, ECB rates are going much higher, much quicker than any public commentator in Ireland has thus far said/wrote.

Calina, interesting few posts there.