Current public sentiment towards the housing market?

[SteelBlue05]

Just take 2packs word for it, good lad.

Nice one 2Pack, I knew you hadn't a clue what you were talking about.

 

[Guest107]

Re: towards the housing market?

Nice one 2Pack, I knew

"Current public sentiment towards the housing market"

Q. How do I explain or quantify sentiment to one such as yourself.
A. I don't bother. I use the Ignore feature in my user control panel instaed

Ciao

 

[SteelBlue05]

Re: towards the housing market?

"
Q. How do I explain or quantify sentiment to one such as yourself.
Ciao

Not asking you to explain sentiment, just give me some logic as to how you plucked out the "Over 50%" figure, Pleeeeeasse, I'll be forever grateful!

 

[whathome]

During a crash, PPR buyers are reluctant to get into the market. The only thing that stops an entry-level market falling continuously is professional investors jumping back in. When they see the opportunity to make money with a positive yield, they will start to buy again.

I think this will happen at about 6% gross yield which would imply that prices would have to drop by 50% in real terms.

There's one reason anyway, I didn't even want to put a % drop prediction on this thread

 

[room305]

It would probably more realistic to claim that the prices would fall back to 2000/2001 levels. However, that would probably still work out around 50%

I think that was the general reasoning behind the 50% figure. Market was slowing around then until Sept. 9/11 and Alan Greenspan brought a glorious era of cheap credit to our shores. It would bring mortgages back into closer alignment with rents and would fit the historical average of 3x-6x times annual salary.

So an average correction of 50% would be logical. Some places will fall more, some less. Markets tend to overshoot because they are driven by sentiment, so we are likely to see falls greater than that before a return to more normal levels.

Steelblue, I understand your frustration at some of the wild and ridiculous claims being thrown around by some of the bears here but that doesn't mean everyone should submit a doctoral thesis with every figure they use.

 

[CelloPoint]

Nice one 2Pack, I knew you hadn't a clue what you were talking about.

Maybe people are confusing 2Pack with some of my posts? I can easily see a 50% drop materialising in house prices (Over the next 3 years I can envisage even 3 and 4 bed suburban Dublin houses suffering such a blow, depending on economic conditions).

For now though, I can see a 40% drop in commuterland 1 bed flats by Christmas - these kinds of half-built developments will be the target of the grandious 'affordable housing scheme' in the run up to election time in 2007, with knockdown prices all round and a roof for every citizens' head, communist style.

And before I'm accused of making 'wild predictions with no factual grounding', please read through my previous posts by clicking on my username and you'll see a whole litany of reasons for why I believe this country is going down the tube (for fear of being accused of 'mind-numbingly repeating myself').

 

[SteelBlue05]

Thanks WhatHome, I can understand that, but I suppose the thing is you say "during a crash".... how to we get to a crash stage from here?

I understant the rising interest rates, rising costs etc but I cant see that causing a crash. Not without changing the attidudes and culture first.

Nevermind, there is way too much in this to consider and too may interlinked issues.. Lets see where we are in 12 months time I say.

 

[phoenix_n]

Looks like phoenix you have just recently turned bearish on property seen as you were going to use the proceeds to buy another house recently. Just getting you back for a tactic you pulled on me

Hilarious. Look i never thought i would do this on AAM but i'm going to put you on my ignore list (current tally 0) as i not interested in this. I suggest you do the same.

 

[Duplex]

The US market is a leading indicator I think. New build prices are down 22% since Feb on an annualised basis.

Looking ahead, for the first time in nearly five years, quarterly housing permit issuance fell in the three months ending in June. Single-family building permits are off 12 percent from year-ago levels, and we could well see this trend accelerate in Wednesday's report for July.
The decline is a belated reaction from homebuilders who have seen annualized new-home price declines of 22 percent since February -- the deepest slide since September 1990, when we were in a recession.

http://www.projo.com/business/content/projo_20060814_dimart14.1f8160f.html

 

[Duplex]

This is a report on a paper which examined the role sentiment had in the Hong Kong bust in the late 90's; prices fell by 57% from the top. I know Hong Kong is not a good comparison to Ireland but there are some parallels.

3 page pdf
[broken link removed]

 

[Persius]

And most property in these outter commute towns are 200-400k, a 50-60% reduction would bring prices way below the max affordability of most people, so why would this happen?
Prices will always be near the max affordability of most people.

Only in a rising market. In a falling market, many potential purchasers stay away even if they can afford to buy. Alternatively they may wait so that a better property will drop into their price range. So in a falling market, property becomes more affordable - it doesn't always have to be at the limits of affordability.

I tend to agree with whathome here. Affordability won't just be based on present wages and present interest rates, but will take more account of possible future wages and interest rates. Rates are impossible to predict, but people will start asking themselves questions like "can I really count on my salary increasing significantly over the next 5 years"? Or, "what are the chances of being made redundant over the next 5 years"? Or, "if I am made redundant, what are the chances of me finding a new job with a comparible salary?" IMHO the third question is very important. I believe people experienced wage drop once finding a new job following previous downsizing waves in the US in the 90s. And I know one of the reasons Germans are reluctant to make such large purchases is the fear of not being able to find a comparibly paying job in the event of being layed off. In times of uncertainity people will be more reluctant to purchase if it means mortgaging out to the max.


Off topic I know, but just in case.

Great post langball but wouldn't go shouting about paying into SSIA while not normally resident in the state.

Wouldn't worry about that. If you were only out of the state for two years, then you remained ordinarily resident. That's all that's required to qualify for the government top-up of your SSIA (I'm sure a search of other threads on this site will clear this up).

 

[StoppedClock]

Wouldn't worry about that. If you were only out of the state for two years, then you remained ordinarily resident. That's all that's required to qualify for the government top-up of your SSIA (I'm sure a search of other threads on this site will clear this up).

Thanks Perisus, I didn't realise it was two years, I'm not feeling so clever now!!

 

[Fergal]

room305, are you still selling your home?

What if the crash doesn't come

• I heard that Dublin county council is predicting a severe shortage of land in 2012
• Long term interest rates of about 5% will cool the market but hardly tip it over.
• The IMF found that the economy is very strong and healthy but issued warnings about over-reliance on property (see article in this weeks Sunday Business Post).
• When I bought back in the 80's, people hardly had enough cash to furnish the house. Now houses are so affordable that people have enough cash to furnish them, buy new cars the same year, still maintain their lifestyle. That was unthinkable back then.
• What if Irish investors are generally very successful with their purchases abroad. E.g. Their Polish apts bought at 50K are later worth 200K. That means that the you will always be competing with those with lots of cash to buy the type of place you want in Dublin. So after selling you place in Dublin 21, your only option may be to buy again in Dublin 51.
• I know many younger people that have refused to buy because they fear a crash. They have been waiting for years. There may be enough bargain hunters to soften any fall.
• I also know several couples getting divorced. They now need second houses. How many of these cases will there be?
• The SSIA money of 250 a month isn't even missed at the moment. Once people aren't saving it, they can use the money to pay off a bigger mortage. This will have more impact that the 20K they receive when it matures.

Isn't trying to sell short a very big gamble to take? What do you think you may gain. E.g. 60% chance that by 2 years from now, prices will be 30% less in a fairly desirable area of Dublin. Also, what do you think the chances are that prices will be 30% higher 2 years from now?

 

[Duplex]

What if Irish investors are generally very successful with their purchases abroad. E.g. Their Polish apts bought at 50K are later worth 200K. That means that the you will always be competing with those with lots of cash to buy the type of place you want in Dublin. So after selling you place in Dublin 21, your only option may be to buy again in Dublin 51.

Pardon me butting in, but this point is of interest to me. Prices are falling in Spain and Florida, prices in Croatia are static at best, Bulgaria is a no go for the sentient, Dubai is inexplicable. I think the foreign exploits of Irish 'investors' will only add to problems at home.

The IMF found that the economy is very strong and healthy but issued warnings about over-reliance on property (see article in this weeks Sunday Business Post).

The Irish economy is heavily reliant on the continuation of the current unprecedented liquidity splurge instigated by the Federal Reserve post 9/11. This is coming to an end. If you can muster an argument, that supports a healthy US economy going forward I would be happy to here your views.

 

[tententwenty]

room305, are you still selling your home?

What if the crash doesn't come

• I heard that Dublin county council is predicting a severe shortage of land in 2012
• Long term interest rates of about 5% will cool the market but hardly tip it over.
• The IMF found that the economy is very strong and healthy but issued warnings about over-reliance on property (see article in this weeks Sunday Business Post).
• When I bought back in the 80's, people hardly had enough cash to furnish the house. Now houses are so affordable that people have enough cash to furnish them, buy new cars the same year, still maintain their lifestyle. That was unthinkable back then.
• What if Irish investors are generally very successful with their purchases abroad. E.g. Their Polish apts bought at 50K are later worth 200K. That means that the you will always be competing with those with lots of cash to buy the type of place you want in Dublin. So after selling you place in Dublin 21, your only option may be to buy again in Dublin 51.
• I know many younger people that have refused to buy because they fear a crash. They have been waiting for years. There may be enough bargain hunters to soften any fall.
• I also know several couples getting divorced. They now need second houses. How many of these cases will there be?
• The SSIA money of 250 a month isn't even missed at the moment. Once people aren't saving it, they can use the money to pay off a bigger mortage. This will have more impact that the 20K they receive when it matures.

Isn't trying to sell short a very big gamble to take? What do you think you may gain. E.g. 60% chance that by 2 years from now, prices will be 30% less in a fairly desirable area of Dublin. Also, what do you think the chances are that prices will be 30% higher 2 years from now?

DCC is probably predicating that on the massive influx of immigrants, who will be leaving once the property and construction well dries up.

Interest rates have historically gone a great deal higher than 5%.

The IMF predicted a sharp downturn of property in Ireland in late 2007. No soft landings there.

Now houses are so affordable that people have enough cash to furnish them, buy new cars the same year, still maintain their lifestyle.

I think you meant to say "enough credit". They'll be paying that off for another 35 years.

Their Polish apts bought at 50K are later worth 200K.

Yes, and the Polish people love them for it. Some way or another, someone is going to have to end up living in that apartment, and they won't be able to pay that price.

The number of divorcees is miniscule.

What makes you think that the percentage of people currently paying out for SSIAs are going to turn around and lumber themselves with more long term debt?

Its high time that Irish people as a whole grasped that there are other and better investments than property. Talk about a one string fiddle.

 

[soma]

• Now houses are so affordable that people have enough cash to furnish them, buy new cars the same year, still maintain their lifestyle. That was unthinkable back then.

My guess is that in alot of these cases (and in a high percentage of FTB purchases) cash is not being used - credit is. There's a world of difference.

The annoying thing about credit is.. you have to pay for it with cash eventually..

 

[phoenix_n]

room305, are you still selling your home?

What if the crash doesn't come

• I heard that Dublin county council is predicting a severe shortage of land in 2012
• Long term interest rates of about 5% will cool the market but hardly tip it over.
• The IMF found that the economy is very strong and healthy but issued warnings about over-reliance on property (see article in this weeks Sunday Business Post).
• When I bought back in the 80's, people hardly had enough cash to furnish the house. Now houses are so affordable that people have enough cash to furnish them, buy new cars the same year, still maintain their lifestyle. That was unthinkable back then.
• What if Irish investors are generally very successful with their purchases abroad. E.g. Their Polish apts bought at 50K are later worth 200K. That means that the you will always be competing with those with lots of cash to buy the type of place you want in Dublin. So after selling you place in Dublin 21, your only option may be to buy again in Dublin 51.
• I know many younger people that have refused to buy because they fear a crash. They have been waiting for years. There may be enough bargain hunters to soften any fall.
• I also know several couples getting divorced. They now need second houses. How many of these cases will there be?
• The SSIA money of 250 a month isn't even missed at the moment. Once people aren't saving it, they can use the money to pay off a bigger mortage. This will have more impact that the 20K they receive when it matures.

Isn't trying to sell short a very big gamble to take? What do you think you may gain. E.g. 60% chance that by 2 years from now, prices will be 30% less in a fairly desirable area of Dublin. Also, what do you think the chances are that prices will be 30% higher 2 years from now?

Very valid points. However, IMO, speculation in the market over the last 12 months have pushed the instrictic value of a house from its true value to that of a speculative value. And i think that is the key. When the speculative nature has ceased then its true value will return. Couple that with slight panic in the market and even that true value can even slip.

 

[whathome]

New buyers starting to get very worried. From neighbours.ie:



"INTEREST RATES HAVE GONE UP TWICE NOW SINCE WE PURCHASED OUR HOUSE AND IT IS GETTING VERY WORRYING AT THIS STAGE"

 

[Fergal]

DCC is probably predicating that on the massive influx of immigrants, who will be leaving once the property and construction well dries up. Fergal: Well that's your prediction, not DCC's.

Interest rates have historically gone a great deal higher than 5%. Fergal: Central bankers have never worked before to keep base inflation at 2%. The banks are offering long term fixed rate mortgage at 5%.

The IMF predicted a sharp downturn of property in Ireland in late 2007. No soft landings there. Fergal: The sharp downturn is from 15% pa to only 3% pa. aka soft landing. They are NOT predicting a fall in values let alone a crash.

Now houses are so affordable that people have enough cash to furnish them, buy new cars the same year, still maintain their lifestyle.

I think you meant to say "enough credit". They'll be paying that off for another 35 years. Fergal: Credit has always been available, jobs were not.

Their Polish apts bought at 50K are later worth 200K.

Yes, and the Polish people love them for it. Some way or another, someone is going to have to end up living in that apartment, and they won't be able to pay that price. Fergal: In 20 years time, wealth will transfer to Poland as it did to India and even China.

The number of divorcees is miniscule. Fergal: I have no reference to determine the number.

What makes you think that the percentage of people currently paying out for SSIAs are going to turn around and lumber themselves with more long term debt? Fergal: Because we're Irish and have always done so.

Its high time that Irish people as a whole grasped that there are other and better investments than property. Talk about a one string fiddle. Fergal: Well its playing a good tune so far!

 

[walk2dewater]

• When I bought back in the 80's, people hardly had enough cash to furnish the house. Now houses are so affordable that people have enough cash to furnish them, buy new cars the same year, still maintain their lifestyle. That was unthinkable back then.

Hows the weather in Spain today?