Current public sentiment towards the housing market?

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Fergal said:
room305, are you still selling your home?
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Still selling and I will be happy to post a detailed summary of the experience once it's sold.

What if the crash doesn't come

I'm not selling so much in anticipation of a crash as a desire to be mobile and to not have a 35 year mortgage hanging over my head.
  • I heard that Dublin county council is predicting a severe shortage of land in 2012
They should really start building up, shouldn't they? I imagine this is based on current building rates which are monstrously high and not sustainable.
  • Long term interest rates of about 5% will cool the market but hardly tip it over.
Maybe, maybe not. Rates could go much, much higher than this though. It will certainly make people think twice before committing to a jumbo mortgage.
  • 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).
Does this not seem contradictory? Also there are many global factors which should be of concern.
  • 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.
It's not so much that these things are 'affordable' per se, just that cheap credit has never been so easily available. Those days are rapidly running out.
  • 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.
Fly-to-let investors should probably have just put their money on the horses. They don't seem to have put much thought into their investments and I'd be surprised if they appreciate much. I very much doubt they'll be able to sell them once the guaranteed rental period lapses.
  • 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.
Most people are afraid to buy a falling asset and overly eager to buy an appreciating asset. I cannot see that changing. Although, I wouldn't rule out a few 'dead cat bounces' on the way down.
  • I also know several couples getting divorced. They now need second houses. How many of these cases will there be?
I dunno, in the US I think it is about 50%. However, once a couple divorces they will look to meet other people and eventually they may move in together again. I'm not sure if it will have a hugely significant effect.
  • 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.
I'm missing it I can tell you! I also think a lot of people's mortgages are going to increase a lot more than the maximum SSIA amount.

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?

Selling is not without risk but it's not like I want to buy back the same house later (neither do I live in what could be called a desirable area of Dublin! ;)) Ideally, I could sell up and buy a bigger place but frankly, I couldn't afford to, not without financial assistance from my parents, which I don't want to ask for.

For the interim, myself and my girlfriend will be happy to rent. If it means we can never again afford to buy in Dublin, then so be it. We'll live elsewhere or continue to rent. I consider this less of a risk than havign the two of us stuck in a FTB home for the foreseeable future.
 
All butt-ins welcome.

Duplex said:
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. Fergal: You predict that a lot of investors will lose out. Perhaps. But my point is that IF a lot of them gain substantially, THEN room305 will find it more difficult. Its another factor in his risk calculation.

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. Fergal: The Federal Reserve have stopped increasing interest rates. So I could argue that more expensive money is comming to an end. American economy may recover quickly when Bush is ejected.
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That strikes me as naive.

Sorry - that was in response to the post on neighbours regarding interest rates being set in stone on date of draw down which I think is a bit naive. Sheesh this thread is busy today.
 
The above posts from neighbours reminds me of the below


langball said:
[broken link removed]
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Stage 3: Euphoria

We have all missed booms. A wise investor knows to wait for the next boom, rather than jump in if they've missed the current one. But when acceleration turns to euphoria, the greater fools rush in.
 
Good answers room305! You've thought it through and I guess you're right to go with your gut feeling.

So good luck to you (though it may be bad luck for me, what the hell - easy come easy go!)

PS Very amusing Walk2DeWater
 
"Sticky prices" might mean "No prices", i.e. a 50% drop means an owner cannot sell because this doesn't cover the mortgage outstanding. I pity anyone who recently bought a starter home to get on the ladder with a view to trading up - don't see that plan working.

These 'stuck' houses will not be 'making the market', investors who can sell at -50% will.

What scares me most is the vicious circle when building slows down, jcb drivers, bricklayers, plumbers, electricians, tilers, carpenters, readymix drivers, plasterers, painters, window fitters, roofers, surveyors, architects, builders providers, cement factory's, timber importers, window manufacturers, DIY outlets, curtain makers, electrical resellers, furniture shops, lighting shops, carpet shops, tile outlets.......

How many of you know anyone who does one of these for a living?

They all spend money in pubs, travel agents, bookmakers, butchers, car showhouses, the local spar, petrol stations, antique shops, Blockbuster, toy shops, mothercare, argos, HMV, Tesco....

The old adage: We employ ourselves, is illustrated here. Their is nothing to relish in a fall in prices. To those of you who held off buying anticipating a crash would do well to remember that when money is cheap houses are dear, when houses are dear........
 
ivuernis said:
I'm still re-reading it because I can't believe what my eyes are telling me. :eek:
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whathome said:
...and these people are spending €300,000 to €500,000.

I know I'll get shot down for this but I feel sorry for them to be honest.
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walk2dewater said:
Jay-zeus, and I get schtick for calling them saps!
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2Pack said:
as for this fella :D



I smell a junior investor flipper type chappie :D
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This is actually a commonly held misconception. A quick browse through the Mortgages section of AAM will throw up numerous threads on this and suggestions on how to effectively lock in the current rate (drawing down "the deposit" early for instance).

Just becasuse it's obvious to you doesn't mean it's obvious to everyone else and you're only fooling yourself if you think this is indicative of lunatics running the asylum. There hadn't been an increase in rates in 5 YEARS prior to this year so it doesn't surprise me that issues like this are alien to most current buyers, or indeed anyone else who's bought in the last 5 years, friends, family, etc, who most people would rely on for advise on such subjects.

Very patronising.
 
That guy who was eager to sign so as to 'lock in the rate' was a right idiot - he was probably fed a pack of lies by god knows who.

This is my absolute favourite! Really brightened up my rainy day...



I can't believe people are so naive - only one word for 'em - saps!
 
This for me is the key point. The ramifications of a property crash extend far beyond the simple act of buying houses.

However, that, in itself, is no reason for allowing property prices to grow insanely for no good reason that we can all equally rip each other off. The point is, a lot of people have bought starter homes which they will go mad in inside two years - but to trade up, they need to exploit someone further down the chain than themselves. And exploit is the world. One bedroomed apartments - sorry - tiny one bedroomed apartments in Swords are commanding 285KE. This is not a rational price for that type of property either from the point of view of living in it or trying to command rent from it.

What would be healthier is a sensible housing price profile (say six times average salary rather than 11 times average salary). Trying to avoid a correction because it will be bad is only delaying the inevitable, and I honestly believe that the longer that the current situation plays out, the worse the backlash will be. It's like an elastic band in that respect.

There are two primary ways for housing prices to reach some sensible balance: either house prices come down significantly, or salaries go up significantly. Neither is good, but I strongly suspect that the economy would be better off if houses prices fell because otherwise, we'll price our labour out of the market and be screwed either which way. At least if we manage to keep salaries someway competitive we might hang on to some reasonably low unemployment. Push salaries up and we can definitely look forward to doubling unemployment.
 
whathome said:
New buyers starting to get very worried. From neighbours.ie:
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One of the comments on that thread is absolutely stunning in it's naivety:

from neighbours.ie said:
Yes. Regardless of whether you choose a fixed or variable rate mortgage it is the rate on the day your loan cheque is drawn down that determines your monthly repayments. I think that once a contract with any bank is signed and mortgage repayments agreed that this shouldnt change and your mortgage repayments should reflect the rate on the date that the contract was signed. We weren't aware of this until we received an amended contract in the post showing an increase in our monthly repayments due to an interest rate rise. Which is why the delays in snagging and moving into Adamstown is costing us more each month because we are vulnerable to any rate increases until we are able to close the deals on our properties.
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Have I read that correctly? Does the person who posted that really think that their repayments are fixed for the duration of the loan? Are the general public really that unaware of how finances work?

If so, some people are in for a very rude awakening. Now, I wonder who they'll blame? The Banks? The Government? Some other culpable party? Certainly not themselves of course.

I'm not as bearish as many on here, but if this level of knowledge is typical then we're in for a rough ride.

EDIT Ach, curses, beaten to the point again...
 
CelloPoint said:
That guy who was eager to sign so as to 'lock in the rate' was a right idiot - he was probably fed a pack of lies by god knows who.

This is my absolute favourite! Really brightened up my rainy day...



I can't believe people are so naive - only one word for 'em - saps!
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I really didnt think there were people buying places like this. The ol' property market will be fine if enough of these people are around to keep buying because "someone in the know" told them to buy.
 
Howitzer said:
Very patronising.
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People spending hundreds of thousands of euro on anything should know exactly what they are getting into. It's not like they're just starting off with a small 10k loan - it's a massive commitment. Due to a lack of education in this area many people are blindly heading into a financial nightmare. Without being patronising, I genuinely feel sorry for them.
 
binman said:
Have I read that correctly? Does the person who posted that really think that their repayments are fixed for the duration of the loan? Are the general public really that unaware of how finances work?
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No, you have not read it correctly.

The person agrees a fixed mortgage in, say, May and draws down in August after snagging. He expected the rate to be the same as what was agreed when he signed the mortgage contract with the bank, instead the fixed rate changed in the interim.

This is a very common issue and one which hasn't arisen atall, to anyone, in Ireland in 5 years until this year.

Has anyone read that thread correctly or are youse just dying to jump on the bandwagon?
 
Howitzer said:
The person agrees a fixed mortgage in, say, May and draws down in August after snagging. He expected the rate to be the same as what was agreed when he signed the mortgage contract with the bank, instead the fixed rate changed in the interim.
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Howitzer, I think you may have it wrong. Here's the key sentence that people seem to be picking up on:
"Regardless of whether you choose a fixed or variable rate mortgage it is the rate on the day your loan cheque is drawn down that determines your monthly repayments"
 
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