Current public sentiment towards the housing market?

[Glenbhoy]

I think I know the land you mean Bearish, and to my mind building out there - 12 (?) miles from the city centre would not be a good idea unless we had a decent transport system. In addition, the density there would by necessity have to be low density, why bother moving outside the M50 unless you get a decent sized place is my own theory.
Re the wealth issue, if you remember recently the BOI claimed we're all millionaires etc, what was that based on? Of course, it was our property assets. Regardless if people own their property outright or not (I would be sceptical of your 60% figure), you try and tell them that the house they have which used to be worth 1m is now worth the rebuilding costs of 200K and they'll not be best pleased. People base their lifestyle around this perceived wealth, be it through top up loans, not bothering with pensions etc.
As for anyone who's bought in the past few years, now they'd be delighted wouldn't they?
I know you're not actually proposing that all land be opened up to development (I'm just thinking of the ramifications of that as I type).
As for dooing something to try and free up more land, the govt tried back in the late 90's by giving a special break for 2 years on cgt on dvlpmnt land of 20%, this was supposed to revert to 40% by 2002. How it all worked out, i don't know as I was out of the country for a few yrs around then, but i do know they didn't follow up on their threat.

 

[killeoin]

ECB tone confirms looming interest rate rise

http://www.unison.ie/business/stories.php3?ca=80&si=1685483

"The ECB is likely to keep raising rates until there are clear signs that the eurozone economy is slowing, although some analysts believe this will happen next year, pegging rates at 3.75pc"

You know what always confuses me above these types of quotes is that the ECB should not be worried about the eurozone economy. According to the ecb website [broken link removed] "price stability is the primary objective" and "Without prejudice to the objective of price stability (Inflation)" are the rest. e.g. eurozone economy. The ECB is failing in its mandate.

Also on the subject of house prices and interest rates, most people now believe that interest rates will go to 3.5% by year end and 4% into nxt year. Thus, is this not allready factored into current prices? It would be if we were dealing with shares, or exchange rates so why not property?

 

[whathome]

Thus, is this not allready factored into current prices? It would be if we were dealing with shares, or exchange rates so why not property?

No - unfortunately it's quite the opposite...Irish buyers realising that rates were going up appear to have rushed to the lending institutions at the start of the year in a race to maximise their approval before interest rates were raised by the ECB.

Also - it's clear from anecdotal evidence that FTB's and recent buyers did not expect interest rates to rise as quickly as they have this year.

The stock and currency markets are very efficient at factoring in central bank activity but interest rate movements have a delayed effect on the property market. The effect of the first rate rises are only filtering through now showing up in the weakening property market. The same happened in 2001 when property prices fell in response to rising rates in 2000. Interest rates peaked at 4.75% in October 2000 and property prices started to fall in summer 2001.

 

[beattie]

No - unfortunately it's quite the opposite...Irish buyers realising that rates were going up appear to have rushed to the lending institutions at the start of the year in a race to maximise their approval before interest rates were raised by the ECB.

Also - it's clear from anecdotal evidence that FTB's and recent buyers did not expect interest rates to rise as quickly as they have this year.

Yes that is my experience from some FTB's that I know, some of them are totally clueless as to where the ECB might go to over the next 12 months. There could be bit of belt tightening if Trichet and Co continue with rises of 25bp every 2 months.

I am sure that the banks are rigorously applying the 2% stress tests at the moment......

 

[Glenbhoy]

The effect of the first rate rises are only filtering through now showing up in the weakening property market.

Although the knowledge that the property market is weakening is at present limited to users of this board

 

[Glenbhoy]

Hi Harrogate,

I've watched this thread with interest and think I have read about 70% of the posts.

I am interested in the historic norms. Have you a source for the info you quote above?


Cheers!

SPC, historical norms in Ireland would be way off the mark imo, the ireland of today is vastly different than at any point in history. We have full employment, mass immigration, average income way above EU average (higher when net income is compared) - these are all in stark contrast to the situation that has existed since this state was formed.
We therefore have to look at something different, say for example rental yields or something along those lines.

 

[whathome]

Although the knowledge that the property market is weakening is at present limited to users of this board

Maybe you should get out more often to have a look - you might notice that it is more commonly known

Are you bidding on any property at the moment Glenbhoy?

 

[whathome]

Many of the previous releases of new developments have still not sold out. Here's another example of the weakening property market...

These Clontarf apartments were released in April and were widely expected to sell out quickly - still for sale in now in September with no margin for a price increase.

April:
[broken link removed]

September:
[broken link removed]

Back in the old days when the market was still strong, the "final" phase would have sold out but the weakening market results in a struggle to offload them. Many developments that were expected to sell out in the previous season are still struggling to sell - and we are definitely into the new selling season now.

 

[Duplex]

SPC, historical norms in Ireland would be way off the mark imo, the ireland of today is vastly different than at any point in history. We have full employment, mass immigration, average income way above EU average (higher when net income is compared) - these are all in stark contrast to the situation that has existed since this state was formed.
We therefore have to look at something different, say for example rental yields or something along those lines.

We don't have full employment. We have an influx of economic migrants working in the service and construction sectors, no one knows if these migrants will remain if we have a slowdown or if their home economies pick up. While incomes have raised so has inflation above the European average and debt creation is now running well above European norms at an unsustainable rate. We are heavily reliant on a handful of American MNC's for export earnings and by extension on an American economy which shows signs of a slowdown. One in eight people in Ireland is employed in construction and heaven knows how much of the economy is dependent on the construction, furnishing and financing of houses.

 

[whathome]

We don't have full employment. We have an influx of economic migrants working in the service and construction sectors, no one knows if these migrants will remain if we have a slowdown or if their home economies pick up. While incomes have raised so has inflation above the European average and debt creation is now running well above European norms at an unsustainable rate. We are heavily reliant on a handful of American MNC's for export earnings and by extension on an American economy which shows signs of a slowdown. One in eight people in Ireland is employed in construction and heaven knows how much of the economy is dependent on the construction, furnishing and financing of houses.

Absolutely, the economy is dangerously dependent on construction. From this article in today's Independent, it looks like there has been no let-up in construction or supply of new housing.

Building on the rise as order books are swelling
http://www.unison.ie/irish_independent/stories.php3?ca=184&si=1686317&issue_id=14630

 

[whathome]

EU's central bankers signal higher rates

[broken link removed]

""Inflation is a very serious risk," Mario Draghi, the governor of the Bank of Italy, said in Helsinki. "We're in a situation of having extraordinarily accommodating interest rates."

 

[soma]

I think I know the land you mean Bearish, and to my mind building out there - 12 (?) miles from the city centre would not be a good idea unless we had a decent transport system.

You mean a public transport system which is as good as the one in meath/kildare, where they're building instead..?

 

[bearishbull]

http://www.timesonline.co.uk/newspaper/0,,2769-2350137_1,00.html


Former chief economist and deputy general of the Irish Central Bank writting in yesterdays Sunday Times.

There is no question that demand for housing is strong, being boosted by demographic factors, immigration and an almost obsessive desire for homeownership, even multiple homeownership. Another demand factor is the help provided by parents to their children through releasing equity in the family home. Young people are buying houses at an earlier age to “get on the ladder”. This, combined with overlending by banks, has set up an almost self-perpetuating spiral. Figures released by the Irish Bankers Federation show that almost a third of all home loans are now for investment. Is this lending underpinned by demographics, or is it a plain old investment bubble? On the supply side, Ireland is not overpopulated, yet site values have shot into hyperspace. The servicing of land for building has also failed to keep pace. When the president of the European Central Bank recently referred to “abnormal” property markets, what other country could he have been talking about?

He also questions the quality of the economic growth and says that theres such a thing as unhealthy economic growth and that under the facade the economy isnt so great going forward.

Merchandise exports, however, have been sluggish for a while now. In the case of indigenous companies, they have been flat for 10 years. This may relate to high wage growth and lack of competitiveness. If the dollar falls in value, the trend for exports could become very worrying.

 

[Bedsit]

More bad news from Australia

http://www.smh.com.au/news/national/left-with-an-empty-feeling/2006/09/09/1157222376383.html

 

[HotdogsFolks]

I get the feeling a lot of people here are secretly hoping for a crash. Is this based on jealousy (you missed the boat a few years back) or because you honestly believe a correction is justified? It does seem a lot of you will be delighted when people start being unable to make their mortgage repayments... Seems a bit sad/sick IMO.

But back OT: Again anecdotal evidence, but a few friends of mine who were planning on buying a house this year have decided to "wait and see". The ones who did make the purchase now have a worse standard of living due to financial stress and the "unknown" which is down the road.

Personally I think people who commute from Kildare / Cavan etc to Dublin each day are crazy. I'd rather emmigrate than live that kind of depressing existance. Financially, mentally, etc it's just not worth it...

 

[Remix]

Irish Consumer Sentiment takes a serious dip August:

http://www.finfacts.com/irelandbusinessnews/publish/article_10007239.shtml

 

[whathome]

I get the feeling a lot of people here are secretly hoping for a crash. Is this based on jealousy (you missed the boat a few years back) or because you honestly believe a correction is justified?

I honestly believe that a correction is justified. We have a massive property bubble which is damaging the economic future of the country IMO. I'm certainly not jealous, I purchased in two properties in 1998 and 2001 - so I don't think you could say I missed the boat.

I would say most people here are enjoying the debate and posters with bearish opinion reflect the change in public sentiment. Nobody wants to see mortgage holders suffering. It would be nice however to see first time buyers have a chance to purchase property without having to commit themselves to a near endless financial incarceration.

 

[Calina]

I get the feeling a lot of people here are secretly hoping for a crash. Is this based on jealousy (you missed the boat a few years back) or because you honestly believe a correction is justified? It does seem a lot of you will be delighted when people start being unable to make their mortgage repayments... Seems a bit sad/sick IMO.

It seems to be common to dismiss those who consider a correction to be somewhat desirable as been sad jealous losers. Personally I think that's highly insulting.

Currently, average home prices in Ireland are between 8 and 10 times average salaries. With the best will in the world, that is not sustainable, so either house prices come down, or salaries will have to rise. There is no way in hell that salaries will go up without causing inflationary trouble and unemployment troubles. It will also happen over IBEC's dead bodies and by and large, as they do the paying....

The property market in Ireland is the way it is because property has lost its utilitarian function and has become a get rich quick scheme. As such, quite a lot of the property being built is being built with the intention of maximising the amount of money that can be made in the short term, and with little or no respect to how it's going to be used. Example - all those small and horrifically expensive one bedroomed apartments going up in County Dublin commanding up to 300K.

Why do I think a correction is necessary? Because we can't afford to pay for that property. We think we can but in truth we have to borrow massive and increasing amounts of money - and that money is getting more expensive - to pay for it, and in a lot of cases, we don't even need it. We're just going to use it as a pension because hey, it'll be worth millions in 30 years time when we retire. But millions mightn't buy you much in 30 years time. Or we're going to make a fortune on cap appreciation within 4 years. Or we think we're able to be landlords whereas half the questions elsewhere on this site display crass naivete on the part of first time landlords.

I don't like raining on anyone's parade but I am convinced that this state of affairs is not sustainable and the sooner a correction comes, the less impact it will have on the rest of the economy - which won't go unaffected anyway. To pretend that things can go on as they are is redolent of burying your head in the sand.

 

[room305]

I get the feeling a lot of people here are secretly hoping for a crash. Is this based on jealousy (you missed the boat a few years back) or because you honestly believe a correction is justified? It does seem a lot of you will be delighted when people start being unable to make their mortgage repayments... Seems a bit sad/sick IMO.

It can seem that way but the bulk of posters here don't want a crash, they just see it as unavoidable. Houses are overvalued by any measure you care to use. Thus they need to correct, how they correct will be either a short, sharp correction or a long drawn out one.

Up to maybe two years ago, a sharp correction would have been better. Now I think it has gone too far and if the "soft landing" can be engineered (I am very doubtful) I think this would be best. A housing correction now will bring about a recession.

As for jealousy - if people have put up with unbearable smugness from specuvestors making obscene money on property in the past few years, then don't deny those who "missed the boat" a sly smirk as they watch these people struggle to come to terms with the sheer volume of debt they are carrying once the market turns on them.

 

[phoenix_n]

More bad news from Australia

http://www.smh.com.au/news/national/left-with-an-empty-feeling/2006/09/09/1157222376383.html

Scary stuff.


At Annandale, a "mortgagee in possession" house, bought 18 months ago for $750,000 was up for auction. But only a handful of interested parties went looking for a bargain.
The Susan Street home passed in at auction without attracting a single bid. Before the auction, Century 21 City West principal Matthew Meynell expected the three-bedroom, two-bathroom strata home to sell for about $550,000.
Afterwards, a potential buyer offered a mere $330,000.