Current public sentiment towards the housing market?

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whathome said:
I think this is responsible for some of the froth in recent years!

http://www.richdad.com/

It's a huge seller, I wonder how many Irish people have been influenced.
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I'm a fan of this book and I think it/RK gets unfair flak for causing people to act like lemmings.

(a) In the book he does hold property up as an example of an income-generating asset BUT (and this is very important) he really does stress that people should stay away from he calls "junk properties". He defines a junk property as one where it's income (rent) does not cover it's costs. This describes virtually every BTL bought in the recent past - people are obviously not looking at cashflow.

(b) He was called a traitor/turncoat last year for writing an article called 'All booms bust' bascially saying that the US property bubble had gotten way out of hand.
 
delboy i agree with alot of your statements, there is alot of truth if not all truth there.

the property market everywhere is not as fundamentally driven as other markets because alot of the partcipitants are not as market savvy or risk aware. Hence alot of the illogical actions. Couple in the fact that alot of market commentators and media are somewhat compromised is also a major issue

delboy159 said:
I would not describe myself as a bull, but seeing as there have been so many requests for bullish arguements I'm going to try and construct some logical evidence for the purpose of lively debate!

The non fundamental perspective.
Bears have been using the fundamentals as a logical reason for the current stalling of house prices in the market. However, these same figures and arguements have been used for the last 5 years - and proved non fundamental. The fact that prices increased in spite of these so called fundamental laws, prove that these factors have moved from fundamental to peripheral considerations in the market. Sentiment, govenment intervention and banking lending criteria are moving from peripheral to fundamental factors.

Economic logic v's Practical logic
The common sense arguement that people will gain a better yield from a savings account today than they will from a buy to let is economically logical. However, most practical/normal people do not have reserves of cash that will earn 3.5% or 3.75% on deposit, the only way they can generate wealth is by borrowing, buying, renting, investing in the asset (in the form of subsidising rent to meet mortgage) and thus accumulating wealth based on this formula. In future the asset will be debt free - with significant value, but will also by an income stream.

Irish connection to owning property
This is one of the most overstated and misunderstood aspects of Irish property.... We do not have a connection to owning property - 50 years ago and even 25 years ago, actually, less than 15 years ago most 20 somethings were living at home or renting in a small room or flat. That was the actual social culture at the time. People were not salivating at the prospect of property ownership, they were content as they were. The amount of people in their 40s/50s who tell me how they they remember when they bought in Leixlip or Blanch that they could have stretched to Rathmines or Clontarf - but it wasn't worth the hassle.
This attitude I believe held up house price growth for many decades - very few people had their "investment property" and it was not uncommon for children to "live at home" until they got marrried. That attitude does not back up the "love of land" perspective.

Government Intervention
Interest rates, supply and demand, new house builds, age demographics are economic statistics that underpin the housing market in a logical market. However, the Irish government has had a massive influence on the develpoment of the market. Stamp Duty is/was an unnecessary form of market control by the government - which can be ammended, eliminated or increased as the governemnt sees fit. This has had a massive psychological impact on how people buy. a 2nd hand house and a new house, same size and spec. A FTB'r will pay more for the new house as there will be no Stamp. They need cash for stamp, whereas the more expensive new build will be looked after by the mortgage.
Also the impending reduction/elimination of espects of stamp on the upcoming budget or next election has a lot of people "waiting and seeing about buying"

Irish negativity v's Irish optimism
It has been accepted that up to the late 80's/mid 90's many of Irelands more aggressive and most hungry for success were forced to emigrate. Those who remained were conditioned by a Catholic society to knuckle down and get on with a formula driven life. With the advent of 3rd level education being much more widespread in this country and the graduates not having to leave as jobs now exist - the nature of an Irish person is a lot more business like and hungry to succeed and achieve. This has created a situation whereby people realise the long term benefit to property investment. A whole generation were exposed to market economics, accumulation of wealth through investment as opposed to work, risk reward ratios etc.

Try that for a start!
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Economic Point above.
Yes leveraging is a great way to increase the capability of maximising returns, just the same as spread betting. But with the simple maths involved to evolve this, geometric increases occur symetricaly with reciporical decreases...if it can go up in this manner, it can also go down in this manner.

Irish Connection:
Not as much a moot point as you suggest but also not as strong as some ppl make it out to be. Government / historic element as turned ppl away from renting due to the lack of security of tenure, something that can be easily remidied and will be in the next few years as this class grows.

Government Intervention: a sneaky tax that we have all come to accept as being part and parcel of property costs. Could be construed in some may of being unconstitutional due to the fact that it infrings on a persons right to a home as laid down by our forefathers - but this is also a moot point.

The government are hopeless as moulding the market in the way that they wish to. As our wonderful leader is a book-keeper helped along by ex school teachers and law academics, its hard not to accept that they know nothing about the dead-weight losses due to taxes or the market inefficiences due to market impositions.
All stamp duty allows developers to du is push up the prices on the margin for newer (some would say, lower standard) housing further form urban centres....as more central sites have houses already upon them.


All in all, Irish property will soften, but won't crash in the near term. I am bearish on it, and have removed myself from carrying exposure in this area, ie: sold ppr and investment properties, increased cash flows doing this, Have also sold out of some of our property dependant market heros....

But Irish property is in a very weak place. Rates will rise to 4% by end 2007,

An awful lot hinges on international developments. Oil and gas have slumped but will come back as always. US hasn't had 3 quiet hurrican seasons in a row!...Hedge funds like Ammarath won't put themselve into a position where they will be caught as short again. If Iran go nuclear which they are on the brink of doing, then oil will again sky rocket.

The dollar will fall against the euro, probably strengthing u.s. d.fi. in ireland but preventing future input. If China increase there fx rates, good will become more expensive, another thing very likely on the cards...

Job losses in this country are also another major worry, if one of the big firms goes, the ripple from it will cause alot of wet ankles.

Irish property is on a pinacle, a major change will decide on where it lands,
My money is on a downward movement, which is where is tottering towards. Anything major will decide how far down it lands when it decides to go
 
I see this new site being advertised everywhere (radio , billboards etc) www.propertynews.com they seem to have all mason estates property on their site. more competition for recently purchased myhome.ie ! the other crowd funda have recently launched too and daft continues to expand.
 
Raskolnikov said:
I mentioned two particular areas that had 7-8 properties for sale all within eyeshot. I notice that there are now only 2-3 properties for sale in both areas. It's only anecdotal, but for all the properties up for sale a good deal of them are shifting.
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would be interested to see where this is occuring , any links?
 
Here's a question for ye: what should the average house cost?
I.e. based on the old banking rule (now defunct) that a bank would only give an individual a mortgage which is 2.5 times their salary (+1.5 times the spouse's salary).

By that calculation the average industrial wage of €30,576 only allows an average working couple to borrow €122k. In a market free of investors would this mean that the average house price should not be much more than this?
Yes, the maths is a little basic, but what do you think a FAIR average price would be?


Note I have updated the price drops and have started to include Daft unit counts: http://irishhousepricesfalling.blogspot.com/

...cheers Whathome for the extra examples in the comments.
 
teknostic said:
tumbleweeds blowing across this thread .........
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over three hundred and thirty thousand hits on the thread

Afuera said:
I think that only leaves trader-uppers in the market for the example you gave. Trying to flog their previous property to a FTB will not be so easy considering that the builders are happily providing tens of thousands of stamp duty exempt houses every year.
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VERY important point. Builders can sell at lower prices without going into negative equity and can easily beat home owners if they were trying to sell the same house! STAMP DUTY! not even a fair fight!

http://www.rte.ie/business/2006/1010/ncc.html
another relevant link ^
 
2nz said:
Here's a question for ye: what should the average house cost?
I.e. based on the old banking rule (now defunct) that a bank would only give an individual a mortgage which is 2.5 times their salary (+1.5 times the spouse's salary).

By that calculation the average industrial wage of €30,576 only allows an average working couple to borrow €122k. In a market free of investors would this mean that the average house price should not be much more than this?
Yes, the maths is a little basic, but what do you think a FAIR average price would be?
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Another old rule-of-thumb was that the price should be around 125X the monthly rental income. That would make my current apartment (3-bed city centre maisonette) worth about €120K if I wanted to buy it from the landlord. At the moment there's another unit in the block, same as mine except doesn't have a parking space which mine does, up for sale
....at €440K...

Now, you could argue that most couples these days have two incomes (the bull argument is that this justifies prices doubling) or that interest rates are still historically very low, but can anyone explain to me where the extra €320K on the value of these units is coming from?
 
The latest analysis from Bank of Ireland economist Dr Dan McLaughlin

http://www.rte.ie/business/2006/1011/economy.html

This is a bullish argument that I made last month on this thread. Rental income from Irish foreign investment is boosting our GDP. This may help to answer the question about why Irish house prices are so much higher than Lipzeig.

I also predicted that house price inflation would, in the next year or two, decrease to normal levels around that of wage inflation. It would seem that no further increases will occur in 2006 with a last jump yet to come in 2007 (That 500K per month per SSIA couple is now available to pay off interest rate increases and a bit more).
 
Was 595,000

[broken link removed]=

Now 560,000
http://www.daft.ie/searchsale.daft?search=Search+%BB&s[cc_id]=ct1&s[a_id][0]=pc8&s[a_id][1]=pc16&s[mnb]=4&s[mxb]=&s[mnp]=&s[mxp]=650000&s[pt_id]=&s[search_type]=sale&s[refreshmap]=1&limit=10&id=147119

Nearly 10%


And when we were looking around 2 months ago we got a brochure for this place at 610k, so this is the second drop.
 
Fergal said:
http://www.rte.ie/business/2006/1011/economy.html

This is a bullish argument that I made last month on this thread. Rental income from Irish foreign investment is boosting our GDP. This may help to answer the question about why Irish house prices are so much higher than Lipzeig.
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:confused:

You're kidding, right? I think you'll find that Germany has a very healthy trading position (a surplus, unlike Ireland) with the rest of the world and has a vast foreign income stream. Last time I was in the States or the UK, I saw a lot of BMW's, Mercedes + large quantities of German machine tools power factories globally. We've got property income, that's about it.
 
Fergal said:
The latest analysis from Bank of Ireland economist Dr Dan McLaughlin

http://www.rte.ie/business/2006/1011/economy.html

This is a bullish argument that I made last month on this thread. Rental income from Irish foreign investment is boosting our GDP. This may help to answer the question about why Irish house prices are so much higher than Lipzeig.
Click to expand...

And why don't you factor in all the money being earned in Ireland and then sent home to Eastern Europe then as well while you're at it?

His predictions of inflation at 3.9% in Ireland (almost twice the recommended rate by the ECB) aren't exactly going to encourage them to go easy on increasing their rates further.
 
Afuera said:
His predictions of inflation at 3.9% in Ireland (almost twice the recommended rate by the ECB) aren't exactly going to encourage them to go easy on increasing their rates further.
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I very much doubt whether the ECB even notice the Irish inflation rate when assessing the level of inflation for Eurozone, we're pretty tiny!
 
Neffa said:
:confused:

You're kidding, right? I think you'll find that Germany has a very healthy trading position (a surplus, unlike Ireland) with the rest of the world and has a vast foreign income stream. Last time I was in the States or the UK, I saw a lot of BMW's, Mercedes + large quantities of German machine tools power factories globally. We've got property income, that's about it.
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No I'm not kidding. Germany: 15% unemployment, high tax, social welfare state. Manufacturing not yet out sourced to lost cost economies. These are factors bearing on the value of property in Germany. But I agree that Germany may well recover and its prospects seem to be improving.As for "We've got property income, that's about it", not exactly in-depth analysis. My original point that Irish overseas investment is making a substantial return still stands.
 
Do people think the potential rate change from NIB will
a) spark a bit of a price war
b) fuel more silly borrowing - and thus improve sentiment?

From what little I read in the paper the details are -
rate - .6% above ECB
LTV of less than 80%
must switch current account to NIB
 
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