Current public sentiment towards the housing market?

Another factor in this debate is the sky high cost of living in Ireland.

With gas prices going up another 34%,electricity jumping 25%,petrol doubling in the last couple of years,and Ecb rates forecast to incease by 50 % from 2 % base last year-how can people afford their mortgages especially those who have bought in the last 2-3 years?

Saturday's property ads in the Irish Times

I was looking through the property ads in the Irish Times on Saturday (22nd of July) and noticed very few. Usually there are lots of big EAs advertising viewings for houses which will usually go to auction. Names like DNG were conspicuously missing while others such as HOK, SF had very lean offerings.

Is it just the time of the year when everone is away on holidays or a sign of things to come?

it's the so called quiet season for property BUT with that said it will be interesting to see if the market "picks up" on the back of rising ECB rates , fuel costs etc as well as it usually does

all i know it there's a perfect FTB / Investor apartment on sale beside me for the last two weeks and it's going for a song (so to speak) and sale agreed sign still hasn't gone up yet ,

the apartment is in citygate which is a very well serviced and central area

I remember 3+ years ago when I was looking for property I was disgusted that there was no activity in July/August in the papers - so it is the norm. Things did pick up in September, but you never know how the market will react to another rate rise in early Ausust etc.

when i speak to people now ,they all admit that house prices cannot keep rising 10-15 per cent year after year.now the talk is all about a soft landing.
sentiment has changed, the buy to let market does not make sense when you strip away the yearly house price increases that people seem to think is normal. once that is gone -there will be alot of buy-to -lets coming back onto the market from so called investors who are over extended,which will depress the market even more.
carnage for a year or two, then the smart investors will start buying back into the market-looking for yield from rents while property is cheap.
investing is a business, those who bought in the last few years will soon have to deal with that fact.
if they are not making money on their buy to let now how do they expect to make money in a few years times?
the smart ones are already selling up and locking away their profits while joe public( aka lemmings)are still buying overpriced and badly built houses in overcrowded estates.
the smart ones know that there will be plenty of bargains to be had when the dust settles.

fisherman.

tactics will win a battle-
but strategy wins the war.

thefisherman said:

...the smart ones know that there will be plenty of bargains to be had when the dust settles.

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Just watch out for the 'dead cat bounce' on the way down!

I was speaking with my aunt who lived through a property crash (Calgary, Canada) during the 80s. She told me about her neighbour who thought she was getting a bargain for $165k having dropped from $300k in the space of 2 months. 6 months later, houses around hers were going for $65.

She also told me that the mortgage companies at that time tried to pull a scam whereby they offered to buy the house off you for $1 in exchange for a 'clean credit rating'. i.e. they would sell you another mortgage at the going rate.

She told me similar tactics will probably be employed here by lenders when things go pear shaped, but that you're better off declaring yourself bankrupt and moving abroad in the long run.

Anyway, it was really nice talking to her and very interesting to get a perspective from someone who had lived through a crash.

once apon a time ,in a far away and pleasant land,house prices started to rise, soon everybody was building houses to sell to everybody else as everyone knew that house prices never ever come down,
then one day, some smart little fellow said - hey, wait a minute ,i don't need to buy a overpriced house-i can rent. rent is cheap.
no problem said the builders to the bright eyed young landlords listening,who were getting nervous. sure wont rent rise to cover the mortgage
no, said the smart kid. why should rents rise when you are building house's as fast as you can-lets drop the prices of house's instead.
no, say the builder.
yes,says the kid.
then,way off in the distance a new voice was heard to say
interest rates are going up.
great ,said the builders,lets just add a few thousand to the price of that small house-sure if you spread the mortgage out over 50 years you wont even notice it.
well,said the kid,i wont notice it-thats right, but my landlord might,and when he wants to raise my rent -i am just going across the road to rent a cheaper place, there's plenty of rental house's available thanks to all the houses you've built.
no problem, said the canny builder, i have my money made-i'm off to spain with my mistress, you can rent cheaply, the only loser here is your landlord for buying an overpriced house that he can't really afford-but on the bright side he has learned the difference between investing and speculating which,maybe, he should have known all along.
see you all.

I certainly don't concur that our eastern european immigrants are going to up sticks and leave, just because Portugal/Spain/Italy etc have opened their doors to them. Do you all know just how bad salaries are in these countries, additionally, jobs are not easy come by in Spain and Italy. People won't move because of poor infrastructure, they may move in the future when we experience a down turn, but right now, they can earn substantially more here.

macbri said:

Another factor in this debate is the sky high cost of living in Ireland.

With gas prices going up another 34%,electricity jumping 25%,petrol doubling in the last couple of years,and Ecb rates forecast to incease by 50 % from 2 % base last year-how can people afford their mortgages especially those who have bought in the last 2-3 years?

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We bought our house 2 years ago. The increases spoken about won't bother us for a good while as a) we have a fixed-rate mortgage for the next 3 years and b) we commute to and from Dublin to the sticks, so don't have enough time at home to use up much electricity or gas.

Regarding buying off plans: the developer gets to sell of plans thereby transferring much of the risk associated with an increasingly skeptical/volatile market onto the buyer.

With regards 'priority lists', tales of '100s of people queueing', 'booking fees' and all the other fancy marketing-speak you have picked up on, think: game theory. Who will be the real winner from buying in 2006 market conditions? You're playing a game of musical chairs.

I'm a definite bear. You've no experience in dealing with snakey estate agents, developers and lawyers (nor do most FTBs), yet you seem (to me) rather carefree about handing over huge sums of money. I would not recommend going near Irish property in 2006.

sorry about above... I copy and pasted the wrong response... (plus, I've lost the response I was going to write...) Not my day!

Sorry about above message. I copy/pasted the wrong one! Plus, to make matters worse, I lost the message I was going to write. Damn!

Glenbhoy said:

I certainly don't concur that our eastern european immigrants are going to up sticks and leave, just because Portugal/Spain/Italy etc have opened their doors to them. Do you all know just how bad salaries are in these countries, additionally, jobs are not easy come by in Spain and Italy. People won't move because of poor infrastructure, they may move in the future when we experience a down turn, but right now, they can earn substantially more here.

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It's not just about how much they earn, but rather how much they've left over to send/bring home after paying rent and other living expenses. So even if the wages are lower in other countries, if the rents and cost of food/drink is also lower, then they may be actually better off there than here. I don't think we'll see an exodus in the next year or so, but if work starts to dry up here, and word gets out that work is picking up in these other countries, then they're gone.

I saw this myself in Berlin in the mid 90s. For the first few years of the decade there were tonnes of Irish and British builders out there, and making good money too. As the cost of unification took its toll, the construction work started drying up. Meanwhile the Irish and British property booms were starting. It didn't take long for all those builders to head back home, and you'll find none there now.

"Rising interest rates on their own won't make that much difference as people will probably cut back elsewhere instead. The only thing that will force sellers to accept lower prices IMHO is a large increase in unemployment where the seller can no longer afford his monthly repayments. However in this scenario purchasers will probably also be very afraid of losing their jobs and less willing to commit to long term morgages. There's another thread on propsects for the Irish economy, but no-one foresees large rises in unemployment for the next 2 years at least".

But this is contradictary,If people decide to cut back in other areas then this foregone expenditure will create unemployment.
This particulary applies to Ireland as one of the main drivers in our economy is the consumer,

OK, "anecdotal evidence" is an oxymoron, but in the course of a recent pub conversation I was asked if I owned or rented. I said "still renting" and expected the usual stuff about dead money. He said "you're dead right - wait for the crash."

OTOH, a couple I know recently had a change of landlord when their flat was sold. The new landlord wanted to increase the rent, so they moved. He bought the place sight-unseen and even the hugely-increased rent wouldn't cover the mortgage, so he's obviously buying for expected price increase.

yawha said:

"Rising interest rates on their own won't make that much difference as people will probably cut back elsewhere instead. The only thing that will force sellers to accept lower prices IMHO is a large increase in unemployment where the seller can no longer afford his monthly repayments. However in this scenario purchasers will probably also be very afraid of losing their jobs and less willing to commit to long term morgages. There's another thread on propsects for the Irish economy, but no-one foresees large rises in unemployment for the next 2 years at least".

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Agreed. Except. Dont forget that many a folk has made quite a profit on property and can sell at a reduced price whilst still retaining a profit. Those that can can take the hit will be able to sell faster than those who are in a negative equity situation.

As regards this whole immigration thing. There is one difference between Ireland and other EU countries which should not be overlooked. Its the language. To learn english whilst earning some kind of living is an added bonus and it would take a serious disadvantage to forego learning the 'common denominator language'.

I don't agree with above statement that rising interest rates on their own won't make much of a difference.What some people don't realise is that interest rates are coming of a very low base and new/recent 1st time buyers are borrowed to the hilt.

Ecb rates currently are 2.75% which are 3% below US & Australia.

If rates were to rise to US levels,mortgage repayments would increase by 60-80% depending on nature of loan.

This is a massive increase and will reduce housing affordability by same amount-I assume most recent home buyers have average mortgage of $300-$350 pw based on current average house price in mid $350 region.

How can they afford an extra $250-$280 pw by reducing living expenses-there only option would be to borrow short term(credit card,bank overdraft etc) to fund their mortgage.

As we all know,this is a vicious circle.

To illustrate my point,I will assume a single guy 1st time buyer on $80k a week is buying average house price in Dublin($380k per daft website).
This person would clear just over 1000 euro per week.
His mortgage assuming 100% over 35 years at 2.5% per daft would be $1500pm works out at $350 pw.

Essential living expenses(car,petrol,tax,insurance,food,utility bills,clothes etc) conservatively estimated at $400 pw.

This leaves him with just 250 euro per week to cover discretionary expenses(meals out holidays,pub etc)

However each 1% increase in mortgages will reduce his weekly spending power by approx 75 euros so a 3% will have this guy living on the breadline.

Its' pretty scary as how many recent 1st time buyers are on $80k pa.

Unemployment will be the outcome of increase in interest rates due to collapse of housing market(construction lay offs,retail lay offs due to depressed consumer spending etc)
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The only thing that can save Irish housing market is reduced housing output,little or no interest rate rises and zero house inflation.

macbri said:

The only thing that can save Irish housing market is reduced housing output,little or no interest rate rises and zero house inflation.

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Of which of course, no condition will be met. Builders won't stop building houses while people are buying (why would they?), interest rate rises will be headed north for quite some time to come and zero house price inflation would mean a reduction in real terms so unlikely without precipitating a crash.

redo said:

On myhome.ie there are 123 properties for sale in Lucan. This is highest figure I've seen in a while. I doubt many of them are leftovers from the auction season.

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There are 141 houses for sale now in Lucan. That is a serious buildup of stock. There was around 40 in January.

The sad part about all this is that it will be young people who have got on the ladder in the last couple of years who will be effected if a crash happens.

Mortgage brokers,banks etc have to take some of the blame for the excess of easy credit currently being offered.

People get caught up in the hype and only look at what there paying back and not how much they are borrowing.
Everybody likes the feeling of being rich(notional until u sell) and property has been the obvious avenue in the last few years.

Like any bubble,the crash will be very painfull but hopefully the country will recover quickly(ie not like another Japan which took 17 years to recover)