bearishbull
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Careful, it’s your first time
22 October 2006 By Laura Noonan
Until quite recently, the white smoke emanating from Ireland’s property market was of the easy to read variety. Prices were soaring to highs that induced bouts of dizziness in even the most levelheaded of homeowners, and the masses clamoured to pour their money into Ireland’s best performing asset.
To buy or not to buy?
Shane Brady, director of Gunne New Homes, said there was never a bad time to buy property.
‘‘Going back to 2001 and that period post 9/11 and people were getting messages from the market place say ‘oh don’t buy the market is going to fall through the floor’ and all this sort of carry-on. Not alone were those statements unfounded, but they were coming from people who didn’t have a knowledge of the marketplace. The market in 2002 took off like a rocket again.”
Austin Hughes, chief economist at IIB Bank, agreed that a mass return to the market was a very real possibility. ‘‘There’s no doubt that you’re going to have a number of people staying out of the market at the moment,” he said. ‘‘Because they see that interest rates are rising, they’ve been told by some commentators that the sky is falling, there is this uncertainty about whether there will be capital gains tax on investors, there is uncertainty about stamp duty, and there is more supply.
‘‘What may happen is that prices of individual properties will fall while prices generally will rise,” said Hughes.
‘‘The falls will be in trophy houses. If you are talking about a unique house somewhere in a desirable suburb, it is very difficult to know whether the underlying value of that is X million or Y million. It all depends on whether three or four people are going for it.
However, Hughes said the fundamentals of the property market remained strong. ‘‘Once you take out the regular bad news on interest rates, put in the SSIAs and hopefully a supportive move in the budget, that would give sustained property price appreciation,” said Hughes.
I don't think most of the bears on here are saying "never buy under any circumstances" - I'm certainly not. Yes, one of the benefits of buying is you own the place in old age - no question. I think most are saying "it's very expensive now and likely to soften/correct/crash [depending on how bearish you are] in the coming years." Renting (for now) has the advantage of helping you save cash each month, putting you in a better position as a buyer for the new market now emerging. A highly leveraged owner/occupier is - by comparison - stuck.
Neffa said:And yes, when you bought property 30+ years ago, it was always a stretch. Difference was that inflation helped make that burden ease pretty quickly for many. That's not the case now and given our membership of the euro, very unlikely to be the case in the foreseeable future.
One typical home in 'risky' Clonsilla
Original asking price 430k
[broken link removed]=
Latest offer 450k and rising...
FTBs will still be saddled with higher interest rates and the prospect of banks willing to lend less. This certainly was the case when the crash happened in London.
Realistically, how much should a bank lend a couple earning €60k/year. The old lending rule 2.5 times first wage, 1.5 times second wage was chucked out the window years ago. If it was still in place the a couple on average industrial wage could not borrow more than €120k. Even if the bank would lend 4 times combined wages that would still be only €240k, considering the average house price in Dublin is over €400k. Plain and simple most are priced out of the property market.
I think a crash in property can happen much more rapidly than the uk crash due to this rapid access to information from all over the country/market.
1. 120% mortgages were commonplace in a unregulated market
2. Interest rates were 15%!
Here in IRL we get a rate increase of 1.25%, and look at the effect its had on everyones perception of the market.
It's the relative increase that's important.
In the UK, rates jumped from a very short term low of 8% to a high of 15% between 1988 and 1990, an increase of 87%. Interestingly, Irish rates only have to go to 3.75% for the same level of increase to apply.
3.75% is an unbelievably low interest rate, and barely on a par with inflation.
What is a believable interest rate? Look at the damage jumping here has done. What will happen if rates jump to your believable rate.
http://irishhousepricesfalling.blogspot.com/ (poll added)
This is just drawing comparisons between percentages increases, and not effects. 3.75% is an unbelievably low interest rate, and barely on a par with inflation. The cost of money is still cheap. Its still very attractive.
The examples that the SBP give relating to falling prices, are all in the million, or muiti-million range.
As I posted here a few months ago, (before being hunted by the "The Sky is Falling, Don't disagree" brigade), the average first-time buyer house (say, a 3-bed semi), is holding firm, or increasing, and is certainly not decreasing.
a believable interest rate?
btw, relating to that new blog, spawned from this thread, how many cached myhome.ie house price INCREASES could we find, going back through the past 6 months, in response to this list of decreases? Many multiples I guess
I understand what you're saying in defense of the market but would you not agree that the price rises of recent years have been driven by too many people chasing too few properties? If so, do you think that the record amount of property on the second-hand market coupled with the record number of new properties on the market will have any effect on prices.
An increase in inventory coupled with a reluctance on the part of buyers to leap into a market that the media tells them is ripe for a fall = potential for a fall in prices (although nothing is certain of course)
Main Street, Swords,
North Co. Dublin Retail Unit For Sale
Sale Price: €65,000
Floor Area: 1,000 sq. feet (93 sq. metres)
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