Current public sentiment towards the housing market?

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Nominal falls of 40% from the peak (April 06) over the next 2 years, followed by at least 6 years of nominal stagnation, for a total correction in real terms of about 60%. That's what a sane market would do to correct, anyway. But we all know the Irish property market isn't remotely sane, so predictions are useless really.
 

That would take annuity mortgage repayments on a nice two-bed Dublin apartment down to about 500 euros. Do you really see that happening??
 

and with that bang goes the rug from under the "fundamental" immigration reasoning
 

I think more than 7 of the posts were positive! A very small number of posters have already made some guesses but it's pure guesswork, I think they just want to have a 'bet' to see if they're right.

I asked a manager in my local BOI branch what he thought. He gave me the standard BOI figure of 3% rise next year, which amazingly never fluctuates at all regardless of what happens in the market - I assume they see it as a self-fulfilling prophecy of some sort.

To my credit I didn't let it go unchallenged. I asked him what he was basing that on and he said "that's what we're hoping for." Then I pointed out that yields didn't make property a very attractive investment anymore, and investors are making up a lot of the market. He agreed and said if investors dump their properties then "who knows, there could be a fall of up to 30%."

But I doubt you'll see any press releases saying "BOI predict property market change between -30% and +3% for 2007" Doesn't mean they're not considering the possibility.
 
partisan said:
That would take annuity mortgage repayments on a nice two-bed Dublin apartment down to about 500 euros. Do you really see that happening??
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But then if you had a correction like this mortgage terms could reduce back to something normal and sustainable as opposed to the 35-40 year terms which people are in HOK to their lenders for nowadays. This would bump up the monthly repayment and don't forget about more realistic interest rates in the future too.
 
 
exile said:
A very small number of posters have already made some guesses but it's pure guesswork, I think they just want to have a 'bet' to see if they're right.
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You're right, none of us can claim to know what's going to happen, and these predictions are pure guesswork based mostly on hunches and gut feeling and partly on historical rent/value and income/value ratios both here and internationally, and on the experience in other speculative bubbles that popped previously in history in both property and other asset classes. No two bubbles ever pop the same way though, and hey maybe the bulls are right and this time it really is a New Paradigm (TM).

Making a firm prediction like I just did is really just a bit of fun so I can claim bragging rights on this thread sometime in 2010 if I'm right

I really do believe Irish property is overvalued by at least 50% though.
 

So would you sell your house now to buy it back for 40% less in two years time?

True shorter lending terms would bump up repayments. A mortgage is the cheapest loan you'll ever get and there are plenty of arbitrage opportunities. I don't think 30-40 year terms are anything to be scared of. Presumably they'd still be available to those who want them.

I think interest rates are realistic now, they're going to oscillatate within a much lower range than prior to the Euro!
 
partisan said:
That would take annuity mortgage repayments on a nice two-bed Dublin apartment down to about 500 euros. Do you really see that happening??
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The market will adjust to the point where a 25-year capital repayment mortgage on a "starter home" for an FTB couple on average incomes is equal to or only slightly higher than the rent on the same property. That's sane levels in my book. And people earning big bucks will be purchasing homes in leafy suburbs on 15 or 20 year capital repayment mortgages.

40 year 100% interest-only mortgages are an abomination, should be banned, and are always the sign that the end of a property frenzy is nigh.
 
partisan said:
I think interest rates are realistic now, they're going to oscillatate within a much lower range than prior to the Euro!
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This is only true if inflation remains subdued. We've had low inflation for the last 10 years because of the deflationary impulses coming from Germany, Japan, India and China. Hence low interest rates. If Germany and Japan are returning to growth, Japan has ended the ZIRP, China is starting to export inflation and oil is running out....and we have the predictable monetary after-effects of the massive post-2001 liquidity expansion...

It all screams "persistent high inflation" to me. Which means rates much, much higher than they are now - assuming the ECB are serious about price stability.
 
miju said:
and with that bang goes the rug from under the "fundamental" immigration reasoning
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yes, some of the property faith-fundamentals seemed to have taken a shakin' this year.

I'll mention just four

1. House prices can't fall in Ireland.
2. The ECB is not embarking on a series of rate hikes and interest rates will stay at or around 2% because of the state of the German economy.
3. Romania and Bulgaria will provide a fresh inflow of workers (i.e renters).
4. Government won't let house prices fall. (Despite widespread evidence of inventory build-up and price falls, Cowen states directly he will not interfere in the property market in the budget)
 
Why do people think 35-40 year mortgages are not realistic or sustainable? They're standard practice in Japan for example.
Certainly a lot of people in Ireland will shorten their terms and clear mortgages in a far shorter time than they were set up with.
We are in danger of talking ourselves into a recession and property crash. It happened in Thatcher's Britain but it does not have to happen here. This time it CAN be different. Properties are not overvalued by 50%. As we reach equilibrium, which is happening right now, price growth will slow in Dublin's affluent areas, stagnate in its less affluent areas and prices will fall outside Dublin where property is a touch overvalued.
Only my opinion!
 
partisan said:
So would you sell your house now to buy it back for 40% less in two years time?
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Of course I would. I bought as an ftb a year ago after years as a property bear but I believe fair value is more like 2001 prices. Thing is we don't have a very pure fair market in residential property here, so I must admit i'll take a bit of convincing that this scenario will actually play out.

What I do know is I won't stand idly by and watch it happen without taking some corrective action. If sufficient momentum gets built up (another 50-100 bps on int rates, and widespread reporting of the esri index falling for 3-6 months) and she looks like she's about to go, I'll lock in whatever equity I can.
 

Agreed. But this readjustment will only come about if the banks stop lending couples absurd multiples of their joint incomes (over 35/40yrs). The truth of the matter is that couples generally get married and have kids. This greatly reduces their available cashflow by either:
(a) one person giving up work/going part-time; or
(b) increasingly expensive childcare costs.
So you are servicing debt based on (sometimes) 10 X combined salaries even though you might now only be earning 1 or 1.5 salary. That requires the kind of wage inflation we are never going to see.

But the banks will continue to lend as long as they have people who'll borrow - and at longer terms they can afford to charge lower interest rates and still make a fortune.
 
exile said:
"that's what we're hoping for."
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A smart guy once said "Hope is not a strategy", I don't think banks have "hoped" their way to billion euro profits! These guys know exactly whats going on and are setting them selves up accordingly.

Try and prolong the bull market with positive sentiment.
Sell off debts to international markets.
Sell off their own property assets (HQs and high profile branches).
Build a war chest to get through the economic winter, maybe do some acquistions of less well prepared banks in a few years.

All good risk minimising steps!
 

you have to got to be taking the proverbial if you think that 40yr mortgages are normal , OK in japan they were normal particulalry at the very height of their bubble but so were mulit-generational mortages


we've long gone past the point of talking ourselves into recession it's more a case at this stage that people are finally beginning to see the writing thats been on the wall for quite a long time

out of curiousity do you think irish property is over / under valued and by how much????

oh and one last thing , prices haven't stagnated they are actually falling , we had a poster earlier tell us of her price drop experiece , as well as plenty of posts showing exmaples of drops in asking prices and the indo artcile detailing 33% drops in asking prices already
 

I have to say, I admire that!
 

ah Arthur, Do you seriously think that nobody else has the same idea.... be careful, you could be the guy who buys high and sells low, worst of all possible worlds.
 
MadPad said:
ah Arthur, Do you seriously think that nobody else has the same idea.... be careful, you could be the guy who buys high and sells low, worst of all possible worlds.
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i'd have to agree with MadPad here Arthur , I mean everyone is obviously thinking the same as the rising inventory levels clearly indicate
 
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