Current public sentiment towards the housing market?

[Guest107]

how many of these people queueing up to buy houses for 400k in the back of Balivor do you think will be living in spanish villas in 10 years' time?

Not a single one , them Back Of Ballivor people will have missed the opportunity that others who bought earlier had to leverage that FTB to get a decent STB near where they wanted to live before prices sent them off to buy at the Back of Ballivor.

In every pyramid there must be a wider base than each of the next rungs . Those bottom rungers will be shafted as always while those who got in early will be fine.

In a few years we will all know an eater of a Bitter Pill at the Back of Ballivor along with a slew of other marooned by negative equity in former outer commuter belts . They can move if they wish but they will have to bank a loss. Transport economics will prevent those outer commuter belts from recovering , ever again.

 

[liteweight]

Liteweight - is there some point at which you would re-evaluate your investment properties based on profit, yield etc.?

I purchased an investment property in Dec 2001 and am currently selling it. I've seen the price rise to a level that doesn't make sense relative to rental income. My view is that with rising interest rates, many other investors will take a profit rather than subsidise tenants. Do you think you would you ever realise a profit and sell?

At the moment I am in the lucky position that rental from investment properties cover all expenses plus the mortgage on my PPR. Of course I re-evaluate our situation constantly.

We recently sold our interests in commercial property and although it might not seem logical to some, the reason I did this was that I began to see more and more brand new offices left standing empty. Upon researching this, I found that, builders who include commercial units in apartment blocks do not have to allocate any units to affordable/social housing. It's a get out clause for them. (This was correct at the time I sold anyway). It led me to believe that commercial property was not being built due to demand but for other reason mentioned. We also wanted to diversify as I don't like having all my eggs in one basket. To cut a long story short, we also wanted to release some capital to buy the famous villa in Spain, which we will rent for part of the year, but because of current situation there, we don't want to have to rely on the rental. It's a lifestyle choice really.

So yes, I would re-evaluate my position if, the property concerned was worth so much that rental yield was less than I could get on investment of the profit from selling and if I felt that the area in which the property was located had hit its ceiling. Otherwise I'd hold on. At the moment I can hold onto properties without too much sweat even if rents go down. I bought with a view to the long term and so far its worked out well.

 

[CelloPoint]

You can't sell if nobody is buying.

And so the adage 'you're not richer unless you cash it in' stares middle-class Ireland in the face. Popular dinner party conversation revolving around the prices of houses in the neighbourhood will meaningless when there isn't a buyer in sight.

 

[Calina]

You can sell if the price is right. Unfortunately, if you've bought a one bed box for 285K you're not going to consider a market valuation of 170K as "right".

 

[Glenbhoy]

Hi, thanks for the contribution. Can I just ask you a question - how many of these people queueing up to buy houses for 400k in the back of Balivor do you think will be living in spanish villas in 10 years' time? There's no doubt that anyone who rode the property wave from the mid 90s has made a killing and done very well,

Cello, I think you're making the mistake that everything is and always will be doom and gloom for those who didn't get the opportunity to surf the celtic property wave.
People amass wealth in a multitude of different ways, property is one facet of wealth accummulation, allbeit one that has worked out well for many buyers of the past 10-15 yrs (beyond their wildest dreams i imagine).
In general, people make money from businesses and successful careers, the couple in Balivor could end up discovering the secret of nuclear fusion, their neighbours could find the oil reserves in the back garden, who knows.......

 

[DonCorleone]

The grass is always greener eh? As I stated earlier - why do you stay?? I have no problem with your overall analysis on the irish housing, i agree, it's overvalued, but your constant denigration of irish society and your elitist attitude becomes a little grating after a while.

Completely agree. Obvilously from Australia...the 'world greatest country'...blah blah blah.

 

[phoenix_n]

You can sell if the price is right. Unfortunately, if you've bought a one bed box for 285K you're not going to consider a market valuation of 170K as "right".

The market value was always 170K. It was just the perceived value was 285K.

 

[whathome]

But no-one is going to take the risk that what they think could be the bottom of the market is in fact.....only a crevice.

I remember an old stuck-up Investment banker being interviewed on Bloomberg TV years ago. He was asked about whether he thought the market had reached a bottom. His reply:

"Well you know what happens when you try feel for a bottom?....
You get smelly fingers."

A crevice might not be so bad!!!

 

[Glenbhoy]

The market value was always 170K. It was just the perceived value was 285K.

Surely if the market paid 285K, then the market value was 285K. Maybe the perceived value in some peoples opinion was 170K, but the market did not agree!!

 

[CelloPoint]

Cello, I think you're making the mistake that everything is and always will be doom and gloom for those who didn't get the opportunity to surf the celtic property wave.
People amass wealth in a multitude of different ways, property is one facet of wealth accummulation, allbeit one that has worked out well for many buyers of the past 10-15 yrs (beyond their wildest dreams i imagine).
In general, people make money from businesses and successful careers, the couple in Balivor could end up discovering the secret of nuclear fusion, their neighbours could find the oil reserves in the back garden, who knows.......

Point taken - anyone can make it in life if they work hard and get the right breaks. Let's decouple this issue from my conviction that there is no value in the back of Balivor and that the risk of negative equity from such a purchase is great.
Such people will find it very hard to break free from the noose of debt hanging around their necks, no matter how hard they work.
You've got to work smart too in this life (as well as work hard), and I don't think buying is the back of Balivor is very smart in 2006.

 

[Calina]

The market value was always 170K. It was just the perceived value was 285K.

This is where you're wrong. The market value is the value borne by the market. If people are paying 285K, then that's the market value at a given point in time. But the market value can change.

I'd see 170K as the actual value. That's a bit different. Additionally, EAs laugh if you say things like that.

 

[phoenix_n]

Surely if the market paid 285K, then the market value was 285K. Maybe the perceived value in some peoples opinion was 170K, but the market did not agree!!

Yes i was not being literal in my terms but i was conveying a message.

 

[room305]

And so the adage 'you're not richer unless you cash it in' stares middle-class Ireland in the face. Popular dinner party conversation revolving around the prices of houses in the neighbourhood will meaningless when there isn't a buyer in sight.

W2DW has made some good predictions on here so I'm going to try my arm.

As the market slows and rather than prices coming down in any dramatic way, instead you simply see a slow down of buying activity (with accompanying rising inventory as seen in the US). Then it will be a fantastic time to be in home improvement. Because that is what middle-Ireland will shift focus too. How do you sell? Everyone will know of someone who sold a place in an unpopular area because they put down extra decking or redid the bathroom. The merits of spending cash on the kitchen vs. repainting the outside will be discussed. "... and once he put in the marble tiling on the bathroom floor sure he barely had to come down in price at all, loads of buyers came in. It pays for itself in the end really ..." will be what you will be the type of thing you will hear.

Anyway, I may have said it before but I'm saying it again now. Home improvement will be big business during the crash.

 

[liteweight]

How much of this wealth is realised and how much is tied up in property? I'd be very nervous if all my equity was tied up in an illiquid market when we're in such an uncertain economic climate.

About 50/50 at mo. I'm not particularly worried about property market falling as we would just hold on to them until we saw a recovery or the children inherited. I agree that it's foolhardy to have all equity tied up in property.

 

[tiger]

What makes people so sure there won't a mass selling off of properties? An investor who bought, say in 2002 will happily take a hit of 50k off today's market price if he was fearful of the market outlook.

</p>
While I do think the market is out of kilter, I'm not expecting a big drop in prices. What's happening is that with 35 yr 100% mortgages, lending has reached it's limit, and that limit is starting to contract now with ECB rates rising. On the other hand the economy & employment is relatively strong. The key for me though is supply, as far as I can tell virtually all new builds are sold off the plans, so there is very little risk for the developers and they can turn off the tap very easily if demand dries up. Does this happen in any other market?

 

[room305]

About 50/50 at mo. I'm not particularly worried about property market falling as we would just hold on to them until we saw a recovery or the children inherited. I agree that it's foolhardy to have all equity tied up in property.

I'd still consider liquidating more of it but you do seem to be in a better position than many newer buyers (including myself might I add). A recovery could be a long time playing out but it sounds like you are in for the long haul anyway.

 

[CelloPoint]

W2DW has made some good predictions on here so I'm going to try my arm.

As the market slows and rather than prices coming down in any dramatic way, instead you simply see a slow down of buying activity (with accompanying rising inventory as seen in the US). Then it will be a fantastic time to be in home improvement. Because that is what middle-Ireland will shift focus too. How do you sell? Everyone will know of someone who sold a place in an unpopular area because they put down extra decking or redid the bathroom. The merits of spending cash on the kitchen vs. repainting the outside will be discussed. "... and once he put in the marble tiling on the bathroom floor sure he barely had to come down in price at all, loads of buyers came in. It pays for itself in the end really ..." will be what you will be the type of thing you will hear.

Anyway, I may have said it before but I'm saying it again now. Home improvement will be big business during the crash.

You can't paint your way out of a bad location with crappy public services.

Also, where will all this money for DIY come from when there are no more equity release offers for the get-rich-quick, middle-class lemmings to avail of?

Those investors who bought in 2000 will happier to sell than those who bought the same property in 2005 - so a 100k hit to the 2000 investor is nothing compared to a 100k hit for a 2005 investor. So the argument that property is 'sticky on the way down', does not apply afaik (especially in the context of investment properties, family properties are a little bit sticky for obvious reasons).

 

[room305]

You can't paint your way out of a bad location with crappy public services.

It doesn't matter whether you can or not, just that people will think you can. They will take the house off the market, put it back on the market a few months later. Maybe fire their REA, do up the garden, put up a fence. Anything is better than doing nothing.

Initially at least. After a while they give up and that's when houses start to get run down and dilapidated looking - making them harder again to sell.

Also, where will all this money for DIY come from when there are no more equity release offers for the get-rich-quick, middle-class lemmings to avail of?

They may still have plenty of equity to release in their PPR. Credit cards, credit unions are also an option. They'll get the money from somewhere, there's plenty of it still sloshing about.

Those investors who bought in 2000 will happier to sell than those who bought the same property in 2005 - so a 100k hit to the 2000 investor is nothing compared to a 100k hit for a 2005 investor. So the argument that property is 'sticky on the way down', does not apply afaik (especially in the context of investment properties, family properties are a little bit sticky for obvious reasons).

Property is sticky on the way down, as people are very reluctant to come down in price. Regardless of what they paid for the house.

 

[whizzbang]

</p> The key for me though is supply, as far as I can tell virtually all new builds are sold off the plans, so there is very little risk for the developers and they can turn off the tap very easily if demand dries up. Does this happen in any other market?

Don't the developers only get the deposit? with the rest paid on completion? This would mean the developers are at risk from people who paid a deposit just walking away if the property is now worth less than they paid for it?

 

[whathome]

Interesting BBC reader-comments feedback on the UK rate rise today:
[broken link removed]

I wonder what the general response on an RTE equivalent would be?