I would not be basing my investment stratagy on a clock that is only right for 2 secounds a day out of 8,640. Not very good odds. I am putting my money on a 3% to 5% rise for the next 3 years and a 0% rise for the 10 years after that.roryodonnell said:The Economists are saying that there WILL have to be a house price correction. I think they resemble a broken clock. Yes they may be broken but they will tell the time correctly twice a day.
woods said:I am putting my money on a 3% to 5% rise for the next 3 years and a 0% rise for the 10 years after that.
Sorry, I just cannot see a situation where property prices will remain flat for a period of years after the vast increases of recent years. It may have been a possibility if prices had only increased moderately in which case we'd never be talking about a property price bubble and the debate would be mute. Either prices will keep rising forever (nigh on impossible) or prices will peak and then fall IMHO.
gearoidmm said:You must remember that a flat market with 0% price rise over 10 years equates to a fall in value of 25% over the same period in real terms if inflation of 2% is factored in.
What is that based on? I hear people say it but none actually give a reason why they say this is the case. Anybody I know that has rental property is looking for the rental return for retirement and maybe hoping for capital appreciation. To claim the whole property investor market is only in it for appreciation and are speculative might be over stating. Even if the new investors are doing this what about the ones that have been in it for years and haven't sold. When did it become most investors are just waiting for appreciation? I don't really need figures but it would be nice to clarify if this belief is true.ivuernis said:
As most investment now in Irish property is primarily based on potential capital appreciation and not rental returns how will a flat property market for 10 years happen.
Loki said:Economists therofore can't predict anything as people do things based on social order not on economic principle. If economists ignored the weather effect of food production they would always be wrong if they ignore social order on housing they will get it equally wrong. There analysis is either correct or not. If they say x will happen and it doesn't you don't get to say they got the calculations right so they are right. X didn't happen their prediction has been wrong I don't accept that as their logic makes sense that makes them right.
Property prices aren't hysteria people use a lot more reason. You may not agree but you calling it hysteria is actually the over reaction and as unreasonable as somebody yelling that prices can only go up.
Fundmentals you are talking about is not supply and demand but safe bets. The safe bet is to say house prices can't keep going up and must at some point drop. It is not quite like gravity and has a high probability of being right over time. It is not analysis of the real world but predictions that are vague enough to be correct. Buying a house makes a lot of sense for many people renting and wanting to seatle down.
Loki said:A crash in the UK was brought on by a huge stock crash and business pulled out of investment property.
Each market is different and even though people don't like it Ireland is different, not because of some misplaced paitriotic view but becasue each market has different factors.
Loki said:What is that based on? I hear people say it but none actually give a reason why they say this is the case. Anybody I know that has rental property is looking for the rental return for retirement and maybe hoping for capital appreciation.
Loki said:When did it become most investors are just waiting for appreciation?
Loki said:To then assume all investors will panic or cash in under a change is also a big leap if you ask me. Many people dig in once hard times come. THe only people I can see panicing and cashing out are thoses late in.
Loki said:Eventually prices will stop rising is a no brainer a sudden fall and calls of a bubble are all speculative on till something happens.
Loki said:What is that based on? I hear people say it but none actually give a reason why they say this is the case.
Loki said:To then assume all investors will panic or cash in under a change is also a big leap if you ask me. Many people dig in once hard times come.
Loki said:What problem would start our crash and how much effect would big businesses pulling out on investement property actually have on the Irish marke? THe bird flu could do it I guess. People seem to be ignore these issues completely and taking a real simple view of how a crash happens and how it effects things.
Well that is a belief system close to religion not science or even close. Nothing is ever overvalued if people are willing to pay for it is a fact not beleif. THe economists can't be wrong and right. What you are saying is you believe the economists are correct.There is belief that what they say is correct by not what is happening but "signs" that lead to show how they are right yet the end figure is still not going down. If you use international comparisons what were the signs accross the world telling the UK? Japan? US? You only believe house prices are overvalued it is not a fact no matter what you say now it is only a fact after the event. At what point in your belief were they right? I have never beleived there is a direct correlation between rent and house price. Rent is more based on location than house price is and always has been from my experienceNeffa said:What I am saying is that the economists are correct - I do believe houses are overvalued based on costs relative to rent, expected future rate rises, international comparisons and so on. And I think the reason most people use before they buy is "it went up last year, better get in quick while I can because it will be more expensive next time.") I really do not accept that the majority do anything more than this.
Economists are a bit like chess players the calculate possible ways for the person to move into check mate and ignore the threat. They are also assuming the pieces the other player is trying to go for. THey are ignoring cultural issues and various other real world factors cumilatively they effect the market. Re you considering the change in demographics in terms of increased single people and marriage break ups? What about the post colonial driven demand to own housing? THe fact that irish home ownership will probably have to drop in line with most other EU countries?Neffa said:On your other point, I do agree that the economists ignore the human factor in all of this. What I am saying (and this is opinion, just like all our views) is that at some point soon the economic factors will make the insatiable appetite for property diminish and that will change people's views. That will see the economists view and the "hysteria" come into line and growth will slow/stall/decline depending on your view.
My understanding had always been that this was all linked - ie, stock market crash, followed by economic recession, followed by decreased economic confidence, job losses etc which inevitably led to a crash in house prices.Sorry, but this is not right. The UK Stock Market crashed in 1987 and property in 1990 and it was a residential market crash, not investment. It crashed because property simply became too expensive and the whole pyramid collapsed like a house of cards. It then drove the UK into recession
I don't accept that this is the case - possibly amongst the Sean Dunne's of the world, who probably forget just how close they all came to the precipice they came 20yrs ago. But the ordinary man in the street in my opinion does'nt believe it's a one way bet!There is a widespread EXPECTATION that you cannot lose, that property is a one-way bet, “money for old rope” as someone once put it to me. Under these expectations dips would mean “buying opportunities” and everyone expects the “the long-term” will bail them out under all circumstances. In the frenzy to grab a piece of the perceived risk-free action no one wants to be left out. This is the essence of asset bubbles, this is why we’re in one, and this is exactly the reason why a severe fall in prices is guaranteed.
Then it is assumption that people are doing this. Who is to say they aren't buying expecting rents to increase or they see it as an investment where the rent pays a divident like a pention fund?glendale said:My understanding is that yields are very low ~2/3/4% and an investment property is only justified by an expectation of capital appreciation. Yields will only get worse as interest rates and house prices go up and rents are not going up at all or too slowly to catch up.
ivuernis said:I don't have figures to back this up but I did read before where a lot (a sizeable minority) of new builds (mostly apartments) are left vacant by investors which leaves me to believe they are only in it for the capital appreciation. Any such activity which takes new builds out of circulation puts increased pressure on prices as people who may actually might want to buy and live there are priced out by investors who then leave them vacant while they wait for an opportune time to sell on. In the block of apartments where I live, of which there are 18, 2 have been unoccupied since they were completed over 2 years ago.
It is assumption that people are doing it speculatively on house gain only in the short term.glendale said:When the investment wasn't justified on the strength of the yield alone maybe.
Actually the point is who is telling you that and is it true? I am not convinced it is true and I am in the property trade and know many investors. I am not convinced that the investors are going to need to sell and the portion that may need to may be very samll. Whty everybody assumes it is a big portion has yet to be explained.If people are buying a home to live in investment is not the key issue.glendale said:The point is that a lot of investment properties are being bought on the assumption of good capital appreciation and when this stops which you agree it has to then it will no longer make sense to keep the property and there will be a large amount of properties on the market and this will have a downward affect on prices (which in turn will feed back into the loop).
Also FTBs are rushing to buy a place lest they can't afford it later as prices keep rising. If prices stop rising or fall there is no rush and the demand will reduce and this will further increase the downward pressure on prices.
Glenbhoy said:the ordinary man in the street in my opinion does'nt believe it's a one way bet!
You seem to have some problem with me asking people to justify what their belief is. A buy to let now is probably not a good idea in the short term gain. I don't think people are buying for the short term in mass. I am asking you to say why you beleive they are. If you arte a real investor you may increase your protfoli due to the gain on your other property. Where you planed to have two houses for retirement you now have 3 giving you more income. Tax breaks make this worth while. So asking about revenue misses what the reality is for many investors. The point is your believe is based on who you think is in the market and what they are doing. I am asking you how do you know? I think your logical arguement to what will happen is so heavily based on knowing other people's intent that it is flawed. It also seems to miss the people I know in the market that probably own a larger portion of the market overall. There will always be idiots in the market doing the wrong thing logically but it working out but the same is also true.glendale said:Ok Loki, what do you think is the average yield on a buy to let?
Do you think this alone justifies the investment.
Its may opinion that taking capital appreciation out of the equation at the moment a buy to let is not a good investment, do you agree?
I don't think they a lot of investors are going to need to sell but that they will want to sell.
I don't think FTBs are going to rush into buying into a market that is flat or going down, the sense of urgency will be lost and people will be able to save money by sitting back.
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