Future price of Irish properties

[Neffa]

Obvious apologies for interrupting a private party, but sometimes the real world commentary does get in the way.

Three bed semis are getting sold for half a million plus in D16 today , starry eyed couples are getting desperately endebted (but happy to live here) to achieve this - that is the reality - but hey the world goes on.

Coming over from the FOOL UK side, they have been wishing a financial housing meltdown upon their fellow citizens (all fall in a flowing tide) for three years , dispite interest rates doubling, IRAQ war involvement, a third term by a party with a really dubious accounting belief (keep borrowing, pay out all) etc, but you know something it still has not happened - that's the problem, prices are set in the margin of the market and the chancer sellers and dubious buyers are still in love - dispite the signs all around

LOKI - well done for defending the indefensible - never heard that angle
Guys - get a life - either invest and pray or don't invest and be happy

Where do I stand - on the edge, about to cash in or do I hold on for 10% more - Ireland was a grime place in the early eighties and you could get a D4 big house for 100k - pity we all had to live in london / yonkers then.

Nice to get another viewpoint on the board. You're right that many people in the UK have wished a price crash - I have to say that prices have certainly softened but they've not crashed.

They are certainly not going up in London now - falling slowly (like -1 to -2%) in most areas. It is too early to say that the threat of a crash has gone away, but equally a slightly negative trend for another 2-3 years would see a fall, but this would be a -20% fall in real terms (-2% with inflation at 2%) over that period. That seems like a pretty plausible scenario.

BTW, we had our house in London valued 14 months apart (March 2004 vs. July 2005). It had fallen 13% in that time.

 

[kane3000]

Loki, a bubble is defined as a thin membrane filled with fluid. It is defined in real-time as it exists - not after it bursts. It has three physical modes growth, stagnation and collapse during which it may be termed a bubble.

Once it has collapsed completely it is no longer a bubble.

The asset analogy is based on this.

 

[Theo]

[edited by DrMoriarty — see above] You said it is a bubble only if house prices sunddenly fall, correct?
So if they do fall in the near future, then we HAVE been in a bubble, correct?

So how do you know prices won't fall (relative to the recent increases) in the near future?

[edited by DrMoriarty — see above]
To answer your question to loki, how do you know prices will fall?
You and your co-horts seems to be so sure of yourselves that there is almost a level of semi-mocking of those trying to get their foot on the ladder, through intoducing quotes here from another thread. I believe you can make your point without resorting to emotion.

The truth is nobody knows exactly what is going to happen. We can speculate and give reasons for a price crash of 50% or we can give reasons why there will be a smooth landing or we can give reasons why property prices will continue to soar. These are only opinions and I can see all sides of the argument so why take them and yourselves so seriously?
I gave my opinion earlier in this thread somewhere, personally i believe that domestic residential property is over-valued, and a correction (long period of stagnation to allow true value to catch up) shall take place in about 3-5 years time. This will co-incide with increases in interest rates to 4-5% (from current 2.25%) and improvement in Eurozone economy. I don't share the extremely pessimistic views here of minimum 50% decreases simply because there is a steady supply of FTBs in the forthcoming future and the population of Ireland, and particularly Dublin, is set to increase substantially. However, increasing housing supply in Ireland over the coming years should see a stop to 20% price increases and there probably will be a small element of inexperienced property people (investors and FTBs alike) who will decide to sell at the first sign of trouble, no doubt egged on by the scaremongering of some of our friends here on AAM.
HOWEVER, I qualify what i say by adding that there are any number of other things that can happen in the meantime that could be good or bad for property prices. What if tax rates are harmonised across Europe?
What if Germany doesn't recover in the next 3-5 years? What if anything?
I can understand why some here might think a major correction with significant repurcussions (spelling?) for our economy is in the making but I truly hope you are wrong - judging by the tone of some of the contributors, we'll have to put up with the "I told you so" thread for years to come.

 

[Loki]

LOKI - well done for defending the indefensible - never heard that angle

Lets get something straight, I do not beleive the property prices and market will continue as is. People are mixing up where I am pointing out the missuse of the term "property bubble" with my belief of the development of the property market in this country. If you want to talk about that I suggest you look back and read what I think instead of claiming something that requires the ability to know the future.
The fact people assume my views and savagely attack a view I don't have suggests you aren't going to listen to any view that oppose your current one.

Note the view that seems to be so popular here is the one prevelant in the media whcih I would think far to many people use to form their opinions without thinking

 

[Neffa]

Lets get something straight, I do not beleive the property prices and market will continue as is. People are mixing up where I am pointing out the missuse of the term "property bubble" with my belief of the development of the property market in this country. If you want to talk about that I suggest you look back and read what I think instead of claiming something that requires the ability to know the future.
The fact people assume my views and savagely attack a view I don't have suggests you aren't going to listen to any view that oppose your current one.

Note the view that seems to be so popular here is the one prevelant in the media whcih I would think far to many people use to form their opinions without thinking

Loki,

I've seen very little discussion in the media that property is over-priced and/or heading for a fall. For instance, the Tribune had a feature a couple of weeks back on the rental imbalance - the fact that renting the same house is so much cheaper than buying it - but did not discuss if that meant anything for selling prices.

The Economist is the only publication which has been bold enough to say the market is over-priced, and David McWilliams. Most others say it is set for growth, based on fundamentals etc.

 

[walk2dewater]

The truth is nobody knows exactly what is going to happen. .... These are only opinions and I can see all sides of the argument so why take them and yourselves so seriously.

Who's taking it personal? I take my opinions seriously, that's why I put my money where my mouth is. As I see it, the bears arguments have resoundingly won the day on this thread. But we'll have to wait and see if they've won the day in the real world...

...although in the UK the worm has definitely turned...

Right now, today, with few exceptions, UK property is not finding buyers unless the seller offers a discount, either unfront in the initial offer or later...

Also BTW, if anyone's interested I'm going to post my ideal investment portfolio as a new thread, in the next few days. I'd be interested in starting a debate on where the best returns are going forward.

WTTW

 

[CCOVICH]

Also BTW, if anyone's interested I'm going to post my ideal investment portfolio as a new thread, in the next few days. I'd be interested in starting a debate on where the best returns are going forward.

Please remember to keep it general-discussion of individual shares is forbidden by the Posting Guidelines.

 

[bearishbull]

the problem with the belief that prices will only keep rising is that it ignores the what ifs that frequently occur in all economies.

what if interest rates hit 5-6%?

what if supply start exceeding demand?(theres loads of land already zoned and approved for development and plenty more room to build out or up)

what if multinationals start leaving for cheaper cost base economies(even gradute jobs will be under threat)?

what if people start accepting that renting isnt that bad when you can save money over a mortgage and invest it in a tax efficient manner every month?

what if US economy goes into recession?

what if unemployment in ireland increases?

what if the euro falls substantially?

what if all the foreign workers decide ireland isnt so great and move on to greener pastures?(rental demand fall substanially?)

what if a few of the above happen at once??

basically it wouldnt take very much in this globalised interconnected world economy or in the domestic economy to rock the boat and affect housing market,we are just lucky that things have gone so smoothly for us for last decade or so.
people will say theres equal evidence supporting both sides of the argument but there isnt,theres far more evidence of overvaluation than of undervaluation so the balance has tipped infavour of those who are bearish on the housing market. by historic levels housing is vastly overvalued relative to income rental yields etc and incomes are only increasing by 5% and population by 2% so how can there be much validity in the argument that prices could rise much more unless there is a massive speculative element involved? if we accept massive speculative investment and that people are buying because they think it will only rise and are not concerned about low rental income i think its fair to say we are far more likely to be in an overvalued market rather than a fairly priced one and in overvalued markets bubbles are much more likely to be in existence but of course untill it happens we cant be sure .

people seem to treat the most informed experts who previously predicted a crash that didnt happen as cranks but eventually even the boy who cried wolf was right. the weather man predicts weather which nevers occurs as forecasting can have errors because the weather is a complex system like the housing markets/economies but does that mean you never listen to the weather man again because, maybe theres a hurricane on the way!

 

[Loki]

Loki,

I've seen very little discussion in the media that property is over-priced and/or heading for a fall. For instance, the Tribune had a feature a couple of weeks back on the rental imbalance - the fact that renting the same house is so much cheaper than buying it - but did not discuss if that meant anything for selling prices.

The Economist is the only publication which has been bold enough to say the market is over-priced, and David McWilliams. Most others say it is set for growth, based on fundamentals etc.

I think the media heavily reported on the Economists views and every time a bank or such give warning. David Mac Williams is on TV every day so what He says is heavily reported along with the like of Damien Kibert. Just look at all the reports people procuced on this thread to use as "proof" this is a bubble. THe radio is constatnly reporting warnings of a drop or crash. THe fact they also report actual facts such as increases does not dimish the fact that they always point out an impending crash is beleived by many traditional economists.

Bearishbull
Notice all the what ifs and the fact economists have been wrong for over 6 years. Eventually they will be right but that doesn't make it expert opinion just playing the odds of inevitability. At what point do you say economists are simple wrong?
I made many point about the property stock reuse, demographic change, price differentional and social matters that I don't beleive I have read an economist talk about yet. An economist that fails to look at all the avilable data to base his conclusions would never make an accurate description of future possibilities but may predict the same out come. Read back on the thread and you might see some points that economists might be ignoring as a way to make their own view of the world fit. Local knowledge is normally important

 

[beattie]

the problem with the belief that prices will only keep rising is that it ignores the what ifs that frequently occur in all economies.

what if interest rates hit 5-6%?

what if supply start exceeding demand?(theres loads of land already zoned and approved for development and plenty more room to build out or up)

!

I believe that these are the two most critical questions that have to be addressed when discussing the future price of property in Ireland (not saying that the other questions are not valid)

It looks like the last int rate rise in Dec did nothing to arrest the increase in values, will the one coming tomorrow have a similar effect? Personally I believe that this will remain the case until the ECB hits 3%, I would be suprised if that passes without causing a ripple or two

With regards to the supply I feel that the point made earlier where many 2nd properties lies vacant is a clear pointer to oversupply. I believe that it was David McWilliams who said that we are building more units than Germany did after WW2 and I would imagine that there was a clear requirement in that instance.

I see that in Sandyford a month or two before Xmas there was on average about ten 2 bed properties advertised on daft on a daily basis and now it can be about 20-25 (and there is no let up in the building activity here)

 

[CCOVICH]

Folks-keep it on topic please and stop making remarks on each other. I don't want to have to make this point again.

 

[Neffa]

I believe that these are the two most critical questions that have to be addressed when discussing the future price of property in Ireland (not saying that the other questions are not valid)

It looks like the last int rate rise in Dec did nothing to arrest the increase in values, will the one coming tomorrow have a similar effect? Personally I believe that this will remain the case until the ECB hits 3%, I would be suprised if that passes without causing a ripple or two

With regards to the supply I feel that the point made earlier where many 2nd properties lies vacant is a clear pointer to oversupply. I believe that it was David McWilliams who said that we are building more units than Germany did after WW2 and I would imagine that there was a clear requirement in that instance.

I see that in Sandyford a month or two before Xmas there was on average about ten 2 bed properties advertised on daft on a daily basis and now it can be about 20-25 (and there is no let up in the building activity here)

Has anyone got a link to data to show this "empty property" rate? It has been much discussed on the board but I've not seen any 3rd party data.

 

[redo]

It would also be informative to finds out how many apartments that have been purchased in the last 2 years or so that are up for sale.

 

[IFA]

My story on Dublin property

Bought moderate 4 bed semi detached house in West Dublin suburbs 1988, and sold it late last year for over ten times what I paid for it. I was commuting for 1 hour ten mins into and out of work in Dublin 2 each day.

Made a decision to move to city centre, D2, walk to and from work 12 mins each way. Saving nearly ten hours a week commuting. Charge my time by the hour. Making lots more income. Saving this in my pension fund.

Put the sale of property money on deposit. Getting 3% return gross, 2.4% net of DIRT. Rates on the way up. A nice nest egg.

Really upmarket apartment I liked would cost €1.0m. Could not afford it. Well I could have borrowed most of it but no way was I going to have a mortgage of over €500k.I would not sleep at night.

Rent is €1,700 a month. Includes service charge insurance and upkeep landlord replaces anything that goes wrong. First time ever in my life renting.

The simple maths:

To buy apartment, assume 100% loan interest only and stamp duty, not realistic as I would use a deposit but shows true cost of money:

€1.0m + 9% = €1.09M, interest at say 3.75% = €3406 mth.

And interest rates are going up.

Why in my right mind would I buy? This is the best deal I ever got in my life. Let the landlord redecorate, refurbish, pay the service charge, replace the dishwasher when its broken, clean the windows, take away the rubbish, so this is what renting is all about, not too bad at all. I really like it!

Special exit clause: have the mortgage free country cottage on one acre which cost 1/3 of the Dublin semi d price a year ago, and will go there when I am finished renting in five or six years time.

Advising my clients to lighten up on Dublin property. Use my own story as an example.

 

[Marie]

Has anyone got a link to data to show this "empty property" rate? It has been much discussed on the board but I've not seen any 3rd party data.

The statistics for empty and/or 'unaccounted-for' property in the RoI in a highly reputable academic independent survey done about a year ago was that one-third (1/3) of housing stock was empty or otherwise unaccounted for. The relevant link is posted on an earlier discussion of the Irish property market on AAM about a year ago.

 

[redo]

http://www.smh.com.au/news/national/slump-hits-home/2006/02/06/1139074171442.html?page=fullpage

http://www.boards.ie/vbulletin/showthread.php?t=2054889213

 

[Neffa]

Thanks Redo - Anyone seen this? It is referenced in the Sydney Morning Herald property article link in Redo's post.

http://www.demographia.com/dhi-ix2005q3.pdf

It is a comprehensive analysis of housing price/income in several markets around the world - Dublin is ranked as "severely unaffordable" in price terms (although more affordable than London, but prices have fallen there since the article was written).

Interesting stuff, although their median household income figure for London looks low - don't know the other markets well enough to comment so perhaps the data is a bit iffy - not sure.

 

[Loki]

Re: My story on Dublin property

Bought moderate 4 bed semi detached house in West Dublin suburbs 1988, and sold it late last year for over ten times what I paid for it etc...

It is not like you are some genius and are smarter than everybody else. Your house went up in value and you used the money. YOu cashed in a huge asset and minimised your risk as far as you are concerned. Congrats on doing well. You have something for retirement if other people don't buy and rent all their lives at some point they won't be working so how will they afford rent?
How much was your mortgage before? Are you paying more now? I am guessing you are as €1700 sounds like a lot more than your mortgage would have been including replacing appliances and routine maintainece. THe figures you used to show the value of money were too unrealitic considering as not many people here are talking about 100% mortgages for 1million. Try using average house price to give a fair illistration. I don't disagree with the point to note. I still think buying the right property at the right price is possible in the market and still be relaitively safe all things considered.

Neffa

THe affordability report is vaguely interesting but not exactely condeming of Ireland. It is interesting to see comparisons as many people claim we are directly linked to world property prices. I find it a bit hard to see how they can really make an accurate calculation. For example Boston is there but it is actually BostonMA-NH. SO that to me means a city and two states. THere is more than one city in MA. In fact Boston is a very small area and I find in different countries they define areas differently to us. Artane is Dublin here but in th US they may call it a town and not included in figures. Is it the greter Dublin area includeing Kildare etc.. or just the city centre or county.

THe fact that the price differential is apparetntly reducing between Dublin and the rest which I think is how things might really happen. People outside of Dublin (other cities also ton an extent) will lose the most money on their property in the event of a turn as they will probably be less desirable due to travel times. WHen the buyer can choose they chose something with small commutes

 

[Calina]

Loki,

that report stated Dublin was seriously unaffordable by international standards. Not only that, it also highlighted that new builds are comparatively small by comparison to Australia, New Zealand and the US. I wouldn't actually call its view of the property market in Ireland an overwhelming endorsement either.

In any case, I want to make it clear that I now have a severe problem understanding what your position on future movements in the Irish property market. In summary I think it's this: They will stay stable or continue to rise within the Dublin city area, and they will fall everywhere else including the commuter belt. To increase supply within Dublin, many houses will be subdivided.

Is this the case?

 

[Loki]

Loki,

that report stated Dublin was seriously unaffordable by international standards. Not only that, it also highlighted that new builds are comparatively small by comparison to Australia, New Zealand and the US. I wouldn't actually call its view of the property market in Ireland an overwhelming endorsement either.

In any case, I want to make it clear that I now have a severe problem understanding what your position on future movements in the Irish property market. In summary I think it's this: They will stay stable or continue to rise within the Dublin city area, and they will fall everywhere else including the commuter belt. To increase supply within Dublin, many houses will be subdivided.

Is this the case?

To me housing sizes are really determined by climate, historical housing, labour costs, material costs, waste costs (here not the US for sure). Compare spanish properties or at least other countries in Europe one with a similar climate would be good for house sizes.

You haven't quite got the view but it is close. I don't think they will be stable as such just not a massive crash more like a bumpy landing with casualties. Certain property will retain value and keep increasing mostley those with cheaper living such as those not requiring long commurtes. This will make older proeprties worth more converted than as is. iam not saying this is the only outcome but part of a natural and historial change in property stock. Effectively it is how buildings learn as they age. If people ignore the effect this will have how can they get an accurate picture? People quote other examples to indicate their view have happened in other places yet are only using economic gauges and ignore a big bit of the property market namely the property itself.

Other things ignore or dismissed by many seem to be
1) THe effect of SSIAs
2) People buying property for long term investement such as pension or to give to their children
3) Government intervention of any sort
4) THe fact we don't have control over the interest rates unlike every other place that has had a a crash and attempts to control via such methods. (Not 100% on that but can somebody give an example of a country that didn't have control when a crash happened)
5) Demographic changes

I am by no means saying I know what will happen (unlike many here) but if people ignore all other possible factors and focus on interest rate growth, rent returns and a belief in over valuation I think they aren't thinking about the issue. Many people who are insisteing on a crash here are hoping for it so they can afford or that they can get a good bargin. Nothing wrong with that as a reason but if they are also ignoring anything and everything that hope will happen they aren't any different from those who say it will just keep going up. Many won't even expect the definition of a term they insist on using, that is not a educated or a deduced view.