Future price of Irish properties

[bearishbull]

There was a supplement with the Irish Times yesterday with a commentary from HOK on residential and commercial prices.

One of the things which really threw me was that they claim that for the average purchase in Ireland for residential, only 65% is actually borrowed. This seems incredibly low to me - if it were true, then the risk of negative equity in the event of a correction would be much lower.

Can anyone explain/back this up? Is it equity withdrawal funding investment purchases being counted as "deposit" money? Or are large deposits common and not reported much?

....and I'm not getting drawn into the semantics debate again.....!

its an average ,i wouldnt read too much into it,obviously if you trade up to a bigger more expensive house and have large amount of equity in old home you may only need a mortgage for 50% of new houses price.

 

[tiger]

its an average ,i wouldnt read too much into it,obviously if you trade up to a bigger more expensive house and have large amount of equity in old home you may only need a mortgage for 50% of new houses price.

Yes, I would see a no. of things here:
- people who bought 10+ years ago & are now doing equity releases to buy cars or consolidate other loans are probably included.
- a person who does an equity release to buy an investment property probably shows up as 2 50% mortgages rather than 1 90% mortgage.
- people who are buying property at €400-500K upwards are probably trading up & have significant equity.

 

[Loki]

- people who are buying property at €400-500K upwards are probably trading up & have significant equity.

Isn't the average house price in Dublin about €400 (€380)? I wouldn't think that price range is the big group trading up.

I don't disagree with the sentiment. Many people buying have money and as I suggested before borrowing on the equity of your house and buying a second property if your mortgage is low enough is a small liability for many. I know people who own 3 properties with badish yields (at the start) but paid out less than their neighbour did for their home on the same street. Now they get income from their property reducing their own home mortgage. It has risks but if it works you can end up very well off.

 

[Duplex]

Back to semantics again, sorry.

There is only one way to ‘release’ equity from an asset that is by selling it, i.e. you don’t pay interest on equity. ‘Equity release’ (marketing flannel phrase) is a loan/debt secured against the notional value of the asset; you will pay interest on this debt.


PS
I’m watching a sample housing estate approx. 20 miles from Dublin. Large estate built in the late 90’s early 00’s, uniform housing type. My comparable evidence is showing an average 23.5% increase in asking prices yoy.

 

[tiger]

Isn't the average house price in Dublin about €400 (€380)? I wouldn't think that price range is the big group trading up.

Don't have my back of envelope with me, but I think if you look at it from the bottom up, the most money most first time buyers would be able to get would be for a €400K property, or a little higher. e.g. dual income of €80K, max monthly mortgage payments of 40% of disposable income, spread over 35 years. (I think the banks stress test by an additional 2% also).

 

[Loki]

the most money most first time buyers would be able to get would be for a €400K property, .

But FTBs aren't the only people buying houses so what does that have to do with it? People buying buying are people buying. I find it strange how everybody here assumes from the lowest level. One minute the investors are increasing prices and the next the only people buying property are FTBs! Not saying you tiger but it seems to be the way

Back to semantics again, sorry.

There is only one way to ‘release’ equity from an asset that is by selling it, i.e. you don’t pay interest on equity. ‘Equity release’ (marketing flannel phrase) is a loan/debt secured against the notional value of the asset; you will pay interest on this debt.


PS
I’m watching a sample housing estate approx. 20 miles from Dublin. Large estate built in the late 90’s early 00’s, uniform housing type. My comparable evidence is showing an average 23.5% increase in asking prices yoy.

That would be semantics but as that is what it is called by the banks you understand what I am saying unlike a bubble that is a claim of an actual event happening. A property bubble has a scientifc definition. The financial aspect is you can do it and make money with a relatively small risk. These maybe the investors people complain about pushing up the price. You can have tow families with the same income with one family paying more on their mortgage for one house than somebody who owns 4 houses. Even if prices crash the guy with 4 houses is better off in the long run in all likely events.

Asking prices are not what they will sell the house at but what price they market the houses at to sell it. They range from 20% below expected price to 20% above. It depends on what level of the market you are buying. Some estate agents will tell you what it is as a rule of thumb they use.

 

[redo]

http://www.propertybubble.com/

 

[Calina]

People buying buying are people buying.

Illuminating

Asking prices are not what they will sell the house at but what price they market the houses at to sell it. They range from 20% below expected price to 20% above. It depends on what level of the market you are buying. Some estate agents will tell you what it is as a rule of thumb they use.

I'm not really interested in what some estate agents do - but I will say this - if someone wants to sell a property at 275KE and advertises it at "offers in excess of 230KE" to draw the punters in then I think they're lying.

And I don't much like liars. The fact that it might be standard practice doesn't make me like it any more.

 

[tiger]

But FTBs aren't the only people buying houses so what does that have to do with it?

That's what I was saying, using my "calculations" most people buying at the €400-500K up level would have to be trading up or have equity/resources from somewhere else.

I think threads are getting crossed here

 

[Loki]

Illuminating

lol typing estate

I'm not really interested in what some estate agents do - but I will say this - if someone wants to sell a property at 275KE and advertises it at "offers in excess of 230KE" to draw the punters in then I think they're lying.

And I don't much like liars. The fact that it might be standard practice doesn't make me like it any more.

That's nice but what you think about the world you live in really means nothing. It isn't lying but misleading at worst. As I said the estate agents will tell you so not exactely lying.
You have to live in this world and you proably won't get a chance at another so I suggest you deal with it as is instead of objecting to somthing based on what you think is right. Life will be very unhappy for you otherwise. Sometimes you have to change not the world. WHat are you going to do when you buy? Sounds like you will just be extra stressed

 

[Loki]

That's what I was saying, using my "calculations" most people buying at the €400-500K up level would have to be trading up or have equity/resources from somewhere else.

I think threads are getting crossed here

My point is the people buying don't need to be upgrading but I see what you are saying.

 

[Theo]

Illuminating



I'm not really interested in what some estate agents do - but I will say this - if someone wants to sell a property at 275KE and advertises it at "offers in excess of 230KE" to draw the punters in then I think they're lying.

And I don't much like liars. The fact that it might be standard practice doesn't make me like it any more.

I appreciate you don't like this practice, but by those standards, every advertisement you see around you is a lie.

What you describe as a lie, I see as salesmanship and every salesperson worth their salt knows they have to "fake it till they make it".

Sorry if you don't like it, but that's just the way it is.

Anyway, i am going off topic here.

 

[CCOVICH]

Let's keep it on topic.

 

[walk2dewater]

Let's keep it on topic.

we're on topic? oh right, the Future Price of Irish Properties. Hmm I'd say, up a lot this year, up some more next year etc, etc until the ECB takes away our smarties... then a bit of a national tantrum, by which time we might just have the most expensive, smallest and most hastily built houses in the world, followed by an excruiating process of prices winding back to x3 or x4 average incomes ... and a country full of a lot of very upset and indebted people...

ok, back to it's-not-a-bubble-until-after-it-bursts-and-even-then-it-was-never-a-bubble-cos-real-bubbles-are-in-baths debate

 

[sonar]

Hmm I'd say, up a lot this year, up some more next year etc,

You're darn toutin' they will.

In fact, I already pushed prices up 5% on a street in Dublin in just a couple of hours last week.

I found a house I really liked that had one bidder and a vendor close to agreeing the sale price. I started moving the bid upwards. After it had gone 5% higher than the record sale price for that street, I was outbid again and at that point I "walked away"

On reflection, I realised it was so easy for me - Mr Nobody on the phone (no id required) - to push this price up significantly. Demand and supply my a***. There's nothing beats the combination of frenzied-manipulated buyers and profit-crazed banks !

I lost out on the house but maybe in some small way I helped move house prices closer to the breaking point.

 

[Calina]

You're darn toutin' they will.

In fact, I already pushed prices up 5% on a street in Dublin in just a couple of hours last week.

I found a house I really liked that had one bidder and a vendor close to agreeing the sale price. I started moving the bid upwards. After it had gone 5% higher than the record sale price for that street, I was outbid again and at that point I "walked away"

On reflection, I realised it was so easy for me - Mr Nobody on the phone (no id required) - to push this price up significantly. Demand and supply my a***. There's nothing beats the combination of frenzied-manipulated buyers and profit-crazed banks !

I lost out on the house but maybe in some small way I helped move house prices closer to the breaking point.

Was at a viewing today where the "latest offer" went up 18 thousand euro in the space of about ten minutes. Walked away because I've slightly different definitions of "turnkey condition" and "you can just move right in" plus other issues relating to the property.

Not sure I understand people any more. Time was, if you were interested in buying somewhere, you went and looked at it, and then went away and thought about it, the pros and the cons. Today, apparently was the first viewing, and there was a bidding war in operation already.

It doesn't strike me that common sense, as such, is being applied. You look at somewhere for five minutes and decide, yeah, you'll fling a few hundred thousand at it.

There wasn't anything special about the place, it was just a two bedroomed apartment in the middle of acres of housing estate.

So, my latest feeling on future movements of property prices: it looks to me as if collectively, a lot of people are not approaching this with any sense of rationality. This state of affairs could last for quite a long time because there is no accounting for the will of man and woman with mortgage approval. But it cannot last indefinitely. By the time it comes to an end though, I might have skipped the country. I'm seeking the logic in staying somewhere with a woefully inadequate transport - either personal or public - infrastructure, bloody expensive and average quality (at best) sprawled out housing, where it rains as well...and I'm not finding it. It must be hidden somewhere but darn it to hell, I just can't see it.

 

[Eurofan]

So, my latest feeling on future movements of property prices: it looks to me as if collectively, a lot of people are not approaching this with any sense of rationality.

Your analysis parallels exactly the way we've been thinking for a while now. No-where in the purchase of property today are the 'normal' questions being asked about suitability of the property/location/amenities for your particular life.

Instead all that seems to matter is A/Will i get mortgage approval and B/Can i commute to work from there.

Anything else is largely irrelevant since we'll trade up in a few years time and make a bomb on it.

This state of affairs could last for quite a long time because there is no accounting for the will of man and woman with mortgage approval. But it cannot last indefinitely. By the time it comes to an end though, I might have skipped the country. I'm seeking the logic in staying somewhere with a woefully inadequate transport - either personal or public - infrastructure, bloody expensive and average quality (at best) sprawled out housing, where it rains as well...and I'm not finding it. It must be hidden somewhere but darn it to hell, I just can't see it.

Snap again. We're reasonably well traveled and there are plenty of options out there. Our priority is quality of life; the ridiculous level of house prices, appauling infrastructure, woeful health care and high cost of living mean we are definately looking elsewhere. Oh and the weather too

'On topic' though during a recent conversation with friends who've recently bought somewhere they really don't like 'to get on the ladder' the possibility of stagnation in the market or even slight neg equity came up. Like many sub-30s buying starter homes in todays market they're no intention of staying in the property more than a few years and then trading up.

If that became an impossiblity due to a market correction they happily provided the solution "we'd toss the keys back to the bank and get on the next plane out of here". I doubt they'd be alone.

 

[Duplex]

You’d be surprised how common the ‘midnight flit’ was in London in the early 90’s, especially among Irish buyers

 

[beattie]

After reading some of the recent posts I am further convinced that the only thing to restore some sense of normality is a large increase in interest rates (3.5%+). People are happy to take on ridiculous levels of debt just to get a foothold and then trade up. I thought the increase in housing stock was going to provide some long needed balance but some investors are happy to top up the difference between the rent and the monthly repayments as capital appreciation is still going strong. I notice that there is an increase in the 100% mortgage ads on the tv over the past couple of weeks. It would be interesting to get some data from an 'insider' on who exactly are buying these investments. The party will go on for some time methinks

 

[tiroileain]

I might have skipped the country. I'm seeking the logic in staying somewhere with a woefully inadequate transport - either personal or public - infrastructure, bloody expensive and average quality (at best) sprawled out housing, where it rains as well...and I'm not finding it. It must be hidden somewhere but darn it to hell, I just can't see it.

You've hit the nail on the head for me there. I've already left. Buying something in Ireland just didn't make sense to me. Like many I missed the boat a few years ago, and the size of any potential purchase (in Dublin) got a lot smaller. I had no intention of living in the 'burbs in a city with an extremely poor transport system among other social problems. Other "cities" in Ireland just don't have the choice of employment in my field (IT), and prices (e.g. Galway) have also gotten out of hand anyway. I've no idea if there will be a major correction in the market, but I won't be surprised if there is. I think that a lot of people who have stretched themseleves with a large mortgage will feel the pinch in the years to come. Higher interest rates, and more expenses (children, etc.) in a relatively low inflation environment that won't erode mortgage debt so quickly.

Ireland is a "richer" country now, but paradoxically homes are getting smaller, and having a family less affordable. This is despite higher (inflation adjusted) wages, more flexible borrowing terms, lower interest rates, lower unemployment, and often two people paying a mortgage. This is capitalism at it's best, a sudden change to a rich hierarchy with the nouveax riche landowners and developers and associates at the top sipping champagne bought with the profit paid by plankton on 1 bedroom apartments bought for €280K in some "luxury" development somwhere in Blanchardstown. I just couldn't bring myself to top up those champagne glasses though.

The mechanics of supply and demand. It's interesting. It's because there is more money about, property has been squeezed skywards to the maximum (or have we got more to go). I see it in my own field (IT Contractor charging daily rates). I'm lucky that it pays so well, for what seems to me to be so little work. Supply and demand, that's capitalism for ya!