Future price of Irish properties

[SLAPPY]

Remember in real estate or stocks... bulls and bears get rich. Pigs get slaughtered. Buying high is OK because someone will buy Higher. Buying Higher is OK, because someone will buy Highest. But, if you buy Highest, you're the one left holding the bag with no one else to sell to.

My wife‘s parents, unfortunately, owned real estate throughout the 1980's in the Dallas, Texas area. In the early 80's house prices raised dramatically, financing was insane and construction quality was horrible. Only 60 months later, in the mid-80's, entire blocks of housing set empty and vandalized. Lenders would do anything to dump their REO's. Several brand new housing developments purchased on speculation sat empty for years and were eventually bulldozed as they became too expensive to maintain by the banks who now owned them (true story, I swear). Homeowners were foreclosed upon by the thousands and home sellers went to the closing table with thousands to avoid foreclosure. Take it from the painful and bankrupt experiences of past generations, housing can definitely crash.

There are people who say Dublin isn’t in a housing bubble - I say it could be the mother-of-all-bubbles that future generations will use as a reference for irrational investment. I’m putting my apartment up for sale next week and will rent (for less than I pay monthly now) for the next few years. Hopefully it will sell quickly and I won’t get left holding the bag.

 

[Mininv]

Interesting story I heard locally. Latest phase of a popular development near me was due to come on stream. All the previous phases sold off the plans in hours, with a lot of advance enquiries to the estate agent. This latest phase wasnt doing the business in terms of advance enquiries. So our estate agent hero paid some people to queue overnight before the 'release' of Phase 3, and arranged for coverage of this in the local paper. The houses sold out in a few days.

This isnt a friend of a friend story either. I personally know someone who was paid to do this.

15 years of boom stil to come, eh?

 

[beattie]

Our leaders daughter has dropped the price of her pad in Dublin.....

http://www.unison.ie/irish_independent/stories.php3?ca=184&si=1588800&issue_id=13860

 

[Neffa]

I'm surprised that made it through uncut,in fairness to her she couldn't have made it any clearer !.

I think the interesting point in the article is that as long as the average price grows by 18% by the end of 2007 (11% then 7%), affordability remains ok. So anything less than that and quite a number of buyers will end up in difficulty. So even though property is at an all-time-high and interest rates are rising, we're ok if we grow by 18% (!) Self-inflating bubble, anyone?

 

[ivuernis]

In the Irish Indo on Saturday it reported that Irish Buyers to splash €8 billion on foreign properties in 2006, up from €6 billion in 2005.

The amounts of money leaving the country, largely financed on the back of Irish property values I'd imagine, are truly staggering. Our lust for property seems to know no bounds.

 

[ivuernis]

Listening to Saturday's Marian Finucane show on the web now. She interviews Eunan King (co-author of the NCB study that came out last week) and Jim Power (Friends First economist).

The interview starts at 55m 30s into the show.

[broken link removed]

 

[beattie]

Interesting story I heard locally. Latest phase of a popular development near me was due to come on stream. All the previous phases sold off the plans in hours, with a lot of advance enquiries to the estate agent. This latest phase wasnt doing the business in terms of advance enquiries. So our estate agent hero paid some people to queue overnight before the 'release' of Phase 3, and arranged for coverage of this in the local paper. The houses sold out in a few days.

This isnt a friend of a friend story either. I personally know someone who was paid to do this.

15 years of boom stil to come, eh?

Quite interesting to see, if this is a widespread practice I think supply could have caught up with demand about 18 months earlier than I had projected

 

[Marie]

I'd say that's accurate! Eighteen months ago I was in a quandary on whether to sell a West Dublin three-bed semi I inherited a 50% interest in, or buy out my sibling, rent it out as an investment property for four years and retire to it. The universal advice from professionals, family, neighbours was "You can't go wrong. The rent will cover your 50% mortgage. Money for old rope etc., etc." However I was very very lucky to encounter an honest estate agent who was straight with me, said the rental market was on the turn, the realities of the work involved in landlording at a distance (I live UK at present) and was honest about growing voids. I sold up and was uncertain for months as I watched prices climb and observed the continuing upbeat media and financial sector views. Here, in what is deepening into the second 'crash' in 20 years, houses sit empty for 6 months to a year and sell in the end reduced by up to 20% of the asking-price and hundreds of buy-to-lets are sitting empty and unlet for 12 - 18 months at a stretch and there are signs of serious economic recession with the announcement last week of about 2,000 health service jobs to be cut in the immediate future.

 

[woods]

I was listening to a lady on "Talk To Joe" last week and she brought something to my attention. People are bidding on several houses at once and waiting to see which one they get. This habit alone would serve to push up prices. Can you imagine a scene where you have 4 houses for sale and 4 buyers. The each fight for every house and push the prices up on all houses and the sellers are laughing all the way to the bank.
She suggested a buyers strike.

 

[CCOVICH]

However I was very very lucky to encounter an honest estate agent who was straight with me, said the rental market was on the turn, the realities of the work involved in landlording at a distance (I live UK at present) and was honest about growing voids.

I would have thought that it was in the estate agent's own interest to tell you that 'now is a good time to sell'-that's how they make their money-right?

 

[CCOVICH]

She suggested a buyers strike.

Ha!

If only people were that rational/smart.

 

[Calina]

I'm on strike. Unfortunately, I can't get anyone else to join in.

I do reckon though that the relaxation of the salary multiples has a lot to answer for in terms of rising house prices.

 

[Howitzer]

I'm on strike. Unfortunately, I can't get anyone else to join in.

I'm with you. Was going to buy but double digit price increases against rising interest rates don't make sense to me.

Everyone together now, I'M SPARTACUS!

 

[Glenbhoy]

I've joined ye!!
If you remember about 20 pages back I asked what someone in my position should do - sell up now and buy the place which will suffice me for the next 10yrs, or stay where I am, enjoy that I live in a relatively handy location in a nice spacious apartment. My question was based on the premise that prices (for the type of property I want) will probably rise another 15-25% this year, and that even if there is a 'correction' will it actually reduce prices below current levels. I still can't answer this (as most people can't), but in general, I do detect a lot more bearish sentiment out there, and feck it, I'd rather not be financially stretched paying a mortgage at my limits, for a dwelling which would not be in my ideal location (Ailesbury Road or nothing don't you know). It's a gamble like everything else - but I do like a punt (Harrington for the masters at 50/1 btw).

 

[redo]

I've joined ye!!
If you remember about 20 pages back I asked what someone in my position should do - sell up now and buy the place which will suffice me for the next 10yrs, or stay where I am, enjoy that I live in a relatively handy location in a nice spacious apartment. My question was based on the premise that prices (for the type of property I want) will probably rise another 15-25% this year, and that even if there is a 'correction' will it actually reduce prices below current levels. I still can't answer this (as most people can't), but in general, I do detect a lot more bearish sentiment out there, and feck it, I'd rather not be financially stretched paying a mortgage at my limits, for a dwelling which would not be in my ideal location (Ailesbury Road or nothing don't you know). It's a gamble like everything else - but I do like a punt (Harrington for the masters at 50/1 btw).

Mike Weir and Olazabal look good too.

 

[casca]

Hi, Its all doom and gloom. Tell me , if the population is supposed to increase in the next few years and considering we and immigrants all want houses, why should there be a slump. Anyway, if the economy loses its shine and immigrants go home to maybe a "take off" in their own countries , houses will become cheaper for the next generation. .

 

[ivuernis]

Hi, Its all doom and gloom.

Bearish would be more appropriate. Doom and gloom implies that most of the posters here are of a negative disposition, whereas most of us look at the property market and don't see how the economics add up any longer to make property either value for money or a good investment.

If everyone was only allowed to buy the one house there might very well be no problem, but as property is now a major investment for many people the fundamentals of the market changes and property becomes in a sense just another tradable stock and like all stocks they are subject to the whims of the market.

Tell me , if the population is supposed to increase in the next few years and considering we and immigrants all want houses, why should there be a slump.

Many possible reasons, a few being...
- higher interest rates
- higher inflation
- higher energy prices
- economic downturn (either local, regional or global)
- increased competition from lower cost economies

Anyway, if the economy loses its shine and immigrants go home to maybe a "take off" in their own countries , houses will become cheaper for the next generation. .

And you'd have another generation sitting on negative equity perhaps, and if property prices did drop that would not necessarily make them affordable... see previous points on reasons why it might go pear shaped.

 

[Theo]

However I was very very lucky to encounter an honest estate agent who was straight with me, said the rental market was on the turn, the realities of the work involved in landlording at a distance (I live UK at present) and was honest about growing voids. I sold up and was uncertain for months as I watched prices climb and observed the continuing upbeat media and financial sector views. Here, in what is deepening into the second 'crash' in 20 years, houses sit empty for 6 months to a year and sell in the end reduced by up to 20% of the asking-price and hundreds of buy-to-lets are sitting empty and unlet for 12 - 18 months at a stretch and there are signs of serious economic recession with the announcement last week of about 2,000 health service jobs to be cut in the immediate future.

I would agree with CCOVICH earlier remark about this honest estate agent. If you're so unwilling to believe one person's hype about the property market, then why are you so quick to believe a person's pessimism wothout doing your own research?

Although it depends on where your 3 bed semi was, I would say its highly likely you have lost substantial sums of money by selling out too early. How much would that 3 bed semi be worth in today's market.

Also, my experience of the UK market is not yours. I own 3 BTLs over in the UK and achieve 13-15% rental yields before tax (cash yields, not gross yields so these are directly comprable to deposit rates) and I have also achieved 25% capital gains (again , received these in cash from the bank tax free when i re-financed) in a priod ranging 6-12 months. There is a significant shortgae of housing supply in the UK over the next 10-15 years.

There is opportunity in prperty for anyone that bothers to look, and ignores all the hype on either side of the argument. true, it is harder to find good deals today than yesterday but they exist.

 

[Duplex]

The Spanish property market has slowed considerably of late and some commentators are now predicting that prices will begin to fall across Spain in the coming years. The fate of the Spanish market may shed some light on the probable outcome for the Irish market. Interestingly Spain (and Finland) has recently announced that it will relax its restrictions on migration from new EU member states; its worth watching the impact that this policy reversal will have on their property market, given that the Ace in the Hole played by Irish Banks is continuing immigration.

The beginning of the end for Spain's real estate bubble?
Interest rate rises and falling consumer spending will prompt a fall in housing prices

El Pais Spain | I. DE LA VEGA

One of the key factors that has driven house prices up over the last decade is buyers' conviction that prices cannot fall. Evidence suggests otherwise. In some areas of Japan prices have been falling since 1992, and have now reached half their 1991 value. Prices in London fell by up to 45 percent between 1988 and 1995. Paris experienced a similar readjustment between 1991 and 1998. Bernardos says that in Spain, between 1991 and 1997, prices fell in real terms by an accumulated 20 percent. A hike in interest rates will hit consumer spending, and squeeze jobs. "These trends won't be immediately obvious. Interest rates will hit 3.5 percent this year, but the impact of this rise won't be felt for six months. Prices could fall by five percent in the second half of 2007, by six percent in 2008, and by seven percent in 2009."

Bernardos also points out that during Spain's previous property boom, between 1986 and 1991, there was no speculation. Today, he says, price adjustments will only come when there is an economic downturn and speculators turn their attention to other sectors.

[broken link removed]

 

[Neffa]

Duplex,

What was the scary thing you mentioned on (I think) lending practices on another thread over the weekend? You teased us with the information , but I've not seen anything else.

Can you spill the beans?