House Market Weakening?

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Originally Posted by Elvis
Thanks for the replies - will check out Dunphy show and see what they are saying. It is somewhere I am happy to live and it beats the shoebox apartments in the city for 1/2 million....but not sure I could stick it for 5 years!! PS: Is it not too late to go renegotiating the sale? We have paid 6k deposit to EA.

Hey Elvis,
I unfortunately listened to the so called 'experts' and other wannabe 'experts' who said the market couldn't continue the way it was going, and I've been hearing it all the way back from the mid 1990's. If I had of paid no attention to them I'd be laughing now. Ignore the doom and gloom merchants, buy the house and be happy that you've managed to make the leap to homeowner. If it all goes belly up, the entire country will be screwed, the econonmy will implode, massive job losses, massive emigration, make sure you have your ticket ready to get out quickly and leave the rest to sort out the mess. Your new house included.
 

Get out to where though. That's the problem with a global recession. It's worldwide.

I don't pretend to any great visionary expertise (nor do many here) so feel free to saddle yourself with debt up to your eyeballs, bury you head in the sand and hope it all works itself out somehow ...
 

I love that line - "I listened to the experts and ......".

When you're talking about spending 100's of thousands of euro, why on earth don't you take a good look at the available data and draw your own conclusions?

The arguments supporting a crash have been laid out aplenty in this thread:-

1) Census figures of 200k unoccupied houses, suggesting speculators relying on capital appreciation.
2) Rental yields of < 2%, investors subsidising mortgage repayments.
3) Rising interest rates
4) Average house prices at 8-9 times the average wage
5) Out with the old 20-year mortgages, in with the new 40-year, 100% capital and interest-only mortgages - all suggesting the limits of affordability are being stretched.
6) Declining birth-rates from 1980 onwards, so less FTB's coming on stream over the next 10 years
7) Rising living costs making Ireland less attractive for immigrants
8) Citizens of EU accession states currently only allowed work in Sweden and Ireland. What happens when these immigrants are given free access the rest of Europe? Will they keep coming to Ireland in the record numbers we see today?
 
54-46 said:
the leap to homeowner.
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Jumbo mortgage holders own nothing.

54-46 said:
If it all goes belly up, the entire country will be screwed.
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wrong. people with liquid assets, no debts, and positive cash-flow are NOW in an enviable position.
 
walk2dewater said:
wrong. people with liquid assets, no debts, and positive cash-flow are NOW in an enviable position.
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Good point. In a deflationary recession your money is worth more (in real terms - purchasing terms) simply by being liquid. The last thing you want to be in a scenario like this is to be highly leveraged (owing money).

I have a question though. In a stagflation scenario, might not the owner of a jumbo mortgage be in a beneficial position? House prices would remain relatively static but decline greatly in real terms. However, inflation would be massively decreasing the amount of money you owed to the bank in real terms also.

With slow economic growth investment opportunities would be limited so there would be few places you could put your money anyway. Gold might be the exception.

Despite being incredibly bearish on property, I have no plans to sell my own house (yet). That said, if I was looking at a choice between buying and renting in Dublin right now I would definitely look at renting first.
 
room305 said:
However, inflation would be massively decreasing the amount of money you owed to the bank in real terms also.
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Only if your wages were going up too. Inflation in incomes wiped out our parents mortgages for them, inflation in house prices made them rich over time. I wouldnt be so sure about either going forward.

I intend to keep my property also. The personal value to me far outweighs their market value.

As for the deflation vs. inflation debate. This is wrecking my head to be honest. I cannot think of a more difficult investing climate in my life as the one today. As a compromise I am gold, CAN$, CHF, € bonds/cash, energy/metal shares.

BTW leveraging to purchase residential property today is IMHO the single worse investment bet possible. There are going to be a lot of very very disillusioned people.
 
walk2dewater said:
Only if your wages were going up too. Inflation in incomes wiped out our parents mortgages for them, inflation in house prices made them rich over time. I wouldnt be so sure about either going forward.
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People working in public service could probably be assured of increasing wages. Not sure if they'll increase enough to match inflation but at least they start from a relatively high base. I don't work in the public sector myself but you are right, wages probably won't increase enough in real terms to make it worthwhile.

walk2dewater said:
I intend to keep my property also. The personal value to me far outweighs their market value.
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My reasons are a little less sentimental I'm afraid. My LTV is about 70% of current market price. Thanks to a very competitive discounted mortgage (for 2 years) my repayments are about half what it would cost to rent the same house. I've calculated that during this period the ECB base rate would need to rise to 7% to bring my mortgage into parity with rent in the area. So if in 2 years the price doesn't slip by much more than 30% and interest rates remain below 7% I'll be happy enough. Meanwhile, the challenge is figuring out what to do with the money I would otherwise be spending on rent.

walk2dewater said:
As for the deflation vs. inflation debate. This is wrecking my head to be honest. I cannot think of a more difficult investing climate in my life as the one today. As a compromise I am gold, CAN$, CHF, € bonds/cash, energy/metal shares.
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Tricky innit?

I have read your reasons for purchasing CAN$ and they seem sound. What do you think of investment in companies with interests in the Canadian oil sands? I've only recently started investing and feel I may have missed the boat on that one. Apart from some small averaging into commodities and alternative energy companies I've reduced almost all my share positions and currently hold mostly cash. I may look to get more agressively into gold during the coming months.

walk2dewater said:
BTW leveraging to purchase residential property today is IMHO the single worse investment bet possible. There are going to be a lot of very very disillusioned people.
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I wholeheartedly agree.
 
I think we just shook the vendor from the lurking grass
 
walk2dewater said:
Look into buying calls/puts rather than long/short positions.
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That makes sense I guess. Although for such companies, I'd prefer to hold the actual shares.

Any recommendations on brokers (I'm aware this is diverging slightly from the main topic) where call/put options are available?

I used to use spreadbetting but in this environment I think it could be an easy way to lose a lot of money.
 
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