Next wave of the crisis

[dieter1]

Two things: -

(1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years. He does not deserve the (sometimes highly personal) attacks on his good name and any site that permits such attacks is worthy of nothing but contempt.

(2) I fundamentally disagree with speculation being touted as fact, just because people can make impressive-sounding arguments to back up their predictions.

I accept that Property Pin may have some useful posts and posters. I haven't seen any but if darag says they are there, I respect darag's opinion from previous experience. But the above two points utterly devalue them.

I accept that these attacks are unacceptable to anyone and I also disagree with speculation being touted as fact, but if facts are what you want regarding exactly where the property market is at (% price drops in certain areas, history of drops on houses), you won't find it anywhere but on that site. And for that reason, it has its merits. Any of my friends that have purchased in the last 18 months that I've spoken to have used it and its an invaluable tool.

A bit like if you are looking for the best savings rate, you got AAM......if you are looking for a recent history of price drops you go to propertypin.

 

[DerKaiser]

I accept that these attacks are unacceptable to anyone and I also disagree with speculation being touted as fact, but if facts are what you want regarding exactly where the property market is at (% price drops in certain areas, history of drops on houses), you won't find it anywhere but on that site. And for that reason, it has its merits. Any of my friends that have purchased in the last 18 months that I've spoken to have used it and its an invaluable tool.

A bit like if you are looking for the best savings rate, you got AAM......if you are looking for a recent history of price drops you go to propertypin.

As far as I know all it does is track asking prices, Am I missing something?

 

[Thomas22]

For what it's worth I think rental yields could rise to 10%. That is until the sucker renting for 10 years earning nothing on deposit realises he's paid for someone elses house! Then the cycle will reverse until the next wave of suckers realise they'd earn twice as much interest hassle free from putting their money on deposit than from the meagre rent they're getting on their investment property!

Do you really think that property will be less than 50% of its current price?
Because that is what would be required to get a 10% yield in a market where rents are falling

 

[DerKaiser]

Do you really think that property will be less than 50% of its current price?
Because that is what would be required to get a 10% yield in a market where rents are falling

To be honest I couldn't see it at the start of the year, but I'm beginning to believe anything can happen.

I certainly wouldn't hold my breath waiting for it to happen and don't think it could possibly be sustainable.

But there will come a point where values reach their floor, and who's to say where that will be.

I doubt there will be many transactions at that floor but the smartest/luckiest/bravest few percent will time it right. As more and more people re-enter the market things will bounce back to more sustainable levels of rental yield (maybe 1% or so above the long term interest rate?)

If we arbitrarily say that 6% should be an appropriate rental yield, given that we have seen 2-3% rental yields at the height of the boom it's not a stretch to say yields could hit 9-10% at the height of the bust.

 

[ringledman]

Do you really think that property will be less than 50% of its current price?
Because that is what would be required to get a 10% yield in a market where rents are falling

Yes of course. But over a long period i.e. like Japan or Germany in the 90's.

Thats what happened there. A halving of property values. Germany property in the 90's fell around 10% in nominal terms but lost 50% of value over a decade through real price falls caused by inflation.

This will happen in the West - inflation affecting the real value of property as well as continuing nominal falls and then a standstill in nominal prices.

Rents may rise slightly too to get to the 10% yield.

Think property will be a dog of an investment over the next 5-10 years.

 

[mainasia]

Two things: -

(1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years. He does not deserve the (sometimes highly personal) attacks on his good name and any site that permits such attacks is worthy of nothing but contempt.

(2) I fundamentally disagree with speculation being touted as fact, just because people can make impressive-sounding arguments to back up their predictions.

I accept that Property Pin may have some useful posts and posters. I haven't seen any but if darag says they are there, I respect darag's opinion from previous experience. But the above two points utterly devalue them.

But it was a HUGE mistake to ban discussion property price discussion. It seemed everybody could talk about the benefits of buying a house/affordable housing schemes etc. but as soon as a suggestion crept in that prices might go down it would be deleted or moved to another section. Isn't it odd that property price discussion was banned on the turn of the bubble, if not 'odd' at least terribly damaging to many posters that were looking for information to make a major financial deciision? Last thing is this website should be called 'all about property' because it's hard to find posts about anything else.

 

[Ethan 1]

Getting back to the OPs question , IMHO eventually (< 3yrs) with all the stimulus packages, lower interest rates etc.... greed will again take over, inflation will rise........ Invest in Oil in the near future.

 

[Askar]

I agree. The fact that the propertypin tracks asking prices is, imo, a very useful tool. The price drops in some places are just staggering. I really don't know why any sane person would buy in the current climate without a hefty discount from the asking price.

I remember when every other source of information such as papers etc. had been hijacked by vested interests, such as brokers, bankers and developers, reaping the benefits of the bubble. Even our ex Taoiseach suggested that anyone who questioned this new paradigm should go and kill themselves.

I also find it odd that brokers were allowed to advise posters on this site about mortgages. When I queried why anyone would need the services of a broker (in light of 'Best Buys' section of the site), it was suggested that they had the ability to get large mortgages and knew lending criteria of institutions better than employees of those institutions.

When will brokers be required by the regulator to disclose their commissions for loan and life policies they 'recommend' to clients? I think it would be a very useful exercise to see whether brokers worked on a profit maximisation basis when advising clients, and promoted the most profitable mortgages. Remember the best mortgage in town for a long time was NIB, and you could not use a broker for that product. How many brokers advised clients that this product best suited them??

 

[DerKaiser]

I agree. The fact that the propertypin tracks asking prices is, imo, a very useful tool. The price drops in some places are just staggering. I really don't know why any sane person would buy in the current climate without a hefty discount from the asking price.

I remember when every other source of information such as papers etc. had been hijacked by vested interests, such as brokers, bankers and developers, reaping the benefits of the bubble. Even our ex Taoiseach suggested that anyone who questioned this new paradigm should go and kill themselves.

I also find it odd that brokers were allowed to advise posters on this site about mortgages. When I queried why anyone would need the services of a broker (in light of 'Best Buys' section of the site), it was suggested that they had the ability to get large mortgages and knew lending criteria of institutions better than employees of those institutions.

When will brokers be required by the regulator to disclose their commissions for loan and life policies they 'recommend' to clients? I think it would be a very useful exercise to see whether brokers worked on a profit maximisation basis when advising clients, and promoted the most profitable mortgages. Remember the best mortgage in town for a long time was NIB, and you could not use a broker for that product. How many brokers advised clients that this product best suited them??

Tracking the change in asking price tells you nothing about the price being achieved in actual transactions. From anecdotal evidence properties were selling 10% above asking was the norm 2/3 years ago, now 10-20% below asking is viewed as the norm. This suggest to me that actual prices have fallen at least 20% more than asking prices. Property Pin does not capture this.

Also I'm no mortgage broker but I got good use from them when going through the mortgage process. The bank effectively outsources work to them. It's a type of specialist outsourcing. If you took your line of reasoning there would be no role for advisors of any kind

 

[Askar]

Tracking the change in asking price tells you nothing about the price being achieved in actual transactions. From anecdotal evidence properties were selling 10% above asking was the norm 2/3 years ago, now 10-20% below asking is viewed as the norm. This suggest to me that actual prices have fallen at least 20% more than asking prices. Property Pin does not capture this.

Also I'm no mortgage broker but I got good use from them when going through the mortgage process. The bank effectively outsources work to them. It's a type of specialist outsourcing. If you took your line of reasoning there would be no role for advisors of any kind

Unfortunately no site, as far as I know, captures actual prices (unlike UK); however, it is the only site which shows the trend. As you say anecdotal evidence suggests actual prices are actually lower.

My line of reasoning does not suggest that 'all advisors of any kind' have no role. You may have felt that your advisor added value, but that is your opinion. I have a different view, based on my own personal experiences. As I said, I do not think that the payment structure for mortgage broking is conducive to truely independent advice (except maybe for the now defunct REA). There will always be a role for independent expert advice paid for directly by the person looking for that advice, be it medical, legal, accounting etc. Most brokers have only limited access to mortgage and life insurance products. I would probably never again buy both products from a mortgage broker, or indeed, the same bank for that matter. There are many sites etc selling mortgage protection policies. It pays to shop around and not rely on a salesman selling limited products.

Btw, NIB does/did(?) not outsource their mortgages to brokers. As I said their ECB+0.5% rate was the best in town for a long time. You can (or at least use to be able) to access loans directly from the financial institutions, so you are incorrect in saying that they effectively outsource to brokers this specialist service. Assessment of ability to pay is/should be a core competence of any lending institution. Outsourcing it creates a dangerous moral hazard as the broker is only worried about his/her commission, and the borrower of recent years was always trying to get the highest multiples of income. Unlike other posters on this site, I did not see the ability of the broker to secure high loans as a beneficial service.

 

[Dave Vanian]

When will brokers be required by the regulator to disclose their commissions for loan and life policies they 'recommend' to clients? I think it would be a very useful exercise to see whether brokers worked on a profit maximisation basis when advising clients, and promoted the most profitable mortgages. Remember the best mortgage in town for a long time was NIB, and you could not use a broker for that product. How many brokers advised clients that this product best suited them??

You obviously don't know much about the mortgage market and are beginning to sound like someone who received poor advice or service from a broker and then jumped to the misinformed conclusion that all brokers are the same.

Commission disclosure for both mortgages and life policies has been a requirement for quite some time.

Brokers cannot advise on the products of NIB because NIB will not offer agencies. A mortgage broker can only advise on the products of the lenders with whom their firm holds agencies. The list of these lenders must be given to a client (by way of the Terms of Business letter) before advice is given.

I'm also curious as to why you're perfectly willing to ask me what I do for a living, which I answered. But you seem to conveniently ignore the same question from me, which I've asked twice so far. What do you do for a living?

 

[Bronte]

I also find it odd that brokers were allowed to advise posters on this site about mortgages. When I queried why anyone would need the services of a broker (in light of 'Best Buys' section of the site), it was suggested that they had the ability to get large mortgages and knew lending criteria of institutions better than employees of those institutions.

I disagree with this point. Many people use brokers because they are unwilling/too lazy/incapable of going to search the best deal from banks directly. Brokers tend to be experts at filling out the application forms correctly and more importantly making sure their client only states that which the bank wishes to hear. For this service they have to be paid, be it on commission or directly. It's also true, in my opinion, that the purchasers only goal was to get the dream home no matter what the cost or their capability of repaying it and they knew a broker would be able to do this for them. As for the brokers knowing the lending criteria of the institutions better than the employees, that wouldn't surprise me, have you ever dealt with the people in the mortgage section, well I have and they are pen pushers and deliberately so, with attitude, to avoid dealing directly with customers even branch staff do not want to deal with 'Dublin'.

 

[Askar]

You obviously don't know much about the mortgage market and are beginning to sound like someone who received poor advice or service from a broker and then jumped to the misinformed conclusion that all brokers are the same.

Commission disclosure for both mortgages and life policies has been a requirement for quite some time.

Brokers cannot advise on the products of NIB because NIB will not offer agencies. A mortgage broker can only advise on the products of the lenders with whom their firm holds agencies. The list of these lenders must be given to a client (by way of the Terms of Business letter) before advice is given.

I'm also curious as to why you're perfectly willing to ask me what I do for a living, which I answered. But you seem to conveniently ignore the same question from me, which I've asked twice so far. What do you do for a living?

Disclosure of commission was certainly not my experience. I was astonished when I subsequently found out what the broker made on my life policy in commission. There were much cheaper policies out there; it took a remortgage for me to discover that.

As already stated, brokers do not have access to all products in the market and can therefore only advise in relation to the products that they are authorised to sell - therefore they may not be selling the best product for a particular person. I have found bank officials to be very helpful in my remortgage applications.

Btw, I am employed in the energy sector. I asked you what you did because I suspected that someone expressing negative sentiment towards a site which would discourage buying in current climate might be involved in the financial sector. You are so involved.

Bronte, the persons selling the loan product is always going to be very helpful if (s)he will make commission on completing the mortgage process; however, as with the subprime liar loans, the broker does not carry the default risk in securing the high value loan. The is a pretty fundamental point.

 

[HouseOfCards]

(1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years.

NOT a pop at the poster but do a Google search on "Brendan Burgess" and the hits you'll get are generally the man himself making submissions while quoting his authority as being "BB of AAM". Maybe there's no personel gain in doing so. Maybe there's some.
Who set up the pin? I don't know. Someone less inclined to promote themselves in any case. If anyone can fill me in then thanks in advance.

If posters of a differing opinion on the sustainability of house prices running at more than 8 times (I think??) av earnings, had a chance to reply, then the mentions of BB on the pin might be less in number and a bit more flattering.... but no... 'banned' 'locked' 'deleted' 'read the guidelines' 'mod edit' are the standard.
Its a bit of a joke to play the Fox News model - 'Fair and Balanced'. Please. For too long people came on AAM and only got the up sides. Any suggestion that it might not be the best idea to leverage themselves to 8 times their income on an overpriced property were sliced. Surely it can't be denied that people took advice that was one sided. Even if it wasn't intended as advice - they did. Its a fact.

The thread that everyone is talking about here was full of people debating whether house prices were grossly inflated or not. Closed because it got boring or broke a rule or something like that. Well the brown stuff has hit the fan in a big way. Too late for debating whether it was inflated now. Don't worry though.... it'll go back up

(2) I fundamentally disagree with speculation being touted as fact, just because people can make impressive-sounding arguments to back up their predictions.

There's somewhere where yourself and pin members are aligned. Try here http://www.thepropertypin.com/viewtopic.php?f=4&t=2631
As much BS unsubstantiated speculation as you can possibly handle. Great read.




.

 

[Dave Vanian]

Disclosure of commission was certainly not my experience. I was astonished when I subsequently found out what the broker made on my life policy in commission. There were much cheaper policies out there; it took a remortgage for me to discover that.

Did you not ask for, or receive a written quotation?

If not, then assuming this was a transaction in the last few years, you dealt with a broker who operated outside the law. That's unfortunate but you shouldn't use this negative experience to wrongly assume that other brokers do so. For every broker you could come up with who doesn't disclose commission, I can point you to three who do.

As already stated, brokers do not have access to all products in the market and can therefore only advise in relation to the products that they are authorised to sell - therefore they may not be selling the best product for a particular person. I have found bank officials to be very helpful in my remortgage applications.

This is a bizarre paragraph which makes no sense. First you criticise brokers for NOT having access to all products and then you praise banks who are tied agents and thus don't offer any choice whatsoever.

I asked you what you did because I suspected that someone expressing negative sentiment towards a site which would discourage buying in current climate might be involved in the financial sector. You are so involved.

Funny that - Askaboutmoney expresses a lot of negative sentiment towards property these days. Look at any query in the Mortgage section from a potential house buyer and you'll find plenty of replies suggesting that the buyer should defer buying altogether. Yet I don't express negative sentiment towards AAM. You evidently haven't understood my reasons for criticising the Property Pin, even though I explained them clearly above.

I have repeatedly disproved your inferences that my views on the Property Pin or the property market in general are influenced by my profession. Yet despite this, you continue to make them, without adding any new substance. It's getting frankly boring. Why is it so hard for you to accept that people are capable of expressing opinions that are not biased by self-interest?

 

[Askar]

This is a bizarre paragraph which makes no sense. First you criticise brokers for NOT having access to all products and then you praise banks who are tied agents and thus don't offer any choice whatsoever.

You are misrepresenting my point.

My point is that an individual can make an independent assessment of best lending rates available without the services of a broker or lending institution, and then approach the institution that is offering the best deal.

No doubt, however, this is an innocent misrepresentation, and not a biased and deliberate misrepresentation based on the fact that you are a broker!

 

[Dave Vanian]

Can't even be bothered repeating myself ad nauseum, so I'll just cut and paste.

No doubt, however, this is an innocent misrepresentation, and not a biased and deliberate misrepresentation based on the fact that you are a broker!

I have repeatedly disproved your inferences that my views on the Property Pin or the property market in general are influenced by my profession. Yet despite this, you continue to make them, without adding any new substance. It's getting frankly boring. Why is it so hard for you to accept that people are capable of expressing opinions that are not biased by self-interest?

 

[Askar]

Can't even be bothered repeating myself ad nauseum, so I'll just cut and paste.

Yeah, probably best course of action.

 

[Dave Vanian]

Well this is progress. It appears you actually do read my posts, despite evidence to the contrary above. I'll leave it at that. Have a good evening.

 

[ph4t]

- Rapidly rising prices
- High expectation for continuing rapid rises
- Overvaluation compared to historical averages
- Overvaluation compared to reasonable levels
- Several years into an economic swing
- Some underlying reason for higher prices
- A new element, e.g. technology for stocks or immigration for housing
- Subjective "paradigm shift"
- New investors drawn in
- New entrepreneurs in the area
- Considerable popular and media interest
- Major rise in lending
- Increase in indebtedness
- New lenders or lending policies
- Consumer price inflation often subdued (so central banks relaxed)
- Relaxed monetary policy
- Falling household saving rate
- A strong exchange rate

Sigh... my Alternative Energy fund investment in 2007 ticked too many of those boxes!