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undersupply
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Waiting for prices to fall is speculation, unless you can not afford to buy, in which case renting and waiting is a very sensible option.
Key Post Will Irish house prices rise or fall?
- Thread starter Brendan Burgess
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I think you're forgetting something in your figures here. As far as I can see, if the price fell 30% then that would wipe out all the equity they've managed to build up in those first 15 years. The 210,000 they get for selling the starter property still belongs to the bank, so when they give that back they would need to pay the full 420,000 to trade up.
Under such circumstances, someone who decided to wait it out could have saved up quite a lot of money during those 15 years and would be in a better position to purchase the 420,000 euro house than the people trying to trade up to it.
I've seen the Japanese bubble burst used on more occasions than I care to remeber on property forums.... The one thing that bothers me is that no one (and I've done quick searches on google) actually has some hard facts from that bubble... I'm not disputing it happened or how severe it was or anything, I just never here the hard core economic facts....
I've heard things like "generational mortgages (70 years+)" and 15 times income multiples etc. etc., but no one has ever put in black and white that
--- av ind wage was X
--- av house price was Y
--- Ireland has the same as XY ratio as the japanese example - or do we?
In the interest of open and informed debate could anyone link to a detailed article that sets out the basic economic conditions that fed the Japanese property boom?
This article, written in 1998 by an economics professor in Japan, may be of help. I think that it was subsequently published in a journal which might explain why I couldn't track down anything, except this draft version of the paper, online:
[broken link removed]
Part of your question seems to be answered directly on page 15 (for the Tokyo metropoliton area anywhere). I'm not too sure what the corresponding ratio of average wage/average house price would be for Ireland/Dubin.
The most important inflation to the housing market is wage inflation as others have mentioned. I was just making the general point that as money is currently structured, inflation of all kinds is very likely and that housing, as a relatively( OK Afeura!) finite good with a long useful life will act as a store of value for the average person.
The other issue not mentioned is the increasing availability of credit. The very first mortgages probably boosted prices at that time. The securitization of mortgages has made lenders more confident in lending more for longer periods to people of higher credit risk. Now there is a limit to this(as the US subprime shows) but it's certainly been a factor in boosting demand.
In the short to medium term prices look high but a true crash usually requires a monetary mistake(the US in the early 80's, the UK in the early 90's). The one exception seems to be Japan where a modest amount of monetary tightening in the late 80's lead to a severe long lasting crash.
Perhaps poor demographics were a contributor here. Japan is definitely worth studying!
The high savings rate and the high loan to value ratio in Ireland should act as cushions against a crash unless interest rates are forced much higher than currently predicted.
So a soft landing but that could mean no capital appeciation for up to five years.
The other issue not mentioned is the increasing availability of credit. The very first mortgages probably boosted prices at that time. The securitization of mortgages has made lenders more confident in lending more for longer periods to people of higher credit risk. Now there is a limit to this(as the US subprime shows) but it's certainly been a factor in boosting demand.
In the short to medium term prices look high but a true crash usually requires a monetary mistake(the US in the early 80's, the UK in the early 90's). The one exception seems to be Japan where a modest amount of monetary tightening in the late 80's lead to a severe long lasting crash.
Perhaps poor demographics were a contributor here. Japan is definitely worth studying!
The high savings rate and the high loan to value ratio in Ireland should act as cushions against a crash unless interest rates are forced much higher than currently predicted.
So a soft landing but that could mean no capital appeciation for up to five years.
I won't say anything against your "relatively finite" description here
I do have to question your presumption of a strong likelihood of inflation though...If the banks and lending institutions in the States continue to unraval because of their exposure to bad debt we could possibly encounter a global credit crunch (which would be deflationary). It's pretty much anyone's guess which is the more probable at this stage, but I'd be quite nervous about saying that continued inflation is likely.
I fail to see what advantage there is for a FTB to buy at a time when there is any kind of "landing" happening. The loss of their FTB status, and the huge differential between the outgoings of servicing a mortgage vs rent would leave them in a worse off position 5 years down the road; especially if they were only buying a starter property.
I think bearishbulls advice, of holding off for at least the next 12 months, would be wise for the vast majority of FTBs out there at the moment.
Brendan Burgess
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I am reopening the thread but restricting it to Frequent Posters to prevent people registering just to post on this thread.
Brendan
Brendan
Brendan Burgess
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Sorry folks
Just lots more repetitive rubbish being posted whcih I have had to delete.
If you don't have something new to add, then don't feel obliged to post.
If it continues, we will close the thread again. It's a pity, it would be nice to have a balanced short discussion rather than a lot of hot air.
Brendan
Just lots more repetitive rubbish being posted whcih I have had to delete.
If you don't have something new to add, then don't feel obliged to post.
If it continues, we will close the thread again. It's a pity, it would be nice to have a balanced short discussion rather than a lot of hot air.
Brendan
Most important factor in current high market, apart from interest rates, was lack of supply/strong demand.
Last year's record number of completions, plus buyers holding back because of stamp duty uncertainties, has tipped the supply/demand balance in many areas, particularly rural areas. I am aware (due to a colleague buying there) of the situation in one medium sized town in the west of Ireland -- in December there were 88 houses for sale on Daft.ie in this town, now there are over 200. Prices have consequently taken a huge tumble there (not quoted prices as yet, but prices being accepted by sellers).
Investors are also offloading quietly, and this is helping to improve supply. leading to more sanity. At best, I believe that the large urban areas will take a small hit, but the more isolated rural areas and small towns will suffer. Prices in those places had been pushed up in response to the high prices in Dublin and Cork, and for no other real reason. These will now reverse to normal levels, the show is effectively over in many small towns with no real demand.
So, prices have fallen in real terms, but not equally across the marketplace. Further falls will depend on whether lots of peoole rush to sell -- remember 1996/1977?
Last year's record number of completions, plus buyers holding back because of stamp duty uncertainties, has tipped the supply/demand balance in many areas, particularly rural areas. I am aware (due to a colleague buying there) of the situation in one medium sized town in the west of Ireland -- in December there were 88 houses for sale on Daft.ie in this town, now there are over 200. Prices have consequently taken a huge tumble there (not quoted prices as yet, but prices being accepted by sellers).
Investors are also offloading quietly, and this is helping to improve supply. leading to more sanity. At best, I believe that the large urban areas will take a small hit, but the more isolated rural areas and small towns will suffer. Prices in those places had been pushed up in response to the high prices in Dublin and Cork, and for no other real reason. These will now reverse to normal levels, the show is effectively over in many small towns with no real demand.
So, prices have fallen in real terms, but not equally across the marketplace. Further falls will depend on whether lots of peoole rush to sell -- remember 1996/1977?
The statement the Irish economy is strong is misleading since most of our growth is directly or indirectly tied in with housing construction.
Employment levels and consequentially consumer spending and tax revenue is now too dependent on the housing construction industry.
What happens with a slowdown in construction?
Lower economic growth will mean less immigrants, thus less demand for rental property and utlimately lead to less demand from investors. This in turn leads to existing investors divesting themselves of unprofitable investments i.e. housing. Consequentially prices drop and it becomes a buyers market.
Employment levels and consequentially consumer spending and tax revenue is now too dependent on the housing construction industry.
What happens with a slowdown in construction?
Lower economic growth will mean less immigrants, thus less demand for rental property and utlimately lead to less demand from investors. This in turn leads to existing investors divesting themselves of unprofitable investments i.e. housing. Consequentially prices drop and it becomes a buyers market.
What will that matter if you are living in it, don't plan to move and can afford to service the mortgage (if any)?
I'm not sure that most people would look at such a situation in such emotional terms.
A PPR is surely more than just an investment in many (most?) cases?
Unless you are selling with a view to renting, trading down or leaving the country and can avoid negative equity, surely this will only be a good thing? The financial gap between your current home and your future home will have narrowed making it easier (in principle) to trade up.
Just wondering if this is location specific and feel free to delete if its contravening the property price discussion ban , but I noticed 2 houses in cork area where the price had been dropped by about 50 grand in the last 6 month ,still for sale now but this week the estate agent has increased the price again
I can only presume its due to the election next week , Has anyone else noticed this ?
I can only presume its due to the election next week , Has anyone else noticed this ?
Hope springs eternal in the land of the estate agent.
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