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phoenix_n
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Its just that when capital appreciation stalls and yields are calculated the speculation in Irish property stops.- Status
Its just that when capital appreciation stalls and yields are calculated the speculation in Irish property stops.Rental growth always follow income growth (you cant borrow money to pay rent). There are times in the market when supply/demand imbalances effect this trend (such as now where rental income lags wage income).
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phoenix_n
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But you have to include the opportunity cost of the lost deposit interest on the 150K cash they are putting into the place. I know what you are saying but these investments at current market rates do not justify their price without capital appreciation.
There is currently no shortage of units in Ireland at the moment so I can't see any upward pressure on rents in the next 3-5 years.
I agree that many cash rich investors can (and do) pump in a load of their own money (I know of a couple myself) but once cap appreciation tails off why would they keep doing this?
CelloPoint
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Has anyone seen a noticable increase in the number of 'for sale' signs yet? I haven't as of yet, but perhaps some of the posters in the west Dublin area might?
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phoenix_n
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If you like. The apt is worth 250K (still think overpriced). The cost of entering the market is 150k cash. (competition is fierce) This 150K cash is speculating that the apt will increase in value. (sale price 400k)
If it does not you have lost your 'bet' on the market. Apt is still worth 250k(as income generating vehicle). You just lost 150K.
And thats how it has worked in the past housing crashes and how it may work here.
If it does not you have lost your 'bet' on the market. Apt is still worth 250k(as income generating vehicle). You just lost 150K.
And thats how it has worked in the past housing crashes and how it may work here.
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Guest107
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Have you read ANY of this thread
There is a massive preprogrammed oversupply of inventory in the market which will take years to shake out .Raskolnikov
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I've seen quiet the opposite, estate agents windows in my Cork suburb are looking extremely bare. In one EA's office, they've resorted to putting three ads for each house on their windows.
CelloPoint
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Really? What do you think is the cause of this phenomenon?
2Pack - I have actually read all of this thread (which isn't easy) - and people have used anecdotal evidence that there is an over supply (people sitting on properties etc.) - but I haven't seen geographical spread on this or concete evidence other than "I've heard" or trying to make assumptions on very raw Census figures. The fact remains - if you are trying to rent in Dublin it's not one tenth as hard as it was 5 years ago, but it's still a competitive market. Landlords have to try a little, but they still get tenants. Apartments in the outskirts of Dublin or on the edge of rural towns are a different kettle of fish in this regard and we all agree that these properties will be the first hit when things get rough... However in Dublin and the other greater urban centres, the normal economic rules of rents increasing when supply of houses decrese will hold true - I'm not actually expecting rents to increase, but I do believe they will stay stable....
Phoenix_n - I do agree that the 150k cash and the 250k mortage isn't "good business", but guess what - I'm only saying it like it seems to be out there. Also many investors aren't looking purely at cap appreciation on their 150k. They would look at 250k being paid off by renters and their 150k cash turning into a full property in 20 years time - a noce little nest egg for only 150k of their own money. I don't agree with this logic and see the flaws - and do agree this will feed into an inevitable property crash, but as regards current public sentiment - this seems a relevant insight into a major portion of the purchasing public.
Phoenix_n - I do agree that the 150k cash and the 250k mortage isn't "good business", but guess what - I'm only saying it like it seems to be out there. Also many investors aren't looking purely at cap appreciation on their 150k. They would look at 250k being paid off by renters and their 150k cash turning into a full property in 20 years time - a noce little nest egg for only 150k of their own money. I don't agree with this logic and see the flaws - and do agree this will feed into an inevitable property crash, but as regards current public sentiment - this seems a relevant insight into a major portion of the purchasing public.
Are you suggesting that the recent preliminary census report from the CSO highlighting an estimated 275,000 vacant properties is purely anecdotal?
Also, the report that whathome mentioned from BoI is hardly what you'd call anecdotal evidence either: [broken link removed]
They state in this that out of the 81,000 new homes built in 2005, a mortgage was used to pay for only 54,000 of them. It doesn't go into details about what happened the other 27,000 but suggests that some of them may have been paid for outright.
I don't think investors are stupid, so why would they put their money into a risky vehicle that gives them a 3% return when they could put that same money into a secure institution such as a bank and get a guaranteed 5% return?
If we're to believe that investors are behaving in that kind of manner than it's proof that the market is not rational and speculation has taken a hold of it. If investors are not behaving in this way than it points to over supply and unsold inventory. Neither scenario is particularily good for the market.
nacho_libre
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I think the current public sentiment is that a crash or at least a property slowdown
is looming. However, from what I gather on this thread there is no "real" evidence
that this has commenced yet or is anywhere near commencing.
Just because a handful of properties have had to reduce there guide-price in order
to stir up some interest for a sale, I believe this no indication of a slump or
anything of the sort.
IMO the housing market will continue to grow rapidy for at least another 18 months,
after that I think it will calm a bit but this crash that people keep talking about is
a long time coming and personally I'll not be holding my breath.
is looming. However, from what I gather on this thread there is no "real" evidence
that this has commenced yet or is anywhere near commencing.
Just because a handful of properties have had to reduce there guide-price in order
to stir up some interest for a sale, I believe this no indication of a slump or
anything of the sort.
IMO the housing market will continue to grow rapidy for at least another 18 months,
after that I think it will calm a bit but this crash that people keep talking about is
a long time coming and personally I'll not be holding my breath.
CelloPoint
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What is your reasoning for this rapid continuation of growth over the next 18 months?
The daft report for Q2 of 2006 has shown that there has been a decline in the average asking price since April of this year. While this is "real" evidence that there is a slowdown happening it is difficult to distinguish at this stage how much is due to seasonal factors.
nacho_libre
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Just pure demand. I'm witnessing bidding wars everday for properties that are very
obviously overvalued and unattractive, but such is the demand that the back of the
queue of these overbidders is still not visible. Of course I can only speak for my own
particular area but even in this particular area the talk of an eminent crash is
constant yet the properties are still selling like hot-cakes.
nacho_libre
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The asking price for a house has no "real" significance. It's not like it's a price tag,
A starting point for a bidding war and a way to attract more interest a bit quicker.
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StoppedClock
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Where is your area?
nacho_libre
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Cork City and suburbs
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Guest126
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Hot cakes in Cork?
Not sure about that.
I had bid in on one place and could not believe how quickly it was accepted, I walked away, also went to view new apartments in Blackpool (< 1 mile from city centre) and the EA seems to be struggling to shift them.
Not sure about that.
I had bid in on one place and could not believe how quickly it was accepted, I walked away, also went to view new apartments in Blackpool (< 1 mile from city centre) and the EA seems to be struggling to shift them.
Afuera - The two examples you used the CSO figures - which explain nothing - were apartments empty? or are students not houses over the summer? Are houses empty due to old people in a home (2 houses on my cul de sac of 17 are like this - old person in a home - house empty). Investors buying holiday homes for their own use which were empty. The CSO stats are very raw and hard to use as the basis for any arguement.
As for the BOI stats - I don't believe that 27,000 homes were paid for with cash - but - if I wanted to justify a point based on raw general statistics I could say - that 20,000+ houses were bought for cash in 2005 which proves there is a lot of cash in the Irish property market which means there is a lot of room for levearge and further expension of the market in the coming years.. That statement is as based on fact as yours and we both know what I just wrote isn't the fact of the situation....
Lies, damn lies and statistics!
As for the BOI stats - I don't believe that 27,000 homes were paid for with cash - but - if I wanted to justify a point based on raw general statistics I could say - that 20,000+ houses were bought for cash in 2005 which proves there is a lot of cash in the Irish property market which means there is a lot of room for levearge and further expension of the market in the coming years.. That statement is as based on fact as yours and we both know what I just wrote isn't the fact of the situation....
Lies, damn lies and statistics!
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