C
Chamar
Guest
askalot said:
I was thinking the very same thing a couple of days ago.
Future price of Irish properties
- Thread starter bacchus
- Start date
- Status
I was thinking the very same thing a couple of days ago.
J
JohnG
Guest
askalot said:
I wonder how many people realise that the real cost of this interest rate change is €300. By that I mean that after 5 years the mortage balance owed will be more than €6,000 higher due to the increase in interest rates.
The real impact of a 1.25% increase in interest rates on a €300,000 loan is €312.50 per month, but the mortgage payment only goes up by €200 per month and the difference gets added to the loan balance!
W
walk2dewater
Guest
Ah but sure JohnG you're forgeting something, sure you have to buy since renting is "dead money", not to mention socially embarrassing and you can paint your walls polka-dot and do all sorts of DIY (with an equity loan of course), besides it doesnt matter what you pay/borrow, I repeat doesnt matter what you pay/borrow, because in "the long-term" etc etc etc...
[a concise summary of what I've been hearing since I returned to Ireland 2yrs ago]
[a concise summary of what I've been hearing since I returned to Ireland 2yrs ago]
bearishbull
Registered User
- Messages
- 207
even with all this bearish sentiment in the media i reckon it will take a crash to convince most people tha property can in fact go down and is a guarunteed raod to riches,it reminds me of the pyramid schemes down in cork where its all over the media but people still put cash in and untill it all crashes people will think "i'll be alrite jack".
Re: Tulips
Probably best to attribute the source of this wikipedia article, madisona.
http://en.wikipedia.org/wiki/Tulip_mania
madisona said:
Probably best to attribute the source of this wikipedia article, madisona.
http://en.wikipedia.org/wiki/Tulip_mania
N
Neffa
Guest
Re: Tulips
Even though I am very bearish on property prices here, I think that comparisons with tulips or the Japanese property bubble are probably over-stated. At the peak of the boom in Japan, the land around the Royal Palace in Tokyo was worth more than the entire real estate of Canada. Whilst I think we are in a frothy market, I don't think we are quite in that territory. 30%+ overvalued perhaps, but not multiples of the long-run value.
What may "catch" the market as it falls will be a function of how many cash buyers are sitting waiting to buy. As renting becomes more common, the renters should be in a good position to buy and potentially stabilise the market.
madisona said:
Even though I am very bearish on property prices here, I think that comparisons with tulips or the Japanese property bubble are probably over-stated. At the peak of the boom in Japan, the land around the Royal Palace in Tokyo was worth more than the entire real estate of Canada. Whilst I think we are in a frothy market, I don't think we are quite in that territory. 30%+ overvalued perhaps, but not multiples of the long-run value.
What may "catch" the market as it falls will be a function of how many cash buyers are sitting waiting to buy. As renting becomes more common, the renters should be in a good position to buy and potentially stabilise the market.
Quite right. An interesting question is when will those cash buyers/renters buy ?
If the market starts falling, would you buy when it fell 5% and then watch it fall a further 5% or 10% ?
Would you wait for it to fall 10% and then jump in ?
IMHO I think the market will over-react and prices will over-correct the current over-valuation (whatever it is: 10%, 20% or 30%). It will look like free-fall for awhile - quite exciting to watch from the sidelines but not if you are caught up in it.
If the market starts falling, would you buy when it fell 5% and then watch it fall a further 5% or 10% ?
Would you wait for it to fall 10% and then jump in ?
IMHO I think the market will over-react and prices will over-correct the current over-valuation (whatever it is: 10%, 20% or 30%). It will look like free-fall for awhile - quite exciting to watch from the sidelines but not if you are caught up in it.
W
walk2dewater
Guest
Re: Tulips
Sorry that's not how true busts play out. The bottom is reached when no one wants to buy, when everyone you meet seems to say renting is smarter than buying, when the last property magazine disappears from the shelf, when the property supplements are replaced by some other fad, when people are so sick of property that they vow "never again", in other words, when there is a complete washout of bullish sentiment and annual housing completions are next to zero. There will be very very few cash buyers waiting to buy at the bottom, EVEN if it makes economic sense to buy. There are several books on the subject here's one:
http://www.amazon.co.uk/exec/obidos/ASIN/0470821523/qid=1143710155/sr=1-2/ref=sr_1_2_2/202-0255429-7416632
This is the psychology of boom and bust, the emotional cycle of greed and fear. Today's price action (up) is PURELY sentiment based, no basis in economics whatsoever.
Neffa said:
Sorry that's not how true busts play out. The bottom is reached when no one wants to buy, when everyone you meet seems to say renting is smarter than buying, when the last property magazine disappears from the shelf, when the property supplements are replaced by some other fad, when people are so sick of property that they vow "never again", in other words, when there is a complete washout of bullish sentiment and annual housing completions are next to zero. There will be very very few cash buyers waiting to buy at the bottom, EVEN if it makes economic sense to buy. There are several books on the subject here's one:
http://www.amazon.co.uk/exec/obidos/ASIN/0470821523/qid=1143710155/sr=1-2/ref=sr_1_2_2/202-0255429-7416632
This is the psychology of boom and bust, the emotional cycle of greed and fear. Today's price action (up) is PURELY sentiment based, no basis in economics whatsoever.
bearishbull said:obviously not.but we are talking about now and the future.for last few years the numbers havent stacked up.ten years ago i was doin my junior cert so i cant remember what rent was like compared to mortgages
as for my points on renting versus buying obviously things will change and this anomaly wont last in medium/long term which raises the question how will it change? theres only 2 ways it can happen, rents rise substantially or prices fall ,i cant see rents rising much with the massive building happening-80k a year for ten more years=another 800k houses! "raise the rents!!"
i am talking about at this moment and untill the change happens it does not make financial sense to buy,even if your house rises ten percent in year after buying this only covers stamp duty and the extra mortgage repayments above rent payments.then inflation is at 3% so take 3% away from any increase in value and the difference between renting and mortgage is around 2-3% of value of home so every year as it stands your houses has to rise by more than 6% in order to "make a profit".
I think we're broadly in agreement then, despite our debate.... the circumstances that currently make renting a sensible option for some areas won't last forever unless the bubble sustains itself..... but what goes up must come down.
If I were looking for a house atm, I wouldn't buy either.
Re: Tulips
The eircom effect....???
To be honest, I disagree that we'll see those depths of despair, purely by virtue of the fact that the demographics of the country will maintain a certain level of demand, even if it's only in the second-hand market for the most part.
The real risk to the market is the amateur investor who gets spooked. There will still be plenty of people waiting in the wings to make a smart, long-term, sustainable investment when this thing bottoms out.
walk2dewater said:
The eircom effect....???
To be honest, I disagree that we'll see those depths of despair, purely by virtue of the fact that the demographics of the country will maintain a certain level of demand, even if it's only in the second-hand market for the most part.
The real risk to the market is the amateur investor who gets spooked. There will still be plenty of people waiting in the wings to make a smart, long-term, sustainable investment when this thing bottoms out.
N
Neffa
Guest
Re: Tulips
Not sure I agree with this from my personal experience - in the UK crash of 1989/90 which bears some similarity to our situation here, the worst fall was about 40-45% from the peak and people still bought/sold through that period. The number of transactions halved and many watched from the sidelines - but there were still transactions. Not all buyers disappear - people will still need buy/sell due to family circumstances, deaths, divorce, marriage, job moves etc.
I'm just reacting to the idea that there will be a tulip-style catastrophic drop of say 80% in prices all-round. Just don't see that happening - if it did, mortgage costs would drop to something like 10% of average income which I don't think is remotely likely.
walk2dewater said:
Not sure I agree with this from my personal experience - in the UK crash of 1989/90 which bears some similarity to our situation here, the worst fall was about 40-45% from the peak and people still bought/sold through that period. The number of transactions halved and many watched from the sidelines - but there were still transactions. Not all buyers disappear - people will still need buy/sell due to family circumstances, deaths, divorce, marriage, job moves etc.
I'm just reacting to the idea that there will be a tulip-style catastrophic drop of say 80% in prices all-round. Just don't see that happening - if it did, mortgage costs would drop to something like 10% of average income which I don't think is remotely likely.
If it was a 'textbook' crash (and that's a big If) prices would fall for a while, then there would be one or two rebounds (during which the bulls announce "it was only a blip - we're on the way back up") but then during these rebounds investors use this time to try to escape with their shirts (they've just been thru quite a scare) and this then triggers the free-fall which lasts until a full correction has occoured.jpd said:
As a real-world example, my Dad (a broker in N.Y.) saw the dot-bomb coming and got entirely out of tech stocks and avoided the initial carnage. But then he mis-timed the bottom of the market (one of the small rebounds I mentioned above) and tried to buy 'low'. Little did he know the stocks had another 50% to fall.. he got badly burned. At the moment he is a fully paid-up subsriber to the global property bubble theory & has just sold up all the family houses in N.Y. except the main residence. He has told me that if I try to buy anything in Ireland he'd be on the next plane over to shoot me first *lol* :-D
soma said:
He'd be right too!
The difference I'd see between the dot-bomb and a property crash is that, once corrected, property still offers decent long-term value.
An awful lot of tech stocks were nothing but hot air.... people will always need houses, but they won't always need to buy their fruit online or whatever....
W
walk2dewater
Guest
To be crystal clear: I'm taking about the prices of property. Life will go on. People will do what people always do. The sky isnt going to fall, and the sun will still rise and set every day. All the new infrastructure and housing stock will remain exactly where it is
IMHO prices in Ireland are MASSIVELY overvalued and prices will over-react to the downside as is typical of manias. But I realise I am in a minority within a minority on this issue!
But ultimately the future is bright, i.e. an abundance of CHEAP property in Ireland.
IMHO prices in Ireland are MASSIVELY overvalued and prices will over-react to the downside as is typical of manias. But I realise I am in a minority within a minority on this issue!
But ultimately the future is bright, i.e. an abundance of CHEAP property in Ireland.
W
walk2dewater
Guest
soma said:
Exactly. Some call it the 'slope of hope'. The bottom is not reached until every drop of bullish sentiment is wiped out. Ironically, the economics of ownership make compelling sense at this point, but few have the stomach for it.
So we have a broad consensus that a speculative bubble exists in the Irish property market?
Would it be controversial to suggest that the price of housing will return to a level supported by fundamentals? For instance what if yields in the investment market rose to say 6 or 7%, still low by historic standards? I believe that such a scenario is highly likely, but the increase in yields will be as a result of falling capital values, rather than inflation in rents.
Would it be controversial to suggest that the price of housing will return to a level supported by fundamentals? For instance what if yields in the investment market rose to say 6 or 7%, still low by historic standards? I believe that such a scenario is highly likely, but the increase in yields will be as a result of falling capital values, rather than inflation in rents.
I can just see it - 10 years down the line there'll be agents in Poland, Bulgaria, Cape Verde and Croatia selling cheap property in Ireland.walk2dewater said:
I'm not sure how far down the prices are going to do. I'm not altogether sure that percentage falls are meaningful at the moment as the figure on which they'll be calculated is currently unknown. When I hear "there'll be a 50% drop in property prices" I can't actually visualise that without knowing 50% of what. So I don't want to speculate on percentage falls.
I do think that there is no indication of sanity in the market at the moment. I realise buying a home is an emotional purchase, but it is the choice of home itself should be the emotional bit, not the actual fact of owning anything at all. Why buy something unsuitable - you'll never be at home in it anyway, and if the market shifts negatively which it looks like it probably will, you'll be stuck in it, hating it and unable to move.
And yet I saw one person advising that people buy unsuitable stuff, just so that they have something. I cannot see the sense in it.
- Status