Current public sentiment towards the housing market?

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2Pack said:
I will predict a -20% minimum everywhere even in D4 embassy land and a fall of over 50% out in the Back of Ballivor type commuter places but this will all take up to three years to bottom out and will most assuredly not happen by December 2006 unless the ECB jacks by 25bp every montg from now on and a panic starts as well .
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"Over a 50% drop" eh? A drop to below the cost of building the place in most cases. Did you just pluck that figure out from thin air?
 
CelloPoint said:
Here are my speculative predictions to come about by December 2006:

* commuterland 1 bed flats - 40%
* commuterland 2+ bed flats - 30%
* inner M50 flats and commuterland houses - 25%
* city centre flats - 20%
* middle class suburbia 2 bed houses and townhouses (no management companies) - 15%
* middle class suburbia 3 and 4 bed semi-Ds (no management companies) - 10%
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I'm quite bearish myself but I have to laugh at your ridiculous predictions. We haven't seen any significant signs of inventory build-up and already you are calling for a huge correction.

You will see these kind of drops (and probably worse) but they are at least two years off yet.

Housing has undoubtedly gone bear in the U.S. and they are only taking about falls in prices occuring next year!

If a 1 bed flat in commuter land cost €250k last year, then it will probably cost about €275k now. For your prediction to come true, the seller will need to drop his asking price from €275k to €150k. A drop of 45% by the seller.

Where is the motivation for such an enormous drop going to come from?

Making these kind of massive, stock market crash style predictions for the short term looks foolish and provides much ammunition for the bulls.
 
Anyone considered forwarding examples of widespread concealed asking price reductions to the Indo ?

I would think there's a story there.

Besides they might be happy to report to the public how myhome.ie facilitates EAs reducing asking prices surreptitously. ;)
 
just caught up on the last 10 pages, took a bit of time but I have read the whole lot so far. There's lots of interesting comments and I hope I can add something meaningful.

I got off the property merry go round in January. I live in Dublin and on my return from a year away I sold my only property which was in Cork. It had been rented for 2 of the 3 years I owned it. The sum remaining on the mortgage was half the sale price of 300k. - 2 other properties in the estate that have been put up for sale since have'nt sold, one (which was bigger and had a garage) was for nearly 400k a few weeks after mine and the sale fell through because the purchaser could'nt raise the funds, the other is still on the market for 300k.

My tenants covered the rent and other costs and paid my ssia for 2 years, one of which I wasnt working. I sold the house with the contents so I presume the purchaser is renting it out. If the new owner got a 100% mortgage there would be a shortfall of 400 over what current (reduced) rental would deliver. I know of others who are buying to let and are covering the shortfall themselves in the hope that the sale will deliver a windfall like others have realised. I think this is total madness as after costs and cgt they need a big increase to break even. These people have other properties already so are especially vulnerable to interest rate increases.

I bought the property because I was unable to afford or justify buying in Dublin. I had a good salary and some help from my parents at a time when property was still reasonable in Cork relative to Dublin.

My reasons for selling were as follows:
  • on returning from travelling I couldnt believe what I was told the place was valued.
  • my tenants were moving out of the house and the company that was renting it were looking for lower rents for their other tenants in a few houses the town.
  • the bypass was finishing and it was expected to have a negative affect on rentals in the town.
  • I would kick myself if the price dropped and I never took the profits - I wont get upset if I see the same house go for more money.
  • I was probably never going to live there.
  • I am sceptical about Ireland's economy and its reliance on corporate America - if the finfacts article is anything to go by and 87% of our exports are by american companies this country is being propped up by people with no allegiance to any country. My job got outsourced in part to india before I left the country. I don't see any reason why many of those companies would stay here in the long run with US govt looking for their money from the likes of symantec, avg engineer wages 400 euros a month in poland (rte news) and america itself being gutted by outsourcing http://www.counterpunch.org/roberts03162005.html / http://www.finfacts.com/irelandbusinessnews/publish/article_10006912.shtml
  • I am not convinced there is that much real money in ireland and have no idea how people are going to deal with a global downturn and layoffs. I am according to the irish independent in the top 10% of earners. I cannot figure how people can affort to buy these suv's and odius apartments with concierges like http://www.thegrange.ie 'city living comparable to london and new york' http://www.dundrumpoint.ie - read the advertising... - the developers must be having some laugh, unbelievable - have these people who are 'registering their interest' given any thought to how they would pay their 2000 euro mortgages when interest rates increase and/or if they found themselves unable to find work or if the dollar crashed.
I have the money in the bank and took some advice from a financial adviser. I have some in gold and I will probably pay some into a pension and an equities fund.

I sometimes consider moving to germany again. I saw well built aparments in Berlin that are rented for 400 euros a month between 3 people! I am not considering buying to let. I speak German and lived there for 2 years so I would consider going back and living there in relative comfort (my definition of comfort doesnt involve getting ripped off on houses, cars, groceries, alcohol). Australia was'nt for me and theres not a lot going on in new zealand. America is out of the question right now.


I am not relying on a spectacular crash so that I can get back on 'the ladder' in a hurry but I do expect it will happen. This comes from many of the books and websites that I read. I know you can find anything out there to support any view but my gut feeling is scepticism. The media in ireland in the last month have become quite worried. The purchase of myhome.ie by the irish times reminds me of dot.com mania that I was surrounded by and involved in. McWilliams book is pop-economics but he did lead me to reading about hyman minsky - I took this link from another great thread on aam [broken link removed]

This one is from thedailyreckoning.com newsletter and the author of 'empire of debt'. Apologies for the length but I did'nt want to edit it. The bit from the guy in the FT is interesting.

Bill Bonner, en vacances in France:
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The gods have gone over to the other side.

What is happening is that trends that worked so
beautifully on the upside are now slipping into reverse.

People still watch central bank policy setters as if it
were a live sex show. They don't want to miss anything.
But the thrill is gone. The magic no longer works.

The most important of these thrills is the housing
market. When house prices were rising - in Britain as in
the US, Australia, South Africa and across English-
speaking world - homeowners enjoyed what economists call
a "positive wealth effect". Interest rates fell. Housing
boomed as more and more people went to work in it the
industry. In America, 20% to 40% of all new employment
in the last five years was in the housing sector. As
everyone's house rose in price, people felt themselves
richer and spent more money.

But now house prices have stalled...and are beginning to
slip back.

>From Dallas comes news that house sellers are offering
incentives such as free maid service, swimming pools and
appliances - whatever it takes to move stuck
merchandise. The trouble is, after ten years of boom
conditions, there's a lot of merchandise to move. And
much of it is not really suited to buyers' interest.

For ten years, people have bought expensive new
apartments - "condos" as the outsized version in the US
is known - not because they really want a condo...but
because they think it is a way to magnify the wealth
effect. The more condos they own, the more effect they
get.

Or, they might have decided to get more bang by putting
up more bucks. A buyer signs up for a plusher, pricier
house than he really needs, realising that the wealth
effect is proportional to the investment. Property, he
sees, has been rising at 20% per year in many areas.
Twenty percent of £500,000, he tells himself cannily, is
more than 20% of £250,000. So he buys the half-million-
pound house, even though he really doesn't need it.

But now that that 20% per year froth has disappeared,
homeowners no longer have an interest in more house than
they need.

"Homeowners say 'downsize me'," reports Reuters. It
costs money to maintain a house. Property taxes, heat,
mortgage payments and maintenance are all proportional
to the size of the house. With nothing to gain, people
naturally want to cut out the unnecessary expense.

The positive wealth effect has gone...negative. The more
house you own, the more it costs you to hold onto the
house...and the more you lose when house prices go down.

Meanwhile, the Anglo-Saxon homeowner is also getting
squeezed by higher interest rates and higher fuel bills.
"Gas prices inch up to another record high," says an AP
report. The US national average rose to $3.03 last week.
Prices in the UK are nearing £1 a litre again.

Now our hapless consumer is in a bind. His real income
is flat or falling...while his expenses are starting to
rise. He has to cut back. Naturally, the first thing to
go will be the house he doesn't need....which makes the
negative wealth effect even more effective and even more
negative. Not just for the seller, but for everyone
else. Every house sold at a discount drops the value of
all equivalent housing stock - even for people who don't
intend to sell. All of a sudden, none of them are as
rich as they used to be. They, too, cut back their
spending.

We know what the Fed and Bank of England will do once
this trend builds up momentum; they will cut rates -
just as the Old Lady did in August last year. She took a
step back and cut to 4.50%. Now the Old Lady's been
forced by inflation to start crawling forwards again.
She's raised base rates to 4.75%.

But if the Bank of England or the Fed now cut the cost
of borrowing from here, the magic will have gone. And no
matter how many passes in the air these magicians make,
it will not come back. For, if they really could
manipulate the economy any way they chose, we need never
have worried. They could have jerked the economy around
like a puppet on a string. Want faster growth...just cut
rates. Want less inflation...just raise them.

But there comes a time when financial officials can
fondle rates as much as they want; they will never get
the response they're looking for.

As Nouriel Roubini explains in last week's Financial
Times:

"Once the housing and consumption slump starts, demand
for durable goods becomes interest-rate insensitive.
Indeed, the recent housing bubble has led to a glut of
housing stock, consumer durables and lingering excess
capital capacity in the rest of the economy. Thus, as we
saw in 2000-01, the housing and consumption slump will
dominate any monetary easing effort..."

In the US, the Fed can chirrup as much as it likes;
lower rates simply won't reverse the negative wealth
effect of a falling real estate market. Mortgage rates
may go up or they may go down (the Fed only controls
short rates), but people won't borrow at all if they
sense they will have a hard time making the payments.
This is because the old star-spangled circus magic has
turned into black magic...a kind of voodoo economics
curse, where the tricks all go wrong.

The magician pulls a rabbit out of his hat and it bites
him on the nose. He saws his pretty assistant in half
and finds her actually cut into two bloody pieces. And
the ace up his sleeve turns out to be an Old Maid.

It is what happened to Japan in the 1990s. Could it
happen in the US and Britain? We don't doubt it.
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SteelBlue05 said:
"Over a 50% drop" eh? A drop to below the cost of building the place in most cases. Did you just pluck that figure out from thin air?
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never mind the cost of building, its simply the opportunity cost of the long commute over the short commute .

outer commuter belt of whatever town will get it hardest .
 
2Pack said:
never mind the cost of building, its simply the opportunity cost of the long commute over the short commute .

outer commuter belt of whatever town will get it hardest .
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Please explain, not following your arguement on how you are comming up with "over a 50%" drop....

I really dont think you'll see places for sale for less than the cost of the build, it does matter.

Some of the figures and claims thrown around on this thread are crazy, I thought this was for rational intelligent discussion, not tabloid type claims.
 
room305 said:
I'm quite bearish myself but I have to laugh at your ridiculous predictions. We haven't seen any significant signs of inventory build-up and already you are calling for a huge correction.

You will see these kind of drops (and probably worse) but they are at least two years off yet.

Housing has undoubtedly gone bear in the U.S. and they are only taking about falls in prices occuring next year!

If a 1 bed flat in commuter land cost ?250k last year, then it will probably cost about ?275k now. For your prediction to come true, the seller will need to drop his asking price from ?275k to ?150k. A drop of 45% by the seller.

Where is the motivation for such an enormous drop going to come from?

Making these kind of massive, stock market crash style predictions for the short term looks foolish and provides much ammunition for the bulls.
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I'm sorry if I make you laugh, but I'm prepared to stick by what I predicted above. Unlike the US, the Irish market has a huge speculative element to it, driven mainly by incentive schemes such as section 23 coupled with a non-sensical property culture (or lingering 19th century Irish inferiority complex as I like to call it - new-found-wealth investors also suffer from this mindset).

I was being conservative above with my price drop in suburban 3 and 4 bed houses - they are certainly not immune either, but I gave them a only a 10% drop because the investor element is not as prominent in this class of housing (unlike section 23 flats). Ultimately I can see around a 50% drop in such 3 and 4 bed suburban houses over the next 3 years, depending on the economic performance. Whilst I agree that certain property classes are sticky on the way down, investment properties certainly are not sticky and with a huge supply of housing (far outstripping the population increase) there is a massive speculative element to the market that will result in a rapid price correction
 
Remix said:
Anyone considered forwarding examples of widespread concealed asking price reductions to the Indo ?

I would think there's a story there.

Besides they might be happy to report to the public how myhome.ie facilitates EAs reducing asking prices surreptitously. ;)
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Do you mean because MyHome is owned by the Irish Times???
 
SteelBlue05 said:
I really dont think you'll see places for sale for less than the cost of the build, it does matter.
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Why not? - even at the height of our current boom it would cost more than €55,000 to rebuild that house in O'Malley park but it's selling for "just" €55,000. The value of a property is not simply related to the build cost.

Also - in a construction recession, building costs would be reduced significantly due to builders competing in a tougher market.
 
langball said:
just caught up on the last 10 pages, took a bit of time but I have read the whole lot so far. There's lots of interesting comments and I hope I can add something meaningful.


<font face=&quot;Arial&quot;>I got off the property merry go round in January....
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Good read.I think my sentiment is similar to yours in that i spent a number of years in Australia and came back last year. I also sold my rented house at the beginning of this year. I too realised the substantial profiit i could realise and was not going to risk that on, from what i could see, an inflated asset. (Interesting that you should mention Gold. I am currently researching that (have invested the bulk of my proceeds elsewhere) but not so sure of the current price. If you could add more info in the gold thread i'd appreciate it)
 
whathome said:
Why not? - even at the height of our current boom it would cost more than €55,000 to rebuild that house in O'Malley park but it's selling for "just" €55,000. The value of a property is not simply related to the build cost.

Also - in a construction recession, building costs would be reduced significantly due to builders competing in a tougher market.
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I am on about the original build cost, not rebuild costs.

Now back to this over 50% figure you magically whizzed up, how did you get that?
 
CelloPoint said:
I'm sorry if I make you laugh, but I'm prepared to stick by what I predicted above. Unlike the US, the Irish market has a huge speculative element to it, driven mainly by incentive schemes such as section 23 coupled with a non-sensical property culture (or lingering 19th century Irish inferiority complex as I like to call it - new-found-wealth investors also suffer from this mindset).
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Well we'll wait and see I guess. I'll be very surprised if we even see falling prices this year, given that prices have jumped about 12% already. As for the U.S. not having a "huge speculative element" to their housing development? You couldn't be more wrong.

Do you not remember all those ads in the Sunday Times property supplement for condos in Florida?

Seriously, making outrageous claims like these just makes bears look stupid.
 
SteelBlue05 said:
I am on about the original build cost, not rebuild costs.

Now back to this over 50% figure you magically whizzed up, how did you get that?
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I didn't come up with any 50% figure.

Why do you believe that a property can't go below original build cost?
 
langball said:
I live in Dublin and on my return from a year away I sold my only property which was in Cork. It had been rented for 2 of the 3 years I owned it. ...
...My tenants covered the rent and other costs and paid my ssia for 2 years, one of which I wasnt working.
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Great post langball but wouldn't go shouting about paying into SSIA while not normally resident in the state.
 
SteelBlue05 said:
I am on about the original build cost, not rebuild costs.
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It is completely irrelevant so i will not even answer that. :D
Now back to this over 50% figure you magically whizzed up, how did you get that?
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peripherality factors.

As energy costs rise the Irish commuter belts 30 -50 miles out in little villages with no services will tank. Simple really .

These peripheral commuter belts will see the greatest falls and thats where the 50% drops will be because there will be far more sellers than buyers and the price will be set by whoever bails out last .

Inner commuter belts less so.

Good close to employment areas less so again.
 
Ok, so you have a hunch that prices will fall, but you dont know by how much or why, and you are basically have a wild guess. Right, that clears that up then.

I would go and search for the theory behind the "over 50%" figure but there are over 2000 posts in this thread and I somehome dont think its worth the effort.

My point is try to keep the discussion factual or at least based on solid reasoning.
 
2Pack said:
It is completely irrelevant so i will not even answer that. :D

peripherality factors.

As energy costs rise the Irish commuter belts 30 -50 miles out in little villages with no services will tank. Simple really .

These peripheral commuter belts will see the greatest falls and thats where the 50% drops will be because there will be far more sellers than buyers and the price will be set by whoever bails out last .

Inner commuter belts less so.

Good close to employment areas less so again.
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It would probably more realistic to claim that the prices would fall back to 2000/2001 levels. However, that would probably still work out around 50%
 
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