Current public sentiment towards the housing market?

[ajapale]

Partisan
Please take time to ensure that your posts make sense. Also note Posting Guideline . "Current public sentiment towards the housing market?"

 

[room305]

You are correct and it's _not_ wage inflation! If inflation outpaces house price growth it reduces the cost of purchasing the asset. If you have money available to purchase the asset you could buy it at a reduced cost compared with the previous year. If you don't have the price of the asset available, a lender could lend it to you at reduced cost. The asset relative to other assets has become more affordable.
Increased inflation means you can sell the same goods and services (which includes your labour) at an increased nominal price. If you can't negoitate that increased price for the same services (and note, year on year, as you learn your productivity should improve so you are actually providing improved services) - you are being short changed by your employer. Why would you do business with someone who rips you off??

Are you high on crack?

If wage increases outstrip house price increases, then homes become more affordable over time. If the reverse happens, then homes become less affordable. Austin Hughes and his band of merry advisors think house prices will increase at a "normal" 7% or so for the next few years. Since homes are barely affordable now, for this to happen and for homes to remain even at today's level of affordability, wages would need to increase at around 7% a year.

 

[tententwenty]

A few people in my office are also having trouble finding suitable rental accommodation - in Dublin btw. Obviously investors are getting out (or trying to!).

It sounds like they are getting out while the FTB market tries to rent a room to sit out the collapse. They have to sleep somewhere, after all. As for higher prices, its quite likely that the same landlords putting the prices up are recent BTLs, and are trying to cover the rising interest rates on their poor investment. There are a lot of factors coming together here, but they'll find out pretty sharply just how related to wages rents are... Unless the government wants to explain rackrenting, on the doorsteps...

 

[partisan]

Eirther you are very poor at explaining yourself or you do not know what you are talking about but this last post is nonsense.

Sorry, I'll try again.

If you have 100 euros today and inflation is 15% pa, in one years time your 100 euros is worth 85 euros today. If that makes sense? In other words if someone promises you 100 euros next year it is roughly equivalent to 85 euros today.
If a house is 500,000 euros today it's net present value in a years time (it's value in a years time, today - based on inflation) is 425,000. Someone has to pay for that asset and it just got cheaper. Wage inflation has little to do with it.

 

[StoppedClock]

Sorry, I'll try again.

If you have 100 euros today and inflation is 15% pa, in one years time your 100 euros is worth 85 euros today. If that makes sense? In other words if someone promises you 100 euros next year it is roughly equivalent to 85 euros today.
If a house is 500,000 euros today it's net present value in a years time (it's value in a years time, today - based on inflation) is 425,000. Someone has to pay for that asset and it just got cheaper. Wage inflation has little to do with it.

Thankyou for the clarification, now I know you just don't know what you are talking about.
If my 30k salary is worth 21.5k (as I have had no pay rise) how is it cheaper? It is still 16.6 times my salary!!

 

[room305]

Sorry, I'll try again.

If you have 100 euros today and inflation is 15% pa, in one years time your 100 euros is worth 85 euros today. If that makes sense? In other words if someone promises you 100 euros next year it is roughly equivalent to 85 euros today.
If a house is 500,000 euros today it's net present value in a years time (it's value in a years time, today - based on inflation) is 425,000. Someone has to pay for that asset and it just got cheaper. Wage inflation has little to do with it.

If in this scenario, your annual salary is €35k and this doesn't increase in line with inflation, how exactly did the house become cheaper to purchase?

 

[partisan]

If in this scenario, your annual salary is €35k and this doesn't increase in line with inflation, how exactly did the house become cheaper to purchase?

The body of money in the economy tied up in assets far outweighs the investable earnings of workers in a single year. But the same logic applies, if a workers salary now is 35k and in a years time her boss is paying her the same it is the equivalent of 29.97 and she really needs to take that up with her boss. Our hypothetical friend is losing out relative to the rest of the economy she is in competition for resources with.
But generally wages do rise with inflation (and outpace it when productivity grows) - if they don't it means labour is becoming cheaper and it represents a great opportunity to invest your own capital in a business (thus increasing employment and hopefully helping drive up wages)!

 

[Duplex]

I think that at this juncture first time buyers are supposed to arrive and buy all the properties that speculators no longer want because they are no longer going up in value. That was the plan, the exit strategy when the top came in it seems.

 

[miju]

I think that at this juncture first time buyers are supposed to arrive and buy all the properties that speculators no longer want because they are no longer going up in value. That was the plan, the exit strategy when the top came in it seems.

at which point the investors realise that the greater fool that they were to relying on to exit the market has been them all along.....oh the irony

 

[Duplex]

The body of money in the economy tied up in assets far outweighs the investable earnings of workers in a single year. But the same logic applies, if a workers salary now is 35k and in a years time her boss is paying her the same it is the equivalent of 29.97 and she really need to take that up with her boss. Our hypothetical friend is losing out relative to the rest of the economy she is in competition for resources with.
But generally wages do rise with inflation (and outpace it when productivity grows) - if they don't it means labour is becoming cheaper and it represents a great opportunity to invest your own capital in a business (thus increasing employment and hopefully helping drive up wages)!

I think that it would be nice if the world would pay us more for our labour but I'm afraid the global economy has decided that we are being paid handsomely enough. We need to be more productive to earn more money which is hard to do when you loose manufacturing jobs at the rate we are.

 

[Sidewinder]

But the same logic applies, if a workers salary now is 35k and in a years time her boss is paying her the same it is the equivalent of 29.97 and she really need to take that up with her boss.[snip]..But generally wages do rise with inflation (and outpace it when productivity grows)

Ummm, partisan, no offence, but you must be either a) a student b) working in the public sector c) far too young to remember the 80s if you honestly believe any of that. You post is simply not a reflection of private sector reality, now or ever.

 

[Sidewinder]

at which point the investors realise that the greater fool that they were to relying on to exit the market has been them all along...

 

[room305]

Our hypothetical friend is losing out relative to the rest of the economy she is in competition for resources with.

That's what inflation does. It robs you of your wealth by eroding the purchasing power of the money you are paid with.

But generally wages do rise with inflation (and outpace it when productivity grows) - if they don't it means labour is becoming cheaper and it represents a great opportunity to invest your own capital in a business (thus increasing employment and hopefully helping drive up wages)!

Not anymore they don't*. The armies of workers in India and China couldn't care less about your inflation related difficulties and generally this is who your boss is competing with.

*Public service workers excepted.

 

[StoppedClock]

The body of money in the economy tied up in assets far outweighs the investable earnings of workers in a single year. But the same logic applies, if a workers salary now is 35k and in a years time her boss is paying her the same it is the equivalent of 29.97 and she really needs to take that up with her boss. Our hypothetical friend is losing out relative to the rest of the economy she is in competition for resources with.
But generally wages do rise with inflation (and outpace it when productivity grows) - if they don't it means labour is becoming cheaper and it represents a great opportunity to invest your own capital in a business (thus increasing employment and hopefully helping drive up wages)!

So in you own inimitable way you are saying that wage inflation is what counts. Excellent; we are all in agreement. Time for lunch.

 

[whathome]

Flipping hell...

It looks like there are three flippers now trying to get out of this development, Beechwood Court in Stillorgan:
[broken link removed]=
[broken link removed]=

And this one has had to drop their price to €550,000
[broken link removed]=
down from €560,000...
www.daft.ie/134285
which was down from €575,000...
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While the developer still struggles on at €590,000
[broken link removed]=

 

[Duplex]

Just a note on wage inflation in the construction sector (the largest part of the private sector). Its running at an annual rate of 3.7% CPI is 4% (public service is about 6%). So effective wage deflation.

 

[partisan]

Ummm, partisan, no offence, but you must be either a) a student b) working in the public sector c) far too young to remember the 80s if you honestly believe any of that. You post is simply not a reflection of private sector reality, now or ever.

Definetely too young to have been working in the 1980's ;-) But if wage increases didn't correlate with inflation to some degree, even then, we'd be long bankrupt. Surely the Celtic-tiger era has lead to increased wealth ,overall, in our society? I don't want to be a cheer leader for it, I know an awful lot of people have been left behind. I was only making an economic point with regard to inflation. We live in a capitalist society and asset prices are going to reflect asset wealth in that society. If your wages don't keep up, and you can't afford to invest in other assets you'll be left behind. It's harsh, I don't like it, but I think that's the way it is and thinking otherwise may result in you being left behind yourself (how many of us challenge our bosses when our pay rises don't match or beat inflation? My attitude is, if they don't it's time to leave). And I suspect that given the sentiment (the desire for cheap house prices & cheap rent) expressed on this board that most people are aware that's the kind of society we live in despite wishing it wasn't.

 

[StoppedClock]

Definetely too young to have been working in the 1980's ;-) But if wage increases didn't correlate with inflation to some degree, even then, we'd be long bankrupt. Surely the Celtic-tiger era has lead to increased wealth ,overall, in our society? I don't want to be a cheer leader for it, I know an awful lot of people have been left behind. I was only making an economic point with regard to inflation. We live in a capitalist society and asset prices are going to reflect asset wealth in that society. If your wages don't keep up, and you can't afford to invest in other assets you'll be left behind. It's harsh, I don't like it, but I think that's the way it is and thinking otherwise may result in you being left behind yourself (how many of us challenge our bosses when our pay rises don't match or beat inflation? My attitude is, if they don't it's time to leave). And I suspect that given the sentiment (the desire for cheap house prices & cheap rent) expressed on this board that most people are aware that's the kind of society we live in despite wishing it wasn't.

What is your point?

 

[miju]

Surely the Celtic-tiger era has lead to increased wealth ,overall, in our society?

it has in the older generations , there has been a massive transfer of wealth from young people to older people during the celtic tiger and the reason??? yer only man property

It's harsh, I don't like it, but I think that's the way it is and thinking otherwise may result in you being left behind yourself (how many of us challenge our bosses when our pay rises don't match or beat inflation? My attitude is, if they don't it's time to leave). And I suspect that given the sentiment (the desire for cheap house prices & cheap rent) expressed on this board that most people are aware that's the kind of society we live in despite wishing it wasn't.

firstly , everyone in the world would like a cheap house to buy or rent (except of course for pro / spectulative investors) , it's not a sentiment unique to this thread

secondly, to flip what your saying , how about not investing and letting the greater fool get burned and even though your wages are lower than the people "ahead" of you, because you are in actual fact in real terms well ahead of the game when the bubble pops because while everyone else is drowning in the pool and reaching for a life belt your sitting idly by on the side sipping sangria and catching some sun watching in amazement

it doesn't all work the one way you know

 

[whathome]

And I suspect that given the sentiment (the desire for cheap house prices & cheap rent) expressed on this board

I think you might be getting confused between

a) Sentiment - which is how people feel about the state of the market now and in the future (that's what we are discussing)

and...
b) Desire or yearning for cheaper property - that is always the case for buyers. (which we are not discussing)