Future price of Irish properties

[CoffeeBrew]

All newspaprers are biased. A journalist will always put his/her slant on an issue...whether it be house prices or the price of cheese. This applies to all articles in all newspapers.

House prices and cheese are similar in some ways - they're both a bit stinky. But housing is probably a more important issue to most people.

Even if some journalists are biased, the question is: on balance is the Irish media giving fair coverage to the downside and the risks to Irish citizens and the economy as house prices appear increasingly out of balance. Perhaps this deserves a thread of its own - with examples and omissions ?

I don't get to read every newspaper and article so perhaps I'm missing a few. I would actually like to be wrong on this issue. I'd like to think that the Irish media are serving well the hundreds of thousands of young people who are planning to acquire very significant debt in the housing market.

 

[JR Rizzo]

- deleted -

Mrs Smi1er visits Ireland 2-3 times a year and ever since the Euro came in Ireland has got unbelievablely expensive.

I hear people saying it will never end. But it will. And an awful lot of people will be hurt.

The only certain thing in life is change!

and wrt property and interest rates, it doesnt happen overnight.

some famous quote about property prices and rates (I think its american)
about Property Crashes are like jumping off a high building, things may seem fine on way down, (eg thanks to estate agents hype and spin)
but then you obviously hit the bottom.

The point is, as you are falling oblivious to whats coming, you cant do anything about it.

Is a coming Irish property crash simply the inevitable "gravity" of higher rates in France and Germany???
They are gonna raise them when they have to and theres nothing we can do in Ireland!

 

[Observer]

Lets face it - you can construct perfectly reasonable arguments as to why property prices will certainly crash..................OR continue to soar.

On the one hand, immigration at net 70,000 pa. Low interest rates from the ECB. Huge pent up demand from a (relatively) newly rich economy. LImited supply in the more desirable areas of Dublin. SSIA's coming on stream. etc etc.

OR

Rising interest rates, stagnant growth in major EU economies, outsourcing of economic activity to wherever, immigrants can leave as easily as they arrive, possible removal of tax incentives.

Either scenario is plausible......you pays your money, you takes your choice!

 

[Lemurz]

Irish property prices will fall sooner or later! The magic anwser of when! is the issue.

We talk of all these immigrants keeping property demand high. What I can't understand is how they can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages?

 

[Marie]

Irish property prices will fall sooner or later! The magic anwser of when! is the issue.

We talk of all these immigrants keeping property demand high. What I can't understand is how they can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages?

Well - the answer to this appears in the AAM columns every day with newbie landlords asking about how to handle Health Board income from rents! Taxes - it would appear - are paying rents and mortgages! Even those of us who are not trained economists might find that particular 'loop' alarming.

 

[Laurie]

On the one hand, immigration at net 70,000 pa.

We talk of all these immigrants keeping property demand high. What I can't understand is how they can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages?

Well - the answer to this appears in the AAM columns every day with newbie landlords asking about how to handle Health Board income from rents! Taxes - it would appear - are paying rents and mortgages! Even those of us who are not trained economists might find that particular 'loop' alarming.

To answer Lemurz’s question as to how immigrants can afford Irish property prices/rents on minimum wages when Irish citizens can't on decent wages: in the exact same way the tens of thousands of Irish emigrants who went to New York or London in the 80s to work in low-skilled jobs paid their rents– by working long hours, sometimes having two jobs, and sharing apartments with a large number of fellow emigrants.

Marie, the Health Board does not pay the rents of the tens of thousands of immigrants from Eastern Europe who have come here to work in the last year. To suggest otherwise is more than a little disingenuous.

 

[CoffeeBrew]

When I lived in Vancouver in the late 80's there was a huge influx of immigrants from Hong Kong as they exited their city prior to the hand-over to China.

Many of these immigrants were professionals and others well-heeled business folks having made fortunes in previous years Hong kong. Their arrival in Vancouver pushed house prices to extremely high levels.

It seems many people in Ireland are anticipating the same affect here with the levels of immigration and population growth often been quoted as a justification for the dizzy heights of property prices here.

But I wonder if our situation is quite the opposite. Our construction and services are attracting immigrants who are great people: hard-working and keen but earning low wages. Our situation is probably more akin to districts of California that have had large inflows of low-paid migrant workers from Mexico. It's not uncommon there also to see the long hours, the two jobs and sharing apartments and houses with a large number of fellow workers. And then when the business cycle changes downwards - as the construction industry will here - these areas can become quite depressed economically. You can imagine downward pressure on rents and house prices in many neighbourhoods if thousands of immigrants find themselves out of work and can't or won't return home.

 

[Marie]

Marie, the Health Board does not pay the rents of the tens of thousands of immigrants from Eastern Europe who have come here to work in the last year. To suggest otherwise is more than a little disingenuous.

Laurie - Nothing in the least disingenuous, and my comment is on an area of which I am more knowledgeable than most. A good number of questions on AAM are from people enquiring about how the H.B. payments work. They are interested in this sector because it is 'guaranteed' rent and - reading between the lines! they anticipate not having to be too particular about the state of the place, the safety of appliances or the quality of the decor and furnishings. Three years ago I inherited a half-share in my family home in Central Dublin. Initially my plan was to 'buy out' my co-inheriting sibling (which she was willing for) and rent the house for the few years up to my retirement and return to Dublin in 2007. Out of 30+ responses I received from a 'tester' advert, some 20 were from the Balkan countries. The applicants had 'school English', they did not have/did not know how to open bank accounts to set up direct debits and offered cash-deposits; they did not have work waiting, they usually wanted an available house within days of contact and the system appeared to be 'get a house first, then look for work'. I found some applications very moving, was concerned for a number of them that their openness and trust would be abused. I conducted protracted e-mail exchanges with three individual males trying to bring selves and family over (e.g. told them NOT to hand over any cash to anyone who asked in advance, sent them lists of banks/building societies in Dublin, mailed them info on moving to Ireland etc.)

Doubtless most of them are getting along perfectly well now, housed and with jobs........but as CoffeeBrew has written, the work is in construction, or packing-plants, or component-manufacture. If (and I sincerely hope it wont!) the Irish economy goes belly-up in the short to medium term then tens of thousands of these newcomers - most of whom have 'burnt their boats' and invested everything they have in relocating - will (rightly and justly!) require State support. That will be the apotheoisis of the current powerful interdependencies between State, property market, construction industry, and immigrant labour.

 

[Glenbhoy]

Marie, I fail to see how your most recent post in any way backs up your earlier assertion that health boards are paying immigrants rents. What you seem to say is that possibly in the future that may happen, but at present these immigrant workers are happily working in various jobs. In addition there is a habitual residence condition in operation (rightly or wrongly) in this state which is supposed to prevent the payment of benefits to persons who have not been resident for 2? years or have no familial connections to the state (this may have to be rescinded shortly as it may be illegal under EU Law).

 

[lotus]

Hi all

I wonder do people believe house prices have now gone too high in Ireland to make them a reasonable option for investing in?

For people with little funds, residential investment can be the only option as the bank will not lend you money for investing in shares etc.

Are there places in Ireland where you can still purchase a house or apartment and the rent will cover the mortgage repayments? I wonder is one better to stick to the main cities or more regional towns?

Regards

 

[RainyDay]

For people with little funds, residential investment can be the only option as the bank will not lend you money for investing in shares etc.

WHat do you mean by 'little funds'? I can't see how anyone can get into a property investment without have say €30k at their disposal for deposit, legals, survey, furnishing etc - hardly 'little funds'.

And it's not true to say that banks won't lend you money for investing in shares - see eTrade - trading on margin - note that I'm not recommending this approach - just pointing it out.

 

[markowitzman]

Theo in my book you make sense. Long term you do not lose. Same as stock market. But caveat is you buy quality. Quality in a property sense in my book is demographics. Dublin and environs will grow and grow in long term. Swallow hard and buy. Analyse your rental market and go for quality property with good rental potential. When the bubble burst and it will it will be important to have manageable loan to value portfolio with units in good areas with solid occupancy levels. Which makes me think should we be looking at our property portfolios and be thinking of selling our dot com properties??
i.e. the ones that are hard to rent and get poor quality tenants in favour of reinvesting in the good quality areas etc? A sort of "quality" reallocation of portfolio. Interested in views on this? are others thinking of selling the poor performers and reinvesting in better quality stuff. The stock market phrase of "flight to quality" comes to mind!

 

[beattie]

If inflation rises throughout the eurozone like the way it is doing here I think the days of interest rate rises might not be that far off

 

[CoffeeBrew]

If inflation rises throughout the eurozone like the way it is doing here I think the days of interest rate rises might not be that far off

I think emerging euro inflation and the resulting interest rates could be key triggers here.

The ECB issued another warning yesterday:

http://www.unison.ie/business/stories.php3?ca=80&si=1488211

Here's an article on the global re-emergence of inflation.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/10/13/ccamb13.xml

It's been argued that the reason British consumer spending slowed so abrubtly when interest rates started to rise was that so many people had mortgages based on earnings that were, shall we say, imaginatively optimistic. So it didn't take many interest rate hikes to have a serious impact.

I don't know how much imagination goes into mortgage applications here but I wonder if we'll find out fairly soon.

 

[CoffeeBrew]

http://www.rte.ie/business/2005/1017/IMF.html

The International Monetary Fund (IMF) says that there is a risk of a sharp decline in Irish house prices, despite the recent slowdown in prices.

I believe they have issued several warnings in the past few years on Irish property.

There has obviously been no correction and debt and prices continue to expand.

In Ireland, many people seem to assume that being early is the same as being wrong and now dismiss these warnings. How wise is that?

 

[Sherpa]

How come anyone on this site who has the temerity to suggest that you can 'time' the equity markets gets put in their place, but people are allowed to pontificate at length about an imminent meltdown in the Irish property market?

Just wondering...

 

[Eurofan]

How come anyone on this site who has the temerity to suggest that you can 'time' the equity markets gets put in their place, but people are allowed to pontificate at length about an imminent meltdown in the Irish property market?

Just wondering...

Don't think anyone actually timed it but I see valid reasons for the market being unsustainable. But if it will make you happy i give it 2 years tops before the 'imminent meltdown'.

 

[Sherpa]

I still don't understand why the 'buy and hold' strategy is advocated (to the exclusion of all else) for equity investments, but this doesn't apply to property investments.

If I posted a view that equity markets were overvalued and that it was the right time to sell, I'd be criticised for attempting to 'time the markets' (which is, according to the received wisdom on this site, a mugs' game, apparently). Strangely though, the same criticism doesn't seem to be applied to opinions on the state of the property market.

Seems a little inconsistent to me, that's all.

 

[ClubMan]

I guess I'm one of the people who often advocates a buy and hold long term strategy and believes that timing the market or basing investment decisions on past performance is a mug's game. I believe that this applies even more so to property especially given the significant acquisition, maintenance and disposal costs involved. I just can't be bothered reading all of these threads about the property markets most of the time as I don't find them interesting. But for what it's worth, like any liquid/open market, I certainly don't believe that people can generally time the property markets with any accuracy (other than perhaps with the benefit of insider information of some sort - which, unlike with equities, is not necessarily illegal!) and because of the costs involved a buy and hold long term strategy (in order to benefit from rental income or capital appreciation) would generally make most sense. I don't really see any inconsistency in AAM's treatment if different investment options to be honest. I do agree that some of the guff posted about the property markets is largely meaningless though.

 

[CoffeeBrew]

My preferred formulation is "Timing the market is for gamblers" because gamblers can get lucky.

I remember reading about an experiment in which a chimpanzee was trained to "time to market". He was given two lights (red and green) which would light one at a time at random . The green light indicated prices going up and the red light represented prices going down. The chimp had to predict which colour light would come on next. When the sequence was altered so that the green light came on, again at random but for 75% of the time, the chimpanzee noticed the "up" trend and always predicted green (Buy!) to get his rewards.

This is the "trend is your friend" approach to investing that has generated so much profit in Irish property as it surged upwards.

But so many people seem to associate the luck of buying in an uptrend with investment acumen and proof of a "sure thing".

As far as I remember the chimp got confused when a "top" was simulated and quite agitated when the red started coming on more frequently as his previously winning strategy was causing him to lose his bits of banana or whatever. He eventually adapted to it though.