Is a further huge crash in house prices imminent?

DuineEile

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There is nothing at all wrong with staying out of the market if you don't accept the market price. Many people refused to buy during the boom because they didn't agree with what the market was saying. They were proved right and the market changed.
Abolutely correct. But don't expect people to rush into selling at a loss either.

D
 


HanleyS

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There is a distinct possibility that the culture of hosue buying in Ireland will be changed by the collapse in house prices. Negative equity will be here for a long time, 10 to 15 years at least. We will soon see houses being torn down in ghost estates. A lot of people who have not bought yet will evaluate teh value of buying versus renting and we could see a major cultural shift. The days of buying a house being the ultimate aim maybe over.
It will take a while for the slow learners. It's possible that by the time we reach the bottom a generation will be turned off home ownership. That's a long time off though.
 

HanleyS

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Well, you can find decent 1 bed apartments in Dublin for around 150,000 eur now :-
2 Bedroom Apartments, Castlegrange, Castaheaney, Clonsilla, Dublin 15, West Co. Dublin - Apartment For Sale
The mortgage is around 500-600 per month.

The rent on a decent one bed Dublin flat is around 800-900 per month and it's hard to save money for a deposit when 10 grand every year is gone to a landlord. So even if house prices are still falling, I'm still losing 10,000 per year in rent with nothing to show for it. In five years, will that 150,000 flat cost 100,000 eur? Quite possibly. But in the meantime, I've paid 50,000 to my landlord mortgage and saved very little.
That flat is not 800 a month to rent. It probably wouldn't fetch 400 a month. Catch yourself on.
 

Squire Allworthy

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There is a distinct possibility that the culture of hosue buying in Ireland will be changed by the collapse in house prices. Negative equity will be here for a long time, 10 to 15 years at least. We will soon see houses being torn down in ghost estates. A lot of people who have not bought yet will evaluate teh value of buying versus renting and we could see a major cultural shift. The days of buying a house being the ultimate aim maybe over.

The main reason for a delay in recovery in the property market is government intervention. Without the intervention the fall would have been more acute and people would then have felt more confident that a bottom had been reached. Ireland is now in the ludicrous position of having a government that has a vested interest in maintaining property prices. Meanwhile in the real world stasis, stagnation and decline.

On rent versus purchase. On normal repayment mortgages 15 - 25 years it is almost always better to purchase if you factor in that you may well be living in the house (or another) to the day you die. So the comparison is buy over say 25 years against rent over 50 -60 years. Also with inflation rents increase but the sum borrowed depreciates in value. Renting long term is expensive.

It would be a sin if houses are pulled down in ghost estates while there are people who are homeless. That really would be waste. It should not be allowed to happen.

The housing market will not run evenly across the country. Recovery will start first with good family houses in areas that are attractive and close to amenities. The pattern normally goes like this, forced sales on new developments, these fade out as new building decreases. Banks dump repossessed property whilst that is on the market spare money is soaked up. Site values drop in line with the price of repo sites. New house construction costs are therefore reduced, construction begins. Then localised shortages in attractive areas and the cycle starts.

The problem in Ireland is the state of many of the banks, NAMA and the government property bank, over supply in some areas, and too many small poorly designed units. It is an utter mess and will delay recovery and reduce confidence in the economy for several years.
 

Cael

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Property, property, property. Whenever any FFer says "the economy" what they actually mean is "the property market".
Of course. Fianna Fáil are not a political party. They are merely one front organisation for the Irish landowners and their bankers. Fine Gael is the other.
 

captainwillard

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The main reason for a delay in recovery in the property market is government intervention. Without the intervention the fall would have been more acute and people would then have felt more confident that a bottom had been reached. Ireland is now in the ludicrous position of having a government that has a vested interest in maintaining property prices. Meanwhile in the real world stasis, stagnation and decline.

On rent versus purchase. On normal repayment mortgages 15 - 25 years it is almost always better to purchase if you factor in that you may well be living in the house (or another) to the day you die. So the comparison is buy over say 25 years against rent over 50 -60 years. Also with inflation rents increase but the sum borrowed depreciates in value. Renting long term is expensive.

It would be a sin if houses are pulled down in ghost estates while there are people who are homeless. That really would be waste. It should not be allowed to happen.

The housing market will not run evenly across the country. Recovery will start first with good family houses in areas that are attractive and close to amenities. The pattern normally goes like this, forced sales on new developments, these fade out as new building decreases. Banks dump repossessed property whilst that is on the market spare money is soaked up. Site values drop in line with the price of repo sites. New house construction costs are therefore reduced, construction begins. Then localised shortages in attractive areas and the cycle starts.

The problem in Ireland is the state of many of the banks, NAMA and the government property bank, over supply in some areas, and too many small poorly designed units. It is an utter mess and will delay recovery and reduce confidence in the economy for several years.

Most governments have a vested interest in keeping property prices up. It supports the financial system.
 

Cael

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The last thing the banks will force you to do is sell for less the amount of the mortgage - so long as you can at least keep up interest payments.
Well, if the banks and speculators are depending on this policy - then expect house prices to crash much further in the near future.
 

Cael

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Most governments have a vested interest in keeping property prices up. It supports the financial system.
By creating Nama, Fianna Fáil tied a rope between the property market and the genitals of every tax payer. Smart move - when you can get away with it...
 

Cael

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It will take a while for the slow learners. It's possible that by the time we reach the bottom a generation will be turned off home ownership. That's a long time off though.
Home ownership is fine. Its allowing land prices to rocket out of control that is the problem. This problem would be soved immediately by nationalising the land.
 

Thac0man

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The former chief executive of Bank of Ireland Michael Soden gave an interview with Ivan Yates on the breakfast show on Newstalk just before 8 this morning.

Did anyone else hear it?

I found it extraordinary.

He basically said NAMA was continuing to cause paralysis in the property sector and that NAMA needed to start unloading its property portfolio on to the market.

Doesn't that not make a mockery of the Governments stance on NAMA?
That is an extraordinary claim alright. Yates thinks that bleeding the massive NAMA property portfolio onto an already depressed and declining property market will increase prices? His basic grasp of supply and demand seems to be lacking as is his appreciation for the fact if the NAMA portfolio is offloaded at any time other then an upturn, a huge loss will result for the exchequer. As it is NAMA only stands a slim chance of getting any return at all. It is a titanic hidden debt behind our already spirelling borrowings and Yates thinks it would be a good time to realise the debt and add it to our out of control borrowings? Baffling logic. One wonders how such a thinker ever got a position in government - oh wait, he was Fianna Fail. :rolleyes:

Yates must be some dullard to make the current serving crop of Fianna Fail hacks look like they know what they are doing by comparison.
 

HanleyS

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On rent versus purchase. On normal repayment mortgages 15 - 25 years it is almost always better to purchase if you factor in that you may well be living in the house (or another) to the day you die. So the comparison is buy over say 25 years against rent over 50 -60 years. Also with inflation rents increase but the sum borrowed depreciates in value. Renting long term is expensive.
The direct comparison of rent and mortgage interest is perfectly valid. There is no justification for the asymmetry you're introducing. Yes, the capital portion of repayments can be justified as a long term investment, but not the interest portion. In situations where interest repayments on a mortgage would exceed rent (including Ireland, UK & Australia currently) It would work out cheaper to save up to buy a house over the long term while renting. This notion that you should pay over the odds now to save yourself money in the future is false. It's money the drain and demonstrates poor financial sense.

Depending on circumstances renting and owning can vary in attractiveness to the individual and should roughly equate to each other in the main. There certainly shouldn't be the irrational asymmetry that we have seen in recent years where property has had a token worth vastly exceeding it's utility value, purely due to manipulation and speculation. Personally right now I would probably be willing to pay a premium for the flexibility afforded by renting as my needs are fluid. At some stage in the future I will value the slightly higher degree of stability offered by home ownership. It's likely again that at another later stage I will again value the flexibility of renting and there may be several cycles of same. I'm lucky right now that my personal circumstances that make renting attractive put me in a great position in the market because there are plenty of fools in Australia who haven't figured out what's happening.
 
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griswold2004

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As it is NAMA only stands a slim chance of getting any return at all. It is a titanic hidden debt behind our already spirelling borrowings and Yates thinks it would be a good time to realise the debt and add it to our out of control borrowings? Baffling logic. One wonders how such a thinker ever got a position in government - oh wait, he was Fianna Fail. :rolleyes:

Yates must be some dullard to make the current serving crop of Fianna Fail hacks look like they know what they are doing by comparison.
What are you on about? Yates was a FG minister for agriculture.
 

HanleyS

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That is an extraordinary claim alright. Yates thinks that bleeding the massive NAMA property portfolio onto an already depressed and declining property market will increase prices?
Who said anything about increasing prices? A functioning market does not mean anything for prices, it only requires transactions.
 

stanley

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He automatically becomes a FF in some peoples eyes if he makes a statement they don't agree with notwithstanding his service as a long standing member of FG.


Odie, will Donie be making another statement in the Seanad (clip on site somewhere) encouraging people to buy houses as he sees great value in the market, he is a great visionary in his dotage, you should encourage him.
 
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Odie, will Donie be making another statement in the Seanad (clip on site somewhere) encouraging people to buy houses as he sees great value in the market, he is a great visionary in his dotage, you should encourage him.
You still a Merchant Banker I see.
 

Squire Allworthy

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The direct comparison of rent and mortgage interest is perfectly valid. There is no justification for the asymmetry you're introducing. Yes, the capital portion of repayments can be justified as a long term investment, but not the interest portion. In situations where interest repayments on a mortgage would exceed rent (including Ireland, UK & Australia currently) It would work out cheaper to save up to buy a house over the long term while renting. This notion that you should pay over the odds now to save yourself money in the future is false. It's money the drain and demonstrates poor financial sense.

Depending on circumstances renting and owning can vary in attractiveness to the individual and should roughly equate to each other in the main. There certainly shouldn't be the irrational asymmetry that we have seen in recent years where property has had a token worth vastly exceeding it's utility value, purely due to manipulation and speculation. Personally right now I would probably be willing to pay a premium for the flexibility afforded by renting as my needs are fluid. At some stage in the future I will value the slightly higher degree of stability offered by home ownership. It's likely again that at another later stage I will again value the flexibility of renting and there may be several cycles of same. I'm lucky right now that my personal circumstances that make renting attractive put me in a great position in the market because there are plenty of fools in Australia who haven't figured out what's happening.
Firstly as you are probably aware by now I am not in favour of inflated land and property prices. The purchase prices in some places bare no relationship to reality. Secondly I agree that life styles make certain occupancy patterns more attractive.

However I earn fair income from construction and rental. If it pays me to have bought, or built, to rent then what does that tell you about long term rental? One caveat it all depends on initial purchase price price, you can never make up for initial overcharge. If you are borrowing then the rate above base is also of major significance or rather the rate of interest against the rate of inflation.

What I was warning against was simplistic, journalistic, back of envelope, bright ideas, scribbled out over a well lubricated lunch. There was a reference to an article that showed that between 1980 and 200 you would be better to rent than buy. It showed rental investment making £42,000 and purchase making around £15000 in that specific period only. In any other period it was better to purchase so 1980 to 2008 purchase would be a lot better. There were also inaccuracies in relation to tax liability which need to be taken into consideration and costs. It was an interesting article and highlights a different outlook but it was decidedly back of envelope and was selective in a way to aid the answer sought.

If you rent and invest I doubt if you would have enough to buy a house outright at the end of 20 years. Rent is such a substantial cost.

In a falling market it makes sense to rent.

A more interesting comparison would have been someone borrowing the total amount needed to buy the house and investing that and not just the deposit and comparing that against purchase. Unfortunately for most people that is not an option as Banks probably would not lend. Would be great fun if the borrowing abroad option (say Japan) was included to show the effect of movements in currency values.
 

Squire Allworthy

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Most governments have a vested interest in keeping property prices up. It supports the financial system.

Indeed that is true. Good for tax take, enables business to borrow against assets to invest. However in Ireland the government has a greater interest than most in property values.
 

HanleyS

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Squire Allworthy said:
If you rent and invest I doubt if you would have enough to buy a house outright at the end of 20 years. Rent is such a substantial cost.

In a falling market it makes sense to rent.
In australia currently it costs circa 4.5% of reliable value to rent. Mortgage interest is over 6.5%. Mortgage interest is a substantial cost. Rent is cheap in comparison.
 


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