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The effect of demographics on the housing market


feargach

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I'm no expert, but I seem to recall that there was a bit of a baby boom in the late 70s that petered out afterwards. Meaning that a majority of that age cohort are approaching the age when they're not going to be able to get a 30-year mortgage, or at least, not the traditional kind, where the banks expect you to still be working during the last years of the mortgage.

NAMA, the banks and the developers still have hundreds of thousands of empties to find buyers for, and they would appear to be squandering their chances of getting them sold while the window of opportunity remains open.

This would appear to bolster the bearish case on housing: that this apparent pause in the fall in house prices is not going to be permanent.

Remember, the grim reaper will ensure that there is a steady year-on-year addition to the ranks of unoccupied houses, even in supposedly tight markets like Dublin. And emigration will be doing a number on the ambition of the banks to convince those born in the 80s and 90s to shackle themselves to bricks and mortar for the majority of their working lives.

Not just that, there's even a slim possibility that some of those younger people might actually realise that, in an economic system which has served up a brutal depression which has lasted the best part of a decade, chaining yourself to an immovable asset is perhaps not the most sensible plan in the world.
 

Davidoff

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The demographic picture is interesting.

But the bottom line is that house prices are primarily a function of the availability and cost of finance.

There will be no proper recovery until the banks are fixed. And that's still a distant prospect.
 

SideysGhost

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IIRC the baby boom was early-mid 70s i.e. my own age cohort. I seem to recall much talk of it when I was at UCD, how in a year or two the numbers doing the Leaving Cert would begin tailing off and how this might impact on ye olde points race and third-level funding etc.

Then there was another baby boom in the Bertie Bubble years.

So yeah....fewer numbers in the late 20s/early 30s age cohort, when a large proportion of those are either emigrating or unemployed, means much less demographic pressure for housing over the next 20 years, even if Ireland didn't have hundreds of thousands of empty units to begin with.
 

Mad as Fish

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Whilst agreeing that the demographics may not be in favour of a long term rise in house prices I think we can lay less emphasis on the surplus new housing stock as being a factor in house prices generally. At some point the banks/NAMA are going to have to bite the bullet and run a bulldozer through many ghost estates which could make a significant difference to the overall availability of new homes.

I'm not convinced that emigration is going to continue at these high levels anyway, soon enough both the Australian and Canadian bubbles will burst and the options for the young will be even more constrained.
 

Nermal

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The baby boom peaked at the end of the 70s IIRC.
So this cohort fuelled the boom from ages 25-27.
They've been having children themselves, so another mini-baby-boom began a few years ago. Demographics will indeed be unkind to the property market for around 15-20 years, but might cause a bit of an echo bubble after that...
 

Davidoff

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One interesting structural change is that historically the safest section of the workforce to lend to has been the public sector. There has always been absolute job security, good pay and guaranteed increments.

But the next generation of PS workers won't be so lucky. We are already seeing new teachers and nurses being recruited on less generous terms. And the CIE dispute shows how the government is determined to squeeze pay.

So this whole cohort of the population is going to have less capacity to borrow in the future. That should put further long-term pressure on house prices.
 

feargach

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I'm not convinced that emigration is going to continue at these high levels anyway, soon enough both the Australian and Canadian bubbles will burst and the options for the young will be even more constrained.
Constrained to bothering their behinds to learn a second language, that is. It's ludicrous to have such an emigration-focused populace who steadfastly refuse to change their monoglot ways.
 

constitutionus

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One interesting structural change is that historically the safest section of the workforce to lend to has been the public sector. There has always been absolute job security, good pay and guaranteed increments.

But the next generation of PS workers won't be so lucky. We are already seeing new teachers and nurses being recruited on less generous terms. And the CIE dispute shows how the government is determined to squeeze pay.

So this whole cohort of the population is going to have less capacity to borrow in the future. That should put further long-term pressure on house prices.

its worth pointing out though that right now even though those new teachers, just to take an example, are earning 30% less than their peers their prospective mortgages are 50 to 70% less than the ones the better renumerated teachers are stuck with.

so in a weird way while they earn less their disposable income is considerably more.

so i dont see them stoping buying houses anytime soon. its just the price they will pay will drop to circa 100 to 120k on average.
 

feargach

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its worth pointing out though that right now even though those new teachers, just to take an example, are earning 30% less than their peers their prospective mortgages are 50 to 70% less than the ones the better renumerated teachers are stuck with.

so in a weird way while they earn less their disposable income is considerably more.

so i dont see them stoping buying houses anytime soon. its just the price they will pay will drop to circa 100 to 120k on average.
How does that translate to prices in the urban areas (within a 10km radius of the centre, that is) with greater than 50,000 population. Averages can be misleading. It seems to suggest that a typical house 1km from the centre of Cork or Galway might still cost 200K, which to me still stinks of overpriced.

The old, trusty yardstick of "monthly rent times 100 or 120" would suggest that such houses should barely be in six figures, in a sane market.
 

constitutionus

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you can buy gaffs in tallaght and crumlin now for under 100k.

thats now.

theyll be going down for quite a while yet.

i dont think the figure to watch is the monthy rent factor. i think a much better yard stick is the AIW and the ol lending criteria of 3.5 times your wages with 10% down on the mortgage.

people will always max themselves out if they can on the lending front and that criteria will still leave them with about two thirds of their weekly wage after payments.

the AIW is circa 30k now and IMO is only gonna drop more as PS pay comes down.
 

cottage_economist

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Constrained to bothering their behinds to learn a second language, that is. It's ludicrous to have such an emigration-focused populace who steadfastly refuse to change their monoglot ways.
So which non English speaking countries are widely advertising for workers in Ireland, in the same way that Oz, NZ and Canada are?
 
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feargach

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you can buy gaffs in tallaght and crumlin now for under 100k.

thats now.

theyll be going down for quite a while yet.

i dont think the figure to watch is the monthy rent factor. i think a much better yard stick is the AIW and the ol lending criteria of 3.5 times your wages with 10% down on the mortgage.

people will always max themselves out if they can on the lending front and that criteria will still leave them with about two thirds of their weekly wage after payments.

the AIW is circa 30k now and IMO is only gonna drop more as PS pay comes down.
I wouldn't pay 500pm to rent a gaff in Crumlin (although some would, and Crumlin does have a few nicer spots. It's hardly Fatima Mansions) so that would suggest 50 to 60K as the correct price for those areas.
 

Davidoff

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its worth pointing out though that right now even though those new teachers, just to take an example, are earning 30% less than their peers their prospective mortgages are 50 to 70% less than the ones the better renumerated teachers are stuck with.

so in a weird way while they earn less their disposable income is considerably more.

so i dont see them stoping buying houses anytime soon. its just the price they will pay will drop to circa 100 to 120k on average.
It's true that a nurse on 25k, but debt-free. is in better shape than someone earning twice as much, but burdened with a huge mortgage.

Nor should we ever forget that a plentiful supply of decent. affordable property in the right places is a benefit to society not a liability.
 

feargach

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people will always max themselves out if they can on the lending front and that criteria will still leave them with about two thirds of their weekly wage after payments.
I consider myself something of a pessimist, but that seems shockingly gloomy to me.

You may say I'm a dreamer, but I sort of harbour this fantasy that kids in their earlier twenties might have a more intelligent, less bull-at-a-gate, buy-now-at-whatever-amount-the-man-at-the-bank-will-lend-you attitude to housing.

I'm hoping that watching their older brothers and cousins get rope-a-doped into unnecessary debt slavery and smothered by negative equity, and condemned to intense stress when one of the household loses their income, that the youngsters will see some merit to the mortgage-free life.

I would even be satisfied if a large minority, say 35%, were to decide against mortgaging as a life option.
 

feargach

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So which non English speaking countries are widely advertising for workers in Ireland, in the same way that Oz, NZ and Canada is?
Bit of a chicken and egg situation there, isn't it? Non English-speaking countries are perfectly well aware how shockingly bad Irish people are at learning languages, so they don't bother advertising here.
 

constitutionus

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I consider myself something of a pessimist, but that seems shockingly gloomy to me.

You may say I'm a dreamer, but I sort of harbour this fantasy that kids in their earlier twenties might have a more intelligent, less bull-at-a-gate, buy-now-at-whatever-amount-the-man-at-the-bank-will-lend-you attitude to housing.

I'm hoping that watching their older brothers and cousins get rope-a-doped into unnecessary debt slavery and smothered by negative equity, and condemned to intense stress when one of the household loses their income, that the youngsters will see some merit to the mortgage-free life.

I would even be satisfied if a large minority, say 35%, were to decide against mortgaging as a life option.
wont happen .

middleclass aspriation will demand these people max themselves out. it was always the case but back in the day the banks actually told you where to go if you came looking for more than 3.5 times your wages in a loan :D

and seeing as lending practices now mean that they wont be layden down with a crippling mortgage (i.e told to feck off it they cant afford it instead of autostamp approved) theyll go for the max they can get which will be what sets the new limits of property prices.

renting is just not seen as respectable in this country on a societal level. in fact its seen as something poor people do amd something to be sneered at.
 
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