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What are your bets on a property market crash?


epml2000

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May 2, 2007
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What are your bets on a propert market crash?
What are the odds of a crash in the property market particularly in Dublin in the next 12-18 months. If it happens it will have the same effect for FF as 1992 did for John Major and the UK Tories.
 

johnfás

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Feb 22, 2007
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Define crash. The areas on the perimeter of Dublin are far more likely to crash because they are of less strategic value. Property in more strategically located areas, near transport, the city etc are less likely to. The very top end of the market is also likely to adjust a bit, unlikely to cause huge amounts of bother, people who have a 4 million euro mortgage can probably withstand a 4% adjustment more than someone with a 300,000 euro mortgage.
 

freedomlover

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The property price crash in the UK occurred in 1989/90. Yet, John Major won the election in 1992. What harmed the Tories in 1992 was Black Wednesday, which damaged their reputation for economic management. That had nothing to do with the property price crash which was well and truly over by 1992. Property prices rose sharply in the UK from 1992 on and are still rising.
 

epml2000

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I suppod crash is a decline of from 20% to 50% in house values across the city with negative equity and rising repossessions due to rising interest rates and the bloated construction sector at least wobbling with large scale job losses. Not necessarily causing a recession(but with a weakening dollar not beyond the realms of possibility either)
 

johnfás

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epml2000 said:
I suppod crash is a decline of from 20% to 50% in house values across the city with negative equity and rising repossessions due to rising interest rates and the bloated construction sector at least wobbling with large scale job losses. Not necessarily causing a recession(but with a weakening dollar not beyond the realms of possibility either)
I'm very sceptical about Ireland's medium term economic prospects. However, over the next 5 years I don't think you will see an adjustment in the market up to the level of even 20%. You may well see that in particular areas, as I said ones of less strategic locations... like blocks of apartments miles from public transport which are only half full because people have bought them solely for capital appreciation and a percentage of the other half are rented by short term immigrants.... that sort of property may well fall by up to 30%. I don't think in the next 5 years you'll se an adjustment of up to the level of 20% across the market.
 

epml2000

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freedomlover said:
The property price crash in the UK occurred in 1989/90. Yet, John Major won the election in 1992. What harmed the Tories in 1992 was Black Wednesday, which damaged their reputation for economic management. That had nothing to do with the property price crash which was well and truly over by 1992. Property prices rose sharply in the UK from 1992 on and are still rising.
You are right in terms of the property crash was earlier in the UK. I am factually incorrect. But I do not think prices has started to rise by 1992 as I was in London then and there was still a serious problem. You are right about black wednesday.
What I mean is that if this happens this surely will be FF's Black Wednesday.
How likely do you think that a property market crash is?
 

johnfás

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The most important thing for most in Ireland's society is not the value of their houses per se because all investments increase and decrease but rather their ability to pay their mortgage. A home dwelling is after all not really an asset, not in the sense that you can dispose of it and do without another. We wouldn't need a market crash for people not to be able to pay their mortgages.
 

constitutionus

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god knows. once upon a time we used to have depression. then it becam recessions then economic downturns.

ive no doubt we'll see a "housing crash" but what they'll call it is another thing. my current favourite term was stock market "re adjustment". which basically meant 25% fell off the values of shares when china sneezed so i confidently reckon a term similar to that will be used so if you hear of " housing price re adjustments" get worried.

fact is i think its happened already. the gaffs across the way from me are 40k cheaper than they were six months ago and no one seems to be talking about it, and i dont live in a salubrious area either, from what i hear housing repossessions are on the up and people are being laid off for the first time in construction.

throw in the next two increases in interest rates that are due this year and i think you could see some significant effect being felt by years end

i agree with johnfas. in a way im happy FF are back in power because i reckon theres a recession ahead and i think they were hopin enda and co would take the rap for it. the govs been waffling on about all the jobs being created but neglect to say theyre mostly in the public sector and construction. one is earning way more than its worth and the other is starting to stall. the outlook aint good.
 

markmchugh

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confidence seems to have gone out of the market, once confidence goes in a market it takes a long time for it to return, remember the .com meltdown?
 

johnfás

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markmchugh said:
confidence seems to have gone out of the market, once confidence goes in a market it takes a long time for it to return, remember the .com meltdown?
I'd agree with that but if you look at the major property developers they're still buying huge plots of land and if you look at the estate agents, many are being bought by UK firms who I would argue wouldn't invest here if they didn't think there was money to be made... Gunne, HOK, Ganly Walters, Colliers..

The greatest issue isn't a decline in house value as such as that only really affects people with multiple properties as investments (who are already pretty well off if they can do that) but the actual ability of people to make repayments.
 

epml2000

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Surely a chain reaction is possible....high interest rates and increased unemployment (due to a sliding dollar)prompts some investors to sell (who are unable to get sufficient income in some areas from rent perhaps due to increases in unemployment) this causes a glut of sales in some areas. Construction sector consequently slows down considerably with large job losses with knockon effects throughout the economy. A considerable number of foreign workers who rent leave causing problems for the rented sector in some areas. Those foreigners who own houses but have lost their jobs sell out adding to the number of houses on the market.
Surely this scenario is likely even fairly likely.
 

markmchugh

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the fact that a number of the players here have sold up tells me that they think they have made as much as they can etc. i.e. sell out at the top of the market
 

constitutionus

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johnfás said:
markmchugh said:
confidence seems to have gone out of the market, once confidence goes in a market it takes a long time for it to return, remember the .com meltdown?
I'd agree with that but if you look at the major property developers they're still buying huge plots of land and if you look at the estate agents, many are being bought by UK firms who I would argue wouldn't invest here if they didn't think there was money to be made... Gunne, HOK, Ganly Walters, Colliers..

The greatest issue isn't a decline in house value as such as that only really affects people with multiple properties as investments (who are already pretty well off if they can do that) but the actual ability of people to make repayments.
yeah but the major sellers have bailed out of the market. hook and macdonald , sherry fitzgeralds and co have all flogged their aylesbury road portfolios and even the banks have flogged their land to rent it back at whats now looking like the height of the market.

when the people that flog you the houses are getting out it means somethings up :D

i agree with your point about abiltiy to pay though. the really scary thing is if france and germanys economys take off and they have the equivelant of areas like tallaght heading for house prices of 400k you can bet your arse the ECB will raise rates to 20% if they have to so 8 to 10% isnt unreasonable and they wont give a toss what it does to us. in fact they'll point to us as a validation to why theyer doing it .

in the long run the EU can handle a bankrupt ireland better than it can handle france and germany running out of control.

thats the real threat
 

johnfás

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Theres arguments both ways as there are people leaving the market and significant players joining (Savills, CRE etc). Thats economics all the experts are wrong. I'd reiterate the point though that the important issue is the ability to repay the mortgage rather than the capital value.
 

markmchugh

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its been way overpriced here for yonks. its changing now, i've had estate agents calling me to arrange viewings within 20 mins walking distance of dublin center.
 

droghedasouth

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The followings are the musings of someone who has been waiting for a crash since 2000.
Being 50+, I have experienced bad days unlike most Irish people under the age of 30-35.
The question is not "if", rather "when".

People who have bought below-average quality/location property could be in for a big shock.

Ireland 2007 (as opposed to say pre-2000) is over dependent on the construction industry, especially housebuilding and retail developments.

There may be some downturn in other eurozone economies at the same time as we have a severe downturn in the construction industry but it will be much more pronounced here. Even though the UK is outside the eurozone, interest rates for major currencies move up and down most of the time almost simulataneously - the difference is more the absolute interest rate rather than the timing of general trends.

There are many immigrants in the construction industry.
When the downturn comes here, most will return home (or go to other EU countries especially UK) rather than stay on here.
Immigrants returning home will cut demand for rental property, undermining rental yields.

Highly leveredged investors will be caught by a lack of rental income to cover mortgage payments and will become distressed sellers.

Falls in property will not have an immediate cash effect on ordinary home owners so long as they do not have to move house but the "wealth effect" of reduced property prices will cause people to reduce spending/save some money. If foreign holidays were the main casualty, then it will not greatly affect the general Irish economy but young people also spend remarkable amounts in Ireland.

Sadly, bad times are just around the corner.
 

Iarmhi Gael

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I think one of the first areas that will hit this new governement is when the likes of the Large American firms start announcing Job losses in relation to expanding work forces to eastern europe.

It is widely known Intel are looking out for some time now.
 

johnfás

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Bound to happen in an economy so heavily dependent on Multinational Companies and Foreign Direct Investment. There has failed to be an adequate spill over into the indigenous and particularly export focused economy.
 

Kf

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The Stamp Duty Changes will provide a huge 6 month boost to the housing market. After that it only down, expect a increase in prices of 10-15% in inner M50 dublin followed by 30% crash.
 

johnfás

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Kf said:
The Stamp Duty Changes will provide a huge 6 month boost to the housing market. After that it only down, expect a increase in prices of 10-15% in inner M50 dublin followed by 30% crash.
Prices within M50 are less likely to crash than those outside the M50 but dependent on commuting into Dublin. If house prices begin to fall nearer the city people will flock to them as they would prefer to live there than in the commuter belt, keeping areas nearer the city higher than those in the commuter belt towns.
 
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