Property Crash

[pete]

Watched the second half of "Future Shock: Property Crash" tonight on RTE1.

They might have a point about a property crash but the last 10 minutes were hilarious stuff with a future property crash type scenario done in a 'end of the world' style documentary with suitable gloomy backing track. :eek:

RTE should stick to Prime Time Current Affairs format & drop the amateur dramatics. :rolleyes:

[Jamjar]

Watched the second half of "Future Shock: Property Crash" tonight on RTE1.

They might have a point about a property crash but the last 10 minutes were hilarious stuff with a future property crash type scenario done in a 'end of the world' style documentary with suitable gloomy backing track. :eek:

RTE should stick to Prime Time Current Affairs format & drop the amateur dramatics. :rolleyes:

Saw the first few minutes of it....but got bored with the usual economist b.s. Soft landing, hard landing, the economy is going to crash, the economy isn't going to crash. Every second one contradicting the other. This is easy television for RTE, just mention the words 'housing crisis' in the advertising and they're guaranteed good ratings. Were celebrity economists George Lee and David McWilliams on it ?

[Dotsy]

Unless the prime reason for buying you house is as an investment then don't worry about it. If you can continue to pay the mortgage you don't have to move.

Terrible program which didn't come up with anything we haven't already heard many times before.

[BohsPartisan]

Unless the prime reason for buying you house is as an investment then don't worry about it. If you can continue to pay the mortgage you don't have to move.


Its not that simple. If there is a property crash it will effect the economy which will effect wages and employment/unemployment. The Celtic Tiger has only been sustained this long because of the Property bubble. We've already seen the latest partnership deal leaving wages trailing behind inflation. This trend will get worse and people will have massive mortgages but no money to pay them. There will be widespread repossesion. This may sound dramatic but it has started already. Its just being kept hush hush so they don't scare people out of the market. What happens is, houses are repossesed and the bank becomes the former owner's landlord, they continue living there but paying rent.


got bored with the usual economist b.s. Soft landing, hard landing, the economy is going to crash, the economy isn't going to crash.
Was it Harry Truman who asked could anyone find him an economist with one hand?

[Poor Student]

This may sound dramatic but it has started already. Its just being kept hush hush so they don't scare people out of the market. What happens is, houses are repossesed and the bank becomes the former owner's landlord, they continue living there but paying rent.


Around the start of the year the Indo reported that repossessions were up by a huge percentage and house viewing was down by a huge amount too. I think recently house price outside Dublin have experienced a minute drop and prices in Dublin are basically staying still. This quarter is supposed to be the real gauge of the market as it's traditionally when you see the biggest increases.

[pete]

A lot of people in our office watched it so I expect the ratings will be high.

As mentioned above as long as a house is a home & assuming you keep your job (i.e. no need to sell) & can keep making mortgage repayments then even something such as a 30% 'crash' should not be the disaster RTE were making out. Of course investors are in different situation but they probably made good money already so no harm them losing some.

I agree that the economy heavily invested in the construction industry. A lot of this is infrastructure which is vital for the future competitiveness of the state.

The last 10 mins was like bad BBC tsunami dram documentary. :eek:

[Bald Student]

I think recently house price outside Dublin have experienced a minute drop and prices in Dublin are basically staying still.I don't think prices can stay still for too long. A lot of people have bought second and third houses and are paying 5% interest or so on the presumption that the house will rise in value by more than this. If prices don't keep rising these people will sell and they'll drop quickly.

[Poor Student]

Of course, was it Haughey or Reynolds who said "Let's not talk ourselves into a recession"? All the media coverage and negative speculation will compound public pessimism and will contribute to dropping prices and a downturn in consumer spending.

[drummerboy]

Of course, was it Haughey or Reynolds who said "Let's not talk ourselves into a recession"? All the media coverage and negative speculation will compound public pessimism and will contribute to dropping prices and a downturn in consumer spending.

Agree with you there. These guys will do anything to prove themselves right. McWilliams has been predicting doom and gloom for about 5 years now maybe longer. There will be a downturn but hopefully a very gradual one.

[pete]

A hint of gloom will almost guarantee the re-election of FF/PD coalition. Just watch the next opinion poll...

[BohsPartisan]

I think the incompetance of FG/Lab will do that regardless.

[Dr.Nightdub]

One of the lads in work was saying at lunch earlier that his niece and a friend of hers had pooled their savings, put down a deposit on a house in Adamstown in January but then changed their minds during the cooling-off period. Yesterday, they got a call from the estate agent to see would they re-consider if the price was €10k lower. €10k mightn't sound like much but it's a sign of the trend - on a €400k house, it's a 2.5% drop in the asking price.

[Poor Student]

There was an article I read recently in the Times or the Indo that said that developers are articifically sustaining prices by throwing in "free" furniture, plasma screen tvs etc. or paying part of your mortgage. Anyone hear anything about that kind of stuff?

[Dr.Nightdub]

There was an article I read recently in the Times or the Indo that said that developers are articifically sustaining prices by throwing in "free" furniture, plasma screen tvs etc. or paying part of your mortgage. Anyone hear anything about that kind of stuff?

Saw something to that effect in either last Saturday's Irish Times or the previous Sunday's Tribune.

[pete]

I remember in late part of 2001 the Developers in my apartment complex had to offer reductions to try to sell the last 20-30 units but they decided to keep them & rent out instead. Property has its slumps but need no crash in Ireland yet.

[BohsPartisan]

Don't know if any of you have been on here, lots of opinion but also great for facts and figures.
http://www.thepropertypin.com/

[cullenswood]

There was an article I read recently in the Times or the Indo that said that developers are articifically sustaining prices by throwing in "free" furniture, plasma screen tvs etc. or paying part of your mortgage. Anyone hear anything about that kind of stuff?

In fairness, they have been doing that type of thing for a while. I bought my house in 2004 and got a free fridge/freezer, cooker and dishwasher thrown in if I paid my deposit on time

[pete]

In fairness, they have been doing that type of thing for a while. I bought my house in 2004 and got a free fridge/freezer, cooker and dishwasher thrown in if I paid my deposit on time

Developers generally need to sell units asap as they will need the money to pay for the next project & so on. I don't think you can call white goods as free when you paying hundreds of thousands of euro on a house. You can be sure developer is getting very good deal if they buy 200 fridges, cookers etc...

[anto1208]

I think the free kitchen fridge etc is because of the amount of new estates rather than a property crash , if you have 5 different houses in 5 different estates all costing the same then you will take the one that gives you a free kitchen .

My house 2 years ago had a free kitchen and fireplace some painting etc this is nothing new its just being picked apon by experts to suit there arguement.

[Macy]

Agree with you there. These guys will do anything to prove themselves right. McWilliams has been predicting doom and gloom for about 5 years now maybe longer. There will be a downturn but hopefully a very gradual one.
There is certainly an element of self fulfilling prophecy about it, however, like you said yourself some economists have been predicting this for 5 yearsm why would they have an impact now?

McDowell starting off the great big stamp duty auction more the immediate catalyst in December (Reacting to an alleged self serving Sindo campaign at that), combined with relatively high tech jobs going in the New Year. The fact that the Government has allowed a situation to develop that we're so dependent on house construction hasn't exactly helped - as soon as doubt is in the market it would always have a proportionally higher effect.

[pete]

Irish people are always moaning about the high price of property but as soon as property stops increasing in value (not even talking about price reduction) they moan about that too...

:confused:

[dahamsta]

Different people moaning pete. Duh.

[BohsPartisan]

From the ESRI website:

“Another spate of high profile layoff announcements has made the average consumer a good deal more worried about the possibility of losing his or her job. This has become the dominant issue even if the standard metrics suggest the Irish economy is still performing fairly well.”



· “Sentiment was also hit by another rise in ECB interest rates in early March as well as a rebound in world oil prices and turbulence in global stock markets. In these circumstances, it is scarcely surprising that a ‘feel-bad factor’ is becoming established among Irish consumers in spite of the substantial support to spending power provided by a generous budget and the maturity of the bulk of SSIA accounts.”



So it seems its more than the state of the housing market contributing to the general pesimistic economic outlook.

[Lionel Ritchie]

Me and Mrs Ritchie are thinking of moving house at the moment. Our Limerick City gaff should go for around €160,000 (former local authority) and we'd be looking at places in the 250,000-300,000 range. Good or bad idea to move now? Sell quick or keep my powder dry?

[BohsPartisan]

Good or bad idea to move now? Sell quick or keep my powder dry?


Tough call, but I definitely wouldn't right now. Depends on how badly you want to move, how stable your job is and even then its a huge gamble. You could be into negative equity very quickly. On the other hand you don't know how long the slump will last, how deep it will be etc. etc. so the situation might turn itself around. For me though there are too many uncertain variables so if you were to push me for a straight answer I'd say stay put.

[Lionel Ritchie]

Tough call, but I definitely wouldn't right now. Depends on how badly you want to move, how stable your job is and even then its a huge gamble. You could be into negative equity very quickly. On the other hand you don't know how long the slump will last, how deep it will be etc. etc. so the situation might turn itself around. For me though there are too many uncertain variables so if you were to push me for a straight answer I'd say stay put.


That's my instinct as well. Even if the arse completely fell out of the market I'd rather see the value of a 160K house I owned take a dive than a 300K (the bracket I believe I'm right in saying it's expected would be hardest hit).

My job is pretty secure -I'm not complacent but I'm not looking over my shoulder the way the many thousands of people here in Limerick who's jobs either directly or indirectly depend on the likes of Dell would be.
For that I'm lucky and grateful.

[pete]

Different people moaning pete. Duh.

I meant the same people.

Rising interest rates will affect those people with high mortgages & may start to affect Residential & Commercial development. The weak dollar is also affecting US companies based here & the dollar is going to continue to slide.

[dahamsta]

Either way, it's hardly "Irish people" as a whole. I know a lot of people bought houses in the last ten years, but again, it's not "Irish people". It's really only the people that bought in the past 2-3 years that were complaining both ways. And who gives a feck about them? Were the five years of warnings not enough? Or were they so stupid they were taken in by the cheerleading tossers closing their eyes and hoping for a miracle?

The gf sent me an email earlier this evening with the subject "Proof the property market has sighed a collective 'O S**t'":


Go on to Daft and search properties [in cork] for €200,000 and under with two or more bedrooms. There were none two months ago. Looks like a lot of people held out that little bit too long to sell.No sympathy here. I hope it goes bang in a big way, I've been waiting for it for years. I feel sorry for the people who needed for buy for family, but the rest of the greedy tossers that are whining now because their investments are going bad on them? I hope their lose their asses.

I also hope their idiocy doesn't pull the market down so far we get dragged into a major mainstream recession.

adam

[Ringo]

Most people who bought even a year ago will be ok IMO. Its those that re-mortgaged their homes and bought apartments or the like who’ll be in trouble. Rents will drop & nobody will want to buy them. I bought the house I’m in 3 years ago my mortgage is half the value, so even a catastrophe would really make any difference. It shouldn’t really matter what happens for most people, as your home is a long term investment, it’ll balance out over the years. Heard an investor who got out of residential property saying when his postman started buying a second house as an investment that started alarm bells ringing. A good house in a good area will be ok. People will be a lot more selective when buying. For what its worth I think we’ll have a soft landing!!!

[Ceirtlis]

The prices are bound to drop but it wont be as dramatic as some people are making out. Prices have been continually rising above inflation for a long time now that some people have been priced out of the market and speculators/investors have been buying up the houses in the last few years. When prices go down the people priced out of the market will be able to buy, the investors might lose out a bit but who really cares. Ireland is not alone in having a property bubble, the US has one too which if it crashed could damage the US market which will effect us as we are so dependent on the Americans.
The sort of commentary that David McWilliams and co come out with is "what goes up must come down" there is not much else to it really. The world economy has been rising generally for the last 4-5 years so now the professors of doom are lining up to tell us where we are going to crash.

[Conor H]

Hosuing Prices,relative to Income,could fall by anything up to 40%.

That's a considerable crash.All the doom and gloom about it is having adverse effects already.
In a downswing people are opting to take their houses off the market rather than sell at a loss.Considering Taces contribute in and around 9% of Total Tax Revenue the Government have to seriously look at Tax breaks for 1st time buyers.
In the Long Run the benefits will be evidential...

[pete]

If your house is a home & you don't need to move & don't lose your job then a drop in house value won't affect you too much. If you were a civil servant who moved to a decentralised office then property value should not affect you as you have guaranteed job & no reason to move.

I can see the overseas investment market taking a big hit though as can't pay mortgage if can't rent. If can't rent then can't find other irish suckers to buy so value plummets.

[Ceirtlis]

Hosuing Prices,relative to Income,could fall by anything up to 40%.

That's a considerable crash.All the doom and gloom about it is having adverse effects already.
In a downswing people are opting to take their houses off the market rather than sell at a loss.Considering Taces contribute in and around 9% of Total Tax Revenue the Government have to seriously look at Tax breaks for 1st time buyers.
In the Long Run the benefits will be evidential...

If the house prices fall as you say by 40% then the tax breaks that you say arent likely to be needed. Also stamp duty doesnt apply to first time buyers on houses under €317,500 and is at a reduced rate past that. There is also mortgage interest tax relief. Its the rising house prices that have been affecting first time buyers not the lack of tax breaks and reliefs which as often as not end up distorting the market.

[BohsPartisan]

If you were a civil servant who moved to a decentralised office then property value should not affect you as you have guaranteed job & no reason to move.


Whats a decentralised office? :(

YOu are oversimplifying anyway here Pete. A house price crash will affect other things like interest rates and wages. In the economic crash in Argentina in the late 90's (after a boom very like ours) Shanty towns sprung up with Slogan on banners "welcome to the middle classes".
If there is an economic slump, wges will go into freefall (in net terms), interest rates could shoot up and then we'd all be rightly fkd.

[Ceirtlis]

Whats a decentralised office? :(

YOu are oversimplifying anyway here Pete. A house price crash will affect other things like interest rates and wages. In the economic crash in Argentina in the late 90's (after a boom very like ours) Shanty towns sprung up with Slogan on banners "welcome to the middle classes".
If there is an economic slump, wges will go into freefall (in net terms), interest rates could shoot up and then we'd all be rightly fkd.

Irish interest rates are controlled by the European Central Bank since the introduction of the euro so they would only move to the demands of the major economies of the eurozone like Germany and France. This is a key factor in the demand for houses in Ireland in the last few years because if the Irish Central Bank had control of the interest rates they would have raised them in order to keep down inflation which in Ireland is fairly high because of the booming economy and therefore decreased the demand for housing. Irish people mostly got variable interest mortgages thinking that interest rates would stay mostly the same so the 0.25% rises in the interest rate in the last year have hit people hard on mortgage repayments. The U.K. has interest rates about 1.5% higher than the Eurozone.

[BohsPartisan]

Irish interest rates are controlled by the European Central Bank since the introduction of the euro so they would only move to the demands of the major economies of the eurozone like Germany and France.

Which are in a worse state than us so thats no comfort. Interest rates ARE rising and WILL continue to rise for the forseable future. Net wages have started to decline. Therefore people will be worse off.

[Ceirtlis]

Which are in a worse state than us so thats no comfort. Interest rates ARE rising and WILL continue to rise for the forseable future. Net wages have started to decline. Therefore people will be worse off.

The reason they have been so low is that Germany and France are in a worse state than us. Interest rates are kept low in order to encourage investment in them countries. The German and French economies have started to pick up recently and that is why the interest rate has risen. If as i said the Irish Central Bank had been in charge of our interest rate in the last few years in would have been much higher.

[Dodge]

If you were a civil servant who moved to a decentralised office then property value should not affect you as you have guaranteed job & no reason to move.


Can't go a thread in here without mentioning civil servants, eh Pete?

I bought a house in Nov 2004, its now worth about 50% more. A drop in house prices isn't likely to bring it back down to the price I bought it for so I think I'll be OK. In saying that I don't expect there to be a crash of any magnitude in the next 5 years ot so

[BohsPartisan]

The reason they have been so low is that Germany and France are in a worse state than us. Interest rates are kept low in order to encourage investment in them countries. The German and French economies have started to pick up recently and that is why the interest rate has risen. If as i said the Irish Central Bank had been in charge of our interest rate in the last few years in would have been much higher.

Yes but my point is they are rising regardless, houseprices are falling as are net wages. Whatever way you look at it its bad news for the average joe.

[Ceirtlis]

Yes but my point is they are rising regardless, houseprices are falling as are net wages. Whatever way you look at it its bad news for the average joe.

I dont agree with you here. The interest rate rises are predicted to stop soon maybe another 0.25%-0.5% but you have to remember that they are at a very low level as it is. Where are net wages falling? If net wages are declining it is because of high inflation. Policymakers put the interest rate up to curb inflation so if the interest rate is going to continue to rise as you say then inflation will come down and this will sort out the decline(?) in net wages.

[BohsPartisan]

Where are net wages falling? If net wages are declining it is because of high inflation

Thats kind of implied by the word "net"

[Ceirtlis]

Thats kind of implied by the word "net"

Read the post again and you will see that the second line is an explanation for the point i was about to make. I know the meaning of net. What i want you to show me is where are net wages falling.
The minimum wage has certainly not fallen in "net" terms, in June 2003 it was €6.35, in June 2007 it will be €8.65, €8.65-€6.35= €2.30. €2.30/€6.35= 36% increase in the minimum wage.
I dont have the official inflation figures but i will use 4% for each year, this would be a high inflation rate,
1.04 to the power of 4 gives a compounded inflation for the 4 years of 17%.
36%>17%= Net increase in wages.

[pete]

Can't go a thread in here without mentioning civil servants, eh Pete?

My point was related to guaranteed job. I suppose a semi-state job may be similar. People in the private sector may have strong job security but there are no guarantees. If you don't lose your job then as long as you can make mortgage payments then you can ride out the reduction in house value. The decentralised reference was to lower price house than the major urban areas.

On the otherhand someone who might need to move across the country because he/she lost their job would not be able to ride out the price fall as need to sell the current house & will be selling at time when value has reduced.

[Dodge]

But what if your govet department moves again? Or you get promoted and have to move?

[pete]

But what if your govet department moves again? Or you get promoted and have to move?

Reasonable point but at least there would be a choice to improve your lot. I don't think the government have successfully forced any civil servant to move location yet?

Maybe my decentralised point not a good one so. The advantage of large urban areas is that can hopefully find a different job without moving home.

[Dodge]

No one's been forced yet but it is a live possibilty. Several of the specialists in my department will be forced to move. And they will not be getting similar job outside of Dublin

[Macy]

Reasonable point but at least there would be a choice to improve your lot. I don't think the government have successfully forced any civil servant to move location yet?

They're just trying to use tools of compulsion like no promotion without signing to go somewhere, no career prospects and the threat of whitewalling if you don't go*. They won't come out and say "move, or else" as then redundancy is due, as it would be in any employment, private or public. FF/PD have successfully spun the supposed voluntary nature as some consession to civil and public servants when it's them trying to avoid redundancy payments and moving expenses that would be due.


*Shame on the CPSU, PSEU and to some extent IMPACT for rolling over on these issues

[pete]

FF/PD have successfully spun the supposed voluntary nature as some consession to civil and public servants when it's them trying to avoid redundancy payments and moving expenses that would be due.

Decentralisation is a political campaign and not a policy one so and when your job location moves you should be entitled to redundancy. Anyway i think this going way off topic.

Everytime i switch on the news there seems to be a property report. I suppose if a crash not due the media will help manufacture.

[BohsPartisan]

1.04 to the power of 4 gives a compounded inflation for the 4 years of 17%.
36%>17%= Net increase in wages.
Most peoples wages will increase by 2% this year (partnership). inflation is around 4% and rising. net decrease of 2% this year.

[Poor Student]

The national house price average has fallen for the first time in 5 years this month. Still crawling at a snail's pace in Dublin but dropping elsewhere.