Property Crash

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Originally Posted by OneRedArmy

And finally, assume a lot of the foreign builders return home as there are fewer houses to build and demand falls further.....

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This is the key factor that was missed in the above analysis. The reliance on construction employment cannot be ignored. If you stop building, yes on the face of it supply will be restricted so demand will go up leading to increasing prices. However, the economy has been kept in a spiral for the last number of years of house construction fuelling employment fuelling house buying fuelling house construction. Slow construction, you slow employment and so slow demand too.

Where I'd differ is that whether the foreign builders will return home. On the contrary, the developers will probably increase the numbers that they can shaft on agreed terms and conditions, instead letting go the workers that want and insist on the agreed rates of pay. They'll be allowed to do this by the Government with the support of IBEC/ISME/Every media organisation - like they have the last number of years.

Average price paid for a house down again in June both nationally and in Dublin. Average price paid for a house now down €8,000 from the start of the year: http://www.rte.ie/business/2007/0810/houses.html


It'll be interesting to see how the market goes if Trichet doesn't hold back on that rate increase for September.

8,000 is not much & IMO a good thing. It will help the bubble have a softer landing rather than bursting.

Are we still grasping at completely unprecendented makey-uppey "soft landings"?

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Originally Posted by dahamsta

Are we still grasping at completely unprecendented makey-uppey "soft landings"?

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2.6% over 6 months is soft.

It is no ones interest that the market crashes (maybe say 15% drop over 12 months). A soft landing as the market adjusts is a good thing as it is unsustainable for prices to rise so much higher than wages especially combined with interest rate increases (looks like will be some time before the ultra cheap German cash is available again)

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Originally Posted by dahamsta

Are we still grasping at completely unprecendented makey-uppey "soft landings"?

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If we continue to listen to the view of "economists" employed by estate agents who most radio and TV stations tend to drag in as their experts........then yes!!

Nothing to see here, move along everyone, keep buying property....:D

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Originally Posted by pete

2.6% over 6 months is soft.

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6 months in the property market is roughly equivalent to a month in mainstream industry. House prices are sinking, and the rate at which they're sinking is increasing, not decreasing. House and car repossessions are up, as are credit defaults and bridging loans in the credit unions. Nothing is in place to slow the rate - the Irish government is clutching at straws at best - but it's unlikely anything put in place would succeed anyway.

Because there's no such thing as a "soft landing". There's never been a "soft landing" in recorded economic history,and if there ever is, this isn't going to be the precedent. It just can't happen in our current economic state. All we can do is sit back and hope that it doesn't drag the entire economy into recession and us back to where Fianna Fail picked up the reins as we dragged ourselves out of a recession the last time.

At least this time the moronic Fianna Fail voters won't be in a position to blame the Opposition for the stupid situation Bertie and the rest of his scheming, selfish muppets have put us in.

adam

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Originally Posted by pete

2.6% over 6 months is soft.

It is no ones interest that the market crashes (maybe say 15% drop over 12 months). A soft landing as the market adjusts is a good thing as it is unsustainable for prices to rise so much higher than wages especially combined with interest rate increases (looks like will be some time before the ultra cheap German cash is available again)

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Pete if you look at seller behaviour, we are still in the early part of a downturn where stubborn human nature kicks in and people refuse to lower their asking price despite little interest.

This is reflected in the fact that there is very little activity in the market, despite summer being the prime season for second-hand sales.

Therefore the true drop in prices is understated by all those people who have had unsold properties on the market for ages with asking prices that are simply never going to be met.

It will take at least another 6-12 months for the real effect to be felt and I personally don't think the drop in the supply of new homes will be enough to halt the slide.

As dahamsta has said, the idea of a "soft landing" is dreamt up by politicians, bankers and estate agents, all of whom are hardly honest brokers in the great property swindle.

We need to believe a soft (or softish) landing is possible otherwise the economy will depress itself. Credit is good for economies as ensures people have to work to pay it back. When we stop spending money in an economy that relies on indirect taxes we are all screwed.

I don't believe the house repossessions are too large yet & mainly restricted to the sub-prime high risk sector.

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Originally Posted by pete

We need to believe a soft (or softish) landing is possible otherwise the economy will depress itself. Credit is good for economies as ensures people have to work to pay it back. When we stop spending money in an economy that relies on indirect taxes we are all screwed.

I don't believe the house repossessions are too large yet & mainly restricted to the sub-prime high risk sector.

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Firstly, the economy isn't depressing itself!!! There are real fundamental reasons why growth is slowing such as interest rates, inflation, poor infrastructure, competition from low cost countries, changes in US tax law etc. This was happening before the property market turned. Also, publications like the Economist have been showing concern about Ireland's economy for years. We've just been brainwashed by a combination of a FF govt, banks, estate agents and a print media who were making too much from their property supplements (anyone notice they've disappeared in the last two months?) to report objectively.

Secondly, repossessions are an uncharted water in Ireland. A combination of the Family Home Protection Act, an uncharacteristic unwillingness of the large Irish banks to forceably repossess and a rising market meaning everyone was overcollateralised and you could hand back the keys without further action means that repossessions in Ireland have been verging on non-existant. The sub-prime market (which is still very small) is changing this and negative equity may also change the large banks attitudes.

Defaults and missed payments is a much better measure than repossessions (in any case repossessions take years to go through the courts so will lag significantly).

http://www.rte.ie/business/2007/0905/houses.html

About time this thread got going again. Are any of the "soft landing" happy clappers ready to admit they were wrong yet? :D

Interesting article on arandomwalk.com that the market benchmark PTSB/ESRI houseprice index of property prices are...shock horror......based on valuations and not actual sales.

Its highly likely therefore that the index, which has still shown significant falls over the last year, is overstated.

Log on to Daft.ie and have a look around and the drop in prices is staggering.
My girlfriend's sister bought a house in Sundale, Tallaght about 2 years ago paying just under 300,000 from what I can remember.
About 12 months ago the asking price for houses in the area had risen to 335,000.
Now log on to daft and there's a load of houses for around 285,000.
If that's not a crash I don't know what is.
Same kind of thing in Springfield in Tallaght, houses that were close to 350,000 12 months ago now asking 300,000.

I make that more than 15% of a drop (and my maths are not the best).

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Originally Posted by passinginterest

My girlfriend's sister bought a house in Sundale, Tallaght about 2 years ago paying just under 300,000 from what I can remember.
About 12 months ago the asking price for houses in the area had risen to 335,000.
Now log on to daft and there's a load of houses for around 285,000.
If that's not a crash I don't know what is.
Same kind of thing in Springfield in Tallaght, houses that were close to 350,000 12 months ago now asking 300,000.

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The drop in new home starts will reduce supply which according to the laws of demand & supply will increase prices, all things being equal of course.

I make that 5% drop in 2 years which is not a crash . Obviously the drop is a lot more if you bought at the top end.

I would guess 15%+ reductions year on year would be a crash?

Bought my house for €218k in Nov 04. Houses in my estate going for €300k now. I see it as more of a finding our level rather than it being a crash

You're embarassing yourself now pete. There are over 200,000 unoccupied properties in Ireland, not including holiday homes. Supply and demand will drive prices down even further, not up.

adam

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Originally Posted by pete

The drop in new home starts will reduce supply which according to the laws of demand & supply will increase prices, all things being equal of course.

I make that 5% drop in 2 years which is not a crash . Obviously the drop is a lot more if you bought at the top end.

I would guess 15%+ reductions year on year would be a crash?

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Pete, as a matter of interest do you work in the property sector? Your optimism is somewhat out of kilter with reality.

Prices will only increase when supply drops below demand. We had 250,000 empty properties at the last census, the vast majority of which are not holiday homes. So factor that in and supply still looks excessive.

In terms of a year on year drop, 10% seems to be the norm rather than the exception in certain areas of Dublin, so 15% appears not unlikely in those areas.

As for defining a crash, it need not happen over one year to be defined a crash. We appear to be in a slow, continual slide, which is even more dangerous to the economy. A short sharp shock would actually be preferable as the recovery could start quicker.

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Originally Posted by OneRedArmy

Pete, as a matter of interest do you work in the property sector? Your optimism is somewhat out of kilter with reality.

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Nope. Little or no connection to the industry either.

When I said reduction in supply would increase prices I did quantify with the "all things remaining equal". I don't have much facts on the market (I think we can agree that estate agents & banks not the most reliable) but prices will or fall less based on a huge decrease in new homes.

200k empty houses does seem a lot but it would be interesting to know how many empty say 2 years ago. Again I am no expert but I would guess it is reasonable to assume 100k empty houses even in a buoyant market?

If we honestly believed a big crash was on the way then the logical move would be sell up & rent for a couple of years & buy back house when the market picks up.

I do get the impression a lot of people are holing off due to uncertainty & the rising interest rates. If the pesky Germans would go back into recession the cheap cash could return ;)

Maybe my opinion skewed by the fact my mortgage is relatively low percentage of value (I could only guess at its value) & its a home not an investment.

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Originally Posted by dahamsta

You're embarassing yourself now pete. There are over 200,000 unoccupied properties in Ireland, not including holiday homes. Supply and demand will drive prices down even further, not up.

adam

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Originally Posted by OneRedArmy

We had 250,000 empty properties at the last census, the vast majority of which are not holiday homes.

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where are they hiding all these properties? ...... im not doubting you or being smart id just like to see if this is true. as in a country of 4 million people approx.. thats a massive percentage of houses to be empty

Well beside laytown station there's half a developement empty that has been on the market for a year for a start.

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Originally Posted by MojoPin

where are they hiding all these properties? ...... im not doubting you or being smart id just like to see if this is true. as in a country of 4 million people approx...

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Look at any apartment development in Dublin. There's a lot of empty places in most of them. Friends I know who bought have frequently been the only occupied apartment on their floor.

Not sure on houses as the investment market tends to prefer apartments, but I'd say their are lots of places empty in the commuter belt.

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Originally Posted by MojoPin

thats a massive percentage of houses to be empty

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Agreed. But as long as prices were going up in didn't really matter that it was empty, capital gains meant the mortgage wasn't really important.

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Originally Posted by MojoPin

where are they hiding all these properties? ...... im not doubting you or being smart id just like to see if this is true. as in a country of 4 million people approx.. thats a massive percentage of houses to be empty

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Table 40, page 14.

http://www.cso.ie/census/documents/P...es%2031-40.pdf

adam

There supposed to be an insane amount of empty houses in Leitrim. 30% of all houses there I think?

Pete, you're also forgetting a fall in house construction means a fall in employment and the number of people with disposable income able to purchase a property lowering demand with supply.

Also the number of people in the country needing a house - I presume a lot of the foreign workers will be let go and will return home as the construction industry contracts.

Of course they will, a lot of them already have. (A friend's father and brother run a busy timber-frame construction firm in Cork, I'm not just speculating.)

adam

I think it was Leitrim @ 30% alright. You would have Leitrim as a sparsely populated country like Longford always has lots of empty cottages. 200k empty homes is 12% of the total homes in the State. How do they classify an empty home? Is an apartment/house that is still in construction deemed vacant? Anyone got the figures from the previous census?

Its also fairly clear from the figures that claims that only 3% are holiday homes is hopelessly low.

:confused:

All the data is on the CRO website pete, have a look yourself. I don't know who you're referencing with 3%, the CRO number is 20% circa. Houses under construction aren't included in that figure, or holiday homes. Again, you're clutching at straws, and I'll be honest with you, it's starting to look like trolling now.

adam

The last two years of property discussions is becoming tiresome, too sum it up I think we're just in another stage of national progression the great property boom of the mid 90's to mid 00's is over, we're in a new phase of progress and adjustment culturally and financially, we're a young progressive nation attracting both unskilled and skilled workforce from all over Europe making Ireland a more diverse interesting country for it, the Service sector is booming, our infrastructure improves with every year..the hoards in Sunday Indo regularly and in an imbalanced fashion have been screaming out headlines the last few months which if believed we would all be all the dole crews next year, so what if jimmy made a fortune buying and selling propery in the last few years and greedy builders and Estate Agents in all their detestable glory made a fortune,We live in a capilist democratic country where Darwin laws exist..If you made money fair play to you enjoy it prosper and enjoy this country, we spent so much time building the UK and USA, what would our ancestors given to have had such opportunities that now exist in our little Island, so stop gripping and talking up a Crash move on, be optimistic and think outside the box!

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Originally Posted by dahamsta

All the data is on the CRO website pete, have a look yourself. I don't know who you're referencing with 3%, the CRO number is 20% circa. Houses under construction aren't included in that figure, or holiday homes. Again, you're clutching at straws, and I'll be honest with you, it's starting to look like trolling now.
adam

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I don't care one way or the other & we probably way off topic. There is no need to suggest a troll just because you disagree. :rolleyes:

Maybe I am looking at incorrectly but I see Table 40 says:
- 1.769m homes in the state.
- 50k unoccupied holiday homes.

The figures don't show how many occupied holiday homes but i would be surprised if 6-7 times more occupied on a Sunday night than unoccupied?

2002 figures http://www.cso.ie/census/documents/vol13_entire.pdf but I can't find the same table. Seems there were 1.25m homes in 2002 though.

Just to put things in perspective. In my neighbourhood in North Culchie Dublin a three bedroom semi is selling for €370k. I believe it was bought in the early eighties new for £29k = €37k aprox. In the mid to late 80's house's in this estate couldn't sell for €25k. All we're seing now is a levelling off in the market. Supply and demand, low interest rates -v- higher interest rates. But remember this, in the mid eighties interest rates were over 17% and the high rate of tax was 60% IMO we're a lot better off now than then. It's just that people have become more materialistic and want want want, and there are a lot of people out their willing to lend them the funds to do it come hell or high water.

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Originally Posted by pete

Maybe I am looking at incorrectly

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Enough with the trolling pete. You know damn well that CA is for serious discussion only, and you're not above the rules. Knock it on the head, now, or I'll toss you out of this forum like I'd toss anyone else out.

adam

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Originally Posted by dahamsta

Enough with the trolling pete. You know damn well that CA is for serious discussion only, and you're not above the rules. Knock it on the head, now, or I'll toss you out of this forum like I'd toss anyone else out.

adam

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If you have problem PM me. I am using facts to argue my point.

The CSO figures you linked above show 15% vacant properties including holiday homes. When you take holiday homes out of the numbers it is 12% (approx 210,000 properties). Where is this 20% figure?

Back on topic. There is no doubt there is drop in new homes being build but does this mean the country about to fall into a recession? I don't think the facts back this up yet but maybe they will change...

4.6-4.7% unemployment is basically full employment.

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Companies in the construction sector are still hoarding workers, but those job losses have been postponed rather than cancelled, they said in a research note. House completions have started to fall (-35% yoy in July), so workers are bound to be laid off it said.
He expects an unemployment rate of 5.1% by the end of the year, ticking up to 6% by the end of 2008.

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Even 6% is not a recession.

Apologies pete, we're at cross-purposes here. You said:

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Its also fairly clear from the figures that claims that only 3% are holiday homes is hopelessly low.

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I see now that you were talking about 3% of homes in the state, I thought you were trying to claim that 3% of vacant homes were holidays homes. That's where my 20% comes from (50k in 250k).

I still think you're trolling though. Correct me if I'm wrong, but it looks to me like you're still suggesting a "soft landing", in complete denial of the market, and zero evidence for such a thing having happened any place at any time in history. Why don't you address that with evidence of a previous occurence and prove you're not trolling? (On that topic, there's a difference between someone saying something disagreeable and someone saying something stupid. Trolling is when someone intelligent says something stupid. QED.)

(Again though, apologies for the above. It really was a misunderstanding.)

adam

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Originally Posted by onceahoop

Just to put things in perspective. In my neighbourhood in North Culchie Dublin a three bedroom semi is selling for €370k. I believe it was bought in the early eighties new for £29k = €37k aprox. In the mid to late 80's house's in this estate couldn't sell for €25k. All we're seing now is a levelling off in the market. Supply and demand, low interest rates -v- higher interest rates. But remember this, in the mid eighties interest rates were over 17% and the high rate of tax was 60% IMO we're a lot better off now than then. It's just that people have become more materialistic and want want want, and there are a lot of people out their willing to lend them the funds to do it come hell or high water.

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Unfortunately crashes aren't defined by assessing property price movements over generations. I'd also be surprised that the area you quoted suffered a fall in value between the start and the end of the eighties, as property prices in Ireland are generally accepted to have only fallen once, by a very small amount (1.6%?) in the last 35 years. http://www.arandomwalk.com/wp-conten...use-prices.png

As in the UK, its the people that bought in the last few years, and who stretched (or lied) to afford a mortgage, that are in real danger. On a macro level its much more serious as property drove a large amount of the GDP growth in the last 5-10 years.

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Originally Posted by OneRedArmy

Unfortunately crashes aren't defined by assessing property price movements over generations. I'd also be surprised that the area you quoted suffered a fall in value between the start and the end of the eighties, as property prices in Ireland are generally accepted to have only fallen once, by a very small amount (1.6%?) in the last 35 years. http://www.arandomwalk.com/wp-conten...use-prices.png

As in the UK, its the people that bought in the last few years, and who stretched (or lied) to afford a mortgage, that are in real danger. On a macro level its much more serious as property drove a large amount of the GDP growth in the last 5-10 years.

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Prices did drop in my area in the 80's. Not for long mind you.

Construction has driven the economy over the last few years. The reduction in new house starts will inevitably lead to greater unemployment. Many of those who will become unemployed are migrant workers who will eventually have to move on. There is talk of major construction projects in England ahead of the 2012 Olympics. If they leave there will be a huge surplus of accommodation to rent leaving many investors stretched. Remember a lot of these investors are those who bought new homes and kept their first one to rent and pay their mortgage. There will also be knock on loss of employment in the supplies sector. Add all this to our inability to maintain competetiveness in the manufacturing industry and it doesn't paint a pretty picture. I read some years ago that Ireland would end up as a country of services. It could come true.

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Originally Posted by onceahoop

I read some years ago that Ireland would end up as a country of services. It could come true.

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The most advanced countries are 75-80% Services based.

I think the biggest threat to Irish competitiveness is the weak US dollar. If you are a US multinational you will see Irish wages increase every year even with no pay increases. This can be ok if the Irish based company if earning money is Euro but a disaster id supporting US based activities. The dollar - euro rate is likely to continue to get worse & we have no control over it.

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Originally Posted by onceahoop

Prices did drop in my area in the 80's. Not for long mind you.

Construction has driven the economy over the last few years. The reduction in new house starts will inevitably lead to greater unemployment. Many of those who will become unemployed are migrant workers who will eventually have to move on. There is talk of major construction projects in England ahead of the 2012 Olympics. If they leave there will be a huge surplus of accommodation to rent leaving many investors stretched. Remember a lot of these investors are those who bought new homes and kept their first one to rent and pay their mortgage. There will also be knock on loss of employment in the supplies sector. Add all this to our inability to maintain competetiveness in the manufacturing industry and it doesn't paint a pretty picture. I read some years ago that Ireland would end up as a country of services. It could come true.

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I didn't think we had a manufacturing industry to be competitive in, unless you count a couple of thousand people in Limerick screwing the lids on computers, who are living on borrowed time :confused:

We've been a country of services for at least 15 years. Before that we were a country of farmers.

Broad generalisations, but ever since protectionist policies were dropped in the 60's and 70's we've never really made anything of substance.

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Originally Posted by OneRedArmy

I didn't think we had a manufacturing industry to be competitive in, unless you count a couple of thousand people in Limerick screwing the lids on computers, who are living on borrowed time :confused:

We've been a country of services for at least 15 years. Before that we were a country of farmers.

Broad generalisations, but ever since protectionist policies were dropped in the 60's and 70's we've never really made anything of substance.

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These are figures for IDA companies.

Total Employment by sector in IDA Ireland supported companies

Pharmaceuticals & Healthcare - 20,207
Information and Communications Technologies (ICT) - 43,661
Engineering - 13,161
International & Financial Services - 51,021
Miscellaneous Industry -7,437

Many of the above jobs could be outsourced to lower cost base countries. We've sen some of this already.

However the IDA recognise the need for change. The following is an extract from theIr Website www.idaireland.com/home/business

"While production and manufacturing industries will continue to be the backbone of the Irish economy well into the future, IDA is also promoting Ireland as a location for a range of headquarter functions. A movement away from the industrial economy to the knowledge economy has caused a shift in the understanding of headquarter operations. Headquarters are no longer necessarily located with the manufacturing site and made up of the functions such as finance, strategy, marketing and human resources. Activities previously considered as cost centers are being converted to profit and wealth generation centers.

Headquarter Activities
Activities which are relevant for headquarter functions today include:

Research & Development
Sales and Marketing
Intellectual Property Management
Supply Chain Management
Shared Services/Contact Centres
Digital Media

Why Ireland for Headquarter Activities
IDA is promoting Ireland as an ideal location for headquarter activities because of its

pro-business environment
political stability
transparent tax regime
knowledge intensive skills and excellent telecommunications infrastructure"

Sorry for going off topic a bit but if our immigrant work force up sticks and go it will lead to problems in the housing market.

Your perception of soft or hard landing obviously depends on your situtation. My house has doubled in the last four years so a drop in house price won't really effect me. its also my home here i intend staying for a long time & so view it as a long term investment. Its my second home so i'm seeing a soft landing. Now if you take someone thats just bought, lets say last year. Then they are could be looking at their house being worth less than they paid for it. For them thats a hard landing. Reality is, we probably will never see the same rate of growth. But if you view your house as a long term investment, you'll be ok in the long run.

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Originally Posted by Ringo

Your perception of soft or hard landing obviously depends on your situtation. My house has doubled in the last four years so a drop in house price won't really effect me. its also my home here i intend staying for a long time & so view it as a long term investment. Its my second home so i'm seeing a soft landing. Now if you take someone thats just bought, lets say last year. Then they are could be looking at their house being worth less than they paid for it. For them thats a hard landing. Reality is, we probably will never see the same rate of growth. But if you view your house as a long term investment, you'll be ok in the long run.

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I agree but when we reach the bottom there could be a surge back into the market due to people delaying first home purchase. I think investors will dry up but some people will still buy houses as its the correct location & they willing to rise out the fall in prices.

I think some prices may be inflated by developers giving away freebies as part of the deal. Its easy that selling houses lower than the you sold a few months ago.

I still lots of building in the Dublin City area. Developers are started to build on the gaps (derelict builds & such) as people will always want to buy close to the City. I am sure it will harder to sell property far from City without transport links as more options for buyers.

My favourite site of the minute, www.arandomwalk.com has spotted a devious scheme by one particular property website to, allegedly, try to obscure price drops in properties being advertised.

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it appears that the site (myhome.ie) has started to display house prices as images rather than text. This is interesting because it impacts on two things
1. IrishPropertyWatch which provided very helpful statistics on price drops
2. It prevents people using google’s “cache” to find out whether houses had changed price in the past

I think it’s indicative of the property vested interests in this country who are running scared of the public finding out what is really going on in the market. We have to rely on the PTSB monthly reports which tell us property prices have fallen by a few %, when most observers know they’ve fallen by a lot more. We find ourselves in a situation where statistics from a couple of computer nerds and other amateurs are more reliable and timely than the “official” statistics - it’s an absurd situation for such an important industry.

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Interesting stuff and pathetic if they think this will pull the wool over peoples eyes.

Someone on the Sunday Business Show on Today FM yesterday made a great point that its exactly those people with vested interests who talked the economy/house prices (as they are so interlinked to be one and the same at the minute) up over the last decade who are howling now that we are talking ourselves into a recession.

So its okay to inflate the bubble but wrong to burst it?