House Market Weakening?

[Reality Bites]

There seems to be a growing feeling that the long heralded leveling of in the Irish Property Market is upon us, Interest Rent rises, Properties staying on the market longer, less bidding wars, The rises that occured between January and April have well and truly softened! (this is more than just cyclical) Savvy investors putting their properties on the markets, Rental yields low etc..
The last two years have been silly for all intents and purposes, with the popular conversation among thirty somethings was their property portfollio, it spread like a bad rash with people over valuing property and under estimating the financial burden on them.. if my best friend has a property then i sure as hell am going to get one as well at whatever it costs etc..

[strangeirish]

America sneezes, Ireland catches the cold? Same over here(U.S.) It's been on a slide since December. Investors having trouble turning their properties. Lots of homes on the market. Turning into a buyers market over here.

[dahamsta]

I've been sitting here like an evil demon for years, rubbing my hands together and smirking while I wait for the whole thing to fall apart -- it's the Irish way unfortunately, we're a nation of begrudgers. I did have the opportunity to get involved nearly ten years ago, when The Daddy offered to front me the deposit on an apartment in Ballincollig, but I decided against it, and in a way I'm glad because I might not still be self-employed if I'd gone for it.

The thing is, a few years ago when everyone was saying it was all going to collapse in a heap, I was pretty sure it was going to level out because it was till possible to cool the market at that time. But Gov.ie didn't take the opportunity, and although now a lot of people are saying it's going to level, it's obvious that that just can't happen. Property isn't golden like some people like to think, any market is susceptible to bad management. Something's got to give.

The problem is, I can't get any enjoyment out of it any more, because the chronic mismanagement by Gov.ie has led the market to a stage where it simply can't be recovered, and more importantly, they've led it to the stage where it's going to drag everything down with it. The market is going to collapse, this year or next year or whenever, but I won't be able to get any enjoyment out of it because it's not going to go down to my advantage: I still won't be able to buy a house.

All I can do is clear any debt I've built up over the years, and I hope to have that done by the time the year is out. I'd advise everyone else to do the same -- clear the credit cards and bank loans, pay off the car and the kitchen, work the body of the credit union loan, etc. If you have a house, use it to clear this other guff while you still can, or you'll feel it later. Like I said, it's not gold, it's just bricks and mortar.

adam

[dcfcsteve]

I know the British property market intimately (it's what I do for a living), but not the Irish one.

However - what I will say is that the media tends to jump at even the slightest sniff of doom when it comes to property. People love to hear doom and gloom scenarios - particularly when it's one in which a lot of them would have a vested interest.

More often than not there is zero economic evidence to support any of the doom merchants who push negative stories about the housing market. The strength of the Property market is more science than art. It is primarily a combination of a number of clearly defined economic indicators. It is not some sort of irrational, moody entity that takes wobbles every now and again just because the mood takes it, or because a few unknowledgeable journos think it has or should.

As far as I understand the economic situation in Ireland, the key economic indicators that determine the strength of the housing market are all positive :

- Interest rates : Low (though expected to rise slightly/slowly).
- Unemployment : At an historical low
- Employment : At an historical High
- Population : In continual growth.
- Economy : Growth expected to be 4.8% this year : more than double Eurozone average
- Property Stock : Not growing fast enough to meet growth in either demand or population.

There are therefore more people in Ireland than ever before, more jobs for them to do and less of them unable to find work. These people all need somewhere to live, yet there isn't enough property around for them. For those who do want to buy, the cost of doing so is historically low. For those who want to rent, the cost of borrowing for investment landlords is also low.

Given the above, would somebody care to explain the rational basis for why there should be some sort of housing crisis on the horizon ?

The things that would have the biggest impact upon the Irish housing market would be factors outside of the country's control - e.g. the impact of imported inflation and increased commodity prices upon jobs, interest rates and cost of living.

WEe've had prophets of doom re the housing markets in Britain and Ireland for about 6 years now - but they've yet to have been anywhere close to the mark.

[pete]

I do not believe interest rates are going to rise enough to in itself bring property prices to their knees.

Always a big difference between people who buy property to live in it & amateur property speculators.

The US market has been rising hugely in recent years are far too high a rate to be healthy.

Manay have predicted a crash in Ireland and while prices stayed even a few years ago the only real falls were in the high end making the overall market look stagnant.

[paul_oshea]

one of the biggest reasons, is economies of scale in ireland, too many people bidding for the same scale houses, why? because about 70% of irish people earn in and around the same salary, therefore leading to those same people bidding for the same property. here are a few others at a glance:
They include:
Supply vs. demand
Over hype of the strength of the Irish economy
Irish ethos that everybody should be a home owner (different in continental Europe)
Misconception that house prices will always rise
Super rich investing in large number of properties for rent
Financial institutions leading silly amounts of money
Historic extended low and stable interest rate (somewhat ignoring the 3 0.25 base point rises since last December
And feckin builders

had this argument with a lad already, but just to add onto the above list and expand in more detail:
In slightly more than one word, Ireland is so expensive because:
1. Workforce supply unable to meet demand
2. High growth in population (natural and inward migration)
3. Geographical size of the country i.e. the majority of the population live in relative proximity to major commercial centres. Consumers have lived or commute regularly to major commercial centres and therefore do not have serious objections to paying excessive prices in rural areas
4. Buoyant consumer outlook due to the rapid continuous growth since the early 90's in the Irish economy. Ireland have, in common terms, never had it so good and therefore have never experienced an economic collapse as experienced during the oil and housing crisis' in the 70's/80's in the UK [ever wondered why a house in an average area of Dublin is more expensive than an average house in London???].

[paul_oshea]

WEe've had prophets of doom re the housing markets in Britain and Ireland for about 6 years now - but they've yet to have been anywhere close to the mark.

steve, That will not happen in england at all, unless the north-south divide becomes huge. For example, which Im sure you should already know, but there is need in london and the home counties for a millon new properties by 2015, so a collapse within the next ten years in England is never going to happen.

If i were at an age 10 years ago where i could have bought a house, in the same job am i in now, I would have jumped at the chance. All my cousins, ahve made serious money on this, but alas i was too young and therefore missed the boat.
Anybody who didnt buy and had the chance years ago must be stabbing themselves in their testicles right now.

[dcfcsteve]

steve, That will not happen in england at all, unless the north-south divide becomes huge. For example, which Im sure you should already know, but there is need in london and the home counties for a millon new properties by 2015, so a collapse within the next ten years in England is never going to happen.

If i were at an age 10 years ago where i could have bought a house, in the same job am i in now, I would have jumped at the chance. All my cousins, ahve made serious money on this, but alas i was too young and therefore missed the boat.
Anybody who didnt buy and had the chance years ago must be stabbing themselves in their testicles right now.

They need so many new properties in the South of Engalnd, due to a rise in population (e.g. an extra 800,000 people predicted in London by 2015).

Likewise - Ireland has a rising population, and new property isn't coming on to the market at a fast enough rate to meet its needs. So why should Ireland also not be ruled out of the doom's merchants predictions of a wholesale crash ? It just doesn't add up.

[Student Mullet]

A lot of these new people coming in are foreigners working in the house building industry. That rising demand isn't going to stay forever and when it stops the foreign builders will move on to another country leaving empty houses behind them.

[dahamsta]

No-one there, so 300,000 homes not counted in census figures

MORE than 300,000 homes across the country will not be included in the latest census - because there was no-one at home.

Enumerators delivering and collecting the census forms were unable to contact the inhabitants.

Following inquiries among neighbours, postmen and women and apartment block management companies, the vast majority of those dwellings - some 275,000 - were identified as being vacant.

[...]

[Macy]

Steve, part of the reason it's a house of cards in Ireland is because the majority of new jobs, and the vast majority of economic growth is from construction. So the thing that's fuelling the economy and thus the increase in house prices, is the building of more houses. This isn't sustainable, no matter how many times economists are called doom merchants and naysayers.

Rates are likely to continue to rise, and there's already data to suggest 50,000 households could be in trouble soon, with a further 80,000 facing difficulties with payments (I'll find the link and post back). There is also anecdotal evidence of crazy bidding wars at auctions no longer happening with the same frequency. We can only hope we chance upon the soft landing.

As to whether there's anything that can be done, I think it's too late. The Government had the opportunity to increase supply and control increases in the late 90's/ early 00's. There was, and continues to be, land zoned residential being sat on by developers. Several of the opposition parties called for windfall taxes and rolling taxes every year development didn't take place on the land. The Government did nothing (probably too busy stopping it's Galway tent mates like the Bailey brothers from having Revenue press charges).

[Reality Bites]

I think collapse may be too strong a word, but the madness of the housing market over the last 24 or so months has ended there is no doubt about it , I heard very recently that auctioneers were in shock at the bidding wars that were forcing the price sky high for very ordinary properties, I think when the dust settles alot of people may have a lot of regret, recent buyers that is!

[drummerboy]

I think the days of huge annual rises in house prices will come to an end in a year or two. However I don't see any collapse. What I think will happen will be minimal annual house price rises. Since the foundation of this state the price of property in this state has never realy fallen.

[paul_oshea]

[QUOTE]They need so many new properties in the South of Engalnd, due to a rise in population (e.g. an extra 800,000 people predicted in London by 2015).

[QUOTE]

You just repeated what i said?!?! :/

[paul_oshea]

probably too busy stopping it's Galway tent mates like the Bailey brothers from having Revenue press charges).

Since when has ballintubber been in galway. If you are going to sprout slander then at least get the area correct.

[Macy]

FF have a tent in Ballintubber as well as at the Galway Races?

[paul_oshea]

they have more than a tent, they have hellipads and several acres of land as well.

[Macy]

they have more than a tent, they have hellipads and several acres of land as well.

FF do? My point was (maybe made flippantly) that major builders, who are regulars in the FF Tent at Galway Races, who have been big FF donors, are FF members and have canvassed for the party as recently as the local elections, who have been found to have made corrupt payments to FF politicians, settle for €22 odd million with the revenue without a hint of them being prosecuted for tax evasion.

Now tie this one (of many) example of FF links with builders, and then consider the fact that FF did nothing to address the supply issues that would've slowed house price rises, have let builders off the hook of their social housing requirements, who continue to do nothing about zoned land that goes undeveloped that is held by developers etc....

(Probably off topic, so feel free to split this off.)

[Aberdonian Stu]

I used to believe in 'the bubble' but have long since seen the error of my ways. Even if I did there's no way I'd forecast a burst until after the SSIA money has been shovelled out.

[dahamsta]

there's no way I'd forecast a burst until after the SSIA money has been shovelled out.

Very true. This is why I think people still have a chance to set themselves up to handle a recession when it happens (the question is not if, but when; and to what scale). The Government aren't going to help them, so they need to do it themselves.

Unfortunately, I think people will just keep borrowing while they can, and I'd say a good majority of the SSIA money will be flushed down the toilet on overpriced cars and "cheap" consumer electronics, both of which depreciate like a bitch.

But of course FF and the PDS don't give a toss about that, they only came up with the idea to win the next election anyway, because they screwed up everything else. Looks like they may have screwed this up too, if the polls are anything to go by...

adam