Property Crash

**pete** · 23/04/2007, 9:40 AM

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...

**dahamsta** · 23/04/2007, 10:15 AM

Different people moaning pete. Duh.

**BohsPartisan** · 23/04/2007, 10:51 AM

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** · 23/04/2007, 12:37 PM

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** · 23/04/2007, 12:42 PM

Originally Posted by Lionel Ritchie

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** · 23/04/2007, 12:48 PM

Originally Posted by BohsPartisan

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** · 23/04/2007, 9:15 PM

Originally Posted by dahamsta

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** · 23/04/2007, 9:38 PM

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** · 25/04/2007, 5:36 AM

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** · 26/04/2007, 3:55 PM

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** · 26/04/2007, 4:01 PM

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** · 26/04/2007, 4:32 PM

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** · 26/04/2007, 4:41 PM

Originally Posted by 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...

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** · 26/04/2007, 11:00 PM

Originally Posted by pete

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** · 27/04/2007, 9:27 AM

Originally Posted by BohsPartisan

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** · 27/04/2007, 9:32 AM

Originally Posted by Ceirtlis

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** · 27/04/2007, 9:39 AM

Originally Posted by BohsPartisan

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** · 27/04/2007, 9:54 AM

Originally Posted by pete

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** · 27/04/2007, 10:42 AM

Originally Posted by Ceirtlis

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** · 27/04/2007, 11:07 AM

Originally Posted by BohsPartisan

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.