Indo - Builders see no further house price increases

From the Irish Independent 2nd May 2007

unison.ie/business/stories.p … si=1822983

Blue Horseshoe

‘Nearly all of the housebuilders said they would rein in supply of new homes and sit on their landbanks, rather than slash prices, if the market continued to weaken.’

Logic gone out the window on that one!

If people cannot afford at present prices, what makes them think they’ll afford them in one years time at the same price with rising I.R no matter how many they build?

They need a reality check to rein in their greed. :angry:

The sad thing is that there are people out there who can pay and are willing to pay over the odds for vastly overpriced property. If there weren’t, we wouldn’t be in the mess we’re in now. People still have to live somewhere. Not everyone is going to rent forever.

Approx 40% of buyers in the past 4 years were buying a second or more property.

If People still had to live somewhere and were not going to rent forever - if these people are the same people who are willing to “pay over the odds for vastly overpriced property” then I would argue that property is NOT overvalued and that we are not in any mess at all!

But in reality they are not the same people.

The people who were willing to pay for overvalued property did so because they saw a way of making serious money. These people priced the other people out of it.
Now that the market is flat at best there is no easy money to be made so they arent buying anymore. The other group are still priced out of it and interest rates are exacerbating that.

Now the first group of people have hundreds of thousands of houses that they want to sell on to make their money and nobody can afford them.

We also have built a phenomenal amount of properties in the past 18 months. The amount of properties we built in 2006 broke records!!! The most we EVER built in a year.

There was never a housing shortage. Only a bubble.
This picture below is worth posting again

https://i137.photobucket.com/albums/q225/thebatoneffect/GRAPHS.jpg

Ah, so they’re just going to stop building huh? Well thats it sorted then. Grand. I guess that’ll have no effect on the approx. 170,000 people directly employed in the residential construction sector, and of course no spillover into the rest of the economy. Jesus wept.

This graph says it all and it should be plastered on every toilet wall in the country.
The fact of the matter is that the fundamental value of a second hand house is 100,000 euros in the country and 120,000 euros in Dublin.
Anybody paying over these two values is getting ripped off big time.

You can add another 100,000 to this as the true figure is nearer to 275000.We now need to get back to 1998 levels of construction to avoid massive over supply which means anything up to 150000 redundancies.
Trouble is it’s already too late to cut back as the construction industry can be compared to a massive oil tanker which can take up to 10 miles to come to a halt after pulling the stop lever.

The commercial construction sector is also heading into a rapid over supply situation as there are rows and rows of empty commercial units lying idle in many parts of the country.

The killing part about all this is that it seems to be government policy to prop up the over priced housing market at every opportunity.
This means that taxes are going to be raised elsewhere or worse still borrowed meaning the people who had sense and stayed away from over priced property are going to have to bail out the cowboys who ran amok.

And all the Estate agent guff about vendors being realistic about prices.

Yes Great Point! I have been thinking this cause I am noticing more and more commercial units ovf every sort. Scores of Industrial estates are popping up everywhere. Retail Units come with every City aprtment dwelling. while many still unlet. You can see on daft industrial units complete or almost ready for sale, no tenants.

Not surprising rents in Dublin are stupid at the moment for commercial space. Nothing less that barmy, I don’t know how people make any money, unless they charge high prices :confused: Guess what they do! :smiley:

I think there may have been a bit of wild speculation in the warehousing market aswell.

You read it & agents say it , that commercial will remian strong.

How/Why? I don’t see it myself, not at current rents.

Anyone been in the Smithfield redevelopment lately? A lot of expensive high profile units more than 10/15 I’d say, still un-let and I would wager for a long time to come unless rents drop dramatically.

Ok it so commercial might be a smaller market in terms of supply but everything the economy is feeding of the demand for housing and how wealthy people percive themselves to be right.

Look at the big retail parks all over the country, Dublin is walled in by them now (with Ikea to come!!!) its furniture store after DIY store after furniture store yet we only have to look back at the warning from B&Q over reduced profits due to tougher trading conditions, yes tougher trading conditions did anyone notice that one??

Just look up Greenogue on the Daft commercial, buckets of units for sale & rent! (one of the many units here))

What is going on eh?

Some of that is planning driven - I’ll bet that one condition of their PP was that they provide commercial and other amenities for the neighbourhood. Nevermind that all the commercial facilities you could want are five minutes away towards O’Connell Street. In effect, the vacant commercial units are the price you pay for the lucrative residential units.

But would it not be better to rent them at whatever rent you could achieve in order to get some income from them?

But would it not be better to rent them at whatever rent you could achieve in order to get some income from them?

Yes you are right a lot of it is planning driven. I understand that. However I don’t think our the states planning machine or vision is dynamic or up to the task. I would say it has failed brilliantly due to so much corruption and in all honeslty should be completely scraped.

We need to start again.

I’ll also add that the residential densities above these developmetns is too low, way to low to support the amount of ground floor retail.

Plus its always retail. Were are the swimming pools, creches, leisure facilities, place sof social gathering etc etc

I’ll give you an exmaple, locally were I am there is a unit and has been designated as a creche, yet its been vacant since built, probably three years now. I only noticed it a year ago! Why is it vacant, well its 3 miles from the city centre, all teh kids are aoubt 25 miles out in the commuter belt. We have a long way to go :confused:

In fact I think we have built in more problems for the futre. We have gone high enough quick enough in the right areas. I am not taking high rise everywhere but clusters and offset high rise from street scapes wrk really well.

Regarding rent, it can be so high on units that you will realise why Centra/SPAR & other such multi-globalised-operations dominant Dublin streetscape, offering the same crap at infalted prices. These are supplier led retails going for supplier volumes(gor e.g. MUSGRAVE > SUPERVLUE > CENTRA). Diversity of retail is out the window becasue of this.

I would say its a big risk right now to take a lease at such high rents, considering we could well be at the very top or a smidge past the top of the BOOM cycle.

If you hit the wall you may have a 25 year lease round your neck.

1.Overall taxation in this country has not changed one bit in the last 10 years.Direct taxation has reduced, indirect taxation has rocketed and not only has this conned the electorate but also doubled our inflation rate.

2.Interest rates have almost doubled in the past 18 months and if this
finfacts.com/irelandbusiness … 0012.shtml
continues for any lenght of time rates could easily triple.

3.In the upcoming recession two income households could easily become endangered or even extinct to be replaced by zero income households.

4.This graph only looks scary if you’re living in an over priced house with a 40 year loan wrapped around your neck and your employed in construction and your wife works in the local furniture shop.

To me this graph does’nt look at all scary and should have been studied carefully before this con job that is the Irish property market was entered.
The sooner people come to their senses about this the better.

People don’t want to come to their senses so the reality check when it comes is going to be very painful.

Completely disagree - this will affect us all

The graph looks scary if you are expecting to be able to trade up, and it looks nervewracking if you’ve bought a home, but however nervewracking it’ll be, it’s still not so relevant if you are not moving anywhere.

However it will have reverberations on the wider economy because there is such a large number of people out there with second homes who don’t, per se, need them, and bought them purely on profiteering grounds. The money that they will wind up spending to service those properties either in terms of subsidizing rent and and paying rising interest on mortgages would benefit the economy greater if it was being spent on actual things like stuff in the shops, not on interest and subsidizing losses. Given that our economy is heavily dependent on consumerism and property, this sees two of our key economic supports in dire trouble as a result of property going out of kilter with fundamentals. Link that to the fact that employment growth is concentrated in centres which have little or no impact on economic growth in terms of actually earning money from the outside (public service and retail) I would venture to suggest that we are heading for a pause in Celtic tiger growth.

It will probably be a bit nervewracking for those who have been refinancing every 2 years in order to buy that flashier SUV, all those holidays and outspend the Jones.

I haven’t seen that talked about too much, a lot of the commentors in the media reckon it’s only people who have bought in the last couple of years that will really be impacted. I’d love to know just how much remortgaging has been going on, I’d say a lot.

The thing is - because a lot of this is sentiment driven, even people who have not been remortgaging to buy SUVs and widescreen televisions will possibly switch from spending to saving more which has an impact on consumer confidence which has an impact on economic growth etc etc etc.

When I started writing on property about three years ago, we weren’t going to have a correction. Then people started talking about a softlanding, and a soft landing was prices tracking inflation. The people started saying that property in less desirable areas/commuter land would probably slide slightly and latest I’ve heard is that a softlanding is 20% fall in values across the board. But none of that is “fact” it’s feeling, opinion. And additionally, property in highly desirable areas is starting to slide. None of this is good for feel-good feelings.

I get the impression that people in this country have convinced themselves that the good times will last forever. But economies operate in cycles and there is always going to be a downturn coming. That’s not such a huge deal if you plan accordingly. I just get the impression that many people have not. Mortgage debt is not really the one that worries me quite so much although I think that there is a set of statistics around to suggest that a lot of refinancing went on last year, but other consumer debt whcih is typically at a far higher interest rate.

I strongly suspect that by the time all this plays out, there will be a lot of jaundiced looking faces out there. I don’t wish it on them but I don’t know if they can avoid reality.

Nope. Building commercial units under apartments, means they don’t have to allocate a portion for affordable housing. Hence they’re not too bothered about renting them, as they saved so much in not having to allocate that 20%. Ground floor apartments in the city area are not very desirable anyway. This means that there is an over supply of commercial property ant that articles stating that it will hold up/remain strong while residential drops are simply not true. However, given that it’s a smaller market with less players its probably more illiquid therefore behind the curve in terms of market stage.

Wow now that explains an awful lot. I didn’t know this and all and I bet 99% of people havne’t a clue.

Here we are again another planning fudge & sop to builders which is causing us to build commercial units we don’t need sacrificing social housing which is desperatley need! This is going to create a Ground level ghost town.

See I told you we have to start all over again. Its has become too distorted, utterly abnormal, nothing is working as intended the agencies of the state are in complete malfunciton. Everything is in a state of malfunciton, that includes the logic of the people involved.

basically 45% are either top up loans or re mortgages
Note that mortgage brokers and the like will eventually lose a fair amount of business since houses have stopped rising in value.
ibf.ie/pdfs/ibf_pwc_mortgage_q3.pdf

Irish Banking federation and price waterhouse coopers report.

https://i137.photobucket.com/albums/q225/thebatoneffect/mortgages.jpg