Qualifications to make predictions in the housing market?

The Irish Property Bubble (2006) The Republic of Property
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You probably have exactly the same qualifications that I have to make a prediction about the housing market. – None. But, who does have qualifications to make these predictions? Your friends? Your colleagues? Your family? Television? Economists? Estate agents? Building societies? Banks? Whenever you take advice on any subject, it is basic common sense to consider

  1. Who is giving you the advice?

  2. What is their interest in the subject?

When it comes to the housing market, most people are unqualified. Some people have ‘experience’ and a very small amount of people have qualifications. The people you know (friends/colleagues) are unqualified, but may own their own home and can relate their own experience. They may not have an interest in misguiding you. However, due to the currently historically low interest rates, they may have just taken out a large loan on their property (for a holiday or car perhaps, personalized number plate or plasma screen TV and en-suite) and may not wish to believe certain possibilities. Of course I would never suggest that your family would purposefully give you harmful advice, but when they give you advice, ask them WHY they believe what they do. If they start using reasons that begin with “They say”, then ask WHO says? Do they have any figures on this? What research have they done?

Estate agents have much more experience in the housing market, and so ARE qualified to advise you. But will they advise you correctly? Or do they have a vested interest in selling you a property? If you were an estate agent, would you ever advise a customer NOT to buy a house? If the answer is ‘yes’ then you should NEVER become an estate agent. I have a friend who is an estate agent right now. He has seen business drop off dramatically recently, but still tells his clients that business is good. He tells me that business is terrible. But then I am his friend (yes they do have some friends). His words to me were: “I just sell houses. If I encourage people to borrow more than they can afford, knowing they will be in danger of losing their home, and that means I have sold a house. That means I have done my job and I get paid. It is ALWAYS their decision whether they take my advice. I can sleep easily at night. Sometimes I feel bad, but at the end of the day, THEY made the choice. I just encouraged them. I would never make that mistake.”. Trust an estate agent at your peril.

Banks and Building societies have a lot of facts and figures about the housing market. They see price movements, as in effect they are the ones that own most of the housing in this country. They make money by lending money. Every time they lend money, they use their customer’s savings accounts also borrowing on the money markets and securitisation to lend money to those who need to borrow. They pay the savings accounts slightly less interest than they charge the borrower, and they keep the difference. They will always take the most positive view of any figures in the housing market. If prices are slowing, they will tell you they will level off. If prices are falling, then they will tell you to buy now as houses are cheap, and the fall is about to end. Whatever they tell you can be roughly translated as “PLEASE come and borrow some money, our shareholders need profit”. If you ask someone selling fish at the fish market whether it is a good time to eat fish, what would they say?

Economists are experts in markets. Not housing markets, but all markets. Shares, gold, Pork bellies, oil, houses, rubber and lead are all commodities; they all have markets, and those markets have trends and patterns which can be analyzed.
Generally economists (that do not work for Estate agents or banks) have no interest in the market itself, their job is analysis. They don’t make money if the market rises. They don’t lose out if it falls. My opinion is that they are one of the best sources of advice for ANY market. PLEASE REMEMBER THAT MY OPINIONS ARE BACKED UP BY NO QUALIFICATIONS WHATSOEVER.

As for television… well. If you manage to turn on the TV when it ISN’T showing a property programme (Do you remember programmes? They are the things that come on between the loan adverts), you will probably find that the opinions they give are from lenders (IIB / BoI usually) or some institutions. The ECB is sometimes quoted (but remember, the ECB just states fact. They have to be neutral. It would be unfair of them to influence the market for Ireland’s buyers, sellers or lenders).

Newspapers and TV are not experts, they just peddle common opinion. They jump on the bandwagon and report what they are told to by industry. Don’t believe everything you read in the press. I would go so far as to say, question EVERYTHING you read in the press. Look at what the estate agent is saying. What proof do they have? Who did the survey? What was it about? Some reporter huh?

So, back to the original question – are YOU qualified to make a decision about the future of the housing market?

There is some good news here. When your parents were buying a house, they only information they had access to was the TV, newspapers and their building society or bank. You have access to the most powerful resource on Earth – the internet. You may be reading this document through the internet right now. You currently have the power to read articles, facts, figures and opinion on the Irish housing market and throughout the world. If you do not have access to the internet at home, then spend Saturday at the library (remember those?) where internet access is FREE or if its not open then use the local internet cafe.

You have the chance to be one of the best informed buyers in history. You are about to make the biggest financial decision you will ever make in your life. YOU HAVE NO EXCUSE. Do some research. If only your parents had access to the information you do, then the previous house price
crashes may never have happened. Your parents bought on gut feeling, or out of necessity, which is no way to make a financial decision. You do not have to. It is IMPOSSIBLE to justify a purchase of this size without first consulting as much of the available information as you can. You must detach from emotion. You are about to make a business decision.

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Some of us have relevant qualifications GB. I have a primary degree in Property Valuation and an M.Sc in Regional Development.

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2Pack owns a calculator , I feel the need to share that with you guys 8)

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That advice should be handed to every buyer, as its a buyer beware market here where nearly all the info pumped out media wise is for the seller at the expense of the buyer.

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Thanks Greenbear. I always enjoy your contributions.The only qualification one needs is called “cop on”. Where do you get it? If you have many sisters and brothers, then you learn how to survive with rations. If you are an only child, your parents give you freedom to roam the streets or the countryside with pals; you come home with dirty boots etc. The one essential is that either a daddy or mother is always at home to succour you when you come out the wrong side of a scrap either on the playing pitch or in a back alley somewhere! You sit down for meals and pray with your parents. It is my experience that people with this type of background do not like to make money by unscrupulous means. There are exceptions, but in general a society with neigbourhoods where people are around all day, looking after the kids etc is by far the healthier way. Such a society takes care of everyone.

Many kids grew up without the above. They then go to College (3rd level), do a Masters to learn how to do business, in general acquire “cop on”. The majority come out at the other end in the same mould as they were reared in i.e. their wakening day is completely mapped for them by their parents, who have no time in their busy schedule for dirty boots. They continue on in this way. The sad thing is they end up in influential positions because of their academic achievements e.g. economists who gladly hold on to their privileged positions and peddle all kinds of mistruths on behave of their employers. They are governed by the morals of the market place! Material growth by the exploitation of the less knowledgeable in society, with a laissez faire government is their cup of tea! Education! We have lost our bearings!

Off course, you can have crossovers within the above two groups depending on how teachers react to unruly kids of absentee parents etc

There are more young people then ever before receiving third level education. The Economic, Social and Financial mess that we are currently in is a real indication that something is drastically wrong with our education system. A society with a Newman Education would never lump our your men and women with unbearable lifetime mortgages, necessitation both future potential parent to work fulltime outside the home with up to three hours commuting time. It is a thundering disgrace :cry:

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I think, with respect, that you’re pushing an unnecessary agenda there WTTR. Some will know that I’ve said it before, so sorry to repeat myself but…

a society with fundamentals of Economics and Finance taught as a compulsory core subject at secondary level may well achieve the same thing in my view.

No need for non-graduates to be at the mercy of ‘‘better’’ educated types’ moral compass. I sense something a bit paternalistic about your vision, again with respect to you.

But it’s hard not to feel that the proliferation of third-level courses is some kind of employment-figures massage. The standard of Business degree in a certain IT I know, is just totally and utterly dire. Ditto a Hospitality degree same place. Teaching, assessment, all of it. And I’m told, the IT course, but I won’t vouch for that.

Yes, there are many varieties of thundering disgrace in our education system.

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I think the diversity of backgrounds on the Pin show that the most important thing is having a decent ability to think in a logical fashion, address data and facts objectively and to be willing to stand out from the popular concensus if necessary.

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GB,

while I understand the “Caveat Emptor” approch, to be honest, many “financial advisors” don’t have any qualification either.

Case in point; a cousin of mine, mid 20’s used to work in the motor trade decieded they wanted a chage of career. Joined a “financial” and is now, following a two week course a financial advisor. They are so good at their job that they, within 3 months of starting, had organised a mortgage for themselves, from their new employer of course, and had purchased a 1 bed appartment somewhere up in the Wicklow mountains in the final months of 2007. Apparently, according to them, they were lucky to get the unit, there was a lot of interest.

So, there you go … highly qualified … though experience I suppose.

Blue Horseshoe

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I agree its a question of providing the skills that allow an individual to make informed decisions. Critical thinking, intellectual curiosity, and the ability the read is all that’s required. But do governments want a population of bolshie free thinkers? :wink:

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With respect, the attitude you have here is pretty much giving permission for estate agents to act like amoral spivs. Would we tolerate a medical consultant who ALWAYS recommends that a patient undergo an operation, even when he knows the chances of the operation being successful are infiniteismal, or a lawyer who always recommends that a client sues someone, even when he knows the chances of success are tiny? Of course not, so why tolerate such spivvery from estate agents.

Again, it doesn’t have to be like this.My advice, quite honestly, is to pretty much ignore the Irish media completely, at least in respect of commentary on economic matters. For example I read the Daily Telegraph business section, especially Jeff Randall and Ambrose Pritchard-Evans who are good (bearish) commentators.

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Agreed 100%.

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But an EA is a sales person. We all know that if you are trying on a pair of jeans in a shop and you think they might not suit you and a sales person comes along and tells you you look really great in them that they may very well be lying to get the sale. It’s pretty much the same thing with an EA except that they have less to lose if it later becomes obvious you were sold a dud.

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I agree GreenBear.
People here by virtue of the fact that they read the Pin have or are educating themselves. However, your post should accompany all mortgages as a financial health warning. It is the muppets who don’t bother to educate themselves who cause the bubbles and make it difficult for the rest of us. It is just such a pity the uneducated ones number over 90%.
Of course the good part is if you do educate yourself and bide your time you can potentially make a killing. Assuming the government doesn’t bail out the thickos to the detriment of the saver.

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There are more savers than thickos.

The savers are older ( generally not always)

They are therefore more likely to vote ( ALWAYS)

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Yeah, who’d want that… We’re better off with a “knowledge” economy and loads of wealth (debt). :unamused: :wink:

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Good to know that some pinsters are waiting in the wings to kick the cycle off again! :wink:

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I will only pay a sensible price for a house so I will not be involved in any bubble (i.e. where 4 times my salary.).
In fact I personally disagree with speculators even being allowed to invest in property. I understand the need for landlords as some people will not want to buy. However I believe speculators are parasites and I believe property prices along with essential food prices should have their prices controlled. An easy way to stop the parasitic speculators would be to tax the shit out of them. Put them at a distinct disadvantage to everybody else. Probably give LL a good taxing too.

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If you earn a nice salary you might well kick it off again!Do you make a distinction between investors and speculators,as I believe there is a difference?Many investors buy with no intention to sell as opposed to speculators who get involved to turn a quick profit.

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So you should only buy an average house (3 bed semi-D in Dublin?) for 4x the average industrial wage (128,000?)

If you are paying more, it better be an above average house, otherwise you are just inflating a bubble :wink:

I look forward to the day!

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Regional wages will vary as will prices.