The nearly impossible property dream

You know when you see highlights of Dail debates on TV. I always got the feeling that I was getting a peep through a hole in the roof of the chamber. Our elected representatives never looked real, and never appeared have any substance in what was been said about the world in which the rest of us lived. They could have been actors, playing and pretending to rule the country.

I just realise to my horror that they really have been playing at ruling the country with not a notion of what could result from various laws that were passed, especially the ones related to securitisation etc

Yea! they had the Dolls House Mentality all right. Everything was so perfect in their little world. But the real players who seemed to be wielding the power were those connected to the IFSC across the Liffey.

I see Green Bear, that your piece was taken from The Western People. Have the previous** Dail opposition from Mayo **suddenly awakened to what was happening under their watch! Blind as bats, the whole lot of them! How would one expect them to notice that International Bankers were ripping off the country when our Hydrocarbon Resurces are being plundered right under their noses! Bloody Dolls house, that’s what it is!

As readers of this forum will be well aware, Irish house prices have risen way out line with incomes since 1996. Here is an illustration that I’ve had for a while but didn’t get around to posting.


For the longest time, Irish house prices were 4 x income (expensive even then by international standards which recommend 2-3 x income). Since the start of the bubble, property prices in Ireland have risen out of line with wages to average around 10 x average earnings, and up to 15 x average earnings for 2nd hand property in Dublin!

Nice graph fable, shame about the implications!!! :cry:

That is a nice graph.

notice how house prices start to dip jist as the dot con boom started to pop in 2000. We hit peak knowledge economy in those years. The price increases after 2001 are due to the global credit splurge in the post dot con/9-11 era when money was uber-cheap and every investment vehicle was securitising mortgages. The Irish property bubble is not one big bubble that started in 1994 and continued until 2006. It was two consecutive bubbles , one due to the Irish economy taking off, the other due to cheap money and buyers of mortgage backed paper.

are you telling me that you think the actual “worth” of houses should be back at 2001 level? dont make me laugh!
i know for a fact that you could have got a house in d9 for less than 200k euro in 2001.
renting out a gaff like that now will give you 1500 a month or 18 grand a year ( and thats a conservative estimate ). thats a whopping 9% yield. do you really think that prices would drop to that again? i think not!

Of course they could, they could fall in price for a couple of decades not at all unprecedented. Thinking they can’t doesn’t mean its not possible. In fact given that the demographic decline has not set in across most of the West the prospects of another episode of ‘fundamentals’ driven housing inflation are over for many decades to come.

https://www.norges-bank.no/upload/import/front/rapport/en/fs/2003-02/graphics/fig_1-ramme1-1.gif

More like fall from current 12x earnings to the 2001 multiple of c. times 8 earnings, which is about a 35% drop in real terms. That could come overnight in a 35% nominal reduction, or as a 20% nominal drop over the next three years (c. 6-7% per annum).

Doesn’t sound crazy to me.

Only if you assume that rents will stay the same.

that depends if upper-crust investor jumps back into the market & depends what the banks are willing to let out. and who is to say that it’s worth 1500 in rent?

factor out inflation from your 9% and you only have about a 4% net yield by your figures.

To analyse this approach:

200,000 is 243,000 in 2007 money assuming 4% pa inflation. That is a 7% yield.

Inflating by wages of 6%pa give a 2007 comaprative price of 283,000 and a yield of 6.4%.

Again, this seems entirely reasonable.

eh…I think the implication is that it could be even worse than that. It seems amazing, and impossible but that just shows how deeply ingrained this madness is in our collective psyches. Let’s not forget that our now mute central bank was stating years ago that houses were overpriced and nobody listened! And things have become a lot worse since then!

Your point about the 9% yield is of course predicated on the fact that rents stay the same and the cost of houses only declines. Well we’ll just see about that when all of those 300k houses come onto the market. They’ll either flood the market, and we’ll have house prices dropping like a stone, or else they’ll go out to rent, in which case rent’s will plummet. My guess is that all those empties will be split between and we’ll see a drop in both!!

My guess everything will revert to the long term average. 4-5 X income. I don’t see why ireland is any different?

Did you read that post? I saw nothing in it that stated the actual “worth” of houses should be back at 2001 level. If I’m wrong please put me right so I can get my eyes tested.

Personally though I think the actual “worth” of houses should be back at 2001 levels once you have adjusted for inflation. If that graph is accurate the actual worth of houses is back at 1997 levels (again once you have adjusted for inflation).

I really like reading the more bullish comments on this site as it brings balance but I have yet to read anything that even attempts to justify why house prices should be at 10x average income. Or why Ireland is different to every other country which has experience a rapid increase in property prices. If anyone can explain to me either of the above (without bragging about how they own x number of properties and our ‘worth’ x million) then I’d be really interested to hear their reasoning.

The graph from 2001 onwards is clear that the speculators with an infinite of credit were crowding the Irish housing market. The smart ones have alreadyleft the market

too right, I made no prediction about the reduction in house prices, even the 2001 prices were considered to be inflated at the time hence the bacon reports. The average wage in ireland is €32k , 5 times €32k = €160k. WHo knows how far they’ll receed to.

The point that I was trying to get across was that the 2nd wave of house price inflation had nothing to do with the resiliance of the Irish property market, our knowledge economy nor any wizadry due to to irish banks and other property VIs.

Someone is forgetting that 9% was a “normal” yield in the recent past. If anything, it is on the low side of an average yield 10 years ago because costs aren’t being taken into account.

Equities long run average yield is about 8/9% with only tax to pay, so the returns on property with the extra costs and work involved should be higher to make any sense.

Excellent graph which trends the insanity that has transpired here in an uncomplicated and direct fashion. Those that think house prices cannot fall back to 2001 levels in real terms won’t be having a laugh in the years ahead I suspect.

A synopsis of a relevant recent insight to what the future holds below

And what have we seen since this paper? The drip-feed of real information and data from the VI’s and media masking the true nature of the slowdown is what. There was a guy on the newstalk debate on the property market this morning, from the plasterers union in Cork that stated construction employment is the worst he and his colleagues have seen in 20 years, talk of extreme hardship and for some, possible emigration. They also had the usual EA/VI stating that things are bad but will pick up at the end of 2008, also the stamp duty thingy again true to form.

Really! It has obviously escaped his notice that inflation is back on the up in the Eurozone so Mr Trichet may not be finished yet with interest rates, ah-hem the little matter of an international credit crunch, oil heading towards $90 a barrel, possible wider war in the middle east and that’s only some of the international news at the moment.

Closer to home we have the HSE being softened up for redundancies by Harney, which is part of a wider policy of cutbacks, post election by her for and with her FF puppeteers, the marked deterioration of the public finances, the roller coaster that has become the Irish stock market, a property market that is in cardiac arrest with the associated knock on to the wider economy that is now occurring but any of that sort of stuff won’t affect the fundamentals and the consequent values of Irish property that much at all.

My last word from Irvine Housing Blog and posted here before also
The Psychology of the Bubble

The psychological stages of a market bubble. It is fairly easy to put timeframes to each of these stages as displayed by our local housing market:
· Take off: 1998-1999
· First Sell Off: 2000
· Media Attention: 2001-2002
· Enthusiasm: 2003
· Greed: 2004-2005
· Delusion: 2006
· Denial: 2007
· Fear: 2008
· Capitulation: 2009-2010
· Despair: 2011-2013
· Return to the Mean: 2014

Think Fish wrote

Martin Luther King said

:wink:

we may not like it , but the cost of housing in Ireland may remain high for 5 more years or 55 years.

We just dont know. If we were truly certain , vast fortunes could be made based on our certain knowledge.

Sadly most posters here act as if they have a superpower to predict where we are heading, why and how we are going to get there.

I “think” it is heading down , and will continue to do so until normalization. But it is just what I think and not a fact.

shrugs

There’s no other way it can go, to be blunt.

Whether it gets there by a combination of nominal and real drops over the next few years, or whether prices stay stagnant for a decade or more till they hit real normal levels is irrelevant really: real prices will go down, and go down quite some way.