Comments on: Global forces take command

By: Stephen

Stephen — Sun, 09 Dec 2007 13:14:00 +0000

Let’s not mix up the whole economy with the individual. *Someone* has to own every property, be it a person, a bank, an insurance company, an investment fund, or whoever. So when prices fall, *someone* takes a hit. As far as the economy is concerned, I’m not sure it matters who it is that takes the hit. No amount of cunning sale-and-leasebacks will save the economy at large, from an overvalued property market.
The imbalances caused by the property bubble need to be worked out of the system, so even if property prices held up (e.g. no one had to sell, so no one did sell, so lower values were never crystalised), the problem needs to be solved. If property prices don’t fall much, due to huge efforts to stop them, then those same efforts will cause other prices to rise, to compensate.
There are so many people waiting to jump into ‘distressed’ (i.e. so-called ‘cheap’) property; the central banks are doing everything they can. It seems possible that all this extra cash will cause general inflation, rather than property deflation.
Only time will tell, mainly because the financial markets are so opaque, and they probably feel that it’s afr too important to be honest about things (Adam Smith would be weeping).

By: john mcdermott

john mcdermott — Fri, 07 Dec 2007 12:02:57 +0000

Remember also a lot of people who have bought into so called “affordable housing” in recent times may feel hard done by as prices are falling towards this “discount” level. these buyers are trapped with a council clawback if the property is re-sold in the next ten years.!

By: shtove

shtove — Fri, 07 Dec 2007 11:27:04 +0000

Nobody considering the prospect of deflation? Something has to contract when all the credit facilities are withdrawn – a bit of scrotum tightening in the snot green sea of debt.

By: joe martin

joe martin — Wed, 05 Dec 2007 21:34:00 +0000

Lonely expat:
Im also seeing “reduced to sell” on the FOR SALE signs !! I’ve never seen that chestnut before !!

By: Lonely Expat

Lonely Expat — Wed, 05 Dec 2007 18:58:27 +0000

Being a neutral observer, I am seeing a huge range of views on the subject of where property prices may be heading and how fast they may get there. These range from optimistic (vested interest) to pessimistic (David MW?) with a fair smattering of in-betweens. We are talking about property values here – real assets for which real cash changes hands. Accurate data (rather than “qualified views”) should not be too dificult obtain if the owners of this information (banks / agents / Daft) were forced to make it publicly available. I personally would be very reluctant to invest in the current market without solid information on:

1) Reliable data on mortgage applications, adjustments and refusals (banks)
2) Average prices / square metre (historical and current) by location and type of accomodation (banks)
3) Current rate of price drops and withdrawals from market per property / location (Daft)

Finally, I have seen that price tags seem to be moving from “in excess of” to “in region of”. Does this imply “am prepared to accept more”, “am prepared for hard negotiations” or, perhaps on a more realistic note “am prepared to accept much less – just get me the hell out of this predicament”. How many retailers get away with “in the region of” labels?

PS: Just to add to the general confusion, individual properties are simultaneously being offered at different prices – check out Daft, 22 Carlisle Street, South Dublin. This is “in the region of” 800k or 900k, depending on which agent you want to believe.

By: Vandala

Vandala — Wed, 05 Dec 2007 11:37:58 +0000

Rent control. Is the idea so unfeasible?

By: laura

laura — Wed, 05 Dec 2007 11:35:45 +0000

I don’t think you need worry David, most people who could already afford to buy already have, and most of those who don’t are either a) priced out of the “morket” entirely or b) unable to put up sufficient deposit to get a mortgage now that 100% is out the window.

But you are 100% correct in saying that the property industry have hijacked the economic debate. Of course they have, and the scary thing is what their paymasters will extract from the politicians they’ve been “digging out” in the past as recompense for past bribes….sorry…..”loans.”

By: VincentH

VincentH — Wed, 05 Dec 2007 09:11:58 +0000

Irish people are not idiots. The reason for the issues with property is based on the reality that renting is a mugs game. WHY, due to the lack of any reasonable legal protection and an foolish belief on the part of the landlord that rents should be a fixed % of the notional value of the property.

By: Conor

Conor — Wed, 05 Dec 2007 00:05:56 +0000

Getting Irish people to follow a prudet investment strategy is much easier said than done. We simply have an obsession with owning a plot of land with a house thrown on top of it. Clear stupidity in some people’s eyes, but it is arguably a matter of history. Securing one’s plot of land has been a mainstay of national and individual pride sice the days of the Land League back in the 1870s.

The issue of homeownership has come up recently in my own family. I myself am happy to rent for the time being; ivesting my deposit and any other savings until the time is right to purchase a home (probably around 2015 or so the way things are going). Nevertheless, my sister is getting itchy feet and wants to stop renting and get on the property ladder, and the rest of my family couldn’t be more supportive of her curious decision. They are all well-read, educated, generally sensible people, but any talk of property and all intelligence seems to go out the window.

My family are fully-aware that property prices will have fallen by 5% by the end of the year and will continue to do so for the forseable future. For some reason they cannot see the logic in holding out and buying in the future when prices have stabilised. No, my sister is fully prepared to shell out approximately €500,000 on an asset which will be worth a mere €300,000 in ten years time. Admittedly, much of this negative equity would be spent on rental costs, but like Paddy mentioned above, surely keeping your deposit and other savings as liquid assets in the form of savings and investments that have the potential to increase in value is better than frittering away your hard-earned cash in the form of negative equity.

But no, she is still adamant that buying is the best decision! She and thousands of other young Irish people are quite happy to throw their money into the air! They view rental as unsecure, the domain of students, young professionals but certainly ot something for families to enter into. Are inflated property values not even more unsecure. This contrasts greatly with the situation in cotinental Europe where in German for example, 70% of households are in the rental market with savings for the future put into diverse investment portfolios, rather than putting all of their eggs in the property basket.

It seems callous to say this, but Irish people get what they deserve in the coming years. History provides us lessons to learn from, and not to multiply its mistakes to the nth degree! A portfolio leveraged 100% on one property is not a sensible one. It is too late for lessons to be learned. Those of you who can sell up now, get a job in the reposession industry, or better still – leave!

By: Glen Quinn

Glen Quinn — Tue, 04 Dec 2007 21:57:01 +0000

Hi Donall,

Actually doing nothing is a good investment strategy as it preserves your investment. You can do a lot worse by buying a particular investment at the wrong time and you end up with an asset that is losing value!

I would just suggest that you pick a good savings account that has a good rate of interest and a bank that won’t go under.

Ooooppppps I’m sorry, I think there all going to go under. :-)