What Is The Sentiment Now About House Buying In Your Area of Northern Ireland

[2buyornot2buy]

I've see mixed sentiment. Most people acknowledge that the boom times won't be returning but also now is a good time to buy and prices are bottoming. Of course these people are conditioned to this that property will always increase in value long-term.

Interestingly it's the older ones (50+) who are more negative, possible due to the fact the few younger ones who are positive (hit the bottom) have recently bought and are in denial. Not really a good sample as most don’t know how good they have it, with above average salaries and good bonus and pension schemes.

[Shotoflight]

From lightning on another thread

http://www.housepricecrash.co.uk/forum/index.php?showtopic=182922&view=findpost&p=909143986

We need to be careful when calling on readers of this site (casual or regular) for perceptions. We have the RICS survey each month and indeed as a countermeasure, a "man/woman in the street" survey would be interesting. However most "in the street" don't have the interest or (dare I say it) the knowledge or information we have accumulated here over the years - hence the 'delusion' charge for the 'sheeple' by some.

Both terms I try to avoid using but which do point to a certain scenario of lack of information or indeed mis information out on main street.

Confidence and sentiment can be hard to change and mistakes hard to accept for people who have obviously been taken for suckers and who have F**ked up their finances (and worse), sometimes by just trying to do the right thing but at the wrong time and other times through poor judgment, recklessness and encouragement from others (with their own agenda).

The thing is both here and with RICS there is the danger of "selective perception".

http://en.wikipedia.org/wiki/Selective_perception

A good example of this is my Mr & Mrs average thread. Guilty as charged.

The thing is whilst this worked on the way up, it's now working on the way down. And that's the big change. The crash is now the story. It is now fact. It is the narrative the media push and even the most delusional and confident know it.

Many owners/sellers/investors can avoid it if they don't have to engage in buying and selling, but more and more are getting the message, sometimes very painfully. The majority of those with no skin in the game are prepared to accept the evidence much more quickly.

The missing part of this crash to date is that sentiment and confidence need to be shattered at all levels of the market, especially the mid market. To the extent that UUJ report average prices are £140k, this hasn't yet happened fully.

Sterling devaluation of 25%, Interest rates at 0.5% and £375 Billion of QE have propped things up but all the big bullets have been fired. What state is our economy in that all this firepower can only result in a double dip recession, inflation of 17% over 5 yrs and house price falls in NI of 50%+?

Anyway - here's what I see:

Few houses and fewer estates being built,

more media exposure - the crash is now fact and in full swing (12% pa drops),

most houses still coming on at RV + 20% but not selling at that - or just not selling,

good houses priced below RV (10-20%) can sell in weeks

garden grabbing dead in the water,

3 people I know (and families) reposessed and now renting,

one family moved in with mummy & renting own house (no idea why),

at least one in wrangle over Belfast (investment) apartment contract

mate paid £190 for apartment 4 yrs ago, needs to sell, refused £140k offer

local BTLer selling off stock

2 examples of familes who planned to build, cant start - current houses wont sell (3 yrs and counting) for asking prices (RV +40%) renting till market improves & living with relatives

Banks lending no problem - but sensibly

95% mortgages still out there

Friend bought BTL last yr, was looking for one or 2 more, has now stepped back to watch and wait

Building trade (mates), retail (family) in trouble and worried. Public sector (mates) nervous/uncertain and going backwards. FG Wilson was a big wake up call.

Most seem to realise we're in the eye of this sh*tstorm rather than anywhere near an outturn and even those previously most confident have had this shaken, reluctantly and eventually, by the relative speed and strength of all this and by the numbers. Negative outlook on what is to come and uncertain re jobs/economy/cuts.

I am surprised (but shouldn't be) at how price conscious most people (that I know) have become, spending carefully, looking for bargains, cutting back, using vouchers (in M&S ), and how happy they are to share their finds without embarrasment. Like the guy on the insurance ad who saved a few quid and was "epic".

Many seem to be regaining the value of money, even though debt is historically cheap, and this will mitigate against the £250,000 3 bed bungalow phenomenon and the like that many had become accustomed to.

There's a lot of bluffing going on. A lot of people are hurting. Repo's and auction sales are the tip of a very large iceberg.

It smarts when I fill the car, do the shopping and buy heating oil. The price of butter is a joke.

How some EA's remain in business I'll never know but they are doing absolutely F*ck all to help themselves in light of what is happening out there. It's a mystery to me.

Selective perception?

[BelfastVI]

I don't frequent Estate Agents Offices too often. However none have states that 'houses are flying off the shelves'. I do visit showhouses, both our own and others, and have heard comments like 'they wont get much lower' etc. Yet the proof of the pudding is in the sales and whilst these are rising they are, as yet not increasing enough to indicate a significant improvement.

On our own sales, Aug and Sept have been the best two months since April 11. April 11 appeared to be a blip and if I ignore it then Aug and Sept have been the best two months since April 2009. Now, Aug and Sept may too turn out to be a blip, but I am more encouraged with two good months. I would need to see 6 months of this before I could honestly draw much from it.

It seems to depend on an absence of negative news. By that I mean a large bank or country going under. However, depending on how the short traders are doing we are always only two weeks away from that happening.

On a brighter note (if that is allowed). We entered this crash late. By that I mean affordability etc should have took it down earlier and we followed the US into it, lagging it by about 6 to 9 mths.

Whilst not scientific, the US would, and I say this tentatively, appear to be coming out of their housing downturn. I say tentatively as , no1 it is far to early to say for certain and no.2 it is election year.

However, if we followed the US into this (albeit we needed a crash all on our own) one could look to following the US out of it. The mortgage market is no longer regional. By that I mean that the reports on NI house prices have little effect on the lending decisions made in London, Newyork or wherever. The odd image of our lok still rioting wont kelp but the lending decisions are make on a UK, Europe and world level. If a recover in the US is sustained that will have dramatic implications on lending conditions on the world market and will, I believe have implications here.

On the opposite side I am increasingly concerned that the London Market is heading for a major crash. It has been propped up, by a falling £ and the overseas purchasers who wish to move cash out of certain hopspots. The good thing about this is the banks are not issuing mortgages on alot of these purchases. I read somewhere that only 20% of purchase in London, over £1m where from UK residents.

However, as we all know the London and south eask growth has been masking the falls in the other regions. I would worry that any sign of leveling off here would be drowned out by any slip in the London Market.

[Shotoflight]

I don't frequent Estate Agents Offices too often. However none have states that 'houses are flying off the shelves'. I do visit showhouses, both our own and others, and have heard comments like 'they wont get much lower' etc. Yet the proof of the pudding is in the sales and whilst these are rising they are, as yet not increasing enough to indicate a significant improvement.

On our own sales, Aug and Sept have been the best two months since April 11. April 11 appeared to be a blip and if I ignore it then Aug and Sept have been the best two months since April 2009. Now, Aug and Sept may too turn out to be a blip, but I am more encouraged with two good months. I would need to see 6 months of this before I could honestly draw much from it.

It seems to depend on an absence of negative news. By that I mean a large bank or country going under. However, depending on how the short traders are doing we are always only two weeks away from that happening.

However, as we all know the London and south eask growth has been masking the falls in the other regions. I would worry that any sign of leveling off here would be drowned out by any slip in the London Market.

Interesting perspective, BVI.

One of our local estate agents had flipcharts in the window about 3 months ago saying they had their highest monthly sales for years. flipchart now gone. Mortgage open night held for info several weeks ago. Don't know if anyone turned up.

Banks are lending and willing to lend. Sensibly, and 95% mortgages available at a price. I was in one enquiring 6 wks ago - keen and amenable to do business. I think BOI are having a mortgage week and say they have £200 million to lend over the next year or so. I don't see affordability criteria relaxing too much for a very long time - I do see SVRs rising. Co ownership still chugging away I assume for those able to prove they can't afford a house.

American sentiment and London sentiment (what about Europe?) may play a minor role in lending at institutional level (and confidence/risk calculation at individual level) however the fact that property and land in NI and ROI has turned out to be toxic in recent years for many individuals and institutions alike would, I would have thought, have a much larger bearing. Sometimes it's the macro view that does the damage - Euro interest rates for ROI for example allied to government/political interference.

Many banks must be nursing (and are still reporting) huge losses and the Northern probably remained here by the skin of its teeth (changing to Danske) and they weren't the worst.

As for show house botherers' perceptions that prices won't go any lower? Depends how low they are and, more widely, in which particular segment - apartment, ex council, auction, new build, repo. (I still think a large proportion of mid market and resales have failed so far to smell the coffee.)

Perhaps so. But I refuse to believe that a UUJ average of £140k and rising is the end of the matter. The show house visitors may well do, however, or may not particularly care and plough on and buy regardless - as of course they have every right to do. As you say elsewhere BVI, these people have moved up the house buying decision making process and will probably be inclined to justify their views/decision. They certainly shouldn't be stung as badly as had they bought 5 yrs ago and will, perhaps, have given a bit more thought to the situation in light of the crash.

As a matter of interest, what would you say is the % price differential on a like for like basis of a house sale by yourself in April 09 and Aug/Sept 12 stripping out any incentives or inducements. If any?

I'm not so sure whether a higher risk appetite from lending institutions (if it ever happens - the fundamentals and goalposts have shifted incl forthcoming FSA regulation) or overseas sentiment (if it materialises & lasts) will be enough to affect individual confidence (nevermind financial circumstances) for quite some time, given the depth and breadth of retrenchment, uncertainty and damage we are currently experiencing.

Edited September 24, 2012 by Shotoflight

[Xerxes]

I think one of the most interesting indicators of the populace's overall state of mind is the trend in planning applcations being lodged. Its a clear indication of how people see their future be they an individual or organisation.

I've noticed that since this mess started not only have the overall number of applications dropped dramatically but there has been "trending" in the type of applications lodged.

At the start of the crash there was a general rush of housing related applications as (I think) people tried a last deperate attempt to secure land value. Then for a year or so there was a raft of applications for house extensions as people thought either - "we cant move so lets improve" or "Im in trouble so better increase mortgage equity to 100% so the bank wont take my home off me." These applications died out as the banks lending started to correct itself. Then we had the brief fad of money making schemes being applied for - in particular wind turbines. But again these have dried up as people hear of the problems related to funding, pay back and the general expense and timeframe of the planning process. Now we seem to be left with applications for change of approved house type because it's the cheapest way of maintaining PP on a site for another 5 years AND the drip drip drip of farmers applying , and generally failing , to get PP for single dwellings as they find out the realities of PPS21. So at the minute, IMHO, we seem to be in a pretty desperate place.

Again this is all personnal opinion and possibly because of my profession I have to stand a little too close to the black hole.

[BelfastVI]

Interesting perspective, BVI.

As a matter of interest, what would you say is the % price differential on a like for like basis of a house sale by yourself in April 09 and Aug/Sept 12 stripping out any incentives or inducements. If any?

I'm not so sure whether a higher risk appetite from lending institutions (if it ever happens - the fundamentals and goalposts have shifted incl forthcoming FSA regulation).

In 2009 (stripping out a few expensive sites) our average was £159k

In 2012 (stripping out a few expensive sites) our average was £141k

I stripped out expensive sites but it is still not like for like as they are different developments.

The new FSA rules, which are already in place are perhaps below what the banks are doing themselves.

We don't offer any incentives or inducements. What you see is what you get.

[Belfast Boy]

I think one of the most interesting indicators of the populace's overall state of mind is the trend in planning applcations being lodged. Its a clear indication of how people see their future be they an individual or organisation.

I've noticed that since this mess started not only have the overall number of applications dropped dramatically but there has been "trending" in the type of applications lodged.

At the start of the crash there was a general rush of housing related applications as (I think) people tried a last deperate attempt to secure land value. Then for a year or so there was a raft of applications for house extensions as people thought either - "we cant move so lets improve" or "Im in trouble so better increase mortgage equity to 100% so the bank wont take my home off me." These applications died out as the banks lending started to correct itself. Then we had the brief fad of money making schemes being applied for - in particular wind turbines. But again these have dried up as people hear of the problems related to funding, pay back and the general expense and timeframe of the planning process. Now we seem to be left with applications for change of approved house type because it's the cheapest way of maintaining PP on a site for another 5 years AND the drip drip drip of farmers applying , and generally failing , to get PP for single dwellings as they find out the realities of PPS21. So at the minute, IMHO, we seem to be in a pretty desperate place.

Again this is all personnal opinion and possibly because of my profession I have to stand a little too close to the black hole.

Informative first post. Welcome.

I have noticed a few foundations going in this year. One even has a 'for sale' sign on it. My guess is that the 5 year planning permission applied for in 2007/8 is running out. People probably think that a site with foundations (or even a new property?) will, at some point in the distant future, be worth more than a farm land.

When did the rush for planning permission on sites drop off?

Though this would not be a factor in the 3 sites on the North Coast that I refered to on another thread. They are all replacement dwellings.

[Belfast Boy]

I do visit showhouses, both our own and others, and have heard comments like 'they wont get much lower' etc.

People have stopped saying that to me I always reply, 'can you explain to me the economic reasons why house prices won't go much lower.' Then I completely rubbish any theory they have using actual economic facts. For instance it is a fact that average house prices are continuing to fall by one thousand pounds every month according to the governments own housing market survey.

On a brighter note (if that is allowed). We entered this crash late. By that I mean affordability etc should have took it down earlier and we followed the US into it, lagging it by about 6 to 9 mths.

Whilst not scientific, the US would, and I say this tentatively, appear to be coming out of their housing downturn.

This is it! Imagine where the economy would be without BoE interest rates at 0.5% and printing money (QE) and a national debt of over one trillion pounds. Is America any better? This is the brighter note! Things would be much worse without all the funny accounting that is going on at the highest levels of our economy.

On that note...

Have a nice day

[NuBrit]

I know quite a few people who have bought or are planning to buy, all at the lower end of the market (50k-100k houses). I definitely think that prices at that segment of the market are fair. Where there are areas of gross overvaluation though is at the upper end of the market. I see far too many ordinary houses asking £200k+ just because they are detached and are on a quarter of an acre.

[ronaldo]

What I am observing is that, like stock market investment, everyone tries to jump in when things are shooting up and sell up when things look messy. In relation to stock market investing, I like to think of myself as a contrarian investor and try to move opposite to the crowd as much as possible - that's usually where the big money is to be made. Unlike the stock market, the housing market isn't very liquid and a different approach must be taken.

As property prices fluctuate over the next 18-24 months, it's a matter of weighing up the potential reward versus the potential risk. You may be lucky and time the bottom perfectly but that will be a matter of buying within a 6-8 week window at the bottom.

I'm buying in Derry now and the reason (apart from the obvious turning 30 next year and having a 25% deposit available) is that, whilst I doubt we are at the bottom now, I don't see prices falling more than 20% from here. I also think that, when the market turns, the final 10% of falls will be made up pretty quickly - due to people on the sidelines jumping into the market.

The house purchase in Derry has been a long process for me due to what I consider to be incompetence on the part of the sellers solicitor. I should be completing in October (having had my offer accepted in May). However, I did negotiate a £5,000 discount to the original offer due to 'market conditions', i.e. I showed the seller the latest NI House Price survey release last month and told him to take the new offer or leave it.

To the flip side of this, as the mortgage application and conveyancing process is such a long, drawn-out process, there is nothing to stop the seller of properties during the eventual upturn renegotiating the selling price or accepting a higher offer. For this reason, I think that it's better to buy on the way down than on the way up.

Put another way, it's likely that any eventual house purchase will take 3 months from the point of offer acceptance to the point of exchange of contracts. This is enough time for a more up-to-date quarterly house price survey to come out. I have no doubt that any house seller during the eventual upturn will be monitoring this and may pull out to remarket at a higher price. This will make chains very difficult to complete.

Of course, this is all personal opinion but I'm sure that many members of HPC would agree that the bottom will be hit within the next 24 months. It's now a matter of picking a 3-month window within that 24 months to initiate, and complete, your purchase and then hoping that you timed the bottom, or close to it.

I notice a few comments above about people saying 'prices can't go much lower'. That has been the opinion of many over the past 2 years or so and it's now reaching a point where, as Belfast Boy states above, people have stopped saying this and are starting to give up on the market.

For the particular property that I am purchasing, the banks valuation came in at about 8% higher than my offered price. Added to my 25% deposit, I could, in theory, sustain a 30% loss before entering negative equity. That would bring my 4-bed detached house down to a value of 1.75 times the average salary of a couple.

I do think that inflation will be a big problem coming out of the recession and, with this, comes the increases in interest rates. For this reason, I'll be looking at 5-year fixed deals as soon as my current 2-year discounted mortgage offer ends. Of course, whilst inflation will cause an increase in interest rates, it will also 'inflate away' your mortgage to a certain extent.

[Xerxes]

Informative first post. Welcome.

I have noticed a few foundations going in this year. One even has a 'for sale' sign on it. My guess is that the 5 year planning permission applied for in 2007/8 is running out. People probably think that a site with foundations (or even a new property?) will, at some point in the distant future, be worth more than a farm land.

When did the rush for planning permission on sites drop off?

Though this would not be a factor in the 3 sites on the North Coast that I refered to on another thread. They are all replacement dwellings.

[Xerxes]

It would be very informative to see Planning Service's data on applications processed in the past 5 years. One thing I am surprised at is how quickly central government moved to re-allocate planning staff in view of the reduction of aplications. A certain senior plnning officer for a very large South Antrim Planning area complained to me last year how his staff had been cut from 15 to 2 planning officers in 2008. Oh the horror. nd as a consequence they would not be conducting site visits - so build what you want people. Nuclear power station on Slemish anyone??

[headmelter]

I would like to hear what people are hearing about how the housing market stands in Northern Ireland. We have plenty of evidence that prices went down at least 10.9% last year.

Are people staying away from houses or filling their boots?

My boots are filled.....

[Belfast Boy]

I notice a few comments above about people saying 'prices can't go much lower'. That has been the opinion of many over the past 2 years or so and it's now reaching a point where, as Belfast Boy states above, people have stopped saying this and are starting to give up on the market.

No... people don't say "prices can't go much lower" to me, because I always ask them to explain the economic reasons why prices cannot go much lower.

You said - 2 years ago people were saying house prices were near the bottom. Yet here we are 2 years later and the average house price has fallen by another £20-£30 thousand. I don't see anything to indicate that the same thing won't happen over the next 2 years.

What makes you think that the bottom of the market will last for only 8 weeks? History shows that the bottom of the market will last for several years.

Where is the data showing that house prices are near the bottom? Have the falls in average prices slowed and started to level off? Ignore opinions and hear say - the facts are that average house prices are continuing to fall by about one thousand pounds a month according to the governments own housing market report.

You are trying to rationalise your buying decision on here of all places.

We are definitely nearer the bottom of the housing market. But we are not there yet!

Most people were amazed at how high house prices went during the boom. They are currently amazed by how far house prices have fallen from the peak. They are going to be amazed again at how low prices go during the bust.

Edited September 30, 2012 by Belfast Boy

[Shotoflight]

No... people don't say "prices can't go much lower" to me, because I always ask them to explain the economic reasons why prices cannot go much lower.

You said - 2 years ago people were saying house prices were near the bottom. Yet here we are 2 years later and the average house price has fallen by another £20-£30 thousand. I don't see anything to indicate that the same thing won't happen over the next 2 years.

You are trying to rationalise your buying decision on here of all places.

We are definitely nearer the bottom of the housing market. But we are not there yet!

Most people were amazed at how high house prices went during the boom. They are currently amazed by how far house prices have fallen from the peak. They are going to be amazed again at how low prices go during the bust.

Agreed.

[Belfast Boy]

ronaldo, there other things in your post that I would like to discuss. Sorry db, if this is off topic.

What I am observing is that, like stock market investment, everyone tries to jump in when things are shooting up and sell up when things look messy. In relation to stock market investing, I like to think of myself as a contrarian investor and try to move opposite to the crowd as much as possible - that's usually where the big money is to be made. Unlike the stock market, the housing market isn't very liquid and a different approach must be taken.

I agree with the above. Though I would not try and compare the two types of investment at all.

As property prices fluctuate over the next 18-24 months, it's a matter of weighing up the potential reward versus the potential risk. You may be lucky and time the bottom perfectly but that will be a matter of buying within a 6-8 week window at the bottom.

I disagree with this. When house prices stop falling nominally, they will continue to fall in real terms. The nominal bottom of the housing market may only be a few years away. But the real bottom will likely be a few years after that. If you look at the data for the last house prices crash. The nominal bottom lasted for nearly 4 years. Where did you get the 6-8 week window?

I'm buying in Derry now and the reason (apart from the obvious turning 30 next year and having a 25% deposit available) is that, whilst I doubt we are at the bottom now, I don't see prices falling more than 20% from here. I also think that, when the market turns, the final 10% of falls will be made up pretty quickly - due to people on the sidelines jumping into the market.

The data shows that this did not happen after the last 3 house prices crashes. But maybe it really will be different this time.

there is nothing to stop the seller of properties during the eventual upturn renegotiating the selling price or accepting a higher offer. For this reason, I think that it's better to buy on the way down than on the way up.

As mentioned above the bottom in the market will likely last for years. Buying as an investment in a falling market is a bad move unless you know that you have - to use a stock market term - reached a level of strong support. The current data is showing a total lack of support for current price levels.

Put another way, it's likely that any eventual house purchase will take 3 months from the point of offer acceptance to the point of exchange of contracts. This is enough time for a more up-to-date quarterly house price survey to come out. I have no doubt that any house seller during the eventual upturn will be monitoring this and may pull out to remarket at a higher price. This will make chains very difficult to complete.

No data supports this opinion.

Of course, this is all personal opinion but I'm sure that many members of HPC would agree that the bottom will be hit within the next 24 months. It's now a matter of picking a 3-month window within that 24 months to initiate, and complete, your purchase and then hoping that you timed the bottom, or close to it.

I think that the nominal bottom of the market may happen in 24 months. But it is unlikely to happen much before that. So why buy as an investment in a falling market?

I notice a few comments above about people saying 'prices can't go much lower'. That has been the opinion of many over the past 2 years or so and it's now reaching a point where, as Belfast Boy states above, people have stopped saying this and are starting to give up on the market.

I have already covered that in another post.

For the particular property that I am purchasing, the banks valuation came in at about 8% higher than my offered price. Added to my 25% deposit, I could, in theory, sustain a 30% loss before entering negative equity. That would bring my 4-bed detached house down to a value of 1.75 times the average salary of a couple.

... catching a falling knife! Or wait until it has fallen and then pick it up? No matter, good luck with yor investment.

I do think that inflation will be a big problem coming out of the recession and, with this, comes the increases in interest rates. For this reason, I'll be looking at 5-year fixed deals as soon as my current 2-year discounted mortgage offer ends. Of course, whilst inflation will cause an increase in interest rates, it will also 'inflate away' your mortgage to a certain extent.

You have hit the nail on the head there. Inflation is why I would not compare investing in the stock market with investing in property.

On the surface you sound like you know what you are doing. Though most of it is opinion and guess work. History does not agree with you.

Edited October 1, 2012 by Belfast Boy

[Belfast Boy]

Nationwide housing data link...

http://www.nationwid...ds/All_prop.xls

Note the UK average house price was £52k in Q1 1992 and still under £52k four years later Q1 1996.The very bottom was just over £50k.

There was a 4 year period where you could buy a house at less that 5% above the bottom.

I really do think that the bottom in house prices is still worth waiting for. Especially for investors as you will avoid potential capital losses. And lets face it the returns on property are poor when you factor everything in. Property investment only makes sense when you factor in capital gains and that may be a decade away (in my informed and well researched opinion )

Edited October 1, 2012 by Belfast Boy

[ronaldo]

I agree with the above. Though I would not try and compare the two types of investment at all.

Yeah, it's difficult (and pointless) to compare the two types of investment. I gave the example to describe the mindset of the investor as opposed to the strategy of investing as the mindset is pretty much the same.

I disagree with this. When house prices stop falling nominally, they will continue to fall in real terms. The nominal bottom of the housing market may only be a few years away. But the real bottom will likely be a few years after that. If you look at the data for the last house prices crash. The nominal bottom lasted for nearly 4 years. Where did you get the 6-8 week window?

As you say, the real-term falls will continue until such times that property price growth increases beyond the rate of inflation which, although the governments target is 2%, I feel will be closer to 4-5% for a few years. Some of the real-term falls will be wiped out by the fact that the mortgage debt is being eroded by inflation. The 6-8 week timeframe is based more on anecdotal evidence of people waiting and saving for a deposit. Of course, noone knows how things will end up. We can look at Nationwide surveys during the last crash but can't really use the Northern Ireland data as Northern Ireland was in a completely different landscape in the late 80's and early 90's with the troubles and subsequent ceasefires. The UK wide data, as it still is, was skewed towards the London property prices too. The LPS/NISRA data in the new survey is much more reliable but, unfortunately, doesn't go back too far.

The data shows that this did not happen after the last 3 house prices crashes. But maybe it really will be different this time.

I agree that it's an unknown and those that do time the bottom exactly are likely to do moreso out of luck than skill.

As mentioned above the bottom in the market will likely last for years. Buying as an investment in a falling market is a bad move unless you know that you have - to use a stock market term - reached a level of strong support. The current data is showing a total lack of support for current price levels.

Whilst I would consider an investment property in the future, my current purchase is for myself. To rent a similar property would be £650 per month including rates. Taking maintenance and rates out of this would leave you with around £450 per month (it's a 6-year old house so maintenance should be reasonably low). Assuming a £450 payment and that I had no deposit and mortgaged the entire cost of the house, an interest only mortgage would be covered up to a rate of 4.7%. Of course, I have a 25% deposit so a £450 mortgage would cover my mortgage up to about 6.2%. These figures are meaningless due to the fact that I'll be on a repayment mortgage rather than interest only but they're worth keeping in mind when comparing the cost of renting and owning.

I think that the nominal bottom of the market may happen in 24 months. But it is unlikely to happen much before that. So why buy as an investment in a falling market?

I don't necessarily agree or disagree with this. I feel the bottom will be within 24 months but believe that we are not too far in percentage terms from that bottom, if we're not there already. I believe that certain houses could be bought now from the more distressed sellers at prices that will be seen as having being very favorable in 3-4 years.

Northern Ireland is a very difficult market to judge in terms of historical data because, whilst the majority of the rises over the past two decades could be attributed to the same factors that caused the price rises in the UK mainland, a certain percentage of it has come from the increased political stability in the region.

As an example, I work in Northern Ireland but, until now, have lived in the Republic of Ireland all my life. In my workplace, I know of four people who, like me, are moving (or have already moved) to Northern Ireland. The reason for this is the uncertainty over what is happening in Ireland regarding property taxes and water rates. At the moment, Northern Irelands rates bills are higher than what would be paid in the Republic of Ireland who only have a 100 euro charge in place now - but that 100 euro is just a placeholder and the increases in rates will be significant over the next few years. At least with Northern Ireland, you know what the rates are and it's 'reasonable enough' to assume that they'll only rise by a similar level to inflation.

Likewise, there are a lot of houses in the Republic's border towns that were bought in past years by people who grew up in Northern Ireland. These people make the commute to Northern Ireland daily and the reasons for purchasing in the Republic were, until now, there were no rates and, in the case of some of the longer term owners of houses in the Republic, to allow their children to grow up in an environment outside the troubles. I am seeing a lot of these houses come on the market in the border towns such as Burnfoot, Bridgend, Muff, etc. I can only assume that a certain percentage of these people will also be moving back to Northern Ireland.

This movement of people from the Republic to Northern Ireland will also have an impact of prices - although the extent of this impact is an unknown.

[Belfast Boy]

Whilst I would consider an investment property in the future, my current purchase is for myself.

Sorry - my mistake - the stock market reference and talk about the bottom of the market confused me. The circumstances are different for people buying homes to live in.

This movement of people from the Republic to Northern Ireland will also have an impact of prices - although the extent of this impact is an unknown.

That is interesting. Though negitive equity and finding a buyer should severely restrict numbers.

[Belfast Boy]

We can look at Nationwide surveys during the last crash but can't really use the Northern Ireland data as Northern Ireland was in a completely different landscape in the late 80's and early 90's with the troubles and subsequent ceasefires. The UK wide data, as it still is, was skewed towards the London property prices too.

That is a fair point. Northern Ireland never really had a housing bubble before. I was just using the Nationwide data as one example of what the bottom of a housing market cycle may look like. Not only has the current boom been one of the biggest in history - it is also one of the longest. I don't think it is unreasonable to expect the bottom of the cycle to be of inversely similar size/duration i.e. overshoot more than expected and for longer.

Edited October 1, 2012 by Belfast Boy

[PJ1977]

That is a fair point. Northern Ireland never really had a housing bubble before. I was just using the Nationwide data as one example of what the bottom of a housing market cycle may look like. Not only has the current boom been one of the biggest in history - it is also one of the longest. I don't think it is unreasonable to expect the bottom of the cycle to be of inversely similar size/duration i.e. overshoot more than expected and for longer.

There's the big Reinhart/ Rogoff dataset to support that contention:

"The other important figure which the two economists have come up with can only spell more gloom for Northern Ireland house owners.

They found that the duration of house price declines has "been quite long lived, averaging roughly six years".

Even when Japan is excluded - it suffered 17 consecutive years of price falls - the average still comes out at more than five years.

So far prices here only been falling for four years suggesting that there is at least another year of falling prices to come."

http://www.bbc.co.uk/news/uk-northern-ireland-15757932

[ronaldo]

That is interesting. Though negitive equity and finding a buyer should severely restrict numbers.

That's true. As an example, one of the local housing estates that a lot of purchasers were from Northern Ireland is Grianan Park in Burnfoot. When these houses were completed in Summer 2007, the Irish Property Index was at 101 and it now stands at 45.4. That means that every €100,000 then is now worth about €45,000.

Of course, at that time, you could get a euro for every 68p sterling whilst now it's at about 80p. Therefore, if you had bought with sterling and were transferring back to sterling, you'd wouldn't be doing AS bad - with £100,000 now being worth about £53,000. Even with the favourable exchange rates, most people in this housing estate will be stuck there through negative equity. I'd imagine that the majority of the people that would fall within the category of being able to move will be those that bought pre-2004 in the Republic.

In addition to this, I'm sure there'll be a certain percentage of children belonging to families that moved to the Republic that will fall within the FTB category over the next few years who may move back to Northern Ireland.

Of course, this is a small factor amongst many others that will impact the housing market over the next few years. No amount of people moving from the Republic of Ireland to Northern Ireland will help cushion falls in the property market if banks tighten their lending criteria further or if interest rates shoot up.

I've read a book in the past on house price cycles and think I remember something about it being the professional landlords that tend to put a bottom to the market and not the FTB's. Basically, they jump in when the returns are too high to ignore any longer. For the middle-higher end of the market, we aren't at that point yet so you may be right that we have more drops to come - either that, or rents will rise (and I can't see rents rising TOO much as they're pretty high already). The rental yields do seem to be there at the lower end of the market (£40,000 - £60,000 houses) but I do not envy any landlords letting within this category - the percentage yields are there but the actual cash returns make it hard to justify the amount of work involved.

It's really all a guessing game and comes down to personal circumstances. For me, I looked at houses in the £135,000 - £150,000 range under the impression that anything approaching the £125,000 stamp duty threshold was likely to be brought down to that level artificially. Given the size of the house and the fact that I'm single, the option is there, if needed, to rent a room. However, as I like my privacy, I'll not be doing that unless my personal circumstances change significantly.

I would say that it's a house that I could see myself living in forever but that would be naive - anything could happen in years to come and, having lived through this recession and property crash, I would have no hesitation whatsoever in selling to rent if property went back up to levels seen in 2007 in decades to come.

[ronaldo]

There's the big Reinhart/ Rogoff dataset to support that contention:

"The other important figure which the two economists have come up with can only spell more gloom for Northern Ireland house owners.

They found that the duration of house price declines has "been quite long lived, averaging roughly six years".

Even when Japan is excluded - it suffered 17 consecutive years of price falls - the average still comes out at more than five years.

So far prices here only been falling for four years suggesting that there is at least another year of falling prices to come."

http://www.bbc.co.uk/news/uk-northern-ireland-15757932

That report's a year old but it's predictions have been correct so far. It's all guess work as to where it will end but houses are available at reasonable salary multiples at the moment. I believe that any further falls will be the 'overshooting' part of the bear-market.

What would be interesting would be to know what sentiment was like in Japan after 5 years of their 15-year bear market. The house that I'm buying has fallen exactly 50% from the price it was marketed at as a new build in 2006. As far as I can see, Japan's bear market started in 1991 and ended in 2005. However, it took theirs 7 years to half so ours appears to be more abrupt.

[Killer Bunny]

This is it! Imagine where the economy would be without BoE interest rates at 0.5% and printing money (QE) and a national debt of over one trillion pounds. Is America any better? This is the brighter note! Things would be much worse without all the funny accounting that is going on at the highest levels of our economy.

In due course our central bank will not control its int rates. The market will, when we are continually downgraded and our bonds are sold to kingdom come.

[Killer Bunny]

I'm buying in Derry now and the reason (apart from the obvious turning 30 next year and having a 25% deposit available) is that, whilst I doubt we are at the bottom now, I don't see prices falling more than 20% from here. I also think that, when the market turns, the final 10% of falls will be made up pretty quickly - due to people on the sidelines jumping into the market.

What's the average price to earnings in Derry?