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ronnie

Dublin Prices Going Even Madder

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luckily according to estate agent price rises will slow to only 15% by end of year! thank goodness for that then! this bubble gets bigger by the day, gross rental yields are nearly 1%,its a joke.

http://www.rte.ie/business/2006/0403/housing.html

Estate agents Sherry Fitzgerald says the average price of a second hand property in Ireland rose by 7.6% in the first quarter of this year. This follows growth of 17.3% last year, which Sherry Fitzgerald says is an indicator of the continued buoyancy of demand for residential property.

The pace of house price inflation in the Dublin second hand market was notably stronger at 11.2% for the first three months of 2006. This brings the rate of increase to 30.5% for the 12 months to March 2006 and compares to a total growth rate of 23.3% in 2005.

Sherry Fitzgerald's chief economist Marian Finnegan says this is partly due to the relative poor supply of new houses in Dublin city. Though just less than 30% of the country's population live in Dublin, only 22% of total completions and 14% of house completions are being provided to the Dublin market.

Today's figures show that sales by first time buyers remained stable at 36% of all second hand properties traded in the three month period. Sherry Fitzgerald says the introduction of 100% mortgages and the elimination of stamp duty has significantly fuelled price inflation for the starter home end of the second hand market.

Investors were also relatively active so far this year with preliminary estimates suggesting they purchased 20% of the second hand properties traded so far. This compares to 19% the same time last year.

22% of traders so far this year sold with the intention of buying a larger property. The estate agents say that this is a 'very healthy' indicator of the robustness of the market. Evidence also suggests that there was a shortage of larger family homes on the market in the first quarter of 2006, a factor which also fuelled price growth.

Ms Finnegan says that one of the more important factors to influence the performance of the market this year will be interest rate cycle. Despite the recent hikes, there is still expectation of further increases of around 0.5% in the near future.

'Such an increase in the cost of borrowing money will temper consumer expenditure and therefore begin to limit the potential for price growth,' the economist says.

'The combination of this and the reduction in the gap between supply and demand will facilitate a moderate of house price growth with current estimates suggesting price inflation will average 15% during the year,' she adds.

She predicts that the greater proportion of this price growth will take place in the first half of the year, with lower growth anticipated in the latter months of 2006.

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Let them carry on. :)

If you spend €800k on a modest property and put down 50% as a deposit, your monthly payment will be around €2,500. (25 year repayment mortgage)

Renting the same property will cost you around €1,500 per month. But then you can invest the €400k deposit you had and get a decent return. Many managed funds are returning 5%-10% per annum, some even more. At 7.5% you would get €2,500 a month gross – comfortably covering your rent.

The phrase, “Rent is Dead Money” is a handy little soundbyte that saves you having crunch the numbers. When people do, they are often stunned at how cheap renting really is.

The biggest trick the banks have pulled is to convince us that rent is "dead money", but interest paid to them isn't.

The real cost of renting is the best kept secret in the Irish property market, and don’t forget all those interest rate rises to come. ;)

Edited by Flash

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Sherry Fitzgerald's chief economist Marian Finnegan said "its my job to come up with the crooked figures for these estate agents, so that you mugs will buy more property". Prices will continue to rise for ever and ever.Amen.

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Let them carry on. :)

If you spend €800k on a modest property and put down 50% as a deposit, your monthly payment will be around €2,500. (25 year repayment mortgage)

Renting the same property will cost you around €1,500 per month. But then you can invest the €400k deposit you had and get a decent return. Many managed funds are returning 5%-10% per annum, some even more. At 7.5% you would get €2,500 a month gross – comfortably covering your rent.

The phrase, “Rent is Dead Money” is a handy little soundbyte that saves you having crunch the numbers. When people do, they are often stunned at how cheap renting really is.

The biggest trick the banks have pulled is to convince us that rent is "dead money", but interest paid to them isn't.

The real cost of renting is the best kept secret in the Irish property market, and don’t forget all those interest rate rises to come. ;)

Flash;

That is a refreshing prospective on the mania. The pyramid scheme is producing tens of thousands of new homes every year, Sherryfitz suggest that 20% of purchases are by investors, I think you could add another 10% for accidental investors people hanging on to their old homes when they move on. With rents falling in real terms it probably now makes more financial sense for bearish potential buyers to keep stum.

:D

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Flash;

That is a refreshing prospective on the mania. The pyramid scheme is producing tens of thousands of new homes every year, Sherryfitz suggest that 20% of purchases are by investors, I think you could add another 10% for accidental investors people hanging on to their old homes when they move on. With rents falling in real terms it probably now makes more financial sense for bearish potential buyers to keep stum.

:D

Another way of looking at it is that if you invest that 50% deposit and nicely spread your risk, the return covers your rent and more, hence the market is paying YOU to live in the property. :D

Edited by Flash

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Let them carry on. :)

If you spend €800k on a modest property and put down 50% as a deposit, your monthly payment will be around €2,500. (25 year repayment mortgage)

Renting the same property will cost you around €1,500 per month. But then you can invest the €400k deposit you had and get a decent return. Many managed funds are returning 5%-10% per annum, some even more. At 7.5% you would get €2,500 a month gross – comfortably covering your rent.

Err... does the word 'endowment mortgage' come to mind?

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Err... does the word 'endowment mortgage' come to mind?

I heard from an Irish colleague that 35 year mortgages are all the rage out there. No wonder house prices continue to increase in Ireland.

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I heard from an Irish colleague that 35 year mortgages are all the rage out there. No wonder house prices continue to increase in Ireland.

How about a 35 year IO? That's like an endowment but without the compensation :lol:

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Yeah, but the problem is, this shows how the UK could get even madder. What are the differences between the UK and Ireland that mean that property prices couldn't get as mad here as they are there.

Don't get me wrong, I believe that property prices are mad and must correct at some time. But when will this happen and what will happen in the meantime?

Billy Shears

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were already past 35 year mortgages

ya just pay the intrest now and never buy the property.

IO is surely the never never nirvana the banks always wanted

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were already past 35 year mortgages

ya just pay the intrest now and never buy the property.

IO is surely the never never nirvana the banks always wanted

That's a good point. IO - the infinity year mortgage.

Billy Shears

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The sense of panic is palpable among first time buyers in Ireland, several of my colleagues are scrambling to get on the ladder before property gets any more expensive and interest rates go up.

Its very hard to reason with people in this state and there is a lot of social pressure to get a house before its too late....

Current monthly payments are the only thing considered by FTB's when taking on a mortgage and exagerating earnings to get a higher mortgage is already common place and assisted by employers and various mortgage agents.

Then there's the 'foreign investments' in Dubai, Hungary, Bulgaria, Spain, Cape Verde islands, Santa Lucia, Miami, & Shanghai.... :blink::huh::huh::huh:

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Yeah, but the problem is, this shows how the UK could get even madder. What are the differences between the UK and Ireland that mean that property prices couldn't get as mad here as they are there.

Don't get me wrong, I believe that property prices are mad and must correct at some time. But when will this happen and what will happen in the meantime?

Billy Shears

Here's some differences:

1) Inappropriately low interest rate for the state of the economy

2) Super loose credit without any impact on currency - because we can't sink the Euro on our own however hard we try (seems the govt have realised this and are now increasing capitalization requirements for mortgages with a high LTV ratio)

3) Extremely centralised economy - for many people in certain industries Dublin is effectively the only choice of place to work in the country, this pushes prices higher there, and transport links into city are frankly crap so long haul commuting is hellish

4) Extreme and irrational cultural bias towards buying and not renting (only for students and losers)

5) Lack of collective memory of any property crash

6) Possible supply problems in the Dublin area (though there still seems to be some shockingly underutilised land/derelict buildings, and apparently a lot of vacant flats about)

7) Huge level of immigration (100K last year, equivalent to 2 million or so entering UK), and a large demographic bulge in the 20s and 30s age group causing increased demand and propping up rental sector

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Here's some differences:

1) Inappropriately low interest rate for the state of the economy

2) Super loose credit without any impact on currency - because we can't sink the Euro on our own however hard we try (seems the govt have realised this and are now increasing capitalization requirements for mortgages with a high LTV ratio)

3) Extremely centralised economy - for many people in certain industries Dublin is effectively the only choice of place to work in the country, this pushes prices higher there, and transport links into city are frankly crap so long haul commuting is hellish

4) Extreme and irrational cultural bias towards buying and not renting (only for students and losers)

5) Lack of collective memory of any property crash

6) Possible supply problems in the Dublin area (though there still seems to be some shockingly underutilised land/derelict buildings, and apparently a lot of vacant flats about)

7) Huge level of immigration (100K last year, equivalent to 2 million or so entering UK), and a large demographic bulge in the 20s and 30s age group causing increased demand and propping up rental sector

Thanks. Though I am still not convinced we couldn't have a last gasp mini-boom in the UK. Irrational exuberance is of course irrational.

One thing I'd like to know. When Ireland goes t*ts up, will that change "house prices can only go up" sentiment in the UK, or will people rationalise that it's different "there" and the same couldn't happen in the UK ("e.g. Eurozone")?

Billy Shears

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Yeah, but the problem is, this shows how the UK could get even madder. What are the differences between the UK and Ireland that mean that property prices couldn't get as mad here as they are there.

Don't get me wrong, I believe that property prices are mad and must correct at some time. But when will this happen and what will happen in the meantime?

The main difference Billy is that Ireland is part of the Euro. The whole Euro will not devalue and crash Irish house prices because HPI is not that high on the continent.

The UK on the other hand....remember 1992...ERM...individual currencies.......

I read somewhere that 'sterlings defences were being nibbled'.

Didnt understand it then but its becoming clearer.

Is it possible that it could be exactly the same as last time?

Sterling dives, rates rise and off we go.....

But, this is a distinct advantage to the UK. Ireland does not have this pressure release valve.

What will happen in Ireland - gradually jobs will be lost to cheaper areas - people will need wage inflation to keep up and that will make Ireland uneconomic for the multinationals.

The sense of panic is palpable among first time buyers in Ireland, several of my colleagues are scrambling to get on the ladder before property gets any more expensive and interest rates go up.

Its very hard to reason with people in this state and there is a lot of social pressure to get a house before its too late....

Then there's the 'foreign investments' in Dubai, Hungary, Bulgaria, Spain, Cape Verde islands, Santa Lucia, Miami, & Shanghai....

Tell me about it...

'Before rates go up' - love it - buy now for when you cant afford the payments

(welcome to HPC btw)

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Thanks. Though I am still not convinced we couldn't have a last gasp mini-boom in the UK. Irrational exuberance is of course irrational.

One thing I'd like to know. When Ireland goes t*ts up, will that change "house prices can only go up" sentiment in the UK, or will people rationalise that it's different "there" and the same couldn't happen in the UK ("e.g. Eurozone")?

Billy Shears

I was wondering this as well. I think a lot depends on how and if it's reported here. For all the 24 hour rolling coverage, the amount of economic news reported is very small, generally only performing a superficial coverage of the stock market. IMO much of the supposed VI spin is probably lazy reporters going with the herd and churning out what their editors expect of them for the next deadline.

At some point a threshold of awareness will be reached where it suddenly clicks with one or two brighter hacks that there's something happening with housing in the US, Oz and Ireland that's pretty interesting, and 'hey', suddenly IRs seem to be ticking up everywhere, and 'oh my god', businesses are folding and unemployment is rising here, and CPI really can't be only 2% can it, because I'm strapped for cash this month - so maybe this is all connected - this is a story we can go with...

A few stories like this could generate enough critical mass in the readership to trigger a change in sentiment as effective as an IR rate hike. Many editors may be in the pockets of government, but once a big story erupts, they'll pile in if it's newsworthy enough.

Just IMHO of course.

TLM

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What Needle said.

The lack of competitiveness is already showing up, we moved down in the rankings of developed countries by 2 places this year. You have to spend a lot even to rent here so even those of us who aren't getting on the ladder are putting pressure on for higher wages. Plus it causes higher costs for most businesses too. It's at the point where we can go nearly anywhere in the EU and find it cheap compared to home.

People here will just keep bidding up houses until they can no longer afford the mortgage. God knows what will happen then, it will be defaults and bankruptcies everywhere. Just a matter of time. ECB base rate hitting 4% would cripple a huge number of people I know.

I'm not sure how a crash in Ireland would affect sentiment in UK, I imagine this stuff is not reported in UK media much, but I do believe a UK crash would have huge ramifications here, if only because many people here are invested in UK property also. It would shake confidence hugely, and that's all that's propping up the monster.

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Ireland has been booming...and because they're in the Eurozone they have no monetary policy of their own and rates are set low to suit economic conditions in France and Germany..

Imagine what will happen to Ireland's economy and housing market if there's a slump in Ireland and a boom in France and Germany and IRs go through the roof during an Irish slump!.....The exact opposite of the current situation.........

Edited by Michael

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Also isn't there tax relief for FTBs in Ireland?

FTBs avoid stamp duty for houses under Eur317,500. That was brought in a couple of years ago. Problem is the lower end of the market's since gone ballistic and you can no longer get much in Dublin for that. You'd be talking a one bed flat in the mid-200s, or a very small house in the very outermost suburbs. It's probably still having an effect outside of Dublin.

There's also mortgage interest relief but I think that's capped at Eur500 or so per annum.

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Sherry Fitzgerald's chief economist Marian Finnegan says this is partly due to the relative poor supply of new houses in Dublin city. Though just less than 30% of the country's population live in Dublin, only 22% of total completions and 14% of house completions are being provided to the Dublin market.

Ms Finnegan says that one of the more important factors to influence the performance of the market this year will be interest rate cycle. Despite the recent hikes, there is still expectation of further increases of around 0.5% in the near future.

'Such an increase in the cost of borrowing money will temper consumer expenditure and therefore begin to limit the potential for price growth,' the economist says.

'The combination of this and the reduction in the gap between supply and demand will facilitate a moderate of house price growth with current estimates suggesting price inflation will average 15% during the year,' she adds.

She predicts that the greater proportion of this price growth will take place in the first half of the year, with lower growth anticipated in the latter months of 2006.

[sung to the tune of 'Michael Finnegan']

An economist called Marian Finnegan

Went to the papers to spread some spin again

Young people's dreams go in the bin again

Rich old Marian Finnegan.

Billy Shears

Edited by BillyShears

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[sung to the tune of 'Michael Finnegan']

An economist called Marian Finnegan

Went to the papers to spread some spin again

Young people's dreams go in the bin again

Rich old Marian Finnegan.

Billy Shears

:lol:

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[sung to the tune of 'Michael Finnegan']

An economist called Marian Finnegan

Went to the papers to spread some spin again

Young people's dreams go in the bin again

Rich old Marian Finnegan.

Billy Shears

I like it. :P Here's another...

There once was a young man from Cork,

Who had not the stomach for work,

He said to his cat, "I'll buy a new flat",

"And then rent it out to some berk".

He found just the thing in Kildare,

One room up fifteen flights of stairs,

Though interest was thin, a girl soon moved in,

With glasses and curly red hair.

"Well this is no trouble at all",

He said to his brother-in-law,

His brother looked grim, and said this to him,

"I've heard that house prices might fall".

The young man he didn't agree,

And bought four more flats in Tralee,

"I'm ever so clever, they'll go up forever",

"He's obviously jealous of me".

Well things worked-out well for a while,

He picked-up his rent with a smile,

But his knees turned to jelly, when he heard on the telly,

That rates would go up by a mile.

He said to his cat with a frown,

"How quickly it all turned around",

"The banks on the phone, recalling their loan",

"They say that house prices went down".

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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