When Will Northern Ireland Property Prices Stop Falling?

[shipbuilder]

Did you actually write this yourself or did you copy it from somewhere? Your posts are contradictory and confusing

Which is it - economic recovery first or green shoots first?

You were quoting me there.

HERMY, i'll be positive when the time is right to be positive. It's not that time yet and pessimism serves us all better when we can avoid a crippling mortgage and negative equity. The logic behind your statements is one we have all heard on here before since the start of the crash - that the crash seems so bad that it can't possibly get any worse and therefore the only way must be up. Unfortunately this argument is not backed by logic or evidence.

Edited December 3, 2008 by shipbuilder

[paul65]

I can tell you from experience on the ground that we have aleady reached the despair level where people will not buy at any price, people are scared they are fearful of what has happened however if you have the balls now is the time to Buy.

My view is that we are only in the Fear stage right now. Capitulation will be next and then we get on to Despair. It took a long period to get to the top of the market and the readjustment (notice I didn't say crash) will play out over some time yet. The Sage of Omaha is patiently waiting with baited breath for me to get into the marketplace.

Edited December 3, 2008 by paul65

[JoeDavola]

My view is that we are in the "still too f*cking expensive" stage at the moment

[Belfast Boy]

...the fast initial drop will flatten out and will continue for 3-4 years, as all crashes do. Have a look at studies that Morgan Kelly of UCD did on previous housing crashes.

This applies to investors and FTBs alike - the logic of buying now for investors only works with a quick recovery and rising rents - with increasing rental stock and a collapsing economy we will have neither.

I can tell you from experience on the ground that we have aleady reached the despair level where people will not buy at any price, people are scared they are fearful of what has happened however if you have the balls now is the time to Buy.

Again, you are contradicting your earlier excellent post.

I am an STR. This website stopped me from making a very big mistake. I very nearly bought a house last year. I am just trying to help other people not make that mistake. I have been very unsucessful so far. I know 3 people who bought this year. They are all regreting it now All are in negitive equity and they know it

Are you a builder, developer or investor?

[Belfast Boy]

Sorry shipbuilder. It was your excellent post. I should have known better HERMY's post are not backed by anything other than wishful thinking

[HERMY]

You were quoting me there.

HERMY, i'll be positive when the time is right to be positive. It's not that time yet and pessimism serves us all better when we can avoid a crippling mortgage and negative equity. The logic behind your statements is one we have all heard on here before since the start of the crash - that the crash seems so bad that it can't possibly get any worse and therefore the only way must be up. Unfortunately this argument is not backed by logic or evidence.

That wasnt my post above..... What evidence have you that this crash will get worse. I have already seen a 50% drop which is what most people were expecting here in NI. I belive that this time next year the situation will be either catastrophic infact so catastrophic that everyone will be wiped out and I mean everybody Government and all on a Global Scale (The Global economy will do whatever it takes and I mean whatever it takes to ensure this doesnt happen) or we will start to see increase in transaction levels which marks the recovery.........

So much has happened recently that so much more can happen in the next 6 Months....

I have asked many people how much a council house should be here is the answers i have got range is 40 - 100k

Thats an amazing range......... I know unless Britain goes Bankrupt they will not go to 40k as investors will be snaping them up well before then. If you have nuts u can buy a decent house now at a decent price.

If you listen to fear you will become fearfull if you listen to common sense and logic you will see that what I am saying is right

Things will only go one of two ways

1) Country goes Bust

2) Recovery starts January in earnst there are already signs out there already

Look if you buy now and the country goes bankrupt who cares everyone else is in the same boat but if it recovers people will hold off for the slightly higher prices meaning u may just have missed the Blow out phase.

Edited December 3, 2008 by HERMY

[JoeDavola]

If you have nuts u can buy a decent house now at a decent price.

Could you post the link to 3 properties on propertynews which you think are good value?

[HERMY]

Could you post the link to 3 properties on propertynews which you think are good value?

Transactions going through now are not being advertised at the levels being accepted........

So unfort I cant show u, but people are buying and buying cheaply.... oportunities are there

If you are waiting for all property to be advertised at bottom of the market prices u will never see it

[mr slump]

Yeah, there are alot of other economies in trouble too. Can the IMF save them all?

mr slump, how can you know so much about what is happening and what could happen, and other new posters know so little? Are you English too?

sorry about my glib reply earlier man

basically I know little

through extensive reading + thinking I think I can make slightly educated speculative judgements

but still know little ,I have no real grasp on global economics but am feeding the growing interest I have

I guess knowing little is a whole lot more than knowing nothing

not english so I never experienced a crash

but the closet thing is probably living through the last recession in poverty after the family business (building trade)

went down the toilet we lost our business, jobs and family home

I'd left school with f-all qualifications to be a labourer in 85

duh

[paul65]

Transactions going through now are not being advertised at the levels being accepted........

So unfort I cant show u, but people are buying and buying cheaply.... oportunities are there

If you are waiting for all property to be advertised at bottom of the market prices u will never see it

So Hermy if you are not an EA how come you are privvy to this information concerning the level of transactions and the prices that are going through for properties right now. I'm curious. Are you a "Finder"?

Edited December 3, 2008 by paul65

[JoeDavola]

I still get the impression that the average seller would tell you to get lost if you offered them half of peak price.

Besides, half of peak price is still overpriced.

Edited December 3, 2008 by JoeDavola

[mr slump]

So Hermy if you are not an EA how come you are privvy to this information concerning the level transactions and the prices that are going through for properties right now. I'm curious. Are you a "Finder"?

was going to ask something similar

got told off by the post flood warning

so how (hermy) do you know actual selling prices?

without evidence/ clarity I can't take that comment seriously

[HERMY]

So Hermy if you are not an EA how come you are privvy to this information concerning the level of transactions and the prices that are going through for properties right now. I'm curious. Are you a "Finder"?

No not at all I am subjected to this information via my job through solicitors etc. I am a little like yourself I am only reporting it as I see it

[HERMY]

No not at all I am subjected to this information via my job through solicitors etc. I am a little like yourself I am only reporting it as I see it

Look I know you are all decent people on this site, but I am only pointing out what I see. I dont want anyone to buy a house and be in negative equity and yes I know what happened in NI was Extreme and Out of This World.

If you are in a serious cash position to buy and what I mean is able to buy with a decent deposit their are def bargains out there.

Look so many people have different views one guy I taked to said he could see Semi - D' s goin to £6,000 I thought he as joking but he wasnt he wasnt even smiling he was so serious...............

That is impossible, absolutely impossible if it does happen there would be no point been in the country as it must have been nucleared out by an atomic bomb.

Thats simply why I asked on the other page what price would you pay for an average house in an average town. We can talk about it all day and night but unless the SERIOUS buyers who put their money where their mouth is step forward and put what they would pay then they will never know when a property has reached an acceptable level.

If you change the goal posts as time goes on lets say you thought 140 then changed to 110 then 105 before you know it they will have returned to 125 and you will have no option but to pay it or rent for ever.

Thats why I am interested to see what people on this site would pay.

[JoeDavola]

Hermy:

If you look at past artcles on BBC news; it seems that it was 10 years ago that prices started to rise far faster than wages.

Adjust 1998's prices to reflect what people's wages have actually gone up by, and you might have a decent idea of what a sensible level might be.

Do you see where I'm coming from? Makes sense, doesn't it? Feel free to tell me if I've got it wrong; some debating is a good thing!

Edited December 3, 2008 by JoeDavola

[Ride_on]

As it has been discussed before this is not a typical crash as its global, its quick, its fast and its furious.

There will be a point when properties fall below the average line in NI...... are we in that period I would say possibly.

For those who were waiting on reposessions by the dozen you may have to wait longer or not at all as you have pointed out 2010 should be recovery.

If you look at history which yous are basing everything a house rises by roughly 7-8% at a year not the 2 or 3 % discussed by some.

NI crashed before the UK mainland and it may even show shoots of recovery. I met a young couple last night who are looking to buy they have 45k saved up that puts them in a really decent position in which they could buy practically anything....... why dont people be positive on this web site......... things were due for correction for sure

But the shoots of recovery are out there if u want to see them that is..........

You think it is fast and brutal only because you see it as being nearly at the bottom, could it not also be falling fast because it has gotten a long way to go? (simple harmonic motion). As others have said it never bottoms out quickly, there is never a square corner at the bottom of the graph.

The reasons for the cycles are different every time, and the patches also ineffective each time.

Many bears such as myself (2nd+ time buyers) have similarly large deposits, I could buy now but compared to what I expect to get for my money it is still too far out of step with asking prices (or even selling prices). I can currently only 'afford' to buy at the same level I originally bought at, yet I am on a much higher salary and have a large deposit (aswell as own my old place outright). I have been waiting for nearly 10 years (in a flat for 18) to upgrade and it just got worse, I see the sense returning to the market after the banks have shelled out too much money to those who cannot afford it, but it is going to take time to get back to affordable levels (thats what I call a recovery, not prices going up). I watched while they lived it up, now I'm happy to watch while they have to move into a rented house, which I have also done and its nearly 4x cheaper than buying for me. Nothing negative about that, although I would prefer to own or have a better landlord.

I'd be interested to know what these shoots of recovery are.

[HERMY]

Hermy:

If you look at past artcles on BBC news; it seems that it was 10 years ago that prices started to rise far faster than wages.

Adjust 1998's prices to reflect what people's wages have actually gone up by, and you might have a decent idea of what a sensible level might be.

Do you see where I'm coming from? Makes sense, doesn't it? Feel free to tell me if I've got it wrong; some debating is a good thing!

You are well switched on, firstly several things happened interest rates dropped significantly you probably would have been paying 11-12% interest on your mortgage in addition it was also more attractive to save as you received a decent return. Today you gain next to nothing on your savings, however 6 weeks ago u could have got 7% at Northern Rock now u would do well to get 4%

The government has also been medling in Housing industry adding more regulation in terms of :

Higher Insulation, Health and Safety. These two simple attributes add a significant factor onto the cost of a build in addition labour materials are getting very expensive at minute for 2 reasons feeling effects of last months inflation and also suppliers are adding on the costs of the hugh amounts they will never receive from Builders etc. Millions in cases...... who pays for it .......... obviously the next customer.......... How Unfair eh ?

If you were to take a mortgage for say £100,000 ten years ago versus a £200,000 mortgage today you would be surprised to find there would be very little difference in payments on a 25 year basis...... Believe it or Not

Work it out if you dont believe me.

Buying a house is a leap of faith and in the bottom of your heart you know what is good value for you....... dont be forced into it however be aware it is also an investment average growth is still 7 -8 % a year over long term. Despite the Nationwides figures on the graph I will present other Nationwide figures to contary the graph u read takes out inflation which is a key component of our economy. I will put link on after i write this

http://www.nationwide.co.uk/hpi/historical.htm

Try second tab down house prices since 1952 and work out the percentage difference. You will find houses will someday return to crazy 2007 levels but it will take time but if you need a home then this shouldnt be an issue

[Ride_on]

Hermy, well done on the posts btw you have managed to hold up under considerable bear pressure without going into insults, but you might find it useful to read into the site a bit more. You are covering a lot of old ground, and you can always reply to most old threads if you disagree on basic points. We welcome the debate, even thought at times it seems bears and bulls are from different planets.

On the issue of what level I would buy at, it might be worth looking at an old thread and re-asking the question, but as I mentioned in the previous post I am expecting to buy at 1990 affordability levels or thereabouts. Not 1990 prices, but looking at how my flat has increased in value against FTB wages, I think prices should be maybe 2-3x times 1990 levels, peak was about 9x so we need to goto 1/3 of peak. Actually my analysis is suffering from stretch, I keep adding in bits unnecessarily (because its so far from current). FTB salaries have only doubled since 1990 so should house prices, that means 1/4 of peak. Assuming banks go back to 1990 lending levels.

[HERMY]

Hermy, well done on the posts btw you have managed to hold up under considerable bear pressure without going into insults, but you might find it useful to read into the site a bit more. You are covering a lot of old ground, and you can always reply to most old threads if you disagree on basic points. We welcome the debate, even thought at times it seems bears and bulls are from different planets.

On the issue of what level I would buy at, it might be worth looking at an old thread and re-asking the question, but as I mentioned in the previous post I am expecting to buy at 1990 affordability levels or thereabouts. Not 1990 prices, but looking at how my flat has increased in value against FTB wages, I think prices should be maybe 2-3x times 1990 levels, peak was about 9x so we need to goto 1/3 of peak. Actually my analysis is suffering from stretch, I keep adding in bits unnecessarily (because its so far from current). FTB salaries have only doubled since 1990 so should house prices, that means 1/4 of peak. Assuming banks go back to 1990 lending levels.

Again 1990's interest rates were so different to now..... it still plays a difference. Anyway time will tell however if what you are saying is correct how many people will realistically be in a position to sell at 75 +++% discounts........ I would reckon not so many which is why I belive 50% is achievable.

Bit I guess time will tell.............. If somone claiming we are at the fear bottoming out phase is Old news then who the hell posted before me they deserve to be taken out.

As confidence returns and I have no doubt it will we are in recovery mode which means the cheapest / blowout phase has passed

The return on this could be quicker than we all think

[HERMY]

My view is that we are only in the Fear stage right now. Capitulation will be next and then we get on to Despair. It took a long period to get to the top of the market and the readjustment (notice I didn't say crash) will play out over some time yet. The Sage of Omaha is patiently waiting with baited breath for me to get into the marketplace.

Just a bit of advice from the Sage of Omaha.............. buy when people are fearful and sell when people are confident ?

That auction you were at in Magherafelt stinks of Despair

If you think it out you know i am right. Now is the time to buy. But u need Balls of Steel to go against the grain. Deals are there to be done.

Buy shares in January Febuary March, they will be at their lowest following christmas sales

Edited December 4, 2008 by HERMY

[kenzoil]

Again 1990's interest rates were so different to now..... it still plays a difference. Anyway time will tell however if what you are saying is correct how many people will realistically be in a position to sell at 75 +++% discounts........ I would reckon not so many which is why I belive 50% is achievable.

Prices have long been 'beyond the norm' and it were 'talked up' for many years. However, even articles such as this http://news.ulster.ac.uk/releases/2002/605.html

showed average house prices as early as 6 years ago were £95k. The peaks and troughs of house prices are inevitable, but the bubble and burst this time around will likely, as you say, break all records. The other data provided from Nationwide illustrates the extent to which NI prices were totally unsustainable - and over time would (I now realise!) have 'corrected'.

Nationwide_indices.doc

nationwide_house_price_trend.doc

The more I read the views of many, the more I concede that the economic, employment, credit and indebtedness data point to very significant reductions, with the changed perception (possibly for a long time to come) that property will be a 'bad investment' - that IMO price reductions of 75% from peak should not be ruled out.

Remember, not everyone has to sell and anyone with property bought before the madness of the last 5 years is unlikely to be in negative territory even then - why do you believe selling at 50% off peak as you believe at most would be OK, whereas -75% would tend to 'bankrupt the economy'?

Personally, in the last year I've gone from 'hoping against hope' for a fall of around 20% (to make some properties affordable to me), to starting to believe others and the figures that back them up, that we are not even half-way through the process to 'normalisation' in NI house prices.

nationwide_house_price_trend.doc

Nationwide_indices.doc

[Traktion]

a) reduce interest rates to their lowest value of time and let firstly the banks re-capitalise themselves

Sorry to join this thread late, but it's been a busy couple of days.

Anyway, the above may not actually happen at all and there is a strong possibility it will make matters worse. Why? As someone mentioned earlier, the Yen carry trade has now ceased to be when buying UK assets with cheaply borrowed Japanese money. While we had high interest rates, people were happy to borrow in Yen and invest in the UK (bonds, property, shares, Sterling etc). If you can yield more from what you buy that the loan interest, it's an easy way to make money.

Now we have low (and getting lower) interest rates, we have several problems:

1. The money is now flowing back into the Yen. With defaults looking more likely and asset prices falling, why would they want to risk losing their money?

2. Bonds now yield less (as base rates are lower), so why buy them? If the government can't sell bonds, it is essentially unable to borrow from other countries in the world. If it can't borrow, there is an increased chance of the government defaulting on existing liabilities (see 1.) as they struggle to balance the books.

3. With interest rates low, there is little point in holding money in Sterling. Pulling money out of Sterling, causes Sterling to devalue. This may cause more currency traders to pull out of Sterling, exacerbating the problem.

4. With people pulling out of Sterling, selling up assets and generally trying to return their money to pay of their Yen based loans, the banks will lose capital. If this continues to happen, lowering the interest rates may make the problem worse.

There may be a point where the government can't borrow any more, without increasing the yield on the bonds. If they increase the yield, without increasing the base rate, then people will move their money from Sterling, to the bonds, putting further pressure on the bank's capital base. This means bond yield rates can't depart too far from the base rate or it can harm the banks.

So, if the government wants to keep the banks capitalised, while giving incentives for investors to buy bonds, without crippling Sterling, base rates would need to increase. Let me reiterate - to prevent continued Sterling collapse and to allow the government to borrow, base rates will need to rise.

This is just following cause and effect. Government borrowing is entirely reliant on investors seeing our bonds as worthwhile investments. You can't have low interest rates and high government borrowing. Japan had it's exports to rely on to avoid borrowing, but keep rates low... we, however, do not.

Why don't they just start the printing presses, you may say? It will just magnify the steps 1-4, causing monetary collapse due to massive inflation and a total collapse of Sterling. At which point, anyone who had money (on shore) will have lost their wealth. Everyone who had large debts, will have next to none. Imports would become prohibitively expensive and things would go Zimbabwe style, right up until the point where the printing presses stop. At which point, the UK would be bankrupt and mistrusted, with civil unrest and poverty rife. No, I don't think this is a good option either.

I would imagine that this charade of sustainable low interest rates will continue for a while, perhaps up until they're no longer sustainable, but then the base rate will rise. We're already seeing pressure in the bond markets and this is likely to get worse. How long can they keep the rates low? How long can Gordon's spending plans be funded by borrowing?

House prices will continue to fall (it's a side show now - the problem is bigger than property prices) and credit card companies are also having trouble selling their bonds (used to fund credit card lending to individuals). If credit card tarting stops being a possibility and limits get capped, there will be an increasing number of bankruptcies. Already, cars are flying through the auctions (many repossessed) at crazy low prices (how does an 07 Vectra for 2.5k grab you? IIRC, I saw this tonight at Carryduff), while people are struggling with their debts. Less repossessions - are you sure? Do you think the government didn't try all these tricks in the last crash?

[HERMY]

The more I read the views of many, the more I concede that the economic, employment, credit and indebtedness data point to very significant reductions, with the changed perception (possibly for a long time to come) that property will be a 'bad investment' - that IMO price reductions of 75% from peak should not be ruled out.

Remember, not everyone has to sell and anyone with property bought before the madness of the last 5 years is unlikely to be in negative territory even then - why do you believe selling at 50% off peak as you believe at most would be OK, whereas -75% would tend to 'bankrupt the economy'?

Personally, in the last year I've gone from 'hoping against hope' for a fall of around 20% (to make some properties affordable to me), to starting to believe others and the figures that back them up, that we are not even half-way through the process to 'normalisation' in NI house prices.

GUYS this is depressing stuff........ be happy.........

time to be positive folks and realise prices will not drop too 60 k for a semi it costs more to build them..........

lets get up every day and be happy from now on and realise that the prophets of doom and gloom are driving it too far down.... do u really think the government will allow it to fall apart completely......... our economy is built on construction and financial services what else has the uk got

[HERMY]

Sorry to join this thread late, but it's been a busy couple of days.

Anyway, the above may not actually happen at all and there is a strong possibility it will make matters worse. Why? As someone mentioned earlier, the Yen carry trade has now ceased to be when buying UK assets with cheaply borrowed Japanese money. While we had high interest rates, people were happy to borrow in Yen and invest in the UK (bonds, property, shares, Sterling etc). If you can yield more from what you buy that the loan interest, it's an easy way to make money.

Now we have low (and getting lower) interest rates, we have several problems:

1. The money is now flowing back into the Yen. With defaults looking more likely and asset prices falling, why would they want to risk losing their money?

2. Bonds now yield less (as base rates are lower), so why buy them? If the government can't sell bonds, it is essentially unable to borrow from other countries in the world. If it can't borrow, there is an increased chance of the government defaulting on existing liabilities (see 1.) as they struggle to balance the books.

3. With interest rates low, there is little point in holding money in Sterling. Pulling money out of Sterling, causes Sterling to devalue. This may cause more currency traders to pull out of Sterling, exacerbating the problem.

4. With people pulling out of Sterling, selling up assets and generally trying to return their money to pay of their Yen based loans, the banks will lose capital. If this continues to happen, lowering the interest rates may make the problem worse.

There may be a point where the government can't borrow any more, without increasing the yield on the bonds. If they increase the yield, without increasing the base rate, then people will move their money from Sterling, to the bonds, putting further pressure on the bank's capital base. This means bond yield rates can't depart too far from the base rate or it can harm the banks.

So, if the government wants to keep the banks capitalised, while giving incentives for investors to buy bonds, without crippling Sterling, base rates would need to increase. Let me reiterate - to prevent continued Sterling collapse and to allow the government to borrow, base rates will need to rise.

This is just following cause and effect. Government borrowing is entirely reliant on investors seeing our bonds as worthwhile investments. You can't have low interest rates and high government borrowing. Japan had it's exports to rely on to avoid borrowing, but keep rates low... we, however, do not.

Why don't they just start the printing presses, you may say? It will just magnify the steps 1-4, causing monetary collapse due to massive inflation and a total collapse of Sterling. At which point, anyone who had money (on shore) will have lost their wealth. Everyone who had large debts, will have next to none. Imports would become prohibitively expensive and things would go Zimbabwe style, right up until the point where the printing presses stop. At which point, the UK would be bankrupt and mistrusted, with civil unrest and poverty rife. No, I don't think this is a good option either.

I would imagine that this charade of sustainable low interest rates will continue for a while, perhaps up until they're no longer sustainable, but then the base rate will rise. We're already seeing pressure in the bond markets and this is likely to get worse. How long can they keep the rates low? How long can Gordon's spending plans be funded by borrowing?

House prices will continue to fall (it's a side show now - the problem is bigger than property prices) and credit card companies are also having trouble selling their bonds (used to fund credit card lending to individuals). If credit card tarting stops being a possibility and limits get capped, there will be an increasing number of bankruptcies. Already, cars are flying through the auctions (many repossessed) at crazy low prices (how does an 07 Vectra for 2.5k grab you? IIRC, I saw this tonight at Carryduff), while people are struggling with their debts. Less repossessions - are you sure? Do you think the government didn't try all these tricks in the last crash?

So wise one in simple lay mans terms what is the solution?

[Traktion]

our economy is built on construction and financial services what else has the uk got

And there, sir, is the problem. There is much to be pessimistic about, I'm afraid.