Dublin property prices falling by €4,500 a month

[popper]

Interesting response sidewinder.

Of course the whole thing is dependent on the prognosis that prices will continue to fall. In that situation would it not make sense to take the profit now before they fall further and wipe out the potential gain? With the added scenario that the money banked will be enough to get back in on good terms a few years later? Especially if plan is not to stay in the house long term anyway.

I agree with you that attempting to use the profit to make money through investment would be an extremely risky venture. Better to keep it as a next egg.

[Sidewinder]

Of course the whole thing is dependent on the prognosis that prices will continue to fall. In that situation would it not make sense to take the profit now before they fall further and wipe out the potential gain? With the added scenario that the money banked will be enough to get back in on good terms a few years later? Especially if plan is not to stay in the house long term anyway.

If it's not a family home and you weren't planning on staying there long anyway, sell (if you can). If it's a family home, you have more than 50% equity (on January prices) and you can stay there for the long haul, don't. If you bought since Q4 2005, pray. And sell, no matter what the loss.

I agree with you that attempting to use the profit to make money through investment would be an extremely risky venture. Better to keep it as a nest egg.

Nothing wrong with appropriate and sensible investments, even measured and considered risk taking, when you understand what you are doing. And it'll be a good 5 years at least before prices bottom out, an appropriate investment time period. But if you don't understand the huge range of appropriate investment vehicles out there from gilts to bonds to stocks to managed unit trust funds to commodities to metals - then just put the money in a high-interest savings account and sit on it. Otherwise you'll just lose it all. I fear the "get rich quick" mentality is still too deeply ingrained in people...

[madura]

Finally: residential property only has value as a home. It is not a money-making machine, it is not an investment vehicle, it is not your pension. This whole mess started because people started thinking of housing as a way to get rich and play the market without doing any real work. As long as such thoughts are entertained, property bubbles and crashes and misery and wealth destruction will result. If nothing else, I hope the crash finally drives this truth into the skulls of the Irish people.

And, presumably, those non-Irish people (from continental Europe, for example) who've got in on the act?

[Sidewinder]

And, presumably, those non-Irish people (from continental Europe, for example) who've got in on the act?

Those numbers are negligable, despite the hype and waffle. Only a couple of thousand non-nationals all told in the last couple of years, and apparently most of them are Asian. I think the number of Eastern Europeans who have bought a house here is something massive like....537...

I'll try and dig up the source, think I saw it on the Pin yesterday...

[GJG]

With house prices falling what would people here do in this situation:

You have a house worth 400K, but falling. You still owe 150k on the mortgage. Are you better off selling now, banking the money (250k) and renting until the market bottoms out and you can buy an equivalent for maybe 25/30% less than they are going at present?

I know a few people thinking of doing this at the moment. Any views?

In what economists call a perfect market, that would be very rational, but there are a few things stopping you. Clearly the hassle of moving house, but mostly the transaction cost, between buying and selling it's easily 12 to 15 per cent.

If it was easy to do what you are suggesting, lots of people would do it and this would moderate the peaks and troughs in the property market, but our idiot government with massive stamp duty and in league with crooked builders and estate agents are causing congestion in the market leading to (now) huge inflation when the market goes up and (very soon) crashes when the market goes down.

[Ponzi]

thats interesting,obviously it was a myth but the fact still seems to be that people did walk away anyway so it will probably happen again regardless of the consequences.

Oh, you can walk away all right, and if you leave the country for good you might get away with it. But the UK banks were relentless. I know one couple from Coleraine, walked away from the house in London in the big crash, stayed away from the banks by doing cash jobs and renting for the next while. Moved around England a few times, eventually moved back home to Coleraine, this was about 1998/9? Thought they were safe at this stage, opened a bank account. Bam. The next week, letter arrives - "That'll be £85K, thank you very much".

People will do it alright, but they shouldn't be suprised when it doesn't actually work. And then we'll have all the people screaming for the Government to plug their negative equity for them, and the banks pleading poverty and begging for subsidies, and building firms trying to blackmail government to stay open a bit longer with some more taxpayer cash, while all the civil servants want 15% pay rises every year...

This is going to get ugly. Very, very ugly.

I had a flat in london for 6 years from 88 till 94 and then lost it through repossesion through no fault of my own but I was still liable for the debt.
I have not lived in england since but as I understand it you take out endeminity insurance when you take out your mortgage and this pays of the debt to the bank and then the indeminty company comes after you.

I have never heard anything since.

If you go bankrupt in england I think you are automatically discharged from bankruptsy after 3 years, I thnik it used to be six.

During 1993 when i still owned my flat i rented it out and worked in America for a while and the amount of people I met in New York who had lived in London and bought a house and then lefdt the keys in the letterbox when the crash came was eye opening.

All the points raised in this thread are just as I envisaged after living through the recession in London. The boom in london in the 80.s was a unique boom in that people for the first time had 100 per cent mortgages and easy credit which which resulted in a bigger boom than previoulsy possible and it also resulted in a very severe recession. The Boom in ireland is a unique boom in that it is has lasted so long and hit such heights and in the same way it will be a very severe recession.

The same things were being said by the estate agents and their cheerleaders, it cant happen in london etc but it did.

The builders of the towers in canary wharf, The reichman brothers were even caught out. These were two canadian brothers who apparantely at the time were the biggest commercial property owners in new york city and yet they lost money in london at the time. In an article in one of the english papers a few years later they were asked how they caught by the downturn in london with all their experience and the answer was simple.
we did not see it coming.

A flat I bought in London in 1992 came on the market in 1991 for £89,000. We bought it for £54,000 (the builder having gone bust in the meantime). It continued to fall in value for the next four years to about £40,000. The Girl who lived next to us did a flit one weekend in 1994 leaving the keys with us. It gives you a different prospective on things I can tell ya.

[madura]

And, presumably, those non-Irish people (from continental Europe, for example) who've got in on the act?

Those numbers are negligable, despite the hype and waffle. Only a couple of thousand non-nationals all told in the last couple of years, and apparently most of them are Asian. I think the number of Eastern Europeans who have bought a house here is something massive like....537...

I'll try and dig up the source, think I saw it on the Pin yesterday...

So few? But the figures I'm interested in are those of non-nationals from "Old Europe" (France, Germany etc). Based on personal observation, I would have thought there were a lot more investors from those countries.

[cooperation]

In Loughrea, Galway people bought there council house for a knock down price from the council. So far twenty have been repossed by the banks in the last twelve months.

[Johnny]

On the other hand, if you bought in the last 3 years, it's probably already too late, but you can still try to get out without losing too much.

So would you call it that the vast majority, if not everything bought in the past three years is heading for negative equity, SW? Is that with inflation factored in?

[Sidewinder]

So would you call it that the vast majority, if not everything bought in the past three years is heading for negative equity, SW? Is that with inflation factored in?

I think prices will return to 2001 levels in real terms (after factoring in inflation), so yeah anybody who bought after 2003/4 will possibly end up in negative equity - depending on whether they put down a deposit and whether it's a repayment or IO mortgage.

Anyone who bought in 2003/4 on a 100% interest-only mortgage will definitely end up in negative equity, IMO. If you put down a deposit and have a repayment mortgage, (and are happy to live in the property for the forseeable future) you might have enough equity built up by now to scrape through. Anyone who bought in 2006 is probably already sitting on a loss....