Agreed - but the effect on the market is the same. Demand is being artificially suppressed. And by this I mean people who want to buy property, and who are well positioned to do so in terms of ability to repay a mortgage, are being refused mortgages. And trying to project future property price trends from this starting point is nonsense.Originally Posted by MortgageBroker
You need to factor in inflation and deflation from the peak of 2006. Inflation is a great leveller. It allows the value of the house to fall without dropping the asking price.
In Ireland there simply isn't a market as the volume of Bank lending is minimal. Also the rate over base is high, and especially so in relation to the inflation - deflation rate.
Not quite as bad in the UK and there isn't the oversupply problem, but again what first time house buyer has 25% deposit plus the cost of any repairs and fees?
In effect many people are being asked to put together 30% - 40% of the purchase price. Despite this House prices in the UK went up around 10% last year and are expected to increase 2-3% this year. Supply shortage problem. In Ireland watch for localised shortage problems, say around Dublin, developing as activity picks up and new building remains suppressed.
In Ireland you have 3-4 years of few first time house buyers, that minus emigration would give an idea as to any potential build up in demand.
House prices should be no more than 3.5 times primary income plus once the second salary plus deposit, that is maximum. Forget the nonsense about affordability with low interest rates and get back to sensible 15 -25 year mortgages which pay back the sum borrowed.
On rental you want to be aiming at 9-11 years to repay investment. In any case straigh buying to rent is for the armatures. You need to be cleverer than that.
IMO the West generally needs a period of higher inflation with declining currency values to adjust, improve liquidity and competitiveness. There is still a risk of the economies developing economic constipation.
NAMA bailouts and all the rest, were not at all clever IMO.
The credit binge we experienced before this was an complete anomaly the lending we are seeing now isn't too restrictive it is what would be described as "normal".
That is the new reality and its effects on the property market will be permanent.
There is no market because there is little or no lending. If current prices were halved there would still be no market because the banks would still not be lending. If prices fall beyond your wildest dreams there will still be no market, for the same reason. I cannot extrapolate from an inappropriate analogy
This argument is entirely tautological. It's like saying the rain would be grand if it weren't wet. Or that your car would drive fine if only it had wheels.
You are trying to suggest there is an underlying "value" on houses that will only be revealed when there is lots of credit again. But this is wrong because those values are defined by the credit availability, they are not distinct from it. So, if there is only the credit in the system to price an average Irish house at €100k, then that is the value of an average house. There is no Platonic meta-value as you seem to be suggesting.
I agree the binge was utter folly, but it did go completely the other way and the percentage deposit requested has been very high. (doubtless to insulate the lender from further drops in value). I would regard about 10% deposit plus costs as a reasonable requirement, and a max amount based on reasonable multiples of salary.
Once normal criteria apply, including realistic asking prices it will take over a year to get chains of buying and selling moving.
No - I am saying that a house has value that is related to what credit-worthy individuals are willing to pay. If this demand for money is artificially unfulfilled, as is happening at the moment, it results in a downward pressure on prices that puts those prices below how a normally functioning market would value them. Otherwise you end up quantifying the value at zero at a time when banks are not functioning at all - but nobody will sell for zero, therefore there is no market, therefore it has no reality - therefore zero is not a "real" valuation. It's the opposite to what happened during the bubble.
the market isn't dependent on lending only, well over 50% of properties have no mortgage and a substantial number of deals are done by institutions without leverage and also by individuals on the same basis.There is no market because there is little or no lending. If current prices were halved there would still be no market because the banks would still not be lending. If prices fall beyond your wildest dreams there will still be no market, for the same reason. I cannot extrapolate from an inappropriate analogy
there is lending occurring, if there wasn't then i would be out of a job.
it really is more about price than anything, the liquidation sales in mullingar and donegal were proof of that, there is plenty of money in waiting when the prices are right, we just haven't gotten there yet. credit for an asset that somebody doesn't want to buy won't create sales.
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It does not help when Estate Agents are trying to hold prices at a certain level purely because they are also the Developer.
And considering most of them were also Mortgage Brokers, you can see why, we had the bubble we had.
One day people will realise the connection between Estate Agents, Politicians and the Property bubble, but until then we will wait until the vested interests have pursued every avenue, before accepting the fact that Property will only sell at give away prices.
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