Property market chills

The latest survey has shown a significant calming of the housing market after the massive growth of previous years. UPDATE The high street also took a big hit.

  • Baudrillard

    There might be some sanity returning to the market – but I think it’s too late. Prices have inflated well beyond the means of anyone who does not already own a house.

    It’s now a very difficult situation for the Executive to manage – particularly in Belfast. The city is generally considered by most planners to be significantly under-populated. (The figure is around 274,000 – when it should be closer to 400,000 for the current district council area.) Too few people and most of our urban services won’t run efficiently – buses, schools, commuting nightmares, etc. It’s already evident.

    But how the hell can the city possibly attract another 130,000 people when it’s now almost impossible to buy there?

  • Stan Erraught

    Market Belfast as a Dublin commuter town – even with the impending crash here, its still cheaper up there…. and we’re used to crap services

  • There is a dissident view on the housing market from Simon Jenkins on yesterday’s Sunday Times main comment page. I don’t know if it was retained in the Irish edition, but it is on line at http://www.timesonline.co.uk/tol/comment/columnists/simon_jenkins/article2076235.ece

    This is obviously aimed at the London metropolitans, but has some wider merit, and is substantially relevant to NI.

    His arguments seem to be to come down to:

    1. There is no housing crisis, and it’s up to the “market” and not the Government to “solve” it. The alleged shortage of housing could vanish with a change in interest rates or a tax on underoccupancy or encouragement to students to live at home.

    2. The way we want to live is wasteful of limited living space more than any country in Europe. Densities are low and estates sprawl. City and town centres are underoccupied while roads are clogged with traffic seeking out-of-town retailing which the government has all but decontrolled under pressure from the supermarkets.

    3. Governments have been wrong to encourage householders to view their real estate as a pension.

    4. We should be satisfied, like the continentals, with private tenancies, the most fluid and efficient form of housing.

    5. House values and costs are not higher than they have been historically: they have only just caught up with the rise in equities and Median housing payments for first-time buyers were 16% of income in 1975, 18.4% in 1980, a savage 27% in 1990, 14% in 2000 and 16.8% last year.

    Jenkins’s conclusion derives from his background in the “Heritage” industry: build on brownfield and inner-city sites where necessary, but no “subsidy”. In this respect, flying into City Airport suggests Belfast (which was Baudrillard @ 12:23 PM‘s focus) is not short of such sites.

    I trust nobody demands I defend each and every one of these contentions: on a tooth-sucking day I could knock holes in every point myself. However, I found enough meat to chew over.

  • Cruimh

    I have nothing but sympathy for recent first time buyers who have been sucked into this. I have no sympathy for others who have played the property game – parasites. I will have no sympathy for someone who bought a house at £80K bleating because if it drops in ‘value’ from £200k to “only” £150K.

    The shame is that vast amount of damage has been done to our countryside that cannot be undone.

    If altruism is behind “development” then make all land prices stay at agricultural levels. If nothing else it would cut down on corruption. Have 75% profit tax (after inflation and improvements) on sales of first houses and 95% on sales of second and holiday homes.

  • Cruimh @ 02:13 PM:

    I like where you’re coming from, but I don’t think I’d want you writing my party manifesto (if I had a party, that is)!

    However, the very last thing I’d want is all land prices stay at agricultural levels. The capitalists would the rest of North Down concreted over in a decade.

    What’s wrong with subsidising the infra-structure and clean-up of brownland sites? If it was good enough for the Greenwich Dome (the most polluted site this side of Chernobyl), why not post-industrial Belfast?

    Prizes and mega-kudos for conversions of redunant buildings?

    As for the speculative buy-to-renters, I’m still working through the “Close to Complete Ideology and Religion Shit List” [http://www.thejaywalker.com/pages/shit_happens.html].

    Memo to self: must get these hyperlinks to work.

  • My friend has just bought/is just buying (have to speak to him and find out if/how it went) a flat for something in the region of 150k but I’m still hoping for a crash in the next year. Not holding my breath, but it’s the only hope my better half and I have of affording to buy our own house any time soon.

  • George

    Beano,
    “I’m still hoping for a crash in the next year”

    I hope that wasn’t spoken like a true public servant because the rest of us live in the real economy and don’t like crashes.

  • Cruimh

    “However, the very last thing I’d want is all land prices stay at agricultural levels. The capitalists would the rest of North Down concreted over in a decade.”

    Do you really think the thousands of acres would have been sold if the farmers were getting agricultural prices for land MR ?

  • Cruimh @ 03:34 PM:

    Precisely: eliminating the differential between agricultural land and development land would equalise prices — but not entirely downwards. It also would reduce the pressure to defend zoning. Much “agricultural land” is, in effect, now being retained mainly as a land bank for future opportunism: which is why the Big Money Boys have acquired so much acreage on the mainland.

    Then the glossy mags have been telling us for years we all must have our little corner of the out-of-town countryside that quickly becomes yet another estate.

    No: surely the way out of this is to encourage the redemption of the inner-cities. Make such developments attractive enough (a canal, as in the Salford Quays, or riverside location helps), instal efficient public transport, locate M&S, John Lewis et al., and Robert is most definitely Daddy’s brother.

    I know it’s not entirely relevant, but I like the Texas story. Observing how Big City regeneration starts, a mayor of a small and struggling town was heard to ask how to bring in some of those ho-mo-sex-shuls.

  • bpower

    Jesus beano, thats up there with “Why dont we print more money, we’ll all be rich!!”. Do you think that a market crash wouldn’t effect the rest of the economy? When the tory’s economic fanaticism led to the UK’s housing crash did it help first time buyers?

  • Comrade Stalin

    beano, it’s a big mistake to “hope for a crash”. Crashes don’t happen by themselves, and they don’t happen because some economist or other thinks that houses are “overvalued”. You do not live in a vacuum where the economy from your point of view will continue on it’s merry way whilst the rest of the country cannot afford property. If there is a house price crash, it means there is something else more serious going on.

    Crashes happen when the economy takes a hit, and people start losing their jobs, and as such lose the ability to continue the repayments on their houses. This results in repossessions, which therefore results in a glut of properties on the market while the banks try to offload them. The UK economy is quite fragile – export industries and tourism will already be feeling the painful effect of the strong pound reducing their turnover, so the likelihood of an economic downturn is reasonably probable in these circumstances.

    The now-homeless individuals who have had their houses reposessed will be bankrupt, and will make ends meet somehow – maybe by renting, or moving in with their parents etc – but they will no longer have the credit to splurge in the high street. Falls in consumer spending will then deepen the effect of the recession, exacerbating the effect on house prices.

    There is a serious problem among people at the moment. I’m always hearing people say “the government won’t allow a crash” (wrong, they can do nothing to stop it) or “property prices cannot crash as people have to have somewhere to live” (wrong, this was true in the 1980s and 1990s when there were two or three crashes – people are forced to grit their teeth and find a way to make do). Everyone should be cautious with their investment decisions.

  • Yer Woman

    I’ve just forked out over £200grand for a terraced house in Belfast which *fingers crossed* i’ll be exchanging on in two weeks time.
    I had a 5 figure deposit courtesy of my parents that would have bought the said terrace outright a mere 5 years ago, and yet I still had to go cap-in-hand to co-ownership in order to buy it. In fact, without co-ownership’s help I wouldn’t have been able to afford anywhere in Belfast full stop and very few properties elsewhere in NI (the extortionate price of some of the hovels I viewed in west Belfast had to be seen to be believed.)
    I’m lucky that I had a financial leg-up to get on the property ladder, but property chill or no property chill, the price of a home in Belfast will be beyond the reach of most first time buyers for the forseeable future.

  • Reader

    Comrade Stalin: Crashes happen when the economy takes a hit, and people start losing their jobs, and as such lose the ability to continue the repayments on their houses.
    Or a specific crash can happen when the Buy to Let market collapses. You won’t object to speculators being burnt? The quickest and biggest losses hit those who borrowed to invest – people who were millionaires in 1928 became nasty stains at the bottom of skyscrapers in 1929. Right now the housing market looks like a pyramid scheme. I’m glad I bought in 1989 and my children won’t be trying to buy until 2015…

  • Turgon

    Comrade Stalin,
    I am disappionted you have not proposed nationalising propertry and sending the speculators to gulags whilst sitting in your datcha on the Black sea.

    Reader,
    I am not so sure only the speculators would be burnt. There could be a fall in confidence and then a vicious spiral set up. I would have thought (I am no economist) that the best thing would be market stagnation. Then wages could begin to catch up with prices. Also speculators might invest some of their money in the stock market which might be more useful for the economy generally.

    Yer woman,
    Sympathy is often too close to condescension but I do sympathise. I could not afford my house now. I am over half way to being a property millionaire. This money is all irrelevant however, as we are probably going to have to move soon and the house we but wll presumably also cost a silly ammount of money.

    The only good thing I can see is that if you can keep up repayments then so what if your house falls in value. If you stay out of negative equity then you can move as other prices will have fallen. If you are in negative equity that would be a problem but I suppose as long as you do not need to move and can afford the repayments you can sit tight. Fairly cold comfort I know.

  • Bemused

    Dear, oh dear, oh dear – what an astounding collection of lazy, whining trash. Can’t get on the ‘property ladder’? My hear bleeds for you. Get a fucking job you lazy oafs. Job not paying you enough to get on the ‘property ladder’? Then get another job or a different job or work harder – my parents did it, I do it and most hard-working people I know are currently doing it. Alternatively you could do us all a massive favour and get on the ‘property ladder’ in Larne, Portadown, Strabane, Craigavon or any other scum-hole apart from Belfast and let the rest of us get on with the job of dragging this place into the 21st century.

  • willowfield

    The fall in house prices is good news – people mortgaged to the hilt with little spare cash to spend is bad for the economy.

    The only people who lose from a fall are those out to make a quick buck.

  • Turgon

    Bemused,

    I think that is a little unfair.

    What about people doing socially useful, highly skilled but poorly paid jobs like nursing? From what I can see they have been priced out of London and are in danger of being priced out of Belfast. Yes they can earn extra money doing extra shifts but not that much. Yes they can commute but that produces all sorts of other problems.

  • George

    Willowfield,
    “The only people who lose from a fall are those out to make a quick buck.”

    In other words, you already own a property so don’t give a toss. Are you a public servant as well?

    You certainly aren’t a person with a young family trying to move to a larger house but are incapable because despite all your savings your flat is worth less than you bought it for.

    Golden rule after all is that when house prices go south you have to stay where you are, regardless of your circumstance.

  • Bemused,

    with all due respect (be that none?) – fuck you.

    You’re nobody to judge. FYI I’ve just got a new job, one which pays reasonably well compared to the average graduate salary. I don’t want to live in a mansion just my own house.

    With the level of immigration rising it’s clear Northern Ireland, and Belfast in particular, is going to need more housing, and this has been known for some time (for Christ’s sake it’s obvious from the soaring house prices) and yet the governments, devolved or otherwise, have done sweet fuck all about it. At the minute it barely seems to be on the radar!

    What use is devolution exactly?

  • DK

    Not sure if it is entirely a Belfast thing. I don’t have the link to hand (think it was BBC) but it showed the average price of houses in different parts of NI. The most expensive area was Lisburn; the cheapest was North Belfast.

  • Aquifer

    The interest property companies pay is an allowable business expense that can be set against income when calculating tax. Mortgage tax relief for individuals was abolished around 1990, so individuals cannot compete in this market. Banks are happy to lend to speculators who put down small deposits, and speculators are happy to borrow and see their own small stake/ deposit multiply with any rise in property values.

    And I do not see it ending. Few homes are being built. people will not live seven to a house again, divorces often mean two homes for one, and there are more young couples and immigrants who need accommodation. Empty social housing is not rented to immigrants, so immigrants rent privately and hold up the price of buy to lets.

    On the plus side many people find they have big lump of equity to use for a pension or to invest in other businesses.

    This could transform the prospects for them and for this region.

    Think of it as a reward for sticking the scabrous politics of this place for so long.

  • Animus

    Bemused – your disconnect from reality would be funny if I hadn’t heard it from other, equally stupid and ill-informed people.

    Beano – good luck – it’s evidently turning into a buyer’s market, so maybe that will be to your advantage.

    Malcolm – I doubt what you say about average salaries to mortage as a percentage. Maybe that’s true of England, but I seriously doubt it is true of Northern Ireland. I know many people who bought houses which were only twice or three times their salaries. Our current home is ‘worth’ nearly 6 times our combined salaries – and we are probably above average earners, so the variance is likely to be even greater for other people desperately trying to make their way onto the property ladder.

    We are lucky to have bought our house and could certainly not afford it at this point. Both my spouse and I would have to work second jobs to afford our fairly modest house at this point. I don’t feel we’ve worked particularly hard, just been lucky at the right time and both on decent salaries. One positive out of all this may be that rental values will decrease as they buy to let market will have a glut of properties which need to paid for. An unoccupied property is very expensive indeed.

    The idea of house as pension only makes sense if you are willing to downsize when you retire. More likely you will have to sell your house to pay for care and your children will have no house and no inheritance. That’s not terrible in itself, but I can see it would be galling to work your fingers to the bone and do without only to find that towards your twilight years, you get fleeced a second time.

  • Animus @ 10:17 AM:

    The “average salaries to mortage percentage” is just that: an arithmetical equation rather than a statement of individual realities. I think, I hope, I made it clear that the source was a London-bias.

    On that basis, though, I notice a quotation in The Times yesterday [http://http://business.timesonline.co.uk/tol/business/economics/article2083427.ece]:
    Seema Shah, property economist with Capital Economics, said: “The regional picture shows that the real strength of the market continues to lie with London, Scotland and Northern Ireland.

    “These three regions continued to record annual house price growth of over 10 per cent in May. However, of these three, London was the only one not to see a moderation in house price inflation from the previous month.”

    Annual house price growth weakened or was stable in May in all other regions except Yorkshire & Humberside, she added.

    Now that, I guess, merely repeats the point which started this thread.

    Two essentials emerge from this thread:
    1. That the recent “surge” (not a good word at the moment) has been about 15% p.a. across NI. Is that not a consequence of catching up with the price inflation across the rest of the UK? And, of course, in a free market, NI is not totally isolated from the RoI.
    2. The Belfast phenomenon is inevitable in a city, indeed a local capital, and especially as the new dispensation gives confidence in the form of the celebrated “peace dividend”.

    To return to Simon Jenkins’s original point, which is where I butted in here, the question is not a notional average price level, but affordability. Borrowing money at 15% (which I remember doing in the mad, bad days of Thatcher/Major) on £X is not fiendishly more expensive than borrowing at 6% on pushing £3X. Yes, I fully expect wholesale screeches of pain and abuse at that thought. It was ever thus.

    The difference this time is that the interest rates, though high (and by Euro and US standards unnecessarily so: see Alex Brummer in last week’s New Statesman for that point of view) are not so precipitous that they invite house-price collapse. After all, a drop of (say) 1.5-2 percentage points (which must happen in the middle term, or no G.Brown re-election) will cut repayments by a quarter or more. In the worst of the Tory counter-inflation policy, a drop of the same amount was only an eighth or so.

    And any vagueness and inconsistencies in this should be blamed on my simultaneous attempt to do a clean re-installation. Easier by far on a Mac than a PC, but still bad anal aggravation.

  • Animus

    Fair enough point, Malcolm but this only proves that it is as awful for Londoners trying to get on the property ladder as for people in Northern Ireland. There is the added complication that salaries are still lower than in the UK as a whole, so while house prices may be catching up, salaries are not experiencing the same growth. I fully agree that affordability is the issue but how can that be sorted out when the market is running rampant?

  • Animus @ 12:12 PM:

    I’m not taking serious issue with you. The trouble is I cannot find the facts to match your (and, yes, my) assumptions.

    I think for a start we should set aside the peculiar nonsense that is Greater London, where the whole thing is so overheated it must be causing major global warming.

    Beyond that, I cannot yet see “affordability” indices later than 2003, and even those seem to be mainland only [http://www.jrf.org.uk/knowledge/findings/allfindings.asp]. So advice and guidance for sources very welcome, please.

    However, there’s an interesting paper there on:

    What factors influence the housing market?

    The role of the economy and employment in driving the housing market was found to be particularly significant. It is not just the economic performance of the wider area that matters, but also the access to jobs at ward level.

    Proximity to city centres has in recent years been a positive factor in terms of increasing prices; rural areas have seen lower price increases over the medium term. The physical form of neighbourhoods, in terms of density and local green space, has a significant effect on both house price levels and residential satisfaction.

    Wards that started with low prices, in absolute terms and relative to predicted levels, tended to see greater subsequent increases, and vice versa, suggesting markets tend to adjust to disequilibrium over time.

    Vacancies seem to have complex relationships with local market dynamics, in some cases indicating slack demand while in other cases being associated with speculative elements of demand.
    School performance has some positive impact on the housing market, but this effect strongly overlaps with that of poverty and social class. Crime does not have a significant extra negative effect on the market.

    Poverty was found to be very important for the market status of neighbourhoods. However, deprived areas may also display more market volatility. From a policy point of view, the question is, how can the level of poverty in neighbourhoods be reduced? The evidence from this research suggests that changing the tenure mix of housing supply can make a difference, although most of the reductions in poverty since 1991 reflected labour market changes and other factors, rather than patterns of housing development.
    Increased owner occupation has generally positive effects on the health of local housing markets, whilst the effects of increased social renting are more ambiguous; physical improvements associated with new houses and remodelling may be offset by the impact of increases in concentrations of poverty within an area. An increase in the proportion of flats in a locality is associated with higher demand and house prices, although it can mean a fall in prices in the particular neighbourhoods where the flats are concentrated.

    Increased concentrations of minority ethnic populations seem to boost housing demand at the wider market level while having some negative impacts on prices at ward level.

    Rather similar models to those used for house prices can be used to analyse other neighbourhood market outcomes, including household growth, poverty change, and changes in low demand. One common feature here is that increased social renting tends to be associated with more adverse outcomes.
    Residents’ dissatisfaction with their neighbourhood was found to be linked to a number of common negative factors, including deprivation, social renting, terraced housing, higher density, and residing in an urban rather than a rural location.

    I was at first finding myself muttering “bleedin’ obvious”, but was brought up short by markets tend to adjust to disequilibrium over time, which is my own instinctive feeling.

    I’m still battling to complete my re-install here (at the moment my mail settings are doing funny things), so my mind is twin-tasking and I’m not fully focussed. However: a final thought. The key to doing well in a price-ramp is to be ahead of the pack. And that means spotting the next big thing. In Belfast (as elsewhere) that involves sussing out where the next cult-area is going to be. Suggestion: nice older houses, solid-built if at the moment run-down, close to the centre, good transport. Now, where’s that?

  • Fraggle

    Malcolm, careful with the mainland word. You’re talking about britain here, not the mainland.

  • Fraggle @ 03:25 PM:

    Point taken. Delete “mainland”, insert “there”.

    Whoopee-doo! All mail settings working, at last.

  • Dread Cthulhu

    Reader: “Or a specific crash can happen when the Buy to Let market collapses. You won’t object to speculators being burnt? The quickest and biggest losses hit those who borrowed to invest – people who were millionaires in 1928 became nasty stains at the bottom of skyscrapers in 1929. Right now the housing market looks like a pyramid scheme. I’m glad I bought in 1989 and my children won’t be trying to buy until 2015…”

    And the historical crash you make passing reference to did not occur in a vacuum, nor did it only effect “millionaires.” There were greater repurcussions, akin to a tsunami following an earthquake. If you think hard enough, you might recognize some of those repurcussions, like Herr Schicklegruber and the Second World War. Whilst the collapse of the housing market likely won’t have so grand a footprint as the Market Crash of 1929, it won’t be nearly as surgical as you hope, either.

  • willowfield

    GEORGE

    “The only people who lose from a fall are those out to make a quick buck.”

    In other words, you already own a property so don’t give a toss. Are you a public servant as well?

    No: in other words, those who are buying and selling houses as homes to live in won’t lose out, but those buying and selling to make easy money will.

    You certainly aren’t a person with a young family trying to move to a larger house but are incapable because despite all your savings your flat is worth less than you bought it for.

    Um, just because prices fall doesn’t mean that they are worth less than you bought them for! If you buy a house for £100,000, its value goes up to £250,000 and then drops to £200,000, your property has increased in value, not decreased!

    The only people who could suffer from negative equity will be those who have recently bought with the aim of selling quickly to make a quick profit.

    Golden rule after all is that when house prices go south you have to stay where you are, regardless of your circumstance.

    Nonsense. If my house is worth less than it was last year, so too is the house I am moving to. It makes no difference to the ordinary family. First-time buyers gain. Property speculators lose.
    Lower prices mean families don’t have to stretch themselves so they have more money to spend. That is good for the economy.

  • Dread Cthulhu

    Willowfield: “Um, just because prices fall doesn’t mean that they are worth less than you bought them for! If you buy a house for £100,000, its value goes up to £250,000 and then drops to £200,000, your property has increased in value, not decreased! ”

    In all seriousness, however, your example ignores a great many variables and makes some assumptions to generate a favorable scenario. You put your buyers purchase far enough back on the curve to have had a paper loss, but a real profit come the time of sale. I’m certain George can craft an equally one-eyed scenario to illustrate his point.

    Willowfield: “The only people who could suffer from negative equity will be those who have recently bought with the aim of selling quickly to make a quick profit. ”

    Not so — anyone who bought towards the end of the boom and wants / needs to sell *NOW* for whatever reason would suffer from negative equity, be it speculation, settling a will, finding themselves owning a house worth less than the amount the owe the bank, particularly if they bought using an adjustable rate device, etc.

    Your narrow-minded assumptions do you no credit.

    Willowfield: “Nonsense. If my house is worth less than it was last year, so too is the house I am moving to. ”

    Only if the loss is general. A great many things influence home prices. Likewise, deflation in the real estate market will not happen in a vacuum and neither you nor I could reasonably predict all the possible reverberations.

    Willowfield: “Property speculators lose.”

    So do those who had the misfortune of buying at the peak of the market, regardless of whether or not they were investors.

    Willowfield: “Lower prices mean families don’t have to stretch themselves so they have more money to spend. That is good for the economy. ”

    Individuals already owning homes will have a decrease in real wealth. Those who do not fully own their homes may find that their debt exceeds the new valuations of the home. A weakening housing market would likely impact consumer optimism, hence, it would impact consumer spending. All these things are *BAD* for the economy, Willowfield.

    Get over the speculators, who are really simply a symptom of a strong economy, and worry about the economy.

  • willowfield

    DREAD

    In all seriousness, however, your example ignores a great many variables and makes some assumptions to generate a favorable scenario. You put your buyers purchase far enough back on the curve to have had a paper loss, but a real profit come the time of sale.

    Um, deliberately so, because I am distinguishing between those who buy and sell houses as homes to live in and those who trade in property to make quick profits. The former category stay in their houses for reasonable lengths of time and hence they will not suffer from a fall-back in prices. As I already said, the only people to suffer will be those who bought recently with the aim of selling soon.

    I’m certain George can craft an equally one-eyed scenario to illustrate his point.

    Only if he wishes to defend the property speculators.

    Not so—anyone who bought towards the end of the boom and wants / needs to sell *NOW* for whatever reason would suffer from negative equity, be it speculation, settling a will, finding themselves owning a house worth less than the amount the owe the bank, particularly if they bought using an adjustable rate device, etc.

    A tiny number of genuine house-sellers may fall into that category. The vast majority will not. The vast majority, and society and the economy generally, will benefit.

    Your narrow-minded assumptions do you no credit.

    My assumptions aren’t narrow-minded. I’m making a general point. Just because a tiny number of genuine house-sellers may lose out doesn’t alter the fact that generally this is a good thing. In the “buoyant” market, the MAJORITY of people were losing out, yet you appear to favour this to a drop in prices in which only a tiny minority of genuine buyers and sellers lose out.

    Only if the loss is general. A great many things influence home prices. Likewise, deflation in the real estate market will not happen in a vacuum and neither you nor I could reasonably predict all the possible reverberations.

    The loss is likely to be general. The effect on one sector tells to knock on to the next.

    So do those who had the misfortune of buying at the peak of the market, regardless of whether or not they were investors.

    Indeed, but such people are a tiny minority. The vast majority of people benefit. You’re viewing the fall from the point of view of a minority rather than from a general perspective.

    Individuals already owning homes will have a decrease in real wealth.

    They won’t. Their asset will be worth less than it was last year (but more than two years ago), but this doesn’t effect them as it is a fixed asset which they will not be realising. Their mortgage payments will be unaffected (except for the interest rate rises) so they will still have the same spending money.

    The benefit will be felt by those who presently cannot afford to buy. Many will now be able to.

    It will also benefit those wishing to move as it will not cost them as much to move. Therefore their mortgage repayments will be less than they otherwise would have been and will have more money to spend, benefiting the economy.

    Those who do not fully own their homes may find that their debt exceeds the new valuations of the home.

    A tiny number. And it only hurts them if they sell. Only a tiny number of that number will be in a position where they have to sell.

    A weakening housing market would likely impact consumer optimism, hence, it would impact consumer spending. All these things are *BAD* for the economy, Willowfield.

    I think most people will be pleased to see prices fall, and – as explained above – many will have MORE money to spend.

    Why do you want to have first-time buyers priced out of the market?

    Why do you want to have districts transformed from primarily owner-occupied to primarily transient renters, and the consequent social problems?

    Why do you want people over-mortgaging themselves, with less money to spend and getting into debt?

  • Yer Woman

    Dread said: “So do those (people who will lose money) who had the misfortune of buying at the peak of the market, regardless of whether or not they were investors.

    Willowfield said: “Those who do not fully own their homes may find that their debt exceeds the new valuations of the home.

    DON’T SAY THAT!!!!!!!!!!! 🙁
    Should I pull out of my house deal now and keep my deposit until the market crashes, in the hope I can get a full mortgage for a house in Belfast without co-ownership’s help?

  • Folks, let’s take a reality check here. I’m (hopefully) about to start renting a house in one of the nicer bits of the Antrim Road for about 700 a months. The same house would go on the market for about 400k if it were for sale. That means as a buy-to-let investment, it has a yield of about 2.1% before management fees, void periods, furnishing and fixing my washing machine when I find the previous tenants have fucked the filter up are taken into account. Call the real yield, optimistically, as closer to 1.5%.

    The only reason for investing in an asset that brings in such a poor yield is if you expect to make massive capital gains. And that’s exactly what’s been happening for the past few years. But that can’t keep on happening for ever. Unless you also happen to think pyramid schemes are a sustainable long-term investment model.

    So what happens when all these cute ‘investors’ realise that their 30% annual capital gains aren’t going to happen, and they’re stuck with an asset with a very poor return (or no return if they own one of the many vacant properties in Inner City Belfast)? Especially if they’ve leveraged in massive amounts of borrowing and the rent isn’t coming close to meeting their non-fixed, more expensive than residential, buy-to-let mortgage? They’re going to want to get out of the market, and fast. Maybe the bank will want to make them get out of the market. Once that happens, anyone who really wants to buy a home for living in will decide to live with Mammy or keep sharing the filthy house on the Ormeau Road for a few years more.

    In any bubble, very few people have the strength of character to get out at the top and take their profits. The rest get suckered and go off and whinge that they want a government bail out. But then the government is going to have to deal with the prudent and irate, like me, who don’t want to bail out some of the most selfish, gredy and stupid people in our society, like our bemused friend up the thread. Some families will really suffer, some investors will get taken to the cleaners, some people who’ve been sensible and prudent will lose their jobs and not benefit. It won’t be pleasant. But when a bubble gets to this stage there isn’t much that can be done about it.

    At least we have lots of British taxpayers’ tax to keep us afloat as the last bastion of Keynsianism. South of the border they’ve destroyed one of the world’s most competitive economies to build one where they invite immigrants in to build houses that Irish people can buy and sell houses to one another in the fantasy that they can let them all out to immigrants and end up being property millionaires and retire to Gran Canaria at 45.

    And everybody will castigate Bertie for allowing it to happen, and true as that is, I didn’t see anyone proposing any alternative strategy down there in the last two general elections.

  • Animus

    Yer Woman – when you buy out your co-ownership, it’s better if there hasn’t been a sharp rise in the value. Sign, close the deal and start planning your housewarming party NOW. Many people waited for the bubble to burst in order to buy and now find themselves priced out of the market altogether. Go with what you know, don’t panic and look forward to getting into your new house.

  • DK

    Yerwoman: “Should I pull out of my house deal now and keep my deposit until the market crashes, in the hope I can get a full mortgage for a house in Belfast without co-ownership’s help?”

    Absolutely Not. Its a massive gamble that the market will crash. And bear in mind that previous “crashes” were largely stagnation, rather than actual price falls. So, even in a crash, you will still likely have to pay the same amount.

  • Ulster McNulty

    DK

    “And bear in mind that previous “crashes” were largely stagnation..

    The extent of price rises has been so extreme, is it not conceiveable that a price correction could also be a bit more extreme than what may have happened in the past? It could be worth a gamble…I’d advise yer woman to wait a while to see what happens…but past performance is no guarantee…

    (btw, the 1989/90 UK property price bubble bursting meltdown didn’t affect Northern Ireland at all – ironically)