N Ireland house prices down 18.6%!

leftieM

Re. the rents rising argument -
It is not a given that in a falling market rents will rise. Look at Ireland, which is a few months ahead of us in crash terms. This report from Daft notes that rents started to fall in Jan 08 after rising for a number of years.

The broad trend that emerges from the Daft Rental Report for the first quarter of 2008 is that rents dropped slightly between January and April. This follows a long period of rental growth, as after rents declined sharply between January 2002 and March 2004, they rose continuously, peaking in June 2007. The second half of 2007 was more volatile, but the emerging pattern is of a gradual decrease in rent levels. This is not all that surprising; indeed, it is only surprising that the decline is modest, given that the stock of properties available to rent nationwide increased from over 5,000 in May 2007 to almost 12,000 in May 2008.

This is just an example and obviously this is a different country with different circumstances at play. However, I just wanted to debunk the 'rents rise when house prices fall' statement as being theoretical at this stage and not inevitable.

Sigur_2

talksalot81 wrote: »

Yeah, but what is the alternative!?

With prices correcting, people are brought down to earth and have to work for their luxuries. In the absence of it, you produce a massive age divide. No longer would your economic well being rely upon your academic and employment success, it would rely upon your having a house. The lowest paid workers could very well enjoy economic well being that a highly paid medical doctor could only dream of, simply based on the time of their birth.

I don't know any doctors struggling, especially when there custom is preferred by banks and financial institutions because of the job security and potential lifetime earnings.

The lowest paid workers would simply have their wealth tied up in the equity of their house, only really tangible to them if they sell the house and downgrade. The increasing in their house value won't really affect their lifestyle too much if their wages aren't increase as well, if they are only on £15k a year, it doesn't matter how much their house is worth unless they are happy to sell it and move somewhere cheaper.

belfastgirl23

Surely this all misses the point that a house is first and foremost a place to live.

If your main goal in buying a house was to have a place for yourself and your family to life, then what it's worth on the open market is irrelevent. Even if you are thinking of moving, dropping prices will also be affecting the house you are buying so your net loss on one side will be balanced by a gain on the other side of the transaction.

If you are an investor then the point of investment is that the value of your investment can go up and down. Which you should have been aware of when you bought.

The people affected are firstly those who are coming off fixed rate mortgages now. They will have bought 2-3 years ago so are a lot less likely to be affected by negative equity. The others are those who bought at the height of the boom in the summer. However they should still be on cheap-ish fixed rate deals for another year at least, so fingers crossed things will have ironed themselves out before these deals run out.

I just think we can all get a bit hysterical about this. Fair enough if you're experiencing problems repaying your mortgage but otherwise it's all just monopoly money

I'm not saying it isn't bad news for some people but it's worth taking a step back and thinking about it before thinking it's bad news for you personally.

jetboy

To rejoice at the fall in house prices is far too simplistic a view. Yes they needed correcting but the fall hasn't been caused by a drop in demand due to people realising they are overpriced. The fall is due to a world-wide macro-economic mess. The credit industry and the oil price has unleashed turmoil which will require years to recover. Little point is a house being cheap if the bank won't let you have a mortgage for it and that is what's happening now and will get worse. If they won't lend you the cash then it doesn't really matter weather the house was £200k or £300k does it.
As for rents, I was talking to an agent 2 days ago who says the market has picked up considerably now and prices are already rising in the rental sector. I can't see rental costs going mad in NI but they will rise nonetheless which isn't good either.

Phoolgrrrl

I'm pretty worried. We bought last feb in a stange way, me my dad and another man putting money in but me and OH livin in house. plan was live in it for a while splittin the mortgage then sell and get a wee bit extra so me and OH can buy somewhere ouselves. Looks like we will be where we are for like 5 yrs before that can happen!

Colin_Kee

It all happens in 13's I know it's a very unluckey number for some, but print this post off and if the house prices are not back up to astronomical prices in 12~13 Years time, I'll eat the paper it's printed on... Hope everyone's in it for the long term!!

thats my prediction anyway!!

36square

As for rents, I was talking to an agent 2 days ago who says the market has picked up considerably now and prices are already rising in the rental sector. I can't see rental costs going mad in NI but they will rise nonetheless which isn't good either.[/quote]

Rising rents is just another way of restoring balance to the market. Witless investors who bought property purely on the basis that the value would go on rising are probably now trying to generate a worthwhile rental income from them.

talksalot81

Sigur wrote: »

I don't know any doctors struggling, especially when there custom is preferred by banks and financial institutions because of the job security and potential lifetime earnings.

The lowest paid workers would simply have their wealth tied up in the equity of their house, only really tangible to them if they sell the house and downgrade. The increasing in their house value won't really affect their lifestyle too much if their wages aren't increase as well, if they are only on £15k a year, it doesn't matter how much their house is worth unless they are happy to sell it and move somewhere cheaper.

Well now you do and i could give you many examples!

As for the low paid workers... I think you are entirely wrong. Did you care to drive around the lower end 'estates' at the height of the boom? They were jam packed full of new cars, people in new clothes, people just home from holidays in the sun... They did not get this money from their jobs! This extends further up the pecking order as well, I know of semi skilled individuals who would likely be earning 20k or thereabouts who were able to extract as much as £100k by MEWing. This practice is widespread now and is exactly how one can extract money from their house WITHOUT moving.

talksalot81

jetboy wrote: »

The fall is due to a world-wide macro-economic mess.

That too is far too simplistic. This is to imply that, in the absence of the 'mess', the situation would have been sustainable. This is further to imply that you believe ti reasonable that one of the lowest earning regions of the UK should have housing costs not far below (and rapidly catching) the highest earning regions. That is of course sillyness.

Sigur_2

talksalot81 wrote: »

As for the low paid workers... I think you are entirely wrong. Did you care to drive around the lower end 'estates' at the height of the boom? They were jam packed full of new cars, people in new clothes, people just home from holidays in the sun... They did not get this money from their jobs! This extends further up the pecking order as well, I know of semi skilled individuals who would likely be earning 20k or thereabouts who were able to extract as much as £100k by MEWing. This practice is widespread now and is exactly how one can extract money from their house WITHOUT moving.

Except many financial institutions gave out loans and credit regardless of income or house value, because the financial institutions didn't need to worry about whether they had the ability to repay as they reneged on the risk by selling it on. Credit became so cheap and available anyone could take out multiple credit cards and loans without much questioning from their bank. The only difference is now this has all stopped, or banks have become much stricter, and people can't borrow more to pay a previous debt.

You haven't proven to me how highly paid doctors are "struggling". The members of my family in the medical field certainly aren't struggling and drive up any of the more expensive areas of Belfast and you won't find too many doctors or surgeons struggling. The members of my family within the medical field are mortgage free and are only in their mid-30s, many of their co-workers have multiple holiday homes.

You seem to have mixed cheap credit with house price inflation. Whilst they mix, they aren't relevant to the point you're trying to make.