Housing and the Economy

Ard-Taoiseach wrote:

cookiemonster wrote:

johnfás wrote:

Squire wrote:

I employ a 'Planning Officer' (Health and Safety Planning Officer) he assesseses the health and safety risks and regesters the project. A document of his is sent to the tenderers who price for that risk and the successful one in turn produces a report on how he will address the issues. So by this means the responsibility is transferred back to the contractor where it rightly belongs.

Employer's Liability for Occupational Injuries is a non delegable responsibility under Irish Tort Law. Even if you employ a third party to oversee safety of your site, negligence can and will attach to the employer in a case of reasonably foreseeable damage resulting from an employer's negligence or under the Health and Safety at Work Act.

You should try telling Mr Scummy McDodgybuilder that. 

Ah, auld DodgeBodge. Would you know him yourself?

I'm used to spending monday morning on the phone to him after he's eventually passed 20 solicitor's letters to me and his ex-employee is talking hin to court. 

cookiemonster wrote:

Ard-Taoiseach wrote:

cookiemonster wrote:

johnfás wrote:

Squire wrote:

I employ a 'Planning Officer' (Health and Safety Planning Officer) he assesseses the health and safety risks and regesters the project. A document of his is sent to the tenderers who price for that risk and the successful one in turn produces a report on how he will address the issues. So by this means the responsibility is transferred back to the contractor where it rightly belongs.

Employer's Liability for Occupational Injuries is a non delegable responsibility under Irish Tort Law. Even if you employ a third party to oversee safety of your site, negligence can and will attach to the employer in a case of reasonably foreseeable damage resulting from an employer's negligence or under the Health and Safety at Work Act.

You should try telling Mr Scummy McDodgybuilder that. 

Ah, auld DodgeBodge. Would you know him yourself?

I'm used to spending monday morning on the phone to him after he's eventually passed 20 solicitor's letters to me and his ex-employee is talking hin to court. 

20 solicitor's letters? God, his business is awful slow these days. I remember he got through 50 a day back in 2006 at the height of the boom.

Ard-Taoiseach wrote:

cookiemonster wrote:

Ard-Taoiseach wrote:

cookiemonster wrote:

johnfás wrote:

Squire wrote:

I employ a 'Planning Officer' (Health and Safety Planning Officer) he assesseses the health and safety risks and regesters the project. A document of his is sent to the tenderers who price for that risk and the successful one in turn produces a report on how he will address the issues. So by this means the responsibility is transferred back to the contractor where it rightly belongs.

Employer's Liability for Occupational Injuries is a non delegable responsibility under Irish Tort Law. Even if you employ a third party to oversee safety of your site, negligence can and will attach to the employer in a case of reasonably foreseeable damage resulting from an employer's negligence or under the Health and Safety at Work Act.

You should try telling Mr Scummy McDodgybuilder that. 

Ah, auld DodgeBodge. Would you know him yourself?

I'm used to spending monday morning on the phone to him after he's eventually passed 20 solicitor's letters to me and his ex-employee is talking hin to court. 

20 solicitor's letters? God, his business is awful slow these days. I remember he got through 50 a day back in 2006 at the height of the boom.

That's just to ruin my monday, I'm sure there are more on a desk somewhere else. I have, on several occasions, cover permitting screwed such people royally by explaining in full the cover and permitted claims to people who would otherwise have settled for a next to nothing private settlement from their employer. I've done it to another insurance company too, you can guess which one it was. Anyway, that's behind me now. I'm off into the quiet world of social research mid August, expect to see a much happier Cookiemonster. 

Solicitor's letter arrives claims you are the descendant of Satan and responsible for WW2. Best response do absolute minimum needed and say or deny as little as possible and imply a counter claim.

Alas much of it is bluff and counter bluff.

cookiemonster wrote:

Ard-Taoiseach wrote:

cookiemonster wrote:

Ard-Taoiseach wrote:

cookiemonster wrote:

johnfás wrote:

Squire wrote:

I employ a 'Planning Officer' (Health and Safety Planning Officer) he assesseses the health and safety risks and regesters the project. A document of his is sent to the tenderers who price for that risk and the successful one in turn produces a report on how he will address the issues. So by this means the responsibility is transferred back to the contractor where it rightly belongs.

Employer's Liability for Occupational Injuries is a non delegable responsibility under Irish Tort Law. Even if you employ a third party to oversee safety of your site, negligence can and will attach to the employer in a case of reasonably foreseeable damage resulting from an employer's negligence or under the Health and Safety at Work Act.

You should try telling Mr Scummy McDodgybuilder that. 

Ah, auld DodgeBodge. Would you know him yourself?

I'm used to spending monday morning on the phone to him after he's eventually passed 20 solicitor's letters to me and his ex-employee is talking hin to court. 

20 solicitor's letters? God, his business is awful slow these days. I remember he got through 50 a day back in 2006 at the height of the boom.

That's just to ruin my monday, I'm sure there are more on a desk somewhere else. I have, on several occasions, cover permitting screwed such people royally by explaining in full the cover and permitted claims to people who would otherwise have settled for a next to nothing private settlement from their employer. I've done it to another insurance company too, you can guess which one it was. Anyway, that's behind me now. I'm off into the quiet world of social research mid August, expect to see a much happier Cookiemonster. 

Congratulations Cookiemonster and good luck in your new profession.

Slim Buddha wrote:

Auditor #9 wrote:

Is there no market for a trailer trash culture here at all in Ireland? With this bit of good weather I could feel like living in a caravan again.

Seriously, we have a traveller culture why don't we have a viable and respected trailer park/side of the road/middle of the river corner of the market?

The question is, Auditor, should we be aspiring to a trailer trash culture at all? Mind you, it's one thing living in a souped-up, modified RV in a "facilities on-site" car park in Santa Barbara. A quite different experience is "wintering" in a second hand caravan in a lay-by in Carrickboy, Co. Longford.

No that doesn't sound inviting - great in the summer but mighty uncomfortable in winter you'd imagine although isn't the problem here more damp than cold?

cactus flower wrote:

I can't understand why no one makes a properly insulated trailer. I know some Travellers and they say it freezes at night in the winter. Its one of the reasons for high child mortality with chest infections.

I would have thought it would be easy enough to do something double skinned and well insulated and properly ventilated.

Campervans are not cheap. I looked into getting one to use as a base for a project a few years back and the one I wanted was over €100,000.

Quite a lot of people in the US, Britain and here live in cars. It is an invisible problem, unless you are looking out for it. I suppose it is something there are no statistics for.

Sure I saw a 20 year old Hymer in the paper for 10K a year ago - they say they are very well built. Doubt if the travellers travel in Hymers though.

This is a very good 7 page unofficial EU report on the Irish Housing Bubble.

"Ireland's Housing Market: Bubble Trouble" Janis Malbruzis

It gives the figure of 15% of Revenue and 15% of employment being construction-related by the peak of the boom.

Quote :

Between 1992 and 2006, new house prices rose by a cumulative 300% in real terms and 340% in nominal terms. At the same time, the stock of housing grew by 150%.
Much of the increase in real house prices may be explained by particularly strong housing demand fuelled by a relatively young and growing population, rapid growth in real disposable income, low (and at times negative) real interest rates, favourable tax treatment of residential property and house purchase for investment purposes.
Estimates of the degree of overvaluation of real new house prices around the peak in 2006 vary between 20% and 40%. Real house prices have already fallen by 18% since 2006. Given the weight of the residential construction sector in output (10%) and employment (13%), the correction in this sector is acting as a drag on overall economic growth as well as on public finances, at a time when the external sector is being hit by deteriorating competitiveness and a slowdown in two major trading partners (US and UK). It remains to be seen whether past structural reforms can help bring about a rapid return to the medium term growth or whether the recovery will be more drawn out, similar to the experience of many industrialised countries that have undergone housing market busts in the past 30 years.

I very strongly recommend this study, which is imo object, balanced, thorough and short. Much of the damage was undoubtedly done in the last two years, after demand had peaked.

Quote :

Developments in the buy-to-let market have been used to provide an indication of the presence of speculative factors in explaining house price behaviour in recent
years (IMF, 2004). The proportion of buy-to-let mortgages in total residential mortgages has been increasing over time, reaching 26% in 2007 and accounting for
almost half of all new homes bought in the last two years. The rental market has expanded from 16% of total housing units in 2000 to 21% in 2006. The growth in the
number of second or vacant dwellings has added to the boom in the housing sector.
The share of vacant dwellings in total housing increased from 10.5% in 1996 to 16.7% in 2006. The biggest class of vacant habitable dwellings in the "other"
category are dwellings held for investment purposes (Fitz Gerald, 2005).

The report suggests that house prices are now at the right level, but that the damage of the bubble might be long lasting or more limited, depending on how it is managed and on the world economy.

As the report looks at housing rather than housing finance, it does not deal with the issue of bank loans for land purchase in the last two years, but only with the current over-supply of housing (in relation to demand and ability to purchase).

To my way of thinking the price of a home shouldn't be out of line with the general inflation figure. They have over 100 years of historical data in the US and the price of a home at any one time and the price always reverts to the long term inflation trend +1 point or so. (There will be problems in tabulating date going forward as the inflation data provided by nearly every Western economy has been degraded through "new" measuring techniques).

Already, there have been posts on various sites stating that the property market is going to take off again. I can only speak from my own locality. Advertised prices in the weekly glossy pamphlet given out for free have not dropped one penny. Not one penny. However, because very few, if any, homes have been sold around our area, it will be hard to know exactly at what prices new sales will be transacted.

My question is simple. Do we really want to perpetuate this over-inflated market? What will be the long term implications?

In my latest incarnation I was a stone mason. I can't tell you how many homes I worked on that had 4 or 5+ bedrooms for a family of maybe three at most. That's when I came up with this observation:

Scandanavia builds eco-homes while Ireland builds ego-homes.

At this time of my life, I'm really loathe to immigrate but I won't be able to afford the unreported inflation rate that will accompany the new property market. I saw the long-term trends developing in New York and decided to come home. Oh, whata mistaka t'makea. It's either move or invest in assets outside the state.

Does anyone know of a place where one can invest money in buying assets at reasonable rates and in a well regulated economic environment? Any thoughts or info would be greatly appreciated.

House prices have dropped rather drastically in some areas. As I stated on a previous thread there is a house for sale on my road at the moment with a guide price in the region of 950k. The last house that sold on my road went for more like 1.6 or 1.7 million and the one currently on the market would have a bigger garden than it with site development potential. Given that it is a disposition of property following the death of the owner it is possible that the family just want to get the cash as quick as possible (and there have been alot of people viewing it). However, that is a rather large difference in price. There is another house on my road where the owner died not too long ago and it will be interesting to see what they will put it on the market for. They might see what the one currently on the market goes for.

I think the biggest problem at the moment is that we are on the edge of a collapse, not in a collapse. There are houses for sale all over the place and they are simply not selling. This is obviously because the potential buyers feel that they are going to drop in price and the potential sellers reckon that if they hold out the prices will somehow increase so they are unwilling to drop their asking price. Clearly in this situation prices are going to drop. The girlfriend's father is an estate agent (though he deals mainly with commercial) and says you can't shift property for love nor money at the moment.

rockyracoon wrote:

Scandanavia builds eco-homes while Ireland builds ego-homes.

I don't know that I would agree with that. I do not believe that we have the same McHouses culture that they have in America or even Britain for that matter. The average person living around Dublin lives in a three bedroom semi which all look rather identical downstairs. One large sitting room, decent kitchen, WC under the stairs and three bedrooms and a bathroom upstairs. That is pretty much the standard.

Compare this to where we have a house in England north of London. Looking on Google Earth everyone in the area seems to have an outdoor swimming pool - hardly the weather for it.

Quote :

Does anyone know of a place where one can invest money in buying assets at reasonable rates and in a well regulated economic environment? Any thoughts or info would be greatly appreciated.

Invest in Venezualan food stamps or something...

How about buying prize bonds? No guaranteed return but you gamble your interest

Thanks for the gen Johnfás. My "saying" isn't so much rooted in reality but in perception. Maybe it's because we can remember a time when many people lived in a small space that we over compensate by having a few people living in a big space. Still gotta be uneconomical to heat a 4+ bedroom house during winter for a couple or couple + one child. The countryside is just stuffed with theses mini-manions; and some mansions to boot.

I think I'll hold off on Veneuala. I'm thinking more along the lines of the Czech Republic or some sane haven. I'd like to invest in manufacturing based economy rather than a credit based speculative economy.

I've been checking out the Chinese ETF's and so on. I really have a hard time investing in such things. Local knowledge is key. I couldn't help noticing when I was in London last year at the extraordinary amount of "To Let" signs on commercial property in the inner London area. Such local info is valuable in the extreme. Cheers

On many threads people say that property will plummet. That will only happen if more people are forced to sell. The resistance to falls is enormous. Property is not a responsive market on the down side of the curve.

Most people selling do not have to sell. If a parent dies generally you do not need the money. You can alter a house rather than suffer the cost of moving.

The big immediate drop is always on new build. Developers who have to sell. Once those are sold (ones in the back end of nowhere that no one wants are irrelevant unless you live there and want one, discount them) you get a real indication of underlying price movements. It is physiological no one dares drop the price of their house radically in fear that the one they buy will not be reduced. You will get people dropping say 10% but beyond that only if they have no alternative. Inflation is the big leveller in the housing market and that is slow but insidious. It looks like it will take 5 years to correct this boom.

The reason why there are so few houses selling is a combination of an anticipated drop in prices and a liquidity problem. From what I hear even people who have loans approved cannot get the money released because the Building Society or Bank has already released this months allocation! May just be rumours but they are coming from people in that line of business.

Enter the DEAL. As sure as day follows night, this will improve liquidity and money will start again to flow into housing. The Banks, the Government and developers are joined at the hip. It won't cause a bubble but it will mitigate against a sudden drop and bale a lot of people out of bad positions IF it works. This scenario is fine unless other factors become major considerations. Rising unemployment will force more to sell will this cause sudden over supply and will the sales be at a loss?

Also with increased money supply generally this eventually leads to inflation. What are the possibilities of interest rate increases in Europe say 1-2 years out? That would really be a game changer. Ireland is fortunate that it is in the Euro Zone for if it weren't we would be well and truely sunk.

There are also places where there is a housing shortage. In the North they have been under building year on year for a decade and the planning restrictions are amplifying that problem. South of England severe shortage, but no coherent regional policy. Same problem in Ireland, areas of high demand and areas doomed to ossify.

House prices need to get back to what are traditional ratios of earnings, but right now I don't see that happening any time soon.

Good analysis Squire. I always think in most markets the simplest analysis is the best. Houses are not like fruit, unless you have a bank calling in a debt there is no reason that you would have to sell it. There is still a strong enough rental market to cover any vacant property you would have and people living in houses never have to move, it would just make their lives nicer if they can.

I agree with you regarding the lack of housing in some areas. We have so much shite housing on the hinterland in Dublin it will be interesting to see how the developers read the situation. I would presume there could still be good money to be made into the future in developing good houses in good locations - there always will be.

Good post Squire. Direct and to the point. Do you think, however, that home prices will remain above the long term inflation trend? There has been a strong correlation between economic growth, inflation increases and the reversion of home prices to these factors after a bubble has occured. My fear is that the basis of this correlation may be changed. This will have reprecussions for purchasers of homes far into the future as their mortgages will be that much higher than if they had reverted back to the mean. For example, buyer's purchasing power due to higher monthly mortgage payments will either require the borrower to forgo other purchases or the necessity to fund other purchases through debt (e.g. autos).

I tend to agree that more stringent lending practices may keep the property market from overheating in the short term, as well as the general economic conditions that now exist. This wholesale gaurantee might just change the whole dynamic of lending and asset price valuation across Europe.

rockyracoon wrote:

Do you think, however, that home prices will remain above the long term inflation trend? There has been a strong correlation between economic growth, inflation increases and the reversion of home prices to these factors after a bubble has occured. My fear is that the basis of this correlation may be changed. This will have reprecussions for purchasers of homes far into the future as their mortgages will be that much higher than if they had reverted back to the mean. For example, buyer's purchasing power due to higher monthly mortgage payments will either require the borrower to forgo other purchases or the necessity to fund other purchases through debt (e.g. autos).

I agree with your deduction, people have become poorer and they just don't see it yet. Whilst you mention the McVilla syndrome what also was apparent in this boom was the number of what I would regard as sub standard small units (small poorly built apartments) that were being sold as 1st time buyers just could not afford a house or a decent apartment. Be in no doubt many of these are tomorrows slums and are below any spacial standards that I know. There is a lot to recommend in Parker Morris. http://en.wikipedia.org/wiki/Parker_Morris_Committee.

What I had hoped is that a Bank or two would go down and at that point we would intervene to pick up the pieces. That in turn would have forced the property market to adjust. IMO that route would have seen a quicker correction and would have been to the general benifit although there would have been a right mess and short term acute pain. Right now because of the deal I think that at best we are stuck in the Japanese syndrome. To me it is an attempt to re inflate and I have to ask cui bono? It is so obvious who this benefits and the real main purpose. If however a bank fails the Irish economy is dammed. I won't be increasing my long term involvement in Ireland as a direct result of this decision.

rockyracoon wrote:

I tend to agree that more stringent lending practices may keep the property market from overheating in the short term, as well as the general economic condition that now exist. This wholesale gaurantee might just change the whole dynamic of lending and asset price valuation across Europe.

The market wont overheat again but the correction will now be much longer. I can't see anyone in Europe following our guarantee and I can see pressure to end it increase. If a Bank opens up a branch here the loans issued would be guaranteed. I can see all sorts of 'opportunities' arising out of that!

On investing abroad. homework and local knowledge are essential. In property you have to be ahead of the herd but invest in places that locals want to live, or are on the up not in places that hoped for foreigners may want to invest in. You have missed the boat in places like the Czech Republic. In many places the price rent ratios are just crazy which makes buy to let a losers game unless rents increase or house prices increase giving capital gain. You have to go to somewhere like Moldova to get a good rental return and it is not worth it unless you like dealing with the local Mafia.

You will get better returns in parts of Asia and South America. Avoid Africa! In many countries you will need to set up a local company to buy local property and the tax regimes need careful consideration. You may find this link useful for general information.

http://www.globalpropertyguide.com/

Like all things they are trying to cover a vast topic and double check.

If you are buying property, you must visit and look at the neighbourhood, the shops and businesses. Check for any other major developments government plans, new university, Olympic sites, Thames Gateway etc. To make big money you need to be well ahead of the herd. Places on the rise.

On countries, don't necessarily overlook parts of Germany, Netherlands or Switzerland. Australia may be worth keeping an eye on. On Switzerland there is good holiday rental as there are 2 seasons and winter is the peak season in ski resorts.

As an individual the problem you have with property is your money does not go far. What I did was form companies where I drew in large investors and obviously got a commission as well as investing. I then bought in whatever help I needed, BUT I do know construction, inherited a property business when I was 14, can design and draw and check what others do, can size up sites myself fast, have contacts in many countries, have contacts who have money with no where to go and know no shame! Some years ago I took the decision Asia (S America if time allowed) and what was decided is motoring along but right now neither I nor those I am associated with can make up our minds what way to jump or how the recession will unfold. We have possibly some good options coming up in the UK which goes against the basic plot so you have to keep an open mind.

Some final points, if you keep hunting you will find an oportunity. If the figures don't add up, don't try to make them, walk there is always another opportunity tomorrow. In Building allow for the unexpected expense, keep about 25% in reserve. You MUST make sure all costs are included including all connection charges. If you are unsure try to get fixed price contracts, a definite profit is better than risk, but remember in fixed price contracts you the client MUST NOT change the scheme.

Also avoid places with over supply like Dubai.

Best of luck.