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Mikeblueprint

IOM Property Market Bubble

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Hi can someone help me understand something? Why does it seem like the house prices are increasing yet they are going to be building more houses and there is a declining population on the island? There are more and more houses I see being bought up yet remaining empty on top of the already vast amount of abandoned houses. Something just does not smell quite right the average house price is nearly 7 times the annual income of a person meaning they are massively over leveraged and with no deal Brexit looming in the U.K. there is a possibility of inflationary pressures that will see interest rates rise to counteract it leaving a lot of working people  over here screwed! 

Now if the increase in prices are being driven by over seas investors it creates a massive unsustainable bubble due to the island demographics. These houses are at least 30% over valued currently and with a 98% chance of recession in 2020 and an 80% chance of a housing market crisis similarly faced by japan when they had their asset bubble due to long periods of low interest rates is it even worth me buying here or just keep renting? I don’t enough about the “special” situation here but something smells really foul about the market here and is not good for normal working people.

Or am I barking mad and everything is all fine here and we can go back to burying the heads in the sand?

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17 minutes ago, Mikeblueprint said:

Hi can someone help me understand something? Why does it seem like the house prices are increasing yet they are going to be building more houses and there is a declining population on the island? There are more and more houses I see being bought up yet remaining empty on top of the already vast amount of abandoned houses. Something just does not smell quite right the average house price is nearly 7 times the annual income of a person meaning they are massively over leveraged and with no deal Brexit looming in the U.K. there is a possibility of inflationary pressures that will see interest rates rise to counteract it leaving a lot of working people  over here screwed! 

Now if the increase in prices are being driven by over seas investors it creates a massive unsustainable bubble due to the island demographics. These houses are at least 30% over valued currently and with a 98% chance of recession in 2020 and an 80% chance of a housing market crisis similarly faced by japan when they had their asset bubble due to long periods of low interest rates is it even worth me buying here or just keep renting? I don’t enough about the “special” situation here but something smells really foul about the market here and is not good for normal working people.

Or am I barking mad and everything is all fine here and we can go back to burying the heads in the sand?

BTL landlords know average Joe has no choice but to rent and are mostly the only one's buying,  and that includes the majority of new builds and of those not even built yet!

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1 hour ago, Mikeblueprint said:

Hi can someone help me understand something? Why does it seem like the house prices are increasing yet they are going to be building more houses and there is a declining population on the island? There are more and more houses I see being bought up yet remaining empty on top of the already vast amount of abandoned houses. Something just does not smell quite right the average house price is nearly 7 times the annual income of a person meaning they are massively over leveraged and with no deal Brexit looming in the U.K. there is a possibility of inflationary pressures that will see interest rates rise to counteract it leaving a lot of working people  over here screwed! 

Now if the increase in prices are being driven by over seas investors it creates a massive unsustainable bubble due to the island demographics. These houses are at least 30% over valued currently and with a 98% chance of recession in 2020 and an 80% chance of a housing market crisis similarly faced by japan when they had their asset bubble due to long periods of low interest rates is it even worth me buying here or just keep renting? I don’t enough about the “special” situation here but something smells really foul about the market here and is not good for normal working people.

Or am I barking mad and everything is all fine here and we can go back to burying the heads in the sand?

Keep renting. Only buy if you have the cash and offer at least 30% below the asking. Building materials are through the roof, most tradesmen are busy and expensive if you can get them in. Are you looking to buy to move straight in, or taking on a project?

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Even unoccupied houses have a value to the ballance sheet of a "developer" considerably more than the cost of building them and a ballance sheet can be used as collateral for securing finance for other activities often far away from the. Island.

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1 hour ago, finlo said:

BTL landlords know average Joe has no choice but to rent and are mostly the only one's buying,  and that includes the majority of new builds and of those not even built yet!

A good option is to rent/share a larger property if possible, with friends or family. It keeps the rent cheap and the bills. Less people paying the absurd rents will help to bring them down.

All in all the housing market is an over inflated bubble that burst years ago and when the interest rates go up its goosed. Not to mention the whole mortgage palava is just another ponzy scheme, derivitive frauds, betting on foreclosure of unsuspecting customers, then swooping the collateral etc etc. The bank dont lend anyone money, they print it then you go bavk in every month and pay them!. And you are restricted to only buying certain properties. Its an absolute shambles. Anyone with a brain could have a plot and build a magnificent house for a quarter of the price of the mortgage route. But who is controlling all the options available to people?  

If four builders bunch together and put work and wages into a house, it could be built and payed for in a year or 2. The plot is the biggest problem to begin with, yet year after year the same old contractors bang out the rabbit hutches or the half a million quid big rabbit hutches, and the banks convince people that they are the sound choice for a mortgage. Its madness when you could literally build your own using the same contractors and save 200 grand. 

I think the bubble will burst soon enough, ive heard a few really low offers being accepted the last year

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16 minutes ago, Rog said:

Even unoccupied houses have a value to the ballance sheet of a "developer" considerably more than the cost of building them and a ballance sheet can be used as collateral for securing finance for other activities often far away from the. Island.

Exactly rog too many playing games with houses, when so many are in need and we all deserve a home x

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Despite / because of the high prices, houses are slow to sell, both new build and older stock.  And yet there is a frenzy of new house building.  I agree, it doesn't seem to make sense.  My guess is that house builders have to keep building houses, regardless of whether they are selling or not, or go out of business.  If you're a house builder and you think "I have an overhang of unsold properties here, I'll just stop building for a while until they are sold" you are going to either have to let employees go (to your rivals) or pay them for doing nothing, ditto expensive plant and machinery, ditto Portacabins, contracts with suppliers etc.  So I suspect they keep building in the hope that the market eventually picks up.  And if it doesn't pick up - well, that is a story which is likely to end badly.

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52 minutes ago, paul's got wright said:

Keep renting. Only buy if you have the cash and offer at least 30% below the asking. Building materials are through the roof, most tradesmen are busy and expensive if you can get them in. Are you looking to buy to move straight in, or taking on a project?

I could take on a project I don’t mind DIY and I have a few mates from the mainland who could always come over to help out the odd weekend for more skilled stuff like plastering, plumbing etc.

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52 minutes ago, Rog said:

Even unoccupied houses have a value to the ballance sheet of a "developer" considerably more than the cost of building them and a ballance sheet can be used as collateral for securing finance for other activities often far away from the. Island.

So basically I am :-

— probably better waiting to see the results of brexit and keep renting.

- houses are over valued so offer 30% off the asking price to try to get value.

- the 2020 downturn / end of economic cycle  will probably see a lot of over leveraged business end up not being able to cover their debts once asset prices are readjusted to sensible un inflated  values and these houses will be sold off cheap by banks foreclosing.

- patience is a virtue.

- the system is rigged against the average joe more so here than on the mainland.

- estate agents are probably in on it.

 

I am in a position to buy something and have a reasonable mortgage that I can afford, but I am not in a position to end up in negative equity for a decade or be broken by mortgage repayments if brexit goes tits up and interest rates have to rise to cover inflation. 

 

Thanks guys for for your input I will sit back and play the waiting game for now. 

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According to Manxforums the IoM housing market is due to crash within the next 12-18 months.


Manxforums of 2012, that is.

 

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4 minutes ago, Bobbie Bobster said:

According to Manxforums the IoM housing market is due to crash within the next 12-18 months.


Manxforums of 2012, that is.

 

People always speculate however the current estimates put a global recession in 2020 and I am pretty sure in 2007/8 the IOM property market took a hammering. 

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4 minutes ago, Mikeblueprint said:

People always speculate however the current estimates put a global recession in 2020 and I am pretty sure in 2007/8 the IOM property market took a hammering. 

Indeed they do, but you need to allow for a hefty "everything is shit" credibility factor for the consensus view on here.

I'd be interested in your data on the 2007/8 IoM property market, can you share, please?

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1 hour ago, Bobbie Bobster said:

Indeed they do, but you need to allow for a hefty "everything is shit" credibility factor for the consensus view on here.

I'd be interested in your data on the 2007/8 IoM property market, can you share, please?

Fair comment and I would have to apply for the data from the government to see if my speculation is correct or not however one would assume the IOM was not immune to the slump in the U.K. 

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https://www.gov.im/media/1361664/2018-02-08-2017-housing-market-report.pdf

Government stats don't seem to go before 2011.

image.thumb.png.c5ca2249d4c680abab71a94bdb7e924b.png

Also this: https://www.home.co.uk/guides/asking_prices_report.htm?location=douglas&all=1

Average Asking Prices By Type in Douglas (£000's)

image.png.1215672ff73faea8cee9b10d7ed7a400.png

Looks as if their sample size fell off a cliff sometime in early 2017, though, so the data may not be reliable:

Number of Properties Found Advertised for Sale in Douglas by Type

image.png.c3f202a75c5e454de1d617bfd8a02e3b.png

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Our house has lost around 40-50k within the last 5 years, a neighbour has put theirs up for sale last week, much better condition than ours and got a decent extension for 40k less than we paid for ours, we bought at completely the wrong time but equally if we were to sell ours then whatever why buy next would also have had a 40-50k drop in value  but we've no plans to move for as long as we can afford the mortgage.

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