The housing bubble has burst

miju

daveirl wrote:

This post has been deleted.

i suppose but the sentiment i meant behind the word is a gradual but significant decrease in prices over about 6 months or so

ronbyrne2005

miju wrote:

feel a bit dumb now asking that question so about €300 extra per month, it quite a hike, the 1% i heard is actually ON TOP of the hike already AFAIK,

even if it's not on top of it that's €300 extra per month by the end of the year, obviously thats not going to affect most people but one of my girlfriends, friends that will be affected and mean alot more overtime / pressure / strain i'd wonder how many other around the country would be in the same boat

sorry shoud have said thats only for an interest only mortgage.if principle is being reduced the interest element will decrease throughout mortgage term provided interest rates are constant.

miju

like i say i'm no financial whizz but i think i get what you mean, if thats the case it still would only reduce the increases fractionally would it not?

Pa ElGrande

Are the first clouds showing over Ireland’s property boom?
http://www.timesonline.co.uk/newspaper/0,,176-2078971,00.html

“Parts of the market are now showing signs of saturation, particularly in the regional towns where apartments are proving more difficult to sell. And developers in Dublin’s docklands are already moving towards larger apartments in an effort to entice family buyers,” says Hunt.

Investors still spending in Ireland are relying solely on capital value increases to earn their crust, with the recent Daft.ie rental report showing that in Dublin, three-bed homes in the city centre are the only ones capable of paying their mortgage with rental income.

Irish mortgages: Pain on the way
http://www.thepost.ie/post/pages/p/story.aspx-qqqt=THE%20INSIDER-qqqs=themarket-qqqs=computersinbusiness-qqqid=12504-qqqx=1.asp

Now that Ireland has surrendered control of its interest rate policy to the European Central Bank, it is surprising that there has been so little domestic focus on ways to mitigate the consequences of that loss of control, notably by devising products and markets that would protect borrowers from the consequences of rising interest rates.

It would be nice to think, though, that our own policymakers were working on ways to protect Irish mortgage holders from the potentially painful consequences as interest rates rise from their historic lows. But there is little to suggest that they are particularly concerned about the problem, let alone remotely bothered about finding a solution.

Ireland’s kamikaze capitalism
http://www.sbpost.ie/post/pages/p/wholestory.aspx-qqqt=DAVID%20MACWILLAMS-qqqs=commentandanalysis-qqqsectionid=3-qqqc=5.2.0.0-qqqn=1-qqqx=1.

Even when the domestic credit economy collapsed, at least manufacturing - which was controlled by Japanese executives - continued to export. We don’t have a domestic manufacturing industry. The second crucial difference is that we do not have a real central bank. If things went pear-shaped here, it is highly likely that our interest rates would be rising not falling.

This is because Germany operates in a different economic cycle to us. No country in the world has ever experienced a property meltdown that was not cushioned by falling or possibly zero interest rates.

No let up in Irish house market boom
http://today.reuters.co.uk/news/newsArticle.aspx?type=businessNews&storyID=2006-03-07T155557Z_01_L07460246_RTRUKOC_0_UK-ECONOMY-IRELAND-PROPERTY.xml&archived=False

DUBLIN (Reuters) - Irish house price growth picked up further in February and an already booming property market now looks set to heat up more than originally anticipated this year, according to a survey published on Tuesday.

DRAWING conclusions about house prices is risky business.
http://www.unison.ie/business/stories.php3?ca=80&si=1575083

In the year to the end of January 2006, prices went up by 10.2 per cent on average, the money men say. But geographical figures buried deeper in the report suggest rises are a bit more than this.

Just for fun, anyone want to put a value on the Phoenix Park (1760 acres) at today's Dublin real estate prices?

Zynks

Pa ElGrande wrote:

Just for fun, anyone want to put a value on the Phoenix Park (1760 acres) at today's Dublin real estate prices?

If the government sold it, we could probably buy a country in the Caribbean and move there

Irish mortgages: Pain on the way
http://www.thepost.ie/post/pages/p/s...504-qqqx=1.asp

Now that Ireland has surrendered control of its interest rate policy to the European Central Bank, it is surprising that there has been so little domestic focus on ways to mitigate the consequences of that loss of control, notably by devising products and markets that would protect borrowers from the consequences of rising interest rates.

It would be nice to think, though, that our own policymakers were working on ways to protect Irish mortgage holders from the potentially painful consequences as interest rates rise from their historic lows. But there is little to suggest that they are particularly concerned about the problem, let alone remotely bothered about finding a solution.

The issue if the Irish government not having any control over interest rates always worried me a lot. I also have a big issue with stamp duty not reducing as house prices go up. However, I just realised that this may have been one of the few smart things done by this government. They actually have a mechanism to help avoid a crash!

As interest rates go up and (potentially) house prices start to dip based on an inverse proportion to the repayment costs, if stamp duty is lowered the "desirability" of property can be sustained. In case you have any doubts about the extent to which this could be applied, consider the German historic interest rates (after all, it is the economy most likely to dictate the Euro rates). They have not gone over 7% since 1948...

Granted, a 5 or 6% rate (in a very, very negative scenario in my view) would be a massive hit to Irish mortgage holders, but proportionally reduced stamp duty could keep the market alive, avoiding people hiting negative equity and allowing people to downgrade in the worst cases when they couldn't afford the repayment - though I don't really expect such a dramatic raise in interest rates for at least 5 years.

It is in the country's interest to avoid a big crash because it's effects could be widespread and could trigger a severe recession.

I suddenly feel the Irish housing market (and its economy as a result) are safer than I previously though...

ronbyrne2005

Zynks wrote:

If the government sold it, we could probably buy a country in the Caribbean and move there



The issue if the Irish government not having any control over interest rates always worried me a lot. I also have a big issue with stamp duty not reducing as house prices go up. However, I just realised that this may have been one of the few smart things done by this government. They actually have a mechanism to help avoid a crash!

As interest rates go up and (potentially) house prices start to dip based on an inverse proportion to the repayment costs, if stamp duty is lowered the "desirability" of property can be sustained. In case you have any doubts about the extent to which this could be applied, consider the German historic interest rates (after all, it is the economy most likely to dictate the Euro rates). They have not gone over 7% since 1948...

Granted, a 5 or 6% rate (in a very, very negative scenario in my view) would be a massive hit to Irish mortgage holders, but proportionally reduced stamp duty could keep the market alive, avoiding people hiting negative equity and allowing people to downgrade in the worst cases when they couldn't afford the repayment - though I don't really expect such a dramatic raise in interest rates for at least 5 years.

It is in the country's interest to avoid a big crash because it's effects could be widespread and could trigger a severe recession.

I suddenly feel the Irish housing market (and its economy as a result) are safer than I previously though...

stamp duty of 5-9% isnt gonna stop a correction if it occurs,people panic snd once prices start falling its hard to reinstill confidence in the market ,when would the government cut the stamp duty?when prices drop 10%? 20%? even if they cut stap duty people would think "why are government allowing me zero stamp duty? somethings wrong,better not buy a new house as prices will fall more"

miju

ronbyrne2005 wrote:

stamp duty of 5-9% isnt gonna stop a correction if it occurs,people panic snd once prices start falling its hard to reinstill confidence in the market ,when would the government cut the stamp duty?when prices drop 10%? 20%? even if they cut stap duty people would think "why are government allowing me zero stamp duty? somethings wrong,better not buy a new house as prices will fall more"

my sentiments exactly, if the government were to lower stamp duty there's 2 mindsets i can possibly envisage

1: market has become unstable best wait a while and see what happens (likely end result being prices coming down as people adopt the wait and see approach)

2: oh house prices have just gotten marginally cheaper i should jump in here and buy because this is a really good deal oh but wait.......why are the government doing this??? market must be becoming unstable best to wait a while and see what happens (likely end result being prices coming down as people adopt the wait and see approach)

2.1 same as mindset two except the people buy the houses (of which i'm sure there would be very few who'd make a purchase on the basis of a reduction in stamp duty)

again thats just my opinion, but the market has peaked (or is very close to it and the only way after the peak is down, but by how much is anyones guess )

Zynks

ronbyrne2005 wrote:

stamp duty of 5-9% isnt gonna stop a correction if it occurs,people panic snd once prices start falling its hard to reinstill confidence in the market ,when would the government cut the stamp duty?when prices drop 10%? 20%? even if they cut stap duty people would think "why are government allowing me zero stamp duty? somethings wrong,better not buy a new house as prices will fall more"

If suspicion of government moves was a reason to stop people from investing, the SSIA's should have been a flop.

PDelux

Granted, a 5 or 6% rate (in a very, very negative scenario in my view) would be a massive hit to Irish mortgage holders

This is exactly the situation in the US at the moment. House sales are predicted to slow by 5% and 7% for new and existing resp. this year as a direct result of 2.5 year record high mortgage rate of ~6% for the average 30yr.

replytohere2004

wikipedia has an article on the "Irish Property Bubble" :

http://en.wikipedia.org/wiki/Irish_Property_Bubble

Pa ElGrande

The frenzy in the Irish property market has intensified. In the last six months,
house price inflation has re-accelerated to an annualised rate of 15%. In the
Dublin market, prices are now rising at an annualised 20% lick, up from only
3% less than a year ago. But rents have only recently recovered after a threeyear
period in which they were in decline. As a result, yields have been driven
down to unprecedented depths. Something does not feel right.

You can read the rest at Davy Stockbrokers.
http://www.davydirect.ie/other/pubarticles/econcr20060329.pdf

Note: they do have a vested interest in pushing stocks.

Sponge Bob

Finally an intelligent comment from the economic forecasterati on the Yield or 'Return on Investment' issue . You wont hear Dan Mc Loughlin say this though, too much of his banks money is out there in the bubble .

All i can say is that the yields are lower than I thought which is bad news

lomb

Sponge Bob wrote:

All i can say is that the yields are lower than I thought which is bad news

For whom? maybe for buyers but most definately not for investors/occupiers. property has an emotional value and its price 'should' always be above the net yield. u dont get the same buzz out of owning one share of stock in some company.

daveirl

This post has been deleted.

ionapaul

lomb wrote:

For whom? maybe for buyers but most definately not for investors/occupiers. property has an emotional value and its price 'should' always be above the net yield. u dont get the same buzz out of owning one share of stock in some company.

Honestly, this doesn't make any sense. If investors are not concerned about yields, they certainly aren't investors! Did you mean owner / occupiers?

lomb

inflation even of the 'quoted official rate of 3%'+ the yield of 3-4% for classic investment type units is much more than interest rates of 4%.
add to that emotional value that u have ur name in the land registry and that actual cap increases are 15%+ and u have something else. this is the peak of the cycle, i know that, u know that. but u also know the previous prices around 1995 and even around 2000 were the trough of the cycle. property is cyclical, and the cycle is based on confidence, alternative investments, gearing, and interest rates and current capital increases, stability of currency, stability of state and its willingness to protect property owners.

no doubt there will come a prolonged period of static prices or slight falls in real terms, but by the time that happens, they will have risen another 30% imho. i would still buy GOOD property. i know in 50 years that it will be worth 5 times what it is today and all on money that was never mine in the first place(gearing) if u can meet the payments id still go for it...

ronbyrne2005

lomb wrote:

inflation even of the 'quoted official rate of 3%'+ the yield of 3-4% for classic investment type units is much more than interest rates of 4%.
add to that emotional value that u have ur name in the land registry and that actual cap increases are 15%+ and u have something else. this is the peak of the cycle, i know that, u know that. but u also know the previous prices around 1995 and even around 2000 were the trough of the cycle. property is cyclical, and the cycle is based on confidence, alternative investments, gearing, and interest rates and current capital increases, stability of currency, stability of state and its willingness to protect property owners.

no doubt there will come a prolonged period of static prices or slight falls in real terms, but by the time that happens, they will have risen another 30% imho. i would still buy GOOD property. i know in 50 years that it will be worth 5 times what it is today and all on money that was never mine in the first place(gearing) if u can meet the payments id still go for it...

if it will be 5times what it is now in 50 years then your saying it wont go up above inflation! inflation is 3% and compounded over 50 years(i think 3% is a reasonable average for the period) any asset will be worth five times what it is now! so in real terms no change over next 50 years,wow your a financial genius lomb!

lomb

ronbyrne2005 wrote:

if it will be 5times what it is now in 50 years then your saying it wont go up above inflation! inflation is 3% and compounded over 50 years(i think 3% is a reasonable average for the period) any asset will be worth five times what it is now! so in real terms no change over next 50 years,wow your a financial genius lomb!

then go buy a car, a sink or a tap, or a jcb if everything appreciates!
property is one of the few things that doesnt depreciate, is linked to inflation, that banks are willing to loan for, ie its not even your money, that goes up. edit/that also provides a return/
its a GREAT buy at any point in the cycle if u can afford the repayments stress tested, and u are in for the long haul. there are too many 'kids' on boards looking at short term gains/losses. sure if i did that (which i have done in the past) id never get past stamp duty, solicitors fees, furnishing costs etc. if u are in it for the long haul and u live long enough to see it i think its a case of the tortoise and the hare. stamina wins out over speed anyday of the week tbh..

ronbyrne2005

lomb wrote:

then go buy a car, a sink or a tap, or a jcb if everything appreciates!
property is one of the few things that doesnt depreciate, is linked to inflation, that banks are willing to loan for, ie its not even your money, that goes up. edit/that also provides a return/
its a GREAT buy at any point in the cycle if u can afford the repayments stress tested, and u are in for the long haul. there are too many 'kids' on boards looking at short term gains/losses. sure if i did that (which i have done in the past) id never get past stamp duty, solicitors fees, furnishing costs etc. if u are in it for the long haul and u live long enough to see it i think its a case of the tortoise and the hare. stamina wins out over speed anyday of the week tbh..

cars sinks taps are wasting assets,im refering to other investment asset classes and not talking short term.good luck to you lomb youll need it.

lomb

ronbyrne2005 wrote:

im refering to other investment asset classes and not talking short term..

Like what? u cant get 90% finance on shares, and even if u could would u take the risk where some dodgy ceo is probably cooking the books?

lomb

ronbyrne2005 wrote:

cars sinks taps are wasting assets,im refering to other investment asset classes and not talking short term.good luck to you lomb youll need it.

would u lose sleep if a house u bought lost 30% overnight and u could still afford the payments? wouldnt trouble me (not alot anyway) u take good with the bad. if u can take a 30% rise u can take a fall also. its all irrelevent anyway its all theoretical, 1000 euro on a table is alot more impressive than a million euro property transaction. property money just goes around, 1000 on the table is real money.

Pa ElGrande

Dublin land sales surge to €1bn
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS-qqqs=news-qqqid=13157-qqqx=1.asp

Unzoned land in south Dublin, which has so-called ‘‘hope value’’, meaning housing development might eventually be permitted on it, has trebled in value to about €1 million an acre over the last 12 months.

Lap of luxury: Irish choose to spend well
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS-qqqs=news-qqqid=13156-qqqx=1.asp

More luxury cars, including Ferraris, Aston Martins and Maseratis retailing for as much as €300,000, were sold in the first three months of this year than during the whole of 2005, new industry figures reveal

Hot money is beginning to melt Iceland’s hardy economy
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=DAVID%20McWilliams-qqqs=commentandanalysis-qqqid=13108-qqqx=1.asp

The sixth stage is the distress stage, where income from the asset - whether it is rental yield or dividend yields - begins to soften. Savvy investors start to get out in the distress phase. They see little underpinning the market and, as a result, take profits. Initially there are sufficient buyers to take up the slack, but in time, sentiment begins to turn and the overhang of supply on the market makes it impossible for yields to rise.

Irish Outlook: Damien Kiberd: Beware the brewing interest rate storm
http://www.timesonline.co.uk/newspaper/0,,2769-2113977,00.html

Ireland is now suffering a Japanese-style asset bubble. There are many senior people within the banking system who realise the crazy nature of what is happening. They can do nothing to stop it: some 60% of their loan books are now committed to mortgages or to loans to builders and developers.

Beware shifting sands if investing in Dubai
http://www.timesonline.co.uk/newspaper/0,,2770-2113703,00.html

Nearly every promoter at last week’s show was offering rental guarantees of about 7.5% per annum for the first two years. Since so many thousands of apartments and houses are still being built and have as yet no tenants, this is just another case of handing you back some of your own money to secure the deal. Such returns may not be sustained.

ionapaul

The writing may be on the wall...but I still think we'll see 20% growth in Irish property this year, no problem! That's how these things work...

Pa ElGrande

ionapaul wrote:

The writing may be on the wall...but I still think we'll see 20% growth in Irish property this year, no problem! That's how these things work...

I expect the same. If you are depending on capital appreciation then consider taking your profits now. Interest rates are going up globally for the next few years, this will limit price growth as new entrants can't bid up the price of property, unless, the banks start introducing 100 year mortgages. :eek:

House completions for January & Febuary are well ahead of any previous year, so this will increase supply (check the excel spreadsheet on the department's web site). Its shaping up to be a record breaking year for housing completions.

http://www.environ.ie/DOEI/DOEIPub.nsf/wvNavView/RegularPublications?OpenDocument&Lang=en#I2

whizzbang

Pa ElGrande wrote:

I expect the same. If you are depending on capital appreciation then consider taking your profits now. Interest rates are going up globally for the next few years, this will limit price growth as new entrants can't bid up the price of property, unless, the banks start introducing 100 year mortgages. :eek:

if the banks introduce these watch out! These were introduced in the UK a few weeks before their crash in the 80s!

~Leanne~

100 year mortgage - are ye serious??? sure how would that work - obviously we would be dead after 100 years

whizzbang

~Leanne~ wrote:

100 year mortgage - are ye serious??? sure how would that work - obviously we would be dead after 100 years

but your kids wouldn't be!

Multi generation mortgages are quite common in Japan but then again so were foot binding and eating poisionious fish but it doesn't mean its a good idea.

MrPudding

whizzbang wrote:

but your kids wouldn't be!

Multi generation mortgages are quite common in Japan but then again so were foot binding and eating poisionious fish but it doesn't mean its a good idea.

Also in Germany and some other European countries I believe.

MrP

TabulaRasa22

ionapaul wrote:

The writing may be on the wall...but I still think we'll see 20% growth in Irish property this year, no problem! That's how these things work...

Yeah, there are substantial differences between the Irish situation and any other. Planning permission here is a warped system angled largely towards developers (the grapevine tells me its nearly impossible to get planning unless you are one, outside established suburban areas anyway). I was reading in the paper there that some loon planned to keep the property bubble inflating until 2015, by, wait for it, importing 5 million immigrants. Jesus H Christ. Great for the property market, civil war, if it could be called that, for Ireland. Not that I've anything against immigrants, but we'll have to change the country to chinomaniababwessialand if they try to pull that stunt. Sigh.

LFCFan

From May this year there is going to be a lot of potential buyers who finally have a deposit (SSIA) and we're probably waiting till now to finally buy. I reckon we could see another spike in price increases over the next 12 - 18 months before it settles back down again and gradually eases off.