The Irish Economy - Worrying Signs?

Cork

I have noticed that it is getting harder to find jobs and I see long established shops closing down.

The Irish ecomony is over hyped - dependent on the construction industry and people borrowing like crazy.

I feel that reality is begining to dawn.

Squaddy

I heard recently that there isnt enough employment and that Ireland needs 50,000 immigrants each year to sustain the economy?

Jivin Turkey

Squaddy wrote:

I heard recently that there isnt enough employment and that Ireland needs 50,000 immigrants each year to sustain the economy?

A huge portion of which is in the construction industry, which is booming, because of the need for immigrants to be housed..........

Squaddy

Yeah but not just that, we have been so educated that there is no1 to do the dirty jobs?

Squaddy

Cork wrote:

I have noticed that it is getting harder to find jobs and I see long established shops closing down.

The Irish ecomony is over hyped - dependent on the construction industry and people borrowing like crazy.

I feel that reality is begining to dawn.

Thats the thing if the housing industrys collapses so does our economy.. Your right we do rely too much on it..

dahamsta

100% the fault of Fianna Fail of course.

Sponge Bob

Ken Shabby wrote:

100% the fault of Fianna Fail of course.

Quite Right Ken, the country is run from that bloody tent at the Galway Races.

Pa ElGrande

I am observing the same thing here in Dublin. In fact Dublin people may have noticed that quite a few petrol stations in the city have closed or are closing.

What is happening is a direct effect of the property boom.

01. The property is worth more than the turnover of the business.
02. The business can no longer get staff at economic rates.
03. The owner is close to or at retirement so this is a nice nest egg.
04. The population is being forced out beyond the suburbs by the price of property, so businesses that depend on a local catchment area have a decreased market.
05. The Internet - we are bypassing the high street shop and going direct or using services like Ebay.
06. Retail outlets in the city center pay very high rents, which means only businesses that sell products with a high margin (e.g. mobile phones, music, clothes) can afford to locate there. Established businesses can't meet the rent and close.
07. Parking is expensive and inconvienient in the city center, thus driving shoppers to the out of town shopping centers.
08. The banks lend to the developers to build houses.
09. The banks lend to the public to mortgage houses.
10. People borrow money based on the increased value of their house (mortgage equity withdrawel) to fund imported goods such as flatscreen TV's and computers, and other goods that are imported from Asia.
11. Borrowed money is flowing out of the country into foreign property.
12. Yields on the rental market are really low, if a significant number of immigrants left tomorrow, the sector would collapse.
13. We are on course to exceed 80,000 properties completed this year & section 23 ends this year (July 31, 2006) [Need to double check this]
14. Some businesses can't get the skilled staff needed here and are moving to markets with an abundance of skilled cheap labour (This is one of the reason's Irelands own boom took off)
15. I know of lots of appartments that are build in the city, that are not being rented (Capital appreciation)
16. Watch carefully what's happening in the UK and the USA. We are tied into their economic cycle.
17. Germany is starting to pick up, and so are the ECB rates, and is a much more attractive destination for most East Europeans once it opens its borders to them.

Pa ElGrande

Sponge Bob wrote:

Quite Right Ken, the country is run from that bloody tent at the Galway Races.

Fianna Fail as the ruling party most of this boom certainly do deserve some blame for the policies they pursued with regard to debt bubble. Indeed, what passes for political opposition in this country does as well, since they have been complicit in this as well. This is why Sinn Féin are likely to make gains in the next election, picking up votes from disenfranchised people.
Indeed the Taoiseach has stated his position on the property bubble quite clearly in words that will echo for years to come.

Bertie Ahern said
"Really we should have an examination into why so many people got it so wrong. My view is there's not a great problem. Really, the bad advice of last year given by so many has maybe made some people make mistakes, that they should have bought last year."

Listen over at RTE - http://www.rte.ie/business/2006/0407/property.html
Irish Times Article - http://www.ireland.com/newspaper/front/2006/0408/3447877711HM1NEWBERT.html

However, we should also bear in mind the only reason the majority of people are complaining about property is that they want to get on the property ladder themselves, but the cost of entry to this ponzi scheme is beyond them. Once they get on the "ladder" they are quite happy for their property to appreciate in value so they can sell it to the next fool.

raxall

ireland should get poor but skilled immigrants and give them the "dirty" jobs with decent pay... they'll take it !

kluivert

I was watching the news last night and heard an ecomonist say that investors buying property for the hope of capital appreciation should consider other options.............In other beware the bubble is going to burst.

I think this country thinks its too good for itself. People are afraid of hard work and would rather pay the minimum wage to someone else to do it..

I work the guts of 60-70 hours a week and I am an accountant (Part Qualified), if you the little things in life you earn them and not borrow the money from the bank. This country is a disgrace.

Construction does not build a strong country its production and exports that makes a wealthy and thriving economy.

Warning is out there for al of you, there is a down turn coming, the government cant continue to hand out free money for much longer and sustain an overheating economy.

FF took the credit for the celtic tiger but failed to control both monteary and fiscal policy, instead they jumped on the band wagon and the gravy train and decided to take what they could. Now they are throwing a celebration for 1916 to win more hearts and therefore more votes.

killeoin

Pa ElGrande...I was going to repaste your post and complement you on it but I deceided it was too long. Anyway, you're right, and great post. The only thing I have to add to it is that really whats kept the property market going is the fact that interest rates are (have been) so low in the past number of years. Cheap money fuelled the housing bubble and really we need also look at the American markets reaction to their interest rate hikes.


kluivert...I presume you are a trainee accountant? 60-70 hours a week! God help you! I'm just after signing a training contract for next year so im ****ed if its going to be like that!:eek:

kluivert

killeoin wrote:

kluivert...I presume you are a trainee accountant? 60-70 hours a week! God help you! I'm just after signing a training contract for next year so im ****ed if its going to be like that!:eek:

I work in Boylesports Head office in Dundalk at the weekends and two evenings a week + work in the accounting practice. A normal week is 65 hrs. So much for the great economy that we have.

TomF

I feel it is my duty to warn others that, as the true and authentic "Last Guy", I have been feeling, recently, that I should buy a house. If I should actually do that, you may be as certain as about the sun rising tomorrow, that the housing bubble in Ireland is going to burst, and very soon.

I know it will be very soon, specifically between the first of September and the last of November that the crash will happen, because the first of September is the end of the contract for this house I rent, and I don't want to move again, and I intend to emigrate to the USA if I don't buy, and generally you are tied-up for three months getting loans, papers signed, etc., etc., before you actually have possession of a house, and so that establishes the latest time of the crash.

You all have been warned, so get rid of that over-priced property now before the bubble bursts and no one will want to know you.

TomF

I think I'll rent in the USA, too, until their crash hits!

http://patrick.net/housing/crash.html

Schuhart

One worry I have is the references to growth being fueled by domestic consumer demand. Consumer demand in Ireland has not great knock on effect, as we generally import our consumer goods. This really is a bubble economy, and there seems to be a high level of delusion in the air.

Pa ElGrande

Thanks for the comments killeon.
Your point about the low interest rates is right, in fact they are "emergency" low interest rates implemented in the wake of the 2000 dot.com crash and Sept. 11 and also the American federal reserve (central banks) liquidity injection (they printed more dollars). The growth in asset bubbles (houses, shares, commodities) all over the world are Alan Greenspan's legacy.
Have a read of this article it was written in March 1999 about the debt bubble underpinning the monetary system and it is very relevant today. Just cross out shares and insert property.

http://www.gold-eagle.com/gold_digest_99/milhouse030899.html

Just to back up the article see this graph - http://www.rense.com/1.imagesF/2bss.gif

DublinWriter

TomF wrote:

I intend to emigrate to the USA

Er, how? (unless you're marrying a yank or have a H1B arranged)

Pa ElGrande

Its a bit Off Topic to this thread but if you get a chance see Robert Newman's History of Oil.
Its a comedy sketch that does make some valid (and invalid) points.
I happened by chance to see see it this evening on More 4.
He made a very funny comparisson between Salvador Dali's Cheques and the American Federal reserve.

World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy.
http://www.atimes.com/global-econ/DD11Dj01.html
http://en.wikipedia.org/wiki/Dollar_hegemony

lomb

THERE was even more bad news for first time buyers yesterday.

Despite the Central Bank warning that Ireland's house price growth is 'worrying', Bank of Ireland announced in the same afternoon that housing demand is stronger than expected.

In its quarterly analysis of the Irish property market, the bank predicted price growth of 9pc for 2006. However, it believes it will slow to 3pc in 2007.

Group chief economist Dan McLaughlin said that despite record supply and the prospect of rising interest rates, Irish people are continuing to buy property in huge numbers.

"So far in 2006, the Irish housing market remains vibrant," he said.

"This is understandable given the strength of the Irish economy and the continued surge in employment, with the creation of an estimated 80,000 jobs over the year.

"These factors, along with buoyant wage inflation and tax concessions in the Budget, are likely to drive household income growth in excess of 9pc." He has predicted the number of home completions this year will exceed the record number built last year.

A total of 81,000 homes were constructed, with 26,000 in the last quarter alone.

"We expect supply to remain at high levels, with a further increase in completions to 85,000 in 2006."

The new mortgage sector of the bank is also experiencing strong growth, with another 110,000 new mortgages expected to be drawn before the end of the year.

The expected 12pc growth in the numbers borrowing comes despite rising interest rates.

Although affordability has decreased slightly in recent months thanks to hikes from the European Central Bank (ECB), he said there is still "relatively comfortable affordability". However, he issued a warning for those who have borrowed at their limit. Already this year the ECB has raised rates from a historical low of 2pc to 2.5pc.

"We envisage a further 1pc increase, bringing the Repo rate to 3.5pc by early next year," he said.

"This will mean standard variable mortgage rates in the Irish market of 4.75pc by the spring of next year."

The 1pc rise would mean that a €300,000 mortgage spread across 30 years would see a monthly increase from €1,387.35 to €1561.55.

This is an increase of €174.20 per month, or €2,090 per year.

also


THREE lenders are now offering 40-year mortgages as longer and longer terms for home loans become the norm in the Irish market, it has emerged.

Bank of Scotland (Ireland), along with Ulster Bank and First Active, are offering the 40-year mortgages, a move that a consumer lobby group said yesterday was a negative development.

And one leading mortgage company said the majority of home loans now extend to 35 years, up from terms of 20 years in 2000, according to research by the Irish Mortgage Corporation.

Yesterday the Financial Regulator cautioned people to be aware that 35-year and 40-year mortgages would leave people with thousands and thousands more euro in interest to pay when compared with home loans over a shorter period.

"We would warn consumers to understand the long-term costs of mortgages with a long term. It will cost more," a spokeswoman for the regulator's office said.

Chief executive of the Consumers Association Dermott Jewell said 40-year mortgages were a bad idea. People could easily be fooled into thinking they are paying less because the monthly repayments are lower.

But over the life of the loan people would end up paying thousands more.

Regressive

First-time buyers were being pushed into taking on 40-year mortgages because house prices were rising relentlessly, Mr Jewell added. He described such long-term mortgages as a regressive step.

The Financial Regulator gave an example of someone paying off a €250,000 mortgage (at 3.6pc). Paying this off over 15 years would cost €321,750 or €1,788 a month. Over 35 years the total cost would be €433,650 or €1,033 a month. This means that the total cost of the loan over 35 years is €111,000 higher than if it was paid off over 15 years.

Spokesman for the Irish Mortgage Corporation Frank Conway said 52pc of its customers in the first three months of this year had taken out 35-year mortgages.

This compares with 33pc of customers taking out 35-year mortgages over the whole of last year.

The numbers taking out 40-year mortgages had doubled to 6.5pc in the first quarter of this year, Mr Conway said. His company did €1bn in mortgages last year, he added.

First Active and Ulster Bank restrict 40-year mortgages to those who are aged 30 or under if they are PAYE workers.

Bank of Scotland said it did not promote 40-year mortgages to its customers, but it was one of its offerings.

The product is restricted to those who are aged 25 or under.


"This is understandable given the strength of the Irish economy and the continued surge in employment, with the creation of an estimated 80,000 jobs over the year.

"These factors, along with buoyant wage inflation and tax concessions in the Budget, are likely to drive household income growth in excess of 9pc." He has predicted the number of home completions this year will exceed the record number built last year.

A total of 81,000 homes were constructed, with 26,000 in the last quarter alone.

"We expect supply to remain at high levels, with a further increase in completions to 85,000 in 2006."

The new mortgage sector of the bank is also experiencing strong growth, with another 110,000 new mortgages expected to be drawn before the end of the year.

The expected 12pc growth in the numbers borrowing comes despite rising interest rates.

Although affordability has decreased slightly in recent months thanks to hikes from the European Central Bank (ECB), he said there is still "relatively comfortable affordability". However, he issued a warning for those who have borrowed at their limit. Already this year the ECB has raised rates from a historical low of 2pc to 2.5pc.

"We envisage a further 1pc increase, bringing the Repo rate to 3.5pc by early next year," he said.

"This will mean standard variable mortgage rates in the Irish market of 4.75pc by the spring of next year."

The 1pc rise would mean that a €300,000 mortgage spread across 30 years would see a monthly increase from €1,387.35 to €1561.55.

This is an increase of €174.20 per month, or €2,090 per year.

Pa ElGrande

Today's Irish economy is fundamentally different from the economy in your granny's day. Some key words: globalization (importing consumer goods and oil from Asia), democratisation (War in Iraq) and emerging markets (Housing in Bulgaria).

Remember when Granny told you to save your pennies? Remember when she gave you a cute credit union book where you were supposed to write down every time you deposited part of your pocket money in your savings account?

Granny loved you, but she was from another time. By teaching you to save she might as well have been teaching you to operate a loom. Saving is obsolete in today's world. Only spending money puts it to work. And money spent on a house works as hard as money can work, because then you can then borrow against the house and spend that same money on a new car, boat, etc., thereby creating new jobs, and all the while your house keeps increasing in value, no matter how much you borrow! It's like a magic circle of money!

Do you want to work for your money or have it out there working for you? Saving might have been smart in 1985, but it's 2006 now, and this housing boom has only begun, so get in while there's still time. Do you know who saves money? The Chinese. And needless to say, we don't look to the Chinese to decide what to do. As a result of all their wasteful saving, the Chinese housing market is in trouble. The Irish are sophisticated enough to keep spending, so here there is no danger of collapse.

Tazz T

er... don't you still need that savings book to get the deposit, fees for that house?

I know I wasn't able to get a 100% mortgage when I was 7 years old.

whizzbang

Pa ElGrande wrote:

Today's Irish economy is fundamentally different from the economy in your granny's day. Some key words: globalization (importing consumer goods and oil from Asia), democratisation (War in Iraq) and emerging markets (Housing in Bulgaria).

Remember when Granny told you to save your pennies? Remember when she gave you a cute credit union book where you were supposed to write down every time you deposited part of your pocket money in your savings account?

Granny loved you, but she was from another time. By teaching you to save she might as well have been teaching you to operate a loom. Saving is obsolete in today's world. Only spending money puts it to work. And money spent on a house works as hard as money can work, because then you can then borrow against the house and spend that same money on a new car, boat, etc., thereby creating new jobs, and all the while your house keeps increasing in value, no matter how much you borrow! It's like a magic circle of money!

Do you want to work for your money or have it out there working for you? Saving might have been smart in 1985, but it's 2006 now, and this housing boom has only begun, so get in while there's still time. Do you know who saves money? The Chinese. And needless to say, we don't look to the Chinese to decide what to do. As a result of all their wasteful saving, the Chinese housing market is in trouble. The Irish are sophisticated enough to keep spending, so here there is no danger of collapse.

I'm going to bookmark this and look back on it in 2008/2009 whenever I need a giggle.

"Saving is obsolete in today's world."

ahhhh classic.

"The Irish are sophisticated enough to keep spending" yes, all we need to do is keep spending money we don't have and nothing can go possibli go wrong!

{edit} reading back on your previous posts I'm assuming you are taking the mick? Still, there seems to be people out there that think like this!

Sleepy

Pa ElGrande wrote:

Today's Irish economy is fundamentally different from the economy in your granny's day. Some key words: globalization (importing consumer goods and oil from Asia), democratisation (War in Iraq) and emerging markets (Housing in Bulgaria).

Remember when Granny told you to save your pennies? Remember when she gave you a cute credit union book where you were supposed to write down every time you deposited part of your pocket money in your savings account?

Granny loved you, but she was from another time. By teaching you to save she might as well have been teaching you to operate a loom. Saving is obsolete in today's world. Only spending money puts it to work. And money spent on a house works as hard as money can work, because then you can then borrow against the house and spend that same money on a new car, boat, etc., thereby creating new jobs, and all the while your house keeps increasing in value, no matter how much you borrow! It's like a magic circle of money!

Do you want to work for your money or have it out there working for you? Saving might have been smart in 1985, but it's 2006 now, and this housing boom has only begun, so get in while there's still time. Do you know who saves money? The Chinese. And needless to say, we don't look to the Chinese to decide what to do. As a result of all their wasteful saving, the Chinese housing market is in trouble. The Irish are sophisticated enough to keep spending, so here there is no danger of collapse.

Fantastic piece of Satire

Schuhart

Pa ElGrande wrote:

The Irish are sophisticated enough to keep spending, so here there is no danger of collapse.

An article about some Irish investors who were sophisticated enough to spend.

http://www.irishexaminer.com/pport/web/ireland/Full_Story/did-sg38c0QuCLYq2sgdq-nXlDAyFE.asp
07/04/06
Labour threaten pyramid fraudsters with prison
By Paul Kelly
ORGANISERS of rip-off pyramid schemes would face unlimited fines and five years in jail if Labour came to power, the party pledged last night.

Labour’s Kathleen Lynch yesterday put forward a private members bill in the Dáil to outlaw the scam, which has seen people reportedly cheated out of their savings.

Pyramid schemes, like one that started in West Cork and spread through neighbouring counties, operated as a gift scheme for a members’ club.

People give money to members and then recruited others to give them cash. However, the schemes collapse when no-one else can be found or the money runs out. Describing people who join such schemes as gullible, Ms Lynch said the Oireachtas had to bring in laws to protect the easily-led and to punish the organisers.

ronbyrne2005

lomb wrote:

THERE was even more bad news for first time buyers yesterday.

Despite the Central Bank warning that Ireland's house price growth is 'worrying', Bank of Ireland announced in the same afternoon that housing demand is stronger than expected.

In its quarterly analysis of the Irish property market, the bank predicted price growth of 9pc for 2006. However, it believes it will slow to 3pc in 2007.

Group chief economist Dan McLaughlin said that despite record supply and the prospect of rising interest rates, Irish people are continuing to buy property in huge numbers.

"So far in 2006, the Irish housing market remains vibrant," he said.

"This is understandable given the strength of the Irish economy and the continued surge in employment, with the creation of an estimated 80,000 jobs over the year.

"These factors, along with buoyant wage inflation and tax concessions in the Budget, are likely to drive household income growth in excess of 9pc." He has predicted the number of home completions this year will exceed the record number built last year.

A total of 81,000 homes were constructed, with 26,000 in the last quarter alone.

"We expect supply to remain at high levels, with a further increase in completions to 85,000 in 2006."

The new mortgage sector of the bank is also experiencing strong growth, with another 110,000 new mortgages expected to be drawn before the end of the year.

The expected 12pc growth in the numbers borrowing comes despite rising interest rates.

Although affordability has decreased slightly in recent months thanks to hikes from the European Central Bank (ECB), he said there is still "relatively comfortable affordability". However, he issued a warning for those who have borrowed at their limit. Already this year the ECB has raised rates from a historical low of 2pc to 2.5pc.

"We envisage a further 1pc increase, bringing the Repo rate to 3.5pc by early next year," he said.

"This will mean standard variable mortgage rates in the Irish market of 4.75pc by the spring of next year."

The 1pc rise would mean that a €300,000 mortgage spread across 30 years would see a monthly increase from €1,387.35 to €1561.55.

This is an increase of €174.20 per month, or €2,090 per year.

also


THREE lenders are now offering 40-year mortgages as longer and longer terms for home loans become the norm in the Irish market, it has emerged.

Bank of Scotland (Ireland), along with Ulster Bank and First Active, are offering the 40-year mortgages, a move that a consumer lobby group said yesterday was a negative development.

And one leading mortgage company said the majority of home loans now extend to 35 years, up from terms of 20 years in 2000, according to research by the Irish Mortgage Corporation.

Yesterday the Financial Regulator cautioned people to be aware that 35-year and 40-year mortgages would leave people with thousands and thousands more euro in interest to pay when compared with home loans over a shorter period.

"We would warn consumers to understand the long-term costs of mortgages with a long term. It will cost more," a spokeswoman for the regulator's office said.

Chief executive of the Consumers Association Dermott Jewell said 40-year mortgages were a bad idea. People could easily be fooled into thinking they are paying less because the monthly repayments are lower.

But over the life of the loan people would end up paying thousands more.

Regressive

First-time buyers were being pushed into taking on 40-year mortgages because house prices were rising relentlessly, Mr Jewell added. He described such long-term mortgages as a regressive step.

The Financial Regulator gave an example of someone paying off a €250,000 mortgage (at 3.6pc). Paying this off over 15 years would cost €321,750 or €1,788 a month. Over 35 years the total cost would be €433,650 or €1,033 a month. This means that the total cost of the loan over 35 years is €111,000 higher than if it was paid off over 15 years.

Spokesman for the Irish Mortgage Corporation Frank Conway said 52pc of its customers in the first three months of this year had taken out 35-year mortgages.

This compares with 33pc of customers taking out 35-year mortgages over the whole of last year.

The numbers taking out 40-year mortgages had doubled to 6.5pc in the first quarter of this year, Mr Conway said. His company did €1bn in mortgages last year, he added.

First Active and Ulster Bank restrict 40-year mortgages to those who are aged 30 or under if they are PAYE workers.

Bank of Scotland said it did not promote 40-year mortgages to its customers, but it was one of its offerings.

The product is restricted to those who are aged 25 or under.


"This is understandable given the strength of the Irish economy and the continued surge in employment, with the creation of an estimated 80,000 jobs over the year.

"These factors, along with buoyant wage inflation and tax concessions in the Budget, are likely to drive household income growth in excess of 9pc." He has predicted the number of home completions this year will exceed the record number built last year.

A total of 81,000 homes were constructed, with 26,000 in the last quarter alone.

"We expect supply to remain at high levels, with a further increase in completions to 85,000 in 2006."

The new mortgage sector of the bank is also experiencing strong growth, with another 110,000 new mortgages expected to be drawn before the end of the year.

The expected 12pc growth in the numbers borrowing comes despite rising interest rates.

Although affordability has decreased slightly in recent months thanks to hikes from the European Central Bank (ECB), he said there is still "relatively comfortable affordability". However, he issued a warning for those who have borrowed at their limit. Already this year the ECB has raised rates from a historical low of 2pc to 2.5pc.

"We envisage a further 1pc increase, bringing the Repo rate to 3.5pc by early next year," he said.

"This will mean standard variable mortgage rates in the Irish market of 4.75pc by the spring of next year."

The 1pc rise would mean that a €300,000 mortgage spread across 30 years would see a monthly increase from €1,387.35 to €1561.55.

This is an increase of €174.20 per month, or €2,090 per year.

dan mc laughlin /bank of ireland is saying house price growth will decrease to 3% in 2007 which is less than the inflation rate of 3.5% released by cso today.i remember you thinking property was still a great investment lomb,did you still think so if prices are not going to be rising in real terms next year?

dahamsta

Lomb's post is so much better the second time.

REDZ

ireland too dependant on construction boom, 20% of employment indirectly.
boom caused by
1. economic growth
2. insufficent supply of houses
3. interest rates that were too low for our economy.

1. economic growth now dependant on construction
2. oversupply of houses now
3. higher and rising interest rates

roll on the bust, cos its my only hope of ever buying a house.
besides making money from property speculation is the lazy way to get rich, just sitting and watching your capital grow was simply too good to last.

Bluehair

Sleepy wrote:

Fantastic piece of Satire

It was brilliant, but scarily accurate to the way many people think.

ronbyrne2005

Ken Shabby wrote:

Lomb's post is so much better the second time.

apologies!

Pa ElGrande

REDZ wrote:

ireland too dependant on construction boom, 20% of employment indirectly.
boom caused by
1. economic growth
2. insufficent supply of houses
3. interest rates that were too low for our economy.

1. economic growth now dependant on construction
2. oversupply of houses now
3. higher and rising interest rates

roll on the bust, cos its my only hope of ever buying a house.
besides making money from property speculation is the lazy way to get rich, just sitting and watching your capital grow was simply too good to last.

Careful what you wish for when the downturn hits.

● The banks will tighten up their lending criteria significantly making it almost impossible to get a home loan.
● You will be lucky to keep your job, if you do, then may have to accept a pay cut. Employers will seize on this to increase productivity (Would you prefer to work on Saturday, for free!, or not work the following Monday)
● In a recession the focus turns from people with money to invest to one of survival. (its easier to move where any jobs are if you are not tied to property)
● Interest rates and fuel prices will rise.
● A significant number of properties will come on the market at once, with those on the extremities of the commuter belt loosing most value. Some will cut their losses initially, Most will stick on the way down.
● Suicide will rise substantially (including some that will take their families with them)
● Land prices will fall (Japan actually has a land shortage, but it still declined)
● We are tied to the American/UK economic cycle, the multinationals will be very quick to lay off people (e.g. Intel, HP, Dell)
● Retail outlets will close all over as demand for luxury goods falls off a cliff.

Ok, I know I am painting a very depressing picture

It's not that bad, remember our ancestors (1840's famine) had it much worse.
Anyone who has been prudent with the management of their income/expenditure will probably get through, those that have over-extended themselves or put their life savings in a single asset (housing) will pay a very heavy price.

lomb

Pa ElGrande wrote:

Careful what you wish for when the downturn hits.

● The banks will tighten up their lending criteria significantly making it almost impossible to get a home loan.
● You will be lucky to keep your job, if you do, then may have to accept a pay cut. Employers will seize on this to increase productivity (Would you prefer to work on Saturday, for free!, or not work the following Monday)
● In a recession the focus turns from people with money to invest to one of survival. (its easier to move where any jobs are if you are not tied to property)
● Interest rates and fuel prices will rise.
● A significant number of properties will come on the market at once, with those on the extremities of the commuter belt loosing most value. Some will cut their losses initially, Most will stick on the way down.
● Suicide will rise substantially (including some that will take their families with them)
● Land prices will fall (Japan actually has a land shortage, but it still declined)
● We are tied to the American/UK economic cycle, the multinationals will be very quick to lay off people (e.g. Intel, HP, Dell)
● Retail outlets will close all over as demand for luxury goods falls off a cliff.

Ok, I know I am painting a very depressing picture

It's not that bad, remember our ancestors (1840's famine) had it much worse.
Anyone who has been prudent with the management of their income/expenditure will probably get through, those that have over-extended themselves or put their life savings in a single asset (housing) will pay a very heavy price.

U paint a very pessimistic picture, one that i doubt will come about. u are right though, prices for property will go thru a sustained period of non growth relative to inflation in all likelyhood. il leave this discussion on this final point, people are richer than u think, no one tells u what they have.

Blackjack

Pa ElGrande wrote:

However, we should also bear in mind the only reason the majority of people are complaining about property is that they want to get on the property ladder themselves, but the cost of entry to this ponzi scheme is beyond them. Once they get on the "ladder" they are quite happy for their property to appreciate in value so they can sell it to the next fool.

Can I put this in my sig?. I'd nearly put it in my epitaph!.;)

Pa ElGrande

lomb wrote:

U paint a very pessimistic picture, one that i doubt will come about. u are right though, prices for property will go thru a sustained period of non growth relative to inflation in all likelyhood. il leave this discussion on this final point, people are richer than u think, no one tells u what they have.

It depends on your perspective whether the glass is either half empty or half full.
House prices will fall as supply exceeds demand over a sustained period until the average house reaches more normal levels (3x wages). How much prices fall will depend on your location.
Certainly some people are richer (over 40's). There are a lot of people in my age group (30's) who are not, and have told me how they regularly dip into credit cards towards the end of the month to keep their heads above water.
There are at least 50,000 such individuals who have been identified by the banks as struggling (and we are still in the boom)
This boom has become a massive wealth transfer from the young to the old generation.

Who is wealthier the C list celebrity who has a €2 million house and lifestyle and owes it all to the bank or the council worker who rents and has €50,000 in savings and no debts?

Pa ElGrande

Blackjack wrote:

Can I put this in my sig?. I'd nearly put it in my epitaph!.;)

lol. be my guest.

lomb

Pa ElGrande wrote:

Who is wealthier the C list celebrity who has a €2 million house and lifestyle and owes it all to the bank or the council worker who rents and has €50,000 in savings and no debts?

ud be surprised what the mortgage is on a 2 million euro house. many people buying them are in their 40s or 50s and so the bank wont advance the money over terms of more than 20 years. acording to my calculations thats 11 grand a month. now to pay 11 to the bank u need to make 22 to pay the tax on it. so u need to make in excess of 300 grand to meet the payments. i would call that wealthy versus a council worker with 50 grand wouldnt u?

Blackjack

lomb wrote:

ud be surprised what the mortgage is on a 2 million euro house. many people buying them are in their 40s or 50s and so the bank wont advance the money over terms of more than 20 years. acording to my calculations thats 11 grand a month. now to pay 11 to the bank u need to make 22 to pay the tax on it. so u need to make in excess of 300 grand to meet the payments. i would call that wealthy versus a council worker with 50 grand wouldnt u?

Do you remember the story about your one Twink and her Mortgage?.

Sponge Bob

Pa ElGrande wrote:

House prices will fall as supply exceeds demand over a sustained period until the average house reaches more normal levels (3x wages).

Hmm, the long term average is 4 x and we are around 6x 7x now. The long term would have generally been a period of higher interest rates than we have now so I would say that we will settle into a new long term average of 5x to take the lower interest environment into account.

Still a 7x to 5x adjustment implies that house prices will fall 28% or so which I feel is realistic given the size of the bubble.

Lack of liquidity in the banks could cause an overshoot where the prices spike below that .

How much prices fall will depend on your location.

Correct, and I fully endorse your commuter zone extremity argument.

Termonfeckin will fall (relatively) more than Terenure !

This boom has become a massive wealth transfer from the young to the old generation.

It has now, yes. OTOH The younger ones are more prepared to borrow and spend beyond their long term means for which one cannot really blame the elders who grew up with no plastic and feck all credit unions even...the over 50s nowadays. The lethal combination of irresponsible borrowers ...the youngers....and irresponsible lender.....the banks who now offer 100% loans .....is what caused much of the boom. Parts were caused by higher disposable incomes and demographics.

When the boom started , c 1995, a semi in Lucan or Galway could be got for around €65k, that semi will certainly not fall below €100k and most likely below €150k no matter what. Nevertheles that semi is now €250k to €300k and in my opinion is unlikely to cost over €200k quite soon.

Who is wealthier the C list celebrity who has a €2 million house and lifestyle and owes it all to the bank or the council worker who rents and has €50,000 in savings and no debts?

In terms of realistic cashflow, the latter. Thats unless the latter believes that they are a Celeb Manqué and have adjusted their lifestyle accordingly

Ken Shabby

Ken Shabby wrote:

100% the fault of Fianna Fail of course.

Anyone remember the economy after the last elected Labour/FG Government? Remember when the national debt per head was worse than Chad and 30,000 a year fled a country where employment was impossible?

I don't think the sky is caving in just yet. There are plenty of people out there investing vast amounts in the country, including land. While it's very easy for us to throw out opinions on a website, as long as people who stake their fortunes ion getting things right are willing to take decisions like buying a 5 acre site in Dublin for €180 million, then I'm not going to lose sleep just yet.

lomb

Deleted User wrote:

Anyone remember the economy after the last elected Labour/FG Government? Remember when the national debt per head was worse than Chad and 30,000 a year fled a country where employment was impossible?

I don't think the sky is caving in just yet. There are plenty of people out there investing vast amounts in the country, including land. While it's very easy for us to throw out opinions on a website, as long as people who stake their fortunes ion getting things right are willing to take decisions like buying a 5 acre site in Dublin for €180 million, then I'm not going to lose sleep just yet.

Uve hit the nail on the head there. people on boards dont realise how wealthy some/many people are. these people who are buying up tracts of development land for record prices are very shrewd businessmen, and id take their opinion over someone from the central bank, or the government or the newspapers or boards anyday.

they know that either prices are going to keep rising or allowable densitys are going to keep increasing and probably both as one puts pressure on the planners for the other.

DublinWriter

lomb wrote:

these people who are buying up tracts of development land for record prices are very shrewd businessmen, and id take their opinion over someone from the central bank, or the government or the newspapers or boards anyday.

I'm sorry Lomb, but it's a bit like that scene from 'Fiddler on the Roof', "When you have money, they think you know..."

The recent sale of the Jury's site in Ballsbridge was basically a 'grown-up' p*ssing contest. Do the maths on that one and you'll realise that what ever apartments are thrown up on the site will have to sell at €3m for the developer to at least break even.

Regarding the economy, the only thinker I'd trust would be Sir Isaac Newton - 'what goes up must come down'.

I remember senior economists opining on the media during the 2000 dot-com boon, saying that "maybe we are reaching a new re-evaluation of equities".

We're heading into a major oil crises with all nations playing ostrich. When the UK and the other EU countries start allowing the accession countries work in their respective territories circa 2009, we'll witness a mass evacuation.

That, combined with the concept of 'peek-oil' about to hit around the same time, means that we won't be in for the smoothest of rides.

lomb

DublinWriter wrote:

When the UK and the other EU countries start allowing the accession countries work in their respective territories circa 2009, we'll witness a mass evacuation.

afaik the uk is an accession country. the others like france etc are non english speaking so i cant see the evacuation u speak of.

reading the paper, even fairly ordinary houses in good areas are selling for in excess of 1.5 million euro which really is shocking when u think about it.

i went to get a loan of 500000 recently for a business property and i was asked all kinds of ridiculous questions. to afford the afformentioned houses u need a monsterous income, but i guess people must have it or else have alot of equity.

the only conclusion i can come to is alot of people are loaded. fair deuce to them but the rest of us are only looking up, and we can see only their feet:D

Cork

Irish economic success is built on people buying stuff they don't want with money that they don't have.

Government don't mind as they are getting VAT & stamp duty.

But with people borrowing to the hilt - they will be to blame for their own stupidity.

It is no wonder Eddie Hobb's "Show me the money" is popular.

Many are in a debt quick sand. I have no doubt reality will strike.

The current boom is created not by productivity but easy availibillity of credit.

Interest rates are going up.

Brian Cowen even issued a warning last week.

lomb

walford was sold a year ago nearly for around 50 million euro. http://www.ireland.com/newspaper/property/2005/0526/3078811573CARRYOVERRPCARRYOVER.html
they reakoned development potential was the key to the value. in doing a search no planning applciation has been submitted and the house appears not to be lived in from passing a few times.

so 2.5 million euro of interest and 4.5 million of stamp duty later nothing has happened here. there are alot of very very wealthy people in ireland. i dont think boardsies realise how obsenely wealthy the people at that end are.

this filters down to the average mere mortal, there are many many accidental millionaires out there. the question is is it an anomaly or was it always going to happen?

lomb

Cork wrote:

The current boom is created not by productivity but easy availibillity of credit.
.

of course thats true any economist will tell u u will get a boom when u loosen up the money supply and increase it.
but...banks need to be paid. what would really worry me and then u know prices will have overshot the mark is if the banks do 30 year mortgages with interest roll up periods so nothing is paid for a few years. thats when u know the collapse is a couple of years away:D

Cork

Reality will bite with interest rate increases.

People who recently bought houses will be fare worst.

People who bought houses miles away from where they work - will be hit y increased fuel costs.

Many commuters almost live in their cars anyway. They have TV, Breakfast, ipod, phone etc in their car.

I pity these.

DublinWriter

lomb wrote:

afaik the uk is an accession country. the others like france etc are non english speaking so i cant see the evacuation u speak of.

The UK, like most other EU states except Ireland, put a block on Poles and Czhecos coming into GB to work until 2009.

Given the favourable exchange rate between Sterling and the Euro, and the relative cheapness of the cost of living outside London, I can see a lot of current Poles and Czhecos heading over to the UK in about four years.

lomb wrote:

the only conclusion i can come to is alot of people are loaded. fair deuce to them but the rest of us are only looking up, and we can see only their feet:D

Dude, you're a dentist! The bank manager must have prostrated himself at your feet while minor clerks scattered rose-petals in your path!

Only kidding, couldn't resist the dig!

ronbyrne2005

DublinWriter wrote:

The UK, like most other EU states except Ireland, put a block on Poles and Czhecos coming into GB to work until 2009.

Given the favourable exchange rate between Sterling and the Euro, and the relative cheapness of the cost of living outside London, I can see a lot of current Poles and Czhecos heading over to the UK in about four years.



Dude, you're a dentist! The bank manager must have prostrated himself at your feet while minor clerks scattered rose-petals in your path!

Only kidding, couldn't resist the dig!

actually uk allows unlimited access from poland etc along with us and sweden.

DublinWriter

In think the recent Forfas report is a lot more telling when you think about the global consequences of 'peak oil' being reached circa 2010.

Remember the oil crises in the early 70's? I don't as I was only 3 at the time, but interest rates shot up, inflation got so bad that the Labour government in the UK introduced a three day working week.

I think we're in for that, but the key difference then was that in 1974, only 20% of people actually owned their own home in the UK, and I'm sure the same went for Ireland.

The large rise in interest rates at the time didn't affect a lot of people because only 20% had mortgages.

Now the inverse is true in the UK thanks to Thatcher's council house buy-back scheme of the early 80's, and around 80% of people in the UK have mortgages.

You could see a mini-version of what we're all in store for when in 1991 George Soros woke up with a sore-head and dumped billions of sterling on the International money markets causing then chancellor Norman Lamont to increase interest rates four times in one day to prevent sterling from caving in.

Many people in the UK just left the keys to their properties with the banks and walked away and it took until the late 90's for the UK economy to pick up again.

Lamont at the time famously called this a 'blip'.

The world running out of oil will be more than a 'blip' and will not be a temporary condition. It will be a permenant condition that personally I think will bring all national economies to a halt and put us back in some kind of feudal existance in 30 years time.

Oil affects everything. Take a look at your pension plan that probably won't mature until 2030. Most of your money is probably tied up in equities. Do you think any of those companies that your pension plan is invested in could survice in a world without oil? Do you think that there will even be a stock-market by then?

Personally I think we're in the end days of what I like to call the Industro-technological age. Most of our personal 'wealth' is tied up in financial instruments that will crumble like pillars of salt when the oil runs out.

As I said, I think 2010 will be the key year as the Forfas report has indicated.

Many people think that the world will suddenly run out of oil, but I think that we're all in for a long, slow grinding down of the economic system post 2010 and oil will become more expensive year on year.

Pa ElGrande

I was talking to my dad over the weekend and we were discussing the outlook for the future. He works in construction and has also formed the opinion that the current growth in property prices is not sustainable, but he's not complaining as he says "make hay while the sun shines".
He related something to me from the 1980's, he had returned from England in the late 1970's and setup his own construction business, which went ok until the 1980's crash, as a result on Christmas eve, 1982 and the following 1983, he only had a fiver in his pocket and AIB bank breathing unmercifully down his neck, try as he might he could not collect any money from any clients. Needless to say his business failed. That was a real low point in his life, with a young family to support, marriage going through a rocky patch, debts with high interest rates and high inflation. He would not wish that on any family today.

However, while the population, labour-force and employment increases achieved during the 1970's were significant they depended, to a considerable extent, on an unsustainable stimulus of the economy through high public sector borrowing and spending. About 50% of the increase in employment over the 1970's took place within the public sector.

The Evolution of Economic Policies in the Republic of Ireland -The Underlying Reasons for the High Economic Growth Rates of the 1990s
http://www.forfas.ie/news.asp?page_id=218

Are we staring at the 1980's again, except this time its unstainable private sector borrowing and massive growth in the construction sector? Interesting what part did the policies of the Fianna Fail goverment of the seventies play in exacurbating the crisis? Are their policies any different today?
There are many stories from the 1980's like my Dad's of what happens when the money suddenly dries up.

The biggest flaw in NCB’s report is its failure to address the debt binge we have been engaged in and where this is likely to lead us by 2020. Credit to the private sector is growing at the rate of 30% a year. Three more years of credit growth at this level would take us to a point where we owe €570 billion by the end of 2008, €750 billion by the end of 2009 and so forth.

Take the numbers out to 2020 and you end up with ludicrous aggregates. You cannot continue for a generation to pump up credit growth at a rate that is six times the level of hoped for gross domestic product growth. Something has got to give, and it will do so long before NCB’s vision has expired.

Irish Outlook: Damien Kiberd: Crystal ball gazers miss the warning signs
http://www.timesonline.co.uk/newspaper/0,,2769-2135902,00.html

Rossa White of Davy Stockbrokers said the “SSIA effect” was the biggest single cause of last month’s jump in inflation and there were plenty of indications that 2006 was shaping up to be the biggest spending splurge in six years.

Exporters operate in the highest price economy in the eurozone — a direct consequence of government policy, he said

SSIA spree may cause economic overload
http://www.timesonline.co.uk/newspaper/0,,2769-2136022,00.html

lomb

DublinWriter wrote:

Dude, you're a dentist! The bank manager must have prostrated himself at your feet while minor clerks scattered rose-petals in your path!

Only kidding, couldn't resist the dig!

I think not! luckily the old man is co signing the loan so that adds a bit of credibility to the equation. they think all dentists are rouges:D

i think all the optimists are partially right and the pessimists are. im a firm believer in true productivity. and i know ireland apart from its low corporation tax is falling behind every day on competitivity.

if it isnt peak oil it will probably be globalisation thats the eventual wake up call.

i reakon theres probably 3-5 years left in this boom with prices rising another 50-60% for starter semis homes in dublin, 40% for apartments, and 40% for trade up houses around dublin. after that it probably will either collapse or whats more likely stop for many years and inflation will slowly erode property prices before another cycle.

everyone who knows property knows its cyclical and we are in the rising part of the cycle, how far it has to go no one knows. but its going to be a bumpy ride:D