Housing bubble starting to pop?

Sponge Bob

The Central Bank has been keeping VERY schtum about the amount of securitised mortgages being flogged off by the banks and the 'performance' clauses on them .

In recent months some large €2bn type packages have been sold to Asian investors.....thereby freeing up another €2bn to lend again type scenario. Sometimes spelt 'securitized' too.

The banks may still be liable for some of this you see. There are even those who contend its a rare thing , see this press release in June 2006

http://www.weil.com/wgm/pages/Controller.jsp?z=pr&sz=n&db=wgm/quotables.nsf&d=0FB322A263330DB48525719C005D4A6E&v=0

ondon, June 29, 2006 - International law firm, Weil, Gotshal & Manges, advised Citigroup in connection with the second "Fastnet" transaction - a € 2,150,000,000 multi-class, euro-denominated bond issue backed by a pool of mortgages originated by Irish Life & Permanent plc. Irish Life & Permanent's previous RMBS issue in Ireland was seven years ago with Fastnet 1.

Three classes of Notes were issued by Fastnet Securities 2 plc, an Irish incorporated special purpose vehicle, listed with the Irish Stock Exchange and rated up to Aaa/AAA by Moody's and Standard & Poor's respectively. This transaction is one of the largest mortgage-backed securitizations to have been issued in Ireland in recent years. Société Générale, Deutsche Bank and Davy Stockbrokers were joint-managers on the deal and were also advised by Weil Gotshal.

More on the permo

http://www.irishlifepermanent.ie/ipm/ir/creditinvest/securisations/

I also believe Anglo Irish are big into securitising commercial mortgage packages.

Pa ElGrande

AIB Bank says Annual Irish Inflation approaching 10% on non-discretionary consumer expenditure
http://www.finfacts.com/irelandbusinessnews/publish/article_10007016.shtml

Inflation is set to hit 5pc - over twice the EU target
http://www.unison.ie/business/stories.php3?ca=80&si=1675192 [free registration required]

Irish housing output surges by 23.6% in first 7 months of 2006; 51,752 Irish houses and apartments were built
http://www.finfacts.com/irelandbusinessnews/publish/article_10007022.shtml

Mr Ahern also said he was concerned by the increasing number of people who buy houses off the plans and sell them on immediately.
He said these investors add nothing to the economy and were only pushing up prices for people looking for a place to live.

Number of new houses and apartments up 24% this year
http://www.unison.ie/breakingnews/index.php3?ca=9&si=97191 [free registration required]

Almost one-in-five first-time house buyers are non-Irish nationals
http://www.finfacts.com/irelandbusinessnews/publish/article_10007019.shtml

Bank of Ireland says ECB interest rate to rise to 3.5% on December 7th next
http://www.finfacts.com/irelandbusinessnews/publish/article_10007018.shtml

August 2006 - Bank of Irelnd Global markets
http://www.bankofireland.ie/html/gws/includes/corporate/pdfs/global_markets/bulletin.pdf

Irish house prices rose by 1.1% in July; Prices up 9.1% in seven months compared with 3.3% in 2005
http://www.finfacts.com/irelandbusinessnews/publish/article_10007009.shtml


* The house price increase in data gives no information on the volume of sales compared with last year. The data concerning non-irish nationals is sourced from Irish mortgage corporation (Hooke & McDonald).

antoinolachtnai

Interestingly, the statistics also show that non-nationals are a significant force in the FTB marketplace, and this suggests that a lot of these people are planning on staying here.

Is true, the securitization doesn't mean that the banks' potential bad debts just go away. Securitization is in many ways a special kind of deposit that can be borrowed against. The risk for the securitizing banks is pretty low. But this just shows how confident the banks are in the strength of the housing market.

SimpleSam06

antoinolachtnai wrote:

Interestingly, the statistics also show that non-nationals are a significant force in the FTB marketplace, and this suggests that a lot of these people are planning on staying here.

Sorry, that one was already torn to shreds over on askaboutmoney. Those figures were released by the IMC, Irish Mortgage Corporation, who are about as biased as it is possible to be without being actively criminal.

The report was not publicly released, just the results, and according to their own reports from last year, they were talking about 30% of the market, so it has in fact reduced since last year, from whatever it was. They had the report timed for release to counter the Department of Environment figures showing a huge increase in home completions this year.

Spin factory, baby.

Edit: And they did the exact same thing last year.

SimpleSam06

antoinolachtnai wrote:

But this just shows how confident the banks are in the strength of the housing market.

AIB are going to sell and lease back 12 of their Dublin branches. If thats not confidence, I don't know what is.

bico

"The 12 branches covered by the latest deal are: Artane; Clonskeagh Road; Crumlin Road; Dame Street; Morehampton Road; Drumcondra; Dundrum; Dun Laoghaire; 37/38 O'Connell Street; Ranelagh; Stillorgan; and Tallaght."

These are all prime locations most with development potential. Who ever buys them , might not get a good return in the short run, but they'll hold their value.

SimpleSam06

bico wrote:

These are all prime locations most with development potential. Who ever buys them , might not get a good return in the short run, but they'll hold their value.

What has that got to do with the confidence of the banks in the property market? If they were that confident they would be holding out for longer in order to realise a better price. What they would do to get the best price is sell at what they think is the peak, which means they think they only way is down from here.

Gegerty

Looks like the US housing market is in for a soft landing:

http://news.bbc.co.uk/2/hi/business/5279104.stm

whizzbang

Gegerty wrote:

Looks like the US housing market is in for a soft landing:

http://news.bbc.co.uk/2/hi/business/5279104.stm

looks like people are not yet decided if it is a soft or hard landing (besides Ben Bernanke who would be dragged over the coals for any hard landing.)

faceman

SimpleSam06 wrote:

AIB are going to sell and lease back 12 of their Dublin branches. If thats not confidence, I don't know what is.

commercial property and residential property cant be classed in the same bracket - unless ive misinterpreted your point?

Pa ElGrande

whizzbang wrote:

looks like people are not yet decided if it is a soft or hard landing (besides Ben Bernanke who would be dragged over the coals for any hard landing.)

You know things are going to get bad over there (and here eventually) when the news outlets start using words like freefall and collapse

"Things do seem to be getting worse very quickly. Freefall is a strong word, but I think it's the right one to use here," said Paul Ashworth, chief U.S. economist at Capital Economics.

U.S. Housing Slump Fuels Crash Fears
http://freeinternetpress.com/story.php?sid=8172

THE R word is back. The housing market has moved from cooling, through slide, into collapse. At least, that’s what many property analysts and economists are saying. They are hoping that the Federal Reserve Board’s monetary-policy gurus take note when they convene in less than a month, and turn their “pause” in ratcheting up interest rates into a permanent stop. Or better still, change direction completely. Otherwise, the recession will be deep and nasty.

House-price fall poses dilemma on interest rate
http://www.timesonline.co.uk/article/0,,2095-2330122,00.html

Is there going to be pain in Spain? Ireland's economy has solid fundamentals underpinning it so now fear here. :rolleyes:

MADRID: For a decade, Spaniards have built an economic boom on cheap credit and a housing and construction bonanza. With their economy outpacing euro zone average growth, year after year, it was easy to ignore roaring inflation and uncompetitive industries.
But with the property sector cooling and economists forecasting a steep slowdown in 2007 growth, the Spanish are becoming more worried about their lopsided economy.
more.....

Spain seeks soft landing as economists forecast steep slowdown
http://www.gulf-times.com/site/topics/article.aspx?cu_no=2&item_no=104654&version=1&template_id=48&parent_id=28

Those interested in German property future trends may need to take the population decline into account, the trend is downwards since early 90's, this does mean eventually they will be forced to import people to keep their economy afloat or face longterm economic decline.

No Brakes on Germany's Population Freefall
http://www.dw-world.de/dw/article/0,2144,2138258,00.html

SimpleSam06

faceman wrote:

commercial property and residential property cant be classed in the same bracket - unless ive misinterpreted your point?

The banks aren't in the business of property - they are in the business of money. Property is just the vehicle by which they make money in this instance. If they are selling their property now, as opposed to say, in 2008, they are turning their property assets into cash, which means they don't believe the price for them will go much higher. In fact selling is a fairly drastic step; I would read that as indicating they believe their asset will in fact depreciate significantly in the near future. Or has commercial property stayed at circa 2000 prices while residential property has gone nuts?

Pa ElGrande

Nearly two-thirds of the SME sector feel that the almost decade-long property boom is just about over.

About 64 per cent of bosses polled in the Sunday Independent Business Owners Survey believe that the days of rampant price inflation that made the the Irish property market so lucrative are grinding to a halt. This view was countered by 30 per cent of respondents, who believe the boom will continue.

Property boom 'is over'
http://www.unison.ie/irish_independent/stories.php3?ca=35&si=1677819&issue_id=14569 [free registration required]

Looks like this thread is reflecting sentiment in the marketplace.

dochasach

faceman wrote:

commercial property and residential property cant be classed in the same bracket - unless ive misinterpreted your point?

Commercial and residential property markets aren't always in phase, but they are tied together. In Ireland right now both markets have similar characteristics:

• Residential property "values" are rising at a maddening pace while rents on the same property are rising slowly, stable or even falling in some markets.
• Commercial property "values" are rising rapidly but some commercial properties "to let" have sat empty for years
  

Just visit Ballsbridge sometime, one of the most valueable locations in all of Ireland (and home of AIB's leaseback property). You will find a sea of "to let" signs.

The same can be said for commercial property in other parts of Dublin. There are few (legal) businesses which can bring in enough cash to support what the owners think the property is worth. We're choking the gold-bearing goose. One of my favorites is this commercial property on daft.ie

According to the website, this property was entered into the website 3 days ago, but it has been up for lease for nearly a year with no takers.

http://irishpropertybubble.blogspot.com/

faceman

SimpleSam06 wrote:

The banks aren't in the business of property - they are in the business of money. Property is just the vehicle by which they make money in this instance. If they are selling their property now, as opposed to say, in 2008, they are turning their property assets into cash, which means they don't believe the price for them will go much higher. In fact selling is a fairly drastic step; I would read that as indicating they believe their asset will in fact depreciate significantly in the near future. Or has commercial property stayed at circa 2000 prices while residential property has gone nuts?

I still believe that there is no correlation between commercial and residential property prices.

i dont think its that cut and dry re your points tho. Converting the assets to cash could be to fund other investment opportunities of the bank. AIB are hardly goin to pull out of the mrket so why sell property now when it will only inevitably over a long term appreciate in value. there is no reason to believe its of benefit due to a downturn to sell the property. Irish business is on the up, more and more businesses open in ireland each year. However most businesses rent buildings as opposed to purchase which gives greater freedom to expand imho. Perhaps this is what prompted AIB to make the move? Dont know, but either way its not linked to residential.

Speaking of which, i read today that german consumer confidence/spending is at a much lower rate post world cup than forecast. As i predictated the world cup did not indicate a sudden long term spark in consumer confidence. This lull will hopefully help ease eurozone inflation and curb the need for rate rises...

SimpleSam06

faceman wrote:

I still believe that there is no correlation between commercial and residential property prices.

Believe what you like.

faceman wrote:

i dont think its that cut and dry re your points tho. Converting the assets to cash could be to fund other investment opportunities of the bank.

I amn't a bank executive, I don't claim to speak for the bank.

faceman wrote:

AIB are hardly goin to pull out of the mrket so why sell property now when it will only inevitably over a long term appreciate in value. there is no reason to believe its of benefit due to a downturn to sell the property.

Eppur si muove. Of course, some might ponder the possibility that they want to buy it back when its price is halved...

faceman wrote:

Speaking of which, i read today that german consumer confidence/spending is at a much lower rate post world cup than forecast. As i predictated the world cup did not indicate a sudden long term spark in consumer confidence. This lull will hopefully help ease eurozone inflation and curb the need for rate rises...

See now that might be a reasonable statement. Its important to remember though thats its the European Central Bank that sets the rates, not the German Central Bank. Its also important to remember that an enormous amount of this property bubble is founded on sentiment (slick marketing), not just lower inflation rates. The latest word I heard is that rates will be up .5% before the Christmas. We'll see.

Pa ElGrande

faceman wrote:

Speaking of which, i read today that german consumer confidence/spending is at a much lower rate post world cup than forecast. As i predictated the world cup did not indicate a sudden long term spark in consumer confidence. This lull will hopefully help ease eurozone inflation and curb the need for rate rises...

We are still on course for rate rises.....the ECB's main brief is to control inflation.

The August bulletin from the European Central Bank (ECB) repeatedly states, in typically verbose central-bank-speak, that ‘‘a progressive withdrawal of monetary accommodation will be warranted if the governing council’s assumptions and baseline scenario are confirmed’’.

In plain English, this means that, if the economic giants of Europe, France and Germany keep delivering strong growth, robust investment and potentially higher inflation, the ECB will again increase its interest rates - and mortgage repayments for Irish homeowners.

Following Germany’s lead of last week, France has just published figures that ‘‘confirm’’ the bank’s ‘‘scenario’’.

ECB keeps close watch on France’s steady growth
http://www.sbpost.ie/post/pages/p/story.aspx-qqqid=16700-qqqx=1.asp

The budget will get real interesting this year, especially if the the government is not seen to take a stand on inflation in the budget. Mr. Trichet of the ECB has already fired a warning shot accross the bows "The Irish authorities are aware of their capacity and influence in this respect and we are counting on them." Last time we had such a showdown, the government under Charlie McCreevy was forced to bring out the SSIA scheme to try control inflation. The news of a looming American recession will probably have a bigger impact on what happens next.

The housing bubble that recently popped was not a market-driven event. The artificial rise in housing prices and the pain associated with the now-evident dropping prices (foreclosures, mortgage problems, etc.) show us a major crisis that was created by the government. How? First see the cause of the housing markets artificial rise during the 2000-2005 period. What happened? Several key government-driven events occurred:

1. Money supply & credit (controlled by government) were expanded exponentially
2. Interest rates (controlled by government) were lowered drastically
3. Lending standards were lowered to allow almost anyone to get a mortgage
4. Bankruptcy laws were very lenient (made less lenient in October 2005)
5. Government-sponsored enterprises (GSEs) bought mortgages from banks

This combination of factors took a bull market in real estate and turned it into an overblown bubble that had to pop. The government runs the printing presses and it sets the interest rates. To increase home ownership, the “benevolent” hand of government lowered lending standards to the point that many people that had no business buying a property bought very easily. Banks had no problem giving John Q. Public a huge mortgage at low interest rates on over-priced property since they were not ultimately on the hook for the money. The banks could make their money at the closing (points, etc.) and immediately sell the mortgage to GSEs such as the Federal National Mortgage Association (FNMA) and be rid of the risk of carrying these vulnerable, sub-prime loans. FNMA bought mortgages with a total worth in excess of $2 trillion in the past six years. All these factors contributed to a huge housing bubble with hidden yet unavoidable problems that are now coming to the surface.

The Mother of all Economic Problems
http://www.financialsense.com/fsu/editorials/2006/0828.html

The American's seem to have turned on a dime and gone all bearish on the property market in the past week. What happens to the dollar will be of most interest to the ECB, and indeed is one that is excercising Ulster banks chief economists' grey matter.

Again, it is not specific, but the dollar’s precarious position must be one of the more obvious ones. A dollar collapse would have a detrimental impact on growth throughout Europe and would exacerbate our already-poor competitiveness situation. Yet we rarely read about this in the media and nobody factors it into their central forecast scenario.

House-price doomsayers are still getting it all wrong
3 August 2006 By Pat McArdle
http://www.sbpost.ie/post/pages/p/story.aspx-qqqid=16355-qqqx=1.asp

Sizzler

EDITED

calm down sizzler. make your arguments in a sensible fashion please

D'Peoples Voice

Pa ElGrande wrote:

Several key government-driven events occurred:

1. Money supply & credit (controlled by government) were expanded exponentially
2. Interest rates (controlled by government) were lowered drastically
3. Lending standards were lowered to allow almost anyone to get a mortgage
4. Bankruptcy laws were very lenient (made less lenient in October 2005)
5. Government-sponsored enterprises (GSEs) bought mortgages from banks

Money supply & credit is not controlled by government but by the Central Bank, whom are INDEPENDENT of the government since the 1920s if memory serves me correctly. Since Jan 1st, the Irish Central Bank ceded control of this to the ECB.

Interest rates are not controlled by the government but by the ECB

Lending standards were lowered to allow almost anyone to get a mortgage- these are controlled by the Irish Central Bank not government

Bankruptcy laws were very lenient (made less lenient in October 2005) - arguably by Government

Government-sponsored enterprises (GSEs) bought mortgages from banks - someone else would regardless

what the irish Government is culpable for is

reducing capital gains tax on investment properties

allowing interest relief for property investors

introducing section 23 etc (Urban/rural reliefs) for certain investment properties

reducing direct taxation rates/ run inflationary fiscal budgets at the same time the Irish central bank was running inflationary monetary policies(lowering interest rates to match Europe), which meant that mortgages were extremely CHEAP for investors

being very slow to introduce laws to stop gazzumping

to name but a few of their mistakes!

conor_mc

faceman wrote:

I still believe that there is no correlation between commercial and residential property prices.

Care to speculate as to why agricultural land prices have sky-rocketed despite the free-falling number of farmers in the country and the shrinking of the agricultural sector?

Surely the land produces the same amount of food that it did last year, technical advances notwithstanding?

Could it be an overflow of speculation from the residential market?

Do you reckon the same could happen in the commercial sector?

SimpleSam06

Sizzler wrote:

More like your posts are adding fuel to the fire, as I said before your antics of CONSTANTLY posting the same socio-economic arguments here week in week out are becoming a self fulfilling prophecy. You have posted more poxy graphs on this thread in the last 3 months than a leaving cert economics book :eek:

Yes sizzler, Pa is single handedly bringing down the property market. Be sure and send him an invoice for the difference when your investment properties collapse. Or, alternately, you could find a few articles and graphs to support your own point of view, and actually add something to the discussion besides personal abuse.

faceman

Ah gents, no need to get personal! Sure we're all goin to heaven lads yayyy!

Excellent article as post by Pa.
House-price doomsayers are still getting it all wrong
3 August 2006 By Pat McArdle
http://www.sbpost.ie/post/pages/p/st...355-qqqx=1.asp

As for SimpleSam and Conor_mc, i reiterate my points with total respect to you dudes. None of your arguments tie residential and commercial property together. its all textbook answers.

Mortgages and interest rates they have in common yes, but the customer base is totally different! I cant speak for outside dublin as im dublin based but it has been known for years (well before any talk of a residential downturn) that commercial property was hard to shift. Commercial property rents in dublin are very low and have been for years. (ive seen approx 500 sq ft offices in dublin 2 go for a measly sum of €1200 per month rent only a few years back.)

SimpleSam06

faceman wrote:

Mortgages and interest rates they have in common yes, but the customer base is totally different! I cant speak for outside dublin as im dublin based but it has been known for years (well before any talk of a residential downturn) that commercial property was hard to shift. Commercial property rents in dublin are very low and have been for years. (ive seen approx 500 sq ft offices in dublin 2 go for a measly sum of €1200 per month rent only a few years back.)

Interesting article in the Times seems to feel differently...

Not only is there likely to be an over supply of apartments in some areas of Dublin, but some investors are now selling off their rental properties, reckoning that they have seen the best of the buoyant market. Other investors are planning to consolidate their portfolios by selling all their bits and pieces to buy one decent investment. Top of the wish list at the moment will be one of the AIB or Bank of Ireland branches which are about to hit the market at prices generally between €5 million and €9 million. Imagine the cachet of owning your local branch? No trouble in raising a loan for your daughter's new car after that. The banks are hoping to capitalise on the runaway commercial investment market, so expect a feeding frenzy over the coming months. The more cynical among us wonder why, if the branches are such good buys, that the banks have chosen to offload them at this stage. Remember Eircom.

faceman

SimpleSam06 wrote:

Interesting article in the Times seems to feel differently...

well one thing is for sure, its all tosh what anyone says. Cos with the exception of some minute optimist economists, no one has got it right - including IMF, World Bank and The Economist magazine.

The amounts that the banks are selling those branches for is for the top end of the investor market and at that its still a long term investment, no different than residential property. Given immigration is as high as it is, we'll never be short of tenants or FTB's.

Anyway i think boards.ie should ban all further debate on property - its get us nowhere! whos with me on this?

whizzbang

faceman wrote:

Anyway i think boards.ie should ban all further debate on property - its get us nowhere! whos with me on this?

nobody is making you read this thread or even this part of boards!

faceman

whizzbang wrote:

nobody is making you read this thread or even this part of boards!

oh good Lord! i wasnt being serious... :rolleyes:

whizzbang

faceman wrote:

oh good Lord! i wasnt being serious... :rolleyes:

ah ok, it read like a few other serious posts I've seen!

faceman

whizzbang wrote:

ah ok, it read like a few other serious posts I've seen!

true true!

how many of the pessimists on this thread own their own property and if u do, are you jumping ship?

whizzbang

faceman wrote:

true true!

how many of the pessimists on this thread own their own property and if u do, are you jumping ship?

Nope, I'm happily renting somewhere I could not afford to buy! 35 year mortgage would be twice the rent!

I'm waiting until after the crash (and the dead cat bounce)

Shane™

faceman wrote:

how many of the pessimists on this thread own their own property and if u do, are you jumping ship?

I don't think selling your home would be a good idea, selling second and third properties might be, do you have any of these?

I was trying to buy in Dublin at the start of the year but investors kept outbidding me, so I quit feeling a crash was obvious – the property market is very different, lots more houses to choose from as far as I can see . . .