Housing bubble starting to pop?

faceman

Link from today's Indo.

http://www.unison.ie/irish_independent/stories.php3?ca=303&si=1687849&issue_id=14640

Bare in mind its the same paper that splashed this as a headline:
http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1688017&issue_id=14640

We all know what the IMF predications have been over the past 5 years and we're still waiting.... The Indo didnt happen to mention that.

Did they clear up their misquote from the article the other day where they said over 200,000 people had posted to a thread on AAM??? Fools.

Lots have ppl have pointed out property that has come down in value but as many have pointed out it was overvalued in the first place.

I think its fair to say its dangerous to generalise when it comes to property though.

Overall if the property market which has had double digits growth up to now drops to growth rates of of less than 4%, does that constitute a crash? Discuss.

Oh yeah i cant remember who brought up the topic of bankruptcy in ireland but to confirm, there were 14 bankruptcys in ireland in 2005. I cud tell you why there wasnt more but that would be a secret! ;-) (Well its not really if you want to know i will tell u!)

And as for yer man above who said that interest rates would go up for the next 3 years and that we are all are forgetting that...

http://www.businessworld.ie/livenews.htm?a=1516072

Today i had a scare and my life almost came to an end. I look back on this thread at utter disgust. Greed, those wishing economic doom, aggressive posts, and downright silly posts. life is too short people.

faceman

faceman wrote:

Oh yeah i cant remember who brought up the topic of bankruptcy in ireland but to confirm, there were 14 bankruptcys in ireland in 2005. I cud tell you why there wasnt more but that would be a secret! ;-) (Well its not really if you want to know i will tell u!)

interesting only 14!
do tell!

SimpleSam06

K_user wrote:

My point has simply been that we can’t stop that growth, we have to live with it.

Yes we're all just little people and have to suck up the decisions of the big boys. Sorry, but that hasn't been true since the removal of the monarchy.

K_user wrote:

Spot the difference?

Yes, one has been photoshopped to adjust for brightness, contrast, and higher hue, the other hasn't. The only other differences you could sort out with a lawnmower. Oh and speaking of which, the grimy looking photo one has a bigger garden.

K_user wrote:

By-the-by, Australia is currently a buyers market, prices are either at a standstill or going down. The last time they did that was in ’87. But that didn’t last back then and it won’t last now. It’s the same here.

Which is in direct opposition to what you said earlier. Direct. "First of all house prices are not toppling in Australia. I just had a long chat with an Australian and he laughed at the idea."

K_user wrote:

The market here is Ireland may stagnate. People may loose their homes, or investment properties. But house prices will never rock bottom out.

Heheheh.

K_user wrote:

Sure that might be the best time to buy but banks, having been bitten, tend to be more careful with giving money out. That makes getting a mortgage more difficult and therefore harder to “capitalise” on the lower prices. Just something to think about…

The upshot of which is that you own more of your home starting out than otherwise. You keep changing your story, mixing generalities with truisms with bad advice and flat-out lies. Whats your interest in the housing market, for a bit of full disclosure? Not that it matters, as far as I'm concerned you have lost all credibilty here...

SimpleSam06

faceman wrote:

Today i had a scare and my life almost came to an end.

Jaysus. Just how exposed are you?

chump

faceman wrote:

Today i had a scare and my life almost came to an end. I look back on this thread at utter disgust. Greed, those wishing economic doom, aggressive posts, and downright silly posts. life is too short people.

Greed? Hah. Get a grip. Do you not see the danger of continually rising prices?

And if you do, can you see any logically way that prices will level off?

If prices stop rising, the canny investors will bail. Add on interest rate hikes, job losses etcetc and see where it leads us - the only instances of people here acting 'aggressive' or stamping down their point is to underline the shambles of a situation we're in as a country (and of course respond in disappointment to another ridiculous post by you).

Questions.
What do you see happening to prices?
If prices level off, what do you see the short-term 'flipper' and other poorly funded go-geter do with the property?
What are interest rates doing to streched investors and FTB's? Are they feeling the stretch? (if they are, what are new purchasers[who have to buy at even greater inflated prices?)
If supply falls to match lower demand what will happen to our economy? Are we somewhat reliant on the construction sector?

Sorry, this is just another silly post.

Pa ElGrande

faceman wrote:

We all know what the IMF predications have been over the past 5 years and we're still waiting.... The Indo didnt happen to mention that.

True, The IMF has been warning about this for a while, its like saying if you drive a Range Rover at 120KM/h into a 90 degree turn you are likely to crash. Its obvious to an external observer what's likely to happen, but when the car occupants are high on cheap credit they feel protected by the vehicles size, despite the impending reinforcement of the laws of physics.

faceman wrote:

Did they clear up their misquote from the article the other day where they said over 200,000 people had posted to a thread on AAM??? Fools.

Whats more, they were also noticed quoting directly from the AAM thread without attributing their sources in an earlier article.

faceman wrote:

Lots have ppl have pointed out property that has come down in value but as many have pointed out it was overvalued in the first place.

I think its fair to say its dangerous to generalise when it comes to property though.

Agreed.

faceman wrote:

Overall if the property market which has had double digits growth up to now drops to growth rates of of less than 4%, does that constitute a crash? Discuss.

This is an element of the scenario painted by the economists for a soft landing to happen, however this reduction alone would trigger a decrease in construction output, leading to a decrease in the level of bank lending, leading to a rise in unemployment among displaced construction workers and bank staff and the same time the deflation of the money supply in the economy will lead to a decrease in retail activity and more unemployment, so starting a downward cycle that will not stop until the excess of the boom has been normalised. As the same time government revenue will decrease and a budget deficit open up, leading to cutbacks in public services and increased taxation.
The knckon effects on house price inflation have already been discussed.

faceman wrote:

Oh yeah i cant remember who brought up the topic of bankruptcy in ireland but to confirm, there were 14 bankruptcys in ireland in 2005. I cud tell you why there wasnt more but that would be a secret! ;-) (Well its not really if you want to know i will tell u!)

That was me, the banks have an increasing number of non performing loans on their books, which they are not publicising. However the signs of debt stress are starting to become visible, especially among people on lower income or who have lost employment. How they are handling these situations: they evict the mortgage holder for 24 hours and take ownership of the property, they freeze the mortgage (while gathering interest) and rent the property back to the person at friendly rate, until the person can get back on his/her feet and start paying the new higher rate.

Credit Unions' bad debts causing some concern
http://www.rte.ie/business/2006/0914/mibusiness.html

More people in North Cork falling victim to poverty trap
http://www.unison.ie/corkman/stories.php3?ca=34&si=1688320&issue_id=14644 [free registration required]

A rising trend in interest rates will hurt Irish borrowers further . Roughly 40 per cent of borrowers reckon their financial position would deteriorate substantially if interest rates rose by 1 per cent. As many as 80,000 borowers would be hit by another half per cent rise in interest rates. O these we reckon some 50,000 borrowers who already expressing significant concerns about both household and non-household debt will feel a considerable pinch.

‘In too Deep?’ IIB Bank/ESRI launch study on Irish personal borrowing.
http://www.esri.ie/pdf/IIB%20ESRI%20Debt%20Survey%202006%20June%20PR.pdf

faceman wrote:

And as for yer man above who said that interest rates would go up for the next 3 years and that we are all are forgetting that...

http://www.businessworld.ie/livenews.htm?a=1516072

We do know the ECB's primary brief is to maintain low inflation by using interest rate policy to affect price stabilty, until that is achieved interest rates will keep rising. We are getting the boiled frog treatment, which is creating a false sense of security among those who should be re-evaluating their position.

* One other factor that has not been taken into acount is a decline in the value of the dollar. Something that Pat McArdle referred to . . . ."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."

Comment: House-price doomsayers are still getting it all wrong
http://archives.tcm.ie/businesspost/2006/08/13/story16355.asp

or the bursting of credit derivatives

Liars' loans
http://www.dailyreckoning.co.uk/article/150920063.html

faceman wrote:

Today i had a scare and my life almost came to an end. I look back on this thread at utter disgust. Greed, those wishing economic doom, aggressive posts, and downright silly posts. life is too short people.

You had a good day today, you live to see another day. Hopefully you were not hurt or anything serious. This is just thread where we express our opinions behind the safety of a computer screen, given today's focus on the housing market in Irish society, its bound to attract a highly charged emotional response from people who feel their beliefs are being undermined by contrary opinions to theirs. This thread would have died long ago if there was consensus.

shaptakster

I guess the way it will be from now on is that not everyone will be able to afford to buy a house. Some people will have to rent forever. Oh wait that how its always been.

My daughter and son in law are coming back to Ireland and looking at buying a 2 bed semi in Lucan.
We've been tracking the prices there since last year and they are still going up at an alarming rate.
I've yet to see house prices falling anywhere, and i've been watching nearly 10 years. I've seen some outrageous asking prices fall alright, but thats just asking prices. Nothing to do with real house prices at all.

I guess they wont go down if at all for a while yet either.
Its just a normal market where demand is high. If demand ever decreases then something might happen. But there is no sign of that on the horizon at all.
For every story predicting doom and gloom theres an opposite rosey story.
Property is worth what people are willing to pay for it - and there are plenty willing to pay todays prices.

SkepticOne

shaptakster wrote:

Property is worth what people are willing to pay for it - and there are plenty willing to pay todays prices.

True, but that is only one way of looking at worth.

faceman

Pa ElGrande wrote:

That was me, the banks have an increasing number of non performing loans on their books, which they are not publicising. However the signs of debt stress are starting to become visible, especially among people on lower income or who have lost employment. How they are handling these situations: they evict the mortgage holder for 24 hours and take ownership of the property, they freeze the mortgage (while gathering interest) and rent the property back to the person at friendly rate, until the person can get back on his/her feet and start paying the new higher rate.

Im not so sure where you got this info from. As im very familiar with debt issues in ireland, courts, bad debts and other legal issues i havent come across this happening before.

However the real reason that there were only 14 bankruptcies in ireland last year was due to how difficult it is in ireland to declare someone bankrupt. However i would encourage anyone who's interested to read the gazettes regarding registered judgements in ireland. makes for very interesting reading.

Pa ElGrande wrote:

Credit Unions' bad debts causing some concern
http://www.rte.ie/business/2006/0914/mibusiness.html

Im afraid that the reason that alot of credit unions are having high instances of bad debt is actually very little to do with bad customers and more to do with business practice. I cant really go into it in detail as im covering myself against legal issues! but i can say the banks are not having the same problem.

havent time to repond to all ur points dude, but will come back again!

Pa ElGrande

• 32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000
• 43% of first-time home buyers in 2005 put no money down.
• 15.2% of 2005 home buyers owe at least 10% more than their home is worth.
• 10% of all home owners have no equity in their homes
• $2.7 trillion in loans will adjust to higher rates in 2006 and 2007.
• 70% of borrowers who took out pay-option ARMS in the past year have loan balances larger than their initial loan.
• Homeowners face higher payments as mortgages are reset. Generally, monthly payments rise between $200 and $500 depending on the size of the mortgage.
• According to Reality Trac, August foreclosures were up 23% over July and 53% over a year ago.
• The number of homes for sale is at record highs, and inventories are 59% higher than a year earlier.
• New home sales are down 22% and existing home sales down 11%.
• The NASB housing market index has recorded an all-time decline.
• The housing affordability index is at a 15-year low.
• The house price-to-income (rents) ratio is off the charts. According to HSBC, in 18 states accounting for over 40% of national home values, the price-to-income ratio is 3.6 standard deviations above the mean.
• The OFHEO index of house prices deflated by the consumption price deflator has soared to a record high of 350 from 250 in 2001. From 1976 to 1996 it never was above 220.
• According to the NAR the year-to year prices of existing homes are now flat. A short time ago they were rising at a yearly rate of 16%.
• Nationally, home prices have not declined on a year-to-year basis since 1933. Recently, however, prices have been dropping in the North East, West and Mid-West.
• Sales incentives are now estimated at 3% to 7% of selling prices.

more >>>

USA: The Hard Landing For Housing is Already Here
http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&category=Market%20Commentary&newsletterid=1263&menugroup=Home

Shanghai, Sydney, Florida, one by one they are popping, who's next?

dochasach

I've long wondered when Irish property would reach valuations similar to Japan during its peak bubble years, when we could sell up the entire country and buy the United States. It looks like we don't have far to go.

If we could sell Ireland at the per/acre cost of parts of Dublin, we could raise enough cash to buy the United States and more! For details check out http://irishpropertybubble.blogspot.com/2006/09/lets-sell-up-entire-country.html

coolhandluke

Hailee Fat Mushroom wrote:

Even supposing the decision is made to accept Bulgarian and Romanian workers without control, what will these people be doing?

What ever we may think this is totally outside our control,if the UK decides to keep them out(which is looking very likely) then so will we because of our common travel area arangements.The UK decided to let eastern european workers in on accession so we had to follow suit,however they totally misjudged the no's that would arrive and this is now a huge issue in the UK.

SimpleSam06

coolhandluke wrote:

then so will we because of our common travel area arangements.

I'm a little confused. What do you mean by this?

bounty

well, we have to follow uk, otherwise all the guys could just use ireland as a backdoor into uk, bypassing their decision

coolhandluke: i havent looked into this, why is looking very likely?


very interesting interview about the usa house price bubble: http://www.europac.net/media/Schiff-Bloomberg-9-8-06_lg.wmv
a bit scary, he says usa is heading for years of recession :eek:

this graph is good:



and my prediction graph



these sites are good for this topic:

http://www.housepricecrash.co.uk/
http://globalhousepricecrash.com/

Pa ElGrande

bounty wrote:

very interesting interview about the usa house price bubble: http://www.europac.net/media/Schiff-Bloomberg-9-8-06_lg.wmv
a bit scary, he says usa is heading for years of recession :eek:

Greenspan and the privately-owned Fed played a major role in putting us in this mess by rubber-stamping the new system of precarious loans (no down payments, interest-only loans, ARMs) and perpetuating their “cheap money” policies. Greenspan admitted this a few months ago when he said that current housing increases were “unsustainable” and would have corrected long ago if not for the “the dramatic increase in the prevalence of interest-only loans . . . and more exotic forms of adjustable rate mortgages that enable marginally-qualified, highly leveraged borrowers to purchase homes at inflated prices.”

Greenspan’s circuitous comments are tantamount to an admission of guilt. The fallout from the Fed’s policies are bound to be widespread and devastating. The country has been buoyed along on $10 trillion of borrowed money which has created the unfortunate sense of prosperity, which is not reflected in the general economy. The increase in housing prices has not come from wages (which have actually decreased under Bush) or from demand (inventory is now at a 10-year high). It has merely been the availability of low interest loans and the promise of getting rich quick. As the market cools, millions of Americans will either face foreclosure or be shackled to a mortgage that is higher than the dwindling value of their homes. It is a grim picture of 21st century debt-slavery.

more...

Day of reckoning; America’s economic meltdown
By Mike Whitney
http://onlinejournal.com/artman/publish/article_1183.shtml

Its really surprising how fast the housing boom is unravelling in the USA, even more surprising is that the financial regulators and bankers now admit they do not understand the level of exposure they have in credit derivatives. Worse there is little regulation in this area, that has been growing substantially since 2001.

Securitisation
Dublin has built up a reputation as a centre of excellence for securitisation and many of the world's top banks, investment banks and law firms now use the jurisdiction on a regular basis. It is seen as an attractive location because securitisation transactions are increasingly driven by investors, who tend to favour an onshore EU jurisdiction.

http://www.ifsconline.ie/about2.html

This is a much more more entertaining debate - http://www.europac.net/Schiff-CNBC-8-28-06_lg.asp

Pa ElGrande

shaptakster wrote:

I guess the way it will be from now on is that not everyone will be able to afford to buy a house. Some people will have to rent forever. Oh wait that how its always been.

Exactly, which is why we urgently need a properly requlated market with long increased security of tenure for tenants. I am actually surpised that the buy-to let owners are not pushing for this since it would make for a more stable long term return on their investment.

shaptakster wrote:

My daughter and son in law are coming back to Ireland and looking at buying a 2 bed semi in Lucan.

I don't know their personal circumstances or long term goals, but if they intend to settle and have children will a cramped 2 bed semi in Lucan allow them an acceptable quality of life? Certainly if I was going to pay top € for a place, I would be asking myself that question.

shaptakster wrote:

We've been tracking the prices there since last year and they are still going up at an alarming rate.
I've yet to see house prices falling anywhere, and i've been watching nearly 10 years. I've seen some outrageous asking prices fall alright, but thats just asking prices. Nothing to do with real house prices at all.
I guess they wont go down if at all for a while yet either.
Its just a normal market where demand is high. If demand ever decreases then something might happen. But there is no sign of that on the horizon at all.

What we are seeing is abnormal growth (averaging 14.6%) per annum in the past ten years, logically this rate of growth cannot continue, part of this is accountable since property in the early 90's was dramatically undervalued due to the economic recession of the '80's, however in my opinion after 2001 it should have levelled and risen in roughly in line with CPI, thats not what happened, interest rates dropped to record lows, lending criteria was relaxed, income taxation lowered and low prices of goods and we persuaded ourselves these conditions will last forever, our incomes grew and we pushed the amount we could borrow to the absolute limit, this growth has also attracted the specuvestor, who with their higher incomes can outbid the first time buyer easily, thus driving prices higher still and focing couples out beyond the suburbs where there are limited services and long commute times to work.

shaptakster wrote:

For every story predicting doom and gloom theres an opposite rosey story.

That rosey story is of a generation who bought their houses on a single income, under very strict lending criteria, high interest rates and had the cost of the servicing that debt eroded by high wage inflation, reduced taxation and low interest rates. They bought their houses at a time when houses were for nesting not investing. They have good pensions, medical insurance cover and property whose price has hyper-inflated since they bought it. Good for them I say and i hope to be as fortunate as them when I get to retirement.

Spare a thought for the young couples who carry this burden today, they are going to have the situation I outlined reversed on them.

shaptakster wrote:

Property is worth what people are willing to pay for it - and there are plenty willing to pay todays prices.

This price is determined by the amount people are willing to borrow at the expense of their own future financial security.
"In Ireland, the ratio of private credit to GDP has reached 190%, the world's highest. "
http://www.finfacts.com/irelandbusinessnews/publish/article_10007281.shtml

Sponge Bob

Sunday Tribune (News Section)finally calls the slump in Dublin.

http://www.tribune.ie/article.tvt?_scope=Tribune/News/Comment&id=51553&SUBCAT=Tribune/News

(reg needed) . One quote only

a Rude Awakening awaits many sellers

That comment came from Austin Hughes , a well known talker upper of the market. Lots of the usual suspects from various estate agents yabber on about a soft landing . That would be the best they could hope for ....if it wasn't too late already.

I note that everybody is staying well away from this statistic below. The 16% vacancy rate, the highest ever recorded in Ireland .

Sizzler

SB, can you not just copy and poste the article?:)

jesus_thats_gre

bounty wrote:

very interesting interview about the usa house price bubble: http://www.europac.net/media/Schiff-Bloomberg-9-8-06_lg.wmv
a bit scary, he says usa is heading for years of recession :eek:

Eek indeed!!

faceman

IMHO the oversupply of houses for sale in dublin (lol what does oversupply mean?!) has a sense of panic about it. Those houses will sell, but it will take longer than the record few weeks we have experienced in the past years, or in fact this year alone.

I wudnt be worried but if i was a buyer i wud pounce on opportunity to be in a better negotiating position.

pod

The one-bedroom unit in Cabramatta sold at auction last week for $95,000. In November 2003 it cost $262,500.

http://www.smh.com.au/news/national/bought-for-262500-in-03-sold-for-95000-last-week/2006/09/16/1158334735688.html

I wonder when this will start happening here...

Pa ElGrande

pod wrote:

http://www.smh.com.au/news/national/bought-for-262500-in-03-sold-for-95000-last-week/2006/09/16/1158334735688.html

I wonder when this will start happening here...

A lot of those houses in Australia that are falling are far from public transport or services, so don't expect those dramatic drops to happen here unless you are buying at the outskirts or beyond of communterland.

When it will happen? That depends on whether you believe armchair economists (see earlier in the thread), or professional economists who earn a living doing this as you can see from their opinions in January 2006 they got it spectacularly wrong in that they underestimated the growth.

All economists are agreed that house prices will continue to rise this year. However forecasts for price growth vary from 4% to 12% depending on market sector. On the most optimistic side one economist believes that the strongest growth of over 10% will be seen in the Dublin second hand market for larger homes. Another expects new homes to show national average increases of only 4%.

http://www.unison.ie/irish_independent/index.php3?ca=51&issue_id=13534 [free registration required]

However the rate of growth so far this year has still been higher than expected with an increase in prices nationally in the first seven months of the year of 9.1%, compared to 3.3% for the same period last year (2005).

http://www.finfacts.com/biz10/irelandhouseprices.htm

It's understandable why they got it wrong, we are in a bubble, and trying to rationalise people's behaviour in such an environment is a fools errand. But one thing is certain, as sentiment turns, it does so on a dime and nobody knows how low prices will go or how quickly.

Sponge Bob

Sizzler wrote:

SB, can you not just copy and poste the article?:)

That Tribune Article Today, register for the of it rest willya

http://www.tribune.ie/article.tvt?&_scope=Tribune/News/Home%20News&id=51468&SUBCAT=Tribune/News&SUBCATNAME=News

AN over-supply of second-hand houses, along with two expected interest-rate increases by December, is fuelling speculation about a cooling of prices in Dublin's property market.IIB Bank chief economist Austin Hughes this weekend warned that a "rude awakening" awaits many sellers putting their property on the market this autumn.
"While there is no sense that prices will drop, some sellers will have to adjust their expectations of price. There is no way that the price inflation of spring will be matched, " Hughes told the Sunday Tribune.
The number of houses offered for sale by Dublin estate agents has increased by 25% compared to figures for the equivalent period last September, according to the managing director of one leading agency. These extra properties, added to the glut of withdrawals at auction over the summer, has resulted in an over-supply of second-hand homes in Dublin.

Catney

SimpleSam06 wrote:

Feeling a little exposed, are we? 30,000 salary, minus what 8k in taxes, 22k thats all yours. Assuming you spend 10k per annum on the mortgage, that leaves you with 12k, or about 200 quid a week to spend on food, fuel, insurance, and so on. Oh and lets not forget interest on the mortgage, on top of that, with rising interest rates.

Which means, essentially, that a person earning 30k per annum has zero chance of paying that off over 30 years. And honestly, I don't know a great many people earning 30k or more in any case. And 300k is no kind of house.

Boom.

in most cases someone on 30k a year couldnt get a mortgage. ie loan amount should be in the region of EUR 120,000 (4*salary) so the above doesnt ring true.

SimpleSam06

Catney wrote:

in most cases someone on 30k a year couldnt get a mortgage. ie loan amount should be in the region of EUR 120,000 (4*salary) so the above doesnt ring true.

Well its closer to 5x salary, so a couple each in full time employment earning 30k per annum could qualify for a loan of 300k. All of one salary is eaten up by repayments, plus a portion of the other salary.

But lets just say for the sake of argument that 20k of the other salary is left over per annum. Thats roughly €400 per week, or €200 per week each for food, fuel, insurance, heating, and electricity. Currently on social welfare, you can draw down around €180 a week, just to put that in perspective. And you can forget childcare, education for the children, and health requirements while mammy and daddy are out working in their jobs which hopefully they aren't made redundant from at any point.

And lets not forget rising interest rates, which may make holding on to the house unfeasable in the first place, which in a falling market means they lose the house and still owe the bank tens or hundreds of thousands of euros.

Doesn't that seem a little unreasonable to you?

Pa ElGrande

[interviewer]
It's to house prices that we're turning next and we've got Austin Hughes, Chief economist of IIB Bank on the line.
Austin the stories of the couurse of the weekend were suggesting that,,all sorts of different factors are now coming clearly into view and that we're likely to see a fairly rapid cooling of house price growth.

[Austin Hughes]
Yeah. There were some scare stories over the weekend. There were actually some positive stories in the news headline but they didn't get quite as much airtime.
I think what you've seen over the last while is a transition, the economy was growing very, very quickly towards the tail end of last year and house prices took off spectacularly. Last September house prices were rising at about 6% annual rate and over the Spring/Summer they started to rise at maybe 15 even 20% in some areas, so that really wasn't sustainable, the key issue is, what sort of slowdown or cooling we're going to have. You mentioned interest rates and certainly during the business supplement you were talking about the likelihood of further interest rate increases, those will dent the market a little bit over the next while, and, they will probably bring about a calmer market in the Autumn. I think a lot of the time that people were talking about a nasty ending for the market, they were actually talking about some of the property supplements that appeared last week because those supplements were suggesting that there were any number of houses on offer, and estate agents are saying that perhaps house supply is up 20-25% from earlier in the year. So that will calm markets. I think the most interesting element is that, you know, these are all sort of fundamental things that it was going too fast and it has to calm down, I think the most interesting element is that probably some sellers got carried away, and that's where it's going to get very interesting over the next couple of months, because seeing that the price of their house maybe rise €30-50 grand over the early part of the year, they began to think, well maybe I could add on another €30 grand, some of the expectations of what property is worth may have to be adjusted a little bit. That doesn't mean the property market is going to collapse, it just means that we probably have a calmer market over the Autumn.

[interviewer]
Is one of the, one of the other things that also happes when we begin to hear these stories about cooling is that, am, people think, "Ah if I've been holding off to buy, and if there's a cooling then now is the time to get in", which in turn tends to have an immediate impact in helping to reingites.

[AH]
Well, It certainly prevents the market from calming too much, if you think about all this extra supply and all the glossy sort of property supplements, we've seen over the last couple of days, in most instances that was because people are jumping out of the market, you know, they are selling up and moving abroad, going to live in tents or wherever, most of the time it is people either trading up or trading down, its a natural market, and you will find people coming in because last week, we saw jobs numbers from the CSO that suggest we are creating 90,000 extra jobs a year, there's about 90,000 extra people coming into the economy every year. So in those circumstances, the market should remain healthy, but it should be a little bit calmer. Good properties will remain very strong, in very strong demand and poorer properties, sellers may have to adjust their expectations a little bit more. So its a very good thing for the property market and the broader economy.

[interviewer]
Now, when we're saying that it might cool, its not that house price growth is going to stop, its that it might be between, say over the next 12 months, that it could be of the order between 3-6% as opposed to the double digit growth that we've seen in the last 12 months.

[AH]
Its exactly that sort of element. Ah, the Sunday Tribune which I think ran a lot of the sort of scare stories at the weekend was saying that they conducted a poll of, that ended up with something that ended up with something like 72% of people saying they expect house prices to rise. The ESRI/AIB bank did a survey about a month ago, where 89% of people expected prices to rise, so what you're going to see is house prices no longer rising around 15-20%, where people add on €10 grand for every month in terms of trying to get a higher price, but prices rising at a more sustainable rate. The economy is going to grow in money terms by maybe 7-10% in the next couple of years on average and you'd expect house prices to rise at a broader, broadly similar rate so you're going to see house prices continue to rise, but just not as madly as they have been over the last while.

[interviewer]
Is that consumer sentiment also one of most important things in the market, the fact that between 72% and 89% of people believe that house prices will rise. That means that effectively they're going to help those prices to rise.

[AH]
I think that is a very important element, now obviously consumer sentiment can be swung by things and the interest rate rises that we're likely to see in October and again probably in December, possibly through next year, will be issues there, but, consumer sentiment is still very strong. People see that there is ongoing demand for houses, they reckon that their jobs are relatively secure and property remains a good long term investment, as well as a basic need. So those mean that the housing market should stay fairly solid, where you do get a bit of a change however, is that some of the silly prices, that we have seen over the last couple of months maybe start to calm down and that's a very good thing because if that had continued then there was risk of a bubble, maybe bursting in a couple of years. That isn't going to happen now.

[interviewer]
Alright Austin Hughes, Chief economist with IIB, always great to have you on the show, thanks for joining us this morning.

Newstalk 106 breakfast show
http://www.newstalk.ie/podcasts/library/br...st/bk180906.mp3 [20 minutes into podcast]

So its a calmer market (not a slowdown). We are have reached the zenith of this bubble, people paid silly prices for property (up 15-20%). Thats one of the classic symptoms of the mania, prices rise rapidly towards the end and everyone (89%) believes they will continue to rise higher and faster (€10,000-€30,000 per month).

Read Hyman Minsky's universal framework for understanding all bubbles, then read the above interview with Austin Hughes, he is describing the euphoria of stage 5, there have already been comments about the insiders getting out...stage 7 is not far off.

whizzbang

SimpleSam06 wrote:

Well its closer to 5x salary, so a couple each in full time employment earning 30k per annum could qualify for a loan of 300k. All of one salary is eaten up by repayments, plus a portion of the other salary.

Why is everything always quoted as a couple! don't ugly and unpopular people have a right to buy a place too?!

(general comment, not directed at you SS!)

hmmm

whizzbang wrote:

Why is everything always quoted as a couple! don't ugly and unpopular people have a right to buy a place too?!

It's classic "new paradigm" bubble economics. "These days", only couples buy, therefore you can forget the old 3.5 times salary and instead go with borrowing 5 times the combined salaries. We've seen the same thinking in all bubbles, e.g. during the tech boom the Internet meant that business had changed and P/E ratios meant nothing any more - until we found out they err did.

It'll just magnify the eventual fall in prices.

Pa ElGrande

It is unclear how exactly international investors will react to the renewed report about Ireland, given that Ireland doesn’t have a national currency to speculate against.

But you can bet your bottom dollar that the Fitch rating will raise a red flag with investors considering allocating assets in Ireland.

They may reach the conclusion that what will bring about the adjustment in Ireland is the impact of higher prices and costs on Irish competitiveness, which will eventually slow growth.

Already, inflation is running at 4.5 per cent, which is likely to have implications for Irish competitiveness.

In the absence of a currency to speculate against, it is possible that international investors will consider shorting Irish shares - that is, selling them with a view to buying them back cheaper later on. Bank shares will be seen as particularly vulnerable in this regard.

The Fitch report came just days before remarks from credit union regulator Brendan Logue to an Oireachtas committee, which also identified risks in the financial system. Logue said last week that evidence from the supervisory process showed that ‘‘underwriting skills are weak in some credit unions and [that] arrears and bad debt provisions are rising.”

This is the second time this year that the regulator has raised a red flag in relation to the bad debt issue in the credit union movement. Earlier this year, the regulator drew attention to a sharp increase in bad debts at Monaghan credit union.

more >>>

Warning signs in financial sector
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=THE%20INSIDER-qqqs=themarket-qqqs=computersinbusiness-qqqid=17310-qqqx=1.asp

Fitch estimated that bank credit to the private sector would increase to 190 per cent of GDP this year, one of the highest ratios of 100 countries surveyed.

GDP measure may not give the most an accurate indication of living standards for Ireland. GDP measures the total output produced by factors of production located in the Irish economy. Therefore it includes the substantial profits made by foreign multinationals, much of which is repatriated.
http://www.esri.ie/content.cfm?t=Irish%20Economy&mid=4

Given that Irelands GDP is skewed by the foreign owned multinationals 190% is a tad conservative and with only 14 bankruptcies last year, have we truly discovered economic nirvana?

Sizzler

What do people make of Mickey McDowell's tesco style price promise on stamp duty if they get in for the next election

I reckon it will just drop another few quid onto the price of property a la the stamp duty band changes last year :eek: