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Housing Bubble Bursting

  • 29-12-2006 12:21am
    #1
    Closed Accounts Posts: 111 ✭✭ mentalson


    by Morgan Kelly

    How the housing corner stones of our economy could go into a rapid freefall

    Demand exceeds supply? While it is not so long ago that property prices were soaring, global experience suggests they could crash by up to 50 per cent.

    Offering no evidence except wishful thinking, estate agents and politicians assure us that we have nothing to worry about: the Irish housing market can look forward to a soft landing.

    If, however, we look at what has happened to other small economies where sudden prosperity and easy credit drove house prices to absurd levels, we should be very worried indeed.

    If the experiences of economies similar to ours are anything to go by, we may be looking at large and prolonged falls in real house prices of the order of 40-50 per cent and a collapse of house-building activity.

    Two housing booms are especially sobering for being so similar to ours: Finland in the 1980s and The Netherlands in the 1970s.

    Finland boomed after oil was discovered off the coast in the mid-1980s. With low interest rates and loans available for the asking, house prices soared. Then, as the Soviet Union collapsed, unemployment rose and house prices started to fall, creating problems first for builders, then for homeowners, and finally for banks.

    The Finnish banking system effectively disintegrated under the weight of bad housing loans and had to be rescued, at huge expense, by the state. Unemployment rose from 5 to nearly 20 per cent. The real price of houses fell by more than 40 per cent.

    A Finnish contributor to an online discussion board captures the spirit of the times.

    "In 1991, a friend of mine offered about $120,000 (€91,464) on a lovely house that had cost $240,000 to build just three years previous. With over 20 per cent unemployment, it was not surprising that the owner and his wife had both lost their jobs and were about $12,000 behind in their mortgage payments.

    "Obviously, the owner refused my friend's offer, but the bank manager called back in just a few hours with a counter-offer: he'd accept the $120,000 if my friend also paid the delinquent $12,000 in mortgage payments.

    "That's it, the other family was left without a house and still owed the bank about $70,000."

    The Netherlands shows how house prices can collapse even when banks are big enough to absorb large losses. In the 1970s, thanks to the discovery of natural gas, the Dutch economy was the wonder of Europe.

    Once again, low interest rates and relaxed lending criteria led to a housing boom. Then, in 1979, the international recession bit, interest rates rose and prices tumbled. By 1985, the real price of houses had fallen by 50 per cent.

    There is an iron law of house prices. The more house prices rise relative to income and rents, the more they subsequently fall. To see the iron law in operation look at figure 1. It shows that for every industrialised economy between 1970 and 2000, how a rise in house prices relative to income is followed by a proportional fall. Economic theory predicts that house prices should be very volatile and prone to "rational frenzies" - and that is what the data show.

    But how about Ireland? Surely our house-price rise is simply due to our rising income and the shortage of houses in places where people want to live?

    Neither reason is valid: while incomes have risen, house prices have risen faster. Since 2000, house prices have risen 30 per cent more than income.

    Similarly, were there any shortage of housing we would see rents rising as fast as house prices.

    In fact, compared with income, rents have actually fallen since 2000. The importance of what has happened to rents cannot be over-emphasised. If the housing boom were due to rising incomes and more people forming households, rents would also have risen. The fact that rents have fallen shows conclusively that our housing boom is a bubble, pure and simple.

    But why can't we just have our soft landing, where prices stay fixed or rise slowly for a while?

    Definitely not: a soft landing is not so much unlikely as contradictory. Suppose that house prices really were expected to level off, then the owners of the tens of thousands of empty houses and apartments can expect no further capital gains and should cash in their investments.

    Why pay a mortgage on an empty apartment that has stopped rising in value? As speculators rush for the exit, prices will crash.

    Second, if prices stop rising, it makes no sense to buy a house. Compared with mortgages, rents are ridiculously low. For €2,000 a month you can pay a mortgage on something in a muddy field on the wrong side of Celbridge, without nearby shops or schools and a two-hour commute to Dublin.

    For the same amount you can rent a €1 million house in southeast Dublin, close to the Dart line and surrounded by good schools.

    Once people put off buying in favour of renting, prices will not stabilise, they will crash. Just as rising prices generate self-fulfilling expectations - you have to buy now before prices rise further, causing prices to rise - so falling prices generate their own momentum. Buying in a falling market is a guaranteed way to lose a fortune. Even if prices fall by only 5 per cent, a €500,000 house on which you paid 10 per cent in stamp duties and fees will leave you €75,000 poorer.

    It is a lot less nerve-wracking to sit things out and rent for a year or two and when everyone does that, prices fall further.

    How far are prices likely to fall when the bubble bursts? If we suppose, optimistically, that prices were more or less in equilibrium with income and rents around €2,000, then house prices are about 25 per cent overvalued now. Unfortunately, when house prices fall, they generally overshoot and end up undervalued.

    It is not implausible that prices could fall - relative to income - by 40-50 per cent.

    House prices can halve relative to income without huge falls in the selling price of houses. If the price of houses falls by 5 per cent each year, while consumer prices rise by 3 per cent and real incomes by 2 per cent, then after 5 years house prices will have fallen relative to income by 50 per cent.

    This is an average: some places will have larger falls, others smaller. After the last British housing bubble, when prices fell on average by 10 per cent, prices in East Anglia fell by 40 per cent.

    The ratio of prices to rents is a measure of the return to investing in housing. Rossa White has shown the ridiculous levels of prices compared with rents in different parts of Dublin (see his report at www.davydirect.ie). In Sandymount, annual rent is barely 1 per cent of purchase cost.

    This is a price/earning ratio above Google's and can only be justified if we believe that future incomes will rise forever at about 6 per cent a year. Is this possible?

    Well, if it is, in 25 years we can look forward to being almost three times as rich as the United States. Rossa White's estimates of rent-to-price ratios show that the middle of the market in Dublin is less seriously overvalued than the top and the bottom. International experience shows the worst houses in the worst places suffer the worst falls.

    We can expect the biggest falls in apartments as speculators try to sell before getting roasted alive and in dismal outlying towns with long commutes to Dublin and at the top of the market, where prices need to fall by perhaps two-thirds to bring them back into line with rents.

    House-price collapses affect the wider economy in three ways. First, households lose wealth and start to repay loans instead of spending. Second, banks reduce lending as they lose money on bad loans. While banks are reluctant to foreclose and try to reschedule instead of taking an immediate loss on a loan, borrowers with negative equity will walk.

    For many with 100 per cent mortgages on apartments that have fallen in value by €150,000 (the sort of falls that have occurred in Washington DC lately), it will make sense to leave the keys in the door and relocate to London for a while.

    The third, and potentially catastrophic, effect of a house-price fall is on building activity: more houses get built as prices rise and fewer as prices fall. As our exports have stalled since 2000, our economy has come to be entirely driven by house building.

    Between building new houses and selling existing ones, housing generates almost one-fifth of our national income.

    In effect, the economy is based on building houses for all the people that have got jobs building houses. Economists call this a multiplier-accelerator process and it is very unstable.

    To see how rapidly a building boom can evaporate, look at Arizona. A rising population led to a building boom that should sound familiar: people queuing overnight to buy houses in new developments; builders increasing prices by a few thousand a week; people paying a down payment of $5,000 on a house and selling it on for a $100,000 profit a few weeks later.

    A few months ago, however, rising interest rates brought it all to a halt. Despite incentives like free swimming pools and fancy kitchens, and even at prices below the cost of labour and materials, builders cannot sell, leading to vast empty developments.

    The parts of America that had the biggest housing boom are now experiencing falls in house prices of about 15 per cent. The US is now facing a possible recession as house building falls towards its usual bust level of about 4 per cent of national income, from a boom level of 6 per cent.

    In Ireland, if and when the fall occurs, it will be from about 18 per cent of national income. We could see a collapse of Government revenue and unemployment back above 15 per cent.

    We have spent the last five years learning to believe that exports and competitiveness do not matter, and that we can get rich by selling houses to each other. We are likely to spend a painful few years as we unlearn that lesson.

    Pilots define a soft landing as one that you can walk away from. Looking at the collapses in Finland and The Netherlands and the building bust in Arizona, Ireland could be heading for what they call CDIT: controlled descent into terrain. You are happily descending through cloud, thinking yourself at a safe altitude, until suddenly you smack into a hillside.

    Morgan Kelly is professor of economics at University College Dublin

    © 2006 The Irish Times


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Comments

  • Closed Accounts Posts: 1,623 dame


    Aaaagh! I'm sorry I read that, I'm off to bed for nightmares now! Thankfully we bought our house a few years ago so I suppose we could deal with it if the price falls back to what we paid for it then but still, aaagh!


  • Banned (with Prison Access) Posts: 8,486 miju


    mentalson wrote:
    We have spent the last five years learning to believe that exports and competitiveness do not matter, and that we can get rich by selling houses to each other. We are likely to spend a painful few years as we unlearn that lesson.

    this is gonna be a very harsh lesson for this country but one that is badly needed in order to get the economy operating properly again

    the writing has been on the wall for this for a considerable amount of time and the slip has now begun to turn to a slide. to be honest tough the essay by the professior above is just a summation of what alot of us bears have been saying (nice to have it condensed like that though)

    incidently anyone catch the permanent tsb/ ESRI report that was published . makes for very grim readon for property owners :(:(


  • Moderators, Entertainment Moderators Posts: 17,495 Mod ✭✭✭✭ ixoy


    Aren't similiar reports published each year now? I'm thinking of stepping into the property market next year but this annual fear-mongering makes me cautious again, during which prices inflate further.

    Is there any reason to think this will be the year that it happens over 2006?


  • Closed Accounts Posts: 3,807 chump


    A nice piece. Nothing new or inspirational in it, but at least the Jo Public Times reader will see what's been written in housing threads for the last year.


  • Registered Users Posts: 8,219 ✭✭✭ Calina


    May not want to believe it though. The response could be predictable "They've been saying that for years and look if I had waited, I'd have lost out on..." or "Look how you got priced out by waiting..."


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  • Registered Users Posts: 31,169 ✭✭✭✭ is_that_so


    If-then-else economics IMO. When is an economist ever wrong? Reminds me when reading this kind of competition that goes on between academics.
    It also reminds me that we have never been here before and that Irish economists like the rest of us are guessing. TBH I think some of them find it upsetting that it hasn't happened.

    Nonetheless it is good to be reminded of the fact that we are a bit over-dependent on the housing sector.

    My take, well prices will probably ease this year as we are going to get hit with a number of interest rate increases, maybe in excess of 1%. Some speculators will drift out of the market and go look at other parts of the world that might be closer to a crash - the UK once again. There may indeed be excess of supply over demand and that can only be good for posters here and all the other doom-mongers who are dying for a crash so that they can buy. That said IMO those on 100% mortgages are most exposed to it all.
    Would suit me too come to think of it. :rolleyes:


  • Closed Accounts Posts: 3,807 chump


    The usual bash the poster and those with similar opinions instead of attacking the points.
    If-then-else economics IMO. When is an economist ever wrong? Reminds me when reading this kind of competition that goes on between academics.
    It also reminds me that we have never been here before and that Irish economists like the rest of us are guessing. TBH I think some of them find it upsetting that it hasn't happened.

    Nonetheless it is good to be reminded of the fact that we are a bit over-dependent on the housing sector.

    My take, well prices will probably ease this year as we are going to get hit with a number of interest rate increases, maybe in excess of 1%. Some speculators will drift out of the market and go look at other parts of the world that might be closer to a crash - the UK once again. There may indeed be excess of supply over demand and that can only be good for posters here and all the other doom-mongers who are dying for a crash so that they can buy. That said IMO those on 100% mortgages are most exposed to it all.
    Would suit me too come to think of it.

    The post contained thorough reasoning, it made references to similar events in the past, and outlined reasons which may compound the problem we have.


  • Registered Users Posts: 31,169 ✭✭✭✭ is_that_so


    chump wrote:
    The usual bash the poster and those with similar opinions instead of attacking the points.



    The post contained thorough reasoning, it made references to similar events in the past, and outlined reasons which may compound the problem we have.

    It might be just the case that I am tired of this type of reasoning. In fact I actually don't believe him. One can reason forever with the right kind of selected data. Where is the actual evidence? As far as I can see it is all "IF X then Y which leads irrevocably to Z". My question still stands when does an economist ever admit to being wrong? IMO scary numbers is not a reasoned discussion. I have no issues with the OP but you are as aware as I am of some posters who will relish the idea.


  • Registered Users Posts: 8,219 ✭✭✭ Calina


    is_that_so wrote:
    It might be just the case that I am tired of this type of reasoning. In fact I actually don't believe him. One can reason forever with the right kind of selected data. Where is the actual evidence? As far as I can see it is all "IF X then Y which leads irrevocably to Z". My question still stands when does an economist ever admit to being wrong? IMO scary numbers is not a reasoned discussion. I have no issues with the OP but you are as aware as I am of some posters who will relish the idea.

    None of this is a reasoned counter argument, so why should anyone take any notice of it? I mean, some people will relish the idea of onwards and upwards in property prices - why is their opinion worth any more than those who are concerned about the equivalent need for raising debt to pay for onward and upward prices, for example?


  • Moderators, Sports Moderators Posts: 11,205 Mod ✭✭✭✭ hmmm


    is_that_so wrote:
    IMO scary numbers is not a reasoned discussion. I have no issues with the OP but you are as aware as I am of some posters who will relish the idea.
    The article quotes facts, figures and experiences from other countries who have gone through the same property price explosion to back up his contention that house prices are overvalued. Those who say house prices are fairly valued have nothing more than wishful thinking to back up their contention. This thinking was ripe back in the dot com bubble, "of course the company makes no money, but it's share price hasn't fallen so you're all wrong when you say it's going to fall". A lot of people lost money in that crash because they listened to cheerleaders and salesmen rather than neutral economists.


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  • Registered Users Posts: 78,057 ✭✭✭✭ Victor


    Please provide a link back to the original article.

    Link to Davy research by Rossa White http://www.davydirect.ie/other/pubarticles/econcr20060329.pdf


  • Banned (with Prison Access) Posts: 8,486 miju


    is_that_so wrote:
    TBH I think some of them find it upsetting that it hasn't happened.

    i'm sure they do as they more than anyone else will realise that the longer this asset bubble continues the more and more long term damage it does to this country
    is_that_so wrote:
    Nonetheless it is good to be reminded of the fact that we are a bit over-dependent on the housing sector.

    a bit over-dependnt??????? :D:D:D:D more like completely and utterly dependent on construction to mask this economys figures

    is_that_so wrote:
    My take, well prices will probably ease this year as we are going to get hit with a number of interest rate increases, maybe in excess of 1%. Some speculators will drift out of the market and go look at other parts of the world that might be closer to a crash - the UK once again.

    out of curiosity what percentage of price drop would you consider a crash?
    is_that_so wrote:
    There may indeed be excess of supply over demand and that can only be good for posters here and all the other doom-mongers who are dying for a crash so that they can buy. That said IMO those on 100% mortgages are most exposed to it all.

    most "doom-mongers" are not dying for a crash so they can buy i think you'll find alot of them are actually thinking of the economys health as a whole and they don't want / wish for a crash but at this stage it is looking increasingly unavoidable , also those of 100% mortgages are not the only ones badly exposed there's the "investors" , retirement purposes as well as those members of the laughable brigade of "top-up mortgages" who will all be royally fooked as well
    is_that_so wrote:
    It might be just the case that I am tired of this type of reasoning. In fact I actually don't believe him. One can reason forever with the right kind of selected data. Where is the actual evidence? As far as I can see it is all "IF X then Y which leads irrevocably to Z". My question still stands when does an economist ever admit to being wrong? IMO scary numbers is not a reasoned discussion. I have no issues with the OP but you are as aware as I am of some posters who will relish the idea.

    your obviously choosing what pallatable to read and whats not , as regards hard figures there's plenty including the permanent tsb / esri index just release , recent daft report and of course the most current site that can be used as a indicator of anecdotal current property prices http://irishhousepricesfalling.blogspot.com/

    then of course there's the fact that property prices (at the very best) is expected to grow by 5% and general inflation (at the least) will be hitting 6% next year so without interest rate hikes , over supply , no more panic buying , investors staying out of the market , capital appreciation finished , end of a fair few property tax incentives property prices WILL fall by 1% at the very , very least in real terms , those hard enough facts for you?

    by the by the below quote clearly indicates the next rise as early as feb next year so after that is anyones guess , however, the ECB wont care about ireland in the grand scheme of stability in the eurozone and you can bank on that

    "The euro zone money supply, as measured by the broad M3 indicator, expanded by 9.3% in November after an 8.5% gain in October, according to the European Central Bank. The increase was bigger than expected."



    "The surge in euro zone M3 money supply growth to its fastest rate since February 1990 points to another interest rate increase early next year, economists said."

    " 'A worryingly strong set of money supply and credit growth data for the ECB to digest, which bolsters the case for another 25 basis point interest rate hike in the first quarter of 2007, very possibly as early as February,' Global Insight economist Howard Archer said."

    ps: heres some late night reading from the central bank that was released this month , is 30 pages long so brew up a cuppa first ;)


  • Registered Users Posts: 4,751 ✭✭✭ Do-more


    Here's the link to the article, but I think you need a sub to open it.

    http://www.ireland.com/newspaper/finance/2006/1228/1166138534016.html

    invest4deepvalue.com



  • Registered Users Posts: 744 cold_filter


    ixoy wrote:
    Aren't similiar reports published each year now? I'm thinking of stepping into the property market next year but this annual fear-mongering makes me cautious again, during which prices inflate further.

    Is there any reason to think this will be the year that it happens over 2006?


    Ixoy i know exactly what you mean every year theres various articles and think thanks that say the house boom is going to crash and.... it never does i also am thinking of buying my first house in 2007 but again i really do not want to be saddled with a large mortgage and 2 months later find out that my house is overvalued by 20-50%


  • Banned (with Prison Access) Posts: 8,486 miju


    i really do not want to be saddled with a large mortgage and 2 months later find out that my house is overvalued by 20-50%

    then why not wait a while and see what happens as it should be perfectly clear come 6 months time what way the market is heading and how good / bad for that matter. certainly with prices now no longer rising (based on most up to date data from mortgages drawn down from november which is as close as you can get to finding out purchases prices) you have nothing to lose and everything to gain

    The SSIA thing when they mature is not going to help at all either only adding fuel to the inflation rate in the best case scenario , not talking about the actual payouts but the monthly payments that people have been paying in which research has indicated people will spend rather than save this part of the SSIA adding to internal inflation (not that the ECB will care that much anyway)


  • Registered Users Posts: 14,304 ✭✭✭✭ jimmycrackcorm


    What does it matter anyway? Suppose you buy a place for €300k now to live in an you commit to a mortgage payment of €1500 per month and accept it will probably rise in line with interest rates. You accept this is your future for 30-35 years.

    Does it matter if prices drop? You still will be paying your mortgage regardless of whether the value of your house goes up or down. It only matters when you can't afford to pay your mortgage as in losing your job. So the real question is what will happen on the jobs front.

    Otherwise the only damage is that you won't feel as rich as when house prices were rising. And by the time your mortgage is paid off in 30-35 years time, you will be sitting on an positive asset in any case as any possible price decrease will not last anywhere near that long.


  • Registered Users Posts: 4,990 ✭✭✭ blindjustice


    What does it matter anyway? Suppose you buy a place for €300k now to live in an you commit to a mortgage payment of €1500


    why be so frivilous with your money! if the same place is gonna cost you 1000 pm instead of 1500pm why buy now ! makes no sense


  • Registered Users Posts: 4,751 ✭✭✭ Do-more


    What does it matter anyway? Suppose you buy a place for €300k now to live in an you commit to a mortgage payment of €1500 per month and accept it will probably rise in line with interest rates. You accept this is your future for 30-35 years.

    Does it matter if prices drop? You still will be paying your mortgage regardless of whether the value of your house goes up or down. It only matters when you can't afford to pay your mortgage as in losing your job. So the real question is what will happen on the jobs front.

    Otherwise the only damage is that you won't feel as rich as when house prices were rising. And by the time your mortgage is paid off in 30-35 years time, you will be sitting on an positive asset in any case as any possible price decrease will not last anywhere near that long.

    This sums up what is driving our economy, 1. the building boom and 2. The spending spree caused by people saying "were rich! our house is worth a million let's spend, spend, spend"

    A drop in house prices eliminates both of these and causes high unemployment both for workers directly employed in building and in secondary areas such as Car dealers, furniture shops, lord knows you name it.

    We then get into a viscious circle of rising unemployment and falling house prices, probably for a period of 6-10 years.

    Even if you are still employed you will be stuck in the house you own now for a long time as no one will want to buy until we hit bottom.

    If you don't want to move and are happy with your present home, then fine, falling house prices don't matter, however, if you have just bought a shoebox on a 100% mortgage and intend starting a family in a few years time, then your best option will be handing back the keys and hopping on a plane to Australia!

    invest4deepvalue.com



  • Registered Users Posts: 4,990 ✭✭✭ blindjustice


    Do-more wrote:
    your best option will be handing back the keys and hopping on a plane to Australia!

    for some people yes, but its alot harder to get into Australia and the USA today than it was in the past.


  • Registered Users Posts: 4,751 ✭✭✭ Do-more


    for some people yes, but its alot harder to get into Australia and the USA today than it was in the past.

    Yep, sums up how limited some people's option will be!

    invest4deepvalue.com



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  • Banned (with Prison Access) Posts: 8,486 miju


    i wonder how many other investors like this guy are about to go into the red with no sign of rate rises abating

    wonder what the most likely end result would be????????? ;)


  • Closed Accounts Posts: 6,123 stepbar


    The amount of people I come across that are ballsed up in debt is unbelievable. Ive noticed that alot of "investors" have Section 23 housing in their portfolios. Some having 2 / 3 houses in the same estate. Bought using "percieved" equity in their PDH of course :rolleyes: It also looks like that some of these properties are not rented either because the rental income does not add up. As it stands these people will get it very hard to sell their Section 23 properties because the locals in the area cant afford to pay the asking price / can build properties in the local area for cheaper. Ive also noticed a uprise in the amount of people going "interest only" on their mortgages, in the hope that they will ride out the storm. I hate to say it but its only a matter of time before the **** hits the fan.


  • Registered Users Posts: 4,751 ✭✭✭ Do-more


    From the AAM link above:
    niceone wrote:
    or should I now consider off-loading the properties. .

    I expect the EA's will be busy the next few weeks with people coming in the door trying to "off-load" properties...

    The Christmas break may have given people the chance to sit down and think about their situation, anyone who read the financial section of the Irish Times on the 28th. for example may have been given cause to do so!!

    Also, I can't see many small investors wanting to add to their portfolio, so the developers are going to have a bleak New Year....

    invest4deepvalue.com



  • Registered Users Posts: 68,333 ✭✭✭✭ seamus


    I reckon there's still going to be massive sales in the new homes area. Don't forget that we still have massive immigration, and new immigrants will be eager to live in relatively low-rent large apartments and small homes, outside of the M50 boundary.

    This of course will be offset by a slump in second-hand sales, essentially turning the new housing market into a house of cards. It'll be much like buying a new car - as soon as the builder hands you the keys to your new property and you open the front door, no-one will want it, and you'd be lucky to resell it without making a loss.

    I was this --> || <-- close to entering the market at the end of this month, but pulled out on an apartment at the end of November. I'm going to keep a keen eye on the market, with a view to seriously considering properties by April. We should know where we stand by then, as the Spring selling season kicks in. I reckon there should be some good prices to be had around then.


  • Registered Users Posts: 78,057 ✭✭✭✭ Victor


    miju wrote:
    i wonder how many other investors like this guy are about to go into the red with no sign of rate rises abating

    wonder what the most likely end result would be????????? ;)
    That poster seems like a fool, but I suspect he isn't alone.

    Why do people expect the rent to cover 100% of the mortgage? I can vaguely understand it covering ~100% of the interest, but this guy has no room to manouver.


  • Banned (with Prison Access) Posts: 25,234 Sponge Bob


    Its probably an interest only mortgage Victor. but either way his margin has been hammered .

    and Seamus, there may well be massive immigration but all the Poles in my hood live in one house, 13 of them a few months back . The Irish renting in the same area would have been 2-3 to a house and therefore required 4 times more houses for the same number of people.

    With immigration the relationship between persons and housing units required per nn unit of persons is not as linear as it is with the native population.


  • Moderators, Society & Culture Moderators Posts: 13,381 Mod ✭✭✭✭ Paulw


    I see this bubble hasn't burst yet, despite what people are trying to say.


    --
    Estate agent Sherry Fitzgerald has said second-hand house prices rose by just 0.1% during the final three months of 2006.

    Strong growth in the first nine months, however, brought total growth for the year to just over 18%.

    Second-hand house prices in Dublin actually fell by 0.7% in the final quarter, though the rate of increase for the year was 22.2%.


    Prices are slowing, but there is still demand.


  • Closed Accounts Posts: 1,571 Mailman


    Paulw wrote:
    I see this bubble hasn't burst yet, despite what people are trying to say.

    Prices are slowing, but there is still demand.

    Where exactly in the report on sherryfitz.ie does it state that there is still demand. They attribute price rises in the last year to strong demand but they do not state that the demand still exists.
    Nor do they suggest reasons as to why the rate of house price increase decreased so dramatically in the last three months of the year.

    No information was given on volume of trade either because very few houses shifted in the last three months of the year except for those which had already gone sale agreed( sale agreed sticker counts for next to nothing) or more likely had deposits put down on them from earlier in the year.


  • Closed Accounts Posts: 7,333 Zambia


    a few things i consider to be true


    A : It is true that there are currently more propertys on the market. Hence demand is not as high.

    B: It is no longer as easy to sell your house as it was pre August

    C: Interest rates have gone up causing less spending on "Other items"

    D: The amount of these conversations has gone up scaring of new potential buyers.

    E: I sold a house in West Dublin in July , A better property up the road can now not sell for that price but at hovers 20,000 lower.

    I do not see a crash but the hot air is slowing getting out of this balloon..


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  • Banned (with Prison Access) Posts: 8,486 miju


    whats going to be glaringly obvious now though is that house prices ARE falling.

    with the new year they can no longer be glossed over with prices rose by 18% but full by x amount in last quarter. instead it will just be plain prices falling and this is where the sheen / spin start to fall apart , more and more people are beginning to realise the ticking time bomb that is around the corner with particular reference to interest only mortgages


This discussion has been closed.
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