Housing Bubble Bursting

stevedublin

according to
http://www.breakingnews.ie/business/mhcwsnqlidsn/
the 15% fall is to be by the end of 2008....

ronbyrne2005

arctictree wrote:

News report on RTE mentions a 15% drop by the year end:

http://www.rte.ie/news/2007/0928/economy.html

A

Expect the Government sponsered ESRI to be labelled "Doom-mongers" and "begrudgers" by Bertie and the media.

Afuera

ronbyrne2005 wrote:

Expect the Government sponsered ESRI to be labelled "Doom-mongers" and "begrudgers" by Bertie and the media.

Sure they know nothin' about nuthin' anyways :rolleyes:

digitally-yours

Looks like the economy slow down is inevitable

Prepare for the rough ride. There is more bad news from the US in coming months. The credit crunch is not fully over yet.



Down, down, down ... ESRI revises growth forecast

FORECASTS for economic growth were cut again today as analysts revised downwards the number of houses they think will be built next year.

The Economic and Social Research Institute (ESRI) now thinks the economy will grow by less than 3pc next year - down from its estimate of 3.7pc in its last report three months ago. This follows from a sharp cut of 10,000 in the number of houses it thinks will be built next year.

The ESRI believes the figure may be around 65,000. But yesterday stockbrokers Merrion Capital joined the Construction Industry Federation in saying the total might be as low as 50,000. A fall of 10,000 in the number of houses built knocks over one percentage point off economic growth, so Merrion believe the economy will grow by only 2pc next year.

The ESRI calculate that the building slump will produce a fall of €5 billion in the government finances. But they will still be in balance and the institute thinks there is scope for a mildly stimulatory Budget this year, where spending on social welfare, pensions and tax bands rises faster than inflation.

Both the ESRI and Merrion see the rest of the economy performing well. "The international economic outlook, while slowing and adjusting downward, still points to moderate growth. The interest outlook is now more benign," Merrion said.

The ESRI agreed that the number of houses built could be even lower than its latest forecast. "This is a large downward revision on our part, but the risks are that it could be even bigger. The figures for house starts show a dramatic slowdown," said senior researcher, Ide Kearney.

Leading estate agents Hooke & MacDonald said they now expect 60,000 new home completions nationally next year. "The impact of this contraction in supply will not begin to have a noticeable impact on the residential market until the latter half of 2008," economist Geoff Tucker said.

The ESRI expects a better performance from trade next year, 18pc growth in other part of the building industry, and a 10pc increase in machinery and equipment investment.

ESRI report co-author Alan Barrett said any reduction in house building knocked a hole in economic growth, but was not a sign of economic weakness and might even bring economic benefits.

"The building boom tied up a lot of resources and put pressure on wages. We have tried to introduce the release of resources, especially labour, and slower growth in wages, into the forecast.

It may not be pleasant for the individuals whose wages are not rising, but it is just what the economy needs," he said.

"There is an economy out there other than housing. Slower wage growth will be positive for those other areas."

The ESRI expects a better performance from trade next year, 18pc growth in other part of the building industry, and a 10pc increase in machinery & equipment investment.

The forecast assumes immigration will fall sharply as the construction industry contracts. Employment will grow by just 12,000 next year, compared with an estimated 50,000 this year.

The jobless rate will rise to 5.6pc, based on net immigration of 25,000 -- down from 70,000 this year.

Colm McCarthy, from economic consultants DKM, said it may be a good thing builders reduced operations so quickly this year. "There should be no big overhang of unsold houses, such as they have in the USA," he said.




http://www.independent.ie/business/irish/down-down-down--esri-revises-growth-forecast-1091357.html

ronbyrne2005

with population growing at 2% you get more growth in economy as a whole but lower per capita gdp/gnp than headline growth figures for economy as a whole. If economy grows at 2per cent next year per capita gnp/gdp growth could be less than 1%.

nesf

iguana wrote:

Not really it's an economic term with an actual definition. That's like saying we can call the dog a cat as neither term defines a horse.

And these "experts" in the media keep to strict economic definitions in their articles? I was trying to get at what they would be alluding to rather than what someone in an economic paper would be getting at, if that makes sense.

iguana wrote:

Of course the theory of relativity is probably wrong but the term still defines one particular concept. A soft landing is a concept and it might be a concept that has never come to pass but it is still one particular concept and the term shouldn't be used to describe other things.

Sure, but if I see someone referring to the theory of relativity in a newspaper I don't automatically assume they know exactly what the theory is and that they are actually referring to it. In strict physical terms you are completely correct and if I was reading an article in a physics journal you'd be right.

Dalfiatach wrote:

Fixed that for ya.

heh.

gurramok

And they said 'The ESRI also says the possibility of a banking collapse needs to be recognised'
Who would of thought our banks were susceptible to a possible collapse to reckless lending?
That must be the first time an institution/media outlet here ever mentioned a 'possible banking collapse', it ain't looking pretty.

whizzbang

This is really such a negative report, is there any chance they are trying to set low expectations so that if it is not that bad we can all relax? Why the sudden turn by the ESRI when the TSB/ERSI reports have been much milder to date?

Afuera

whizzbang wrote:

This is really such a negative report, is there any chance they are trying to set low expectations so that if it is not that bad we can all relax? Why the sudden turn by the ESRI when the TSB/ERSI reports have been much milder to date?

This is probably the only way for the ESRI to maintain any kind of credibility now. If the Irish economy hit a huge hickup without being flagged by them, you'd have to wonder why they even exist in the first place. Setting low expectations is a dangerous game as it can also lead to credibilty issues (the boy who cried wolf) or become a kind of self-fulfilling prophacy, so I doubt they would try to do that intentionally. In the States, the most optimistic bad case scenarios have been released publicly and these have continued to be downgraded as more bad statistics start to turn up. I suspect it will follow a similar pattern in Ireland. I think the house price figures released this week have made it impossible to avoid the huge elephant standing in the corner throwing it's shadow over the Irish economy.

bill_ashmount

Oh my god, we're all doomed :eek:

Do-more

I just saw a "Newsletter" from one of the EA's here in Mullingar presumably sent to all the vendors on it's books. Dated 18/9/07 it described the local market as slow! It said that what offers that were being made were at a level of about 10% below asking price. It urged vendors to take heart from the fact that they had sold 3 properties the previous week! (All in the price range of €200,000-€250,000 IIRC) It also mentioned that there was a shortage of rental property available...

Bleak news for anyone trying to sell and rent for the next few years as Eddie Hobbs reccomends!

Pa ElGrande

Rent is going to keep rising briskly for a while yet in the parts of the country where employment remains strong, there are several reasons for this.

1. Uncapitalised landlords have exited or are trying to exit the market
2. Increased debt service costs are being passed on by some landlords.
3. Potential FTB's don't want to catch a falling knife and buy an over priced property so stay put.
4. Migration is still inward, but will begin to reverse next year.
5. Landlords will be aware of the FTB predicament and will increase their prices.
6. House prices are sticky on the way down and the vendors will hold out for as long as possible at unrealistic asking prices.
7. The ongoing credit crunch has another 18 months to roll, at a minimum, so the banks lending criteria is going to get even tighter.

digitally-yours

Average price of second-hand houses in Dublin fell 7.4% in the first nine months of 2007


Estate agents Sherry FitzGerald, announced today that the average price of a second-hand property in Ireland fell by 1.8% during the third quarter of 2007, with the results for the year to date down by 4.5%.



However, if one excludes the Dublin market from the analysis, the figures shows a more moderate price reduction with prices falling by 1.2% during the third quarter and 1.0% in the year to date.



Dublin market trends show a price reduction of 2.3% in the quarter, bringing the results for the year to date to minus 7.4%. The Cork market shows price reductions 2.1% in the quarter and 2.3% in the year to date.



Commenting on the results Marian Finnegan, Chief Economist, Sherry FitzGerald Group said; "The performance of the property market in the year to date is reflective of the underlying consumer uncertainty. Originating in the furore of stamp duty in the autumn of 2006, this uncertainty was compounded by the rising interest rate environment and the tightening of financial sectors policy in relation to bridging finance. The net effect was a more challenging market place where purchasers and vendors alike were caught in a chain effect unable to sign contracts until their existing property is sold, thereby lengthening the time it takes to sell a property. That said, we remain absolutely confident that the fundamentals underpinning the market remain sound, a factor which will underwrite its performance in the medium term.



Finnegan added; “The stock of available second-hand properties is strong, thereby providing a healthy choice of property for potential purchasers. Activity levels have rebounded somewhat with an uplift in internet activity and viewing levels, a factor which bodes well for the demand trends in the coming weeks.”



Although there has been uncertainty in the second-hand market, first time buyer demand remained surprisingly resilient with 34% of all sales bought by the sector. Sherry FitzGerald say that investors also remain very active purchasing 17.6% of all second hand properties in the year to date.



An analysis of the profile of vendors who sold their property through Sherry FitzGerald in the year to date reveals that 29% of vendors were selling investment properties. Furthermore, approximately 23% of vendors sold with the intention of purchasing a larger property. This is termed "a very healthy indicator of the buoyancy of the economy". Finally approximately 25% of vendors were selling their home to relocate to a different county within Ireland.



Looking to the future Finnegan noted; “The events which began with concerns over lending in the sub prime market in the US have rippled through the world financial and equity markets and are influencing trends in the interest rate environment. The abandonment of the much anticipated interest rate hike in September will have brought some solace to potential purchasers. This combined with an increasingly attractive range of fixed interest rates in the market will serve to tempt more customers back in the mortgage market.



That said we do not anticipate an immediate significant revival in activity or price performance, rather a gradual improvement in market sentiment and demand trends. Overall, the fundamentals underpinning this market remain sound. We have a sound economic base with a young dynamic population operating in a strong European economy, factors which will underwrite the performance of the property market in the medium term.”

How do people here interpret this ?

A Random Walk

digitally-yours wrote:

How do people here interpret this ?

When was the last time you heard an estate agent employee telling you now was not a good time to buy property? This is the usual sales patter masquerading as research.

We've gone from a "soft landing" where prices would remain rising at the rate of inflation to a "soft landing" of prices remaining static to a "soft landing" of maybe a reduction of 5% to now a "soft landing" where prices have fallen over 7% in the first 9 months alone.

Yet amazingly enough now is apparently still a good time to buy. Imagine that.

digitally-yours

Ireland external debt reaches 1.36 Trillion!

Thats the result of all the borrowing

God knows where the country is going.

The picture is very distorted. One news show positive signs and second shows negatives.

Over all its a negative story.

The the soft landing i think there is a negative sentiment in the market despite all the assurances of selling agents and GOV the market is still in the RED


http://www.cso.ie/releasespublications/documents/economy/2007/externaldebt_q22007.pdf#External_Debt_30_June0

SkepticOne

It's always a great time to buy.

Prices rising? Snap up your property before it's too late!

Prices falling? Value and affordability returning to the market. Snap up your bargain now!

Finnegan added; “The stock of available second-hand properties is strong, thereby providing a healthy choice of property for potential purchasers. Activity levels have rebounded somewhat with an uplift in internet activity and viewing levels, a factor which bodes well for the demand trends in the coming weeks.”

Good use of the word "strong" in place of "high". I also like the phrase "healthy choice" for oversupply.

Tom123

SkepticOne wrote:

It's always a great time to buy.

Prices rising? Snap up your property before it's too late!

Prices falling? Value and affordability returning to the market. Snap up your bargain now!

Good use of the word "strong" in place of "high". I also like the phrase "healthy choice" for oversupply.

I wonder how much editing is required so all the top brass can agree on all the new definitions of common phrases.

Moderating = Falling
is strong = Absolutely huge over hang
healthy choice of property for potential purchasers = No point rushing out to buy

And don't forgot that internet viewing is picking up! (Probably because someone has replaced the MyHome collection with a Sherry Fitz one!)

SkepticOne

Interesting how use of words can lend positive and negative slants to a message without adding any extra information.

Strong = high (good)
Unsustainable = high (bad)

Sustainable = low (good)
Weak = low (bad)

Stabilise = no change (good)
Stagnate = no change (bad)

digitally-yours

SkepticOne wrote:

Interesting how use of words can lend positive and negative slants to a message without adding any extra information.

Strong = high (good)
Unsustainable = high (bad)

Sustainable = low (good)
Weak = low (bad)

Stabilise = no change (good)
Stagnate = no change (bad)

Excellent interpretation


I wonder how many Irish banks are going to be affected by this

Banks reveal US mortgage losses

I thought Swiss banks wouldn't be affected but off course i was wrong.

A number of big investment banks have admitted major losses caused by bad investments centred on the crisis-hit US sub-prime mortgage market.

Worst hit was Swiss bank UBS which was write down losses of 4bn Swiss francs ($3.4bn; £1.67bn) as a result.

http://news.bbc.co.uk/2/hi/business/7021529.stm

gurramok

From the Pin

times wrote:

New borrowers face higher mortgage costs from tomorrow when Bank of Ireland increases the rates on its flagship package for first-time buyers, blaming the global credit crunch, write Niall Brady.
<snip>
The hikes take effect tomorrow, the same day the Financial Regulator introduces "tougher "stress testing" rules that ensure lenders weed-out mortgage applications who can't afford further ECB base rate increases.

Mortgage rate up for first-timers
Niall Brady, Sunday Times, 30 September 2007

BOI kept that one quiet, hardly an incentive to help Sherry, is it now?

david1two3

I have only read up to the middle of January on this thread but Im in a rush to tell yee what my neighbour here in Holloway did in December 2005. He sold his three storey house, a mile from Camden for £460,000, £35,000 less than he wanted as it was in bits ,roof ,internal timber, plaster, the lot .The new owner informed me this February that they were now £725K, I am rarely shocked but to gain 230 thou in 15 months is to put it bluntly, absurd. Everybody knows they are worth about half of what people pay but they are all looking the other way when the vote is taken.My neighbour is probably apopleptic as I write. Easy money is bad for you.

david1two3

I couldnt help notice the fiteen per cent thing on previous page. Pat Kenny said last week that his friend sold eventually For 370,000 euros having dropped from 440,00 euros. That is more than 15% ,16 more like .Pats didnt say where the place was or to my memory what it was but its not good. I live elsewhere(London) and have been sickened conversationally having to listen to this price related housing quiz for ten years now and it would seem a lot of people are not getting their prize. My sister in Palmerston road is on the dole getting 130 euros a week and she has one third of the house,the house next door is 3.5 million,sorry make that three.

digitally-yours

Irish Exchequer deficit in first nine months of 2007 at €3.1 billion; Shortfall on tax for the year to be between €1 and €1.5 billion


Awesome ! looks like they have most of the eggs in the same basket.
no wonder there is freeze on health service recruitment.

Reflecting the impact of the property slowdown, stamp duties were 13.8% below target - €401m lower, while the figure for capital gains taxes was €101m below forecasts.


http://www.finfacts.com/irelandbusinessnews/publish/article_1011355.shtml

pjbrady1

At first this website sounds like an advice forum on how to soak in the Mayoness of Mayo.

www.mayolifestyle.com

Boomer development in the Heart of underdeveloped Foxford (only has one house for sale for every ten residents!)

digitally-yours

pjbrady1 wrote:

At first this website sounds like an advice forum on how to soak in the Mayoness of Mayo.

www.mayolifestyle.com

Boomer development in the Heart of underdeveloped Foxford (only has one house for sale for every ten residents!)

What's their average price for the house in the middle of nowhere ?

D'Peoples Voice

pjbrady1 wrote:

At first this website sounds like an advice forum on how to soak in the Mayoness of Mayo.

www.mayolifestyle.com

I see the changeover to kilometers has yet to happen in Mayo, well I'm sure it will arrive any day now:D

ronbyrne2005

Desperate seller? A two week auction, highest bid in next 2 weeks wins!

digitally-yours

Some more data released which show the trend.

Definitely not the best situation 35 year mortgage :eek:

That's a life time liability


Four out of ten Irish first time buyers taking out mortgages of between 35 to 39 years long


http://www.finfacts.com/irelandbusinessnews/publish/article_1011365.shtml

DonJose

ronbyrne2005 wrote:

Desperate seller? A two week auction, highest bid in next 2 weeks wins!

LOL who took those photos, a midget!!!

pjbrady1

Not sure what the average price is. But by the tone of the website I would say strong 2006 prices. They might have a hope of selling phase one, but I wouldn't suprised if phase two has to be abandoned. It's developments like this and the one in Ballyconnel in Cavan that are going to cause a second major slide in Irish banking shares as predicted by me a long time ago. Just thought, everyone is saying Anglo Irish is rock solid with their impressive ratios. But they have some of the highest exposure to the hotel market. Where a figure was released lately with a large amount of hotels still due for completion. So if the tiger fades, and oil/food prices rise. Won't that leave Anglo Irish with many non-paying hotel developments all across Ireland.