Housing Bubble Bursting

soma

joemc99 wrote:

The above is a quote from one of the doom reports. Surly if this happens, the interest rate will plummet too, aka 2000?

Joe this is one of the reasons why some people (myself included) suspect that Ireland may become the 'poster child' for the mess than can happen when your interest rate policy has been decoupled from your economic performance/status.

We've been 'booming' (consumer binge) because we've had the interest rates set at a level suited for a country in recession. The last time interest rates hit 2% (which they were until recently) was just after world war two - that should tell you how unsuited they were to be applied to a country like Ireland, which was just coming out of a (genuine/sound fundamentals) manufacturing and housing boom from 1995-2000.

Calina

Exacerbated in this case by recent lending practices on the part of the banks though.

joemc99

Jez guys, give me some credit :rolleyes: .....that report was a EURO report, not an Irish report......so, if the euro takes a dive (from the report, not me), I suspect the interest rates would follow.....

You all seem to be contradicting yourselves, posting links to euro doom reports and then mentioning that Ireland is the only country going down!

I do agree that we do have a lot more to lose though, as we are falling for a greater height.

The_Conductor

joemc99 wrote:

Jez guys, give me some credit :rolleyes: .....that report was a EURO report, not an Irish report......so, if the euro takes a dive (from the report, not me), I suspect the interest rates would follow.....

You all seem to be contradicting yourselves, posting links to euro doom reports and then mentioning that Ireland is the only country going down!

I do agree that we do have a lot more to lose though, as we are falling for a greater height.

What you are saying is entirely accurate. From a European perspective though, we are not even the worst in the EU- that accolade goes to Denmark (with the Netherlands not far behind). Property here, from an affordability perspective, is considered on par with that of Spain and Portugal, where they are also forecasting a massive slump. Over there they are blaming all the Irish and UK ex-pats for pricing locals out of the market, while they do make good scapegoats, monetary supply is the reason.

It is the large Euro economies that have been fueling this- notably France, Germany and Italy, which while simultaneously in recession were running massive budget deficits and pleading with the ECB for low interest rates that suited them and no-one else. Unfortunately for much of the rest of Europe, as they are the largest economies, their voices are heard most loudly at the table.

So, lots of misery on the horizon, and as you quite rightly point out, its not just going to be an Irish phenomenon. The Irish in particular are used as poster boys though- because of our pre-occupation with ownership of property. Elsewhere on the continent this is not the same, most people have long term leases (20-30 year leases). Where people on the continent do buy, they also tend to lock in their mortgages at long-term fixed rates. Here- we got heady at the notion of cheap money and borrowed wildly for the most part at floating or tracking rates- spending as though 2% rates would last forever (and as it was lower than the rate of inflation, money was literally being shovelled out the door). Our foolishness is now catching up with us, and our wild abondon of latter years is coming home to roost when we have to repay all the monies we borrowed.

An interesting statistic is that in 1987 the Irish government at national debt levels of 140% of GDP, and private debt was at 38% of GDP. Precisely 20 years later these are reversed........ An expression from Alice in Wonderland comes to mind:
"Curiouser and curiouser", said Alice to the cat.......

whizzbang

joemc99 wrote:

Jez guys, give me some credit :rolleyes: .....that report was a EURO report, not an Irish report......so, if the euro takes a dive (from the report, not me), I suspect the interest rates would follow.....

You all seem to be contradicting yourselves, posting links to euro doom reports and then mentioning that Ireland is the only country going down!

I do agree that we do have a lot more to lose though, as we are falling for a greater height.

is that this report? http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS-qqqs=news-qqqid=21320-qqqx=1.asp

It was a European research agency but I believe the articles here were just talking about a chapter that referenced Ireland specifically. I think the general European economy is quite healthy.

I think this it the report, http://www.cesifo-group.de/portal/page?_pageid=36,286932&_dad=portal&_schema=PORTAL
looks like it is due tomorrow.

joemc99

Yeah, thats the one.....doesnt necessarly report on Ireland in the first few paragraphs, only towards the end.

This topic seems like a battle between the boomers and gloomers. I'm somewhere in the middle tbh. Yes, there will be a lot of people 'found out' in the next few years, but the vast majority are in very good shape, you cannot deny that. The vast majority of people out there have little or no mortgages. And all the companies that are driving the irish economy are not just going to jump ship, as its still a lot cheaper for them to do business here than is most EU countries.

There is a lot more to the construction industry than new home you know, roads, NDP, etc.

A lot of quotes from people saying that the property/jobs crahs has already started.....I just dont see it! Sure, asking prices are down on last year, but they are not down on 2003 prices, not exactly a disaster guys (yet).

miju

joemc99 wrote:

The vast majority of people out there have little or no mortgages.

i'd be highly inclined to disagree with you there. do you mean to say that people who bought between 2001 and today have their mortgage fully paid off (actually even the interest wouldn't be paid off in most cases)

joemc99 wrote:

And all the companies that are driving the irish economy are not just going to jump ship, as its still a lot cheaper for them to do business here than is most EU countries.

2 words motarola and dell. 1 has already announced they're pulling out and the second has announced a major review of staffing levels. we are now in a globalised economy and irelands is slipping down the scales of cost effectiveness very fast. while other large companies may come in and create jobs it's very naive to think for one second that established companys here wont pull out (motarola were here for 30 years if memory serves)

joemc99 wrote:

There is a lot more to the construction industry than new home you know, roads, NDP, etc.

yes but they are mostly less labour intensive and more specialised

joemc99 wrote:

Sure, asking prices are down on last year, but they are not down on 2003 prices, not exactly a disaster guys (yet).

if we were to extrapolate current anecdotal figures and official figures and meet them somewhere in the middle they wouldn't be too long in getting there again.

conor_mc

joemc99 wrote:

A lot of quotes from people saying that the property/jobs crahs has already started.....I just dont see it! Sure, asking prices are down on last year, but they are not down on 2003 prices, not exactly a disaster guys (yet).

In fairness, most crashes take 7-8 years to play out - if this is the crash, we're only several months into it as yet.

For the record, earlier comment duly withdrawn. As a regular poster, I was genuinely astonished by your comment, but now I see the misunderstanding. I took the point of view that it was a European article on the state of the Irish economy.

KingKenny7

conor_mc wrote:

For the record, earlier comment duly withdrawn. As a regular poster, I was genuinely astonished by your comment, but now I see the misunderstanding. I took the point of view that it was a European article on the state of the Irish economy.

If you think about physics, and you get a stone and throw up into the air as fast as you can (like the rise that we seen over the past few years).
What will happen when it reaches the top? Its slows down, and eventually stops, then its plummets all the way down, to where it started.
But if you throw the rock onto a wall, and on to another wall, and kept going up that way at a slow and steady pace, all would be well.

Housing market is up **** creek and its about to hits rocks, nasty sharpe rocks at that.

miju

KingKenny7 wrote:

But if you throw the rock onto a wall, and on to another wall, and kept going up that way at a slow and steady pace, all would be well.

what ???????????

justfortherecor

Supoib analogy!

We should have thrown the shaggin rocks up the wall incrementally lads, incrementally!!!

When will we ever learn?

KingKenny7

justfortherecor wrote:

Supoib analogy!

We should have thrown the shaggin rocks up the wall incrementally lads, incrementally!!!

When will we ever learn?

You know what I mean, as the old add for fresco wallpaper said. What goes up must come down"

The_Conductor

KingKenny7 wrote:

If you think about physics, and you get a stone and throw up into the air as fast as you can (like the rise that we seen over the past few years).
What will happen when it reaches the top? Its slows down, and eventually stops, then its plummets all the way down, to where it started.

Unless you reach escape velocity and subsequent orbit

conor_mc

smccarrick wrote:

Unless you reach escape velocity and subsequent orbit

But your orbit eventually degrades until one night, one beautiful glorious night, you're a shooting star......



.... as you incinerate at about a million degrees celsius!!!

jimmycrackcorm

It occurs to me that no one considers the effect of government policy in the event of a possible crash. What if for example in such an eventuality, the government interfered in the market and introduced reliefs to encourage construction / rental?

I can understand the reluctance and/or inability to control the market in a phase of growth (e.g.witness the apprehension to change stamp duty), but Government policy has a lot of scope when it comes to the reverse.

Victor

jimmycrackcorm wrote:

It occurs to me that no one considers the effect of government policy in the event of a possible crash. What if for example in such an eventuality, the government interfered in the market and introduced reliefs to encourage construction / rental? I can understand the reluctance and/or inability to control the market in a phase of growth (e.g.witness the apprehension to change stamp duty), but Government policy has a lot of scope when it comes to the reverse.

Anything done to counter a slump, can usually be doen in the other direction to counter an excessive boom.

Look at what removing investors from the market did in 2000-2001. The government could have cut mortgage interest relief and a whole range of other property reliefs and / or introduced property taxes years ago.

Calina

But to do that, they need to recognise that there is a problem and the issue in this country is that no one wanted to accept that there was a problem.

Gurgle

KingKenny7 wrote:

If you think about physics, and you get a stone and throw up into the air as fast as you can (like the rise that we seen over the past few years).
What will happen when it reaches the top? Its slows down, and eventually stops, then its plummets all the way down, to where it started.

Ah yes, that makes perfect sense.

Because the housing market is actually controlled by physics, specifically gravity :rolleyes:

I fully expect to be buying pints for €2 in Templebar long before the value of my house drops back to the €130k or so I paid for it.

KingKenny7

Gurgle wrote:

Ah yes, that makes perfect sense.

Because the housing market is actually controlled by physics, specifically gravity :rolleyes:

I fully expect to be buying pints for €2 in Templebar long before the value of my house drops back to the €130k or so I paid for it.

I'll think you'll find that the price of a pint has gone up much much slowly the of ping of beer. Can you tell me a beer that went up from 300k to 400k in a year?? or in beer terms 3 yoyo to 4 yoyo....

Zambia

KingKenny7 wrote:

I'll think you'll find that the price of a pint has gone up much much slowly the of ping of beer. Can you tell me a beer that went up from 300k to 400k in a year?? or in beer terms 3 yoyo to 4 yoyo....

Depends where you drink I have seen pints go from 4 yo yo to 5 yo yo from 8 pm to 1 am ....

Gurgle

KingKenny7 wrote:

Can you tell me a beer that went up from 300k to 400k in a year?? or in beer terms 3 yoyo to 4 yoyo....

Which year was it that house prices rose by 33%?

KingKenny7

Gurgle wrote:

Which year was it that house prices rose by 33%?

My mates bought a house in sept 2005 for 297k and now its worth just over 400k

Smoggy

Who says it's worth 400k ? has he sold it for 400k ? have the same houses in the area sold for 400k in the last month ?


If not - then it's not worth 400k ! only worth what someone will pay for it.

KingKenny7

Smoggy wrote:

Who says it's worth 400k ? has he sold it for 400k ? have the same houses in the area sold for 400k in the last month ?


If not - then it's not worth 400k ! only worth what someone will pay for it.

All houses in the area are being sold for over 400k and they are new developments

Afuera

KingKenny7 wrote:

All houses in the area are being sold for over 400k and they are new developments

So that's the current price new houses are going for in the area. Second hand houses are unlikely to be going for as high though since they will have stamp duty attached to them.

KingKenny7

Afuera wrote:

So that's the current price new houses are going for in the area. Second hand houses are unlikely to be going for as high though since they will have stamp duty attached to them.

Price at the moment, 14 months ago it was 100k less for a new house. Therefore a jump of 100k in a year

miju

KingKenny7 wrote:

Therefore a jump of 100k in a year

and was there anything to warrant such a ridiculous increase ????? if it can go up by that same amount in one year you can be sure as night follows day that they can come down as much if not more.

especially given how in an asset bubble when that asset begins to come back to normalised prices the price tends to overshoot its real worth on the way back down

KingKenny7

miju wrote:

and was there anything to warrant such a ridiculous increase ????? if it can go up by that same amount in one year you can be sure as night follows day that they can come down as much if not more.

especially given how in an asset bubble when that asset begins to come back to normalised prices the price tends to overshoot its real worth on the way back down

Excatly, I think that is the situtation that is going to happen. Not one person I know agrees that the market will fall. And when I have spoken to people, I get a typical response. If it drops, I;m broke!!!
These are from people who have no intention of selling, and have bought to live in for a long time.

I can actually see, people selling their house, thinking the same way of some of my friends have. In any ecomomy you have to factor in the human factor, or lack of knowledge factor.

Western_sean

If it drops, I;m broke!!!

These are the people the banks should have put a leash on......

jhegarty

miju wrote:

and was there anything to warrant such a ridiculous increase ????? if it can go up by that same amount in one year you can be sure as night follows day that they can come down as much if not more.

especially given how in an asset bubble when that asset begins to come back to normalised prices the price tends to overshoot its real worth on the way back down

He may had bought the house in 05, but when was the price set.... i know people who paid the deposit two years before they got keys....