Housing Bubble Bursting

babytooth

the thing is that everything is so finely stacked. Ppl have really stretched themselves. I believe that cash flow is king here. OK. PPl may have lost of assets but have high levels of debt and cyclical jobs like construction. Yes, they earn good money and so on, but, if things slip for a two/three months then the wheels start to come off....

Before, in times gone by, Irish ppl were used to more uncertain times and and greater cushions of savings. Now-a-days, we are so dependent on each months pay check.

How many ppl do you know that could keep things ticking over for 3 months if they lose their jobs. Not many. Factor in the fact that the average time to get a new job after losing an old one is 4 months in Ireland, and this was during the boom era. Will this go to 6 months. Can you survive for 6 months.

What about all those in construction, how many have savings, or pensions or health care or even medical ins. 280k people are responsible for 90k houses. Now, some banks state that this could drop to 65k this year. To have the same number involved per house would mean that 78k lose their jobs.

Factor in the other, related services such as furniture, solicitors, banks, etc etc, then this number could rise to perhaps 90k,

Thats allot more money to hand out in social welfare payments, Added to the fact that we will have a massively reduced tax take and increases in public service wage bill with B.M.2...Looks like this is the slow start of a massive avalanche,

these things take time, but are hard to stop and will cause massive pain for many who have taken their success and prosperity as guaranteed......no one wins, the poor will get poorer and the dis-enfranchised will be further marginalized. This could Orwellian and bleak..

Calina

Gurgle wrote:

A soft landing is correction of inflated prices by stagnating or slow falling until inflation catches up. If growth continues to exceed inflation, thats not a landing of any kind.

What we're seeing now is a soft landing. Predictably though, lots of people who expected a bubble burst are claiming that this is what they meant :rolleyes:

I beg to disagree. A soft landing in the property market has - until very recently - been defined by those interested as a slowing in the rate of property value growth from high figures to inflation matching figures, ie, a slow in the rate of growth in market values. Not any sort of falling at all.

What we have - at the moment - is falling house prices almost totally across the board. With an inflation rate of something like 4% - someone will have to remind me because I've forgotten - this means that property values are falling and they are falling a lot more than you want to admit.

What we have now is not a soft landing. It is the creaking sound of the door closing on property as an irrational wealth generator. For inflation to catch up with fundamental property values we need a massive increase in inflation. I don't know about you but frankly I've no interest in inflation rates of 10% plus and 17% plus. We don't need them in general in the economy and I see no reason why we should support the idea just so as we can make our property values economically sound.

The property market is largely illiquid, and it has been driven by irrational exuberance. Despite the blurb which some estate agent dropped in my letter box during the week, buyers are not going to come back. The few FTBs that are around want decent value for money and are not so interested in starter pack homes any more.

The problem - as I see it - is that you don't really know what a housing crash is likely to look like in real terms. If you want a short sharp correction to call that a bubble burst, fine. The truth is we are facing into a long, long deflation - this will not happen over night - for a couple of reasons 1) those selling by and large will find it hard to face up to the fact that their property is not worth as much as they thought it will and that is why a lot of property is sitting on the sales market for a lot longer than it used to and 2) those selling will not want to take a loss initially. This means that sales volumes are most likely to stagnate in the short term which will cause major grieve to estate agents whose main interest isnot so much in the price, but more so in the volume of sales.

Where I live, asking prices for 2bed apartments is now down by almost 10% on six months ago. This implies a couple of things to me: 1) too many of the for sale 2) not selling at that asking price and 3) not considered good value by the lynchpin of the property market, the FTB. This is an extremely bad sign.

It is open to debate what the actual fall in the property market in Ireland will be. Percentage fall rates will be localised - some places will be higher than others, some places less and more affected. That is the way it goes.

It is extremely naive to say that what we have now is "a soft landing". We don't know, in truth, whether things are turning around gently or not. I have serious doubts based on the volume of inventory sitting on the sales market at the moment which in my locality, just outside Dublin, is three times what it was this time last year in all types of properties, not just investoboxes being cashed in. In the same way as you can't call the top of the market until the market starts to fall, nor can you call the bottom of the market until it starts to climb again. By climb, I mean at least six months of straight inflation matching/beating increases. At the moment, what we have is sliding nominal values in the face of what would, in today's world, be called quite high inflation, particularly compared to the rest of our European neighbours.

From the point of view of competitivity on a global scale, and maintaining - somehow - employment, we cannot let inflation go any further out of control. Relying on it to sort out a fundamentally out of kilter property market is not a good idea if you like cos a lot of people are going to be without jobs in which case the property market is screwed either which way, and then, so is everyone else.

Ultimately, with property values approximately 10 times the average single income, it's probably not sustainable. Come back in 12 months time when a little more of this saga has played itself out. Personally I think it's going to bump up and down a little on the way, but frankly, over the next two or three years, I think it's on the way down. Maybe not the 70% predicted by some parties. I don't exclude it though because what a lot of people don't like to face is that rents did not match property value increases on the way up.

In short, we have ample supply of housing to house people. We just want to much money for it. But you know, if there is more supply than demand, then by and large, prices only go in one direction and regardless of the speed of that slide...the net result is a crash.

A Random Walk

A soft landing is now regarded as prices falling? I'm finding it very hard to keep up with these changing definitions.

Who was it on here said prices won't fall, but they may "ease" 40%?

JupiterKid

My prediction for May 2007 is that house prices will have fallen even faster than they did in April, with big fall in value this coming Autumn after the quiet Summer and that is when the penny will really start to drop for most punters - the "oh ****!" realisation will start to sink in that Ireland's housing market is sliding into a major and prolonged crash. Ireland could be looking at a Japan-style slump in house prices that will go on for up to a decade and see house prices almost halved.

There's just no way that the stratospheric house prices and the reckless credit splurge that fueled such excesses were able to continue. All this talk of "soft landings" is coming from those who want to keep the public in the dark about the real seriousness of the reversal of fortune - ie the lending agencies, estate agencies, property developers and their government buddies. Three of my friends are trying to sell their houses - two of these have had their houses on the market since January, have dropped their asking price and still have not sold. They are getting very worried at this stage.

Open Window

Pa ElGrande wrote:

Nureyev is correct, if you read the article from the first link you posted gave you will see the following paragraph.

Obviously banks don't make this public since it would ecourage a moral hazard among the public.

It seems either way, how delicate or brutish & by what mode they adopt its still a repro behind-closed doors or public sight.

I was reacting to the post in a sense that it was a derivative expression of the "its different this time" or "ireland is different" mentality of denial. perhaps its just even ordinary human presumption. Just the other day, I spoke with a neighbour, as far as he was concerned "the banks wouldn't" let a crash happen! What can you do but nod & smile

kippy

Quote:
Originally Posted by Gurgle
A soft landing is correction of inflated prices by stagnating or slow falling until inflation catches up. If growth continues to exceed inflation, thats not a landing of any kind.

Thats pretty much exactly what I said.

Quote:
Originally Posted by Gurgle
What we're seeing now is a soft landing. Predictably though, lots of people who expected a bubble burst are claiming that this is what they meant

And through it all, one man walked alone... lollers, ah no seriously, I can't wait till you clap your eyes on the yoys for 2007. You represent the majority of Irish people, even the slightly more clued in ones at the moment.

Quote:
Originally Posted by kippy
Jaysus, this is a massive post and I dont intend reading all of it but have read a few pages.

I'd have put in a bit more work into it, if I were you.

Quote:
Originally Posted by kippy
People have been predicting it for the last seven years so they eventually had to get it right

Some people only started talking about it in May last year... I include myself among their numbers.

Quote:
Originally Posted by kippy
however what we are seeing at the moment, I believe, is a natural slowdown which wont have much of an impact on those who have bought their houses primarily for living in (not for rental or investment)

As long as they:
a) remain employed
b) don't have any serious sicknesses
c) don't have children, if they bought in the last three years
d) can keep up with the interest rate rises insitigated by the ECB
Double that if you bought with a partner, plus you'd better pray there are no marital difficulties. But yeah, if you are bound and determined to pay off a property for the next 20-30 years, you probably can. Thats hardly a revelation, nor will win any awards.

Quote:
Originally Posted by kippy
You can talk figures all you like but at the end of the day it is much better to pay towards something you live in and own rather that some landords mortgage even if the value of your house is going down in the short term.

Unless interest payments on a mortgage for a similar property are higher than or equivalent to the rent. In that case you'd be as well off to save and wait a few years.

Quote:
Originally Posted by kippy
Whether we like it or not buying a house in todays environment is far easier (relatively speaking) than it was in the 80's.

Only because the banks are throwing around money like shams in a hilfiger shop, a nasty bit of irresponsible lending which is making international lending institutions distance themselves from Irish banks. They'll have to rein it in whether they want to or not.

Quote:
Originally Posted by kippy
FTB's should, in the next few months find it easier to buy a house due to changes in stamp duty and the seemingly huge amount of houses on the market at the moment.


The changes in stamp duty will affect very very few people, and surprisingly few FTBs as well. Why do you think Bertie promised it?

I could spend the next hour arguing with you but I wont.
What I will say is this.
Do you think that it will be "easier" to buy a house if there is this perceived "crash" in the market? Of course it won't. It'll be much more difficult to get a mortage in the first place.

Saving and waiting a few years is what many people have been doing for the past seven years. They've been shelling out rents in that time as well as seeing house prices rise in a time when interest rates have been low, employment has been good and banks have been willing to lend to them. When you intend to live in a house it wouldnt make ANY difference to you whether the price of the house went down in that time. No difference at all. Again, I highlight the fact that it is the investors who are possibly in the most diffuculty if prices do fall.
Serious illness is something you SHOULD insure against so that you can pay your pmortage if that does happen, as is losing your job. If you wanna have kids you should think of the far more difficult lives our parents and the older generations went through to bring us up and put us through college in order that the country be in the far better state that it is in now. Haveing a couple of kids is nothing nowadays to what it was in years gone by when familes had many mouths to feed and little or no income.

Either way, house prices dont make a blind bit of difference to me. I will never make any money out of property but hope to live in my current house for many a year. If I lose my job, well, theres always others.
Kippy

A Random Walk

kippy wrote:

When you intend to live in a house it wouldnt make ANY difference to you whether the price of the house went down in that time. No difference at all.

I see this line trotted out a lot recently and those who say it are wrong. It makes a hell of a difference whether your "house for life" costs 500k or 250k. It's going to be a lonely existence when you're 65 in your house and you can't afford to retire because you haven't been able to put money into a pension.

You also seem to have this idea that all rent is "dead money". We've gone over this a dozen times on this thread and again if you want to believe in mantras rather than financial realities it's hard to argue.

kippy

I see this line trotted out a lot recently and those who say it are wrong. It makes a hell of a difference whether your "house for life" costs 500k or 250k. It's going to be a lonely existence when you're 65 in your house and you can't afford to retire because you haven't been able to put money into a pension.

You also seem to have this idea that all rent is "dead money". We've gone over this a dozen times on this thread and again if you want to believe in mantras rather than financial realities it's hard to argue.

First of all , I did not say rent is dead money.
But if you've been waiting for the "crash" to happen for the last seven years when you could have realisticilly gotten a mortage when the times were good enough to get it, and you wanted to buy a house, then it was dead money.

I know people who've rented all their lives. Ask them about what happens when they are 65, they dont even have a place to live in. Nice pension but not enough to pay rent or buy a house. Id rather have a house and a standard government pension (although I would be pretty pissed off with myself if I hadnt gotten a pension of my own after working 30+ years as well as a house)
People who buy a house for their pension are again investing. They could be in trouble as that is what matters to them.
Sadly our generation remember or know little of the hardships generations before us went through. If **** happens, we'll have to get through it. It wont be anywhere near as bad as times past.

iguana

kippy wrote:

Haveing a couple of kids is nothing nowadays to what it was in years gone by when familes had many mouths to feed and little or no income.

That's not entirely true. My parents had what they considered to be a huge mortgage IR£24k (with a 16% interest rate) back in the 80's. My dad was a binman so had a pretty crappy wage, so we never had a lot of money. However the mortgage was do-able on one crappy salary.

Nowadays most mortgages need both parents to work. If I was to have children I would either have to lose my salary or pay almost as much as I earn in childcare. We could just about do this now, but in two years (which is when we would like to have kids) our fixed rate ends and I honestly don't think we could afford this house and have children. Luckily for us we don't actually plan on staying in this house.

Pa ElGrande

The soft landing's purpose is to obfusticate from Joe and Mary Public the true extend of the credit bubble in Ireland. House prices will revert to the mean. The real problem is where are we going to get the money to pay it all back when the inevitible credit crunch hits?

Since we don't print our own money anymore monetary deflation in Ireland is the likely outcome.

1. Less properties are going to be built, therefore less money is borrowed.
2. Interest rates are still rising therefore we can borrow less and existing borrowers pay more to the banks.
3. Mortgage securitisation means that more money from mortgage repayments leave our economy, so the money no longer circulates unless they reinvest here. So the banks have less to lend.

On top of this the cost of essential commodities such as food and energy continues to rise, we import the bulk of this, so we have less money in our pockets and more leaving the economy.

I can't see how we can avoid a credit crunch on our present course and this is going to be the most painful phase of the crash.

Calina

The reality is ths - regardless of whether you want it or not, a correction/crash/reversion to mean is increasingly likely now because property prices are so out of whack with basic fundamentals such as salary multiples and/or investment fundamentals. Capital appreciation which is not backed by actual value creation isn't not sustainable without a lot of economic hardship.

Saying that "if the crash comes it'll be harder to borrow money" isn't any argument against a crash coming, it's just along for the ride. I have no truck with it because frankly, we should never have gotten here in the first place.

It does, as a matter of fact, matter how much your property costs even if you do want to live in it forever and ever amen. Anyone with any intelligence at all will want to pay the lowest price, particularly since the money is by and large borrowed. Interest rates are not fixed, hence, the cost of borrowing that money can go up and down. There is this fairy tale in this country that interest rates will never get high. That's a very naive position to take and frankly, all the bank economists who keep claiming that cycle of rises is over should be hung out to dry.

A prudent person will try to keep the amount of money they are borrowing to a minimum and someone who pays 250K for a house rather than 500K for a house is in a far better position financially for the long term than someone who pays 500K because "ah sure I'm going to live here forever, it doesn't matter). Where I live, the year before last, prices went up by 30% plus depending on house time in one year. It's entirely possible that the difference between a person who paid 200K for something and 300K for something is one year or one and a half years. Over the course of a 35 or 40 year mortgage, that year is not a whole lot, but 100K is a lot of money, and the interest on it is substantial too. Over 30years, at 3% - which is below current rates - that's an additional 90,000E to be paid. For many people that equates to 3 years salary. In an environment with rising interest rates and sliding house prices, the difference is even more pronounced.

You could do a lot with that 90,000E, when you think about it. Holidays, flatscreen televisions, the like...it doesn't all have to go to the bank. If people were prudent, it wouldn't be.

However, the fact that quite a lot of people have not been prudent should not necessarily blind people to the following facts which should be writ high in shining letters on debates of this type:

1) Not everyone who didn't buy property in the past 7 years could afford to buy property then either, so telling them they should have done it sometime then is fallacious as an argument and displays a crass lack of understanding of the relation of house prices to single salaries. I couldn't buy a property 7 years ago when I was on 20KE and I can't buy one now that I'm on 37K. Even a one bedroomed apartment is still beyond my reach.

2) Not everyone who argues that a correction is coming is doing it solely on the grounds that they can make a killing on cheap property when the crash comes. My key argument for the past 3 years has been this: a property bubble is not sustainable, and when it starts to deflate it will cause major, major economic hardship. Since many pro-softlanding components are now starting to argue that if we allow the bubble to burst it will cause credit crunches, therefore the bubble must be protected at all costs, grosso modo, it would appear that what no one wanted to admit 3 years ago was totally prescient on my part

3) The mode of property development in this country has been shortsighted at best. We have built a lot of property which is by and large, long term uninhabitable. I hear developers talking about family friendly apartments and how they are building them now and wondering how it is that other cities managed to do this 30 and 40 years ago. We have built a lot of investorboxes that single people can't live in for the long term. In short, we have built to maximise short term profit rather than long term utility. Part of the problem there is regulatory. But people still bought them.

4) The legal framework for many new estates is going to be problematic because of management companies and common area leases. In short, a lot of people don't per se own their houses and apartments, they have occupation rights, but the sort of rights that I would expect to have in my house is not guaranteed, such as the right to erect a sat dish, for example.

Pretending that a soft landing will make all this okay is not a good idea in my view. There are a bundle of 99year based apartments that probably won't even survive out their 99 years. It's pretend economics to say that those engaged in building the too many houses that we don't need will immediately shift over to building roads and railways to service all those houses built in places that we don't really need them.

I happen to be old enough to remember 17% unemployment in the early 90s. What I see is this: it doesn't matter how easy it is to buy a house now, or how easy or hard it will be in three or four years time. What matter is how easy it is to go on paying for those houses that it was easy to buy at 2% base rates when the base rate is 5 or 6 per cent more. You cannot depend on salary inflation because it is not guaranteed to happen. And like interest rates, when times are bad, tax rates rise too.

seahorse

Calina wrote:

I happen to be old enough to remember 17% unemployment in the early 90s. What I see is this: it doesn't matter how easy it is to buy a house now, or how easy or hard it will be in three or four years time. What matter is how easy it is to go on paying for those houses that it was easy to buy at 2% base rates when the base rate is 5 or 6 per cent more. You cannot depend on salary inflation because it is not guaranteed to happen. And like interest rates, when times are bad, tax rates rise too.

Very good points made throughout your post Calina; just wanted to respond that I am old enough to remember the state of this country in the late '70's and all through the '80's when the unemployment rate was far higher than 17% and my grandfather, who worked all his life in CIE, was paying tax to the rate of sixty pence to the pound. God help the spoiled brats spawned here in the last couple of generations if the economy reverts to even half of what it was in those times...

kippy

Ah feck it, I couldnt give a toss.
If times will get tough we'll struggle through. It'll be no worse than times gone past-that my friends is a certainty.
Not everyone is up to their tits in debt, living in something that they cant afford and about to lose their job.

luckat

kippy wrote:

Ah feck it, I couldnt give a toss...
Not everyone is up to their tits in debt, living in something that they cant afford and about to lose their job.

You don't have to be indebted to be hit hard by a recession, though certainly the indebted are hit harder.

During the Famine, to give an analogy familiar to us all, there was high emigration by the middle classes.

At the time, rather than a centralised tax system that paid for social welfare, the locally-collected Poor Law Rates paid in each area for workhouses and provision for the destitute.

As more and more very poor people lost their homes and were thrown on the provision of the Poor Law Rates, those rates rose steeply, and middle-class people found themselves unable to pay. In huge numbers, they sold up their homes and businesses at a loss and emigrated to try for a new start in countries where they could hope to make a living.

In the 1950s, 1960s, 1970s and 1980s, as other posters have pointed out, those who had work paid taxes at high rates to support an enormous level of joblessness.

(While unemployment rates of 17% were admitted by the government, these were fiddled in various ways. Married women, for instance, who had been able to work until the 1930s, were not considered 'unemployed' if they couldn't get work in those decades.)

Yes, people got by, most of them; yes, some people even got rich; yes, sometimes the emigration enriched the country culturally and financially. But we've done all that. We need to be a little smarter now, think our way out of coming trouble.

SimpleSam06

kippy wrote:

Do you think that it will be "easier" to buy a house if there is this perceived "crash" in the market? Of course it won't. It'll be much more difficult to get a mortage in the first place.

But you will, however, own a much larger percentage of the house from the outset.

kippy wrote:

Serious illness is something you SHOULD insure against so that you can pay your pmortage if that does happen, as is losing your job.

Its a common misconception that insurance will permanently cover you in the case of a serious illness or accident - generally speaking, it will only stretch so far.

kippy wrote:

you should think of the far more difficult lives our parents and the older generations went through to bring us up and put us through college in order that the country be in the far better state that it is in now.

Not to downplay the achievements of our parents, but really they had to only worry about mortgages that were 3 or 4 times their salary. As for making the country a better place, that largely happened due to low corporation taxes, American fascination with Irish monuments, and low interest rates sparked off by 9-11.

kippy wrote:

If **** happens, we'll have to get through it. It wont be anywhere near as bad as times past.

I love people who say things like "the only way is up". Believe me, theres always more down...

kippy

I love people who say things like "the only way is up". Believe me, theres always more down...

Can you seriously see in the next number of years unemployment reacing 17%+, Interest rates hitting 12%+, the lower rate of income tax hitting 60%+?
I didnt say things will only get better, just said that if they do go down it wont be as bad as times gone by.

Not to downplay the achievements of our parents, but really they had to only worry about mortgages that were 3 or 4 times their salary. As for making the country a better place, that largely happened due to low corporation taxes, American fascination with Irish monuments, and low interest rates sparked off by 9-11.

Now, fair enough, if what you say is true then WE and especially a few people on an internet messaging board, have absolutely no control over what the future holds- so why discuss it? Everything is based on outside factors.
Our parents had high taxes, unemployment and interest rates to worry about, never mind the mouths they had to feed.

But you will, however, own a much larger percentage of the house from the outset.

Not if you cant get a mortage.

I love all this negativity. Really good. As is the discussion about how to avoid it.
Sadly none of us are in the positions of power in order to make those changes and decisions and even if we were, there are two many outside influences involved in a country the size of Ireland.

Calina, that was a very good and interesting post by the way.

Calina

kippy wrote:

Can you seriously see in the next number of years unemployment reacing 17%+, Interest rates hitting 12%+, the lower rate of income tax hitting 60%+?
I didnt say things will only get better, just said that if they do go down it wont be as bad as times gone by.

But you're taking that as an article of faith - there is no rational reason for being convinced that unemployment will not reach 17%. It could. It has before. The fact that it is just 4 or 5 now does not exclude 17 as a possibility. That being said, both France and Germany which are far healthier economies than ours in many respects are struggling with 9 and 10% unemployment. I don't think it even needs to go to 17 to cause major trouble. As for taxes, I have no wish to see them go back up to 60% - but I don't see it as being impossible with the right combination of economic hardship either. The other massive issue is that a lot of people in this country are heavily, heavily endebted which means that the margin for error in many households is likely to be significantly less than it was 20 years ago when people saved more rather than running up credit card debt and equity withdrawal.

Economies alway run in cycles. The truth is no matter how much you try to avoid that reality, the good times do come to an end temporarily in the way that the bad times come to an end. How you weather the bad times depends on how you behaved in the good times. In this country, a significant number of people ran up huge debt on property for no rational reason other than "property always goes up". Over the long term it tracks inflation. This means that some people will make a very nice profit thank you but some people are heading the opposite way.

kippy wrote:

Now, fair enough, if what you say is true then WE and especially a few people on an internet messaging board, have absolutely no control over what the future holds- so why discuss it? Everything is based on outside factors.
Our parents had high taxes, unemployment and interest rates to worry about, never mind the mouths they had to feed.

This is a cop out. The future can, to some extent be affected by the decisions you make. I engaged with the canvassers who stood on my doorsteps. I have an interest and that is why I do discuss what can be done, what mistakes can be learned from. I also have some control over what my future holds and I don't abdicate responsibility for it. We still have some power of decision ourselves, we are not passive beings who were forced to buy or sell property or have or not have children. What matters is how you respond to those outside factors. Currently, I'd have to say that most of the response in this country is a total abdication of responsibility but it doesn't have to be that way.

Are you going to tell your politicians that the banks need to be regulated more effectively? Did you when you had the chance?

kippy wrote:

I love all this negativity. Really good. As is the discussion about how to avoid it.
Sadly none of us are in the positions of power in order to make those changes and decisions and even if we were, there are two many outside influences involved in a country the size of Ireland.

It's when I see statements like this I wonder if the country has any hope at all. This is not negativity, it's reality. If you can't face it and if collectively the country can't (and shows worrying such signs) then the problems are going to be a whole lot worse than they might be with some forward planning. The truth is you are in a position to make certain changes to sort things out for yourself. I have no idea what your situation in life is and frankly I really don't care too much for the details. But assuming you can do nothing at a macro level doesn't preclude you from doing something at a micro level. Ultimately people in this country could perhaps stop borrowing so much money, and start paying off debts faster than they hitherto have done, for example. That would put those people on a micro scale better off then they are now and would alleviate some of the problems they may face in the future if the economy does grind to a halt.

But hell, it's easier to say "it's outside our control" though, isn't it?

kippy

I amn't up to my ass in debt. I have a decent job.
I feel I have done my bit for myself to protect from the alleged upcoming hard times.
Theres little else I can do. We've had some good times. We'll have some bad times - as you say this is how it works.
Swings and roundabouts. It all evens out. And I dont believe I can have any more influence or impact on how the next 10+ years pan out. None of us here have any influence on how the multinationals will react or how the european central bank will react. OUTSIDE OF OUR CONTROL.
I've told politicians my concerns when I had my chance and voted for those I believed in. This does not mean I will have any impact on what happens in the next 5 years.

Pa ElGrande

kippy wrote:

Now, fair enough, if what you say is true then WE and especially a few people on an internet messaging board, have absolutely no control over what the future holds- so why discuss it? Everything is based on outside factors.

Why dicuss it? Hard to believe but this thread and others on askaboutmoney.com and thepropertypin.com do influence public opinion and they are followed keenly by the media and property vested interests. The media has on several occasions echoed the comments on these threads in newsprint. Animo productions who did the recent future shock program used them to research material for their production.
What's driving Bank of Ireland's paranoia about talking ourselves into a recession? If this was possible it would have happened 6 years ago and David McWilliams exiled to Tory Island off Donegal. No. The real reason is we are seeing through their manipulation, ripping their credibility to shreds and they don't like it. Quite a few people on this thread and others have put together sound aguments based on available data as to why the property market/credit bubble will collapse and what its affects will be. Since they have not been able to discredit the data, those with a vested interest in keeping the gravy train going very often resort to trying to to discredit the messenger, and BoI's attacks should be seen in this light.

"First they ignore you, then they laugh at you, then they attack you, then you win."
Mahatma Gandhi

SimpleSam06

Pa ElGrande wrote:

"First they ignore you, then they laugh at you, then they attack you, then you win."
Mahatma Gandhi

If you start wearing diapers and little roundy spectacles, do post up a picture...

Pa ElGrande

SimpleSam06 wrote:

If you start wearing diapers and little roundy spectacles, do post up a picture...

I shared a house once with people from the Punjab and I've heard enough Gandhi jokes, thank you.

miju

Pa ElGrande wrote:

Why dicuss it? Hard to believe but this thread and others on askaboutmoney.com

still cant believe I got a site ban from Ask About Money for honest to god simply starting that thread though its still the most popular thread I've ever started and ever seen on a forum

imho the ultimate demise of that thread marked the beginning of the end of the property market. there are were alot of "professional finacial" people on that site and who were involved in that thread rubbishing claims of a downturn in july of last year andwhen they'reargumens / reasoning were shredded by "ordinary folk" quickly followed up by the very first example of ahouse price drop in Ireland on that thread further rubbishing the "experts" it was shut down and all property price discussion banned on the site.

even though its allowed again now its confirned to the one thread and very heavily moderated with posts disapearing as within minutes and only regular posters with over 100 posts elsewhere on AAM allowed to post in it. as an aside i always thought it funny that one of the main reasons they closed the thread was that they felt some people where only posting in that thread and not elsewhere on the site.

lollers can you imagine Boards handing out bannings for people not using every section of a site

chump

miju wrote:

still cant believe I got a site ban from Ask About Money for honest to god simply starting that thread though its still the most popular thread I've ever started and ever seen on a forum

imho the ultimate demise of that thread marked the beginning of the end of the property market. there are were alot of "professional finacial" people on that site and who were involved in that thread rubbishing claims of a downturn in july of last year andwhen they'reargumens / reasoning were shredded by "ordinary folk" quickly followed up by the very first example of ahouse price drop in Ireland on that thread further rubbishing the "experts" it was shut down and all property price discussion banned on the site.

even though its allowed again now its confirned to the one thread and very heavily moderated with posts disapearing as within minutes and only regular posters with over 100 posts elsewhere on AAM allowed to post in it. as an aside i always thought it funny that one of the main reasons they closed the thread was that they felt some people where only posting in that thread and not elsewhere on the site.

lollers can you imagine Boards handing out bannings for people not using every section of a site

Yea it was a pathetic decision by the website with no real logic behind it.

I suspect that the owner may have become disappointed that his baby was being used as a medium to discuss a topic that was at odds to the common consensus, and his.

Sure if you've read enough of that forum you can see how absolutely obtuse the man is to anyone disagreeing in the slightest with his opinion. Remember the 'rip-off' thread for example.

Also it probably wasn't good business for him to have a website that was almost proclaiming a property crash long before the press started to get wind of it. Afterall it was only time before one of his appearances on the radio would turn to the topic of property prices and he may have felt the thread on his site represented his views.

Do-more

Just came across this article in Accountancy Ireland Magazine by Jim Stafford which was published in December 2006.

It raises a number of points relevant to what has been discussed here over the last couple of days.

Upon qualifying in 1987 I took up a two year contract with a New York based firm of accountants. During my time there I recall one of the firm’s corporate bankruptcy partners stating one day that “The average American family is 6 weeks away from bankruptcy”. I queried his statement, and asked how one of the wealthiest nations in the world could have such a situation. He explained that the average American family at that time was heavily in debt with mortgages, credit card debt and car loans, and had very little savings. He said that if the bread winner in each family lost their jobs, they would be unable, within a period of 6 weeks, to pay their bills as they fell due. Being unable to pay your debts as they fall due is a classic definition of bankruptcy. 20 years later, looking around the present Irish economy, I can see parallels.

It is clear that the growing levels of personal debt have made us more sensitive to interest rate changes.
Rising interest rates and a down turn in the economy create a classic “pincer” movement, which will trap many people in bankruptcy.

The “pincer” movement referred to above will be exacerbated if it transpires that the explosive growth in property values was really a massive pyramid selling scheme orchestrated by the lending banks – overseen by the Central Bank! As with any pyramid scheme, the last ones in lose the most.

TCollins

Just checking back to make sure the property bubble is still bursting
Is it still like a long wet fart rather than an explosive scutter.
Or is it one of those holdy in kind of spasmodic farts. Slow but small release of pressure but no damage done to the underpants.
Thats good news to me
Might by soon if im not covered in sh!te.

Pa ElGrande

TCollins wrote:

Just checking back to make sure the property bubble is still bursting
Is it still like a long wet fart rather than an explosive scutter.
Or is it one of those holdy in kind of spasmodic farts. Slow but small release of pressure but no damage done to the underpants.
Thats good news to me
Might by soon if im not covered in sh!te.

Just be ready to duck when the brown stuff hits the fan over your head

Anyways here are some facts:

• Housing inventories are at record levels
• Households are already dedicating a record percentage of their income to mortgage payments.
• Banks are tightening mortgage-lending standards.

So what will happen to the Irish housing market? For normal markets, these facts - excess supply, falling demand - would foreshadow falling prices.
But, for housing, prices are sticky because sellers tend to want a price close to recent sales in their neighborhood, and buyers, sensing prices are declining, will wait for even lower prices.

But sticky doesn't mean stuck. Prices are now falling by most measures, and will probably continue to fall. However, in a typical housing bust, prices tend to fall slowly over several years - so buyers wait, and transaction volumes also decline.

VoidStarNull

kippy wrote:

... you should think of the far more difficult lives our parents and the older generations went through to bring us up and put us through college in order that the country be in the far better state that it is in now.
Kippy

The point about hard times being nothing new is well made. One interesting
difference between our parents' experience and ours is that they were able
to buy houses without taking on the level of debt that we have, but they
could not afford a well-heeled lifestyle. My dad told me that he bought
his house (in a good area of Dublin) for about 6000 pounds in the 1960s.
He made a down payment of 20% of the price, which represented 10 years
of savings. After moving in, my parents could not afford to buy furniture
and for the first year they had to use the back-seat of their car (which was
removable) as a sofa. They never went to restaurants and they never
took foreign holidays. They finished paying the mortage in the late '90s.

Totally different experience from our generation. When I bought my house
I was the same age as my father was when he bought his, but there
is no way I could have bought a house in his neighbourhood, and I had to
go way further out of town. I took on a load of debt which seemed laughable
at the time (but now seems very reasonable!), I literally laughed at the
banker's draft I handed over to the seller. But I was able immediately to
fully furnish the house and continue going out to restaurants etc.

The difference is cheap credit. Cheap credit contributed to the high house
price I had to pay. It also made it affordable, and allowed me to continue
my well-heeled lifestyle.

Cheap credit has been a global (not just Irish) phenomenon over the
last decade. Some economists think that it is justified by financial
innovations and by the move to independent central banking
(i.e. governments gave up control of central banks, leading to
better monetary policy). Other economists believe, on the contrary, we
are in the grips of a global credit bubble, caused by special circumstances
(deflation in Japan, anti-deflation in the US after the 1990's tech bubble, and
Chinese mercantilism), and which is now set to unravel... with unfortunate
consequences.

We may be in for hard times just like our parents, but of a different kind.
We'll have to cope, just like they did
We'll manage somehow

SimpleSam06

VoidStarNull wrote:

We'll manage somehow

Well either that or we'll devolve into some sort of a mad max scenario. I've dibs on Pa's ghandi suit for ruling the highways in!

Gurgle

miju wrote:

whats your actual explanation for this soft landing being acheived when it has never been done bfore Gurgle so I'll again call you on it seeing as how you have fudged on this question so far and you will prob dodge this one too.

Explanation for what?
The fact that the bubble hasn't burst?

I'll explain my reasoning again then:
1. People need somewhere to live.
2. People aren't going to sell a property for less than they paid for it, if theres any possible way they can avoid it.

A bubble bursts when people offload holdings because they realise they are worthless and not going to gain any value. Ever.

Example - dotcom bubble

Houses failing to sell are houses which are priced as though there has been no slowdown. Estate agents check the sale price for a similar house last year and add 10%-15%. House doesn't sell, so they slowly bring the price down until either it sells or the vendor says they'll take it off the market.

As for the soft landing - My understanding of this term is that there will be no catestrophic decrease in prices. The prices peak, drop a bit and level off.

You want mathematical theory?

Basic system dynamics show that any underdamped system overshoots its steady-state value, oscillates a bit and then levels off. The rate of rise in the last 10 years is a classic underdamped system.

I believe the peak of the overshoot was last year, and we're currently in the oscillations.

As for a bursting bubble - if it started to burst last year, then its gone now. A bubble doesn't take years to burst.

A Random Walk

Gurgle wrote:

A bubble bursts when people offload holdings because they realise they are worthless and not going to gain any value. Ever.

Before you develop these fantastical definitions any further, you should go read what the definition of a "financial bubble" or "economic bubble" is. It would help avoid confusion if we at least understood the basic terminology.

Here's Wikipedia

An economic bubble (sometimes referred to as a "speculative bubble", a "market bubble", a "price bubble", a "financial bubble", or a "speculative mania") is “trade in high volumes at prices that are considerably at variance from intrinsic values”.[1] The intrinsic value is a theoretical calculation that aims at reflecting the fair value by taking into account hypotheses of future returns and risks.