Irish property prices "floating on air" ?

BenjAii

There seems to be speculation that Irish banks are basically allowing loans to property developers to "tick over". I.e the developers do not have the income coming in to repay on schedule, but the banks are allowing them a grace period rather than force a fire sale.

It's striking that despite a similar (if not greater ?) house price bubble, we have yet to see the falls that have occurred in US/UK markets.

To what extent do you think this is because the banks leniency is allowing developers to sit on their ever growing portfolios of empty property, that are not selling at current asking prices and allowing them to support the market at its current level ?

Baird

BenjAii wrote: »

There seems to be speculation that Irish banks are basically allowing loans to property developers to "tick over". I.e the developers do not have the income coming in to repay on schedule, but the banks are allowing them a grace period rather than force a fire sale.

It's striking that despite a similar (if not greater ?) house price bubble, we have yet to see the falls that have occurred in US/UK markets.

To what extent do you think this is because the banks leniency is allowing developers to sit on their ever growing portfolios of empty property, that are not selling at current asking prices and allowing them to support the market at its current level ?

To be fair the banks are doing their best to try and soften the landing as a
hard property crash would automatically mean a long and deep recession.
Property prices have a long way to go but they are still down 20% and higher
in some areas. The reason we havent seen the crashes that have been seen
in the US for example is that we have no subprime exposure to speak of
and as a result dont have the incredible bad debt levels they have.
As a result our property crash HOPEFULLY wont be as severe.
Fingers crossed

Darragh29

Baird wrote: »

To be fair the banks are doing their best to try and soften the landing as a
hard property crash would automatically mean a long and deep recession.
Property prices have a long way to go but they are still down 20% and higher
in some areas. The reason we havent seen the crashes that have been seen
in the US for example is that we have no subprime exposure to speak of
and as a result dont have the incredible bad debt levels they have.
As a result our property crash HOPEFULLY wont be as severe.
Fingers crossed

I honestly can't believe what I'm reading here. The banks are the cause of this problem, chasing for the last few years a property circus act that everyone knew wasn't sustainable in the medium term never mind long term!

Subprime or no subprime, if thousands of people continue to lose their jobs every month as has been happening for the last 12 months, and cannot pay their mortages, the outcome will be the exact same, people will be unable to pay their mortgage, and you won't see the banks that you claim "are doing their best to try to soften the landing", rolling over personal mortgages!

We haven't got a soft landing, that was all utter rubbish, a soft landing was where prices tailed off and growth still continued, which is what we thought might happen a year or two ago, or so the economists in all of our banks were telling us!!!

What we actually got is a property crash, where there have been massive job losses in the industry & negative equity! Have you been living on another planet for the last 12 months??? A soft landing, will you stop making me laugh ffs! :rolleyes:

silverharp

Agreed D29 , the only thing missing is the mark to market, All crashes have the same "DNA" and all the banks are doing is delaying the bottom of the cycle, the Irish property market is no different.
Price is all that matters and I could only foresee a bottom when prices are a screaming buy, I'm talking a rental yield of 7-9% so do the math
The plus side is that when it finishes, property will be affordable which will increase the poductivity of the country.

Victor

The question is "How much air?"

Baird wrote: »

The reason we havent seen the crashes that have been seen in the US for example is that we have no subprime exposure to speak of and as a result dont have the incredible bad debt levels they have.

Rather, we don't have the same sub prime problem - lots of developers paid silly money over the last few years to buy land that they can't now sell.

gurramok

Victor wrote: »

The question is "How much air?"

Rather, we don't have the same sub prime problem - lots of developers paid silly money over the last few years to buy land that they can't now sell.

And they based alot of their loans to those developers on 2006 peak values which in some cases have now plummeted to at least half hence the looming bad debt which is causing the bank shares to be worthless.

Baird

Darragh29 wrote: »

I honestly can't believe what I'm reading here. The banks are the cause of this problem, chasing for the last few years a property circus act that everyone knew wasn't sustainable in the medium term never mind long term!

Subprime or no subprime, if thousands of people continue to lose their jobs every month as has been happening for the last 12 months, and cannot pay their mortages, the outcome will be the exact same, people will be unable to pay their mortgage, and you won't see the banks that you claim "are doing their best to try to soften the landing", rolling over personal mortgages!

We haven't got a soft landing, that was all utter rubbish, a soft landing was where prices tailed off and growth still continued, which is what we thought might happen a year or two ago, or so the economists in all of our banks were telling us!!!

What we actually got is a property crash, where there have been massive job losses in the industry & negative equity! Have you been living on another planet for the last 12 months??? A soft landing, will you stop making me laugh ffs! :rolleyes:

Darragh do me a favour and re read what i wrote.
I said they were trying to soften the landing i didnt say we were getting a soft landing.
Your posts are sensationalist and have no substance in them to back up
your points.
You are speculating on mortgage defaults when you have no clue what the implications of mortgage defaults are.
Why could we not follow Spains example and say anyone to lose their job doesnt have to make full mortgage repayments for 2 years?
Normal recessions last 11 months or so ive been told by people here so why
not just wait it out?
There are lots of options, you seem to like stressing the negatives and then
adding your own even more negative slant to them. Its like trying to talk
about economics with the business editor of the Sun. Be sensationalist all
you like but ultimately you are not fully aware of the situation and what
drives international business cycles. We are the victim of the global crisis,
we are not and will never be again, in control of our own destiny.

Oh and to the guy that subprime exposure is the same as residential
development exposure you are simply wrong.
As an example residential mortgages for BOI are 65bn roughly
Residential development loans are about 15bn
I would much prefer to have a high bad debt charge on 15bn rather than a
high bad debt charge on 65bn wouldnt you?
The big banks in the US are seeing the bad debts go through the roof
on their residential mortgage books which are huge, our banks are seeing
the bad debt charges baloon on the much smaller residential dev books.
Thats the difference!

silverharp

Baird wrote: »

There are lots of options, you seem to like stressing the negatives and then
adding your own even more negative slant to them. Its like trying to talk
about economics with the business editor of the Sun. Be sensationalist all
you like but ultimately you are not fully aware of the situation and what
drives international business cycles.

Anybody looking at this needs to review previous business cycles and use some metrics to see how this present cycles compares and where we are in the cycle, otherwise you are left either listening to shills from various industries/gov or listening to extreme doomer rethoric.

Darragh29

Baird wrote: »

Darragh do me a favour and re read what i wrote.
I said they were trying to soften the landing i didnt say we were getting a soft landing.
Your posts are sensationalist and have no substance in them to back up
your points.
You are speculating on mortgage defaults when you have no clue what the implications of mortgage defaults are.
Why could we not follow Spains example and say anyone to lose their job doesnt have to make full mortgage repayments for 2 years?
Normal recessions last 11 months or so ive been told by people here so why
not just wait it out?
There are lots of options, you seem to like stressing the negatives and then
adding your own even more negative slant to them. Its like trying to talk
about economics with the business editor of the Sun. Be sensationalist all
you like but ultimately you are not fully aware of the situation and what
drives international business cycles. We are the victim of the global crisis,
we are not and will never be again, in control of our own destiny.

Oh and to the guy that subprime exposure is the same as residential
development exposure you are simply wrong.
As an example residential mortgages for BOI are 65bn roughly
Residential development loans are about 15bn
I would much prefer to have a high bad debt charge on 15bn rather than a
high bad debt charge on 65bn wouldnt you?
The big banks in the US are seeing the bad debts go through the roof
on their residential mortgage books which are huge, our banks are seeing
the bad debt charges baloon on the much smaller residential dev books.
Thats the difference!

The rate of unemployment now is nothing less than alarming. I've two friends who have girlfriends who were made redundant in the last week. I've business colleagues who have let around 40 people go between them in the last month. I'm not being sensationalist at all, you just don't seem to have a grasp on the problem on the ground. I'm sure it doesn't look too bad from whatever paperwork you are looking at. Grand, but I don't see the need to knock someone who might be standing a closer to the front line than you are...

I'm seeing all this going on around me, I see businesses that should not be failing or letting people go, pulling down shutters, these businesses cannot be bailed out, but their banks can, and even after they are bailed out, they will still not do what they are there to do, which is lend to businesses, because right now, our government have yet to grow a pair and take control of the situation. The first thing that should have happened at or immediately after the bank guarantee scheme was out in place was the banking management should have been changed.

20goto10

Darragh29 wrote: »

The rate of unemployment now is nothing less than alarming. I've two friends who have girlfriends who were made redundant in the last week. I've business colleagues who have let around 40 people go between them in the last month. I'm not being sensationalist at all, you just don't seem to have a grasp on the problem on the ground. I'm sure it doesn't look too bad from whatever paperwork you are looking at. Grand, but I don't see the need to knock someone who might be standing a closer to the front line than you are...

I'm seeing all this going on around me, I see businesses that should not be failing or letting people go, pulling down shutters, these businesses cannot be bailed out, but their banks can, and even after they are bailed out, they will still not do what they are there to do, which is lend to businesses, because right now, our government have yet to grow a pair and take control of the situation. The first thing that should have happened at or immediately after the bank guarantee scheme was out in place was the banking management should have been changed.

Personally I don't see any of it, I'm just reading about it for now. I guess some industries are not as affected as others. I see people with high mortgages but also high wages. And I see people with plenty of cash in the bank holding out either saving up their 25% deposit they now need to move home or simply holding out because the rates are good and its very much save for a rainy day territory. But I'm not denying people are getting laid off - I'm just saying I don't see any of it, for now anyway.

As for letting the developers off the hook, what I've heard is that they only have to pay back the interest on their loans. Seems like a smart move to me from the banks. They'll still want their money back eventually but right now getting anything back is good enough.

Also where's the evidence to suggest that people who lose their jobs are not given any leeway with their mortgage repayments? As far as I'm aware its very very difficult for the banks to reposses a home, especially when the person is temporarily unemployed.

Darragh29

20goto10 wrote: »

Personally I don't see any of it, I'm just reading about it for now. I guess some industries are not as affected as others. I see people with high mortgages but also high wages. And I see people with plenty of cash in the bank holding out either saving up their 25% deposit they now need to move home or simply holding out because the rates are good and its very much save for a rainy day territory. But I'm not denying people are getting laid off - I'm just saying I don't see any of it, for now anyway.

As for letting the developers off the hook, what I've heard is that they only have to pay back the interest on their loans. Seems like a smart move to me from the banks. They'll still want their money back eventually but right now getting anything back is good enough.

Also where's the evidence to suggest that people who lose their jobs are not given any leeway with their mortgage repayments? As far as I'm aware its very very difficult for the banks to reposses a home, especially when the person is temporarily unemployed.

Businesses collapsing due to cash flow/capitalisation problems is capitalism at work in its most classic form. It is clearly an insane situation we have now, whereby the institutions that have made the most monetary gain by far from the capitalist system, are also protected from the most fundamental tenet of free capitalism, which is that if you run out of cash, game over, please play again.

Dob74

20goto10 wrote: »

Personally I don't see any of it, I'm just reading about it for now. I guess some industries are not as affected as others. I see people with high mortgages but also high wages. And I see people with plenty of cash in the bank holding out either saving up their 25% deposit they now need to move home or simply holding out because the rates are good and its very much save for a rainy day territory. But I'm not denying people are getting laid off - I'm just saying I don't see any of it, for now anyway.

As for letting the developers off the hook, what I've heard is that they only have to pay back the interest on their loans. Seems like a smart move to me from the banks. They'll still want their money back eventually but right now getting anything back is good enough.

Also where's the evidence to suggest that people who lose their jobs are not given any leeway with their mortgage repayments? As far as I'm aware its very very difficult for the banks to reposses a home, especially when the person is temporarily unemployed.

Well its true banks dont run in and reposses homes unless you have not been paying for a few years. If you lose your job they will add the payments you missed on to the capital. That was working fine when the price of houses was going up. It was a one way bet. Now with the prices going down everyone is in trouble. The banks are worthless because everyone there balance sheets are fiction. If they are taken over by a foreign equity firm it could be a real blood bath. The nicey nicey approach will be gone.
House prices should be three times your yearly pay. Its now ten times yearly pay. Prices are coming down and they will be half of what they were at the peak.

Économiste Monétaire

Dob74 wrote: »

The banks are worthless because everyone there balance sheets are fiction.

Dob74 wrote: »

Prices are coming down and they will be half of what they were at the peak.

A reputable source, or a link to your professional assessment of the situation, to support your assertions of apparent fact would be welcome; and how exactly you came to the 50 per cent reduction in peak value would be interesting to see.

silverharp

UCD_Econ wrote: »

A reputable source, or a link to your professional assessment of the situation, to support your assertions of apparent fact would be welcome; and how exactly you came to the 50 per cent reduction in peak value would be interesting to see.

if you click on the link there is a graph of house prices from the 70's in the UK, if there is a reversion to mean and who'd bet against it, the downside is considerable, I cant see irish property prices resisting a global slump

http://globaleconomicanalysis.blogspot.com/2008/01/global-property-bubbles-to-implode-in.html

Économiste Monétaire

silverharp wrote: »

if you click on the link there is a graph of house prices from the 70's in the UK, if there is a reversion to mean and who'd bet against it, the downside is considerable, I cant see irish property prices resisting a global slump

http://globaleconomicanalysis.blogspot.com/2008/01/global-property-bubbles-to-implode-in.html

I never said anything about resisting a slump, I never mentioned slump. I'm asking for sources to dub74's two assertions that I quoted, about the Irish market falling exactly 50 per cent, not the British property market, and stating unequivocally that Irish banks are worthless. Read what I actually wrote, silverharp.

silverharp

UCD_Econ wrote: »

I never said anything about resisting a slump, I never mentioned slump. I'm asking for sources to dub74's two assertions that I quoted, about the Irish market falling exactly 50 per cent, not the British property market, and stating unequivocally that Irish banks are worthless. Read what I actually wrote, silverharp.

fair enough, its obvious he pulled the numbers out of his head, however he did make the comment that loan multiple had got out of hand which is a reasonable observation to form a conclusion that prices must fall, by what % is anyones guess

Dob74

UCD_Econ wrote: »

A reputable source, or a link to your professional assessment of the situation, to support your assertions of apparent fact would be welcome; and how exactly you came to the 50 per cent reduction in peak value would be interesting to see.

Unfortunately the only evidence I have is anecdotal. A friend was selling a rental property for 630k. He has it down to 350k on the qt and still no takers. He did his house up and a nieghbouring house not done up, went for 290k. Since he bought in the late 90's he is ok but I pity those who bought in the last 5 years. Since the buy-to-let market has gone from 9131 in dec03 to 33293 in sept08(from the central bank stats). Its plain to see why the market is collapsing. A nearly 400% increase in the volume of rental houses. Can only lead to one thing. Since the correct selling price for houses is not recorded anywhere its difficult to find out there real value. Most banks give out stats but can these be trusted? I dont think so.

Économiste Monétaire

Dob74 wrote: »

Unfortunately the only evidence I have is anecdotal.

Anecdotal evidence alone is justification for saying that all banks are worthless, and that the average price of a property will fall exactly 50 per cent? Those are interesting statistics from the CB (just an observation: an increase from 9131 to 33293 is a near 265% increase, not a near 400% increase). My request was an effort to see where people, who are claiming to know how much the property market will fall by since peak value, are getting their figures from.

With reference to the earnings to mortgage ratio, are you using the average value of a home in the entire country to the average family income? Or the average family income to a specific geographic are? (e.g. Dublin county)

asdasd

A reputable source, or a link to your professional assessment of the situation, to support your assertions of apparent fact would be welcome

One assumes by reputable source you dont mean professional economists. Speaking as an engineer; were people in my profession to be as wild-eyed in their forecasts as economists, and/or just plain wrong in their assessments of future events ( i.e. the safety of a bridge), they would be fired, sued, or jailed.

Take Dan McLaughlin. This time last year we were in for a 4% increases in GDP. i think he extrapolated from last year's 4 %. see what he did there? The thing is my a tea-leaf or entrails reader could that that and be as accurate, or better.

McLaughlin wasn't an outlier either.

So lets cut the professional economist crap, unless the more wild eyed forecasts are subject to proper peer review you are not scientists. Nor if you are always wrong.

BenjAii

asdasd wrote: »

One assumes by reputable source you dont mean professional economists. Speaking as an engineer; were people in my profession to be as wild-eyed in their forecasts as economists, and/or just plain wrong in their assessments of future events ( i.e. the safety of a bridge), they would be fired, sued, or jailed.

Take Dan McLaughlin. This time last year we were in for a 4% increases in GDP. i think he extrapolated from last year's 4 %. see what he did there? The thing is my a tea-leaf or entrails reader could that that and be as accurate, or better.

McLaughlin wasn't an outlier either.

So lets cut the professional economist crap, unless the more wild eyed forecasts are subject to proper peer review you are not scientists. Nor if you are always wrong.

Good point, but even peer review wouldn't turn economics into a science, it's a social science, describing human behavior.

Whilst I would agree economists on the whole have a huge credibility problem; IMHO, but I can't think of any other academic discipline where I would trust least what people say at face value.

That makes it all the more important to fully engage our critical thinking faculties & demand people support assertions with facts, albeit, what is so often presented as "fact" in economics is merely opinion.

Économiste Monétaire

asdasd wrote: »

One assumes by reputable source you dont mean professional economists. Speaking as an engineer; were people in my profession to be as wild-eyed in their forecasts as economists, and/or just plain wrong in their assessments of future events ( i.e. the safety of a bridge), they would be fired, sued, or jailed.

Take Dan McLaughlin. This time last year we were in for a 4% increases in GDP. i think he extrapolated from last year's 4 %. see what he did there? The thing is my a tea-leaf or entrails reader could that that and be as accurate, or better.

McLaughlin wasn't an outlier either.

So lets cut the professional economist crap, unless the more wild eyed forecasts are subject to proper peer review you are not scientists. Nor if you are always wrong.

Asking for a source for wild assumptions that all banks are worthless, rather than gut feelings, is grounds to be met with ramblings (about comparisons between engineers and economists) and the idea that there are no professional economists?

Engineers: the new ubiquitous taxi man economist? Economists are always wrong, the concept of a science being that which investigates natural phenomena is also wrong, there are no peer reviewed economics journals, there are no criticisms between economists over forecasts, the actions of the components of bridges and the actions of human beings are of the same degree of homogeneity, pop economists represent the entire field, et cetera. Yawn.

travellerI

In my mind there are two types of economists. Academic economists and vested interest economists.

For the last ten years until the recession hit we heard the likes of Austin Hughes, Dan McLoughlin etc, all who work for financial institutions putting a postive spin on the economy, the property market and the capitalisation of the institutions they worked for. A particular mantra of theirs was the soft landing in the property market. This has led to a situation where Irish people's private debt per capita is the largest in the world - I think. We probably also will have the most in negative equity per capita soon.

Some people such as Morgan Kelly, Alan Ahearne knew this was bull**** and said so. Academic Economists such as those were accused of talking down the economy. We are now listening to these guys but for many it is too late.

Heard much lately from Austin, Dan et al on the soft landing in the housing market. I know. Lets blame it all on the credit crunch.

asdasd

Economists are always wrong

Economists can't predict recession. which is not that useful. That is what they should be able to do at the most trivial. Like meteorologists who can predict weather.

the concept of a science being that which investigates natural phenomena is also wrong,

Not sure what that means..

there are no peer reviewed economics journals

I didn't say there weren't any, i suggest that all forecasts should be peer reviewed. Read what I said again.

there are no criticisms between economists over forecasts,

There are criticisms between me and my sister over economic forecasts. Yours should be more accurate. A proper applied science would have criticisms around the edges, about the severity of a recession, about the severity of a downturn when a bubble is evident not on the existence of a bubble.

the actions of the components of bridges and the actions of human beings are of the same degree of homogeneity

If humans are too complex to model then what is the point of your science? And the modelling is just of one type of activity, economic activity. Lots of things are complex. the weather is complex and meteorologists sometimes get it wrong. They don't however predict snow in July.

pop economists represent the entire field, et cetera.

McLaughlin is "pop"? I hear that kind of argument from astrologers. Does he have a degree? Is he not quoted regularly? Is he not in the employ of an organization, and well paid, as a professional? If he is bogues subject him to peer review before he comments.

Engineers: the new ubiquitous taxi man economist

Engineers. Real applied scientists. Economics - simple social scientists with no predictive power over the economy and very very simple mathematical models. Try not to patronise us, old boy.

Économiste Monétaire

You’re digressing into a debate on the economics profession, and assuming two professions are perfectly comparable. You’re doing that without experience of the field, which bemuses me.

asdasd wrote: »

Economists can't predict recession. which is not that useful. That is what they should be able to do at the most trivial. Like meteorologists who can predict weather.

Economists should be able to predict recessions to the very day, hour, minute, second? Of course economists can predict a recession will occur; here’s a prediction for the next 30 years: There will be a boom, then there will be a recession, then there will be a boom, and another recession. After a boom, predicting that there will be a recession is possible by anyone, it’s called the business cycle.

The question you should be asking is not can we predict a recession, but, do we know the most progressive steps to dissipate the effects of a recession. For that, I need say nothing more than economics ≠ political economy.

asdasd wrote: »

Not sure what that means..

You were questioning the idea of economists as scientists. If they are actively investing the field, which is itself a science, then I don’t see your argument. I provided a definition of a science for that purpose. Every other science has active participants that are infallible?

asdasd wrote: »

I didn't say there weren't any, i suggest that all forecasts should be peer reviewed. Read what I said again.

Is every engineering project peer reviewed in a journal? Having every forecast rigorously peer reviewed in a journal would obviously not be feasible. It is up to the reader to intelligently interpret that which they are presented. You can blame the general media for focusing on the sensationalist pieces. A forecast is taking available data and interpreting it, you cannot factor in every event, obviously.

If you were to require all projections to be peer reviewed the process would mean that by the time the data was actually released, it would be near-useless for active policy analysis. Lags are one of the key arguments against discretionary fiscal policy currently being advocated around the world. You want to extend those lags.

asdasd wrote: »

There are criticisms between me and my sister over economic forecasts. Yours should be more accurate. A proper applied science would have criticisms around the edges, about the severity of a recession, about the severity of a downturn when a bubble is evident not on the existence of a bubble.

Is this about people claiming that there would be a ‘soft landing’? I know of very few people who are active in monetary economics research that believe an asset bubble can have a, so called, soft landing. Are all members of the physical sciences in agreement on every subject? No.

asdasd wrote: »

If humans are too complex to model then what is the point of your science? And the modelling is just of one type of activity, economic activity. Lots of things are complex. the weather is complex and meteorologists sometimes get it wrong. They don't however predict snow in July.

I’m drawing attention to the relative lunacy of comparing natural effects on a bridge and how an entire economy interacts in a dynamic fashion. The structure itself is inert, nature is dynamic. An economy is not an inert organism.

asdasd wrote: »

McLaughlin is "pop"? I hear that kind of argument from astrologers. Does he have a degree? Is he not quoted regularly? Is he not in the employ of an organization, and well paid, as a professional? If he is bogues subject him to peer review before he comments.

And where is he quoted? Any projections would be irrelevant before the full credit crunch evolved. That’s called dynamic events that are unforeseeable, think of it as a meteor hitting your bridge. Highly unlikely? Yes. Unable to factor into a model? Yes. Why didn’t you see that meteor hitting the bridge? Bad and useless engineer.

asdasd wrote: »

Engineers. Real applied scientists. Economics - simple social scientists with no predictive power over the economy and very very simple mathematical models. Try not to patronise us, old boy.

Ahh, the amusement of someone complaining that economics is not mathematical enough. I’m assuming you’ve completed graduate level modules in economics to make that statement and can justifiably make comparisons based on sound knowledge. My model is well bigger than yours, et cetera. My statement was comparing professions looking in at economics and believing that it 'should' be able to do this or that, and believing it's all blatantly obvious.

asdasd

hat’s called dynamic events that are unforeseeable, think of it as a meteor hitting your bridge. Highly unlikely? Yes. Unable to factor into a model? Yes. Why didn’t you see that meteor hitting the bridge? Bad and useless engineer.

Thats ridiculuous. The reasons for the credit crunch are not Acts of God but acts of human beings as economic actors. That is exactly the kind of thing you should be able to predict. It is not even the same as the bridge withstanding the most powerful storm imaginable ( which is achievable) as the storm is an Act of God, albeit one subject to prediciton. The credit crunch is not an act of god, but of humans. It ia an act caused by myriad human actions, and financial shenanighans. Your science should have predicited this, and cried foul when all the credit default swapping was going on.

Économiste Monétaire

The causes of this credit crunch have never occurred before, they are new(ish) financial instruments and short-term, short-sightedness on the part of those actors you referred. Each was acting in his/her own self interest and, obviously, there was market failure of mega proportions. That's an ill conceived incentive structure on the part of the financial institutions that caused systematic failure--you can't measure that specifically. It's an unknown unknown, so to speak.

asdasd

Didnt Soros write a book on it a few years ago?

tedstriker

http://www.statusireland.com/statistics/property-house-price-statistics-for-ireland/

Some House price statistics for those interested.

Économiste Monétaire

asdasd wrote: »

Didnt Soros write a book on it a few years ago?

I actually don't know if he wrote about ABS/MBS/whatever derivative acronym you want to use, being a source of potential financial market failure. He may have written about the American property market, but he has a new book this year about the crisis that you might be thinking of. I didn't read it; it had quite poor reviews.

johnnyskeleton

Baird wrote: »

To be fair the banks are doing their best to try and soften the landing as a
hard property crash would automatically mean a long and deep recession.

I would have thought that it was the opposite - you can either take your medicine upfront, bear the pain, and get back on your feet after a year or two, or else you can have it drip fed to you and slowly decline over 10 years before slowly stagnating and leveling out. Given the choice, sudden sharp drops are what is best for the economy, albeit bad for individuals and for banks' profits.

Baird wrote: »

Property prices have a long way to go but they are still down 20% and higher
in some areas. The reason we havent seen the crashes that have been seen
in the US for example is that we have no subprime exposure to speak of
and as a result dont have the incredible bad debt levels they have.

I attribute the lack of a massive crash to the culture of the banks which tend against repossessing and/or forcing their clients to sell. This attitude comes from a) the unwillingness of judges to grant repossession orders in days gone by b) the fear of public perception if they become known for evicting people (look at START mortgages, a make no bones about it subprime lender, who are on the backfoot re: the level of repossessions they have) c) the banks own experts who told them that the market would bounce back after a year or two and d) in our legal system, foreclosure is rare, and most banks will get orders for possession and sale (foreclosure is non-recourse so if you get foreclosed you don't owe the bank another cent, but under our system once the house is repossessed and sold, the customer still owes the bank the difference).

We do have a lot of subprime, and it's not just localised to the subprime lenders. 100% loans, 40 year terms, using imaginary income levels and rent a room to bolster the applications, banks lending to people not in permanent employment (some of whom didn't even work under a written contract of employment). If you take subprime loans to mean any loan which the borrowers could not afford to pay back (but which were backed by a perceived high value asset), we have a lot of subprime.

Baird wrote: »

As a result our property crash HOPEFULLY wont be as severe.
Fingers crossed

As a result, our property crash won't seem as severe to a casual observer, but when we look back on it in 10 or 20 years, we will see that it was a slow painful decline while other countries suffered in the short term for their long term health.

johnnyskeleton

Baird wrote: »

Why could we not follow Spains example and say anyone to lose their job doesnt have to make full mortgage repayments for 2 years?

Where exactly do you find the Free Mortgage for 2 years switch in the banks? I can see how saying "I've lost my job, give me 2 years reduced payments" fits in perfectly with the capitalist free market system we live in.

Baird wrote: »

Normal recessions last 11 months or so ive been told by people here so why
not just wait it out?

I think it helps if you look at an economy like a human being, and recession as a minor illness such as a flu or stomach illness. You pick these things up every now and again because your immune system is worn down or because you have ingested too much rubbish. There are two ways to deal with such illnesses. You can either ignore it, in which case it lasts a long time, or else you try to deal with it by addressing the root causes, taking it easy and having some foul tasting medicine. You'll probably feel worse before you get better.

So lets say that a sickness takes on average 11 months. Doesn't mean that every illness lasts for 11 months; more likely it means that the people who take their medicine are ill for 8-9 months, but those who don't are ill for 13-14 months. What you seem to be suggesting is like someone who is ignoring the illness presuming that it will just magically go away after 11 months because that is the average.

It doesn't work like that. The problems with the economy will have to be addressed before it gets better. It would be better to have this happen sooner rather than later, but our politicians are going to drag it out for years.

The best real life example of this is post WWII Europe. At the end of WWII the average Irish person was probably better off than the average German, because Germany was almost completely destroyed. But while the German economy prospered as it built itself up (with US aid), Ireland stagnated and any marshal aid we received was squandered in unproductive enterprises. The idea that the Irish economy would have been better off if the Germans (or the English) bombed the **** out of us is counter intuitive, but looking at the history of that time, it may meant that we would have prospered along with the rest of Europe.

Baird wrote: »

We are the victim of the global crisis, we are not and will never be again, in control of our own destiny.

So the boom was due to our brilliance as a nation, but the bust has nothing to do with us? It's about time Ireland grew up as a nation and accepted responsibility for our mistakes. Half our country was employed in either the public sector or in construction. That was a ridiculous state of affairs and had nothing to do with international factors and everything to do with domestic incompetence.

Baird wrote: »

Oh and to the guy that subprime exposure is the same as residential
development exposure you are simply wrong.
As an example residential mortgages for BOI are 65bn roughly
Residential development loans are about 15bn
I would much prefer to have a high bad debt charge on 15bn rather than a
high bad debt charge on 65bn wouldnt you?

You can pretty much reverse those figures when it comes to AIB and Anglo.

Baird wrote: »

The big banks in the US are seeing the bad debts go through the roof
on their residential mortgage books which are huge, our banks are seeing
the bad debt charges baloon on the much smaller residential dev books.
Thats the difference!

Ultimately what is important is what percentage of the overall loanbook has to be written off.