# AIB latest report "House price rises can't be sustained - John Beggs"



## walk2dewater (11 Apr 2006)

http://www.rte.ie/business/2006/0411/housing.html
"AIB did not foresee a sharp fall on house prices, but 'a protracted period of stability' "

Does anyone else see how taking away future price growth expectations pulls the rug on the pyramid?  Ive stated several times on this forum that like any asset bubble it's the EXPECTATION of future capital gains that's at the heart of the issue.  Selling on for a higher price to the next contestant is crucial whether it's tulips, land in Louisana, Dot com shares or whatever.

In the irish property market todays price growth is driven by expectations of further price growth.  Take away the EXPECTATION of future price growth and why buy?  Why would Mr & Mrs FTB rush to buy, when they can rent cheaply, save a bigger deposit and buy for the SAME price later. Where's the panic?  Similarly why would Mr BTL get into a mortgage that exceeds rental income when there's no (to paraphrase the Irish Times property section) "long-term capital gains" to be had?

"[Beggs] said it was possible that economists had underestimated the short-term level of demand"
That's because IMHO a large portion of demand to purchase property is driven by speculation and fear, NOT the need for shelter per se.  If shelter is in such short supply why then are rents so cheap?


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## Neffa (11 Apr 2006)

*Re: AIB latest report*

And they still don't really explain how the "fundamentals" say that prices will rise by 20% when incomes are growing at 10%-ish over the same time period. Bear in mind we are aleady starting from price levels which relative to income are amongst the highest in the world!

As I said to my wife during the RTE 9pm news tonight - imagine you are chief economist at AIB. Most indicators are saying there is the potential for a significant correction in the market if interest rates rise further. Do you:

(a) Say - it's not sustainable, but it is ok - we'll get a soft landing, so don't worry.

or

(b) Errr - the market is overheated and may collapse. (A market collapse would after all bring about a monumental fall in AIB's share price as it scrambled to unwind itself from the mortgage market).


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## beattie (11 Apr 2006)

*Re: AIB latest report*

Yes agree AIB are not going to pull the house down. At least they are not offering those ridiculous 100% loans AFAIK


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## Glenbhoy (11 Apr 2006)

*Re: AIB latest report*



			
				beattie said:
			
		

> Yes agree AIB are not going to pull the house down. At least they are not offering those ridiculous 100% loans AFAIK


If they are offering 92% loans secured on an asset overvalued by 30% it is'nt going to make a huge difference.


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## bearishbull (11 Apr 2006)

*Re: AIB latest report*

_"ah sure people have been saying prices will stop rising for years and they were all wrong ,i'll buy now before they go higher"_ *average punter 2006*


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## Chamar (12 Apr 2006)

*Re: AIB latest report*

Ultimately they're no more informed than the rest of us.

People will all be right and all be wrong with this I think.


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## redo (12 Apr 2006)

*Re: AIB latest report*



			
				bearishbull said:
			
		

> _"ah sure people have been saying prices will stop rising for years and they were all wrong ,i'll buy now before they go higher"_ *average punter 2006*



Is that you Bertie?


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## Duplex (12 Apr 2006)

*Re: AIB latest report*

Oh to be a fly on the wall, when the directors of AIB made the decision to forsake the profits they could have earned from ‘no money down’ 100% mortgages.  Allowing your competitors to pick off the last few stragglers, while watching from the sidelines, illustrates either a degree of ethics driven forbearance or rational risk assessment, seldom witnessed in the Irish banking ‘industry’.    

When the inevitable does happen I advise any admirer of the thespian art to watch Irelands bankers feign surprise.  The pathos will be faked, but the shamelessness of the performance will be worth seeing.


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## gearoidmm (12 Apr 2006)

*Re: AIB latest report*



			
				Duplex said:
			
		

> Oh to be a fly on the wall, when the directors of AIB made the decision to forsake the profits they could have earned from ‘no money down’ 100% mortgages. Allowing your competitors to pick off the last few stragglers, while watching from the sidelines, illustrates either a degree of ethics driven forbearance or rational risk assessment, seldom witnessed in the Irish banking ‘industry’.


 
That makes me want to keep my account at AIB - at least they have some morals (or at least some sense).  When everyone else is feeding at the trough, it must be hard not to join them.


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## walk2dewater (12 Apr 2006)

*Re: AIB latest report*

Banks are a business that make money by selling debt.  Cant really blame them, they want their money back firstly and interest on it secondly.  They have shareholders, bondholders and staff to pay.

The real reason for the pending bust is the lack of foresight, planning and prudence by our government.  Listening to Bertie the other day at the IMI just made my skin crawl.


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## walk2dewater (12 Apr 2006)

*Re: AIB latest report*



			
				Glenbhoy said:
			
		

> If they are offering 92% loans secured on an asset overvalued by 30% it is'nt going to make a huge difference.


 
GB,
some of us think property is MASSIVELY overvalued.   I know Im in the minority on this specific issue.  IMHO the bust will not be a 'correction' then business as usual.  We're talking a grinding year-on-year unwinding of prices to where they were YEARS ago.  A sea-change in sentiment towards property.  Shirts will be lost.  That's what a 'bust' is after a 'boom'.


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## Calina (12 Apr 2006)

*Re: AIB latest report*

No, AIB don't do 100% mortgages. I have had long conversations with an AIB mortgage advisor on that subject. 

In any case - personally speaking, the issue, as far as I'm concerned, is less the 100% mortgage and more the "Arrah, you can have five, six times your annual income by way of a mortgage" regardless of whether it's 92% of the house price or 100% of the house price. And while we're at it, I don't think 35 year mortgages are a good idea _either_ but that's just this funny foible I have about trying to pay off debt ASAP. I think the Central Bank should perhaps have introduced regulations regarding salary multiples and mortgage terms. 

The AIB report is interesting because it is the first interested party to suggest things as they are now are not sustainable. It's a bit like the Elephant in the Corner which no one wants to mention...


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## redo (12 Apr 2006)

*Re: AIB latest report*



			
				Calina said:
			
		

> It's a bit like the Elephant in the Corner which no one wants to mention...



Yes, but the elephant is wearing a fake mustache !


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## Purple (12 Apr 2006)

*Re: AIB latest report*



> I think the Central Bank should perhaps have introduced regulations regarding salary multiples


 I think that this would have prevented the whole property boom and the massive long term damage that it has done to our economy. I thought that the central bank was unable to do this though. Can anyone clarify this?


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## Hibernicatio (12 Apr 2006)

*Re: AIB latest report*

Everyone agrees that in its current form it is unsustainable, it has to be because people cannot afford to buy their first property.  IMO the banks are well aware of this and are being both selfish and foolish.  One recent event in particular, that being the sale and leaseback AIB's headquarters in the property boom heartland of Ballsbridge would certainly indicate to me that all is not rosy in the garden.


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## Afuera (12 Apr 2006)

*Re: AIB latest report*



			
				Calina said:
			
		

> I think the Central Bank should perhaps have introduced regulations regarding salary multiples and mortgage terms.



Very good point Calina. Where did this "3 times your salary" figure come from that they used to use years ago? Was this only around as a recommendation or a piece of advice that the banks are free to flaut as they see fit?

Having regulations tying mortgages somewhat to wages makes sense I think. Although, could it lead to a situation where everyone could get priced out of the market except for the rich and we have a landlord class and tenant class all over again?


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## Calina (12 Apr 2006)

*Re: AIB latest report*



			
				Purple said:
			
		

> I think that this would have prevented the whole property boom and the massive long term damage that it has done to our economy. I thought that the central bank was unable to do this though. Can anyone clarify this?


According to the Central Bank's website their functions include :



			
				Central Bank website said:
			
		

> _Contributing to the maintenance of a stable financial system in Ireland;_


It looks as though this might now the beef of the Irish Financial Services Regulatory Authority under the following



			
				IFSRA website said:
			
		

> The refinement of a regulatory approach based on risk profile and impact of default


I don't see how it wouldn't be possible...but you never know...

On the other hand, the State has benefited from massive stamp duty income lately...


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## gearoidmm (12 Apr 2006)

*Re: AIB latest report*



			
				Afuera said:
			
		

> Very good point Calina. Where did this "3 times your salary" figure come from that they used to use years ago? Was this only around as a recommendation or a piece of advice that the banks are free to flaut as they see fit?
> 
> Having regulations tying mortgages somewhat to wages makes sense I think. Although, could it lead to a situation where everyone could get priced out of the market except for the rich and we have a landlord class and tenant class all over again?


The problem with a lot of these suggestions is that they should have been implemented years ago. It's just too late now. If the central bank waded in and insisted that banks stick to a policy of 3-4x salary multiples it would immediately cause an enormous crash which is in nobody's best interest. Given the state of the market, any direct intervention could be disastrous. True, it's possible that it will end in a crash anyway but we all have a vested interest in hoping that won't happen (whether we own property or not) because of the huge part that the construction industry currently plays in our economy.


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## Glenbhoy (12 Apr 2006)

*Re: AIB latest report*



> GB,
> some of us think property is MASSIVELY overvalued. I know Im in the minority on this specific issue. IMHO the bust will not be a 'correction' then business as usual. We're talking a grinding year-on-year unwinding of prices to where they were YEARS ago. A sea-change in sentiment towards property. Shirts will be lost. That's what a 'bust' is after a 'boom'.


That  indeed may well happen - I would prefer if it did'nt (as I imagine we all would -  I don't fancy moving to Krakow to pick mushrooms). 



> I think that this would have prevented the whole property boom and the massive long term damage that it has done to our economy. I thought that the central bank was unable to do this though. Can anyone clarify this?


In my brief time in monitoring mortgage approvals (3 yrs ago now), we   were of the belief that Central bank could pull a licence (from a tied agent) or severly censure the bank, if it looked likely that info on applications were false, that stress tested affordability exceeded 40%, if deposits were loans etc.  However as  I neared the end of my stint, Ulsterbank offered the first 100% mortgage - within the bank we waited  with bated breath to see the central bank reaction (I hope they're not waiting still, as there may have been a slight admonishment in private, but that was it).



> That makes me want to keep my account at AIB - at least they have some morals (or at least some sense). When everyone else is feeding at the trough, it must be hard not to join them.


Is that you Bertie??


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## Calina (12 Apr 2006)

*Re: AIB latest report*

As an addendum, when I came back to the country after a prolonged period away, a mortgage advisor at an AIB in Dublin explained that they would have to be a bit more circumspect because the Central Bank was getting interested in banks' leniency regarding the 92% limit and the salary multiple limit. That was back in 1999. I don't see any evidence to say they actually followed through on it though. 

One of the points that was made as the rules (for want of a better word) loosened up was that interest rates were so low, that there was room for manoeuvre...which only works if interest rates stay low.


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## Calina (12 Apr 2006)

*Re: AIB latest report*



			
				gearoidmm said:
			
		

> The problem with a lot of these suggestions is that they should have been implemented years ago. It's just too late now. If the central bank waded in and insisted that banks stick to a policy of 3-4x salary multiples it would immediately cause an enormous crash which is in nobody's best interest. Given the state of the market, any direct intervention could be disastrous. True, it's possible that it will end in a crash anyway but we all have a vested interest in hoping that won't happen (whether we own property or not) because of the huge part that the construction industry currently plays in our economy.



The problem is the longer we go without some sort of a price correction, the greater the impact of that correction when it eventually comes about. Yes the Central Bank should have done this four or five years ago but I bet that this same argument would have been made then too. 

AIB never had the greatest reputation for owner occupier mortgages - quite a few mortgage brokers I spoke to said it was almost impossible to get a reasonable deal out of them - so I suspect they took a calculated risk that they wouldn't alienate that many potential customers by refusing to offer 100% mortgages.


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## z107 (12 Apr 2006)

*Re: AIB latest report*

The whole salary multiple thing is nonsense, largely due to  dodgy P60s/Payslips. There is a whole industry around this.


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## bearishbull (12 Apr 2006)

*Re: AIB latest report*

the central banks main tool in ensuring financial stabilty was taken when we joined euro,they are a toothless tiger nowadays although they could have tightened credit through changing margin requirements back in say 99/00 when we were locked into euro and property was booming then and inflation was close to 5%,again another example of no foresight and future planning in this country.


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## walk2dewater (12 Apr 2006)

*Re: AIB latest report*



			
				Glenbhoy said:
			
		

> That indeed may well happen - I would prefer if it did'nt (as I imagine we all would - I don't fancy moving to Krakow to pick mushrooms).


 
Agreed.  I strive to interpret the facts as I see not as I wish to see them.  Just because I hold a particular interpretation of where property market is headed doesnt make me the problem.  The problem is the problem.  It is caused by external forces (ECB) combined with a political system that focuses on the short-term at the expense of the long-term.

There will be a golden window of opportunity to short AIB et al. and I plan to time it well.  Does it make me a bad person if I'm preparing my moment to short the hell out of the Irish banks and make a mint???


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## Duplex (12 Apr 2006)

*Re: AIB latest report*

With average prices now reaching 11 times the average industrial income you have to wonder how far credulity can be stretched. I know that in many cases the information that the banks use to calculate affordability is fictional construct. The brokers know how the system operates, the banks know the brokers know and the dogs on the street know that they know. The use of one off inflated wage slips provided by employers, fictional bonuses, rent a room borrowed deposits etc. In the short term it serves no ones interest to blow the whistle on widespread fraud because we are all compliant and we all benefit, through a booming economy. If it were possible it would be in the national interest to maintain this debt driven fantasy. But needless to say some ‘unforeseen’ external catalyst will materialise to deliver a sobering smack down. 

Gnashing of teeth and much wailing will have to be endured I’m afraid, some feigned some real.

[broken link removed]


[broken link removed]


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## bearishbull (12 Apr 2006)

*Re: AIB latest report*

dan mc laughlin in todays bank of ireland property review says increases will slow to 3% in 2007 or the same as inflation so we have the bnak of ireland saying property will not increase in real terms next year! why rush to buy now then??
http://www.rte.ie/business/2006/0412/houses.html

central bank warnings of increasing risks of sharp correction in prices and warning about decreasing productivity in economy
http://www.rte.ie/business/2006/0412/centralbank.html

its starting to unwind i think!


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## Glenbhoy (12 Apr 2006)

*Re: AIB latest report*



			
				walk2dewater said:
			
		

> There will be a golden window of opportunity to short AIB et al. and I plan to time it well. Does it make me a bad person if I'm preparing my moment to short the hell out of the Irish banks and make a mint???


Not at all, I did'nt see George Soros shed too many tears back in 1992 - as a keen spread bettor myself, it takes balls to short anything!!


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## bearishbull (12 Apr 2006)

*Re: AIB latest report*

i'd consider a cfd/short sell on irish financial instituitions on the first signs of weakness which i feel could be in next 12 months. watch the markets for indications of slowing housing market.


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## Duplex (12 Apr 2006)

*Re: AIB latest report*

From that RTE on the Central Bank report. 




> On housing, the report said the current level of activity was 'beyond what is required' and a contraction would be needed 'at some point'. It described the 11% annual increase in house prices in February as worrying. It said that though a soft landing was the most likely scenario, the acceleration in growth increased the risk of sharp falls in the future


.

Bertie, get a grip on these doom mongers, they are way off message.


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## Theo (12 Apr 2006)

I think its very telling also that AIB are sellers of property in the current climate.


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## walk2dewater (12 Apr 2006)

I still think we are not quite at a top.

The vast majority of FTBs will continue to buy at any price until they simply cannot arrange a repayment schedule that fits their income.  Price means nothing to most FTBS, it's all about managing the monthly lump.  We MAY yet see 50yr mortgages, 125% loans, exotic interest deferability, government intervention, etc. to fuel the bottom of the pyramid.

The vast majority of 'investors' will continue to buy until they see from direct personal experience that capital appreciation is over.  That is, a good year or two of PERSONALLY CONFIRMED zero capital appreciation before the penny drops.  Landlords are subsidizing tenants, they just dont realise it yet.  That point is still a way off.

Prices could go much higher than today before either of these points is reached, and bullish sentiment could continue even with "one engine" working.  Remember there is nothing 'rational' about price action in this market, sentiment is still vastly in favour of buying.  "Rent is dead money" and "long term capital appreciation" are still by-words, not yet cruel jokes.


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## CCOVICH (12 Apr 2006)

Talk of shorting individual shares etc. is in breach of .

Discuss it via PM or on www.boards.ie if you wish.


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## redo (12 Apr 2006)

walk2dewater said:
			
		

> I still think we are not quite at a top.
> 
> The vast majority of FTBs will continue to buy at any price until they simply cannot arrange a repayment schedule that fits their income.  Price means nothing to most FTBS, it's all about managing the monthly lump.  We MAY yet see 50yr mortgages, 125% loans, exotic interest deferability, government intervention, etc. to fuel the bottom of the pyramid.


I don't think this will stop them.  Unless the banks stop giving the FTB money, house prices will rise.  If they cannot meet a repayment schedule, they would consider adding 10 years on to the term, or as you say, use an exotic method of interest repayment.  We may even see the return of the Endowment mortgage (where buy one invests capital portion of mortagage into shares and pay interest off as normal)


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## tiger (12 Apr 2006)

walk2dewater said:
			
		

> I still think we are not quite at a top.


 
Agreed.  Have a look at some of the bidding threads over on house buying & location, location. e.g.
http://www.askaboutmoney.com/showthread.php?t=25521


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## walk2dewater (12 Apr 2006)

But you won't need a top in house prices for shares of [unmentionables] to top out  The stock market is always ahead of macro events.


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## darex (12 Apr 2006)

walk2dewater said:
			
		

> I still think we are not quite at a top.
> 
> We MAY yet see 50yr mortgages, 125% loans, exotic interest deferability, government intervention, etc. to fuel the bottom of the pyramid.
> 
> ...


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## Afuera (12 Apr 2006)

walk2dewater said:
			
		

> I still think we are not quite at a top.


I'd agree with this as well.

From a survey by IIB/ESRI they've revealed that 75% of people know what they are going to do with their SSIA and of those, 10% are planning on putting it into Irish property. I know that they've got a vested interest in spreading news such as this but the figures aren't that remarkable to be unbelievable.

http://www.finfacts.com/irelandbusinessnews/publish/article_10005489.shtml

Since there are 1.1 million people with SSIAs this would mean that 80,000 people would have a wad of cash burning a hole in their pocket next year and they are already thinking about buying property in Ireland with it. Whichever way you look at it something like that is not going to keep prices down in the short term.

As gearoidmm said it's probably too late now for a lot of the things that could have been done to prevent the current situation. The only option for the banks to ease their way through this without causing large shocks is to change what they're doing internally without too much publicity.

By their nature people buying BTL are a risk to the market since they can turn on a sixpence if their losses mount up and could flood the market with houses. If the banks tightened up lending for that element but still kept the money flowing for owner-occupiers it might be possible to reach the "soft landing" that the banks have been alluding to.

Whether this can actually happen or not is obviously just pure speculation though. Any number of outside factors such as interest rates, property markets bombing in other countries etc. all have there part to play in this complex game.


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## Glenbhoy (12 Apr 2006)

Has anyone else noticed that there a few threads on the property investment section recently from BTL's asking if now's the time to get out?  We also have AIB pronouncing that BTL is unlikely to make sense in the immediate future, allied to a helluva lot more negative sentiment in all of the various media outlets recently.  Could this be a sign that we are actually going to peak a bit earlier than predicted, maybe the SSIA boost won't be quite the catalyst that everyone assumed (in any case I felt that most buyers in the fast few months had already factored these into their buying power and were possibly trying to beat the 'SSIA boom' that's been so widely predicted).  The very fact that such a small rise in interest rates (although in percentage terms it's been a 25% increase) can begin to cause such re-evaluation may indicate that we've peaked?


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## walk2dewater (12 Apr 2006)

darex said:
			
		

> walk2dewater said:
> 
> 
> 
> ...


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## Duplex (12 Apr 2006)

Ah the 100 year mortgage, the holy grail of the banking industry. Why stop at a hundred years?, what about a thousand year mortgage or a mortgage that runs until the day that the Sun turns super nova. 

I don’t think that Irish banks would go this far, but if you start reading stuff like this (see below) in the Irish Times property section, be afraid.





> *100 Year Mortgage Program Lets You Buy a House With No Bank Qualifying!
> 
> All the joy of home ownership are yours immediately without; producing bank statements, credit or FICO score requirements, debt ratios, income tax returns or financial statements!
> 
> ...


* 

*[broken link removed]


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## robd (12 Apr 2006)

Its interesting that SSIA money is mentioned so frequently as a future contributer to house price rises over the coming 12-18 months (in Economist's reports, in media, and on this board).  So frequently, I wonder have people been panic buying at the end of 2005 and start of this year to try and get in before this.  Perhaps when the SSIA money comes out the effects might be considerably less than predicted.  What effect might this have?  A sudden last sharp spike (ala Head & Shoulders in Technical Trading terms) followed by a sharp dip when the market disappoints (due to that great SSIA spend not propping up the market when predicted to do so).


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## beattie (12 Apr 2006)

robd said:
			
		

> Its interesting that SSIA money is mentioned so frequently as a future contributer to house price rises over the coming 12-18 months (in Economist's reports, in media, and on this board). So frequently, I wonder have people been panic buying at the end of 2005 and start of this year to try and get in before this. Perhaps when the SSIA money comes out the effects might be considerably less than predicted. What effect might this have? A sudden last sharp spike (ala Head & Shoulders in Technical Trading terms) followed by a sharp dip when the market disappoints (due to that great SSIA spend not propping up the market when predicted to do so).


 
Very good point, it reminds me of all those Y2k stories before the millenium. It is very interesting to see BOI being less than bullish. It looks like the ECB won't increase rates at as quick a pace than is needed to cool the market. If the goernment were interested in doing something to stop this runaway train they would impose a levy on investors which would reduce the amount of activity but then I guess they need all the stamp duty taxes they can get it the run up to an election. No let up in price increases for the next 12 months IMO


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## Marie (12 Apr 2006)

Isn't there a bit of a "vicious circle" here?  Have I understood correctly that when the SSIA pot will create such a hole in the country's Revenue that taxes will increase steeply - including property tax?


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## Marie (12 Apr 2006)

that should of course read "when the SSIA pot pays out shortly" etc.


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## SteelBlue05 (12 Apr 2006)

Marie said:
			
		

> Isn't there a bit of a "vicious circle" here? Have I understood correctly that when the SSIA pot will create such a hole in the country's Revenue that taxes will increase steeply - including property tax?


 
Direct taxes will not increase, no government would shoot themselves in the foot by doing that. I wouldnt expect taxes to increase because of the SSIA's, people will have more money to spend when they get their SSIAs so revenue should increase...?


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## Glenbhoy (12 Apr 2006)

robd said:
			
		

> So frequently, I wonder have people been panic buying at the end of 2005 and start of this year to try and get in before this. Perhaps when the SSIA money comes out the effects might be considerably less than predicted.


Yeah, agree it's very definitely a possibility (see my previous post), but then again - we're all speculating, that's the funny thing about any technical analysis, it's always easy to spot the spike afterwards - not quite as easy during it


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## Glenbhoy (12 Apr 2006)

> Direct taxes will not increase, no government would shoot themselves in the foot by doing that. I wouldnt expect taxes to increase because of the SSIA's, people will have more money to spend when they get their SSIAs so revenue should increase...?


It should also free up government revenue (after all who had to pay that 25% bonus) - but given that we are low on direct taxes and high on indirect taxes, the consumer spending frenzy after SSIA payouts should boost the govt coffers even more (VRT is quite high here is'nt it!!).


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## walk2dewater (12 Apr 2006)

Yep the SSIA is a red herring.

Did anyone see the stiffs from the central bank on the 9 news tonight?  Talk about bolting the barn doors after the horses have left.

The economy, yes the economy, hinges on the prevailing and unsustainable sentiment that property prices will continue rise.  Take that expectation away and suddenly overnight we'll have no willing buyers.  How much will the house fetch then? That is the precarious position we are in, but there's enough levers to keep buyers eager and prices ratcheting higher for a little longer.

And so here we have the surrealism of the central bank asking the commercial banks to voluntarily provide info on what would happen if unemployment went to 9%.  A little late no?  Prices by end 2006 will likely end up x3.5 what they were in 1997, price to income ratios will average x12 in Dublin and a significant portion of young working adults will be in ridiculous debt.

I'm starting to wonder when the knives come out for the unmentionable shares that will get crushed, will the smell of blood attract foreign sharks a la Soros? hmmm


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## sandymount (13 Apr 2006)

As Warren Buffet said

"Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

I think this pretty much sums up the Irish property market


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## bearishbull (13 Apr 2006)

im suprised theres so little coverage in media of dan mc laughlins/BOI's prediction of no rise in real terms of house prices next year. when people realise the high price rises are coming to an end they may be prepared to wait and see for a few years and sentiment in market may change substantially.


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## SLAPPY (13 Apr 2006)

Don't worry folks, the 40 year mortgage is here to save the day.


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## Duplex (13 Apr 2006)

SLAPPY said:
			
		

> Don't worry folks, the 40 year mortgage is here to save the day.


 
More like put off the day, and to make the aftermath of the inevitable day of reckoning that much worse.   What have the Irish people done to the Banks that makes them so bent on the destruction of our economy for a generation?   I fully appreciate that they will have sufficiently feathered their nests to cushion them and theirs from the upcoming ahem, unpleasantness, but surely they have some fraternal feelings for their fellow countrymen and women?  Or am I just a misty-eyed romantic?


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## Glenbhoy (13 Apr 2006)

> Or am I just a misty-eyed romantic?


It's all that talk of 1916 that's got you going.

But sure as our great leader does be saying:
"Dem dere banks are da bees knees, sure if it was'nt for dem, nobody would be able to get mortgages and den look how much money you'd all have lost out on making"


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## Duplex (13 Apr 2006)

Would ya stop it, sure tis more misty eyed yer makin me.  And me questioning the noble intentions of dem fine gentlemin in de banks.  Sure amint I just hearing dat day’ll be introducin a 90 year mortgage ta celebrate 1916.

Oh de fine heros who dyed ( it’s a long story, to do with bed sheets and green white and orange dye)  for de Emerald Isle and here is  me questioning the noble intention of gentlemin.  I,m off to a dark corner to practice tugging me forlock.


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## beattie (13 Apr 2006)

Prime time are dealing with this subject now


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## Duplex (14 Apr 2006)

*Dan O'Brien* from the  Economist Intelligence Unit made cogent arguments, referring to Ireland as the most indebted nation in Europe, the unsustainable growth in mortgage debt at 30% pa and the new and worrisome issue of an emerging trade deficit.  Finna Fail produced an unintelligible, stumbling gobdaw from central casting; who proceeded to stutter an embarrassing litany of infantile auctioneers blather.   

The general impression given by the program was that anyone with a modicum of intelligence should set their affairs in state, in anticipation of a hard landing for the Irish property market.

Congrats to RTE for a brave piece of Journalism in the face of powerful sectional and government influence.


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## thewatcher (14 Apr 2006)

Duplex said:
			
		

> *Dan O'Brien* from the Economist Intelligence Unit made cogent arguments, referring to Ireland as the most indebted nation in Europe, the unsustainable growth in mortgage debt at 30% pa and the new and worrisome issue of an emerging trade deficit. Finna Fail produced an unintelligible, stumbling gobdaw from central casting; who proceeded to stutter an embarrassing litany of infantile auctioneers blather.
> 
> The general impression given by the program was that anyone with a modicum of intelligence should set their affairs in state, in anticipation of a hard landing for the Irish property market.
> 
> Congrats to RTE for a brave piece of Journalism in the face of powerful sectional and government influence.


 
Agreed,fair play to rte for once,it's not like we havent being saying the same for the last 6 months.The problem is the average donkey buying now was more than likely watching Desperate Housewives or something, personally i think the country is in major trouble. 

Could bertie's 
"intervention" be the the biggest mistake ever made by an out going taoiseach ?


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## Howitzer (14 Apr 2006)

Didn't see this, out on the lash, Holy Thursday and all that. Any property bulls see this and have a different take on the content and / or conclusions? Don't make me name names now...........



			
				thewatcher said:
			
		

> Could bertie's
> "intervention" be the the biggest mistake ever made by an out going taoiseach ?


 
I'm still amazed he made ANY comment. I've never heard of any serious politician make comment on any risk based investment product.


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## beattie (14 Apr 2006)

Howitzer said:
			
		

> I'm still amazed he made ANY comment. I've never heard of any serious politician make comment on any risk based investment product.


 
Agreed, the second tier FF'er on Prime Time looked a bit out of his depth as well. I thought the interviewer could have asked him about 35-40 year mortages, increase in interest rates  of up to or past 4% etc which would have really put him on the spot. I wouldn't have thought the property bulls of Ireland would have been pleased by his showing...


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## onekeano (14 Apr 2006)

*"House price rises can't be sustained - John Beggs"*

Bought a house in Phibsboro (Shandon Park) exactly 20 years ago for IR£35k (c.€43k) - myself and Mrs Roy were just starting out and earning a combined about £28k so price was about 1.25 times joint earnings.

An almost identical house came on the market last week in Shandon Drive quoting 705k, the first viewing was on Wednesday evening and there was a "queue of people to see it". Yesterday morning there was an offer of €825k on the house and yesterday afternoon the Sale Agreed sign went up (not sure what the final bid was).

Assuming the lucky winners of the bidding process were on say a combined 125k that means they price was 6-7 times earnings. We're not talking Shewsbury or Aylesbury Road here.

Sustainable - I don't think so!

Roy

BTW. The stampers on this house will come in about TWICE what I paid for the house at that time - ouch! Just in case the buyer is an AAM contributor.... it's a very nice area and very central but..............


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## bearishbull (14 Apr 2006)

i thought the rte report wasnt great,they had an estate agent on for gods sake! everyone knows what he's gonna say, if i was presenting i say to him "mr estate agent isnt it impossible for you rule rule out a property crash? " and "you would say that wouldnt you" or something along those line.i though the economist guy barely got started and didnt really address many of the fundamentals,he commented mainly just on levels of debt and other things which people wouldnt grasp as meaning a correction is nigh.the fianna fail guy was a joke,is he really a TD? epitomises everything that is wrong with fianna fial and this country,"ah sure if ya can afford a few pound a week more if your mortgage rises you'l be grand" fecking gombeen.


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## JohnnyBoy (14 Apr 2006)

I was working last night so didn't see the report(but got a call from g'friend saying I was wrong about a collapse,because the guys on Prime Time said so!!!),who was the Feena Fowler?


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## Duplex (14 Apr 2006)

Here's a link to last nights Primetime. 


[broken link removed]


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## bearishbull (14 Apr 2006)

Ecb chief economist warning on our situation ,im sure sure bertie will say "ah sure everythings fine ,dont mind dem eurocrats" but this guy is close to the interest rate setters and probably knows exactly where rates are headed. markets are forecsting 3.5% rates by dec06 so mortgages rates could be 4.5% by jan07.
Despite the rate rises i just heard a report on radio from HOK i think  that 2nd hand prices in dublin were up 10% in first 3 months of year,thats 10% for the 3 months not annualised! the estate agents says they are now upping their forecasts for year from 12% to 18% increases for 2nd hand prices in dublin! this is a sure sign of the madness and mania that exists before crashes,people are getting in at any price despite wages not rising much and interest rates rising.i think we are on course for a drop in real terms by end 2007,bertie must be getting very worried with ecb increasing rates and pesky journo's and economist questioning the sense of the market in the run up to an election.
....................................................................................................
One of Europe's top bankers has warned that Ireland's economy could be in danger of over-heating. 
Chief Economist at the European Central Bank, Otmar Issing has said mortgage growth rates pose a threat to Ireland's economy.

Mr Issing said policy vigilance by the Irish Government is required in order to ensure that the increasing number of mortgage loans does not damage the economy.

He has warned the Government they cannot be complacent and says it is possible for them to prevent the problem, if they tackle the issue immediately.

Mr Issing's comments came in the wake of yesterday's CSO announced that inflation has hit a three year high of three and a half percent.

Last week the ECB said it was worried about an 11 percent rate of house price inflation in Ireland.

It also said it believed current rates of house construction are too high.
..................................................................................................


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## bearishbull (14 Apr 2006)

http://www.rte.ie/news/2006/0414/housing.html
actually it was douglas newman good


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## gearoidmm (15 Apr 2006)

bearishbull said:
			
		

> Ecb chief economist warning on our situation ,im sure sure bertie will say "ah sure everythings fine ,dont mind dem eurocrats" but this guy is close to the interest rate setters and probably knows exactly where rates are headed. markets are forecsting 3.5% rates by dec06 so mortgages rates could be 4.5% by jan07.
> Despite the rate rises i just heard a report on radio from HOK i think that 2nd hand prices in dublin were up 10% in first 3 months of year,thats 10% for the 3 months not annualised! the estate agents says they are now upping their forecasts for year from 12% to 18% increases for 2nd hand prices in dublin! this is a sure sign of the madness and mania that exists before crashes,people are getting in at any price despite wages not rising much and interest rates rising.i think we are on course for a drop in real terms by end 2007,bertie must be getting very worried with ecb increasing rates and pesky journo's and economist questioning the sense of the market in the run up to an election.


 
I just want to point out again that the methods used by the estate agents to calculate house price rises are extremely suspect.  DNG like SF use a 'basket' of properties (approx 500) and assess how much they think they would go for if they were on the market today.  It is a tiny sample statistically speaking and isn't based on any real completion figures.  Thus, both DNG and SF price indexes have been showing price rises far in excess of the ESRI and DOE for the past 2 years.

It drives me nuts that the media report these uncritically and give them the same weight they give to the ESRI and DOE reports which are based on much more robust data (and funnily enough show dramatically less price rises)


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## bearishbull (17 Apr 2006)

media getting increasinly bearish on property in light of last weeks AIB report,richard curran in irish indo writes
http://www.unison.ie/irish_independent/stories.php3?ca=35&si=1599563&issue_id=13929

edited ,apologies ccovich.


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## CCOVICH (17 Apr 2006)

_bearishbull_-have you reproduced the text of an entire article that is available online?  Again?


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## Duplex (18 Apr 2006)

A tale of two countries. The report below discusses the predicaments of New Zealand and Spain as they battle to defeat the economic damage that debt fueled housing bubbles have caused their economies.   The author suggests that New Zealand is better placed to see off a deflationary recession because it maintains control of monetary policy.  Spain due to its membership of the Euro is faced with having to swallow the pill of deflation in incomes in the absence of a rise in productivity.  

I wonder what would happen if the pain of recession was such that political pressure to leave the Euro mounted in Spain? 







[broken link removed]


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## Afuera (18 Apr 2006)

Duplex said:
			
		

> A tale of two countries. The report below discusses the predicaments of New Zealand and Spain as they battle to defeat the economic damage that debt fueled housing bubbles have caused their economies. The author suggests that New Zealand is better placed to see off a deflationary recession because it maintains control of monetary policy. Spain due to its membership of the Euro is faced with having to swallow the pill of deflation in incomes in the absence of a rise in productivity.
> 
> I wonder what would happen if the pain of recession was such that political pressure to leave the Euro mounted in Spain?
> 
> ...


I don't think he knows what he's talking about with regard to the Spanish economy. The unit labor cost in Spain that he talks about is still very low relative to the other major EU countries. The inflation or "loss of competiveness" as he calls it is nothing new in Spain, has been going on for years but was accelerated due to entry in the Euro. Spain's old economy as a cheap manufacturing base for textiles is now truly blown out of the water with the emergence of China so it needs to repurpose itself for the changed environment but this was inevitable; Euro or no euro.

The housing bubble is well acknowledged over in Spain as like Ireland, the Spanish see renting as dead money and want to buy their own home at any price. The housing market is split into two types here which may shield the Spanish somewhat. The costas contains the holiday homes which many foreigners from Germany, the UK, Holland and Ireland have bought (many as investments). The cities and towns where the jobs are contain homes which are bought by owner-occupiers and therefore not likely to be affected so much if there was a downturn in the market.

Having said that though young Spanish are now looking at 50 year mortgages since affordability has gone out the window. Some young families buying now could be facing a life of debt and they could get hit really hard if interest rates keep moving up.


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## Duplex (18 Apr 2006)

Hi Afeura
To quote from the article; the issue in Spain is falling productivity relative to wage inflation, and a large current account deficit.




> For its part, Spain too is running a staggering current account deficit of around 7 1/2  percent of GDP. Though smaller than that of New Zealand, Spain’s current account deficit is also unsustainable by almost any reasonable measure. Spain’s external deficit is the result of a housing-led consumer boom and a worrying loss of international competitiveness as Spanish productivity increases have woefully lagged behind corresponding wage increases. Over the past five years, Spain’s unit labor costs have increased by around 20 percent more than those of Germany.


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## Afuera (19 Apr 2006)

Hi Duplex,

Falling productivity relative to wage inflation implies that there is an increase in the unit labour cost. I still maintain that the ULC in Spain is low when compared to the likes of Germany, France and the UK.

The current account deficit in Spain is very high indeed but compared to the US which has a current account deficit of nearly 6 1/2 percent of GDP, it's not totally out of line with the current climate. Prolonged low global interest rates have encouraged this situation and I think everyone will end up suffering for it.

I get the feeling that this article was written with the intention of bashing the Euro/EU a bit and I don't think it's totally justified based on the arguments put forward.


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## Howitzer (21 Apr 2006)

90,000 new homes to be built this year. Wow!

http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1601259&issue_id=13943

(free registration required)


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## beattie (21 Apr 2006)

Howitzer said:
			
		

> 90,000 new homes to be built this year. Wow!


 
It is hard to see how rents are going up with this amount of building


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## bearishbull (21 Apr 2006)

yeah but how many in dublin? prices in my estate have risen 40% in 16 months!  the densities are too low for a modern city,eventually over next few decades we will build higher densities but it's not easily done as there not a huge amount of large brownfield sites within dublin,if we were to build a city from scratch on the site of dublin now we could get two or three times as many people into city without going too high rise.


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## Howitzer (21 Apr 2006)

bearishbull said:
			
		

> yeah but how many in dublin?


 
Well the article suggested 1,935, an increase of 13.6%

This AIB article gives a bit more commentary to the figures

[broken link removed]


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## bearishbull (21 Apr 2006)

i'd like to see figures for housing stock in dublin ,we havent got great stats  on housing market in this country


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