# Next wave of the crisis



## beekeeper (14 Nov 2008)

I am looking for money making ideas/investments/trades that will take advantage of the next wave in this credit crunch which i think we will see in the new year. I was just discussing this with a friend and we both agreed that it has to get much worse before we see the bottom. Lets be honest..not one bank and only one small developer has officially gone bust in Ireland so far. The property market has come off 20/30% from the highs which is a drop in the ocean compared to the astonishining rise we have seen in property in Ireland over the past 10 years. 

In my view we will see another 30/40% drop in house prices in Ireland in the first 6 months of the new year, one or two of the banks will go to the wall and quite a few small and large developers will declare bankrupcy in the new year.

Sorry for being such a doom and gloom merchant but its my view. However there must be a way to profit from this !??


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## Guest124 (15 Nov 2008)

For a start no Bank will go to the wall - The E.U. will save it if need's be. As for Builders etc. who know's?


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## z103 (15 Nov 2008)

Pawnbrokers, loansharking, shotgun sales...
What if money itself becomes old hat? - we may have a new paradigm shift.


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## ringledman (15 Nov 2008)

You are right beekeeper about not hitting the bottom yet, we have yet to see capitulation in the markets when people sell all shares and every stock indiscriminately. Then the markets will be a huge buy.

As for the claim that only one small developer has gone bust I think it is much much more!

The banking crisis may be largely over buy the real economy is now getting hit. Large caps with huge layoffs as seen in the UK recently will be the trend, i.e. BT and RBS. Also large profit rightdowns such as vodafones last week. 

This downturn is far from over. 18 bear months minimum. I reckon 30 months before we see a real upturn in the economy. Thats not being pessimistic. Its not about being pessimistic or optimistic its about being realistic! 

A major reversion to the mean is occuring in property and this will undershoot by some way. Property will be cheap in around 3 years. Don't buy before as you'll be trying to catch a falling knife. Lucky stocks have gone under the mean (look at the current P/E compared to history) but still have some way to 'bottom'. Unfortunately property is still going to go one way for many many months to come. 

Sit in cash and await the biggest bargains of our lifetimes...


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## beekeeper (15 Nov 2008)

BroadbandKen said:


> For a start no Bank will go to the wall - The E.U. will save it if need's be. As for Builders etc. who know's?


 
BroadbandKen... that is a ridiculous statement and with all respect this is symptomatic of a large portion of the population of Ireland and partly responsible for the position we are in now  !!  2 of the main banks in Ireland are trading c. E1 at present and one is so dependent on commercial property lending it is as good as bust.  

As for the EU saving the banks.. nota hope. If Bear Stearns and Lehmens in the US can go to the wall .. surely Irish banks can and will.


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## mercman (15 Nov 2008)

beekeeper;As for the EU saving the banks.. nota hope. If Bear Stearns and Lehmens in the US can go to the wall .. surely Irish banks can and will.[/quote said:
			
		

> Or the question should be 'How many, For How much and WHEN ???'


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## limerickboy1 (16 Nov 2008)

another post full of silly people trying to predict the future . when people say "i think property will fall another 30 - 40%" , they are talking rubbish . no one knows what will happen. 

and by the way if one of the banks goes to the wall as you put it then the irish govt will step in and take control of them. no bank is actually closing , all the banks that are failing in america are being run now by the FDIC. they are still open for business but just under a differnet name.


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## z109 (16 Nov 2008)

limerickboy1 said:


> and by the way if one of the banks goes to the wall as you put it then the irish govt will step in and take control of them. no bank is actually closing , all the banks that are failing in america are being run now by the FDIC. they are still open for business but just under a differnet name.


Not much consolation to their shareholders... mainly large pension funds. The FDIC guarantees deposits, as its name implies. Bond holders often get stuffed as they only get a proportion of their outstanding debt back.


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## Guest116 (16 Nov 2008)

beekeeper said:


> In my view we will see another 30/40% drop in house prices in Ireland in the first 6 months of the new year,


 
If they do then there will be very good rental yields to be had and that will draw the investors back in. With interest rates dropping to low levels over the next few months I cant see property prices dropping that much.


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## z103 (16 Nov 2008)

> If they do then there will be very good rental yields to be had and that will draw the investors back in.


Two problems I can see with that;
1. There is a huge oversupply of rental properties already. This is bound to impact rental yields.
2. Where will investors get the money? One of the reasons prices are dropping is because people can't get mortgages.


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## webtax (16 Nov 2008)

aristotle25 said:


> If they do then there will be very good rental yields to be had and that will draw the investors back in. With interest rates dropping to low levels over the next few months I cant see property prices dropping that much.



Rents will fall due to the increasing supply and contracting demand. Its the availability of credit that drives house prices more than interest rates.

The graphs in the attached link show that while Ireland is adjusting back to long term equilibrium it still has some way to go.
http://www.tradersnarrative.com/global-real-estate-ratios-show-extent-of-bubble-2066.html


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## mercman (16 Nov 2008)

And regardless of what they do with Interest Rates, the easy supply of money we have witnessed over the past 5 years will not reoccur.


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## ringledman (16 Nov 2008)

limerickboy1 said:


> another post full of silly people trying to predict the future . when people say "i think property will fall another 30 - 40%" , they are talking rubbish . no one knows what will happen.
> 
> and by the way if one of the banks goes to the wall as you put it then the irish govt will step in and take control of them. no bank is actually closing , all the banks that are failing in america are being run now by the FDIC. they are still open for business but just under a differnet name.


 
The trend is your friend as they say and its going one way for residential property. Down. 

All booms that crash result in an undershooting of the 'true' average or 'fair' value of an asset, whether it be property or stocks.

Look at the last 3 UK crashes on this graph - http://www.housepricecrash.co.uk/graphs-average-house-price.php

Everyone resulted in an undershooting of the mean. That is when property becomes cheap. No doubt Ireland has seen similar occurances in the past. 

With a yield in the order of 3-4% (Dublin had the lowest yields in the world in 2006-07!) there is only one way for that yield to go. Up.

How is this going to occur? 2 ways either rents rise significantly or values fall significantly. 

There is no real wage growth momentum to support rising rents and yield and therefore values will continue to slide. 

There will be a long slow errosion of property prices across the western world until yields become overly attractive again (think 10-15%) then property will be a huge buy. It could take 3 years it could take 10.


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## beekeeper (16 Nov 2008)

limerickboy1 said:


> another post full of silly people trying to predict the future . when people say "i think property will fall another 30 - 40%" , they are talking rubbish . no one knows what will happen.
> 
> and by the way if one of the banks goes to the wall as you put it then the irish govt will step in and take control of them. no bank is actually closing , all the banks that are failing in america are being run now by the FDIC. they are still open for business but just under a differnet name.


 
Limerickman, this thread is on the INVESTMENT forum.  The nature of such is that people have a view or opinion (in silly mans language).  Every investment is in some way trying to predict the future.  Everybody is entiltled to one and thats what makes a market.  Its the same as your obvious view that property will rise.  

Oh, and by the way hope you dont cut your hand when you try to catch the falling knife !


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## Guest124 (16 Nov 2008)

I stand over my statement no Bank in the E.U. will go to the wall. By this I mean all deposit's are safe.


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## brazen_dude (16 Nov 2008)

leghorn said:


> Two problems I can see with that;
> 1. There is a huge oversupply of rental properties already. This is bound to impact rental yields.
> 2. Where will investors get the money? One of the reasons prices are dropping is because people can't get mortgages.



Dublin suburbs are already seeing a 12-15% decrease in rents...


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## Complainer (16 Nov 2008)

You might check out options for spread betting on property indices - http://www.boards.ie/vbulletin/showthread.php?t=2055070304 more of a gamble than an investment, I'd reckon.


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## beekeeper (17 Nov 2008)

BroadbandKen said:


> I stand over my statement no Bank in the E.U. will go to the wall. By this I mean all deposit's are safe.


the govt has protected deposits/depositors not the banks


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## Bronte (17 Nov 2008)

brazen_dude said:


> Dublin suburbs are already seeing a 12-15% decrease in rents...


  How do you know this?


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## ringledman (17 Nov 2008)

Great post on the current state of the property & stock market and how to value property. Its all about the yield.

[broken link removed]

When opportunity knocks 
Sunday, October 26, 2008 By David McWilliams</SPAN> 
The current market instability could create lucrative chances for those willing to take a risk.

Because of the panic that has gripped the markets, the next few months will probably be the most profitable opportunity to make money in this generation. But you’d hardly think so by listening to the mainstream commentary in Ireland.

Sometimes it’s difficult not to laugh at the type of advice that is being thrown around Dublin by so-called financial experts. For example, the same lads who were telling you last year that Irish property was ‘‘fundamentally’’ sound and would experience, at worst, a ‘‘soft landing’’ are now telling you that the world is ending. 





Last year, these heads were telling you that AIB shares were a buy at €20.Today they are suggesting that AIB at €3.7 is a sell. God knows who pays these lads, or why. Nobody is suggesting that the background noise has not changed dramatically. Nor is anyone underestimating the risk involved in trying to stop the bottom of any market, but if we stand back a wee bit, we might gain that most valuable of insights - perspective.

The key thing to appreciate, is that all financial crises are temporary. They tend to blow over. People with debts and companies going into the crisis get hammered and those with cash prosper. The rout in asset prices becomes self-correcting.

Either markets exhaust themselves in a selling frenzy or they get pushed back by the heavy artillery of government intervention. Either way, the system rights itself at a different price and we start again.

We are now seeing huge falls, mainly because hedge funds are selling everything to meet their financial obligations. Their clients are demanding cash and, as a result, the funds have to sell everything they have.

At times like this, the selling becomes indiscriminate, which is why certain blue-chip companies - ones that will almost certainly survive the recession - are offering double-digit yields. Given that global interest rates are headed downwards rapidly, such companies must be a screaming buy.

But like everything in investing, you have to be diligent and, most of all, patient in your research. A crucial dynamic in all these episodes is that markets overshoot. In good times, as we’ve seen to our regret in the Irish property market, markets overshoot on the upside, bringing prices up to ludicrous levels.

In bad times, like now, the same process occurs and asset prices overshoot on the downside, bringing prices down to levels where the assets are at bargain basement prices. We are seeing this now in stock markets.

Unfortunately, this is not happening in the Irish housing market which, on any rational basis, is still wildly overvalued. Last year, this column ran a simple financial model for where fair value might be in the Irish housing market. This is back-of-the-envelope stuff, but bear with me. The price of any asset must be related to the amount of money the asset generates each year.

In the US, analysts claim that, in the long run, house prices should be equal to between 12 and 14 times earnings. This means that if a house is generating a rent of $10,000 a year, it must be worth between $120,000 and $140,000 a year.

Apply this test to Ireland. A quick search of Daft.ie will reveal, for example, that a three-bedroom house in Co Wicklow - advertised as an investment property - is on sale for €289,000.

The same website tells us that the average rent for a three-bed in Arklow is €850. So let us say that, in the best possible case, this place is rented for 11 profitable months a year - the final month’s rent goes on various costs. The implication from the American model is that the house is worth about €122,000.

The implication from this, compared to the advertised price of €289,000, is that the house is still wildly overvalued. The Irish calculation means that the house is trading at 31 times its annual yield. This clearly needs to fall dramatically by close to 60 per cent for it to make any financial sense to buy.

So one of the factors impinging on Ireland’s recovery is that we have to see house prices fall dramatically for any investor in their right mind to get back into the market. As long as estate agents, banks and builders are in denial about where prices need to go, we will not have a platform for any recovery.

So property investment is out, but let’s go back to the stock markets. The question is whether we are near the bottom? In Ireland, the bottom might take a few more months to materialise because we are caught in a bad debt brace.

Going into the crisis we were the most indebted population in the world. More worrying, practically all of that personal debt had been taken on since 2000, so not only were we indebted but we were newly indebted. Finally, practically all of that debt was property-related.

At this stage - for heavily indebted players - it hardly matters now what happens to interest rates. Sure, a few decreases will help, but the employment situation is of much more consequence for mortgage holders. Unfortunately, unemployment in this country is likely to rise substantially in the coming months and years because so much of our recent job increases were generated by the domestic service sector and the construction sector.

Rising unemployment will prompt industrial-scale mortgage defaults in Ireland and the defaulting process will follow the same pattern we have seen in the US. We are likely to experience what could be described as ‘‘shunting defaults’’, as people’s defaults shunt on from one loan to another. This means that we will also witness large-scale credit card default, many thousands of car loans will never be paid and home loans will similarly be reneged on.

This will lead to house prices tumbling in a delayed reaction. However, this is probably the point at which the Irish stock market will begin to rally.

For the brave, for those who understand the dynamic of markets, this week’s panic should be the signal to begin the process of thinking about investing again. The lessons from history are that turbulent times pass and also present the buying opportunity of a generation.

_www.davidmcwilliams.ie _


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## nuac (17 Nov 2008)

ringledman - good post - worth thinking about.


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## Headothelake (17 Nov 2008)

From a simple perspective, should we be able to gauge the financial position of the developers now that the tax filing deadline has passed?

I suppose what I wish to know is when can the affected companies no longer hide behind accounting exercises?


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## esher (17 Nov 2008)

Is discussion of house prices allowed again?


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## Kemo_Sabe (17 Nov 2008)

esher said:


> Is discussion of house prices allowed again?


 
it's the capitulation phase!


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## esher (17 Nov 2008)

Kemo_Sabe said:


> it's the capitulation phase!


 
true 

I feel sorry for my fellow first time buyers who sought impartial advice on askaboutmoney at the top of the boom 

I nearly fell for the gracious living brochures before I discovered www.thepropertypin.com


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## Bronte (17 Nov 2008)

esher said:


> true
> 
> I feel sorry for my fellow first time buyers who sought impartial advice on askaboutmoney at the top of the boom
> 
> I nearly fell for the gracious living brochures before I discovered www.thepropertypin.com


 
Do you think people buy houses based on what someone says on an internet forum?  Do people not do their own research?


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## esher (17 Nov 2008)

Bronte said:


> Do you think people buy houses based on what someone says on an internet forum? Do people not do their own research?


 

I think the exchange of ideas on internet forums can very helpful in allowing people to conduct their own research. For example the property pin website helped me to judge the lack of balanced information coming from the media, compromised forums, and even family and friends

Yes, many relied on these vested interests and are now paying the price.


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## Dave Vanian (17 Nov 2008)

I've had a look at this Property Pin website.  What balance?  Everything just points the one direction.   

Looks like a wannabe Askaboutmoney set up by sulking former Askaboutmoney posters who got banned from AAM because they didn't stick to the posting guidelines.  Where's the useful information, as distinct from the useless opinions of those who think they can predict the unpredictable?


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## z103 (17 Nov 2008)

> I've had a look at this Property Pin website.  What balance?  Everything just points the one direction.


It seems to me that everything is just going in one direction.


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## Dave Vanian (17 Nov 2008)

leghorn said:


> It seems to me that everything is just going in one direction.


 
If I make a recording of myself shouting "Property prices are going to go down tomorrow." and then play it on a constant loop outside my house, for a while people are going to mistakenly think I'm displaying uncanny prescience and judgement. But then one day I'll be wrong.


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## beekeeper (17 Nov 2008)

Brilliant article by McWilliams !


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## diarmuidc (18 Nov 2008)

Dave Vanian said:


> If I make a recording of myself shouting "Property prices are going to go down tomorrow." and then play it on a constant loop outside my house, for a while people are going to mistakenly think I'm displaying uncanny prescience and judgement. But then one day I'll be wrong.


But you are assuming that the people who were shouting that the prices were going to fall are going to continue to preach that after the decline. How do you know this is true? Maybe if they stop you'll admit that they were right?


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## Bronte (18 Nov 2008)

esher said:


> I think the exchange of ideas on internet forums can very helpful in allowing people to conduct their own research. For example the property pin website helped me to judge the lack of balanced information coming from the media, compromised forums, and even family and friends
> 
> Yes, many relied on these vested interests and are now paying the price.


That's a fair point that the exchange of ideas can help one in making a decision.  I can't read the property pin, it's layout is impossible for me


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## dieter1 (18 Nov 2008)

Bronte said:


> Do you think people buy houses based on what someone says on an internet forum? Do people not do their own research?


 
The Property Pin is an extremely useful tool for buying a house.  It introduced me to treesdontgrowtothesky which was invaluable in tracking actual house price drops and seeing how long a house has been around and when the drops have occured.

Doing your 'own research' was impossible. Estate Agents being what they are, were hardly going to give you an inkling into what was going on.  Sure you could talk to developers and connected people but they were all knee deep in it.

I have never had any connection with the Property Pin, sure there is alot of trash talk on there (you dont have to read it) but it was and I think still is, the only source of actual market information of what is going on out there.


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## iggy (18 Nov 2008)

Dave Vanian said:


> If I make a recording of myself shouting "Property prices are going to go down tomorrow." and then play it on a constant loop outside my house, for a while people are going to mistakenly think I'm displaying uncanny prescience and judgement. But then one day I'll be wrong.


 Burying your head in the sand doesn`t help anyone either.
I find the property pin site absolutely fantastic and has guided my financial decisions in the right path for the last few years. It`s the only site I log on to virtually every day, it`s informative and unbridled by silly censorship.


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## shanegl (18 Nov 2008)

iggy said:


> Burying your head in the sand doesn`t help anyone either.
> I find the property pin site absolutely fantastic and has guided my financial decisions in the right path for the last few years. It`s the only site I log on to virtually every day, it`s informative and unbridled by silly censorship.


 
And its absolutely full of useful information. Don't see how anyone could have missed it.


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## dieter1 (18 Nov 2008)

I think its fairly clear that most people buying a house at the moment use and rate the property pin.  I think its also fairly clear that most people getting a mortgage and looking for financial info use AAM.

There's plenty of space for two bulletin boards......


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## Askar (18 Nov 2008)

Dave Vanian said:


> If I make a recording of myself shouting "Property prices are going to go down tomorrow." and then play it on a constant loop outside my house, for a while people are going to mistakenly think I'm displaying uncanny prescience and judgement. But then one day I'll be wrong.


 

Are you a mortgage broker?


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## sfag (18 Nov 2008)

there are many ways for a bank to go to the wall. They could merge where two become one. Merill Lynch 'went the wall' when it was merged with bank of america. I think we'll see mergers with the market capitalization of both becoming more or less equal to one therefore one will have disappeared.


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## Dave Vanian (19 Nov 2008)

Askar said:


> Are you a mortgage broker?


 
I have several strings to my bow. A minority perentage of turnover does come from arranging mortgages. 

Why? Perhaps you think that I'm incapable of holding a view without it being warped by self-interest. Or maybe you think that I'm on a one-man crusade to talk up the Irish property market. Go me! 

I was equally scathing of the muppets who proclaimed that property could only go up. They were just as wrong as these property pinheads.

What do you do yourself?


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## diarmuidc (20 Nov 2008)

Dave Vanian said:


> They were just as wrong as these property pinheads.


The guys who were saying that property was over valued were *not* wrong. Stop trying to distort the facts.


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## MikeM (20 Nov 2008)

There is another school of thought that would suggest that this current downturn in the economy will be relatively short lived due to two factors.

The price of oil
The current interest rates
MikeM.


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## z103 (20 Nov 2008)

> There is another school of thought that would suggest that this current downturn in the economy will be relatively short lived due to two factors.
> 
> The price of oil
> The current interest rates




Ireland can't really take advantage of this though because there is no real indigenous Irish enterprise, and the banks won't give credit, so it doesn't really matter what the interest rates are.. The government is also hell bent on try to destroy any glimmer of a hope we have for a 'knowledge economy', by
1. Neglecting education.
2. penalising entrepreneurs; http://www.thepropertypin.com/viewtopic.php?f=19&t=15666

Maybe if we had different leadership, the downturn might be short lived.


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## z109 (20 Nov 2008)

Next up, bond market dislocation. Supply exceeds buyers. Governments unable to roll-over debt. (This is after all the corporate stuff has gone to the moon; junk bond yields have already reached 20%).


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## Dave Vanian (20 Nov 2008)

diarmuidc said:


> The guys who were saying that property was over valued were *not* wrong. Stop trying to distort the facts.


 
Just like all the economists who predicted 13 out of the last 3 recessions.


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## ringledman (20 Nov 2008)

Dave Vanian said:


> Just like all the economists who predicted 13 out of the last 3 recessions.


 
Add something of value or don't add anything at all. 

I'm sick of these worthless posters. I enjoy reading posts from the opposite view point providing they can back up their claim with something of half value.

Those here calling property overvalued were right, are still right and will be right for many years to come.

This aint a temporary blip, 'correction' or whatever else the ostrich brigade like to call it. 

Welcome to reality. Property is falling and will continue to do so for 3-5 years.

Yields are slowly heading back towards the 8-10% fair value but its going to be a long slow way...........................


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## Dave Vanian (21 Nov 2008)

ringledman said:


> I'm sick of these worthless posters. I enjoy reading posts from the opposite view point providing they can back up their claim with something of half value.
> 
> Those here calling property overvalued were right, are still right and will be right for many years to come.
> 
> ...


 
And I'm sick of listening to people sprout figures that sound authoritative but are meaningless in the current unprecedented financial conditions.  

In the boom years you could get countless economists who could back up their predictions of endless growth with lovely impressive statistics.  

As I understand it, the reason that property price discussions are banned on Askaboutmoney is that you'd get people like you sprouting predictions in one direction and people arguing against you with more predictions in the opposite direction and the end result would be worthless.  So th Property Pin can gaze into crystal balls to their heart's content.  I prefer to deal in the here and now.


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## diarmuidc (21 Nov 2008)

Dave Vanian said:


> In the boom years you could get countless economists who could back up their predictions of endless growth with lovely impressive statistics.


Glad we agree then that the economists who were backing up their claims that property was over priced with figures *were right*. You know who to listen to the next time it happens.


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## Dave Vanian (21 Nov 2008)

diarmuidc said:


> Glad we agree then that the economists who were backing up their claims that property was over priced with figures *were right*. You know who to listen to the next time it happens.


 
*With hindsight only.*


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## stanley6 (24 Nov 2008)

Dave Vanian said:


> Just like all the economists who predicted 13 out of the last 3 recessions.



I totally agree


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## Askar (24 Nov 2008)

Dave Vanian said:


> I have several strings to my bow. A minority perentage of turnover does come from arranging mortgages.
> 
> Why? Perhaps you think that I'm incapable of holding a view without it being warped by self-interest. Or maybe you think that I'm on a one-man crusade to talk up the Irish property market. Go me!
> 
> ...


 
I would have thought as much. The propertypin imo serves a useful purpose for those people who are probably making the biggest investment decision of their lives. Essentially, a decision to defer buying would run contrary to your broker interests. Btw, were you previously promoting the wonders of hedge funds on a thread some time ago?


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## ringledman (24 Nov 2008)

SPC100 said:


> I disagree.
> 
> _*We can identify property markets that are over or under priced based on historic international and national ratios. We can't predict when, why or how these ratios will mean revert. (e.g. will property prices, inflation, or income streams move). That does not take away from the fact that they are valued at more than their historic average.*_
> 
> ...


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## Dave Vanian (24 Nov 2008)

Askar said:


> I would have thought as much. The propertypin imo serves a useful purpose for those people who are probably making the biggest investment decision of their lives. Essentially, a decision to defer buying would run contrary to your broker interests. Btw, were you previously promoting the wonders of hedge funds on a thread some time ago?


 
Yes, predictably you assumed that if I declare an interest in the finance business that this must some way influencing my opinions on property websites who appear to be hell-bent on pushing just one set of predictions (when they're not crying about being kicked off Askaboutmoney).  If you read my earlier post more carefully, you'll see that I said that mortgage broking represents a minority percentage of my firm's turnover. Now that minority has got smaller, it gives me more time to get on with my other interests which are not property-related.

I note you seem reluctant to be as open with the board when I asked you what you do. 

You already asked me in another thread if I was promoting the wonders of a hedge fund. And I answered there too that you're obviously mistaking me for someone else.


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## Rosinsky (24 Nov 2008)

I dont understand the confusion about the Irish property bubble - it was so obvious - Ringledman - good post.

In simple terms the large medium multiple, the house price earning ratio and the phenomenon of the ingenius 100% mortgages was a great indication of the developing Irish housing bubble.  Paying 500k for an apartment in Sandyford - cmon where is the value in that???


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## dieter1 (25 Nov 2008)

Dave Vanian said:


> Yes, predictably you assumed that if I declare an interest in the finance business that this must some way influencing my opinions on property websites who appear to be hell-bent on pushing just one set of predictions (when they're not crying about being kicked off Askaboutmoney).  If you read my earlier post more carefully, you'll see that I said that mortgage broking represents a minority percentage of my firm's turnover. Now that minority has got smaller, it gives me more time to get on with my other interests which are not property-related.
> 
> I note you seem reluctant to be as open with the board when I asked you what you do.
> 
> You already asked me in another thread if I was promoting the wonders of a hedge fund. And I answered there too that you're obviously mistaking me for someone else.



I dont understand what this guy has against the property pin, its a very useful website, ok so initially it was a bit shaky, but people were angry that there was a complete lack of information out there (myself included) on where true property prices were then.  Can't people accept that these two websites both exist and both have their merits?


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## johnnygman (25 Nov 2008)

Rosinsky said:


> I dont understand the confusion about the Irish property bubble - it was so obvious - Ringledman - good post.
> 
> In simple terms the large medium multiple, the house price earning ratio and the phenomenon of the ingenius 100% mortgages was a great indication of the developing Irish housing bubble. Paying 500k for an apartment in Sandyford - cmon where is the value in that???


 
Surely these kind of assertions are very easy to make in hindsight, i didnt hear anyone shouting about the property crash 2 years ago apart from the doomsday folk who were continually spouting this over long periods, you will eventually strike oil if you drill enough wells.
Its a cycle people we will get through it and prices wil rise again given time i have no vested intersted in this either, i own my own home pay my mortgage and i live in it. thats the way people should view property if they are not investors, it was outside of our control as to what price or stage of the market you bought at, housing is a need and somtimes you dont have much choice when you are bringing up a family and need a home etc..


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## darag (25 Nov 2008)

I visit thepropertypin occasionally.  It contains some useful and interesting information but unfortunately is let down by a bizarre conspiracy theory ethos including a completely misplaced sense of victimhood.

The latter has almost reached biblical proportions at this stage whereby their ejection from the garden of eden (www.askaboutmoney.com) by the forces of evil (everyone here is a property owner/auctioneer/builder/etc.) in the dim past followed by their crossing of the desert into the promised land (www.thepropertypin.org) has become one of their defining experiences as a group.

The funny thing about their conspiracy theories (particularly concerning is that I was a property bear on the old thread (and in fact still am) and contributed in that basis but I didn't find the locking of the thread particularly unreasonable.  It had become circular and boring by the time it was locked.

Having said that, outside of the conspiracy loving fantasists, there are some informed and interesting views and opinions on the site.


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## DerKaiser (25 Nov 2008)

ringledman said:


> Add something of value or don't add anything at all.
> 
> I'm sick of these worthless posters. I enjoy reading posts from the opposite view point providing they can back up their claim with something of half value.
> 
> ...


 
Who's to say 8 - 10% yields are fair?

First we look at the long term interest rate. If it's 3% then we might look for a 6% yield on property. If it's 5% we might seek an 8% yield.

Now assume rather than being flat, rents increase at 2% per annum. The yield corresponding to interest rates of 3% and 5% would be 4% and 6%.

Say we expect rental income of €20k p.a. on a property. At long term interest rates of 3% and assumed rental growth of 2% per annum we might value it at €500k. If, on the other hand, long term interest rates rise to 5% and we expect no growth in rental incomes, the corresponding value would be €250k. 

The return on property is rent and that's what drives its value. We need to know the sustainability of rents, the volatility of rents and how much they're expected to grow or fall to work out the return we can expect on a property. We need to look at these in conjunction with returns from alternative sources, generally interest rates.

So yes 8% is probably a fair rental yield on property investment where long term interest rates are 5% and we expect little or no long term rental growth. 4% might be an appropriate yield where interest rates are closer to 3% and some rental growth is expected.

To predict for sure whether property is over or undervalued we need to be sure on many variables e.g. how will our population change, will global interest rates rise or fall, are current rents sustainable. 

For what it's worth I think rental yields could rise to 10%. That is until the sucker renting for 10 years earning nothing on deposit realises he's paid for someone elses house! Then the cycle will reverse until the next wave of suckers realise they'd earn twice as much interest hassle free from putting their money on deposit than from the meagre rent they're getting on their investment property!


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## Dave Vanian (26 Nov 2008)

dieter1 said:


> I dont understand what this guy has against the property pin...Can't people accept that these two websites both exist and both have their merits?


 
Two things: - 

(1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years. He does not deserve the (sometimes highly personal) attacks on his good name and any site that permits such attacks is worthy of nothing but contempt. 

(2) I fundamentally disagree with speculation being touted as fact, just because people can make impressive-sounding arguments to back up their predictions. 

I accept that Property Pin may have some useful posts and posters. I haven't seen any but if darag says they are there, I respect darag's opinion from previous experience. But the above two points utterly devalue them.


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## aircobra19 (26 Nov 2008)

I visit the "pin" infrequently. Useful in its own way, but I find the "attitude" off putting. It like Boards.ie also has some annoying moderation at times. AAM isn't perfect either. You have to accept its someone else game/ball so you have to play by their rules or vote with your feet.


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## dieter1 (26 Nov 2008)

Dave Vanian said:


> Two things: -
> 
> (1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years. He does not deserve the (sometimes highly personal) attacks on his good name and any site that permits such attacks is worthy of nothing but contempt.
> 
> ...


 
I accept that these attacks are unacceptable to anyone and I also disagree with speculation being touted as fact, but if facts are what you want regarding exactly where the property market is at (% price drops in certain areas, history of drops on houses), you won't find it anywhere but on that site.  And for that reason, it has its merits.  Any of my friends that have purchased in the last 18 months that I've spoken to have used it and its an invaluable tool.

A bit like if you are looking for the best savings rate, you got AAM......if you are looking for a recent history of price drops you go to propertypin.


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## DerKaiser (26 Nov 2008)

dieter1 said:


> I accept that these attacks are unacceptable to anyone and I also disagree with speculation being touted as fact, but if facts are what you want regarding exactly where the property market is at (% price drops in certain areas, history of drops on houses), you won't find it anywhere but on that site. And for that reason, it has its merits. Any of my friends that have purchased in the last 18 months that I've spoken to have used it and its an invaluable tool.
> 
> A bit like if you are looking for the best savings rate, you got AAM......if you are looking for a recent history of price drops you go to propertypin.


As far as I know all it does is track asking prices, Am I missing something?


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## Thomas22 (27 Nov 2008)

DerKaiser said:


> For what it's worth I think rental yields could rise to 10%. That is until the sucker renting for 10 years earning nothing on deposit realises he's paid for someone elses house! Then the cycle will reverse until the next wave of suckers realise they'd earn twice as much interest hassle free from putting their money on deposit than from the meagre rent they're getting on their investment property!



Do you really think that property will be less than 50% of its current price?
Because that is what would be required to get a 10% yield in a market where rents are falling


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## DerKaiser (27 Nov 2008)

Thomas22 said:


> Do you really think that property will be less than 50% of its current price?
> Because that is what would be required to get a 10% yield in a market where rents are falling


 
To be honest I couldn't see it at the start of the year, but I'm beginning to believe anything can happen. 

I certainly wouldn't hold my breath waiting for it to happen and don't think it could possibly be sustainable. 

But there will come a point where values reach their floor, and who's to say where that will be.

I doubt there will be many transactions at that floor but the smartest/luckiest/bravest few percent will time it right. As more and more people re-enter the market things will bounce back to more sustainable levels of rental yield (maybe 1% or so above the long term interest rate?)

If we arbitrarily say that 6% should be an appropriate rental yield, given that we have seen 2-3% rental yields at the height of the boom it's not a stretch to say yields could hit 9-10% at the height of the bust.


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## ringledman (27 Nov 2008)

Thomas22 said:


> Do you really think that property will be less than 50% of its current price?
> Because that is what would be required to get a 10% yield in a market where rents are falling


 
Yes of course. But over a long period i.e. like Japan or Germany in the 90's.

Thats what happened there. A halving of property values. Germany property in the 90's fell around 10% in nominal terms but lost 50% of value over a decade through real price falls caused by inflation.

This will happen in the West - inflation affecting the real value of property as well as continuing nominal falls and then a standstill in nominal prices.

Rents may rise slightly too to get to the 10% yield.

Think property will be a dog of an investment over the next 5-10 years.


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## mainasia (27 Nov 2008)

Dave Vanian said:


> Two things: -
> 
> (1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years. He does not deserve the (sometimes highly personal) attacks on his good name and any site that permits such attacks is worthy of nothing but contempt.
> 
> ...



But it was a HUGE mistake to ban discussion property price discussion. It seemed everybody could talk about the benefits of buying a house/affordable housing schemes etc. but as soon as a suggestion crept in that prices might go down it would be deleted or moved to another section. Isn't it odd that property price discussion was banned on the turn of the bubble, if not 'odd' at least terribly damaging to many posters that were looking for information to make a major financial deciision? Last thing is this website should be called 'all about property' because it's hard to find posts about anything else.


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## Ethan 1 (27 Nov 2008)

Getting back to the OPs question ,  IMHO eventually (< 3yrs) with all the stimulus packages, lower interest rates etc.... greed will again take over, inflation will rise........ Invest in Oil in the near future.


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## Askar (27 Nov 2008)

I agree. The fact that the propertypin tracks asking prices is, imo, a very useful tool. The price drops in some places are just staggering. I really don't know why any sane person would buy in the current climate without a hefty discount from the asking price.

I remember when every other source of information such as papers etc. had been hijacked by vested interests, such as brokers, bankers and developers, reaping the benefits of the bubble. Even our ex Taoiseach suggested that anyone who questioned this new paradigm should go and kill themselves. 

I also find it odd that brokers were allowed to advise posters on this site about mortgages. When I queried why anyone would need the services of a broker (in light of 'Best Buys' section of the site), it was suggested that they had the ability to get large mortgages and knew lending criteria of institutions better than employees of those institutions. 

When will brokers be required by the regulator to disclose their commissions for loan and life policies they 'recommend' to clients? I think it would be a very useful exercise to see whether brokers worked on a profit maximisation basis when advising clients, and promoted the most profitable mortgages. Remember the best mortgage in town for a long time was NIB, and you could not use a broker for that product. How many brokers advised clients that this product best suited them??


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## DerKaiser (27 Nov 2008)

Askar said:


> I agree. The fact that the propertypin tracks asking prices is, imo, a very useful tool. The price drops in some places are just staggering. I really don't know why any sane person would buy in the current climate without a hefty discount from the asking price.
> 
> I remember when every other source of information such as papers etc. had been hijacked by vested interests, such as brokers, bankers and developers, reaping the benefits of the bubble. Even our ex Taoiseach suggested that anyone who questioned this new paradigm should go and kill themselves.
> 
> ...


 
Tracking the change in asking price tells you nothing about the price being achieved in actual transactions. From anecdotal evidence properties were selling 10% above asking was the norm 2/3 years ago, now 10-20% below asking is viewed as the norm.  This suggest to me that actual prices have fallen at least 20% more than asking prices.  Property Pin does not capture this.

Also I'm no mortgage broker but I got good use from them when going through the mortgage process.  The bank effectively outsources work to them.  It's a type of specialist outsourcing.  If you took your line of reasoning there would be no role for advisors of any kind


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## Askar (27 Nov 2008)

DerKaiser said:


> Tracking the change in asking price tells you nothing about the price being achieved in actual transactions. From anecdotal evidence properties were selling 10% above asking was the norm 2/3 years ago, now 10-20% below asking is viewed as the norm. This suggest to me that actual prices have fallen at least 20% more than asking prices. Property Pin does not capture this.
> 
> Also I'm no mortgage broker but I got good use from them when going through the mortgage process. The bank effectively outsources work to them. It's a type of specialist outsourcing. If you took your line of reasoning there would be no role for advisors of any kind


 

Unfortunately no site, as far as I know, captures actual prices (unlike UK); however, it is the only site which shows the trend. As you say anecdotal evidence suggests actual prices are actually lower.

My line of reasoning does not suggest that 'all advisors of any kind' have no role. You may have felt that your advisor added value, but that is your opinion. I have a different view, based on my own personal experiences. As I said, I do not think that the payment structure for mortgage broking is conducive to truely independent advice (except maybe for the now defunct REA). There will always be a role for independent expert advice paid for directly by the person looking for that advice, be it medical, legal, accounting etc. Most brokers have only limited access to mortgage  and life insurance products. I would probably never again buy both products from a mortgage broker, or indeed, the same bank for that matter. There are many sites etc selling mortgage protection policies. It pays to shop around and not rely on a salesman selling limited products.

Btw, NIB does/did(?) not outsource their mortgages to brokers. As I said their ECB+0.5% rate was the best in town for a long time. You can (or at least use to be able) to access loans directly from the financial institutions, so you are incorrect in saying that they effectively outsource to brokers this specialist service. Assessment of ability to pay is/should be a core competence of any lending institution. Outsourcing it creates a dangerous moral hazard as the broker is only worried about his/her commission, and the borrower of recent years was always trying to get the highest multiples of income. Unlike other posters on this site, I did not see the ability of the broker to secure high loans as a beneficial service.


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## Dave Vanian (27 Nov 2008)

Askar said:


> When will brokers be required by the regulator to disclose their commissions for loan and life policies they 'recommend' to clients? I think it would be a very useful exercise to see whether brokers worked on a profit maximisation basis when advising clients, and promoted the most profitable mortgages. Remember the best mortgage in town for a long time was NIB, and you could not use a broker for that product. How many brokers advised clients that this product best suited them??


 
You obviously don't know much about the mortgage market and are beginning to sound like someone who received poor advice or service from a broker and then jumped to the misinformed conclusion that all brokers are the same. 

Commission disclosure for both mortgages and life policies has been a requirement for quite some time. 

Brokers cannot advise on the products of NIB because NIB will not offer agencies. A mortgage broker can only advise on the products of the lenders with whom their firm holds agencies. The list of these lenders must be given to a client (by way of the Terms of Business letter) before advice is given. 

I'm also curious as to why you're perfectly willing to ask me what I do for a living, which I answered. But you seem to conveniently ignore the same question from me, which I've asked twice so far. What do you do for a living?


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## Bronte (28 Nov 2008)

Askar said:


> I also find it odd that brokers were allowed to advise posters on this site about mortgages. When I queried why anyone would need the services of a broker (in light of 'Best Buys' section of the site), it was suggested that they had the ability to get large mortgages and knew lending criteria of institutions better than employees of those institutions.


  I disagree with this point.  Many people use brokers because they are unwilling/too lazy/incapable of going to search the best deal from banks directly.  Brokers tend to be experts at filling out the application forms correctly and more importantly making sure their client only states that which the bank wishes to hear.  For this service they have to be paid, be it on commission or directly.  It's also true, in my opinion, that the purchasers only goal was to get the dream home no matter what the cost or their capability of repaying it and they knew a broker would be able to do this for them.  As for the brokers knowing the lending criteria of the institutions better than the employees, that wouldn't surprise me, have you ever dealt with the people in the mortgage section, well I have and they are pen pushers and deliberately so, with attitude, to avoid dealing directly with customers even branch staff do not want to deal with 'Dublin'.


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## Askar (28 Nov 2008)

Dave Vanian said:


> You obviously don't know much about the mortgage market and are beginning to sound like someone who received poor advice or service from a broker and then jumped to the misinformed conclusion that all brokers are the same.
> 
> Commission disclosure for both mortgages and life policies has been a requirement for quite some time.
> 
> ...


 
Disclosure of commission was certainly not my experience. I was astonished when I subsequently found out what the broker made on my life policy in commission. There were much cheaper policies out there;  it took a remortgage for me to discover that.

As already stated, brokers do not have access to all products in the market and can therefore only advise in relation to the products that they are authorised to sell - therefore they may not be selling the best product for a particular person. I have found bank officials to be very helpful in my remortgage applications. 

Btw, I am employed in the energy sector. I asked you what you did because I suspected that someone expressing negative sentiment towards a site which would discourage buying in current climate might be involved in the financial sector. You are so involved. 

Bronte, the persons selling the loan product is always going to be very helpful if (s)he will make commission on completing the mortgage process; however, as with the subprime liar loans, the broker does not carry the default risk in securing the high value loan. The is a pretty fundamental point.


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## HouseOfCards (28 Nov 2008)

Dave Vanian said:


> (1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years.


 
NOT a pop at the poster but do a Google search on "Brendan Burgess" and the hits you'll get are generally the man himself making submissions while quoting his authority as being "BB of AAM". Maybe there's no personel gain in doing so. Maybe there's some.
Who set up the pin? I don't know. Someone less inclined to promote themselves in any case. If anyone can fill me in then thanks in advance.

If posters of a differing opinion on the sustainability of house prices running at more than 8 times (I think??) av earnings, had a chance to reply, then the mentions of BB on the pin might be less in number and a bit more flattering.... but no... 'banned' 'locked' 'deleted' 'read the guidelines' 'mod edit' are the standard.
Its a bit of a joke to play the Fox News model - 'Fair and Balanced'. Please. For too long people came on AAM and only got the up sides. Any suggestion that it might not be the best idea to leverage themselves to 8 times their income on an overpriced property were sliced. Surely it can't be denied that people took advice that was one sided. Even if it wasn't intended as advice - they did. Its a fact.

The thread that everyone is talking about here was full of people debating whether house prices were grossly inflated or not. Closed because it got boring or broke a rule or something like that. Well the brown stuff has hit the fan in a big way. Too late for debating whether it was inflated now. Don't worry though.... it'll go back up 




Dave Vanian said:


> (2) I fundamentally disagree with speculation being touted as fact, just because people can make impressive-sounding arguments to back up their predictions.


There's somewhere where yourself and pin members are aligned. Try here http://www.thepropertypin.com/viewtopic.php?f=4&t=2631
As much BS unsubstantiated speculation as you can possibly handle. Great read.




.


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## Dave Vanian (29 Nov 2008)

Askar said:


> Disclosure of commission was certainly not my experience. I was astonished when I subsequently found out what the broker made on my life policy in commission. There were much cheaper policies out there; it took a remortgage for me to discover that.


 
Did you not ask for, or receive a written quotation?

If not, then assuming this was a transaction in the last few years, you dealt with a broker who operated outside the law.  That's unfortunate but you shouldn't use this negative experience to wrongly assume that other brokers do so.  For every broker you could come up with who doesn't disclose commission, I can point you to three who do.  



Askar said:


> As already stated, brokers do not have access to all products in the market and can therefore only advise in relation to the products that they are authorised to sell - therefore they may not be selling the best product for a particular person. I have found bank officials to be very helpful in my remortgage applications.


 
This is a bizarre paragraph which makes no sense.  First you criticise brokers for NOT having access to all products and then you praise banks who are tied agents and thus don't offer any choice whatsoever.  



Askar said:


> I asked you what you did because I suspected that someone expressing negative sentiment towards a site which would discourage buying in current climate might be involved in the financial sector. You are so involved.


 
Funny that - Askaboutmoney expresses a lot of negative sentiment towards property these days.  Look at any query in the Mortgage section from a potential house buyer and you'll find plenty of replies suggesting that the buyer should defer buying altogether.  Yet I don't express negative sentiment towards AAM.  You evidently haven't understood my reasons for criticising the Property Pin, even though I explained them clearly above.  

I have repeatedly disproved your inferences that my views on the Property Pin or the property market in general are influenced by my profession.  Yet despite this, you continue to make them, without adding any new substance.  It's getting frankly boring.  Why is it so hard for you to accept that people are capable of expressing opinions that are not biased by self-interest?


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## Askar (29 Nov 2008)

Dave Vanian said:


> This is a bizarre paragraph which makes no sense. First you criticise brokers for NOT having access to all products and then you praise banks who are tied agents and thus don't offer any choice whatsoever.


 
You are misrepresenting my point. 

My point is that an individual can make an independent assessment of best lending rates available without the services of a broker or lending institution, and then approach the institution that is offering the best deal. 

No doubt, however, this is an innocent misrepresentation, and not a biased and deliberate misrepresentation based on the fact that you are a broker!


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## Dave Vanian (29 Nov 2008)

Can't even be bothered repeating myself ad nauseum, so I'll just cut and paste.  




Askar said:


> No doubt, however, this is an innocent misrepresentation, and not a biased and deliberate misrepresentation based on the fact that you are a broker!


 


Dave Vanian said:


> I have repeatedly disproved your inferences that my views on the Property Pin or the property market in general are influenced by my profession. Yet despite this, you continue to make them, without adding any new substance. It's getting frankly boring. Why is it so hard for you to accept that people are capable of expressing opinions that are not biased by self-interest?


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## Askar (29 Nov 2008)

Dave Vanian said:


> Can't even be bothered repeating myself ad nauseum, so I'll just cut and paste.


 
Yeah, probably best course of action.


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## Dave Vanian (29 Nov 2008)

Well this is progress.  It appears you actually do read my posts, despite evidence to the contrary above.  I'll leave it at that.  Have a good evening.


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## ph4t (3 Dec 2008)

ringledman said:


> SPC100 said:
> 
> 
> > - Rapidly rising prices
> ...


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## dunkamania (3 Dec 2008)

yoganmahew said:


> junk bond yields have already reached 20%


 
No they havent


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