# gloomy predictions for the Irish rental market were misplaced



## zardebt (18 May 2005)

Early 2005 data suggest that previous gloomy predictions for the Irish rental market were misplaced - Rental values appear to have bottomed out and are improving modestly as the Irish economy strengthens and inward migration continues at a very high level - Signs of broad balance in rental market mirror the recent trend in broader housing market and bode well for outlook - Rents rising countrywide but variation suggest returns will increasingly reflect investment decisions rather than broad economic climate

http://www.daft.ie/report


----------



## joe sod (19 May 2005)

It is true that rents in certain areas may have risen somewhat over the last 6 months. The reason for this is no doubt the big influx of eastern Europeans into Ireland over the last year. However this is largely restricted to certain areas of Dublin, Cork and Galway. They are largely young and mobile with as many occupants as possible per property. 



It is the same as the irish labourers in London in the sixties and seventies. They definitely had an effect on certain areas of Britain such as Kilburn and Camden town but their overall effect on British property was negligible. The Irish in the sixties and seventies preferred to send their money home and buy houses and businesses in Ireland. Indeed I remember being on holidays in Mayo in the late eighties and coming across unfinished derelict houses. When I enquired why this was so I was told that someone in England had run out of money ten years before and was unable to finish it. 



The immigrants from Eastern Europe are very similar to the Irish labourers of the sixties and seventies in that they will have a negligible effect on Irish property. It is worth remembering that Britain experienced large flows of immigrants in the sixties, seventies and eighties however this did not prevent property crashes in the seventies and late eighties. I believe what happens to Irish property and the irish economy will not be determined by irish events but by global events.


----------



## nahdoic (19 May 2005)

joe sod said:
			
		

> I believe what happens to Irish property and the irish economy will not be determined by irish events but by global events.



Well totally.  We are the most global economy in the world.  So when a world-wide recession hits,  Ireland will be hit hard.  It's only a matter of time.  When this will happen and why is anyone's guess.


----------



## Gabriel (19 May 2005)

nahdoic said:
			
		

> Well totally.  We are the most global economy in the world.  So when a world-wide recession hits,  Ireland will be hit hard.  It's only a matter of time.  When this will happen and why is anyone's guess.




Something like what happened after 911 perhaps?


----------



## nahdoic (19 May 2005)

Gabriel said:
			
		

> Something like what happened after 911 perhaps?



Did a recession happen?  Central banks around the world seemed to follow the Fed - interest rates were slashed and a recession was avoided for the moment.


----------



## zardebt (19 May 2005)

I was surprised with the report!!  was anyone else.???

Since the large amount of construction , the introduction of section 50 20 ....... I thought
supply would have exceeded demand.....

or is this report just IIB wanting people to invest .,,, and up talking the figures !

Would be very interested in feedback !!


----------



## Gabriel (19 May 2005)

zardebt said:
			
		

> Since the large amount of construction , the introduction of section 50 20 ....... I thought
> supply would have exceeded demand.....
> 
> or is this report just IIB wanting people to invest .,,, and up talking the figures !
> ...



http://www.finfacts.com/biz10/irelandhouseprices.htm

_“House prices in Ireland are finally responding to the scale of supply, and the era of double digit house price inflation may well be over. *Demand for housing in 2005 is likely to remain strong*, underpinned by strong employment growth and solid wage inflation, so a sustained price decline remains a low probability”, according to Dr. Dan McLaughlin, Chief Economist, Bank of Ireland Global Markets._

Bold text is my own.


----------



## CoffeeBrew (19 May 2005)

Gabriel said:
			
		

> http://www.finfacts.com/biz10/irelandhouseprices.htm
> 
> _“House prices in Ireland are finally responding to the scale of supply, and the era of double digit house price inflation may well be over. *Demand for housing in 2005 is likely to remain strong*, underpinned by strong employment growth and solid wage inflation, so a sustained price decline remains a low probability”, according to Dr. Dan McLaughlin, Chief Economist, Bank of Ireland Global Markets._
> 
> Bold text is my own.


 
And now for the small print ;-)

The words “looking forward,” “anticipates,” “probability,” “expects,” “will,” “believe(s),” “may,” “is expected to,” “likely”, and similar expressions, among others, identify forward-looking statements. 

Readers should be cautioned not to place undue reliance on these forward-looking statements whenever any entity with a massive vested interest in the property market uses them, they speak only as of the date the statement was made and are subject to change without notice !!


----------



## Gabriel (19 May 2005)

CoffeeBrew said:
			
		

> And now for the small print ;-)
> 
> The words “looking forward,” “anticipates,” “probability,” “expects,” “will,” “believe(s),” “may,” “is expected to,” “likely”, and similar expressions, among others, identify forward-looking statements.
> 
> Readers should be cautioned not to place undue reliance on these forward-looking statements whenever any entity with a massive vested interest in the property market uses them, they speak only as of the date the statement was made and are subject to change without notice !!



It's easy to rubbish almost any claim, but the fact of the matter is demand for new housing is still high in this country and while supply has been increasing there is still some way to go before we reach a state of saturation.


----------



## zardebt (19 May 2005)

I would agree with CoffeeBrew !!!

As for the market has not reached saturation  well I am not too sure about that ......
I suppose once it does the building company will decrease their output which means less workers with SLOWER employment growth and solid wage inflation .. I suppose my fear is that one is driving the other ......


----------



## Gabriel (19 May 2005)

zardebt said:
			
		

> As for the market has not reached saturation  well I am not too sure about that ......



http://www.finfacts.com/irelandbusinessnews/publish/article_1000716.shtml

"In a review of the Irish house property market, the European Housing Review 2005, which has been published by the Royal Institute of Chartered Surveyors...


...The country had the lowest number of dwellings per thousand inhabitants in the EU in 1980 and, despite the huge recent building boom, is still at the bottom of the housing availability league. This is reflected in the relatively high average household size (3 persons in 2001), though this was far less than the 4 persons per dwelling in 1971.6 This historic lack of dwellings is a root cause of current shortages and rising house prices....

...The sustained level of new housing supply may help to moderate future price pressures."


----------



## CoffeeBrew (19 May 2005)

The demand for housing is always there. That's why when property prices crash they never crash to zero. Demand provides a floor.

In the event of a shock to the property market or even sustained pressure with increasing interest rates it's difficult to say how far that floor is below current prices. It ranges from overly optimistic (no correction) to darkly pessimistic. Personally, I'm concerned enought to adapt my own "Don't Buy Here" strategy.

Also as discussed many times before, assets prices are set at the margins. It doesn't take a huge change in sentiment to have a significant impact.


----------



## Gabriel (19 May 2005)

CoffeeBrew said:
			
		

> The demand for housing is always there. That's why when property prices crash they never crash to zero. Demand provides a floor.



I'm not sure what point your trying to make here? Wasn't zardebt's question that he's not sure whether we've reached saturation yet? Housing supply is directly related to demand. If people weren't buying houses it would be uneconomical for builders to build them. Therefore supply will, at some stage in the future, meet or nearly meet demand, which will result in a decrease in supply. We're not seeing that right now for the reasons as set out by the Royal Institute of Chartered Surveyors.



			
				CoffeeBrew said:
			
		

> In the event of a shock to the property market or even sustained pressure with increasing interest rates it's difficult to say how far that floor is below current prices. It ranges from overly optimistic (no correction) to darkly pessimistic. Personally, I'm concerned enought to adapt my own "Don't Buy Here" strategy.


 
No one knows what will happen to interest rates...but the general view is that they are likely to remain low for sometime and increases will be small.

Again, your presumption is that house prices are severely overpriced. If you're wrong, which I personally believe you are, then you'll possibly never own a house in Ireland, waiting for the magical bubble to pop. I believe that price rises will merely slow and (eventually) reach a new floor.


----------



## tonka (19 May 2005)

Dunno Gabriel .

Lets see, 60,000 leave school per year at 19 ish  and 'form' a household with an average of 3 persons. Thats requires 20,000 gaffs a year assuming nobody fecks off to Australia  . Thereafter they recycle into other households but the basic formation group is aged about 19  .  

60,000 immigrate requiring another 20,000 gaffs  (actually its less because immigrants frequently sleep 5 or 6 to a house or flat to save money which is what they come here to do ) . 

I make the natural household formation (rate per annum) out to be 40,000 by that reckoning and we had problems building more than 40,000 units a year until fairly recently. 

Here is our build rate  (from http://www.environ.ie/DOEI/doeipub.nsf/0/27f8d54f8e43126f80256fbd003f03e6/$FILE/HousecompletionsTable%20%202.doc    )

Year	Number of House Completions
1993	21,391
1994	26,863
1995	30,575
1996	33,725
1997	38,842
1998	42,349
1999	46,512
2000	49,812
2001	52,602
2002	57,695
2003	68,819
2004	76,954

Nowadays we build 80,000 units per year .  Where are we getting the bodies to fill them again ????? I believe interest rates will remain low for a long time to come as well by the way .


----------



## zardebt (19 May 2005)

"Wasn't zardebt's question that he's not sure whether we've reached saturation yet? Housing supply is directly related to demand._"

...........just in case my husband is reading this ---ah I am a SHE ......
I wouldn't want him asking more question when I get home tonight other than
where is my dinner"..._


----------



## Gabriel (19 May 2005)

tonka said:
			
		

> Dunno Gabriel .
> 
> Lets see, 60,000 leave school per year at 19 ish  and 'form' a household with an average of 3 persons. Thats requires 20,000 gaffs a year assuming nobody fecks off to Australia  . Thereafter they recycle into other households but the basic formation group is aged about 19  .
> 
> ...




If your logic/figures are correct, which I doubt, where are all the empty houses?


----------



## Gabriel (19 May 2005)

zardebt said:
			
		

> "Wasn't zardebt's question that he's not sure whether we've reached saturation yet? Housing supply is directly related to demand._"
> 
> ...........just in case my husband is reading this ---ah I am a SHE ......
> I wouldn't want him asking more question when I get home tonight other than
> where is my dinner"..._


_

My apologies zardebt _


----------



## CoffeeBrew (19 May 2005)

Gabriel said:
			
		

> I'm not sure what point your trying to make here? Wasn't zardebt's question that he's not sure whether we've reached saturation yet?


 
I was commenting on the relationship between demand and prices. A topic introduced to the thread by none other than yourself when you quoted Dr. Dan. 




> No one knows what will happen to interest rates...but the general view is that they are likely to remain low for sometime and increases will be small.


 
If there's one thing we can learn from what's happening overseas is that small increases in interest rates are taking a toll - a more severe toll than was anticipated. 



> Again, your presumption is that house prices are severely overpriced.


 
I would hate to be in a position of having to defend todays house prices.



> If you're wrong, which I personally believe you are, then you'll possibly never own a house in Ireland, waiting for the magical bubble to pop.


 
whoa there horsey - I'm not waiting for the bubble to pop anymore than you are waiting to get rich from your property (well I hope you're not anyway!). 
I've outlined my own humble approach on this thread:


----------



## CoffeeBrew (19 May 2005)

Gabriel said:
			
		

> If your logic/figures are correct, which I doubt, where are all the empty houses?


 

er, I think a link you posted has the answer

You posted this earlier


http://www.finfacts.com/biz10/irelandhouseprices.htm

Scroll down to the bottom:
Special Article: "The Irish Housing Stock - Growth in Number of Vacant Dwellings",


----------



## tonka (19 May 2005)

Thanks Coffebrew, I was wondering where that recent report on empty properties  was. 

[broken link removed]

19.4% of Habitable houses on the Atlantioc Coast are empty (normally) 

1 in 6 in County Galway , they are all around me . One neighbouring house is inhabited for 2 weeks a year as I see it .


----------



## Gabriel (20 May 2005)

> Lets see, 60,000 leave school per year at 19 ish and 'form' a household with an average of 3 persons. Thats requires 20,000 gaffs a year assuming nobody fecks off to Australia . Thereafter they recycle into other households but the basic formation group is aged about 19 .
> 
> 60,000 immigrate requiring another 20,000 gaffs (actually its less because immigrants frequently sleep 5 or 6 to a house or flat to save money which is what they come here to do ) .
> 
> I make the natural household formation (rate per annum) out to be 40,000 by that reckoning and we had problems building more than 40,000 units a year until fairly recently.



I was referring to this type of logic above actually.

The point you seem to be making is that we're building houses that no one wants. 

Builders could not stay in business if people weren't buying their developments.


----------



## tonka (20 May 2005)

It means that 40000 houses are 'needed' and 40000 are built for speculators and as holiday homes ! 

We currently build twice the demand from demographics . This will not last. 

Mate just moved into spanking new , very well fitted out, €220k flat in Galway , it costs him €670 a month to rent. 

That covers interest on mortgage at 3% + building service charges for the landlord . 

The flat is not appreciating in value .

Where IS the return ?


----------



## Gabriel (20 May 2005)

tonka said:
			
		

> It means that 40000 houses are 'needed' and 40000 are built for speculators and as holiday homes !



I see...and you can back this up with solid evidence right? 40,000 homes and 40,000 holiday homes?



			
				tonka said:
			
		

> Mate just moved into spanking new , very well fitted out, €220k flat in Galway , it costs him €670 a month to rent.
> 
> That covers interest on mortgage at 3% + building service charges for the landlord .
> 
> ...



I'm sorry, I don't understand your point. He just moved in to a new apartment but it hasn't appreciated yet! Is that what you're saying? Appreciation usually takes some time.


----------



## CoffeeBrew (20 May 2005)

> We currently build twice the demand from demographics . This will not last.


 
As the report says (emphasis mine) : _The Irish housing market is currently in an *unstable* position. House prices are not only exceptionally high by historical standards but also very high.....relative to the richest countries in the EU._ 

Given this instability it would appear that anticipating price falls is perhaps the more reasonable position to be in right now.


----------



## tonka (20 May 2005)

Gabriel said:
			
		

> I see...and you can back this up with solid evidence right? 40,000 homes and 40,000 holiday homes.



If we build 80000 this year (we will) and we did last year , and shovel the Irish average of bodies into them (c.3) we have therefore housed 240,000 out of a population of 4M  bodies 

WHERE did this 240000 bodies come from ?


----------



## Gabriel (20 May 2005)

tonka said:
			
		

> If we build 80000 this year and shovel the Irish average of bodies into (c.3) we have therefore  then we have housed 240,000 out of a population of 4M
> 
> WHERE did this 240000 bodies come from ?



You're beginning to become completely irrational in your logic now so I'll bow out of this at this stage.


----------



## tonka (20 May 2005)

I see that building homes has become abstracted from anyone living in them, how quaint .  

Thanks Gabriel.


----------



## CoffeeBrew (23 May 2005)

In complete contrast to the highly - almost desperately - optimistic report from daft and IIB, an article in yesterday's Sunday Business post quoted a landlord agency as saying the rental market is in a state of 'collapse' !


----------



## zardebt (23 May 2005)

- they discuss the report on the Sunday business show yesterday and it seemed that
basically the message from the report was that areas like limerick and Galway are experiencing a decrease in rental price while place in Dublin esp. D4 ..D2 and D6 are seeing  a rise.

I suppose in the end of the day if you got a sum of cash and you want to invest it
even with the poor returns in renting are there better options ??


----------



## tonka (23 May 2005)

zardebt said:
			
		

> it seemed that
> basically the message from the report was that areas like limerick and Galway are experiencing a decrease in rental price while place in Dublin esp. D4 ..D2 and D6 are seeing  a rise.



My opinion was based on the Galway market where building peaked in 2003 , funny how the experts are saying the same thing as i , rental down due to oversupply .


----------



## walk2dewater (23 May 2005)

zardebt said:
			
		

> -
> I suppose in the end of the day if you got a sum of cash and you want to invest it
> even with the poor returns in renting are there better options ??


 
Zar, you're forgeting about risk the other element of investing. Return is what you get for risking your capital. Property IMHO is a very risky asset in todays world. Right now the world is a strange place because of the huge amount of cheap money sloshing about because of ridiculously low interest rates. In my view property is the worst asset on a risk/return basis, followed by equities (shares) and even debt (bonds). All are expensive by almost any criteria. Are there options? Well yes, COLD HARD CASH is an investment option. Right now my wealth is 50% in cash (govt-backed short terms), 30% in debt -mostly canadian mortgage bonds and german bonds-, 15% in selected natural resource shares, and 5% gold. I'm availing of the cheap rent in Dublin (rel to asset values), but I fear property values here will 'go Japanese' before ever becoming cheap again.


----------



## joe sod (23 May 2005)

I agree totally with the last posting. However I am more bearish I am invested 20% in gold and silver. I have taken a small short term loss but as I see it events are slowly unfolding and I am going to sit this one out as I am concerned about having too much money in banks some of them are looking dodgy now.


----------



## tonka (23 May 2005)

joe sod said:
			
		

> I agree totally with the last posting. However I am more bearish I am invested 20% in gold and silver.



20% in Bullion is a tad bearish all right  , too bearish for me  TBH


----------



## walk2dewater (23 May 2005)

I might add that said portfolio is up 4.6% in last 6 mths.  Not great, but very low risk and +4.6% is better than -4.6%.... what would a 100% Irish property portfolio be worth now... or a UK property portfolio?... hometrack just reported their housing index today, yeap down again... 11mths of declines now, year-on-year their index is down -2.3%....  I can hear the property bulls now, "down 2.3% is hardly a crash....", yeah but the housing market is R-I-S-K-Y today... not to mention highly illiquid and difficult to assess actual market value... ok I'll stop banging my head against the wall...    Im off to McSorleys...


----------



## walk2dewater (23 May 2005)

joe sod said:
			
		

> I agree totally with the last posting. However I am more bearish I am invested 20% in gold and silver. I have taken a small short term loss but as I see it events are slowly unfolding and I am going to sit this one out as I am concerned about having too much money in banks some of them are looking dodgy now.


 
Joe, if u dont mind me askin, how are you investing in metals?  Bullion or shares?  If shares, what currency?  I would also agree w Tonk that 20% is an aggressive position for what amounts to essentially an 'insurance policy' against all hell breaking loose (not implausible).  And why 20%?  Why not 30%?

I might also add, that it's refreshing to see some real investors on this board... I was beginning to think ireland was the exclusive refuge of 100% property bulls!!!!


----------



## joe sod (24 May 2005)

Yes I agree with you it is a very bearish position and I am invested in gold and silver bullion not in shares. I also would not consider myself to be a serious investor. The reason why I have such a big proportion invested in bullion is that I have no faith in the global economy and the direction it is going. I have been doing a lot of reading over the last couple of years as to what is going on in the world and frankly the bears have more convincing and compelling arguments than the bulls. In the bears camp you have Warren Buffet, George Soros and now more recently Tony O’Reilly. The only figure in the bull’s camp that is a heavyweight in my opinion is Alan Greenspan. But his pronouncements over the last few years have been lame and unconvincing. I think his sole priority at the moment is to keep recession at bay until he is safely out of the Fed no matter what the cost.



I believe the reason why we have had high tech bubbles, property bubbles etc is because there is too much cash in the global economy. Also with the anglo saxon world being in so much debt the only out is to allow inflation to rise to reduce the burden of this debt. As the Americans have been printing more dollars to keep their economy above board, the Japanese and the Chinese have been printing more yen and yuan in order to maintain their exchange rates with the dollar. With all this printing going on I think it is sensible to have a substantial bullion holding. 



You are right though maybe 20% is too much but I think 5% is too little, I think 10% would be better proportion. You are right it is an insurance policy to an extent and I would rather have a pretty good one. I also believe that bullion is returning to its rightful place as a serious investment alternative rather than just something for the heretics. It is also worth remembering that the financial establishment hate gold and silver because it is so simple, there is nothing in it for them. Its like something out of the middle ages to them. Also the Chinese and the oil producing countries are falling out of love with American assets and they will also want to hold more bullion.


----------



## walk2dewater (24 May 2005)

Joe, any interesting links to investment views of Tony O'Reilly or Soros you'd like to share?


----------



## CoffeeBrew (24 May 2005)

walk2dewater said:
			
		

> I might also add, that it's refreshing to see some real investors on this board... I was beginning to think ireland was the exclusive refuge of 100% property bulls!!!!


 
Might not be far of with that 100%, that's why any any sane individual who expects an end to the current Irish property madness is made to look like a pessimist and doom-and-gloomer rather than a prudent investor !

I've owned properties (PPRs) in the UK and the US so I'm not exactly timid about entering property markets, however I wouldn't touch the Irish property market today with the proverbial bargepole !!

Anybody consider a portion of their portfolio _shorting_ financial and other property related stocks ?


----------



## tonka (24 May 2005)

Shall we who believe in the inevitable pool some 'resources'  into a dedicated hedge fund with a view to shorting property stocks et al ? . An Investment Club  _of sorts_


----------



## CoffeeBrew (24 May 2005)

Yeah I like it - even if initially the investment is simulated !

1. We could come up with an 'fund' - appropriately named ;-)

2. Identify the long and short stocks to go into it (Irish, UK ? and US ?)

3. Track the fund index and a simulated investment of say 100k

Might even be tempted to jump into it later myself ;-)


----------



## tonka (24 May 2005)

Virtually would be nicest. Thats If everyone agrees the rules first .  

A couple of €10 bets between the members allowed on the side with a maybe  a 'tax' into a kitty and a vote around the 15th of December on who gets the kitty ....for being most right/ most useful all year. 

Centrally invest 50% of the nominal fund , kitty vote based on activity there,  and to invest the other 50% as per members own ideas but in keeping with the 'philosopy' .

Run another book on that 50% investment , winner takes all  . No real money but enough to focus the mind !!!!! 

I hereby name it the Development Opportunity Syndicate Simulator , DOSS in short .


----------



## CoffeeBrew (24 May 2005)

DOSS it is... time to research the list..


----------



## joe sod (24 May 2005)

"Joe, any interesting links to investment views of Tony O'Reilly or Soros you'd like to share?"

Well I took Tony O' Reilly's quote from the gold.ie website it is near the bottom of this link
[broken link removed]

Also printed it here

"Asian economies are growing while Europe and the US are in decline . The solution is for the major economies to adjust their currencies to levels which reflect today's economic reality. There is a general feeling that Europe, particularly "old Europe" as a manufacturing and potentially services area, is, or will become, increasingly uncompetitive    . . . 

Essentially this means that manufacturing and services in Europe will be a shadow of their former selves   . . . 
In the medium and long term - not to speak in certain cases of the short term - this bodes ill for Ireland, and for Europe. 
The question is what can be done about it?   . . . 

There are a number of answers, not least being a growing sense of awareness both in Europe and the US, that they are engaged, as assuredly as they were in the Second World War, in a major battle for economic prosperity and survival.
Simply stated, as we contemplate this growing struggle   . . .   it becomes clear that companies act in this way [relocate] because European and US currencies are overvalued in relation to Asian currencies, particularly the Chinese yuan.
The solution to this is a major and organised adjustment of currency parities. Otherwise, there is a risk of a drift to protectionism, as is actively being pursued in the US Senate today (and as happened, to drastic effect, in the 1930's with the Smoot-Hawley Act in the USA.   . . .    

I believe therefore that all the major parties, the EU, Britain, USA, China and Japan should urgently organise a major conference along the lines of the Plaza/Louvre Accords of 1985 and 1987 which would indicate that the parties believe is fair value for a basket of currencies for a period of say, 5 years, and a concurrent declaration that they will act in concert against any speculation or gross overvaluation of a particular currency against it's neighbours. 

Such a declaration will bring economic stability and growth to the world on a steady and measured basis.

Nothing else will."
Asian economies are growing while Europe and the US are in decline
*Sir Anthony O'Reilly, The Sunday Independent*
There are many other good commentaries on this website. Admittedly there maybe a bias towards getting you to invest in bullion.


----------



## CoffeeBrew (25 May 2005)

Going back for a moment to the earlier question on vacant properties. An article this morning in 

http://www.unison.ie/business/irish/stories.php3?ca=80&si=1402359

quotes Davy Stockbrokers:



> The house-building peak is nigh and it might be better to begin the adjustment process sooner rather than later," the report says. The number of new units left vacant needs to decline from the present 30pc towards the historical average of 11pc


 
On the possibility of the bubble bursting :



> They say it is difficult to know what might trigger a sharp fall in the housing market, or when it might happen. "Sentiment can change without an observable catalyst - think back to 2000 and the bursting of the technology bubble."
> 
> Investors might be deterred by falling or static rent yields, or the demand for second homes might be hit by tax changes or loss of confidence in future price rises, the report says. In any event, the underlying demand for homes to live in is set to fall rapidly from 2007 onwards.


----------



## walk2dewater (25 May 2005)

When does the April ESRI/TSB index come out... the April one is due, no?

Here's March's...
[broken link removed]

Will it go negative?


----------



## tonka (25 May 2005)

*Comparative Hard Stats and Commentary from the US on Interest Rates and Overbuild*



			
				CoffeeBrew said:
			
		

> "Sentiment can change without an observable catalyst - think back to 2000 and the bursting of the technology bubble"



Huh !?

It seems my own 'observation' back then that tech companies with no or little revenue were not worth 100s of millions of €€$$$£££ was obviously overlooked by the 'experts' who were working for firms that wanted to sell more of the damn things....shares that was then  .  The lemmings stampeded into the market figuring that they could not lose and then they stampeded out again , trampling some potentially viable companies in the rush....had the expectations not been so high in 1999 / 2000 that is . 

The lemming rush out of the asset is the scary bit when a bubble bursts. They get into it because 'everyone' is doing it and get out of it for the same reason , not because of any innate long term understanding of asset valuations or trends or value or herd behavior . The herd animal always overestimates its individual objectivity and judgement the poor crayther. 

I fully expect house prices to remain at historically high income multiples even AFTER the bubble bursts. That is because the cost of servicing home loans appears set to remain historically very low .

See comments in this good long termist article here from CNN on the subject http://money.cnn.com/2005/05/23/real_estate/mortgage_bubble/index.htm

especially from those whose job is to think long term , Freddie and Fanny .



> "Mortgage financing firm Freddie Mac put the average 30-year fixed-rate mortgage at 5.71 percent last week. While that was higher than some weeks over the last year, *it's still below any annual average rate since Freddie started tracking the numbers in 1973* And it's below the rate last June, when the Fed started raising short-term interest rates."



and this fella here 



> "The crystal ball on rates
> 
> Last week Bill Gross, manager of the world's biggest bond fund, wrote a commentary predicting long-term bond yields would hold at or near their current low levels for several more years.
> 
> ...



but a sharp comment on what Gross Oversupply can do to a market ....the nub of the problem in my opinion.



> "Some still see bubble
> 
> But some economists who are less sanguine say they still see a housing price bubble. Dean Baker, the co-director of the Center for Economic Policy Research, admits he's been wrong about when mortgage rates would rise, but he still expects them to top 7 percent as soon as year's end. And he said that even if mortgage rates don't start to climb, he expects home prices to start coming down, sooner rather than later.
> 
> "We're (THE USA)  building at a *2 million-a-year pace, which is more than demand, and we're going to keep building at that pace until home prices correct,*" said Baker. "*It's already showing up in the rental market, oversupply is pushing down rental prices."* "



uhhhhh 2 units million a year( leading to a possible oversupply in the US) in a country of 300 million people is: 

*1 unit per 150 persons per annum *

80,000 units in Ireland is 

*3 units per 150 persons per annum *

Thats Some Bubble is it not 


de Tonk


----------



## CoffeeBrew (25 May 2005)

Some considerations for DOSS Hedging on the US side.

Overall US home construction index is $DJUSHB (can be viewed on stockcharts.com)

Some sectors to conside

_Mortgage and Related Services_

_Household – Appliances_

_Savings and Loan (similar performance in other banks too)_

_Building Paint and Allied_

_Building Wood Products_

_Household and Office Furniture_

_Building Cement, Concrete and Aggregate_

_Building Construction Products Misc._

_Building –Residential Homebuilders_

Some companies in the last category:

_Beazer Homes USA Inc _
_Pulte Homes Inc _
_KB Home_
_Lennar Corp _
_Toll Brothers Inc _
_Hovnanian Enterprises Inc_

_(Sectors & lists would need to be widdled down)_

_Others?_


----------



## tonka (25 May 2005)

and see http://www.virtualstockexchange.com/ to 'trade' in these , team competition option available 

step 2 of the Signup is untick everything and click next , if a number of persons can do this we can set up a competition (or 2 or 3 ) and have at the Virtual Market 


just a thought


----------



## CoffeeBrew (25 May 2005)

Nice!

Above word is too short for a posting so in addition here's an article that comes up with a 5 group classification in how people view a house-price correction.

http://www.mortgagedown.com/mortgage-tips/Why-a-House-Price-Crash-is-GOOD-for-your-Wealth-20050523.html


----------



## tonka (25 May 2005)

A good classification system that . 

I would not contend that 80% WANT a crash as asserted.

I would say 10-20% do, incipient FTBs and Bottom Feeders such as de Tonk who will be minded to go in when the money is to be made again. The other 80% will suffer ...however vicariously.....from a negative wealth effect  .


----------



## CoffeeBrew (26 May 2005)

walk2dewater said:
			
		

> When does the April ESRI/TSB index come out... the April one is due, no?
> 
> Here's March's...
> [broken link removed]
> ...


 

W2DW, Looks like April's is out but not yet on the website.

[broken link removed]



> house price inflation for calendar 2005 is heading towards 3.9%. This fact may concern some Buy To Let investors. According to Davy Stockbrokers, the gross yield on many investment properties is no more than 3%.andnbsp;If capital appreciation is off the table, some investors may decide to sell out before the expected upward turn in interest rates next year.andnbsp;Such a move would prompt further downward pressure on prices.


 
Also keep in mind that this index lags by about 2 - 3 months.


----------



## Marie (28 May 2005)

These are very interesting statistics on numbers of vacant 'second homes' along the Atlantic counties.  The idea of devolving infrastructural costs to the owners of 'second homes' is a sound one.  Wherever there are 'second' or 'holiday homes' there is simultaneous economic depression of the area (the 'locals' are covering the costs of habitations of absentees, essentially!) plus upward pressure on property-prices necessitate the younger 'locals' moving to the nearest big towns.  A number of councils along the seaboards of England and Wales have addressed this in restricting numbers of outsiders who can purchase second homes and in putting taxes on holiday properties into place.


----------



## CoffeeBrew (31 May 2005)

Marie said:
			
		

> A number of councils along the seaboards of England and Wales have addressed this in restricting numbers of outsiders who can purchase second homes and in putting taxes on holiday properties into place.


 
Some related news on this:

http://www.unison.ie/breakingnews/index.php3?ca=9&si=73648



> The Government's National Economic and Social Council has reportedly recommended the imposition of a special tax on second homes.
> Reports this morning said the proposal was contained in a study on Ireland's housing needs that was presented by the NESC at a conference in Cork yesterday.
> 
> The body has reportedly called for measures to address the purchasing of second homes as investments, which is pushing up house prices and restricting opportunities for first-time buyers.
> ...


----------



## nahdoic (31 May 2005)

I think that news item deservers its own thread, but I do not believe there is any chance of a tax on a second home from a fianna fail/pd government.

We need more houses built, putting a tax on people buying second homes would reduce the investment in building new houses.

However when we have absolutely no control over our central bank interest rate, the government needs to have some method of curbing house price inflation.


----------



## Duplex (31 May 2005)

Prior to the Euro’s introduction the issue of divergence in the economies of the Euro area was supposedly addressed with the suggestion that fiscal policy would be employed by governments to control excess liquidity in domestic economies.


----------



## nahdoic (31 May 2005)

Duplex said:
			
		

> Prior to the Euro’s introduction the issue of divergence in the economies of the Euro area was supposedly addressed with the suggestion that fiscal policy would be employed by governments to control excess liquidity in domestic economies.



Yes!  Which was great in theory but governments want to get re-elected.  Whereas an independent central bank should do what is best for the economy but a government will do what it takes to get re-elected!

Didn't the government attempt to introduce a property tax way back in 2000 or something, and the idea was quickly squashed?  can't remember the details.


----------



## ClubMan (7 Jun 2005)

Seeing that there has been some crystal ball/navel gazing on rates in this thread it's interesting to note that the IMF think that rates need to fall rather than rise in the short term.


----------



## CoffeeBrew (8 Jun 2005)

As of today, the futures market is putting a 1 in 4 change of a .25 reduction to 1.75 by the end of the year but the ECB is attempting to stamp out talk of a rate cut. 

Rate cuts might be of benefit to big stagnating economies but are not necessarily a good thing for those countries already experiencing anaemic economic booms fueled in large part by debt and property speculation. 

It's like cranking up the power to the big generator despite a risk of overheating and damaging the smaller ones !


----------

