Average Dublin house in 2015 to hit €750,000

Ponzi scheme

Good article in the latest edition of Foutune:

Common sense or what............

The monthly cost of buying a house is significantly higher than the monthly rent. Using the "imputed rent" test it makes no sense to buy.

People buy because they assume that house prices will keep rising, meaning they can sell later for a profit. That of course requires that another buyer will come along who also assumes that prices will keep rising, which will require yet another such optimistic buyer down the road, and so on, and so on. Welcome to the perfect Ponzi scheme - the Irish property market!
 
People buy because they assume that house prices will keep rising, meaning they can sell later for a profit
Click to expand...

People buy houses to live in, I thought
 
stuart said:
People buy houses to live in, I thought
Click to expand...

Perhaps people should buy houses to live in ?

Of the massive record-breaking number of houses built in Ireland over the past two years, it's estimated that 40% are lying vacant as second homes, holiday homes or unlet investment properties.

It's probably a fair statment that this "artificial demand" i.e demand for houses not as a residence is fueled in large part by a desire for capital appreciation and is distorting the market considerably.
 
A key factor will be what will the ECB do with interest rates. I am convinced they will be left at 2% for the moment but will soon start rising following the American rates back up. It looks like the American dollar will be a weak currency for many years to come even with higher interest rates. That is what Warren Buffet has been saying its fundamentals will continue to drive it down. The Fed will have to keep rising rates in order to slow it down and stop foreign capital leaving too quickly. The reason why the ECB lowered interest rates to 2% was to get the german and french consumers to consume more. This has not worked but instead has caused property bubbles in ireland and spain and crippling debt levels in italy. Now the ECB is more worried about this than the lack of consumer confidence in france and germany.
 

Hi Joe-

Will the weakness of the dollar againts the euro not prevent the ECB from raising interest rates ?

Do you think there will be a rise after the German election ?

Doesn't the current German government want to boost growth inorder to get re-elected ?
 
First of all America wanted a weak currency in order to reduce its current account deficit and make its exports more competitive so they reduced interest rates to historic lows. It didn’t work because instead the American consumer borrowed more and more increasing the deficit by sucking in more imports.



Europe on the other reduced interest rates to historic lows in order to encourage growth in Germany and France by getting consumers to consume more. It also didn’t work instead German industry became more competitive and efficient and is now the second largest exporter in the world. But the Germans and French didn’t go out and borrow more money but the Irish, Spanish and Italians did. This is exactly what the ECB didn’t want. If 2% interest rates didn’t raise confidence then lower interest rates will hardly work either.



So in both cases interest rates will have to rise to halt the borrowing binge in America, Ireland, Spain and Italy. This is now a much bigger problem than lack of growth in Germany
 
"The greatest BUBBLE in history"

Finfacts is an often quoted site - being one of the main business info sites for Ireland.

The finfacts team have taken the recent Economist article and added some additional facts from an Irish persective and some additional analysis from the IMF.

Interesting to note that the surge in global house prices "not only dwarfs any previous house-price boom, it is larger than the global stockmarket bubble in the late 1990s .... or America's stockmarket bubble in the 1920's '


Global House Price Boom: The greatest BUBBLE in history :

http://www.finfacts.com/irelandbusinessnews/publish/article_10002284.shtml
 
... sometimes I wish the ECB WOULD push up interest rates, just to shake out the market here and see what happens ......
 
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