Current public sentiment towards the housing market?

[Guest107]

In the event of a crash if anyone was to suggest that taxpayers money should be used to bail out the likes of this carry on,i would seriously have to consider my position within ireland inc.
Everyone is entitled to 1 house in my book,after that your're on your own.

But the poor banks and the poor builders will also have to be bailed out....not just the investor muppets.

Lest anybody forget the £3000 FTB grant was intriduced in the early 1980s duing the last slump (and when you could buy a house for £15000 in some cases. A 20% subsidy that was in that example.

Don't think it could not happen again even though we bankrupted ourselves the last time

 

[Calina]

Who is relying on terrorism to keep interest rates low?? Of course it is only a possibilty. I was merely pointing out that it could play a big role in the recovery of European economies. You must be very naive to think that a major 9/11 style attack in Europe would not affect fragile recovering economies. London and Madrid were minor attacks compared to 9/11. A large terrorist attack could have a severe impact on consumer confidence.

And your point is? We're talking about current public sentiment towards the housing market. Are you suggesting 1) terrorist attack followed by 2) low interest rates followed by 3) continued property growth or are you actually highlighting this as an issue that would have a further impact on property growth? Because if you are, you must be incredibly naive. The country is already endebted up to its ears. There comes a point when no matter how low interest rates are, it can't afford to take on any more debt. Low consumer confidence suggests low wishes to take on massive personal debt.

I don't know what your point is. Currently, there are a busload of indicators telling us we're in trouble. Personally I wouldn't be endebting myself to the hilt in Stepaside if I saw all these indicators and thought that a major terrorist attack was a likely possibility. I can only assume you think otherwise.

 

[Calina]

Do you see the euro falling apart then. How can it continue to hold economies like Germany and France who would prefer higher interest rates with Italy, Spain and Ireland who need very low interest rates. If it did fall apart how would national currencies come back into existence. In 2001 Argentina defaulted on its national debt. This was also talked about in Ireland in the mid eighties. What would happen if there was large scale debt default by individuals in ireland. I think this is very likely.

No, I don't personally see the euro falling apart. I see that different regions will have hard times at different times. But that's a moot point.

For the record, Ireland does not need very low interest rates. Ireland needs higher interest rates and has done for the past two to three years. It needs them because our inflation is above average, and our consumer debt is spiralling. Why do you think we need low interest rates - so we can afford to continue taking on so much debt?

 

[tyoung]

The paradoxical thing is that the longer the credit inflation goes on the lower the natural rate of interest level. As debt/income ratios increase the lower the rate of interest at which these become problematic. Debt is deflationary. The rise in debt to income means a smaller rise in interest rates could cause problems than even a few years ago. If the debt to income ratio continue to spiral Ireland will need low interest rates just to avoid an deflationary scenario.
Of course we don't know what level of interest rate would cause problems at a given debt/income ratio.

 

[southsideboy]

And your point is? We're talking about current public sentiment towards the housing market. Are you suggesting 1) terrorist attack followed by 2) low interest rates followed by 3) continued property growth or are you actually highlighting this as an issue that would have a further impact on property growth? Because if you are, you must be incredibly naive. The country is already endebted up to its ears. There comes a point when no matter how low interest rates are, it can't afford to take on any more debt. Low consumer confidence suggests low wishes to take on massive personal debt.

I don't know what your point is. Currently, there are a busload of indicators telling us we're in trouble. Personally I wouldn't be endebting myself to the hilt in Stepaside if I saw all these indicators and thought that a major terrorist attack was a likely possibility. I can only assume you think otherwise.

No that wasn't my point at all. I was just responding to your rather naive view that terrorism isn't an issue re; interest rates. Of course it is.

As for the busload of indicators that are telling us we are in trouble - I still don't think we're heading for a crash. I think there will certainly be a downturn but not a crash. And I don't ever remember saying I was endebting myself to the hilt. In fact I can comfortably afford to buy my apartment without compromising on holidays, cars, nights out etc. I personally don't understand people who want to sacrafice their lifestyle for an investment property but I wouldn't want to wish a crash on them either.

 

[redo]

Prediction;

This coming selling season (Autumn/Winter) will (will = might, if Loki is lurking out there) see a decline in FTB's and a collapse of FTS (First time speculators) entering the market. This much is pretty obvious and understandable. Activity amongst intending second time buyers (ISTB), (FTB wishing to trade up) will notice a severe increase in competition.

The housing output before the boom started, was very low (~35k), compared to the current output (projections from BOI this week is that over 100k houses will be built this year in 06). Given that the typical FTB normally trades up their property within 4-7 years, I think we can expect to see the panic depart from the investor and FTB market and begin to enter the ISTB market. (I don't have the figures but I can probably guess there is a higher percentage of apartments built within the projected 100k figure than within the 35k figure).

Prices for normal semi-d and detached houses in desirable areas are going to rocket in price. Areas in non desirable,value for money areas are going to plummet. I won't get into name calling. I think everyone knows if an area is nice or not, or whether or not they wish to bring up there kids there, assuming they can even get a place in the school (Read 2Packs' 2 band theory). Competition will be fierce, with the threat of ISTB being stuck in areas they never wished to settle in, with the intention of just getting on the property ladder. Initial evidence was provided in the first quarter of this year with house prices increasing circa 30% for properties in the trade up market.

Currently, reduced viewings and fewer attendances at auctions, should not been seen as a lead indicator but as seasonal. In short, this coming selling season we will witness a marked increase in the ISTB's market. Prices will go through the roof (due to fundamentals, ie demand vs supply, lol) and prices increases will probably increase to 20-25%, incorporating the new interst rates.

You will hear EAs' economists trying to play down these figures the quarter after they are released by saying,

"We have noted a marked increase in house price inflation during the last quarter of 2006. House price inflation has surpassed previous highs of 1998 and is most prevalant in the trade up market. Initial indicators signal a drop in demand in the FTB and investor market, however this still brings inflation figures within previous predictions of 12%. The inactivity in the property market during the 2nd and 3rd can directly attributted to seasonal factors including the World cup. Going forward, we anticipate a cooling off effect, as potential buyers asess the impact of the recent interest rates increases from the ECB. Any continued reduction in FTB activity could weaken the overall market and lead to a period of negative growth".

 

[Marie]

Hmmm! Surely the scenario you describe would lead to a s-t-r-e-t-c-h between falling-in-price second-hand 'starter' properties/apartments and increasingly-expensive (through relative scarcity) of 3-bed semi-d's. Do we know if this is borne out by birth-rate statistics for the past decade? Is there actually a growing group of parents with three or four kids? My impression was the birth-rate was down somewhat (adults too exhausted with overtime, commute and stresses of debt )

 

[walk2dewater]

It's laughable that people think 8% ECB rates are out of the question. And I think it's a minumum. Just goes to show how ultra low rates has embedded in Irish group-think.

 

[room305]

It's laughable that people think 8% ECB rates are out of the question. And I think it's a minumum. Just goes to show how ultra low rates has embedded in Irish group-think.

No, not out of the question by any means. Certainly if we hit 2009 and inflation is still rampaging out of control, then 8% is hardly out of the question. Your timeframe seems quite short though.

Going by your estimations:

Dec 2006 - 4% (5 more hikes)
Dec 2007 - 7% (12 hikes)
Dec 2008 - 8% (4 hikes)

Given the much slower growth rate in the EU (estimated 1.8% p.a.) compared to the US (5-6%), twelve month-by-month, Fed style rate increases could probably tip some countries into a recession.

I doubt even the more hawkish members of the panel would want that.

 

[walk2dewater]

Going by your estimations:

Dec 2006 - 4% (5 hikes)
Dec 2007 - 7% (12 hikes)
Dec 2008 - 8% (4 hikes)

Given the much slower growth rate in the EU (estimated 1.8% p.a.) compared to the US (5-6%), twelve month-by-month, Fed style rate increases could probably tip some countries into a recession.
.

The ECB will start making 0.5% hikes or more, perhaps starting Aug 3. The so-called "weak" growth in Germany is made of far tougher and sustainable stuff than the so-called "strong" growth in US.

 

[Eurofan]

The ECB will start making 0.5% hikes or more, perhaps starting Aug 3.

My thoughts are leading that way too. Threat of future rises can also be effective in damping inflation and after the relatively strong words of last week i wouldn't be surprised if the ECB is now ready to make that move.

While being a predictable central bank has been one of their states aims i'd suggest they now need to demonstrate they are serious about the constant aim of price stability etc.

A .5% on Aug 3rd would really start to polarise sentiment amongst the public here i believe. Rates have, in my experience, been of little concern to most buyers in the last few years. It's simply been a matter of the mortgage costing €xxx a month and thats that.

Gradual increases have allowed people to keep their heads stuck in the sand. A .5% increase with the threat of more to follow would start waking a lot of people up.

(btw i agree too the 'weak' German economic recovery is a complete red herring)

 

[ecstatic]

There is not a snowballs chance in hell interest rates will be 8% in two years.

Until european convergence of the east block has occured rates will stay low to create growth.

God you can even get 4% fixed rate from banks in brussels for 20 years.

 

[micheller]

Can an Irish citizen as an EU Citizen get a mortgage from a European Bank (i.e avail of a 4% 20yr fixed?)

 

[walk2dewater]

There is not a snowballs chance in hell interest rates will be 8% in two years.

There isn't a snowballs they'll be 2.75%

 

[Guest107]

Anybody mention Japan ?

http://www.rte.ie/business/2006/0710/wealth.html

[FONT=Verdana, Arial, Helvetica, sans-serif]The Japanese are the only people in the world wealthier than the Irish, according to the report, which values our houses and financial assets - like pensions, shares, and other investments - at almost €800 billion.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]If €115 billion owed to banks for mortgages and other loans is subtracted, the result, is €680 billion. Property, however, accounts for three-quarters of this amount, a higher proportion than any other country. The massive property boom has resulted in a massive 350% increase in wealth in a decade.[/FONT]

And we all know what happened to Japan ....around when they introduced the 50 year mortgage IIRC .But the Japanese also have investments in productive assets.

OH! and daft is up to 14157 having dropped to almost 14000 over the weekend as expired properties were cleared off.

 

[whizzbang]

Re: Anybody mention Japan ?

http://www.rte.ie/business/2006/0710/wealth.html

[FONT=Verdana, Arial, Helvetica, sans-serif]"even when the value of principal private residences are excluded Ireland now has 30,000 millionaires."[/FONT]

so how many of those 30,000 are millionaires because they have second/thurd houses as "investments"?

also it would be interesting to see the Japanese personal debt stats vs the Irish. From what I know Japanese save a lot, us, not so much.

 

[walk2dewater]

Re: Anybody mention Japan ?

http://www.rte.ie/business/2006/0710/wealth.html


And we all know what happened to Japan ....around when they introduced the 50 year mortgage IIRC .But the Japanese also have investments in productive assets.

OH! and daft is up to 14157 having dropped to almost 14000 over the weekend as expired properties were cleared off.

Quote from that article: "Property, however, accounts for three-quarters of this amount, a higher proportion than any other country."

What a joke..... surely even the most reality challenged can see through this. The complete absence of foreign investors in Irish property tells us exactly what the rest of the world makes of our delusional property "wealth".

 

[room305]

Guessing interest rates can be an impossible game anyway but whether base rates are 5% or 7% come the end of next year, it is clear that a vast number of Irish people are completely unprepared for interest rates even close to these figures.

I very doubt it bothers the ECB (and in some respects may even suit them) but it is funny that the high inflation of the last few years hasn't really led to many sustained calls for wage increases. Mostly I suspect, the availability of cheap credit has been offsetting the need for a rise in income.

It is somewhat paradoxical, but I imagine as interest rates trend upwards to combat inflation, many Irish workers will start to aggressively demand higher wages to meet rising borrowing costs.

Example:

Interest-only €1M mortgage for 35 years @ 3.5% - €4,132.92 p.m.
Interest-only €1M mortgage for 35 years @ 8.5% - €7,468.61 p.m.

That's quite a jump to take in the space of a few years!

 

[walk2dewater]

Guessing interest rates can be an impossible game anyway but whether base rates are 5% or 7% come the end of next year, it is clear that a vast number of Irish people are completely unprepared for interest rates even close to these figures.

I very doubt it bothers the ECB (and in some respects may even suit them) but it is funny that the high inflation of the last few years hasn't really led to many sustained calls for wage increases. Mostly I suspect, the availability of cheap credit has been offsetting the need for a rise in income.

It is somewhat paradoxical, but I imagine as interest rates trend upwards to combat inflation, many Irish workers will start to aggressively demand higher wages to meet rising borrowing costs.

Example:

Interest-only €1M mortgage for 35 years @ 3.5% - €4,132.92 p.m.
Interest-only €1M mortgage for 35 years @ 8.5% - €7,468.61 p.m.

That's quite a jump to take in the space of a few years!

And because of the way we measure inflation [we count mortgage payments not house prices] Irish inflation will SOAR as ECB rates rise.

oh yeah, ain't going to be pretty at all.

 

[room305]

And because of the way we measure inflation [we count mortgage payments not house prices] Irish inflation will SOAR as ECB rates rise.

I always found this a bizarre way to measure inflation.

If I buy a car on hire purchase and it costs €30k and last year it would have cost me €20k. However the car dealer spreads the payments over a longer period, thereby actually reducing the monthly repayment compared to last year. Nobody would then say the car price had fallen!

Is anyone aware of the reason for doing it this way or is it really a dastardly evil plot to convince people that house price inflation isn't really proper inflation ...