- Status
Interesting points Firefly. The cost of re-entry may help prop up the market, so if the government abolishes or relaxes the stamp duty in an effort to bolster a weakening market it may actually result in a crash.
I think public sentiment is digesting the bearish news and probably hearing reports about how it is getting tougher to sell overpriced property. So "stall" is a good analogy. Once they have come to terms with prices no longer rising they will start to focus on the possibility of prices dropping. They may think "they may drop in some areas, but not in good areas". Finally, fear kicks in and you will see drops across the board.
I'm guessing a year from now before the Indo is running "Irish Property Market Crash" headlines.
I think public sentiment is digesting the bearish news and probably hearing reports about how it is getting tougher to sell overpriced property. So "stall" is a good analogy. Once they have come to terms with prices no longer rising they will start to focus on the possibility of prices dropping. They may think "they may drop in some areas, but not in good areas". Finally, fear kicks in and you will see drops across the board.
I'm guessing a year from now before the Indo is running "Irish Property Market Crash" headlines.
P
phoenix_n
Guest
By a crash I mean the star went super-nova but we can still see it. It will take (which i have said before) up to xmas for it to be known that the star is in fact gone. But property will still exchange hands, its not like gold where one price affects all.
And i dont believe i am really over the top. There is talk of 'soft landing' etc but what i see is a big balloon squeezed under the armpit of the irish economy which is just about to be burst by a hot needle.
But thats just my sentiment.
It looks like recent buyers are really feeling the pressure from rising interest rates.
Here's a thread entitled "Interest Rates!!!! Ahhhhhh!!!!" where recent buyers voice concern this week.
[broken link removed]
The opening poster says:
"Six months ago I could have managed with the repayments but now it is going to be tough"
"I have two friends who have bought properties elsewhere and have had to sell due to the rises. Is this the beginning of the end?"
Here's a thread entitled "Interest Rates!!!! Ahhhhhh!!!!" where recent buyers voice concern this week.
[broken link removed]
The opening poster says:
"Six months ago I could have managed with the repayments but now it is going to be tough"
"I have two friends who have bought properties elsewhere and have had to sell due to the rises. Is this the beginning of the end?"
My own sentiment on house prices is that we are at a tipping point due to interest rates....I think people are "waiting and seeing"...if rates hold firm then I expect prices to rise by 3-5% over the next 12 months. If they rise by .25% I expect them to remain flat and if they rise by .5% I predict them to fall. Interest rate changes (like inflation) cause uncertaintity in the market resulting in a "look before you leap" mindset.
I don't think there is/will be mass selling as the re-entry costs are too high...it's funny to think that Stamp Duty (as bad as it is) might actually be the one thing holding up the property market
On the over-supply side...I think developers will scale back to protect margins as will owners of landbanks. There will be instances of builders forging ahead and hitting the wall, but the Sisks, McInerneys and Bovales of this world will adapt.
Firefly
If the Irish market stalls all bets are off. Investors will not invest at present yields without the compensation of capital growth, current investors will be exposed to higher finance costs without the compensation of capital growth. Builders are likely to retreat as demand wanes, with a knock on effect on employment. The ability of homeowners to utilise equity in their properties will diminish as inflation ends; having a further impact on the economy and employment. Then we have to consider the wider global economy and the impact that will have on Ireland, the current prognosis is not good. Pyramid schemes require a constant stream of new entrants to survive, it seems to me that we are approaching a point where new participants are drying up. If the Irish property market stalls, it will inevitably crash.
The third Indo article, "Is the debt-fuelled world living on borrowed time?", is IMHO particularly interesting.
So my gut feeling is still that the housing market still has another two or three selling seasons to run, and we will still see price increases, or at least static prices. IF the ECB really does raise rates above neutral levels within the next 9 months, then we may see panic setting in. Someone here had a stalling theory where the ECB rather got frightened of the height at neutral levels and lower growth and then dropped the rates a bit. This then fuelled one more borrowing spurt before the ECB bites the bullet and hikes up rates seriously (probably mid 2008). This looks quite probable to me.
I've had this feeling for a while that low interest rates have become the new "neutral". Our whole economy seems to be based on this fact. As a result even central bankers, IMHO, will be wary about raising rates too high. It's hard to seem them rising rates above what they consider "neutral". As a result the old neutral becomes the new top limit.
I read a comparisson somewhere between rate rises and a frog in water. Put a frog in boiling water and it immediatly jumps out. Put a frog in tepid water and he thinks it is ok. Gradually bring the water to the boil and the frog will not notice the danger to him as the temperature increases, and will continue to feel fine at first. He will then die from overheating before he recognises the danger. I think this gradual notching up of Euro interest rates will have the same effect in the housing market.
So my gut feeling is still that the housing market still has another two or three selling seasons to run, and we will still see price increases, or at least static prices. IF the ECB really does raise rates above neutral levels within the next 9 months, then we may see panic setting in. Someone here had a stalling theory where the ECB rather got frightened of the height at neutral levels and lower growth and then dropped the rates a bit. This then fuelled one more borrowing spurt before the ECB bites the bullet and hikes up rates seriously (probably mid 2008). This looks quite probable to me.
B
Bedsit
Guest
[FONT=Verdana, Arial][FONT=Arial, Verdana, Arial]Leixlip and Shannon are spared the worst of the axe[/FONT] (Irish Independent)
(Interesting snippet from the Indo today. Don't think we have reached the end of the Intel saga just yet)
http://www.unison.ie/irish_independent/stories.php3?ca=35&si=1683472&issue_id=14609
"... Over the past few months speculation is growing that Intel Ireland is looking at another loss-making division and there has also been a shift in recruitment tactics by replacing staff workers with contract employees.
The Leixlip facility is highly profitable for the group - with the exception of its loss-making Ireland Fab Operations (IFO) plant or flash memory division, which manufactures older computer chips or memory chips and employs about 2,000 people.
It is understood that Intel is planning to sell or spin off its entire flash memory division, which is likely to include the Leixlip IFO. .."
[/FONT]
(Interesting snippet from the Indo today. Don't think we have reached the end of the Intel saga just yet)
http://www.unison.ie/irish_independent/stories.php3?ca=35&si=1683472&issue_id=14609
"... Over the past few months speculation is growing that Intel Ireland is looking at another loss-making division and there has also been a shift in recruitment tactics by replacing staff workers with contract employees.
The Leixlip facility is highly profitable for the group - with the exception of its loss-making Ireland Fab Operations (IFO) plant or flash memory division, which manufactures older computer chips or memory chips and employs about 2,000 people.
It is understood that Intel is planning to sell or spin off its entire flash memory division, which is likely to include the Leixlip IFO. .."
[/FONT]
"By a crash I mean the star went super-nova but we can still see it. It will take (which i have said before) up to xmas for it to be known that the star is in fact gone. But property will still exchange hands, its not like gold where one price affects all.
And i dont believe i am really over the top. There is talk of 'soft landing' etc but what i see is a big balloon squeezed under the armpit of the irish economy which is just about to be burst by a hot needle."
"But thats just my sentiment"
Phoenix_n - I agree with your sentiment above (to an extent). But things have not "crashed" as you put it - a crash is imminent.... But if the govt props things up or interest rates stay as they are or global fuel prices fall etc. then prices could keep increasing (I don't think any of these will happen - but they could). So until there are "ACTUAL" signs of a crash, don't go heralding it - state stats as they are and form opinions on that, not the usual bear scare mongering which tends to dilute logical bear perspectives!
And i dont believe i am really over the top. There is talk of 'soft landing' etc but what i see is a big balloon squeezed under the armpit of the irish economy which is just about to be burst by a hot needle."
"But thats just my sentiment"
Phoenix_n - I agree with your sentiment above (to an extent). But things have not "crashed" as you put it - a crash is imminent.... But if the govt props things up or interest rates stay as they are or global fuel prices fall etc. then prices could keep increasing (I don't think any of these will happen - but they could). So until there are "ACTUAL" signs of a crash, don't go heralding it - state stats as they are and form opinions on that, not the usual bear scare mongering which tends to dilute logical bear perspectives!
yep, we are at the top of the rollarcoaster, floating in mid air, everyone feeling quesy, drop hasn't started but more and mroe people are expecting it.
If construction scales back we will have countless plasterers, plumbers, blocklayers etc. out looking for work, they will have to price lower to get work, which will feed into lower house prices.
There is due to be 90K completions this year, if it falls to 80K there won't be enough work for all the existing people working in this industry, not to mind schoolleavers and apprentices coming on stream each year.
Due to the nature of our boom, I would guess that the vast majority of people working in construction are under 40, so its not like there is a generation about to retire.
I don't think that the ECB pay to much attention to the Irish economy, when making decisions on the most accommodative interest rates for the Euro area. The ECB will only know that their rate tightening policy is having an impact when it has an impact, (on Germany specifically). As the article suggests the worlds central bankers may be relying on a cyclical slowdown to help them tackle the inflation monster.
I'd keep an eye on news that the Chinese have allowed inflation creep up over the past few months. The deflationary effect of cheap as chips Chinese goods has helped keep a lid on inflation in the west for nearly a decade.
P
phoenix_n
Guest
delboy said:
I have formed my opinion that is all based on my own research and instinct. Others can wait for the Indo headline to second theirs.
lol - nope, trying to sell 2 and buy 1 - so the effect of a moving market is neutral to me unfortunately
I would love to rent and take advantage of the impending crash though - but won't be able to.
No chance of convincing Mrs. Whathome otherwise? Gonna be tough to avoid saying "I told you so" in the coming years but if you can hold your tongue it would be advisable.
Then again, you're selling your investment properties and the new one is a family home so the only issue for you will be that you will end up paying too much for it given the current market. This is in itself will be counterbalanced by selling the other properties at an over-inflated price.
Not a chance, I've tried but it's a non runner
....but at least selling rather than hanging on to the existing properties is good compared to many trader-uppers who do the hanging on thing.
To keep the plane analogy going, the plane may be stalling, but as long as the pretty hostesses keep lashing out the free booze to politicians and developers, noone will care!
The Irish Times will remain bullish - it has put alot of its eggs in the property basket.
Comparison to US is more relevant IMO than UK. Interest rates in UK never fell to giveaway levels like Europe and US. The fact that the UK market is still doing ok with a base rate of 4.75% says something - at this rate Irish property market would be in meltdown. IMO this is also reflected in fact that UK property prices are relatively alot cheaper than Irish property prices - at least 20% ( due to the higher interest rates).
Comparison to US is more relevant IMO than UK. Interest rates in UK never fell to giveaway levels like Europe and US. The fact that the UK market is still doing ok with a base rate of 4.75% says something - at this rate Irish property market would be in meltdown. IMO this is also reflected in fact that UK property prices are relatively alot cheaper than Irish property prices - at least 20% ( due to the higher interest rates).
- Status