Current public sentiment towards the housing market?

[CelloPoint]

I hope they don't start blaming the 'Anglo-Saxon' model when things go pear shaped.... The last thing this government needs (especially with all the trouble at the moment) is for the bubble to burst before the next election

Not too sure about this at the mo, but:

Anyone think that Bertie will resign over the next couple of days/weeks, ending FF's reign, by calling an early election? Remember what instigated Albert Reynolds's exit - a beef tribunal (which we've since all forgotten about). Is Bertie's 'dark incident from the past' the smoke screen that is needed for him to vanish off the stage in a puff, leaving somebody else to pick up the pieces once the house of cards collapses?

</end of (plausible) conspiracy theory>

 

[beattie]

Not too sure about this at the mo, but:

Anyone think that Bertie will resign over the next couple of days/weeks, ending FF's reign, by calling an early election? Remember what instigated Albert Reynolds's exit - a beef tribunal (which we've since all forgotten about). Is Bertie's 'dark incident from the past' the smoke screen that is needed for him to vanish off the stage in a puff, leaving somebody else to pick up the pieces once the house of cards collapses?

</end of (plausible) conspiracy theory>

No he doesn't want to go out this way IMO. He won't want to exit by the side door though some of his backbenchers will be getting very tetchy even before they hit the hustings. Just look what happened to the the two FF politicians at the opening of the road today (even though that is a local issue)

 

[Maine]

good point, what i have read is that worldwide there is very little correlation between residential and commercial property inflation, dont know whats the the correlation in irish commercial and residential markets... any ideas?as a consumer my debt servicing is not imapacted by lets say intels or jury's debt.. theirs depends on economy, or macro economics, im not economist though take it by grain of salt,

Zac - see below, central bank is good source of facts on debt.

From Central Bank sectoral report.

This shows that during 12 months to June 2006 the manufacturing sector was borrowing almost 15m a week while the mortgage / construction / real estate industry was borrowing almost 1,000m a week. For other industries the figures are even weaker.

Suggests things may be just a little unbalanced to support growth in prices all the way to 2010.

[broken link removed]

 

[Maine]

Our GDP / GNP is on steriods anyway because of all the investment in property and borrowing mania. We are dependent on property so one can cut the above by 10% to 20% if property market crashes. Do some sress testing excluding some construction froth and ratios jump. Fitch have spotted this and put it on the agendas of all the banks in Europe financing bank borrowing here who will now focus more on Irish banks balance sheets which are largely comprised of ....property lending. This is why Irish banks will be loath to admit any problems because if they do the European banks will reach for the taps.

Commercial property will lag the economy downwards - if we stop buying Range Rovers the dealer will eventually get a cut in his rent or move / downsize.

 

[zac]

Zac - see below, central bank is good source of facts on debt.

From Central Bank sectoral report.

This shows that during 12 months to June 2006 the manufacturing sector was borrowing almost 15m a week while the mortgage / construction / real estate industry was borrowing almost 1,000m a week. For other industries the figures are even weaker.

Suggests things may be just a little unbalanced to support growth in prices all the way to 2010.

[broken link removed]

Maine, interesting points indeed, finally seen somebody with cold hard numbers, things are definitely unbalanced in irish economy, construction sector too big a proportion of the economy on the basis of comparison that i hv seen with uk and other eu countries...

problem is things can stay unbalanced or irrational for longer than you and i can imagine(or stay solvent trying to capitalize on those unbalances)
what do u think

 

[zac]

Our GDP / GNP is on steriods anyway because of all the investment in property and borrowing mania. We are dependent on property so one can cut the above by 10% to 20% if property market crashes. Do some sress testing excluding some construction froth and ratios jump. Fitch have spotted this and put it on the agendas of all the banks in Europe financing bank borrowing here who will now focus more on Irish banks balance sheets which are largely comprised of ....property lending. This is why Irish banks will be loath to admit any problems because if they do the European banks will reach for the taps.

Commercial property will lag the economy downwards - if we stop buying Range Rovers the dealer will eventually get a cut in his rent or move / downsize.

true without invesmtnt in property GDP would be lot less..10-20% feel like too much, but guess that depends on the extent of the crash, has anyone seen analysis of that e.g. drop in GDP for every 1% drop in residential property value?


if there was a trouble with irish banks balance sheets e.g. aib or boi, i wouldnt have expected them to be making new all time highs,

http://finance.yahoo.com/q?s=ire
http://finance.yahoo.com/q?s=aib

IMO market is better judge than a rating agency. i checked fitch rating on AIB's mortgage based debt, and its AAA, best rating that you can get...
whwther banks admit their troubles or not, markets would sense it before you and i.

 

[bearishbull]

Maine, interesting points indeed, finally seen somebody with cold hard numbers, things are definitely unbalanced in irish economy, construction sector too big a proportion of the economy on the basis of comparison that i hv seen with uk and other eu countries...

problem is things can stay unbalanced or irrational for longer than you and i can imagine(or stay solvent trying to capitalize on those unbalances)
what do u think

When theres too many houses/apartments/offices then construction will slow dramatically, i feel we are close to supply exceeding demand, we'll still need 50-60k units a year but this implies a 40% reduction in homebuilding. Can we stick to sentiment on this thread, the debt debate has been debated before and its inevitable that credit growth will slow significanty soon (1-3 years), and with less credit there will be less money leant by banks and hence less credit to drive up prices. A correction is inevitable, its all about timing now.

 

[Maine]

problem is things can stay unbalanced or irrational for longer than you and i can imagine(or stay solvent trying to capitalize on those unbalances)
what do u think[/quote]

Agree with this. IMO big questions to ask for anyone are as follows -

1/ How safe is ones job if the property market slows - need to really analyse this
2/ Buying to live in - at least for 3 years now
3/ Can one comfortably afford another 1 %

Private sector credit was 150,000 million in July 2003 from the dawn of time. people expected a levelling off however banks got around the rules and pumped things up - all the way up to 300,000 million currently. Next year this will hit 400,000 million. Banks could have a few other tricks and this is maybe the only remaining but a big caveat.

Alot of replies to the site estimate second half of next year could see the crunch and tend to agree with them. Interest rates increases will hurt.

IMO investing in Irish property for long term or pension from here is far too late. Go almost anywhere else and better value will be had long term. Familar with central london property market and despite at least a 10% gain in past year it is still minimum 20% below Ireland prices.

 

[SHARP]

All this talk of "in-the-know-ness" is annoying me now (a recurring theme in this thread). Either name this well-known property developer, or stop boasting on AAM about the fact that you are "in-the-know" more so than anybody else. I'm sure your intention was to give more credibility to your opinion by declaring yourself more "in-the-know", but your opinion is actually diminished by failing to reveal your source!

So no more in the know, about someone who we all know... ya know?

Woah , hang on there!

Im not "in the know", a friend of mine isn't "in the know" either - he only works for the guy and knows he is currently selling all his Irish properties. He was worried about his job because he thought he was selling the company, but it was confirmed that he is just selling his Irish properties only.

Sorry, I didn't want to come accross as being in the know, just what I was told at the weekend. The person who told me wasn't concerned about the property market, but his job and told me why he was initially worried.

And no, Im certainly not going to name the company because I would like to continue to be anoymous and if I say a name it could have comebacks

Make of it what you will

 

[blindjustice]

A correction is inevitable, its all about timing now.

but what sort of a "correction"? does anyone foresee houses crashing to pre 2001 levels for example? Or will they go down by say 40,000 euros and sure its no big deal as they went up so much in the first place that very few will have negative equity

 

[hmmm]

but what sort of a "correction"? does anyone foresee houses crashing to pre 2001 levels for example? Or will they go down by say 40,000 euros and sure its no big deal as they went up so much in the first place that very few will have negative equity

We get this every 20 pages of thread The ranges go from the most pessimistic (include me), who would say we'll revert to the old housing price/earnings of says 8-10% yield on rents, and an income to mortgage ratio of 2.5 - 3 times earnings. Plus on the way down we'll invariably have a negative bubble which may see us undershoot this level temporarily. That's an over 50% drop, I won't scare you by saying what it actually is.

Midrange of peoples guesstimates would be about 30% drop I think. There's some consensus (I don't share) that 2001 represents a "fair" level.

Some think 10% only. Can't see that, other than in a bit of a dead cat.

 

[Debtwish]

13th September 2006

One small step for rates….one giant leap for repayments

Why some buyers have seen housing costs rise nearly 50% in the past year.

The housing market is stalling. Anecdotal evidence suggests that houses are taking longer to sell than this time last year and the number of For Sale boards is increasing. So what’s happening? Shouldn’t the combination of a booming economy, full employment, SSIA spending, low interest rates and unprecedented levels of immigration see these houses being snapped up? For the answer, step back just 12 months and imagine you are a Dublin house buyer.

Rest of copyrighted article removed -- please post a link!

 

[SHARP]

13th September 2006

One small step for rates….one giant leap for repayments

Why some buyers have seen housing costs rise nearly 50% in the past year.
......

That is an excellent piece and I have just printed it off to show friends. Thanks for posting it, not sure whether the Mods will allow it to remain though.

 

[beattie]

Anyone catch the piece on Newstalk just before the 8 o'clock news.They had an economist from DNG (I think, didn't catch his name) and a journalist from the property supplement of the Indo. The journo was even more bullish than the representative of the EA. He dismissed the article from the Sindo by saying that it was referring to a holiday home which had 30k knocked off the price. Presenter didn't exactly put on the spot though. Bring back Eamo, all is forgiven.....

 

[plaudit]

That article sums it up well.

 

[redo]

I think what we'll see when the market does decline/stall is the increase in the use of the "POA" price tag instead of highlighting a 50k drop.

 

[SHARP]

I think what we'll see when the market does decline/stall is the increase in the use of the "POA" price tag instead of highlighting a 50k drop.

Thats even starting allready

 

[Savvy]

Thats even starting allready

Have to say that I am in the market for a house and I have spotted this too.
it was almost a rarity for me to come across this but in the last 2 to 3 weeks I'm seen it more regularly.(I'm looking in the Laois area)

 

[Sidewinder]

That is an excellent piece and I have just printed it off to show friends. Thanks for posting it, not sure whether the Mods will allow it to remain though.

Agreed, excellent article.

The scariest bit of all is the realisation that the market has stalled because mortgages have become completely unaffordable at interest rates of a mere 3%

Surely even the most bullish must recognise that this is insane. What happens if current predictions are true and we are facing into a period of 70's style stagflation? Imagine ECB rates at 7,8,9%? 12%?

Oh, and someone asked about "fair prices". I'm very bearish, and think the market left "fair value" for housing behind sometime in the late 90s. 2000/1 was a natural peak of the market before the artificial and externally induced liquidity bubble. Call it 1998/9 prices as long-term fair value (adjusted for inflation in the interim). But of course bubbles bursting tend to overshoot a bit on the way down....

The only question is whether we get humungous nominal falls over 3-4 years, or merely large nominal falls followed by a decade of flat prices while inflation erodes the rest of the bubble away.

 

[HotdogsFolks]

Does anyone know what % of people take out interest only mortgages?

Maybe I'm being silly, but why the hell would you pay €1500+ for a house miles away from your job, which you will never own because you are just paying the interest?

Why not just rent closer to your work (will be cheaper than €1500 per month) and not have to worry about interest rate / huge debt / etc. ?

I just don't get it.

Some anecdotal evidence: I have a few friends who have bought houses in places which no one would have considered living 10 years ago and have gotten themselves an "investment" property. They are totally stretched beyond their means, cannot afford to socialise like they used to, and to me at least, I can see they are way unhappier now. Some of my friends have lost a lot of weight. The stress etc. is clearly taking its toll. However, these friends are seen as "clever" because they are doing this. These "clever" friends are commuting a long time to work, have no life, yet won't admit this and keep up the act that everything is OK.

I find this really sad.

If these guys lose their job, or their girlfriend gets pregnant, or interest rates go up a bit more, they are totally screwed. If they can't sell their property, what will they do? Perhaps they will get a second job and cut out all spending. But this alone will affect so many businesses that relied on their money.

I can see a situation where everyone stops spending, people start sitting at home terrified to losing their insane loss making home, and Ireland becomes a depressing, dead country.

I'm quite worried about the next few years here, so I'm making my own plans to emigrate.