Future price of Irish properties

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Good points Coffeebrew, I would just add that we are also adding about 4% (I think) to our housing stock every year which I have not heard of being matched anywhere else.
 
The Economic and Social Research Institute in Ireland has issued another warning on the Irish property bubble. Phrases such as “massive house price fall” and “house prices could fall by over 30%” are not lightly bandied about by academics in the pay of government. This warning follows a statement by the ECB yesterday warning of the risks of unsustainable asset price inflation. The ruling Finna Fail party however won’t act to gently deflate the bubble by some combination of fiscal and regulatory action. The government will instead allow the bubble economy to succumb to an inexorable savaging by the forces of globalisation; safe in the knowledge that it can sell this pup to the credulous majority.


ESRI warns of threat to house prices
By Brian O’Mahony, Chief Business Correspondent
HOUSE prices could fall by over 30% if the economy was hit by a sudden loss of confidence, the Economic and Social Research Institute (ESRI) has warned.


Prof FitzGerald warned, however, of the real dangers for the economy in its over-dependence on the construction sector.

Not only that but borrowers are showing no signs of caution and continue to invest at a very high level.

These are “internal risks” that have to be set against the “global imbalances that, if anything, are growing in magnitude.”


That loss of momentum could then trigger the massive house price fall as unemployment undermined confidence and lenders got worried about borrowers’ ability to repay their debts, warned Prof FitzGerald.
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http://www.irishexaminer.com/pport/web/Full_Story/did-sgvn6bYA0jaDcsglO-LCk0lQvU.asp
 
Bubble?

I have no background knowledge of economics in general. Perhaps this is waaaay too complex question to be put like I'm going to, but here goes...

If the property 'bubble' in Ireland was to burst- what impact would external or internal factors have to do with it?
In other words, would external things like the dollar value, oil prices, world economics etc have more/less/any bearing on the property market here?
Or would things like Irish economy, immigration & growth buoy the market here if external factors were in troubled times?

Sorry if that's a stupid question :) , just wondering if there were any considerations outside of the irish market we should be aware of?
 
Re: Bubble?

Wikipedia is always a good start:
http://en.wikipedia.org/wiki/Economic_bubble
(I like the tulip mania story)

The problem when a bubble bursts is that people are left with assets worth less than what they paid for them. This can be a problem if they borrowed on the strength of these assets (e.g. borrow 350K for a 400K house, drops to 200K). This becomes worse if they lose the ability to pay back (e.g. economy slows down, lose job). This becomes worse again if the lending institutions get stuck with the undervalued asset as a result of bad debts. Bit of a viscious circle unfortunately...
 
Ireland is well positioned to shrug off any global slowdown. The US debt and deficit bubbles may be worrying some as yield curves invert and mortgage lending and house prices stall, with consequent blows to consumer spending. The UK may be witnessing rising unemployment, rising trade and current account deficits and a consumer spending slowdown but this will not have an impact on the Irish economy.

Though the level of debt creation in Ireland is running at the highest in the western world (maybe the entire world) the debt is being invested in property which is of course the safest investment class. And while yields are now below self financing levels and rents are deflating (in real terms) the pyramidal shape of the market ensures that a collapse in house prices is not only highly improbable but in fact impossible.

And finally immigrants, this is complicated but it goes something like this ‘If you build it they will come’ or aah maybe it’s ‘If they come they will build it’ anyway something like that.

The main point is that you shouldn’t worry your pretty little head about all this silly money stuff leave that to the banks.



(But a good question;)
 
<the pyramidal shape of the market ensures that a collapse in house prices is not only highly improbable but in fact impossible>

Can you please explain what you mean by this?
 
Surely the Irish economy is inextricably linked to the US economy? If they go down, so do we. And if we go down, surely a vicious cycle of rising unemployment, reduction in spending, drop in consumer confidence, slowdown of housing demand, more unemployment in the construction sector, tightening of credit, and so on, will conspire to cause a collapse in the housing market -- which itself is now "artificially" buoyed by speculative purchasing and high demand for investment property.
 
Extopia- that's what I was wondering! Is Ireland economy so autonomous that it could self sustain in overall world decline?
Also, I've heard that whilst Western economists are much more upbeat that other sources (Pravda was mentioned) are not so upbeat?
 
I believe Duplex was being somewhat ironic in his previous post. Nice post too.

The impact of a credit tightening squeeze in a negative equity environment is missed by a lot of commentators. If you have a 300k mortgage and your house price drops by 20%, most people are taking the attitude that "give it time and prices will rise again". In the meantime, you will have difficulty financing that car or kitchen loan as no bank is going to lend you money whilst you have a 60k unsecured mortgage loan outstanding.
 
Duplex said:
.....

The main point is that you shouldn’t worry your pretty little head about all this silly money stuff leave that to the banks.

(But a good question;)
Click to expand...

mmm, not sure I like being verbally patted on the head :D

Anyway, anyone have any further comments on any visible changes to the overall market since end last year? Any further global trends to watch?
 
hi,
a fall in house price's will not necessarily hurt estalished investors with good equity as long as rents do not drop too much,
panic selling by those of nervous disposition of rental property could see first time buyers buying the former rentals as owner occupiers thus leaving strong rental demand
of course life is never that simple,
the next couple of years should be interesting,
getting your feet on the property is only the first step-keeping them there when they get slippery will require some dancing etc......
sudden
 
Euphoria. Even the pessimists are optimists now. The situation with property here is a lot like the situation with stocks back in 2000. Personally I find that quite scary.

I would still buy a house in which to live. But I would be very slow to invest in all but the most rentable of properties (ie. location ...)
 
I loved that poll in the Irish Times yesterday saying that we think that there are too many immigrants in the country and that further entry should be restricted.

40% of all properties sold last year were investments or second homes.

I wonder where the market would be going at the moment if the 'cursed' immigrants weren't coming in renting these apartments and keeping demand high?

What if they stop coming?
 
I believe that daft.ie have indicated that immigration is the only thing preventing the rental market going into freefall. If we keep building proportionally more units than Germany did after WW2 we will need the projected 300,000 extra immigrants to fill these units.
 
Newspapers give coverage today that number of properties in the RoI have increased by ONE-THIRD in the last 10 years.
 
Shurely shome mishtake? I think most properties have increased in value at LEAST threefold in the last 10 years?
 
No! The stock of Irish domestic properties has been increased by one-third by buildings completed in the past 10 years. It's a main headline in yesterday's Irish Times.
 
An afterthought. Properties have not 'increased in value' to the quoted extent. This is illusory. They have increased in cost but as far as their value is concerned this is relative to dozens of other economic markers. Like most magic tricks, it's all a matter of sleight of hand.
 

Warren Buffett on the difrence between price and value;

"'For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for someone else.' The sage of Omaha sums up pithily: 'The dumbest reason in the world to buy a stock is because it's going up.'"


 
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