Future Shock: Property Crash

[jmayo]

Sunny,
yes we do need roads, railways,schools, etc but do they need to be plastered, plumbed, and furnished. Thanks to Catepillar and Komatsu the numbers involved in road building is much smaller than house building. And how many thousand schools are going to be built to make up for the 20,000 less housing units?

Increasing interest rates do have affects on affordabiolity and ultimately prices. It means one or all of following: people cannot afford to repay exisiting mortgage thus repossessions, cut backs on disposable income and less comsumer spending and thus unemployment in certain retail sectors, less people able to afford houses because tightening in bank lending. All of these lead to house price drops.

I think you will find there have been more job losses from multinationals than job creation.
According to most people on here Intel are focusing all their investments in very large plant in China at the moment. They definetly are not upgrading their existing infrastructure here and that points to one thing.

Yes I agree the state sector is driving price up and wage demands in public service will ultimately drive up taxes for everyone.

KalEi, Jim Power may have been taking the mickey but don't you think that the supposed scenarios all are already happening to a degree and thus are not as far fetched as the some of the vested interests would have us believe. They will not happen in next week or month.

At the moment our population increase and thus demand for housing is been driven by housing construction itself. Thus we are building houses for immirgants to come and live in, so that they can build more houses for more immigrants.
Doesn't an economy built (sorry about the pun) on this model not strike anyone as scary?

 

[Sunny]

Below is a summing up comment from S&P rating agency in a report earlier this month on European Housing Markets.

There is no reason to expect the Irish housing market to move from a soft landing into a real downturn, however. For one thing, rents have been steadily increasing in the past two years, providing support to the buy-to-let segment of the market. More broadly, the economy is still growing at a robust pace (5.2% in 2007, after 5.8% in 2006). After more than 10 years of exceptional growth, Ireland's housing market is simply maturing.

Not saying they are right but thought I would throw in a "neutral" view. Pretty much what Jim Power had to say last night.

And by the way, they were not saying such nice things about the Spanish market in case people think they are only the bearers of good news!

 

[conor_mc]

Below is a summing up comment from S&P rating agency in a report earlier this month on European Housing Markets.

There is no reason to expect the Irish housing market to move from a soft landing into a real downturn, however. For one thing, rents have been steadily increasing in the past two years, providing support to the buy-to-let segment of the market. More broadly, the economy is still growing at a robust pace (5.2% in 2007, after 5.8% in 2006). After more than 10 years of exceptional growth, Ireland's housing market is simply maturing.

Not saying they are right but thought I would throw in a "neutral" view. Pretty much what Jim Power had to say last night.

Central Bank just revised 2007 GNP growth forecast down from 5.75% to 4.75%.

http://www.rte.ie/business/2007/0418/economy.html

S&P and other ratings agencies have been caught out big time in the sub-prime collapse in the states - they're not infallible either.

 

[Sunny]

Central Bank just revised 2007 GNP growth forecast down from 5.75% to 4.75%.

http://www.rte.ie/business/2007/0418/economy.html

S&P and other ratings agencies have been caught out big time in the sub-prime collapse in the states - they're not infallible either.

4.75% is still strong growth. You can't compare the US sub-prime market problems with anything going on in Ireland or in other country to be honest. No-body is claiming that anyone is infallible but just because it doesn't go along with your way of thinking doesn't make it wrong. You're not infallible either sorry to say.

 

[Firefly]

Think we're in danger of having 2 parallel threads on house prices here...can we stick to the subject?

Firefly.

 

[demoivre]

Cos its their home first, an asset second.

Great consolation for the people who listened to the doomsters over the last ten years telling them not to buy - prices were too high in 1999 eh !

Actually, how many banks are buying up new property for branch networks/headquarters, or how many estate agents are expanding rather than selling up?

Freeing up capital can be a valid reason for a business to sell property . I know several auctioneers in the south east who, in a private capacity, have built up extensive property portfolios over the last number of years.

Seriously - you're calling into question the motives of individuals who have nothing at stake except their reputations. And yet somehow that seems to be less palatable to you than believing a salesman whose employer is overseeing mass exploitation of the young people of this country for their own profit.

I attach much more credibility to people who practice what they preach. What's least palatable of all to me is that young people over the last ten years might have been influenced by the doomsters telling them not to buy a home because we were at the top of the market!

 

[KalEl]

Think we're in danger of having 2 parallel threads on house prices here...can we stick to the subject?

Firefly.

Yes, this is supposed to be about the Future Shock programme and the Primetime debate. One of Power's more persuasive arguments was that a lot of the boom in prices was "catching up". I have to admit I was very impressed with him...he was debating with an intellectual heavyweight and in my view he came out on top.

 

[Duplex]

Yes, this is supposed to be about the Future Shock programme and the Primetime debate. One of Power's more persuasive arguments was that a lot of the boom in prices was "catching up". I have to admit I was very impressed with him...he was debating with an intellectual heavyweight and in my view he came out on top.

Were you not surprised KalEl when he described the Irish housing market as insane over the past two years?

 

[KalEl]

Were you not surprised KalEl when he described the Irish housing market as insane over the past two years?

I'm not sure...he seemed exasperated with Professor Kelly at the time so it's hard to know if he meant the rises were crazy in size or that people were crazy. I wouldn't read too much into it.

 

[Duplex]

I'm not sure...he seemed exasperated with Professor Kelly at the time so it's hard to know if he meant the rises were crazy in size or that people were crazy. I wouldn't read too much into it.

"If we saw another two or three years of the sort of insanity we've seen over the past couple of years in the housing market then I would agree with Morgan."

It seems to me that the statement seemed to contradict Power's assertion that the market was built on sound fundamentals. Could have been a slip of the tongue, possibly Freudian.

 

[KalEl]

"If we saw another two or three years of the sort of insanity we've seen over the past couple of years in the housing market then I would agree with Morgan."

It seems to me that the statement seemed to contradict Power's assertion that the market was built on sound fundamentals. Could have been a slip of the tongue, possibly Freudian.

Yeah, I think he meant we're not going to see the spectacular growth we have seen and if we did there would be trouble.
hard to know but that'd be my guess.

 

[Sunny]

Yes, this is supposed to be about the Future Shock programme and the Primetime debate. One of Power's more persuasive arguments was that a lot of the boom in prices was "catching up".

But you are still talking about house prices........

 

[KalEl]

But you are still talking about house prices........

Considering the discussion is about "Future Shock - Property Crash" and a Primetime debate about the same programme the subject is quite hard to avoid.
My understanding is this thread is about the two programmes but should not descend into a general discussion, which to be fair I don't think it has.
Do you?

 

[Remix]

One of Power's more persuasive arguments was that a lot of the boom in prices was "catching up". I have to admit I was very impressed with him...he was debating with an intellectual heavyweight and in my view he came out on top.

Yes we are catching up all right. According to finfacts:

For the cost of a typical house in an area favoured by a management level family in Dublin, Ireland, you could buy nine similar houses in Houston, Texas, three in Amsterdam, two in Sydney and almost two in Tokyo, according to an international survey.

Much of this has occured during a time when Ireland has seriously fallen down the world's list of exporters but risen spectacularly up the list for the level of private sector debt.

 

[joe sod]

I do not think the euro will rise to 1.70 against the dollar, why because europe could not afford it. The euro is probably getting over valued relative to the dollar on purchasing power parity at the moment. The trade deficit the united states has is not with europe but with asia, therefore the big falls in the dollar will be in relation to the asian currencies. Yes the euro may rise some more against the dollar but european interest rates are lower than american ones and I think that will remain. I do not think property prices will collapse in nominal terms however I think they may drop 10/20% over a protracted period. However I think in real terms the value of property will be eroded by high inflation rates. So in 10 years time a 400,000 house may still be worth 400,000 but the value of that 400,000 will be an awful lot less. Therefore as an investment over the next 10 years property will be a lousy investment. The central banks of the world cannot allow property prices to fall but neither can they allow them to rise

 

[room305]

Well I watched it last night finally. Nowhere near as bad as I feared. The ever present haunting, jangling music was very annoying and suggested to me that either the director had no confidence in his work or he was overly enamoured with his 'daring' in contemplating a dreaded property crash. Wasn't sure what to make of the MTV-style editing either.

That said, I thought the scenarios discussed were quite reasonable. I'm a longterm dollar bull myself but I wouldn't blightly dismiss the chance of a significant slide. I thought the figures bandied about in the event of a crash were pretty realistic as well.

It's such a shame that the director felt the need to employ tricks and scary music instead of focusing on the key risks to the Irish economy (and consequently) the property market.

Apart from the sentamentalising and the "nobody told me there could be interest rate rises, I wasn't expecting that" stuff (it may well be the biggest purchase of their life - you think they'd research it a little) the only thing I would take issue with was the comments on the American trade deficit. "All economists agree that the best way to overcome the trade deficit is through continued devaluation of the dollar". It's a possible solution but not necessarily the best one. Still it is a minor point and the main point was clear - Ireland can hardly expect to emerge unscathed from a collapse of the dollar or the US economy.

 

[conor_mc]

The central banks of the world cannot allow property prices to fall but neither can they allow them to rise

If that's the case, the Fed is doing a pretty lousy job, isn't it!

Oh, and the ECB don't have a property bubble to worry about. They have a blip out on the edge of the Atlantic.

Where do people get this blind faith from? If central banks were doing their job, we wouldn't have property bubbles in the first place. We'd have price stability in almost everything, and frankly the only central bank that I see doing their doing their job is the ECB.

The Fed under Greenspan inflated not one but two asset bubbles, and the MPC in the UK has lost all credibility by holding rates steady just three weeks before having to write a letter of explanation to Gordon Brown on why inflation had hit 50% above their target rate. The BoJ is a joke in their country after their handling of the lost decade.

 

[gearoidmm]

Apart from the sentamentalising and the "nobody told me there could be interest rate rises, I wasn't expecting that" stuff (it may well be the biggest purchase of their life - you think they'd research it a little).

Much and all as I found this annoying and trite, it did highlight one important point about the housing market in Ireland - people have been so desperate to buy that they haven't researched it properly, don't know what interest rates are doing and have an unshakeable belief that property always goes up. I wouldn't be surprised if that woman's attitude was mirrored all over the country. You take it for granted when you frequent websites like this that everyone knows what the ECB will do from month to month (sure doesn't Trichet telegraph it in his conference) but most people seem to be financially illiterate and these interest rate rises have caused a significant amount of pain and uncertainty.

That said, the brain tumour woman (although I did feel sorry for her personally) made me want to throw something at the television - terrible journalism.

 

[MortgageMate]

the brain tumour woman

nicely put

 

[mollser]

Much and all as I found this annoying and trite, it did highlight one important point about the housing market in Ireland - people have been so desperate to buy that they haven't researched it properly, don't know what interest rates are doing and have an unshakeable belief that property always goes up. I wouldn't be surprised if that woman's attitude was mirrored all over the country. You take it for granted when you frequent websites like this that everyone knows what the ECB will do from month to month (sure doesn't Trichet telegraph it in his conference) but most people seem to be financially illiterate and these interest rate rises have caused a significant amount of pain and uncertainty.

Just another aside on that lady: she never actually said that she wouldn't have purchased the apartment if she knew interest rates were going to go up, what astonished me was she said she would have continued to rent in town but 'purchased an investment property somewhere in the suburbs'. Err, even after realising the error of her ways, AND with the benefit of hindsight, she's STILL blinded by the property bug!! A real eyeopener that one I thought...