House price inflation continues to slow....

Loan securitisation is the selling of loan assets to domestic / foreign investors - by way of cashflow (your mortgage replayments) against a book of pooled assets (over valued property - based on income multiples)

So how does that work out again for these investors when the asset (your house) value dumps / or slows (reverses) down against inflation and the cashflow dries up (because joe bloggs can't make his mortgage repayments) - just curious - do we just keep printing FIAT money like the US does?
 

That's all a bit irrelevant, securitisation is not a problem unless (like Leeds Utd) the cashflow required to meet obligations dries up and the assets fall below their booked value. Essentially you're talking about a housing crash brought on by a shock to the domestic economy causing massive job losses.
As for the SSIA's themselves and the sense behind them, it's quite obvious to anyone what that was - I mean why not give handouts to everyone pre-election, it's not as though our schools, hospitals and general transport infrastructure are a disgrace
 

Would I be right in saying that even if this does happen, because the banks have sold the debt, they will not be particularly exposed to the effect of the bad debts? Do the banks even care anymore if people can repay loans? I'm not really sure if I understand all this properly.
 
This page has some stories on banks pulling out of new developments in the US as the Housing market slows. Freddie May and Freddie Mac are subject to federal investigation for accounting irregularities and many sub prime lenders are finding it difficult to find punters.

You have to wonder what might cause a credit crunch in the US, but defaults and resultant foreclosures would come pretty high on the list.


http://thehousingbubbleblog.com/
 
Do you really think in the year SSIAs house prices will not rise? I must say I think that it is extremely unlikely that there is not an upsurge. ANy survey I have seen suggests that at least a 1/3 arte planing on buying houses with it.

I still don't get peoples' obsesion with the US property market indicating the Irish market. Different banking ssytem and lack of control on Irelands part put us in extremely different situation. Ireland also has the highest home ownership in the world with a Italy a far second and that has a decreasing population.
 
An SSIA funded to the max will yield c. €20K plus interest/growth less 23% maturity tax on the latter. Many commentators consider this amount of money to be negligible at an individual (or couple) level in terms of its impact on house prices. €20K isn't even the deposit on many houses these days.
 

So you are telling me a young couple with both people having SSIAs coming to €40k and parents giving their SSIA money to the kids isn't going to have an effect? An extra €20K along with the money people were saving anyway would have an impact as far as I can see. As infalation isn't an individual level I think a third of the ssia money going into one market will have a cumilative effect pushing prices up. To ignore as a commentator I think is a bad idea and lazy
 
Not necessarily no effect but most likely less of an effect than some people assume. Especially since some people will plan to spend some or all of their SSIA on discretionary luxury purchases or roll them over into a longer term investment. What specific survey says 1/3rd of the SSIA money will go into the housing market?
 
It was in some paper I can't remember which one but it was 1?3 on buying a house and about 10% on home improvements but cars and holidays were after buying which I was shocked at. I think it will have a massive effect based on that and personal observation. Everyone I know who has an SSIA and no house plans to use it to buy. Many people underate the extra €255 an individual will suddenly have, couples have more and I think that walone would effect house prices and upgrading let alone the lump some.
As a married couple we will have an extra €500 euro to spend on or mortgage if we so wanted. That is a lot of house or investment in a 2nd house. I think to say it will have little effect is really a massive underrating.
 
Loki said:
It was in some paper I can't remember which one
Click to expand...
Hardly an authoritative source so?
I think to say it will have little effect is really a massive underrating.
Click to expand...
On what basis? Just anecdotal evidence and hunches?
 
There is a suggestion that the effect of the SSIAs has already been priced into the market. So many people expected that there would be a rise in house prices when the SSIAs came in that it may have been partially responsible for the rise seen at the end of last year.

In this market, fundamentals don't matter, it's all about expectations. Most economists do agree, however, that the further impact of the SSIAs on house prices will be limited.
 
ClubMan said:
Hardly an authoritative source so?
Click to expand...
I am not claiming to be an expert but how do you know it is not going into property? If you need absolute facts then provide one where an expert says it won't have a n effect
ClubMan said:
On what basis? Just anecdotal evidence and hunches?
Click to expand...
#
On what basis are the experts saying this or you? I saw a survey saying a third of the people with ssia money will go into property. I have friends saying so. From my position it seems to be pretty straight forward.

As has been said there is the view that the SSIAs have already had an effect and many have said the 100% mortgages were directly created to deal with people avoiding a sudden rise in the years of SSIAs.

Why don't you try and be critical of your own stuff before complaining about a different view to yours based on different information to the stuff you seem to think is right. It is all speculation
 

the reports you are talking about were produced by companies who are going to benefit like banks stockbrokers Diy chains etc so i wouldnt beleive them unless its an independent market research company,also just becuase your friends are going to do something is no reason to extrapolate to the rest of the population.
clubman is right ,many people ahev already bought things with their ssia money even though they havent physically got the cash yet.
 

As I didn't name the source you don't know that. I worked in market research and know a fair bit about it. I would have noticed a bias source and remebered it more but you wouldn't know that but you also couldn't assume any knowledge on what my info is based on.
It is your opinion based on nothing where I am a least just stating a logical reason why I think differnt you are just oppsoing. I thought there would be more logic here that bias opinion but I guess I am wrong.

I am in the property market as has my family for over 40 years. For over 15 years experts have got house prices wrong on a grand scale. They will eventually be right but it doesn't make them good at their job.
 
Hi Loki,

Did the report you are referring to say that SSIA money will be used for property in general or specifically for purchasing property?

Because most people I have talked to will put their SSIA money into property alright- but in the form of new kitchens, extensions, sun-rooms etc. etc.

I cannot see how having €40,000 will suddenly provoke lending institutions to approve people for large mortgages that they couldn't already get - ok €40,000 may be enough for a deposit but the real driver for mortgage approval is salary and that will not change.
 

and by the same logic just because prices are high it doesnt mean that the prices are right.
we now know that you are a vested interest and dont want to consider the possibility that your property business will be affected,im sure you/your family have made significant capital gains and most good investors will tell you you must know when to take profits.
 
i have read /heard commentary on all the ssia reports and not one was from an independent market research firm,maybe i missed the one your talking about but i doubt it,why dont you do a googgle search and find any independent research on the intentions of people upon receiving ssia's.
 

That is not logic. Logic tells you something is worth what people will pay for it. Basic economics starts with supply and demand all else is based on that.In other words prices are what people pay no right or wrong which seems to be the bit many people don't understand.
Being in property is not all about speculation which seems to be what many people get wrong too. I bought property for income not speculation the rent is profit. If I was in any other business that gave me a profit not many people would suggest selling the whole business. I take my profits and have an asset that will proabbaly never really devalue in the long term. Not all property people are speculators which is what many people assume.

To claim you have gotten all SSIA data is a little rich. Assume I made it and just explain how and what experts have done to work out the impact, even if small, of SSIAs on the property. Why people here are so aggresive about an opposing view and all superior about their knowledge without any show of it is beyond me.

In general I would say there have been no signs of a reduction in demand but there is a lot of speculation about there being a crash. This speculation has been going on as long a the rises.

Kane The survey I remember was specifically people saying buying property and home improvements were seperate.
 

you say- "They will eventually be right but it doesn't make them good at their job" which suggests that their statments werent of any value or valid because house prices have continued to rise.i say by same logic just because house prices are rising to very high levels doesnt mean they are fundamentally good value but that will not be clear untill after any possible crash,in another words im saying house price increases like statements by doom merchants may not be valid in light of future events.

why would these informed people stake their reputations on predicting a crash if there wasnt significant validity to their analysis AT THAT TIME ?
no one can predict timing of a crash by its very nature,does this make prior statments invalid? one would be very naive to assume so.

yes its supply and demand but when the demand is driven by a herd mentality and speculaitve investors the price isnt right in fundamental economic terms,obviously to many people a house is more than an investment but there is a large part of the market that is invesment and speculation driven so economics matter here.plus if there was such a shortage of supply why arent rents rising in line with prices?? and no matter how much irish people love owning their own home salaries only increase by low amounts so prices have limited upside from here.
 
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Loki

  • Last year America spent 57 percent more than it earned on world markets. That is, American imports were 57 percent greater than exports.
  • Last year the personal savings rate fell below zero for the first time since 1933.


  • The American Treasury Department website is openly stating that as of January 24, 2006 American national debt stood at $8,185.3 billion and on January 26th at $8,190.5 billion."

  • U.S. consumers who once saved an average of 8% of their take-home pay ten years ago now spend about 1% more than they earn.
  • US manufacturing has lost lost 2.9 million jobs, almost 17% of the manufacturing work force in the last decade and productivity has fallen.
  • Consumer now account for two thirds of American economic output.
  • 30 year Treasury Bonds are yielding less than two year bonds.

But these facts are, as you say, irrelevant as far as the Irish housing market is concerned and I agree that house prices will rise by 10% plus this year. The reason for the likely steep rise in prices is not however the result of some mass rationalisation of the current global economic situation by home buyers in Ireland, the rise in prices is as result of a bubble;

"...if the reason that the (housing) price is high today is only that the price will be high tomorrow - when "fundamental" factors do not seem to justify the price - then a bubble exists." (Stiglitz, Joseph - Syposium on Bubbles 1990, 13)
 
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