Next wave of the crisis

There is another school of thought that would suggest that this current downturn in the economy will be relatively short lived due to two factors.
  1. The price of oil
  2. The current interest rates
MikeM.
 
There is another school of thought that would suggest that this current downturn in the economy will be relatively short lived due to two factors.
  1. The price of oil
  2. The current interest rates
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Ireland can't really take advantage of this though because there is no real indigenous Irish enterprise, and the banks won't give credit, so it doesn't really matter what the interest rates are.. The government is also hell bent on try to destroy any glimmer of a hope we have for a 'knowledge economy', by
1. Neglecting education.
2. penalising entrepreneurs; http://www.thepropertypin.com/viewtopic.php?f=19&t=15666

Maybe if we had different leadership, the downturn might be short lived.
 
Next up, bond market dislocation. Supply exceeds buyers. Governments unable to roll-over debt. (This is after all the corporate stuff has gone to the moon; junk bond yields have already reached 20%).
 
Dave Vanian said:
Just like all the economists who predicted 13 out of the last 3 recessions. :p
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Add something of value or don't add anything at all.

I'm sick of these worthless posters. I enjoy reading posts from the opposite view point providing they can back up their claim with something of half value.

Those here calling property overvalued were right, are still right and will be right for many years to come.

This aint a temporary blip, 'correction' or whatever else the ostrich brigade like to call it.

Welcome to reality. Property is falling and will continue to do so for 3-5 years.

Yields are slowly heading back towards the 8-10% fair value but its going to be a long slow way...........................
 
ringledman said:
I'm sick of these worthless posters. I enjoy reading posts from the opposite view point providing they can back up their claim with something of half value.

Those here calling property overvalued were right, are still right and will be right for many years to come.

This aint a temporary blip, 'correction' or whatever else the ostrich brigade like to call it.

Welcome to reality. Property is falling and will continue to do so for 3-5 years.

Yields are slowly heading back towards the 8-10% fair value but its going to be a long slow way...........................
Click to expand...

And I'm sick of listening to people sprout figures that sound authoritative but are meaningless in the current unprecedented financial conditions.

In the boom years you could get countless economists who could back up their predictions of endless growth with lovely impressive statistics.

As I understand it, the reason that property price discussions are banned on Askaboutmoney is that you'd get people like you sprouting predictions in one direction and people arguing against you with more predictions in the opposite direction and the end result would be worthless. So th Property Pin can gaze into crystal balls to their heart's content. I prefer to deal in the here and now.
 
Dave Vanian said:
In the boom years you could get countless economists who could back up their predictions of endless growth with lovely impressive statistics.
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Glad we agree then that the economists who were backing up their claims that property was over priced with figures were right. You know who to listen to the next time it happens.
 
Dave Vanian said:
I have several strings to my bow. A minority perentage of turnover does come from arranging mortgages.

Why? Perhaps you think that I'm incapable of holding a view without it being warped by self-interest. Or maybe you think that I'm on a one-man crusade to talk up the Irish property market. Go me!

I was equally scathing of the muppets who proclaimed that property could only go up. They were just as wrong as these property pinheads.

What do you do yourself?
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I would have thought as much. The propertypin imo serves a useful purpose for those people who are probably making the biggest investment decision of their lives. Essentially, a decision to defer buying would run contrary to your broker interests. Btw, were you previously promoting the wonders of hedge funds on a thread some time ago?
 
SPC100 said:
I disagree.

We can identify property markets that are over or under priced based on historic international and national ratios. We can't predict when, why or how these ratios will mean revert. (e.g. will property prices, inflation, or income streams move). That does not take away from the fact that they are valued at more than their historic average.

SPC100 I think this is one of the best quotes I've seen on this website.

Mathematical ratios can determine if an asset is overvalued against its historical average. This applies to any asset class- stocks, property, commodities, anything.

Property is easy to value it comes down to one main thing - yield. Likewise yield applies to stocks but Price to Earnings is the key driver here.

All assets follow a cycle of undervalued, fair value, overvalued and back again. By using historical ratios you can see where the asset is along its path.

Property was hugely overvalued before the bubble burst. It was merely a matter of time before the crash occured. Of course no one could say for sure when and how the bubble would burst but that one day soon it would.

The bulls kept however saying that there had been a 'paradigm shift' in property and like the tech stock of a few years before we had entered a new age where normal or historical valuations no longer applied. This is the top of any bubble.

Anyone with an interest in reading about asset bubbles and how to value any asset fairly and rationally should read -

'Bubbles and How to Survive Them' by John P. Calverley

This is an excellent read, written in 2004 and forecasting that property in the Western World was overvalued. He couldn't predict when a crash would occur but that one was highly likely.

Awesome read.

I include a summary checklist of the characteristics of a bubble below. How telling now-

- Rapidly rising prices
- High expectation for continuing rapid rises
- Overvaluation compared to historical averages
- Overvaluation compared to reasonable levels
- Several years into an economic swing
- Some underlying reason for higher prices
- A new element, e.g. technology for stocks or immigration for housing
- Subjective "paradigm shift"
- New investors drawn in
- New entrepreneurs in the area
- Considerable popular and media interest
- Major rise in lending
- Increase in indebtedness
- New lenders or lending policies
- Consumer price inflation often subdued (so central banks relaxed)
- Relaxed monetary policy
- Falling household saving rate
- A strong exchange rate
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Askar said:
I would have thought as much. The propertypin imo serves a useful purpose for those people who are probably making the biggest investment decision of their lives. Essentially, a decision to defer buying would run contrary to your broker interests. Btw, were you previously promoting the wonders of hedge funds on a thread some time ago?
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Yes, predictably you assumed that if I declare an interest in the finance business that this must some way influencing my opinions on property websites who appear to be hell-bent on pushing just one set of predictions (when they're not crying about being kicked off Askaboutmoney). If you read my earlier post more carefully, you'll see that I said that mortgage broking represents a minority percentage of my firm's turnover. Now that minority has got smaller, it gives me more time to get on with my other interests which are not property-related.

I note you seem reluctant to be as open with the board when I asked you what you do.

You already asked me in another thread if I was promoting the wonders of a hedge fund. And I answered there too that you're obviously mistaking me for someone else.
 
I dont understand the confusion about the Irish property bubble - it was so obvious - Ringledman - good post.

In simple terms the large medium multiple, the house price earning ratio and the phenomenon of the ingenius 100% mortgages was a great indication of the developing Irish housing bubble. Paying 500k for an apartment in Sandyford - cmon where is the value in that???
 
Dave Vanian said:
Yes, predictably you assumed that if I declare an interest in the finance business that this must some way influencing my opinions on property websites who appear to be hell-bent on pushing just one set of predictions (when they're not crying about being kicked off Askaboutmoney). If you read my earlier post more carefully, you'll see that I said that mortgage broking represents a minority percentage of my firm's turnover. Now that minority has got smaller, it gives me more time to get on with my other interests which are not property-related.

I note you seem reluctant to be as open with the board when I asked you what you do.

You already asked me in another thread if I was promoting the wonders of a hedge fund. And I answered there too that you're obviously mistaking me for someone else.
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I dont understand what this guy has against the property pin, its a very useful website, ok so initially it was a bit shaky, but people were angry that there was a complete lack of information out there (myself included) on where true property prices were then. Can't people accept that these two websites both exist and both have their merits?
 
Rosinsky said:
I dont understand the confusion about the Irish property bubble - it was so obvious - Ringledman - good post.

In simple terms the large medium multiple, the house price earning ratio and the phenomenon of the ingenius 100% mortgages was a great indication of the developing Irish housing bubble. Paying 500k for an apartment in Sandyford - cmon where is the value in that???
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Surely these kind of assertions are very easy to make in hindsight, i didnt hear anyone shouting about the property crash 2 years ago apart from the doomsday folk who were continually spouting this over long periods, you will eventually strike oil if you drill enough wells.
Its a cycle people we will get through it and prices wil rise again given time i have no vested intersted in this either, i own my own home pay my mortgage and i live in it. thats the way people should view property if they are not investors, it was outside of our control as to what price or stage of the market you bought at, housing is a need and somtimes you dont have much choice when you are bringing up a family and need a home etc..
 
I visit thepropertypin occasionally. It contains some useful and interesting information but unfortunately is let down by a bizarre conspiracy theory ethos including a completely misplaced sense of victimhood.

The latter has almost reached biblical proportions at this stage whereby their ejection from the garden of eden (www.askaboutmoney.com) by the forces of evil (everyone here is a property owner/auctioneer/builder/etc.) in the dim past followed by their crossing of the desert into the promised land (www.thepropertypin.org) has become one of their defining experiences as a group.

The funny thing about their conspiracy theories (particularly concerning is that I was a property bear on the old thread (and in fact still am) and contributed in that basis but I didn't find the locking of the thread particularly unreasonable. It had become circular and boring by the time it was locked.

Having said that, outside of the conspiracy loving fantasists, there are some informed and interesting views and opinions on the site.
 
ringledman said:
Add something of value or don't add anything at all.

I'm sick of these worthless posters. I enjoy reading posts from the opposite view point providing they can back up their claim with something of half value.

Those here calling property overvalued were right, are still right and will be right for many years to come.

This aint a temporary blip, 'correction' or whatever else the ostrich brigade like to call it.

Welcome to reality. Property is falling and will continue to do so for 3-5 years.

Yields are slowly heading back towards the 8-10% fair value but its going to be a long slow way...........................
Click to expand...

Who's to say 8 - 10% yields are fair?

First we look at the long term interest rate. If it's 3% then we might look for a 6% yield on property. If it's 5% we might seek an 8% yield.

Now assume rather than being flat, rents increase at 2% per annum. The yield corresponding to interest rates of 3% and 5% would be 4% and 6%.

Say we expect rental income of €20k p.a. on a property. At long term interest rates of 3% and assumed rental growth of 2% per annum we might value it at €500k. If, on the other hand, long term interest rates rise to 5% and we expect no growth in rental incomes, the corresponding value would be €250k.

The return on property is rent and that's what drives its value. We need to know the sustainability of rents, the volatility of rents and how much they're expected to grow or fall to work out the return we can expect on a property. We need to look at these in conjunction with returns from alternative sources, generally interest rates.

So yes 8% is probably a fair rental yield on property investment where long term interest rates are 5% and we expect little or no long term rental growth. 4% might be an appropriate yield where interest rates are closer to 3% and some rental growth is expected.

To predict for sure whether property is over or undervalued we need to be sure on many variables e.g. how will our population change, will global interest rates rise or fall, are current rents sustainable.

For what it's worth I think rental yields could rise to 10%. That is until the sucker renting for 10 years earning nothing on deposit realises he's paid for someone elses house! Then the cycle will reverse until the next wave of suckers realise they'd earn twice as much interest hassle free from putting their money on deposit than from the meagre rent they're getting on their investment property!
 
dieter1 said:
I dont understand what this guy has against the property pin...Can't people accept that these two websites both exist and both have their merits?
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Two things: -

(1) Do a Google search "burgess site:thepropertypin.com" and have a read of some of the many posts attacking Brendan Burgess. I may not agree with everything Brendan says but I have huge respect for the fact that he set up Askaboutmoney using his own time and money for no personal gain and it has genuinely helped thousands of people with their financial education over the years. He does not deserve the (sometimes highly personal) attacks on his good name and any site that permits such attacks is worthy of nothing but contempt.

(2) I fundamentally disagree with speculation being touted as fact, just because people can make impressive-sounding arguments to back up their predictions.

I accept that Property Pin may have some useful posts and posters. I haven't seen any but if darag says they are there, I respect darag's opinion from previous experience. But the above two points utterly devalue them.
 
I visit the "pin" infrequently. Useful in its own way, but I find the "attitude" off putting. It like Boards.ie also has some annoying moderation at times. AAM isn't perfect either. You have to accept its someone else game/ball so you have to play by their rules or vote with your feet.
 
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