IMF warns on housing bubble

dod

http://www.rte.ie/business/2004/0422/housing.html

IMF warns on housing bubble
High house prices in countries like Ireland, Britain and Australia raise fears of a housing market bubble that could damage economic growth if it burst, the International Monetary Fund warned today. It added that the Netherlands and Spain were also included in this danger list.

The global recovery is fuelling expectations that interest rates are set to rise, focusing attention on housing. The lowest borrowing costs in years have boosted the growth of the property markets and also helped shore up consumer spending when the world economy stalled in 2001.

The IMF warned its is latest World Economic Outlook that the market could be hit even if the gains look justified on a fundamental basis.

'A house price reversal could still be caused by deteriorating fundamentals, for example higher interest rates, a significant rise in unemployment and slower growth in disposable income,' the IMF warned.

The IMF said a housing market slump delivers a potentially lasting blow to growth because it hits the economy through a range of important channels, with consumer spending top of the list.

'Although asset quality typically deteriorates slowly, financial supervisors should remain vigilant, in light of the relatively large mortgage exposure of banks, still rising house prices and the recent moves towards more speculative mortgage transactions', it said.

Merrion

Not surprised. There was a recent report which stated that Ireland has the highest average house price of any country in the EU.

DaithiSurfer

I wish they'd just shut up and stop guessing as usual about a bubble bursting.
We've all been listening to this from econimists for the last 5 or 6 years.
It just proves to me that they don't know what they are talking about. All economists should be fired and thrown into the same hole as astrologers.

They will be wrong 15 out of 10 times. And yet people beive them everytime they go and make a statement like this.

Eventually they will be right but if you bought a house now it would probably be wirth double that when the bubble bursts.
Simple truth is. Noone knows.

l3rian

i hope the bubble bursts soon, even a leveling off would be great

DaithiSurfer

I'l love a bit of a pop.
That would mean i could trade up because the gap between my bursted house would be smaller to the next bubble bursted house

Sarsfield

Originally posted by DaithiSurfer
I'l love a bit of a pop.
That would mean i could trade up because the gap between my bursted house would be smaller to the next bubble bursted house

Partly true. But would you be able to sell your current house if the bubble burst? A lot of people weren't able to when the bubble burst in the UK. A gentle levelling off, and even a little downward movement would be better. I'm in the same position as you btw.

sceptre

Originally posted by DaithiSurfer
They will be wrong 15 out of 10 times.

I hope that wasn't a typo because I found it hilarious.

DaithiSurfer

Originally posted by sceptre
I hope that wasn't a typo because I found it hilarious.

Completely intentional It sums up economists perfectly i think.

If there is a bubble burst starter homes should hol their value a lot better than houses further up the ladder.

The problem might be trying to get someone further up the ladder to sell as their perceived worth is no longer as high and they may just decide to sit on it until times improve.

spongebob

Not necessarily .

When the bubble bursts , starter homes in Lucan will drop further than starter homes in Bray because Bray will still have pubs and scholds within walking distance etc....and thats assuming they cost the same now and are teh same distance out in terms of time spent commuting.

Location will determine the extent of the falls , bad locations will assert themselevs more quickly but that does not mean you would want to live there even if it was a 'good deal'

M