The housing bubble has burst

Ann77

PDelux wrote:

There must be some people on this board who have recently got a mortgage. I wonder what kind of stress tests in terms of interest rises were taken into account? Any figures?

Myself and my partner got a mortgage last September for €297,500. Believe it or not although we are both highly educated (degree and masters), I have no idea what kind of stress tests were performed on our application.

I know I'm going to get shot down for not knowing this and while I take full responsibility for it, lets just put it down to the current property mania.

Anyway here's the stats. I earn €32,000 and she earns €28,000. We had our €30,000 deposit (from parents) and the place we bought was €330,000. The mortgage is over 35 years (ouch) and the interest rate is fixed at 2.25% until this September coming. We have no savings.

So while we are fine at the moment with our monthly repayments being €951 I believe a coming flurry of interest rate hikes and a recession will hit us quite hard simply because we borrowed way too much. The only excuse I can give for that is we did not look to borrow what we could afford, we looked to borrow how much could we possible get.

So given that the economic climate is changing we have two choices - sell up now or bear down and try to weather the impending storm. However with a €297,500 mortage will it be possible to weather it?

Any comments would be very welcome.

mox54

I would weather the storm, Interest rates will prob go up to approx 7% at most in the medium-long term and then correct to what they are at present in the very long term, the days of 15% are over, what would concern me is job stability, if you have that then I'd stay as is.

The bubble is going to burst and burst big time, our economy is fuelled by a fools dream and he's about to wake up and smell the coffeeeeee!!!!:eek:

PDelux

Ann77, maybe you have a spare room to rent for extra income?

A separate point, i have heard people say "my house is up €50,000 since i bought it..." but isnt it a fact that if they were to sell and move in the hope of getting some profit, other houses would have increased by some similar amount in the meantime and unless they move to some remote location, or from a 3bed to a 2bed, they will not get any decent profit?

daveirl

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ionapaul

It it really only the 'bought a property I don't actually love to get on the ladder' and recent or highly leveraged Buy-to-let investors who are going to be screwed should there be a big correction. I do feel a lot of people bought small apartments out in the middle of no-where suburbia who don't plan to live there more than a few years, who will still be there in 10 / 15 years time. So many apartments coming on stream within one or two miles of the city centre, in any downtown in the general economy (which would accompany a property price correction or contraction of the construction industry), apartments or townhouses, which in reality should only be built in city centres, out in the sticks are going to be hell to rent or sell. IMHO, obviously.

Sponge Bob

daveirl wrote:

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Exactly. The areas that will suffer are areas where rental is low and investors account for lots of property, espcially recent investors .

They will exit under pressure (can't rent it and price not rising and more ) and freak the market out in that area.

daveirl

This post has been deleted.

PDelux

1. don't feel you have to buy and 2. if you are buying make sure you are happy to live there long term.

Exactly!
If anyone saw the TV programme, "I'm an adult get.." you can see how naive many people are in terms of their expectations. e.g. i want to find a house near where my parents live in S. Dublin, no i dont want to buy that bargain house in Tallaght because i dont like the grafitti around the corner
ah sure i will live here for a year or two and then move up...yea right!

GreeBo

Ann77 wrote:

The mortgage is over 35 years (ouch) and the interest rate is fixed at 2.25% until this September coming. We have no savings.

Go transfer it to NIB and try to get the 4.25% fixed for 5 years to ride out the hike.
You are gonna feel it at after September when your rate jumps to 4%.
Thats nearly double. :eek:

Glenbhoy

Go transfer it to NIB and try to get the 4.25% fixed for 5 years to ride out the hike.
You are gonna feel it at after September when your rate jumps to 4%.
Thats nearly double.

Ann's new repayments will be up by about 300 per month at expected september interest rates.

GreeBo

What do you think the Sept rates will be?
I think at least 4%.
(I didnt mean that her repayments would double, just the rate)

daveirl

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GreeBo

daveirl wrote:

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wont .25% put us at 4% already??

AIB Stand'd Var'ble
BOI Variable
BOI Variable End
BOS-Bank of Scotl Var
BOS Variable En
EBS Variable
First Active Variable
IIB Bank Variable
ICS Variable
ICS Variable End
Ir Nat Variable Ex
Ir Nat Variable New
Permanent tsb Disc
Permanent tsb
Permanent tsb En
Ulster Stan'd Var Ex
Ulster Disc Var New 3.75%
3.99%
-
3.74%
3.74%
3.75%
4.03%
3.95%
3.99%
3.99%
3.98%
3.98%
3.19%
3.85%
3.85%
3.99%
3.44%

ionapaul

Think they are talking about ECB *base* rates = 2.5%

daveirl

This post has been deleted.

GreeBo

ah ok then
I was just trying to highlight to Ann that her rate will jump by a fair amount very suddenly and the sooner she can lock in a fixed rate (if that is what she wants, and I would recommend it) the better.

Sponge Bob

Mortgage rates will be 4% by next week I say.

If your mortgage is 297k for 35 year then run the figures thru Karls Calculator Here

http://www.jeacle.ie/mortgage/ie/

297k for 35 years at 2.25% (discount variable rate quoted above) €1022 a month
297k for 35 years at 3.5% (normalish variable today) €1227 a month
297k for 35 years at 4% (variable this summer sometime ) €1315 a month
297k for 35 years at 5% (normalish variable by around March-Jun next year if Germany does not cool a bit ) €1499 a month

That will spook the investors , especially the recent ones, whose rent will not rise by anything like that owing to oversupply .

Pa ElGrande

Anecdotal:

I'm observing more estate agents that ever opening shop, this would indicate there is a large supply of housing stock available or high margins on low volume in order to support so many players.
I am also noticing over the last few weeks more "for sale" signs that normal especially in south Dublin. I think those record breaking house prices in Ballsbridge have motivated a lot of sellers.
Property seems to be moving briskly, though I am watching some properties back on the market after a few months, often with a different agent.

ronbyrne2005

i think rte's boom programme was the final nail in the coffin for irish property!

homah_7ft

It did leave me with the gut feeling of a moment when everyone realised what has been happening all along.

Pa ElGrande

ronbyrne2005 wrote:

i think rte's boom programme was the final nail in the coffin for irish property!

RTÉ's Economics Editor George Lee will be online for a live webchat on Friday 2 June from 1 to 2pm. He will answer any questions you have about the Irish economy or about his show, Boom.

You can submit questions
http://www.rte.ie/thetimeofourlives/webchat.html

Sponge Bob

ronbyrne2005 wrote:

i think rte's boom programme was the final nail in the coffin for irish property!

Yep. I think it will flush lots of recent investors out . Once they dump their 'assets' on the market its the end of the boom .

Out of interest, ring up a few local estate agents this morning and tell them you have a rental in estate x that is empty and clean.

You want to sell, do THEY want the agency ?

How long before they make an appointment for you ???

I think you may find they are awful busy this morning so you will , read what you will into that

As for George , he looks and sounds and dresses like an undertaker and this is the only good program he EVER did is it not?

Once the recession is over RTÉ should get a happy looking economics editor to cheer the country up and get the ball rolling again, c late 2008

mox54

we are now talking ourselves into a recession - dangerous times but I'm alright Jack;)

Sponge Bob

we talked ourselves into a bubble years ago . the bubble being this "ladder" that the owner or the investor must get on using the dirt cheap money sloshing around since 9/11 .

every bubble bursts, I am dreadfully sorry it got this out of hand but I warned against this ****ing insanity years ago and nobody listened.

All I got back was "must get on ladder" "you cannot lose on property" "property always rises" etc

Then George does his undertaker chic routine on TV and they suddenly listen .

Ah well

mox54

I lived in London during the property boom when a 1 bed flat was 1/4 million sterling, bubble burst and it was worthless - NEGATIVE EQUITY became the catchphrase of the day - we bought a house for 68,000 sterling during the slump it got that bad -

It's going to happen here and it's going to be nasty - :eek:

Sponge Bob

Ireland is NOT comparable to London at ALL .

You carefully neglected to mention the 15% mortgage rates in the UK in the early 1990s. That simply will not happen here and thats what tanked the market. The other factor was that there were no repayment mortgages they were bull**** crooked endowments instead. Therefore the owners were double negative equitied in no time at all.

The problem in Ireland is fundamental oversupply in some areas but not in 'good ' areas . Any slump here will be highly asymettric .

In Wales , property prices rose in the first half of the 1990s while 'up and coming' areas of London in the late 1980s (scumpits basically ) fared worst in the early 1990s .

I lived in London then too. I had the sense not to panic in 1988 and 1989 but I remember the panic all right .

mox54

I know it's not appropriate to compare London to Ireland but I was trying to convey how much it can go wrong and how nasty the slump can be, those endowments were crap and we don't have them etc etc but when we get into NEGATIVE EQUITY then it's curtains, we're over borrowed and dependant on 1 industry, it's too late to reverse this, the horse has bolted and no point closing the door!!....that's my view and I hope I'm wrong...I really do but the writing has been on the wall a few months now.......mmmmmm!:eek:

shnaek

I was reading an article in the Echo yesterday where a labour senator was demanding that we spend the surplus 1.5 billion on hospitals and that The Annual Surplus would pay for the extra staff needed year on year. The annual surplus! What the hell is that? Where was the annual surplus back in the 1980's?

Sponge Bob

mox54 wrote:

I know it's not appropriate to compare London to Ireland but I was trying to convey how much it can go wrong and how nasty the slump can be, those endowments were crap and we don't have them etc etc but when we get into NEGATIVE EQUITY then it's curtains

NO for most people who bought years ago. Only about 20% of properties in Ireland are likely to EVER end up in Negative Equity . The rest are owned outright or have tiny mortgages.

we're over borrowed and dependant on 1 industry, it's too late to reverse this,

we can reconfigure some of that industry to civil from housing .

only the flutes who borrowed 100% are over borrowed or the 100% and an interest only mortgage on top who have no equity .

Most people are a good bit of the way into a repayment and will be fine.

the horse has bolted and no point closing the door!!....that's my view and I hope I'm wrong...I really do but the writing has been on the wall a few months now.......mmmmmm!:eek:

The writing was on the wall in 2003 (latest) and probably 2000 except that the property market went soggy in 2001 and where the **** was George Lee then I ask you . ?????

He was moaning in his best undertaker voice and in his best undertaker suit outside some closing down factory in Tallaght I will grant you but the man presented no cohesive overview of anything to anybody until last night.

"The wooooorrrrkkkkkerrrrrrss will be very saaaaaaaaaaaaad when the gaAAAAAAtttes finallllllly shuuuuuUUUUUUUt"

Only a moron could apportion George guru status for doing what he IS capable of ....IE stating the bleedin obvious.

mox54

Hindsight is a wonderful thing!!!

Only 20%, that's 1 in 5, that's scary and that's scary (it's not me but it's 1 in 5) also I don't think we can reconfigure at the drop of a hat and besides that misses the point - we need to re-think again and not mess with a reconfiguration - why oh why oh why didn't the TD's and economists and such like deal with this earlier - why oh why oh why!!!

our balance of payments is far from balaced and the undertaker needs to get off the telly and get a real job.

Sponge Bob

mox54 wrote:

Hindsight is a wonderful thing!!!
Only 20%, that's 1 in 5, that's scary and that's scary (it's not me but it's 1 in 5) also I don't think we can reconfigure at the drop of a hat and besides that misses the point - we need to re-think again and not mess with a reconfiguration - why oh why oh why didn't the TD's and economists and such like deal with this earlier - why oh why oh why!!!

They joined the euro, handed over interest rate policy to Frankfurt, and could not see 911 and emergency low interest rates happening . I blame Osama as much as our TD's . The 1990's "tiger" would not have happened had they NOT joined the euro .

The Central bank lost most of its banking supervision to IFSRA, between the Central Bank and IFSRA they did not stop the overborrowing frenzy. Since 2001 we have gone from 3x-4x gross and 90% mortgages to 5x and 6x gross and 100% mortgages .

The overborrowers did not look carefully at long term income/house price ratios and started that "ladder" "ladder" mantra to convince themselves to overborrow .

Therefore you ended up with a LETHAL combination of the Irresponsible Borrower and the Irresponsible Lender in a mutual feedback mechanism.

As prices rose so did the mortgage funding to feed more rises.

All very mad , what what . Nevertheless these are reducing mortgages and not the scumbag endowment situation per the UK in the early 1990s .

mox54

I'd hate to have borrowed 250,000 yo yo's to buy a 3 bed semi in Dudlin and have to worry about how i'm going to have to pay the mortgage over 35 years.......35 years is insane.....I really think our politicians and banks and big business have taken the young of Ireland for a ride and sucked them into a crazy situation -

it's simply not right and proper and the maths don't add up - these geezers surely had a good idea that we were going to come unstuck and what was going to happen and rode the wave until it began to break up.

The undertaker put it well when he said if we build 20,000 less homes next year what will happen - we will build less and it will have consequences:rolleyes: it's not looking good I'm afraid - in 1999 I asked myself how long will this last - we've done well to get here but I fear it's not going to be a pretty sight when the wheels fall off

Sponge Bob

mox54 wrote:

.I really think our politicians and banks and big business have taken the young of Ireland for a ride and sucked them into a crazy situation -

The young themselves are complicit to an extent. You have no idea of how many I have told "Just say No" ....but they chose to ignore this gnarly old sponge anyway <sigh> .

Unlike the tiger pups I remember the days before easy credit . They have never known anything but easy credit.

Like I say , its a feedback mechanism .

jdivision

The banks are one of the main reasons for the property boom and have largely gotten away with it without criticism. First it was getting rid of the 20 per cent deposit, then it was changed from 3 times income to 3.5 times income to 5 times income and then the repayment period went from 20 to 25 to 30 and finally 35 year mortgages and now there's 100 per cent mortgages widely available. If people had not been able to borrow more, house prices wouldn't have risen as much. I think George Lee was okay but he conveniently forgot how much large multinationals we've attracted in last couple of years such as Google, Yahoo, Amazon and eBay (admittedly some of them are only starting to invest).

ronbyrne2005

http://www.rte.ie/thetimeofourlives/boom.html

ronbyrne2005

jdivision wrote:

The banks are one of the main reasons for the property boom and have largely gotten away with it without criticism. First it was getting rid of the 20 per cent deposit, then it was changed from 3 times income to 3.5 times income to 5 times income and then the repayment period went from 20 to 25 to 30 and finally 35 year mortgages and now there's 100 per cent mortgages widely available. If people had not been able to borrow more, house prices wouldn't have risen as much. I think George Lee was okay but he conveniently forgot how much large multinationals we've attracted in last couple of years such as Google, Yahoo, Amazon and eBay (admittedly some of them are only starting to invest).

multinationals are attracted by low tax and dont employ that many people , do you really think we are better workers than those in other european countries?? its a simple tax avoidance measure although it helps that we speak english too but in uk they have all our advantages except for low tax and thats the reason the companies are setting up european bases here.

Afuera

ronbyrne2005 wrote:

in uk they have all our advantages except for low tax and thats the reason the companies are setting up european bases here.

The fact that they would have to pay staff in Sterling over there is a major turnoff too.

ronbyrne2005

Afuera wrote:

The fact that they would have to pay staff in Sterling over there is a major turnoff too.

nonsense, why? what does the fact they have to pay in sterling got to do with it? translate irish wages into equivalent amount in sterling and uk is probably no dearer for same job. nominal currency levels are irrelavant it relative levels and actual cost to the multinational in its home country.

homah_7ft

ronbyrne2005 wrote:

multinationals are attracted by low tax and dont employ that many people , do you really think we are better workers than those in other european countries?? its a simple tax avoidance measure although it helps that we speak english too but in uk they have all our advantages except for low tax and thats the reason the companies are setting up european bases here.

You make it sound like a bad thing! Thank heavens for transfer pricing. It's about all that is keeping our exports up.

ronbyrne2005

homah_7ft wrote:

You make it sound like a bad thing! Thank heavens for transfer pricing. It's about all that is keeping our exports up.

Bad in the long run as we have become complacent and not developed our own indigenous innovative sustainable export industry.

Pa ElGrande

Six months after the European Central Bank (ECB) raised interest rates for the first time in five years, a resurgence in demand among investors and a shortage of starter homes are contributing to dizzying rates of capital appreciation in the Irish housing market. Demand is so strong that next week’s expected 0.25 per cent rise is unlikely to have any immediate effect on prices which have risen by 12.1 per cent over the past year.

‘‘Bank of Ireland and Permanent TSB recently launched products which allow existing investors to gear up in order to purchase more units, and they have had a phenomenal response,” he said.
<snip>
‘‘They’re offering interest-only finance at 0.9 per cent over the cost of funds and people are snapping it up. I have one client who bought four houses in a new development in Kildare - it’s great for them because they can afford it, but it’s very unfair to the first-time buyer who is queuing up beside them.”
<snip>
‘‘At the moment there are a lot of first-time buyers coming off discounted rates of 2.55 per cent, but the cheapest tracker rate they can get is 3.6 per cent - that’s a hell of a jump, and when you consider that there is probably another 1 per cent to come, you can see where the problems could arise,” he said.
<snip>
But for now, buyers seem happy to carry on borrowing.
<snip>
‘‘People want the house but they don’t want to sacrifice their lifestyle, and they don’t seem too concerned about what could be coming down the line.”

Housebuyers chase soaring prices, but what’s the limit?
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS%20FEATURES-qqqs=news-qqqid=14766-qqqx=1.asp

The latest surveys on what those who have special savings incentive accounts (SSIA) intend to do with their money have thrown up some interesting results.

One conducted by the Financial Regulator says only one person in 10 intends to reduce their debt with the proceeds of their fund, while another conducted by Ulster Bank says more than one in 10 plans to use their cash to buy an investment property.
<snip>
Already, the rental yield in Dublin is only about 2% or less (nearly two percentage points below the official inflation figure) and adding thousands more properties to the market is hardly going to put more money in landlords’ pockets.
<snip>
However, as auctioneers will cheerfully tell anybody who asks them, their buy-to-let customers aren’t interested in anything as insignificant as an annual yield. They are chasing capital appreciation.

And as we were told last week, capital appreciated by 14% in the past year.

Comment: Jill Kerby: Property investors ignore feeble yields
http://www.timesonline.co.uk/newspaper/0,,2770-2209339,00.html

Is there a ‘‘tipping point’’ for the Irish housing market, or are we facing into a slow squeeze on incomes from higher interest rates and rising costs, which will slowly take air out of the market?

Next Thursday, the European Central Bank in Frankfurt will announce its third interest rate increase since December, probably increasing rates by a quarter of a percentage point, though a half-point rise cannot be ruled out. Perhaps more importantly, the language from the bank’s urbane president, Jean-Claude Trichet, will point to further increases later this year and into 2007. So far two rate rises have done nothing to slow the Irish market, but at some stage higher rates will take their toll.
<snip>
Then came the Central Bank borrowing figures, which showed the total level of borrowing was up 29.6 per cent in the April, the highest rate of increase since – you’ve guessed it – 2000.

In the sober words of the Central Bank: ‘‘If residential mortgages continue to grow at this rate, the amount outstanding would double in three years.”
<snip>
Even if the market does not collapse, the slow squeeze this will have on incomes and on borrowing ability is bound to start telling. But when is the question.

Rising rates set to start slow squeeze
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS%20FEATURES-qqqs=news-qqqid=14765-qqqx=1.asp

If you are a potential FTB reading this, you are probably better off abandoning the market now and let the "investors" get burned. If you do decide to buy, do your own financial calculations first, don't base your decision to buy on emotions like fear that house prices will rise higher or greed, that this property boom is a one way upwards bet, forever and ever.

homah_7ft

ronbyrne2005 wrote:

Bad in the long run as we have become complacent and not developed our own indigenous innovative sustainable export industry.

I disagree. It wouldn't have happened with or without. At least there was some degree of talent acquisition this way. Enough for a critical mass if the government policies were there but long-termism has never been a characteristic of Irish politics.

Pa ElGrande

Lots of bearish sentiment today

A couple earning €76,000 a year which qualified for a mortgage of €430,000 last week would only qualify for a mortgage of €327,462 early next year, if rates continue to rise as expected.
</snip>

‘First-time buyers’ share of the market has already fallen due to the rise in house prices,” said David Duffy, an economist with the Economic and Social Research Institute.

‘‘They had a 34 per cent share of the property market in 2004, compared to 43 per cent in 2001.”

First-time mortgage limits will fall by €100,000 if rates rise
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS-qqqs=news-qqqid=14976-qqqx=1.asp

Equity strategists in Dublin and London have not ruled out more falls for the Dublin stock market and have warned that prices could fall by more than 10 per cent by the end of the year.

‘‘The fear would be that [Ireland and Spain] are very linked to property markets and, with interest rates on the rise, there is a fear that those property markets will slow down,” said Carr. Liam Boggan, head of equity research at Merrion Stockbrokers, said investors could not be sanguine about the Irish market.
</snip>

‘‘The problem for the [Irish] market is that the international guys have taken a view,” Boggan said. ‘‘They are - by and large - taking a bearish view on markets, and there is a view that the Irish market was looking too expensive.”

Market participants said that the role that contracts for difference (CFDs) have played in boosting the Irish market in the last two years would now start to unwind.

Jim Power, chief economist at Friends First, said that Irish shares may have been hit last week because the majority of corporate earnings are linked to the ongoing property boom.

Analysts fear further Iseq fall
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=THE%20MARKET-qqqs=themarket-qqqid=14907-qqqx=1.asp

‘‘The average house price is about €300,000 and the average industrial wage is between €33,000 and €34,000. This means house prices are now ten times the average wage. In the 1970s and 1980s, house prices were between three and four times the average wage.”

Hughes said that first-time buyers were in danger of being squeezed out of the market due to the cycle of interest rate rises.

All lenders stress test mortgage applications to see if borrowers can repay a mortgage if interest rates rise by 2 per cent.

As interest rates are going up, so will the rate at which borrowers are stress tested. Many first-time buyers will no longer be able to afford to buy where they want or may even not be able to raise enough to buy a property at all.

First-time buyers hit worst by rises
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=MONEY-qqqs=themarket-qqqid=14899-qqqx=1.asp

For instance, at the time of writing Anglo Irish Bank was down 13 per cent this year and down 18 per cent in the last month alone.

Brokers say the downturn is due to investor concerns that the commercial property lending that has supported its share price is likely to slow.

However, while professional investors are baling out of the Irish banks in their droves, the Irish property buyer appears to have shrugged off concerns about interest rate hikes and inflationary concerns.

Irish house buyers are as exuberant as ever. They have shown willingness to pay 13 per cent more for houses this year than last. This is despite the fact that, after last week’s 0.25 per cent rise, the benchmark European Central Bank (ECB) interest rate now stands at 2.75 per cent compared with a lowof 2 per cent last year.

Yet while house prices appear to be roaring ahead, there are some important markers that indicate that the market could be close to a turning point.

One indicator that the property market may be close to a peak is that first-time buyer couples are spending an average of 27 per cent of their income on their mortgage repayments nationally, while Dublin couples are spending 32 per cent.

The figures, published by the EBS and DKM Economic Consultants last week, show a sharp deterioration in affordability compared with last year, when first-time buyer couples were spending 24 per cent of their income nationally, and 29 per cent in Dublin.
</snip>

But Minister for Finance Brian Cowen, who relies heavily on stamp duties to run the economy, is having none of it. He last week dismissed concerns about first-time-buyer couples spending a third of their income on mortgages as ‘‘nothing new’’. With an election around the corner, Cowen is hardly going to admit that the housing market is overvalued.

The stock market, however, appears to be telling a different story if the fall in Irish bank share prices is anything to go by.

Housing warning as shares drop
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=THE%20INSIDER-qqqs=themarket-qqqs=computersinbusiness-qqqid=14882-qqqx=1.asp

So how great will the impact be on the economy? According to the same survey, 7 per cent of Irish consumers felt higher interest rates would force them to curb their spending ‘significantly’, while another 40 per cent would face a ‘moderate’ adjustment. So roughly half of Irish consumers expect to have to tighten their belts.

Our estimates suggest that as many as 50,000 mortgage borrowers face a notable weakening in their household finances this year as a result of higher borrowing costs. It is fairly clear that a number of recent purchasers who have stretched themselves to get on the property ladder will find the rising in mortgage costs particularly threatening.

Also, many of the more vulnerable are also experiencing a painful rise in their motoring and heating bills at present because of higher energy prices.

</snip>
Overall, the rise in borrowing costs is unlikely to be so large as to threaten the broader economy. In fact, it could be argued that higher rates will exert a badly-needed counterweight to risks of overheating posed by SSIAs and a runaway property market

Interest rate squeeze here to stay
http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=MONEY-qqqs=themarket-qqqid=14898-qqqx=1.asp

I think international investors are pulling back from all foreign exchanges in recent weeks, not just Ireland. The government is going to let the market take care of the affordabilty issue, which means prices have to level off or start coming down over the next 12 months as credit availabity tightens.

One of Ireland's most popular economists, Eddie Hobbs, has just published a best-selling book in Ireland advising people how best to redeploy their funds in a country boasting Europe's most dynamic economy and rapidly expanding population; an average 10,000 immigrants, largely from the recently admitted EU states of Eastern Europe, arrive here each month.

Dublin radio stations have devoted excited hours of air space to discussing how people are going to splash out on parties, luxury goods, trips -- or to pinpoint the next killer investment, often in other parts of Europe or the United States.

The Central Bank of Ireland is warning that the fun could end in unmanageable debts and, if the housing bubble bursts after an 11-year run, negative equity on mortgages.

On Wednesday, the bank published the latest in a string of reports documenting Ireland's remorseless rise in personal debt, which it linked directly to the spiraling cost of housing and Ireland's place in the euro common currency.

Since the introduction of the euro in 2001, the euro-zone's central interest rates have been kept low to suit the moribund, high-unemployment economies of France and Germany, not inflationary Ireland, which would have benefited from much higher rates.

The bank said Ireland's consumers had accrued debts, largely in mortgages and credit cards, totaling €276.2 billion (US$353 billion), up €63.5 billion over the past year -- or about €70,000 (US$88,000) for every man, woman and child in Ireland. Mortgage debt grew by 29.5 percent, credit card debt by 17.3 percent.

Ireland faces spending spree
http://www.businessweek.com/ap/financialne...me_down&chan=db

We have 10,000 people a month arriving here and rents are static, either we have just as many people leaving or we are building enough accomodation. Given the current mood in the markets, clearing down debt is probably a good idea, but it looks like our domestic economy depends on people taking on debt so this is a double edged sword.

whizzbang

Pa ElGrande wrote:

First-time mortgage limits will fall by €100,000 if rates rise
http://www.sbpost.ie/post/pages/p/st...976-qqqx=1.asp

That coudl very well be the pin that pricks the bubble. If there is no way FTB can afford property then there is no-one for upgraders to sell to etc...

and down comes the house of cards.

Pa ElGrande

whizzbang wrote:

That coudl very well be the pin that pricks the bubble. If there is no way FTB can afford property then there is no-one for upgraders to sell to etc...

and down comes the house of cards.

Not only that inflation in other sectors of the economy driven by high energy and commodity prices and an increasingly expensive public sector, who already earn on average 40% more than the private sector worker willl combine to reduce disposable income further. The much anticipated giveaway budget in December my be the last throw of the dice.

The Government received just under €17 billion in tax revenues in the first five months of the year, latest Exchequer returns have revealed.
The housing market continues to strongly influence the Government's financial position, the figures show. Stamp duties rose on an annualised basis by 38 per cent in May (compared with May 2005), and by 39 per cent in the first five months of 2006.
Capital gains taxes rose on an annualised basis by 55 per cent in the five-month period, while capital acquisition taxes were up 33 per cent.

Tax take for year to May increases by 16.7%
http://www.ireland.com/newspaper/front/2006/0603/1033777227HM1EXCHEQUER.html

The newest deal has secured a 10% pay rise over the next 27 months for the majority of workers, as well as an extra 0.5% for the lower paid. Despite the agreement, the issues of pensions and employment rights protection have not been completely resolved, and must still be signed off on.

Agreement close as social partnership talks resume
http://breakingnews.iol.ie/news/story.asp?j=79352312&p=7935z6y4

whizzbang

Pa ElGrande wrote:

Not only that inflation in other sectors of the economy driven by high energy and commodity prices and an increasingly expensive public sector, who already earn on average 40% more than the private sector worker willl combine to reduce disposable income further. The much anticipated giveaway budget in December my be the last throw of the dice.

So what you are saying is our only hope is an economy that only builds houses and sells them to civil servents? who then rent them out to builders?

ronbyrne2005

i prefer to look at our total debt levels in terms of working population in which case the average working person in the economy has 140k of debt and average couple have 300k of debt and its rising by 30% a year so it will double every 3 years!!!! the house of cards will fall soon but even if the amount a couple can get for a mortgage decreases they will end up buying further from dublin or a smaller property in dublin untill no property can be had anywhere within commuting distance to dublin for the average amount capable of being borrowed by the average couple.

Pa ElGrande

whizzbang wrote:

So what you are saying is our only hope is an economy that only builds houses and sells them to civil servents? who then rent them out to builders?

Precisely, its a virtuous circle, the civil servants rent money from the banks (io mortgage), who then rent the property to the builders at a competitive rate (captital appreciation, yield is so 2001), the builders then build more houses for the growing public sector.
In 2011 the civil servant sells at 3 times what they bought the property for and invests in hot property market in Ulan Bator. Most Irish people will work for the government, Russian becomes the countries second language since all building sites and SPAR's are now operated by people from Eastern Europe. Land Rover will have an entire factory dedicated to producing Stockbrokers tractors for the Irish market, on the downside noise pollution will be a problem due to the constant sound of developers helicopters flying overhead to observe their property investments appreciating. :cool: :cool: :cool:

whizzbang

Pa ElGrande wrote:

Precisely, its a virtuous circle, the civil servants rent money from the banks (io mortgage), who then rent the property to the builders at a competitive rate (captital appreciation, yield is so 2001), the builders then build more houses for the growing public sector.
In 2011 the civil servant sells at 3 times what they bought the property for and invests in hot property market in Ulan Bator. Most Irish people will work for the government, Russian becomes the countries second language since all building sites and SPAR's are now operated by people from Eastern Europe. Land Rover will have an entire factory dedicated to producing Stockbrokers tractors for the Irish market, on the downside noise pollution will be a problem due to the constant sound of developers helicopters flying overhead to observe their property investments appreciating. :cool: :cool: :cool:

Thats just silly, they'll just build sound-proofed appartments.

Pa ElGrande

whizzbang wrote:

Thats just silly, they'll just build sound-proofed appartments.

Egg carton boxes sound like a good investment. The next commodity bubble.