The bubble....

Cantab.

Ipso_facto wrote:

All thing's being equal ....etc ! . I have penciled in - Springtime 07 - as the moment of truth...whatever !

Sort the "Boy's out from the Girls" so to speak - investors having to, start selling bigtime.

The "oul" unemployment thing increasing, future anouncement of new jobs bleak...etc.

I would tend to agree. I'd say most likely Spring 07 when an election is imminent.

I wouldn't be at all surprised though if things went pear shaped in Q4 of 06 either...

D'Peoples Voice

MrJones wrote:

remember wages are rising all of the time

Real or Nominal wages? because SIPTU seem to think that real wages are by no means rising!
Are you taking into account the rise in fuel costs,refuse collection costs, heating, health, creches, education and leisure industry costs!
According to SIPTU, after taking these into account, people have less disposable income than before. That would suggest to me that they will find it more difficult to buy a house. I assume that's why many FTB are looking at 100% mortgages because they can't save for a decent deposit any more, but I stand to be corrected!

MrJones

D'Peoples Voice wrote:

Real or Nominal wages? because SIPTU seem to think that real wages are by no means rising!
Are you taking into account the rise in fuel costs,refuse collection costs, heating, health, creches, education and leisure industry costs!
According to SIPTU, after taking these into account, people have less disposable income than before. That would suggest to me that they will find it more difficult to buy a house. I assume that's why many FTB are looking at 100% mortgages because they can't save for a decent deposit any more, but I stand to be corrected!

It's true but it still looks good to the banks if you say you are earning 50k a year (which i am not). i defo agree that the cost of living is spiralling out of control but sure that's another thread

D'Peoples Voice

MrJones wrote:

It's true but it still looks good to the banks if you say you are earning 50k a year (which i am not). i defo agree that the cost of living is spiralling out of control but sure that's another thread

You see that's my problem with banks in this country, thats how future problems can build up.
Banks should assess how much disposable income people have after paying their monthly direct debits/day to day USUAL bills, and then determine if someone has enough left over to cover a mortgage after assuming an interst rate increase of 2% from current rates.
Of course human nature is that we all promise the bank that we will cut down here and there, we assume that our wages will continue to increase with inflation and therefore paying the mortgage will be no problem!
The proportion of first time buyers buying houses is now almost on a par with home owners who are upgrading, while the proportion of investors is falling, is there something we should know?

Pa ElGrande

miju

Cantab.

Pa ElGrande wrote:

You have far too much time on your hands...

It is quite funny I have to say!

D'Peoples Voice

Which of these reasons can you EVER see applying to Ireland?

3 of the top 9 reasons that the real estate bubble will burst include:

1. Interest rates are rising - foreclosures are up!
2. First time homebuyers are priced out of the market - the real estate market is a pyramid and the base is crumbling
3. The psychology of the market has changed so that now people are afraid of the bubble bursting - the mania over real estate is over!

http://ezinearticles.com/?3-Of-The-Top-9-Reasons-That-The-Real-Estate-Bubble-Is-Bursting&id=192244

Cantab.

D'Peoples Voice wrote:

Which of these reasons can you EVER see applying to Ireland?

3 of the top 9 reasons that the real estate bubble will burst include:

1. Interest rates are rising - foreclosures are up!
2. First time homebuyers are priced out of the market - the real estate market is a pyramid and the base is crumbling
3. The psychology of the market has changed so that now people are afraid of the bubble bursting - the mania over real estate is over!

http://ezinearticles.com/?3-Of-The-Top-9-Reasons-That-The-Real-Estate-Bubble-Is-Bursting&id=192244

Very good link.

Just goes to show that fundamental economics applies no matter where you are in the world. Ireland is nothing special (especially these days).

D'Peoples Voice

Cantab. wrote:

Very good link.

Just goes to show that fundamental economics applies no matter where you are in the world. Ireland is nothing special (especially these days).

Correct me if I'm wrong here, lets assume one partner stays at home to mind the kids!
The average house in Dublin is EUR 350,000
assuming an interest rate of 5%,
then 350,000 x 5% x 1/12 = EUR 1,458.33pm for a mortgage
and if the average wage in Dublin is EUR 30,000 gross or EUR 24000 (that is assuming PAYE 20%)
then that's EUR 2,500 GROSS per month or EUR 2,000 Net,
so 1,458.33/2,500 is 58.33% of people's gross wage or 72.92% of their net salary.

However if both partners work and have no kids, and each earn EUR 30,000, then the mortgage is only 31.25% of their net salary. I wonder are the couples who are getting mortgages thinking about what will happen if they have a kid!
Come on, we can survive on rice and water, I can see the property bubble continuing:D

Cantab.

D'Peoples voice:

I must correct you. Firstly, the average Dublin house price is €394,795 according to the PermanentTSB/ESRI house price index as at May 2006.

A Permanent TSB 5% mortage for this amount will cost you E1,695pm net.

A 30k salaray gives you a take-home salary of E2,132 net.

This is 79.5% of salary.

Please explain to me how you are supposed to pay electricity, gas, management fees, stamp duty, legal fees, food, children, run a car, etc.

If you commit murder, you'd be out after 20 years. This kind of mortgage for a house in Tallaght is a life sentence. The risks involved in such a transaction far outweigh the perceived benefits of investing in such a house.

dunno what all this is about didnt anyone see the news a few weeks ago
sure we are the 2nd richest country in the world
we can afford it
150,000 for every man woman and child
something must be wrong with my banklink

faceman

Cantab. wrote:

A 30k salaray gives you a take-home salary of E2,132 net.

This is 79.5% of salary.

Please explain to me how you are supposed to pay electricity, gas, management fees, stamp duty, legal fees, food, children, run a car, etc.

its pretty obvious that most FTB's buy a property less than the average price (or within their affordability) and most FTB purchases are done with a partner/friend etc. Rent a room schemes etc give relief to mortgage payments.

People forget how clever banks are. They wont give a mortage unless they know the risk is low.

Gurgle

faceman wrote:

People forget how clever banks are. They wont give a mortage unless they know the risk is low.

Thats the bottom line really.
They're the experts.

daveirl

This post has been deleted.

Boomtastic

faceman wrote:

People forget how clever banks are. They wont give a mortage unless they know the risk is low.

How has house prices affected the banks risk assessment?

If you borrow €300k to buy a house with a 100% mortgage and house prices drop 10% the house is only worth €270k but you still owe €300k. No risk for the banks there.....

aphex™

Banks have little risk, they can sell off their mortgage books in an instant these days down the IFSC.

They'll quietly start doing that at the first sign of trouble. Might have started doing so already.

Pa ElGrande

faceman wrote:

People forget how clever banks are. They wont give a mortage unless they know the risk is low.

"Could you tell me the rate of interest on a demand savings account?" I asked innocently.
"It's 0.1 per cent," she replied.
"So how much will I earn in interest if I deposit 10 grand?" I enquired.
"That'd be €100 a year," shot out the reply.
She was wrong.
The agent from the EBS misled me. The answer is €10.
She had exaggerated the return tenfold. I corrected her. She apologised.

EBS: Every Body Suckered
http://www.unison.ie/business/stories.php3?ca=80&si=1666684 [free registration required]

Here is what's happening

Banks finance this because they have to. They are in the business of lending money and the more money they lend the more profit they make. Every mortgage manager is set volume targets each year and these will be met.

As the banks take equity in existing houses as collateral for further property related loans, both sides of the bank's balance sheet is tied up in the fortunes of the Irish housing market.

Central European housing markets are simply a play on the Irish property market for people priced out of the second home game in Dublin, Cork and Galway. With an average income per head of $7,000, central Europeans are not going to be buyers of $150,000 apartments.The game is to buy in Hungary today to sell on to a Paddy tomorrow. The golden rule in Budapest is: don't be Paddy last.

The banks are involved in a dogfight for market share and will push lending to the max if they have to. Margins on lending have fallen, but fees on facilitating are still strong. So more deals means more fees means more clients. But if we are spending more than we are saving, where are the banks getting all the cash? They are borrowing on the European money markets to lend here.

This is simply a process where money moves from one country to another and they are borrowing cash from old Germans who have saved and lending it to young Paddies who are speculating.

Banks are also securitising mortgages. This is an instrument whereby the banks borrow against the stream of income coming every month from their existing mortgages. This allows banks to borrow twice for the same house more or less and make the new cash available for further mortgages.

So it is not hard to see why they might have an interest in keeping the whole show on the road. If you doubt that the banks are making good money on mortgages, check out AIB's results on Tuesday

Young victims of property tyranny 22/02/2004
http://www.davidmcwilliams.ie/Articles/view.asp?CategoryID=-1&CategoryName=&ArticleID=224

However, a bit of perspective might help. We have seen this type of stuff before, in countries that have been much more successful for much longer than ourselves. For example, in the late 1980s, Japan - an economic powerhouse - experienced the most inflated property bubble of the 20th century. As a result of the lending boom, four Japanese banks dominated the top five banks in the world. (Today, no Japanese bank is in the top five and one of these original 1980s financial colossuses is bankrupt.) However, the most startling statistics of all were those about property values and implied wealth.

more ...

How the prophets of boom may pocket profits of doom 12/07/2006
http://www.davidmcwilliams.ie/Articles/view.asp?CategoryID=-1&CategoryName=&ArticleID=376

For starters, the IMF points out that ‘‘bank credit to property-related sectors has grown rapidly and now accounts for more than half of total bank lending’’. The Irish institutions’ lending is more concentrated in this area than is typically the case in the rest of western Europe, it found.

That means that buyers of Irish bank shares are effectively taking a big bet on the Irish property sector on top of any other Irish property investments they may already have.

Taking this big bet on Irish property may not have been much of a worry when interest rates were falling and demand for houses was rising. But it looks a rather riskier proposition now that interest rates are rising and, as the IMF points out, ‘‘most estimates of the underlying demand are lower than the current pace of house completions’’.


Warning signs linger despite clean bill of health for banks
http://www.sbpost.ie/post/pages/p/wholestory.aspx-qqqt=THE%20INSIDER-qqqs=themarket-qqqsectionid=3-qqqc=3.7.0.0-qqqn=1-qqqx=1.asp

Banks clever?? , I'm sure the Japanese banks were regarded as clever at one stage as well.
The fundamentals of the housing market are quite good (demand due to growing population) and could potentially make for a healthy outcome over the next few years from a property bull perspective, but it is my opinion that not at the current house price inflation levels or output. You can also get an idea of the banks thinking to extend the market for loans, when they are prepared to consider inter-generational mortgages.

• House Price Inflation continuing to outpace earnings inflation
• First Time Buyers struggling to get onto the first rung of the property ladder
• System has already flexed to accommodate first timers
  • 100% Mortgage
  • Interest only repayments
  • Terms extended to 40 years
  • Room rental recognised in affordability calculations
• Will more radical solutions be required?
  • Inter generational mortgages
  • Shared ownership structures

Opportunities & Challenges in The Irish Mortgage Market
http://www.ibf.ie/pdfs/NMCDenisCasey.pdf

RainyDay

aphex&#8482 wrote:

They'll quietly start doing that at the first sign of trouble. Might have started doing so already.

AIB sold off their HQ site in Ballsbridge last year and are now leasing it back. I wonder why?

Pa ElGrande

RainyDay wrote:

AIB sold off their HQ site in Ballsbridge last year and are now leasing it back. I wonder why?

Reason why here - http://www.boards.ie/vbulletin/showthread.php?t=2054967253&page=14

RainyDay

You didn't really expect them to come out in the open and admit that the market (on which much of their business is based) is over-priced, did you?

okidoki987

Bubble bursting I don't think so.
I heard from a friend a house in his area sold last October for 890,000 Euro.
Same house after some small refurbishment was sold last week for 1.4 million!
:eek:

Pa ElGrande

okidoki987 wrote:

Bubble bursting I don't think so.
I heard from a friend a house in his area sold last October for 890,000 Euro.
Same house after some small refurbishment was sold last week for 1.4 million!
:eek:

We are in a period of transition at the moment, some houses located in desirable areas will continue to command a premium (location, location, location) and there is a lot of liquidity in the economy that will take some time to flush out of the system. Rising energy prices and interest rates are beginning to soak up some of that.
As more supply comes onstream in more desirable locations. Property located furthest from the main population centers will be the first to fall, as will 1 & 2 bed apartments located outside the M50.

Notice, you will seldom hear about anyone being repossed or into a forced sale, it is happening on a small scale and my friend in the bank has admitted they do have more non performing loans on their books.

bico

RainyDay wrote:

AIB sold off their HQ site in Ballsbridge last year and are now leasing it back. I wonder why?

I understand that it was bought by Sean Dunne who also paid between €50, 000000 and €80,000000 per acre for the Jury's and surrounding land. Does he know something we don't ? The price for a one bed will have to start at a million euros for it to be proffitable and that is if he gets permission to build tall buildings there.

faceman

Given interest rates went up during the summer and august particularly is a quiet month, we wont really see what the true impact is until september/october.