Imminent pop or not?

अधिनायक

homeOwner wrote:

If you were advising someone back 8 years ago you would have been wrong to advise them to invest in equities rather than property. Full Stop.

That's not in question, but what about the next 8 years?

With investing in the stock market, to make a large profit you have to leave it long term. You dont with property.

This not true. If you bought a random selection of stocks from the NASDAQ in 1996 and held them for 4 years you would have quadrupled your money. All markets have their boom times. There have been periods in the housing market where prices remain static for years or slide relevant to inflation. From 1975-2000, the UK housing market had a roughly equal number of years with gains compared to years with losses in the average house price compensated for inflation.

It was valid comparison to people with real money, their live savings. You are talking about statistics over the long term, i am talking about me and people like me who have made money in property. That it may be an one off "Boom" is irrelevant the fact is it happened and imo will continue to happen the for forseeable short term. There is still money to be made in property.

Hindsight investing is easy. You should have invested 5 years ago in the markets that went up the most in the past 5 years. Also you should have invested in a lottery ticket last week with the winning numbers.

I worked in a company one time whose stock seemed to double every year. After about 10 years, many staff had become millionaires. There was a very strong belief amonst the staff that this would continue indefinitely. Most people worked for salaries below market rate in exchange for a few of these magical shares. Staff borrowed money to buy them and when their options vested they used the profits to purchase more stock or options. One day the stock tanked and now, years later, it has never recovered to even a third of its high point. It was the strong faith of people like the staff who believed the stock would grow indefinitely that led to an overpriced market.

To me the housing market in Ireland looks similar now to those magical shares in that company I worked for. I have friends who have traded up and not sold their old houses. They are renting them out for 2-3% of market value, using money they are borrowing at 4%. So their investments are making a negative return of 1% per year. They are all betting on capital appreciation, of course, at a time of rising interest rates and massively rising housing supply. And they're getting the capital appreciation at a rate of 1% a month! But the party cannot go on for ever!

daveirl

This post has been deleted.

lomb

daveirl wrote:

This post has been deleted.

it is as property is generally geared, the return on a 90% mortgage with 10 % down and 400% overall gain is is closer to 4000%

SkepticOne

HomeOwner,

Historically a diversified portfolio in equities would perform better than property alone. By diversifying I mean not sticking to a particular stock, industry or particular national stock exchange.

This is far less risky, imo, than investing in one or two dwellings in a single, overvalued market like Irish property. I would not call this diversifying at all, tbh.

Comparisons between short terms in markets are not valid. Comparisons need to be made over the long run.

Cantab.

Just came across this Q2, 2006 report 'Quarterly Labour Labour Market Commentary', written by Brian McCormick of FAS.

http://www.fas.ie/information_and_publications/publications/2006q2.pdf

I've picked through it and found the following statements to be very sobering indeed (considering FAS are themselves state agency):

FAS wrote:

Underpinning the strong employment performance has been the rapid growth of the non-traded sectors of the economy (namely construction and non-market services). However, the employment boom continues to bypass the manufacturing sector and, to a lesser extent, the hotel and restaurants sector.

FAS wrote:

we are forecasting employment to grow by 4.3% (+84,000) this year, followed by a slower rate of1.8% (+37,000) in 2007. The deceleration in the rate of employment growth forecast for 2007 is predicated on the belief that there will be a substantial slowdown in employment in both the construction and services sector.

FAS wrote:

Given the increasing competitive pressures facing export firms it is hard to see much room for net job growth in the short-term. Our forecast is for manufacturing employment to remain unchanged this year, before falling by -1.7% (-5,000) in 2007.

FAS wrote:

Now that more Member States have opened their labour markets to Eastern Europe, the choice of destinations for migrant workers has increased... However, the attractiveness of our labour market may diminish in the medium-term if our reliance on the non-traded sector to create jobs becomes unsustainable... This is especially true for the construction sector where a large number of EU10-nationals are employed.

FAS wrote:

While the economy has been performing extremely well, concern is increasing that it may have begun to overheat in certain sectors. Energy and house prices have risen noticeably this year, and the overall inflation rate has increased sharply in recent months reaching 3.9% in May. Although the strength of the euro vis-a-vis the dollar will help lessen the inflationary impact of high oil prices, it brings another problem namely a loss in export competitiveness outside the Eurozone.

FAS wrote:

Employment again grew fastest in the construction sector, up 20,700 (+9%) year-onyear to 253,800. While this rate of growth was extremely high relative to other sectors, it represents a slowdown from the peak growth rate of 18% recorded in the second quarter of 2005.

FAS wrote:

The only sector to show a decline in employment was the one most exposed to international competitive pressures, namely manufacturing. Between the first quarter of 2005 and the first quarter of 2006 there was a net fall of 12,300 (-4%) in manufacturing employment.

I heard Intel's profits were down 57% on the radio this morning. Whilst I can't forsee Intel's departure from Ireland at present (they've invested so much money on non-movable capital), it doesn't sound good. I believe Intel are also cutting 1000 middle management jobs worldwide.

FAS wrote:

The importance of foreign nationals to the labour force continues to increase. The CSO estimates that net inward migration accounted for over half (51,200) of the growth in the labour force in the year to the first quarter of 2006.

FAS wrote:

For every 2 EU10 migrants who come to the UK, approximately 1 comes to Ireland despite the fact the UK population is 15 times larger... On May 1st, four more EU Member States, (Finland, Spain, Greece and Portugal) opened their labour markets to the East European States, while others (France, the Netherlands, Denmark) have allowed access to key sectors which are experiencing skills shortages such as construction. It is too early to say what effect this will have on migration flows into Ireland...As immigration from the EU10 has increased, the number of work permits being issued to non-EU migrants has fallen. There were 6,655 work permits (new and renewed) issued in the first four months of this year, down 27% from the same period in 2005 (Figure 4). The most significant decline was in the number of renewed permits being issued, down 34% on the first four months of 2005.

FAS wrote:

the number of warning signals has been increasing in recent months. Of particular concern has been the impact of cost trends on the performance of internationally traded sectors of the economy.

FAS wrote:

While employment has continued to boom in the construction sector (+50,000 in the last two years), commentators are becoming increasingly concerned that the property market is overheating, with house prices continually exceeding forecasts.

http://www.fas.ie/information_and_publications/publications/2006q2.pdf

Julesie

homeOwner wrote:

You are stating (as fact) that diversifying within the stock market is spreading your risk.

It is a fact. Ever heard of Markowitz portfolio theory.

Cantab.

The madness continues... (this got me laughing!)

http://www.murraybrowne.ie/property_details.aspx?PID=296&RT=search&County=Cork&Status=All&Ref=&Type=All&MethodOfSale=All&Search=2&Min=All&Max=All&PT=All&KW=&Area=Address&RPP=5&Page=3

On a more sombre note, I've copy/pasted this excellent (and very well-written) perspective from a poster over on askaboutmoney.com:

AAM_poster wrote:

Well, as a member that rarely seen, Highly endangered species : an employee of an Irish owned, Irish based (for the mo) high tech manufacturer which exports all its products outside the EU (North America, Japan and the Far east) , the discussion of particular interest to me.

A few observations on the last few years:

The export manufacturing industry surge that revived the irish economy in the nineties , set up the foundations of the Celtic Tiger and brought home many emigrants like myself is dying, on its knees at the moment. The large multinationals that fuelled this have already made their last serious investments in this state - see previous posters mention of intel etc etc reviewing their operations - as a somewhat industry insider - believe me - its only the tip of the iceberg.

Ireland was chosen as a destination for these companies as it was relatively low cost , low corporation tax and a relatively skilled workforce for what was required - assembly and manufacturing work - no R&D - an important point which i will come to later.

Many local small companies , like my own, were set up the late nineties to service these giants, outsourced R&d for particular projects - most of these startups were blown away in the industry recession 2000/2002 - looking at it 4/5 years later it is like walking through an elephants graveyard - We survived purely down to the fact that we quickly diversified away from the Irish based mulitnational branches and took on the world market head on, had an extremely strong product in a niche but very profitable market and an a strong R&D base (out of a workforce worldwide of 300 over 70% are in R&D) and most importantly our investors who have a long term view and the balls to support it.

All manufacturing industries are constantly in state of some degree of flux - technologies become obsolete , no longer profitable etc etc , old industries either adapt or die and are replaced. The big problem facing this country is that industries are dying, moving on and are not being replaced. This was unheard of 10 years ago. Every week more and more both domestic and foreign owned companies are shutting up shop . In our canteen every monday its like a roll call of the dead in battle as we discuss who went down the previous week. I havent done any serious statistical analysis on this , but for my own part as an operations manager and junior purchasing officer I will give you this small example.

On an average machine system we would spend approx 800,000 euros on material inputs alone , not including R/D, software and our own assembly costs. We produce approx 60 machines a year(they take 4 months to build) and they sell for 7 figure sums . In 2001 We would have spent approx 35-40% of the material cost in sourcing materials from Ireland. this year that figure has fallen to 14% and next year when we outsource the production of low skill metal parts , doors etc to Germany and Japan (those notorious low cost labour centres) that total amount we will spend here will be less than 3%.

Why??? -

A) the technology involved in the high value areas of a machine(Lasers,robots optical pieces) are simply not done here - We develop the technology we require with our partners in the US, Japan and Germany.

over 60% of our Irish suppliers have gone to the wall in the last 3 years, for the rest,1) they are making so much moolaa fabricating Balcony railings and other construction property related work that they have downskilled their workforces and are no longer in a position to meet our requirements 11) after much effort and expense on our behalf working with them, pulling them up to world industry standard and still getting the same crap service and excuses , we have simply given up on them and moved our business to companies that will fulfill our needs - Cost is normally one the least of our considerations - much more important is that you can produce the product consistently , show consistent improvement and be able to meet deadlines.

Im afraid in that aspect the domestic irish industry is in the dark ages , a shambles ,and the reason you werent able to deliver components on time to a production line was because the boys were on the piss for a week after Munsters victory doesnt cut much ice in Boardrooms in California or Seoul.

to summarise

Ireland is going from an average skilled economy to a low skills economy. Our productivity is falling away. We should have built on the prosperity started in 90s and seriously invested in Research and Development for the next wave and moved on up the Value food chain. We should have come up with serious financial incentives for capitalists and entrepreneurs to invest in High tech and environmental tech , which will be next big thing , and make Ireland the inventor as opposed to the hired labour in the technology game. We should have invested the resources and more importantly the brain power in developing proper infrastructure for the country - Its a joke - It takes a courier an average of 2 1/2 hours to get a package from one end of Dublin to the other on a weekday - 12 miles!

Well other countries , primarily our ever so sensible and long term thinking Scandanavian cousins have done precisely what i've outlined above - What have we done ?- pissed it all away on a consumption spurge, an inefficient and unreformed public service and the least benefical of all "investments" - property

I heard recently that a company closed down after after operating profitably for 30 years with a wealth of experience and market share built up - because the simple bricks and mortar is still worth more than all that combined - you know we are in serious trouble


later

Source:
http://www.askaboutmoney.com/showthread.php?t=32642&page=2

whizzbang

Cantab. wrote:

The madness continues... (this got me laughing!)

http://www.murraybrowne.ie/property_details.aspx?PID=296&RT=search&County=Cork&Status=All&Ref=&Type=All&MethodOfSale=All&Search=2&Min=All&Max=All&PT=All&KW=&Area=Address&RPP=5&Page=3

Thats is quality! What is "Semi solid oak flooring" are they liquid in some parts? It looks like a house a fairytale character would live in.

It is not even wide enough to park a car outside!

Idleater

whizzbang wrote:

...What is "Semi solid oak flooring" are they liquid in some parts? ...

Without being (overly) picky, you are showing some ignorance of general household parts.

Solid wood flooring is 100% one piece of wood - a big plank of timber,
Semi Solid flooring, is layers of timber (still 100%) but with 1 3-5mm sheet in length, lots of cross strips of wood (glued width ways along the bottom sheet, and then a final veneer again 3-5mm thick of actual wood glued on top of the strips.
Synthetic wood flooring (laminate) is the cheapest form where wood dust is glued together in "planks" with an image of wood grain painted onto it.

It's all ahead of you when you grow up (unless you keep on renting...)


L.

Cantab.

nereid wrote:

Without being (overly) picky, you are showing some ignorance of general household parts.

Solid wood flooring is 100% one piece of wood - a big plank of timber,
Semi Solid flooring, is layers of timber (still 100%) but with 1 3-5mm sheet in length, lots of cross strips of wood (glued width ways along the bottom sheet, and then a final veneer again 3-5mm thick of actual wood glued on top of the strips.
Synthetic wood flooring (laminate) is the cheapest form where wood dust is glued together in "planks" with an image of wood grain painted onto it.

It's all ahead of you when you grow up (unless you keep on renting...)


L.

Ah yes, the joys of being a middle class parasite.

lomb

nereid wrote:

It's all ahead of you when you grow up (unless you keep on renting...)


L.

lol, a bit sharp , but maybe has some truth. even the biggest nay sayers will be buying in the years to come. everyone at some point wants their 'own' place. its human nature.

whizzbang

nereid wrote:

Without being (overly) picky, you are showing some ignorance of general household parts.

I sit corrected. Thank you for the good description!

I'm sure I will buy some time, and then the world of decking and dormer windows will mean something to me

(I take it that I had just gotten off a 12 hour flight isn't a valid excuse? ahh feck it, its a stupid name either its solid or it is not, semi solid in every other field means partially liquid , it should be "veneer oak flooring" or something. /end sleep deprivation rant)

Idleater

whizzbang wrote:

I sit corrected. Thank you for the good description!

(I take it that I had just gotten off a 12 hour flight isn't a valid excuse?

LoL. Sorry, I thought it was actually quite a funny twist to the thread, so I thought I would chip in with a bit of actual "real life" mundane activities that house owners (Landlords to some folk) have to put up with to keep us all happy.

L.

whizzbang

nereid wrote:

LoL. Sorry, I thought it was actually quite a funny twist to the thread, so I thought I would chip in with a bit of actual "real life" mundane activities that house owners (Landlords to some folk) have to put up with to keep us all happy.

L.

hehe, sure its all ahead of me

Cantab.

I think we're safe for the silly season with builders, estate agents etc. all off sunning themselves during the quiet period. The danger will resume come September when the builders start planning their new year afresh.