Housing bubble starting to pop?

antoinolachtnai

re: wealth existing in real terms. If you believe banking is a conspiracy against the common man, there is no way I am going to be able to convince you otherwise.

re: UK. Quality of life.

re: large amount of farmland - it is just not well located. There are no services there. There is no public transport. You won't get planning to build on a lot of it. The lack of a strong counterweight to Dublin makes it unlikely that a new centre will emerge for at least 10 or 20 years.

re: petrol prices, an extra hundred euros = 20 grand. That's a substantial amount for the average price of a house in a particular area to increase by. Additionally, increased construction costs will make the existing housing stock more valuable.

American and other companies also come here because we have a younger population than most parts of Europe, which is English-speaking. Granted, there will certainly be an adjustment at some point, but if the economy stays open and we continue to keep our labour costs low and our average age low by importing more labour, then we will be able to keep some of our position.

SimpleSam06

antoinolachtnai wrote:

re: wealth existing in real terms. If you believe banking is a conspiracy against the common man, there is no way I am going to be able to convince you otherwise.

And if you believe thats what I am saying, I suggest you re-read my post. Banks are profit making companies, they do not exist for anyones good but their own. The bank manager is not your friend, or at least not primarily. And they are making out like bandits on the property boom.

antoinolachtnai wrote:

re: UK. Quality of life.

Back to what I said again. What makes you think the quality of life is worse in the UK than here, outside the slums, and what makes you think that slum dwellers are going to migrate en masse to Ireland?

antoinolachtnai wrote:

re: large amount of farmland - it is just not well located. There are no services there. There is no public transport. You won't get planning to build on a lot of it. The lack of a strong counterweight to Dublin makes it unlikely that a new centre will emerge for at least 10 or 20 years.

There are 3 million people living outside of Dublin. There are 270,000+ houses sitting empty. There are going to be 100,000+ houses built this year. Who is talking about farmland? Theres more outside the pale than bog and cattle, you know.

antoinolachtnai wrote:

re: petrol prices, an extra hundred euros = 20 grand. That's a substantial amount for the average price of a house in a particular area to increase by. Additionally, increased construction costs will make the existing housing stock more valuable.

A hundred euros a month is 1200 a year. Wheres this 20k coming from? You've lost me here completely.

antoinolachtnai wrote:

American and other companies also come here because we have a younger population than most parts of Europe, which is English-speaking. Granted, there will certainly be an adjustment at some point, but if the economy stays open and we continue to keep our labour costs low and our average age low by importing more labour, then we will be able to keep some of our position.

Nope, try again. Companies, like banks, exist to increase their profits as much as possible. Single, one and only reason for existing. The age of our population has nothing to do with it. The large tax benefits and higher profit margins they can realise here because of that are why they are here. And wow, keeping the average age low by importing labour is some new field of economics I have never heard of before. You do realise that that 10% of the population is transient, and will hit the road as soon as the money runs out here?

They don't care about Ireland, most of them don't even like the place.

Pa ElGrande

SimpleSam06 wrote:

Nope, try again. Companies, like banks, exist to increase their profits as much as possible. Single, one and only reason for existing. The age of our population has nothing to do with it. The large tax benefits and higher profit margins they can realise here because of that are why they are here. And wow, keeping the average age low by importing labour is some new field of economics I have never heard of before. You do realise that that 10% of the population is transient, and will hit the road as soon as the money runs out here?

They don't care about Ireland, most of them don't even like the place.

The more and more, I read about "fiat money" and "fractional reserve banking" the more I am inclined to agree its a conspiracy against the common man, but that's a discussion for another day. The tax benefits are certainly the main draw for foreign direct investment, but "transfer pricing" is bringing the country into disrepute internationaly and moves are afoot to stamp it out in both Washington D.C and Brussels, this means that Irish emloyees of multinationals will no longer be as productive on the balance sheet. The point about immigrants taking the pressure off wage inflation is valid. Without immigrants, wage inflation would have destroyed the country five years ago, as we were running out of skilled workers at the time, something to ponder next time you are queing in SPAR staring at the talent behind the counter, would Irish people work for that sort of money long term? Speaking as someone who works with people of at least 30 different nationalities daily, I have to say they are mostly highly motivated and much better at their jobs that most of their Irish counterparts and most would consider staying here long term, as one Latvian woman said to me recently "even the dogs are friendlier here". It is also not so easy to move to Germany or Spain when you have invested so much time learning English.

AIB report says almost 160,000 non-nationals in employment in Ireland - 8% of workforce; Magnitude of inflows may slow; Many buying property
http://www.finfacts.com/irelandbusinessnews/publish/article_10004800.shtml

SimpleSam06

Pa ElGrande wrote:

The more and more, I read about fiat money and fractional reserve banking the more I am inclined to agree its a conspiracy against the common man, but that's a discussion for another day.

Never attribute to malice that which can be adequately explained by stupidity.

Pa ElGrande wrote:

The tax benefits are certainly the main draw for foreign direct investment, but transfer pricing is bringing the country into disrepute internationaly and moves are afoot to stamp it out in both Washington D.C and Brussels, this means that Irish emloyees of multinationals will no longer be as productive on the balance sheet.

Yup, thats what I said.

Pa ElGrande wrote:

The point about immigrants taking the pressure off wage inflation is valid. Without immigrants, wage inflation would have destroyed the country five years ago, as we were running out of skilled workers at the time, something to ponder next time you are queing in SPAR staring at the talent behind the counter, would Irish people work for that sort of money long term?

So you are saying that lower wages are a good thing. Did it occur to you that with natural wage inflation, we might not have this property bubble and associated economic problems looming over us, or even that private sector pay might have kept up at more than one-third of public sector pay? High wages don't destroy economies, they feed back into economies. Low wages destroy economies.

Pa ElGrande wrote:

Speaking as someone who works with people of at least 30 different nationalities daily, I have to say they are mostly highly motivated and much better at their jobs that most of their Irish counterparts and most would consider staying here long term, as one Latvian woman said to me recently "even the dogs are friendlier here". It is also not so easy to move to Germany or Spain when you have invested so much time learning English.

Speaking as someone who employs a wide variety of non-nationals in a wide variety of roles, 95% of them are sending money home so they can buy a house there. Anecdotes anecdotes, gotta love em.

Pa ElGrande wrote:

AIB report says almost 160,000 non-nationals in employment in Ireland - 8% of workforce; Magnitude of inflows may slow; Many buying property

The only thing I could find in there about non nationals buying property is the last sentence, which goes as follows:

The magnitude of inflows may slow down but as evidence from estate agents shows, many of these workers are now buying property and are here to stay.

So, we have a report from the AIB, supported by estate agents, who have no vested interest in maintaining the property bubble at all, of course, giving us unbiased figures about foreign workers, who as you point out have been kindly keeping wages depressed for the country in the private sector, and thusly have little buying power, buying property.

I see.

Cork

Dell announced a 50 percent drop in quarterly earnings & the Dell battery recall.

The dublin media did no analysis of Dell's problems and potential effect on the economy.

Our economy is not very robust.

Pa ElGrande

SimpleSam06 wrote:

Never attribute to malice that which can be adequately explained by stupidity.

SimpleSam06 wrote:

So you are saying that lower wages are a good thing. Did it occur to you that with natural wage inflation, we might not have this property bubble and associated economic problems looming over us, or even that private sector pay might have kept up at more than one-third of public sector pay? High wages don't destroy economies, they feed back into economies. Low wages destroy economies.

The only reason wages go up in the private sector is due to increases in productivity or skills shortages, if the productivity is not there, then in a globalised economy manufacturing companies and even some of the services industry move where costs of production are lower, hence we have have a recession in manufacturing and growth in outsourcing since 2000.

As it stands, Dell employs around 3,500 directly in Limerick and a further 1,000 on a contract basis.
It is estimated that around 16,000 jobs in the mid-West are indirectly linked to the success of Dell in Ireland

Dell eyes new factory in Poland to cut costs
http://www.unison.ie/business/stories.php3?ca=80&si=1670510

Dell are not the only company preparing to move out, I know several other companies around Dublin also have migration projects to Eastern Europe in place and will be scaling back their operations in Ireland over the next few years. Like it or not we compete in a global economy, even my current job will likely be outsourced in a few years.
High wages would not have stopped the housing boom happening, that happened because of economic mismanagement, poor planning and corruption when the birthrate was at its zenith in the last century (1980's). The Japanese have high wages, a large population and an actual land shortage, they still had a housing bubble that burst.
The low wages of the last century were part of the package that attracted foreign direct investment to Ireland, the rise in productivity meant wages rose. I agree high wages create a positive feedback in the economy, and if we had our own significant indigineous industry like the Japanese then we could do this, we don't, we operate in a global market that is in the process of levelling wages.

SimpleSam06 wrote:

Speaking as someone who employs a wide variety of non-nationals in a wide variety of roles, 95% of them are sending money home so they can buy a house there. Anecdotes anecdotes, gotta love em.

I agree most migrants are sending money home, I know there are some villages in Bulgaria depending on the income from guys working as labourers over here. Speaking of anecdotes have you noticed the businesses opening up around Dublin catering to the non-national communities, they surely need investment capital to startup? maybe they are here for the long term? Not all immigrants work in low paying jobs, as I said one of the problems we encountered was a lack of skilled workers in certain disciplines, this means they command good wages and also bring their families over here to settle. Google has to recruit from the continent to find the calibre of people it needed for its operation. Don't be surpised if the next generation is working for these guys, or even if the Cork All-Ireland captain in 2030 is Liam Kalinovsky.

Herlihy is director of online operations in Dublin for Google, whose tiny office established three years ago has ballooned into a European headquarters with 800 employees, 70 percent of whom aren't from Ireland. Herlihy says they speak 37 languages.

The company plans to hire another 600 university-educated, mostly foreign people to work in a second, identically designed office block being constructed next to its headquarters.

Low-tax Ireland relishes its multinational boom
http://www.courier-journal.com/apps/pbcs.dll/article?AID=/20060612/BUSINESS/606120346

SimpleSam06 wrote:

The only thing I could find in there about non nationals buying property is the last sentence, which goes as follows:

The magnitude of inflows may slow down but as evidence from estate agents shows, many of these workers are now buying property and are here to stay.

So, we have a report from the AIB, supported by estate agents, who have no vested interest in maintaining the property bubble at all, of course, giving us unbiased figures about foreign workers, who as you point out have been kindly keeping wages depressed for the country in the private sector, and thusly have little buying power, buying property.

I see.

My point is not to support the VI's but to show that not all immigrants work in low pay jobs and some are actually staying here long term and rearing their family. You never know some might get hitched to an Irish cailín and end up here for life , and, if the price of property was reasonable more would setup here permanently.

Pa ElGrande

Its [IMF] most general observation is that Ireland needs to prepare “cushions”, given the risk of a “hard landing”.

The phraseology is important. Most Irish commentators speak in terms of soft landings, corrections, or a reversion to more balanced growth rates from 2008 onwards. While no definition of a “hard landing” is given by the IMF, it must mean little or no growth. The effect this might have on the brimming confidence built up during the good years is not broached, but it would almost certainly be substantial.

The clear inference is that the government will need money in its coffers to stimulate the economy beyond 2007. Slower growth can have strong adverse effects on government revenue, so there is an element of saving for a rainy day. Equally, a tight fiscal policy now is necessary to dampen demand, which is being fuelled by SSIA money and by low interest rates.

<snip>

The IMF clearly believes that public services should be improved by structural reform rather than by increasing expenditure. In other words, there can be no repeat of the public service jobs doled out ahead of the last election.

Although there has been talk of improved efficiency and reform in the public service, the chances of concrete developments are remote. No government will risk conflict with public service unions in an election year.

<snip>

IMF staff and Irish officials do agree that immigration is likely to continue to dampen wage pressures. For the unions one of the main planks of social partnership was to limit the effect of immigration on wage demands, and in a slowing economy, the tension over immigrants’ wage rates is likely to rise. Is the government happy to accept the effects of immigration on wages or not?


Is government ready to soften a hard landing?
http://www.timesonline.co.uk/newspaper/0,,176-2320121,00.html

Looks like Mr. Casey covers something that we have been discussing.

antoinolachtnai

SimpleSam06 wrote:

And if you believe thats what I am saying, I suggest you re-read my post. Banks are profit making companies, they do not exist for anyones good but their own. The bank manager is not your friend, or at least not primarily. And they are making out like bandits on the property boom.

So what is the point of this line of argument. Tesco makes money off a strong economy by supplying things that are needed. Extravision too. So what? Extravision rents you videos, the bank rents you money. It's the same process.

Back to what I said again. What makes you think the quality of life is worse in the UK than here, outside the slums, and what makes you think that slum dwellers are going to migrate en masse to Ireland?

All that space and empty property you were telling us about might attract them.

I didn't say they were going to move 'en masse'. It only takes a small number, maybe 0.1 percent per year to move and our services will be overwhelmed. This is by no means unlikely. Employment opportunities for english people are opening up all the time, as salaries here rise and as UK firms play a larger and larger role in our open economy.

There are 3 million people living outside of Dublin. There are 270,000+ houses sitting empty. There are going to be 100,000+ houses built this year. Who is talking about farmland? Theres more outside the pale than bog and cattle, you know.

There's no critical mass. Without critical mass it's tough going to build a modern economy Not impossible, but tough.

A hundred euros a month is 1200 a year. Wheres this 20k coming from? You've lost me here completely.

100 / 5 euros per thousand euros borrowed = 20000 euros. That's the amount of debt you could take on as a result of freeing up 1200 euros. It's all about capacity to repay. That's what drives house prices (not sentiment).

Nope, try again. Companies, like banks, exist to increase their profits as much as possible. Single, one and only reason for existing.

Modern management theory mostly says something different. But however.

The age of our population has nothing to do with it.

You have strong empirical evidence for this? It seems clear enough that the availability of a talent pool is an important part of attracting multinationals here, in particular in the Dublin area. Ebay and Google could have availed of far greater tax breaks if they had set up operations in Athlone. But they didn't. The talent pool wasn't there, it was in Dublin.

The large tax benefits and higher profit margins they can realise here because of that are why they are here. And wow, keeping the average age low by importing labour is some new field of economics I have never heard of before. You do realise that that 10% of the population is transient, and will hit the road as soon as the money runs out here?

You didn't hear about this? The reality is that wages in the service industries are the same now as they were 5 years ago as a result of this deliberate, concerted government strategy to attract young people to Ireland from abroad.

Which 10 percent of the population is transient? Immigrants working in the construction industry might move on, it's true, around 2017 or whenever the two metros, the two luas lines, the DART interconnector and the second port tunnel are finished, but a large proportion are also working in areas such as childcare and care of the elderly where there will be continued demand for people even in a downturn.

They don't care about Ireland, most of them don't even like the place.

Where is this argument going? You think all the foreigners are just going to go home one day? Like they did in New York? and London? and Amsterdam?

Do you have any evidence that no immigrants care about Ireland? Lots of immigrants I have met like it here and plan to make a life here. It certainly has a lot of benefits over Poland in the medium term.

SimpleSam06

antoinolachtnai wrote:

So what is the point of this line of argument. Tesco makes money off a strong economy by supplying things that are needed. Extravision too. So what? Extravision rents you videos, the bank rents you money. It's the same process.

The difference being that Xtravision doesn't own you for the next 35 years. I'd call that one hell of a difference.

antoinolachtnai wrote:

All that space and empty property you were telling us about might attract them.

Yes, it might. Heheheh.

antoinolachtnai wrote:

I didn't say they were going to move 'en masse'. It only takes a small number, maybe 0.1 percent per year to move and our services will be overwhelmed. This is by no means unlikely. Employment opportunities for english people are opening up all the time, as salaries here rise and as UK firms play a larger and larger role in our open economy.

Salaries are larger in the UK than Ireland. Thats not a concrete reason for even .1 percent of the UK population to move here. You are grasping at straws, without foundaton. What are the immigration rates from the UK to Ireland?

antoinolachtnai wrote:

There's no critical mass. Without critical mass it's tough going to build a modern economy Not impossible, but tough.

What exactly is this mystical critical mass? You do realise that Dublin is one of the smallest cities as cities go in the world? Reckon its hit critical mass yet?

antoinolachtnai wrote:

100 / 5 euros per thousand euros borrowed = 20000 euros. That's the amount of debt you could take on as a result of freeing up 1200 euros. It's all about capacity to repay. That's what drives house prices (not sentiment).

Hahahaha, oh crikey, so sentiment has no part to play in it? And let me see if I get this straight, the only way you see money is as a factor on how much you can borrow based on that money?

antoinolachtnai wrote:

Modern management theory mostly says something different. But however.

Oh please enlighten me on which part of management theory states that the primary function of a company is not to be profitable.

antoinolachtnai wrote:

You have strong empirical evidence for this? It seems clear enough that the availability of a talent pool is an important part of attracting multinationals here, in particular in the Dublin area. Ebay and Google could have availed of far greater tax breaks if they had set up operations in Athlone. But they didn't. The talent pool wasn't there, it was in Dublin.

They compromised between location and tax breaks. All things being equal, they get the same tax breaks anywhere in the country, and there are more people nearby in Dublin. Whats your point? The biggest city in the country is still only a piddling million, is that something to be proud of?

antoinolachtnai wrote:

You didn't hear about this? The reality is that wages in the service industries are the same now as they were 5 years ago as a result of this deliberate, concerted government strategy to attract young people to Ireland from abroad.

You say that as if its a good thing.

antoinolachtnai wrote:

Which 10 percent of the population is transient? Immigrants working in the construction industry might move on, it's true, around 2017 or whenever the two metros, the two luas lines, the DART interconnector and the second port tunnel are finished, but a large proportion are also working in areas such as childcare and care of the elderly where there will be continued demand for people even in a downturn.

Only as long as businesses can employ them. Which, in the event of a downturn, isn't going to be for very long.

antoinolachtnai wrote:

Where is this argument going? You think all the foreigners are just going to go home one day? Like they did in New York? and London? and Amsterdam?

Whats the size of the capitals of any of those places, and the relative size of the economies?

antoinolachtnai wrote:

Do you have any evidence that no immigrants care about Ireland? Lots of immigrants I have met like it here and plan to make a life here. It certainly has a lot of benefits over Poland in the medium term.

What do you want, written affidavits? People would rather be rich and at home than lower to poor class in a foreign country.

SimpleSam06

Pa ElGrande wrote:

The only reason wages go up in the private sector is due to increases in productivity or skills shortages, if the productivity is not there, then in a globalised economy manufacturing companies and even some of the services industry move where costs of production are lower, hence we have have a recession in manufacturing and growth in outsourcing since 2000.

Nope wages have to go up in any case to match inflation at the very least (which they have not done), or you have a bunch of workers that can't buy dinner. Thats a seriously unhealthy economy.

Pa ElGrande wrote:

Dell are not the only company preparing to move out, I know several other companies around Dublin also have migration projects to Eastern Europe in place and will be scaling back their operations in Ireland over the next few years. Like it or not we compete in a global economy, even my current job will likely be outsourced in a few years.

Better start your own business then!

Pa ElGrande wrote:

High wages would not have stopped the housing boom happening, that happened because of economic mismanagement, poor planning and corruption when the birthrate was at its zenith in the last century (1980's). The Japanese have high wages, a large population and an actual land shortage, they still had a housing bubble that burst.

Funny, I was thinking of the Japanese when I wrote that. That just goes to show how much worse off we will be when the bubble bursts.

Pa ElGrande wrote:

The low wages of the last century were part of the package that attracted foreign direct investment to Ireland, the rise in productivity meant wages rose. I agree high wages create a positive feedback in the economy, and if we had our own significant indigineous industry like the Japanese then we could do this, we don't, we operate in a global market that is in the process of levelling wages.

Time to get busy creating indigenous industries then.

Pa ElGrande wrote:

I agree most migrants are sending money home, I know there are some villages in Bulgaria depending on the income from guys working as labourers over here. Don't be surpised if the next generation is working for these guys, or even if the Cork All-Ireland captain in 2030 is Liam Kalinovsky.

I know some villages in Muldovia likewise, and I will be quite surprised if that happens. This isn't America, nor the UK. There are significant differences in the economic setup and the culture.

Pa ElGrande wrote:

My point is not to support the VI's but to show that not all immigrants work in low pay jobs and some are actually staying here long term and rearing their family. You never know some might get hitched to an Irish cailín and end up here for life , and, if the price of property was reasonable more would setup here permanently.

What percentage would you say are on high paying jobs? 1%? 2%? Qualify that with the high price of property, and I see no saving graces for our economy or the housing bubble.

Pa ElGrande

SimpleSam06 wrote:

Nope wages have to go up in any case to match inflation at the very least (which they have not done), or you have a bunch of workers that can't buy dinner. Thats a seriously unhealthy economy.

Agree totally and there is evidence this is already happening, which in part might partly explain our obsession with property as a hedge against inflation. Though I don't think most are thinking in these terms. It does not help that some are also turning to borrowing to fund a lifestyle beyond their means, how else can the growth of sub-prime lenders in Ireland be explained.

Higher earners forced to cut back spending
http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1584653&issue_id=13829 [free registration required]

IIB Bank's chief economist Austin Hughes said about 50,000 borrowers would have to tighten their belts and up to 80,000 would have to "look at their sums".
http://www.finfacts.com/irelandbusinessnews/publish/article_10006844.shtml

Strong Growth and Stubborn Inflation point to Higher Borrowing Costs - - Austin Hughes, IIB Bank
http://www.finfacts.com/irelandbusinessnews/publish/article_10006783.shtml

Sub-prime lenders target the vulnerable
http://archives.tcm.ie/businesspost/2006/02/05/story11502.asp

SimpleSam06 wrote:

Better start your own business then!

I am concentrating on keeping my skills up to date and ahead of the market, Its important if you work in an engineering or technical discipline that you be able to work with the upcoming technology, few are interested if the skills you learned are five years out of date. Though the experience does count.

SimpleSam06 wrote:

Funny, I was thinking of the Japanese when I wrote that. That just goes to show how much worse off we will be when the bubble bursts.

Not all Japanese escaped lightly, the depression meant some major changes to the lifetime corporate culture there and a high proportion of the salarymen there took their own lives rather than face their families when they lost thir jobs and honour.

Suicide: Japan's Growing Nightmare
http://www.theforeigner-japan.com/archives/200304/news.htm

Suicide state
http://www.hinduonnet.com/thehindu/mag/2002/05/12/stories/2002051200280500.htm

How the current Irish generation will cope with an economic downturn is anyone's guess, remember they have not experienced the downturn or mass emmigration of the 80's, they've only ever known high economic growth and are projecting this will continue into the future.

One other legacy of Japan's depression is the carry trade, which has led to a lot of speculation in the markets by financial institutions, there are hugh concerns that when this unwinds it could lead to serious fall out in the currency markets.

Japan's Boom May Explode Yen-Carry Trade: William Pesek Jr.
http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_pesek&sid=a0gK4Vt__cBU

SimpleSam06 wrote:

I know some villages in Muldovia likewise, and I will be quite surprised if that happens. This isn't America, nor the UK. There are significant differences in the economic setup and the culture.

Our culture is changing (always has) the younger generation does not have the same outlook their parents did, and DeValera's ideal of "comely maidens dancing at the cross roads" does not exist today. As you said this is not America or the UK, but its not Moldova either and there are oppertunities here for those that want to take them.

This land is Ireland, this land is their land: The Brave New World 11/01/2006
http://www.davidmcwilliams.ie/Articles/view.asp?CategoryID=-1&CategoryName=&ArticleID=316

SimpleSam06 wrote:

What percentage would you say are on high paying jobs? 1%? 2%? Qualify that with the high price of property, and I see no saving graces for our economy or the housing bubble.

If you look at table 1 & 2 of the AIB report (Q3, 2005), detailing where non-nationals come from and the sectors of the economy they work, then 8% is not an unreasonable number, There are a lot of non-nationals from the UK here, working in well paying secure jobs, who have the same home owning culture that we have.

antoinolachtnai

SimpleSam06 wrote:

The difference being that Xtravision doesn't own you for the next 35 years. I'd call that one hell of a difference.

The banks would be hit harder than anyone by a downturn.

Salaries are larger in the UK than Ireland. Thats not a concrete reason for even .1 percent of the UK population to move here. You are grasping at straws, without foundaton. What are the immigration rates from the UK to Ireland?

Well, I see plenty of them. We'll see what the rate is when the census figures come out.

What exactly is this mystical critical mass? You do realise that Dublin is one of the smallest cities as cities go in the world? Reckon its hit critical mass yet?

Dublin appears to have it. Nowhere else does. Athlone certainly doesn't, for example.

Dublin is not one of the smallest cities in the world. It is the 410th largest city.

Hahahaha, oh crikey, so sentiment has no part to play in it? And let me see if I get this straight, the only way you see money is as a factor on how much you can borrow based on that money?

That's not how I see it, that's how the economy seems to work. Whenever more money goes into people's pockets, it goes towards housebuying. I'm not saying that's a good thing. That's how it is.

Oh please enlighten me on which part of management theory states that the primary function of a company is not to be profitable.

Hamel, Peters, Collins and Porras.

They compromised between location and tax breaks. All things being equal, they get the same tax breaks anywhere in the country, and there are more people nearby in Dublin. Whats your point? The biggest city in the country is still only a piddling million, is that something to be proud of?

They obviously feel there is value in Dublin as opposed to the rest of the country and are prepared to absorb the costs of this economy. They could get most of the same tax deals somewhere else.

You say that as if its a good thing.

A say it because it is a fact.

Only as long as businesses can employ them. Which, in the event of a downturn, isn't going to be for very long.

So they're going to close the hospitals and throw the old people out on the streets?

Whats the size of the capitals of any of those places, and the relative size of the economies?

They're all bigger, but Amsterdam is 1.9m, and Dublin could be comparable to that in a few years. Dublin is growing rapidly.

SimpleSam06

Pa ElGrande wrote:

how else can the growth of sub-prime lenders in Ireland be explained.

You know when those vultures start sniffing around, the end is near...

Pa ElGrande wrote:

Not all Japanese escaped lightly, the depression meant some major changes to the lifetime corporate culture there and a high proportion of the salarymen there took their own lives rather than face their families when they lost thir jobs and honour.

Well I can't see Paddy McMortgage topping himself because he lost the second home, but I am sure it will be an educational experience for all.

Pa ElGrande wrote:

How the current Irish generation will cope with an economic downturn is anyone's guess, remember they have not experienced the downturn or mass emmigration of the 80's, they've only ever known high economic growth and are projecting this will continue into the future.

Given the experience of the past, I'd say emigration is on the cards once again. Its not nearly as easy as it was in the past, however, so what happens when good economies turn bad?

Pa ElGrande wrote:

Our culture is changing (always has) the younger generation does not have the same outlook their parents did, and DeValera's ideal of "comely maidens dancing at the cross roads" does not exist today. As you said this is not America or the UK, but its not Moldova either and there are oppertunities here for those that want to take them.

Hahah, that wasn't true the day Dev said it. These opportunities have only existed for the past 5-10 years; likewise, these are the only times we have seen significant immigration to Ireland. Migrant workers are mainly opportunists.

Pa ElGrande wrote:

If you look at table 1 & 2 of the AIB report (Q3, 2005), detailing where non-nationals come from and the sectors of the economy they work, then 8% is not an unreasonable number, There are a lot of non-nationals from the UK here, working in well paying secure jobs, who have the same home owning culture that we have.

Even assuming those figures are correct, and I have serious doubts about reports released by banks and estate agents, thats still not a lot of buyers. Certainly not the 270,000 needed to fill all those homes at premium prices.

SimpleSam06

antoinolachtnai wrote:

The banks would be hit harder than anyone by a downturn.

Thats why they are striving valiantly to avoid the results of their actions, in order to preserve their record profits. In a downturn however (rising interest rates) they would not do too badly, because of all the people who already owe them their entire lives.

antoinolachtnai wrote:

Well, I see plenty of them. We'll see what the rate is when the census figures come out.

We will indeed.

antoinolachtnai wrote:

Dublin appears to have it. Nowhere else does. Athlone certainly doesn't, for example.

Dublin is not one of the smallest cities in the world. It is the 410th largest city.

410th largest eh? I'm not sure how you said that with a straight face. What a metropolis. Why did you single out Athlone, and ignore for example Galway, Cork and Limerick?

antoinolachtnai wrote:

That's not how I see it, that's how the economy seems to work. Whenever more money goes into people's pockets, it goes towards housebuying. I'm not saying that's a good thing. That's how it is.

No, thats how the Irish economy seems to work. Smarter economies put their money into better ideas, not this knock-kneed run for the sun kickstarted by our elected politicians, fuelled by greedy banks, and brought to its crashing conclusion by ignorant specuvestors.

antoinolachtnai wrote:

Hamel, Peters, Collins and Porras.

Splendid, I hope they end up managing my competition. Did they really get paid to write something like that?

antoinolachtnai wrote:

They obviously feel there is value in Dublin as opposed to the rest of the country and are prepared to absorb the costs of this economy. They could get most of the same tax deals somewhere else.

They can't get the same tax deals outside Ireland. Thats why they are here. Single and only reason. The higher rent they pay isn't a problem compared to their enormous tax savings. I just don't see where you are going with this. If the tax advantages dry up, they won't be letting the door hit them on the arse on the way out. Dublin, Cork, wherever. Dell is already packing its bags.

antoinolachtnai wrote:

A say it because it is a fact.

I'm not even going to get into how many immigrants came here not because of the cunning marketing on behalf of Bertie and the civil service, but because they heard there was piles of easy money here. The vast majority of them are milking the "celtic tiger" for everything its worth, and shipping the proceeds straight back home.

antoinolachtnai wrote:

So they're going to close the hospitals and throw the old people out on the streets?

What?

antoinolachtnai wrote:

They're all bigger, but Amsterdam is 1.9m, and Dublin could be comparable to that in a few years. Dublin is growing rapidly.

Right, and when the Irish population hits the 16 odd million on the postage stamp size that is Holland, you can come back to me. Honestly, I have offices in cities with three times the population of this entire country. Dublin ain't much at all.

antoinolachtnai

If the economy loses, the banks lose. Even 1 or 2 points of bad debt would put them in a precarious position. But they aren't worried about that. You know why? There is relatively little risk of negative equity. Even if there is a little negative equity, there will be hardly any defaults.

You made out that Dublin is a tiny city. It's just not. I don't see what the population of Holland overall has to do with the population of Amsterdam.

More important is the trend. Amsterdam's population is no longer growing. People are emigrating. In contrast, Dublin is growing. That is why prices are going up.

Germany has loads of scale and loads of manufacturing, together with easy access to markets. Yet it's been in the doldrums for 10 or 15 years.

If the tax benefits are drying up and Dell are on the way out, why did Google and ebay just show up?

Polish immigrants came to Ireland because it was one of the only countries they could work in legally after accession. The government chose to allow this happen, even though it didn't have to. Before that, Chinese immigrants came because the government had marketed Ireland as a study/work destination for them.

These were deliberate, thought-out government policies.

I suppose they could have gone and worked illegally in Germany, but what's the point? The economy is in a bad state and there are no jobs (although they have not yet started closing hospitals wholesale).

Re throwing old people out on the streets, that's what you are suggesting. You are saying that when there is a downturn, all of the immigrants will leave, because there will be no money to pay them. This would mean that there would be no one to look after our sick and elderly.

It is true that because Ireland is such a small economy with so little capacity at present, it actually only takes a little bit of economic activity to sustain it.

I am well aware that there are some quite large cities in the world. I don't see how the extent of your office network has much to do with the discussion.

It may be that you are making the point that property in Ireland overall is overvalued. That may be true to some extent and there will be some adjustment. But prices in the built up areas, particularly central Dublin, seem basically rational.

The reason I mention Athlone rather than the metropolises of the west and south because this is the size of town where most Irish people reside. if you want to start arguing that Dublin is a pipsqueak of a city (and it's not NYC, I grant you) then I don't know what can be said about Limerick or Galway. These cities are ranked way further down in global terms. The reason I bring this up in the first is to show there is no strong counterbalance emerging to Dublin in terms of population. That means that the structure of the property market is not going to change that much in the medium term.

SimpleSam06

Okay rather than replying point by point, I'll just condense my arguments. You say there is little risk of negative equity. I say there is. I say this for a good many reasons which I have already outlined ad nauseum in this thread. Saying prices in Dublin are any way reasonable is not a defensible position. Dublin may be very impressed with itself in the context of Ireland, but on any other scale, its not even worth a mention. Even in the context of Ireland, it certainly isn't the end of the story, despite many Dubliners who have never set foot outside the place feeling that it is. And I never claimed that Cork or Limerick were going to be just fine.

Your reasons for this lack of negative equity appear to be simply that a) Ireland has too good a young workforce, and, well, thats it. My counterpoint to that is that the employers are multinationals taking advantage of tax breaks. These advantages are being removed by foreign governments, and so these multinationals are going to move somewhere else with either the same low tax benefits, or low cost workers, like eastern Europe or India. Late comers to the party like Google and Ebay have very little in the way of infrastructure required to keep their doors open; they may as well jump on the bandwagon and enjoy the last of the party.

The idea that the migrant workers are going to buy large amounts of property in Ireland and keep the bubble going is laughable at best. The vast majority of these individuals came here to make money, and are, as I mentioned, sending the money home, either to buy their own houses there, or to support their families. They have neither the financial leverage nor the inclination to further inflate the prices for Irish properties. Saying that they do is wishful thinking, and frankly grasping at straws.

Furthermore, there are a lot of countries that are allowing Polish workers, among others, to work legally starting in 2007. That would be next year. These are also a lot closer to home for these migrant workers than Ireland.

You also seem to be of the impression that the entire health service is comprised of foreigners. For a start, I would say that the health service is in the public sector, and will be least affected by a downturn. Secondly, I will repeat that a large amount of the foreign workers int he health service are... sending money home. Every single one of the filipinos for example.

Housing is traditionally 3-4 times the average wage. Currently its at 10 to 15 times the average wage. It will drop down to 5-6 times the average wage.

antoinolachtnai

Negative equity: you say there is, I say there isn't.

Dublin is growing like crazy. That is the relevant thing rather than Dublin's position in the world. That is driving everything. Improving the infrastructure could make it grow even faster.

The Polish aren't just coming here because of the accession treaty. The restricutions in most European countries ended this year or last year. They come here because the place is prosperous and there is plenty of work.

Less and less of the healthcare sector is public. I didn't say the service was comprised of foreigners. It has to be said though, that many of the people who actually do the work (cleaners, nurses, nurses aides, junior doctors) are foreigners. The nursing home sector is completely dependent on immigrants. It doesn't matter if they are sending money home. They still have to live somewhere.

Housing will probably drop a bit relative to average wage. Realistically though, it won't drop as far as you imagine, because:

- interest rates will not go back to 'traditional' rates. As a result the payments on a mortgage are far far lower.

- more homes are double-earning. This increases affordability.

- investors who desire a small but steady return are involved in the market now in a way that wasn't the case before.

SimpleSam06

antoinolachtnai wrote:

Dublin is growing like crazy. That is the relevant thing rather than Dublin's position in the world. That is driving everything. Improving the infrastructure could make it grow even faster.

Yes Dublin is growing, as would the capital of any boom economy. In a bust cycle however, the opposite is true.

antoinolachtnai wrote:

The Polish aren't just coming here because of the accession treaty. The restricutions in most European countries ended this year or last year. They come here because the place is prosperous and there is plenty of work.

See above.

antoinolachtnai wrote:

Less and less of the healthcare sector is public. I didn't say the service was comprised of foreigners. It has to be said though, that many of the people who actually do the work (cleaners, nurses, nurses aides, junior doctors) are foreigners. The nursing home sector is completely dependent on immigrants. It doesn't matter if they are sending money home. They still have to live somewhere.

Yup, so they rent, as cheaply as possible. The vast, vast majority aren't going to be buying Irish property, and certainly not at its current prices.

antoinolachtnai wrote:

- interest rates will not go back to 'traditional' rates. As a result the payments on a mortgage are far far lower.

You have reasons for this? Already they are rising. Not so long ago they were at 10% and more. A difference of one percent adds a large amount to monthly repayments, and to a couple who are already stretched to their limits, that could make all the difference.

antoinolachtnai wrote:

- more homes are double-earning. This increases affordability.

It does if the only thing you want to do is buy a house and pay for it for the next 35 years, because you can forget having children with both parents out working and the cost of childminding. And having two or three people the only ones able to afford a house isn't increasing affordability, its complete insanity.

antoinolachtnai wrote:

- investors who desire a small but steady return are involved in the market now in a way that wasn't the case before.

Equity or rent investors? Rental returns here are a joke, mostly they don't even cover the interest portion of a mortgage. Equity investors are in for some serious problems of their own, when they go into negative equity. What exactly is this small but steady return you are speaking of?

dochasach

SimpleSam06 wrote:

...
Given the experience of the past, I'd say emigration is on the cards once again. Its not nearly as easy as it was in the past,

Yes, even ignoring that the U.S. et al are cracking down on illegal immigrants, imagine how difficult it would be to emigrate if you have to sell a house when most of your neighbors are selling their houses because they are emigrating too. Mobility is extremely valuable in our modern global economy. Corporations take advantage of this by shifting jobs to economies with high productivity low taxes and low labor costs. In an ideal world, labor would be willing and able to follow these jobs, and seek the locale where labor gets the best deal. But as long as nations have labor immigration restrictions, the playing field will always tilt against labor. The fact that young workers are anchoring themselves to a house and paying more than twice what they would leasing the same place gives an even bigger advantage to multinational corporations.

SimpleSam06 wrote:

...
Hahah, that wasn't true the day Dev said it. These opportunities have only existed for the past 5-10 years; likewise, these are the only times we have seen significant immigration to Ireland. Migrant workers are mainly opportunists.

Yes, they (we) are opportunists, as are the tens of millions of Irish who live outside Ireland. Immigrants may be opportunist, but don't expect many are daft enough to fall for the Irish property easy money scheme. Look where most immigrants are coming from, the U.K., the U.S., western Europe, eastern Europe. Many have recent experience with property booms and busts. The rest will, soon enough.

Pa ElGrande

A THREE-BEDROOM brick-veneer house in St Clair sold for just $260,000 at the weekend - down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market.

Only one person bid on the house in the city's west. The mortgagee sale was forced after the owners could not meet the interest payments on the $405,000 they borrowed to buy the house at the peak of the market.

<snip>

Given it has been 16 years since the last recession, long-time estate agents fear the fate of a generation of owners who had not experienced having a loan when times were tough.

Mr Beatty said: "There was a wave of people punting on the expectation of constant price rises until well into 2004, even after the three interest rate rises of late 2003. There has been significant price deflation and many now have negative equity in their homes.

"There are some sad stories. But we have to show the sellers the comparable sales and say honestly this is where the market is realistically at."

Australia: Housing crash puts sellers in debt crisis
http://www.smh.com.au/news/national/housing-crash-puts-sellers-in-debt-crisis/2006/08/20/1156012414995.html

Somebodies dream smashed
Its a pity to see repossesions but people really need to weigh up the pros and cons before buying into overinflated markets. Hopefully the people invloved will be able to pick up the pieces. Ireland isnt a special crash free zone, we are not immune, its only a matter of time.

I highlighted a quote from the estate agent Mr. Beatty, anyone care to guess what he was telling sellers and buyers in 2003?

SimpleSam06

Pa ElGrande wrote:

Somebodies dream smashed

Meaning they still owe around $140,000 after they sold? Ha, that may sting for but a moment. Truth be told I have no pity whatsoever for specuvestors, they reap what they sow.

SimpleSam06

dochasach wrote:

Immigrants may be opportunist, but don't expect many are daft enough to fall for the Irish property easy money scheme.

Oh, I really don't.

Edit: Hey, I finally got the reasoning behind daft.ie's name!

Pa ElGrande

The prophets of doom in Europe appear to have taken out the entrails of the beast and are examining the auspices with misery written into every line on their faces.

According to one source, thousands of jobs may go in Intel EMEA, partly as a result of the proposed AMD ATI merger.

Major job jitters hit Intel staff
http://www.theinquirer.net/default.aspx?article=33799

The inquirer is usually months ahead on rumours, which have a knack of coming to fruition. Hopefully this is nothing more than that, but we could be looking at our worst nightmare, (Dell+Intel) scaling back (not closing) by 2008, combined with falling output in the construction sector (planning applications are down this year). These two companies alone account for a significant portion of exports from this country.

Ireland's largest exporter Dell is responsible for 4% of all expenditure in the Irish economy
http://www.finfacts.com/irelandbusinessnews/publish/article_10006071.shtml

The free lunch has yet to be invented - the tipping point for the Irish economy
http://www.finfacts.com/irelandbusinessnews/publish/article_10006332.shtml

Update:

Bernanke, Trichet Have to Sacrifice More Jobs to Curb Inflation
http://www.bloomberg.com/apps/news?pid=20601103&sid=adN8w9qgRznU&refer=us

Those who are predicting the air will be let out of the bubble in 2008 may not be wrong if these leading indicators are anything to go by as it will halt the multiplier effect in the economy.

miju

antoinolachtnai wrote:

Well since we're in the business of anecdotes a friend of mine selling a house in the FTB range has had his house bid up by 7 or 8 percent over the asking by an FTB and a BTL. He put it on the market last week and only had two viewings.

well to offer you the flipside of that , two properties (which are incidently side by side) have been on sale now for 2 1/2 months , no bidders on either and only 2 viewings on 1 of the apt's ,

these are very 2 bed apts inside the m50 ring and the price has dropped on them already by 20k , IMO these properties would be ideal BTL or FTB properties

ps: seeing as someone mentioned a move to Oz , things aren't that rosey over there (particularly in relation to property)

Pa ElGrande

Davy Stockbrokers today warned that first time buyers are increasingly being squeezed out of the Irish property market due to spiralling interest rates and long term mortgages.

Davy analyst, Scott Rankin, said that mandatory mortgage stress could mean that banks could be charging rates of over 7.0pc next year as ECB rates continue to rise.

<snip>

Mr Rankin warned that a rise to 7pc in mortgage rates would mean that mortgage repayments would equate to 49pc of salary.

First time buyers being squeezed out
http://www.businessworld.ie/livenews.htm?a=1496714

More and more first time buyers are unable to meet the sellers expectations, support for increasing prices is being removed, a standoff will develop and volume of houses sold will decrease, eventually the sellers will have to reduce their asking prices to meet the buyers expectation of value. As the buyers perceive the market to be going down more will hold off in the expectation of paying lower prices next year and so begins the house price deflation cycle.

SimpleSam06

Pa ElGrande wrote:

More and more first time buyers are unable to meet the sellers expectations, support for increasing prices is being removed, a standoff will develop and volume of houses sold will decrease, eventually the sellers will have to reduce their asking prices to meet the buyers expectation of value. As the buyers perceive the market to be going down more will hold off in the expectation of paying lower prices next year and so begins the house price deflation cycle.

Is that 49% of the salary of an individual, or 49% of the salary of a couple? I think thats a couple on average wages, which would make it 98% of the salary of an average individual.

Pa ElGrande

SimpleSam06 wrote:

Is that 49% of the salary of an individual, or 49% of the salary of a couple? I think thats a couple on average wages, which would make it 98% of the salary of an average individual.

In the article they are citing two people earning €30,000 each and its potentially more alarming when you take into account the rise in energy prices.

SimpleSam06

Pa ElGrande wrote:

In the article they are citing two people earning €30,000 each and its potentially more alarming when you take into account the rise in energy prices.

Or, say the cost of childminding services. Or the difficulties that two people will face trying to live on 14k a year between them, given thats 30k a year repayments, and after taxes they are pulling in more like 22k a year each. That is, if I'm not mistaken, a little over a hundred quid a week each.

They'd be better off on the dole.

D'Peoples Voice

antoinolachtnai wrote:

If the economy loses, the banks lose. Even 1 or 2 points of bad debt would put them in a precarious position.

this is a misconception on behalf of a lot of people. Banks GENERALLY do not hold our loans on their books FOR LONG. They simply securitize their loans.

For those unfamiliar with the process, an extremely simplistic view of the process is that a bank might take 1,000 mortgages, each having a repayment due every month from their customers.
The banks then finds investors who have plenty of cash and are looking for a good return at low risk. So they 'in effect' sell the mortgages to these investors.
The bank still acts as an intermediary, by collecting people's repayments and then taking a cut for themselves before passing the rest of the repayments (coupon) to the investors. This is the incentive for banks to get in as many mortgages as possible.
If a borrower defaults, the bank is not at risk because it no longer owns the mortgage, some poor investor does. The same process works for credit cards, although the banks have to charge their customers a higher interest rate to attract any investor to buy the credit card repayments.
Net effect, banks are not really that exposed to massive increase in default. This was not the case before securitization took off in the 1990s.

Pa ElGrande

After five years of explosive growth, the housing market is finally cooling off. New national data show that the stock of unsold houses is up, prices are stable or dropping in most places, and sales this quarter are down from a year ago.

Where Is the Housing Market Headed?
http://www.npr.org/templates/story/story.php?storyId=5690967

Since we tend to eventually follow the US, it may be useful to listen to this (38 minutes)
Condo = Apartment