Housing Bubble Bursting

gurramok

Significant news today straight from JT at the ECB.

http://www.rte.ie/business/2008/0718/ecb.html

Mr Trichet told the Irish Times that the ECB will not change the course of its monetary policy to assist those euro area members such as Ireland, Spain or Portugal that are currently experiencing economic difficulties.

'The ECB has to care for the superior interest of the euro area,' Mr Trichet said. 'Our monetary policy must be optimal at the level of the whole euro area - exactly like the US Fed would not look at what is in the interest of Missouri, California or Texas,' he added.

The only goal of the ECB is to ensure price stability in the medium term, Mr Trichet said. By anchoring inflation and curbing inflationary expectations, the ECB strategy underpins a financial environment favourable to job creation and sustainable economic growth.

Responsibility for solving specific economic problems confronting individual euro area members rests with national governments, parliaments and social partners, he said.

There you have it as official. It's up to the govt here to sort out their own mess, not the ECB.

Bank/estate agent paid economists calling for interest rate cuts should take note.

The_Conductor

Looks like the 2 further interest rate increases are still on the cards- Sept/Oct and early 09...... Well, most people have already allowed for them already I guess. Inflation at a 16 year high in the Eurozone is a bigger problem than Irish/Portuguese/Spanish/Dutch property markets going into meltdown.......

punchestown

smccarrick wrote: »

Looks like the 2 further interest rate increases are still on the cards- Sept/Oct and early 09...... Well, most people have already allowed for them already I guess. Inflation at a 16 year high in the Eurozone is a bigger problem than Irish/Portuguese/Spanish/Dutch property markets going into meltdown.......

But we are the richest country in the world! How dare they not pander to our friends in the CIF and reduce interest rates intermittently! Europe revolves around Ireland not vice versa

topper75

smccarrick wrote: »

Looks like the 2 further interest rate increases are still on the cards- Sept/Oct and early 09...... Well, most people have already allowed for them already I guess. Inflation at a 16 year high in the Eurozone is a bigger problem than Irish/Portuguese/Spanish/Dutch property markets going into meltdown.......

Yeah but this inflation is not classic demand-fueled inflation that can be cut by higher int rates. It is imported inflation driven by rising fuel costs. The rate rises will not control this type of inflation and just makes it harder for the common EU man/woman to make ends meet.

faceman

topper75 wrote: »

Yeah but this inflation is not classic demand-fueled inflation that can be cut by higher int rates. It is imported inflation driven by rising fuel costs. The rate rises will not control this type of inflation and just makes it harder for the common EU man/woman to make ends meet.

Thats a good point. Also the increase in VAT in Germany had a part to play.

johnnyskeleton

topper75 wrote: »

Yeah but this inflation is not classic demand-fueled inflation that can be cut by higher int rates. It is imported inflation driven by rising fuel costs. The rate rises will not control this type of inflation and just makes it harder for the common EU man/woman to make ends meet.

They might think twice about buying a gas guzzler on credit though. It will also reduce overall inflation by stifling demand for luxury goods such as flat screen tvs, foreign holidays, fancy clothes etc. The usual personal credit living beyond your means things.

It's good to see that the bubble is bursting again - for a while there it had stopped.

orbital83

topper75 wrote: »

Yeah but this inflation is not classic demand-fueled inflation that can be cut by higher int rates. It is imported inflation driven by rising fuel costs. The rate rises will not control this type of inflation and just makes it harder for the common EU man/woman to make ends meet.

Not true. Lowering interest rates increases the money supply, and excessive money supply leads to bubbles as investors seek out a home for all the cheap money.
Bubbles lead to inflation.

Witness the global property bubble caused by interest rate cuts in US and Eurozone post 9-11.

Witness the current oil and commodity bubble caused by interest rate cuts in the US post credit crunch.

Of course, there is nothing one central bank can do on its own to tackle this problem - if you have other fruitcake central banks that don't see the big picture.

expediateclimb

The only people I feel sorry for are first time buyers who bought in the last year or two and are now facing negative equity.

As for investors and property developers, I have no sympathy. Your greed over the past few years was astounding and now that you are up to your arse in debt, makes me very happy

ronbyrne2005

topper75 wrote: »

Yeah but this inflation is not classic demand-fueled inflation that can be cut by higher int rates. It is imported inflation driven by rising fuel costs. The rate rises will not control this type of inflation and just makes it harder for the common EU man/woman to make ends meet.

Either way, higher rates = stronger euro = cheaper import such as oil priced in dollars. Whether Eurozone exports are hit less than imports will determine GDP/GNP growth in Eurozone. ECB want to attack inflation even if it hits growth and don't want inflationary expectations to gain traction in Eurozone so they will curb domestic demand to cut domestic demand driven inflation even if they can't sort imported inflation out.

SimpleSam06

ronbyrne2005 wrote: »

Either way, higher rates = stronger euro = cheaper import such as oil priced in dollars.

Isn't Iran dealing in euros now, rather than dollars?

SimpleSam06

SimpleSam06 wrote: »

Isn't Iran dealing in euros now, rather than dollars?

Don't know about Iran, but Iraq tried to switch to trading in Euros just before the last invasion (some people believe that was one of the reasons for the invasion - to protect the status of the dollar).

astrofool

Deleted User wrote: »

Don't know about Iran, but Iraq tried to switch to trading in Euros just before the last invasion (some people believe that was one of the reasons for the invasion - to protect the status of the dollar).

Iraq's oil was sanctioned and was usually misappropriated under the oil for food programme. Any threat to change to another currency was just beating a drum.

The Iranian oil bourse has been running since February this year.

Oil has been tracking the decline in the dollar (by rising) almost 1:1 for a while now, so for euro customers has not risen that much in real terms.

overandout

hi,
have a family home and a second rented out, want to move to a larger family home but it would mean circa 1,650 per month mortgage, earning approx 105k pr yr on 2 incomes, saving now but could not for a while with new mortgage, are we mad to move or should we sit tight for a few yrs ?
thanks.

Caoimhín

I see Daft.ie has bought a stake in Boards.ie.

Will this thread be closed for talking down the "Morket"?

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=IRELAND-qqqm=news-qqqid=35210-qqqx=1.asp

Firetrap

According to today's Sunday Business Post (link here) the government is considering moves to spur activity in the housing market, as part of a package of measures to stimulate the economy....A range of measures that could help first-time buyers back into the market are being examined, including an expansion and restructuring of the affordable housing scheme.

Jesus, can they not leave enough alone? Let the 'morket' find its own value. Then they won't have to blow taxpayers' money they can ill-afford because houses will become affordable for more people. I'd rather see this money being spent on hospitals and roads 'n stuff.

caoibhin

caoibhin wrote: »

I see Daft.ie has bought a stake in Boards.ie.

Will this thread be closed for talking down the "Morket"?

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=IRELAND-qqqm=news-qqqid=35210-qqqx=1.asp

Doubt it! Daft.ie has it's own discussion forum where the bears are already talking down the "Morket"?

Caoimhín

Deleted User wrote: »

Doubt it! Daft.ie has it's own discussion forum where the bears are already talking down the "Morket"?[/quote]

Say market in a D4 accent and you will see where im going with that.

SimpleSam06

Firetrap wrote: »

including an expansion and restructuring of the affordable housing scheme.

= "bail out people who took on more mortgage than they could handle, and bail out banks who gave out more money than they should have, on the taxpayers euro". I weep. If they just leave it alone, houses will become affordable all by themselves. Bah.

miju

caoibhin wrote: »

I see Daft.ie has bought a stake in Boards.ie.

Will this thread be closed for talking down the "Morket"?

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=IRELAND-qqqm=news-qqqid=35210-qqqx=1.asp

very much doubt it for a vast variety of reasons not least the fact that the more houses for sale mean more advertising revenue for Daft

Duckjob

caoibhin wrote: »

I see Daft.ie has bought a stake in Boards.ie.

Will this thread be closed for talking down the "Morket"?

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=IRELAND-qqqm=news-qqqid=35210-qqqx=1.asp

Compu'er says no

Firetrap

Hopefully not. We need discussion boards like this one in order for dissenting points of view to be put forward. I'm grateful for the likes of boards and thepropertypin - they stopped me from buying a house in 2006.

gurramok

Firetrap wrote: »

According to today's Sunday Business Post (link here) the government is considering moves to spur activity in the housing market, as part of a package of measures to stimulate the economy....A range of measures that could help first-time buyers back into the market are being examined, including an expansion and restructuring of the affordable housing scheme.

Jesus, can they not leave enough alone? Let the 'morket' find its own value. Then they won't have to blow taxpayers' money they can ill-afford because houses will become affordable for more people. I'd rather see this money being spent on hospitals and roads 'n stuff.

Ah yes, 'to spur the economy'.

That just shows you how our little economy depends so much on the amount of houses built and sold. FF=CIF imho.
Will there be a stimulus package for start-up businesses for long term employment as well?

Tea drinker

Another ant-competitive move when we shuld be embracing our new found competitiveness.

Anyone who barks about freedom and impartialiy in the media and press should take a look at the amount of people who were hoodwinked with the conivance of Gov, and we are about to get another dose of increasing the gap between the rich and poor to ensure we get the message.

Cosmic Dancer

The day housing became a commodity and people assumed that it was perfectly acceptable to profiteer out of providing the most basic of human rights is that day we collectively let each other down as individuals and a nation. Hopefully the majority of those affected by our impending gloom will be greedy speculators who have artificially inflated house prices beyond a level affordable by ordinary citizens. Young dubliners are being economically banished from their own city. Areas that were previously working class centres you would now need the salary of a neurosurgeon to afford a mortgage in. No doubt though the bulk of those affected will be the least well of as usual. Anyone who is sitting on multiple properties in this city or who snapped up properties in buy to let schemes, forcing the first time buyer off the market, who can look at the hardships being endured by the future generations of this town without any modicum of a social or moral conscience i hope can find all the solace they need in there cash. It appears they feel the model of society is to take care of oneself and oneself only. What goes up....

The_Conductor

From yesterdays Indo- and article claiming prices have now dropped 20% from their 2006 peaks, and are continuing to fall at an accelerated rate. Here



By Shane Hickey

Monday August 18 2008

THE property market is in "crisis" with homes increasingly being sold at below-market asking prices, according to estate agents and auctioneers.

In a further indicator of the slowing market, the organisation representing property sellers has said there would be further job losses by year-end.

President of the Irish Auctioneers and Valuers Institute (IAVI) Edward Carey said that houses and apartments were being sold at a "considerable discount".

However, people selling were not reducing the advertised prices even though homes were being sold below that level. "There is no question that the property market is going through a crisis period at the moment and I think to call it anything else would be understating it," said Mr Carey.

Agents

"Any of the agents that we are talking to are basically saying the same thing -- places are not selling. What is selling is selling at a considerable discount.

"The reasons are lack of confidence and primarily lack of finance and lack of availability of finance."

The price of property has dropped by some 20pc since 2006 and there have been a number of redundancies in the sector. In June it emerged that Lisney, one of the country's biggest estate agents, was to cut staff salaries by 10pc. Mr Carey said he expected there to be cuts in the newer entrants to the market.

"I would expect the first places that you are going to see job losses are the more recent entrants to the business. I also feel the more recent entrants would be people who would concentrate primarily or solely on residential, where the biggest downturn is occurring."

SkepticOne

"Any of the agents that we are talking to are basically saying the same thing -- places are not selling. What is selling is selling at a considerable discount."

You can see that there's a element of denial among valuers and estate agents. The price a property sells for is not a special discounted price, it is simply the market value.

faceman

IIB cut their fixed rate mortgage loans this morning to try generate some business. Interesting move.

Firetrap

I dunno if it'll do anything though. My feeling on this is that sentiment has changed. The bubble was driven by sentiment as much as anything else. It was a frenzy of people buying houses so they'd get their foot on the ladder before it was too late, investors buying houses so they could rent them out or flip them, the banks throwing money at people and the belief that prices could only rise.

Now that that scenario has changed, it's hard to see the bubble being reinflated. Why would anyone in their right mind dash out to buy a house when it's clear that prices aren't rising the way they were? Unless you have a burning need to buy a house, surely it wouldn't do any harm to sit back and watch to see if prices fall more?

mrgaa1

so what do people think of the following scenarios at what price do you think the house would sell:

within reach of & including Dublin:

A house was bought at 450k and is on the market for 440k to sell

new development - houses for sale at 350k

outside of Dublin area

House for sale at 250k

New development - houses for sale at 180k

I know it depends on the area - type of house/apartment etc... but I am talking generally.
There are places throughout the country where houses are for sale at 160-190k - source DAFT.IE - which seem be very realistic - and these are newly built. Of course houses are only worth what people are prepared to pay for them but there is no way a house for sale at, lets say 160k will drop in half - would it not be fair to say that houses at 700-800k are more than likely to drop substantially?

punchestown

Have you a link to these properties or have we to use our imagination?