Housing Bubble Bursting

iguana

mrgaa1 wrote: »

Can't pay much heed to the above - there are over 8million people living in that one city and the areas mentioned aren't areas where you would exactly run to live in. All the people in Ireland - twice over - could live in London and its suburbs. And they were re-possessions so its already written off. More scaremongering

You make absolutely no sense. London has a fairly high population density, much higher than anywhere in Ireland. Properties in densely populated areas tend to be far more expensive than in areas of low density. Your argument is backwards, it's the equivalent of asserting that 5-3=8.

jmayo

20goto10 wrote: »

This is the real scandal. Never mind prices, its the size that is appalling. And they were building shoe boxes long before the boom. That all started in the 90's. The big difference in the last 8 years or so is the size of the gardens. In the 90's you got a shoe box with a garden, now you get a shoe box with a glorified patio and chances are you don't even own it, the management/developers own it and charge you 1500 p.m for pruning your bushes every 6 months.

I think the reality of the sub standard homes is now kicking in. People can't sell and the thought of being stuck in their homes scares them. It shouldn't do. I know a lot of people who are not happy at all with their homes. If they're not happy you can't expect anyone else to be and to top it all off there is zero prospect of extending or doing anything worthwhile to improve it.

No matter what happens to prices, you can't polish a turd.

Agree totally, most sense you have made on this thread.

iguana wrote: »

You make absolutely no sense. London has a fairly high population density, much higher than anywhere in Ireland. Properties in densely populated areas tend to be far more expensive than in areas of low density. Your argument is backwards, it's the equivalent of asserting that 5-3=8.

Ah but you forgot normal laws of economics or physics do not apply in Ireland.

gurramok

jmayo wrote:

Ah but you forgot normal laws of economics or physics do not apply in Ireland.

Ah yes, Ireland is different, that was nailed into us by the bank paid economists like Dan McLoughlin and Austin himself for donkeys years:)

News today that the live register is now at 7.8%, its highest since sept 1996 should ring a bell.

The bubble is reputed to have started in mid 1996 onwards, talk about omens

gurramok

More news today on the predictions front.
http://www.rte.ie/business/2008/1204/economy.html

Davy forecasts that the economy will contract by 2% this year, 4.1% next year and by 0.5% in 2010. As the economy contracts unemployment is expected to hit 12% by the end of 2010.

If the one for 2010 is true or even near it for economic output and unemployment at 12%, question for the bulls....why again will there be a recovery in house prices before then?

SimpleSam06

gurramok wrote: »

If the one for 2010 is true or even near it for economic output and unemployment at 12%

Unemployment doubling in a three year space. This is going to get messy.

ravendude

mrgaa1 wrote: »

Can't pay much heed to the above - there are over 8million people living in that one city and the areas mentioned aren't areas where you would exactly run to live in. All the people in Ireland - twice over - could live in London and its suburbs. And they were re-possessions so its already written off. More scaremongering

Not true, Brixton has become one of the trendier suburbs in London in recent years. Also, East Dulwich is a quite reasonable area of London. These areas have a lot more going for them than many parts of Dublin

wjc

Well thought out and researched article in Irish Times commercial property supplement explaining the methodology of putting a valuation on development land. Think bank bad debts are going to be a lot higher than anyone imagines.
http://www.irishtimes.com/newspaper/commercialproperty/2008/1203/1228216695748.html

SimpleSam06

wjc wrote: »

Well thought out and researched article in Irish Times commercial property supplement explaining the methodology of putting a valuation on development land. Think bank bad debts are going to be a lot higher than anyone imagines.
http://www.irishtimes.com/newspaper/commercialproperty/2008/1203/1228216695748.html

Thread on it here.

stevie.enright

No doubt the question has being asked already on this thread but don't particularly have the patience to read through 360 odd pages.:o

Can somebody well informed advise if property prices will go further south in 2009 and if so how much further south approximately. Wouldn't have normally looked to enter the property ladder as soon but given the current economic climate I think I may be mad not to. If for argument sake prices were to drop by 20% to 30% in 2009 as a few people have suggested to me, would the end of 2009 be a good time to buy? Could prices tumble a whole lot more after this or more likely would they level out?

In a word YES!

How far... down as far as is needed to make the mortgage repayments cheaper than rent for a similar property - a looong way 50% at least.

johnnyskeleton

stevie.enright wrote: »

No doubt the question has being asked already on this thread but don't particularly have the patience to read through 360 odd pages.:o

Can somebody well informed advise if property prices will go further south in 2009 and if so how much further south approximately.

No one can predict the future, the best you can do is read the opinions on this website and other sources and make your own mind up. Asking for a simple yes/no answer is not really going to help you.

As for how much, different people have different views.

stevie.enright wrote: »

Wouldn't have normally looked to enter the property ladder as soon but given the current economic climate I think I may be mad not to.

How would you be mad not to? The worst time to buy anything is when prices are falling and about to fall further.

stevie.enright wrote: »

If for argument sake prices were to drop by 20% to 30% in 2009 as a few people have suggested to me, would the end of 2009 be a good time to buy? Could prices tumble a whole lot more after this or more likely would they level out?

Again, no one can tell you this. Some people will say they will fall, others that they will level out. A few people are even suggesting that once this "brief correction" is over, prices will go back to the heady days of 10%+ increases.

ravendude

johnnyskeleton wrote: »

A few people are even suggesting that once this "brief correction" is over, prices will go back to the heady days of 10%+ increases.

The "few" generally being limited to those who have a vested interest in the property market (EAs, Solicitors etc.), the vast majority of people with their faculties of sanity intact wouldn't subscribe to this world view

johnnyskeleton

ravendude wrote: »

The "few" generally being limited to those who have a vested interest in the property market (EAs, Solicitors etc.), the vast majority of people with their faculties of sanity intact wouldn't subscribe to this world view

I'm not so sure. A lot of ordinary people who have only ever owned property during the last 15 years seem to think that price increases above inflation are normal and think that once this "international credit crunch thing" is over, it will be business as usual.

I'd be willing to bet that no sooner will the stats reveal prices leveling off & you'll see people eager to find out how much their house is increasing by.

ravendude

johnnyskeleton wrote: »

I'm not so sure. A lot of ordinary people who have only ever owned property during the last 15 years seem to think that price increases above inflation are normal and think that once this "international credit crunch thing" is over, it will be business as usual.

I'd be willing to bet that no sooner will the stats reveal prices leveling off & you'll see people eager to find out how much their house is increasing by.

Sorry, I take your point. There are a lot of uninformed people out there with their heads in the sand.

ronbyrne2005

Does'nt matter how many people have their heads in the sand and think that prices will rise again in a few years time. They wont rise because the easy credit that fuelled the bubble are gone for a generation or more.

iwo

ronbyrne2005 wrote: »

Does'nt matter how many people have their heads in the sand and think that prices will rise again in a few years time. They wont rise because the easy credit that fuelled the bubble are gone for a generation or more.

So many "experts" on this forum... Everything is so unpredictable at the moment and you can see future. Years...generation...? Well maybe you have some special skills

asdasd

Everything is so unpredictable at the moment and you can see future. Years...generation...? Well maybe you have some special skills

did you read the whole thread? the pessimists won.

blast05

True the 'pessismists' have won. However, one angle that has not been sufficiently considered i feel is the impact of interest rates. Minutes from the last bank of England meeting on interest rate show that there will certainly be a further drop in January and that it is feasable if not probable that interest rates go to that of the US fed - 0%. Based on that scenario, we could realistically see a drop of ECB by up to another 1.5% - what would the real impact of this be in Ireland ?

I know there is the example of Japan and how extremely low interest rates did nothing for their economy over a 10 year period and people will say all it will do is lower rents further but on say a 250K mortgage (at say bank rates of 2% and ECB at 1%) then when you factor in mortgage interest relief, you could be looking at monthly repayments of as low as €700 .... if you were in a secure job and had been waiting to buy and weren't sure what to do, would this be a catalyst for you to buy ?

I know this is the type of question my sister and her boyfriend (2 teachers) will be asking themselves if the interest rates drop like i suggest..... and i honestly would not be able to give the right advice.

dny123456

If it's for themselves and they are happy to stay there a few years, the answer is definitely yes... providing they can get mortgage approval.

The_Conductor

The big problem when interest rates are around 0% (in Japan they were for a period of 7 years actually in negative territory)- is deflation. People do not want to borrow money to buy goods that they feel will be cheaper tomorrow. Why would they?

Toss the complete and utter lack of trust that people now have in-

1. Politicians,
2. The Media,
3. The Financial Sector,
4. Job Security,
5. The regulatory environment-

Why would you borrow to spend?

We are already up to our eyes in debt- those of us still in jobs are stretched trying to make repayments on debt we took on in better times, there is zero prospect of pay rises, bonuses, a better job offer elsewhere. All people are prepared to do is buckle down, and try to secure their situations to the best of their abilities.

It used to be- I must get myself an '08/'09 reg car- now its- aren't I lucky I bought the estate a few years back, it'll continue to suit us when we have two kids. Pity we're a crap apartment with paperthin walls- but at least there is a roof over our heads, food on the table and the bank manager isn't threatening repossession........

People's sentiment, and indeed their perspectives of what is important, have changed. Sentiment is incredibly fickle- and now that its turned- interest rates and their changes, while welcome to all of us, as we're all hocked to our gills, are pretty meaningless in the context of our future purchasing intentions. We've moved on.

There is an excellent article in this weeks Economist about how governments are massaging true unemployment figures. If the US were to factor in all those actively seeking employment into the equation- as opposed to all those who qualify for unemployment assistance- their unemployment rate would be just under 13%, instead of the 6.7% reported (story here).

The consensus is that a best case scenario is another 2% rise in unemployment in the US (roughly another 5.5 to 6 million jobs lost), translating into a contraction in the economy of possibly as much as 8-9% over the next 3 years. This is unprecedented. (This is also the optimistic forecast- as its already accepted that the current rate of economic contraction is around 5% p.a.)

In an Irish context- we are now forecasting an increase in unemployment (of which over 70% of the increase is male) of an additional 4-7% (possibly as high as 14-15%- by 2010!!!) The big problem in Ireland is the individualisation of tax bands. We have become a nation of dual income households- so when Johnny the builder looses his job and has to rely on the wife to be the bread earner- not only is there the shock of falling to one income- but there is the dual shock of the wife being unable to use Johnny's now not very useful tax credits (though he can claim a 900 Euro credit as a stay at home parent- fat lot of good that is going to do). There was an article in yesterday's business section in the Indo about this- and how loosing a job in a middle income household will result in a higher tax bill of about Euro4k/pa....... Is anyone proposing to reform the individualisation of the taxbands to save the 'family model' as they put it? I've not heard anything!

Why would people spend in circumstances such as these?

Interest rates are only one weapon in the economic arsenal- but they may very well already have been overplayed by the main central banks. Once rates are at zero (or if you factor negative rates on government bonds- US bonds currently paying -0.1% on 3 month bonds)- what do you do? A massive government expenditure programme- a la Germany in the 1930s, the second world war in the 1940s for the US?

We're really up the creek.

Personally I think that an in depth study of the Japanese story and how it unraveled should be compulsory reading for everyone. Obama doesn't appear to have read it yet.......

ntlbell

smccarrick wrote: »

Personally I think that an in depth study of the Japanese story and how it unraveled should be compulsory reading for everyone. Obama doesn't appear to have read it yet.......

I have to say personally I don't know too much about what happened in Japan.

do you recommend any good reading to get a good overview of what happened?

Fr0g

asdasd wrote: »

did you read the whole thread? the pessimists won.

I think you mean the realists won.

smccarrick

smccarrick wrote: »

Why would people spend in circumstances such as these?

Simple answer is that they wouldn't, except for essentials

The other downside is that even with such low interest rates, savings will continue to grow (relative to RPI) even more so if deflation really kicks in!

Anyone that takes out a mortgage based on the extremly low rates that may be available in a couple of months time, would be very exposed when rates start to rise again in a few years as their income may have dropped in line with deflation.

blast05

The big problem in Ireland is the individualisation of tax bands. We have become a nation of dual income households- so when Johnny the builder looses his job and has to rely on the wife to be the bread earner- not only is there the shock of falling to one income- but there is the dual shock of the wife being unable to use Johnny's now not very useful tax credits (though he can claim a 900 Euro credit as a stay at home parent- fat lot of good that is going to do).

Quick question on this that someone may be able to help with .... my wife is currently looking to reduce her hours from a full time 5-day week to a 4 or 3 day week (struggling to get it and given the current climate i am not sure whether to be happy or sad about this !) ..... would she still be entitled to full tax credits while working say a 3 day week ? and would our jointly assessed income still only be subject to tax at 41% when our joint income passes the existing joint threshold of €72800 (€36400 each) ?

SimpleSam06

smccarrick wrote: »

A massive government expenditure programme- a la Germany in the 1930s, the second world war in the 1940s for the US?

I would actually agree with this process, (it was also an instrumental part of the "new deal" that helped pull the US out of the great depression) as long as its a constructive one, laying infrastructure to provide for a stronger future. The autobahns built afer Weimar Germany are still in use today, as is the Hoover dam and highway system in the US. With a vast array of bad options open to the country, its the best.

asdasd

The other downside is that even with such low interest rates,

the other thing is that low interest rates may not be that low (in real terms) during a deflationary period. If inflation is less than 2.5% in Ireland next year then it will be below the ECB rate. Which means positive real interest rates probably for the first time this century.

astrofool

The ECB rate looks like it's going down further still.

faceman

I think we are in a very dangerous period at the moment. Any effort to stimulate the housing industry while we are only at the early stages of a recession is dangerous IMO.

To quote Jerry Flum, CEO of a credit and risk analysis firm on his formula for interpreting a recession and the impact of debt on society:

Credit Today wrote:

A second point made by Flum is the impact of debt on our society. After a depression (and he cites our own Great Depression from the 1930s as an example), debt is largely wiped clean from society. So at that point (lets say the late 1930s), any new incremental debt gives a real "shot in the arm" to the economy. For the first decade (and he emphasizes that these are round numbers), a dollar of new debt creates $5 dollars of new spending in GDP. During the next decade, a dollar of new debt creates roughly $4 in new spending, and so on, dropping a bit through each successive decade.

Eventually, you reach the point at which $1 of new debt creates just $1 of incremental spending.

But today, he says, we are at the point where every new dollar of debt creates just 15 or 20 cents of new spending! So, as he puts it, the Fed "has no ammo left in their gun! The game is over."

He points out that the levels of debt embedded in all sectors of our society (consumer, corporate, government) are higher than ever. This has lead to the current business cycle going much longer and expanding much higher than it would have otherwise, meaning that the unwinding on the downside will be much more severe. So survival, rather than growth, should be the focus of most businesses.

bill_ashmount

Anyone needing a laugh have a read of this thread. The OP is living on a different planet:

http://www.askaboutmoney.com/showthread.php?t=99788

SimpleSam06

faceman wrote: »

To quote Jerry Flum, CEO of a credit and risk analysis firm on his formula for interpreting a recession and the impact of debt on society:

Its an interesting point of view he lays out there, but I wouldn't agree with most of his conclusions, to the extent that he seems to view the global economy as a zero sum game, a closed cycle where wealth is never truly created or destroyed, just parcelled out in smaller packages until it's worthless. Its not a zero sum game, and wealth is both created and destroyed, as distinct from money.

Credit Today wrote:

So survival, rather than growth, should be the focus of most businesses.

Sadly this part I agree with. I'm in the process of battening down the hatches myself, streamlining and offloading disposable assets as fast as they can be moved. How depressing.

bill_ashmount wrote:

Anyone needing a laugh have a read of this thread.

Distinctly gallows humour there.