Housing Bubble Bursting

iguana

Glenbhoy wrote:

I don't agree that it means there's lot's of room still to rise - possibly a 0.25 in Aug, definitely by September anyway - after that possibly one in december, possibly another early in the 2008, but afaik, most commentators think that may be the end of it - obviously hard to know, but as you all rightly point out, it's more to do with how Italy, Fra and Ger get on than anything that happens here.

See I live in the UK and I'm constantly hearing how interest rates might rise 2/3 more times then level off and start coming down. And apart from August 2005 when they dropped .25% they have risen consistently since late 2004 and I don't think they will stop rising anytime soon. So while I know that the ECB is a completely different set of economies I don't find it hard to see European rates rise for some time yet.

Glenbhoy

BendiBus wrote:

I'd consider room for another 0.75% to be accommodative!

True, but the 0.75 is by no means certain, it may finish in Sept, or Dec - very, very tough to know. As you doubtless know a 0.75 increase at this stage of the cycle is nowhere near as hard hitting in percentage terms as it was when the base rate was 2%, so whilst in absolute terms it's still significant, if banks have been stress testing properly, it shouldn't over stretch the more recent buyers. For the buyers several years ago, then one would imagine their incomes will have increased by a reasonable amount since they were stress tested too (at least that's the theory).

Calina

The key impact with rising interest rates, however, is that it limits the amount of money that new purchasers can borrow.

Additionally, you have to put it in the context that in a period of unprecedentedly low interest rates, banks still had to loosen lending criteria to enable people to borrow sufficient money to buy any sort of property. Hence 100% mortgages and 40 year mortgage terms. In other words, the country has been at the limit of affordability for quite sometime...and now finance is getting more expensive. And trader uppers can't rely on rising equity to finance their trade up as much now as they could even 12 months ago. House prices are falling,.

D'Peoples Voice

Glenbhoy wrote:

True, but the 0.75 is by no means certain, ......

I think it is pretty much certain.
With Cyprus and Malta joining the euro area in january 2008, both have tended to be at the higher end of the inflation limit, they should help keep the inflation rate of the euro area at or above the 2% (the size of their economies vis-a-vis other euro area countries should dilute their effect somewhat).
http://www.ecb.int/pub/pdf/conrep/cr200705en.pdf
In addition assuming that the US housing market does not bring down their economy, a strengthening dollar will make petrol more expensive given OPEC make no intervention into oil supplies - inflation up! Not to mention a strengthening dollar would also make european exports more competitive thus boosting economic activity in the euro area.
Hence home owners here should be praying for a weakening dollar caused by a recession to make european exports more expensive and reduce the need to increase interest rates here. But such a recession may have an effect on jobs in Ireland so it's a catch-22.

Glenbhoy

D'Peoples Voice wrote:

I think it is pretty much certain.
With Cyprus and Malta joining the euro area in january 2008, both have tended to be at the higher end of the inflation limit, they should help keep the inflation rate of the euro area at or above the 2% (the size of their economies vis-a-vis other euro area countries should dilute their effect somewhat).

Ah now, we're talking about 1.2 million people joining a currency with approx 310 million people, I would think the effects will be negligible.

miju

regardless 0.75% is pretty much a certainity and its has good as price into the markets already. general consensus amongst the more realistic / no vested experts is two more this year followed by another by March 2008.

after that no-one seems to want to hazard a guess as to what the ECB will do.

gurramok

Stretched homeowners in UK eye 'sale and rent back'
http://news.bbc.co.uk/2/hi/business/6266268.stm

Wouldn't be surprised if this was happening with at least banks here already to hide the growing reposssesion figures.

patrickolee

gurramok wrote:

Stretched homeowners in UK eye 'sale and rent back'
http://news.bbc.co.uk/2/hi/business/6266268.stm

Wouldn't be surprised if this was happening with at least banks here already to hide the growing reposssesion figures.

Gosh, I hope they don't start doing that here. Of course it won't just help hide the growing reposssesion figures, it will also prop up the prices. I wonder is that why they do it?

D'Peoples Voice

Glenbhoy wrote:

Ah now, we're talking about 1.2 million people joining a currency with approx 310 million people, I would think the effects will be negligible.

The size of a country's population has no bearing on it's influence on interest rate policy for the euro area. Influence is dictated only by the size of a country's GDP. That said, Cyprus and Malta's GDP would be miniscule but they still 'help' bring up the average.

BendiBus

D'Peoples Voice wrote:

The size of a country's population has no bearing on it's influence on interest rate policy for the euro area. Influence is dictated only by the size of a country's GDP. That said, Cyprus and Malta's GDP would be miniscule but they still 'help' bring up the average.

Their combined GDP is little more than 10% of Irish GDP so even calling it miniscule is overstating it's importance!

Glenbhoy

D'Peoples Voice wrote:

The size of a country's population has no bearing on it's influence on interest rate policy for the euro area. Influence is dictated only by the size of a country's GDP. That said, Cyprus and Malta's GDP would be miniscule but they still 'help' bring up the average.

Would there be a relationship between GDP and popuation size do you think?

Today's Irish Times property section tells us how a house on Ailesbury road was sold last week for a little over 13.0 million.
The same house was bought last year for 12.95 million, looks like somebody took quite a loss - presuming stamp duty was paid.
I reckon:
Sales proceeds - 13.10
Purchase price (12.95)
Stamp Duty ( 1.18)
Agents Fees ( .05)
Bank Interest ( ? ) (We'll assume the buyer had the cash on hand)

Loss (1.08) Million.

Looks like someone's plan to turn a quick million or two went a little sour.

nesf

Glenbhoy wrote:

Would there be a relationship between GDP and popuation size do you think?

For comparatively developed countries yes, but it's a fairly weak relationship in general terms if you're comparing countries with very different levels of development.

Maxwell

http://rte.ie/business/2007/0705/ecb.html

No ECB change, but rise to come
Thursday, 5 July 2007 17:13
European Central Bank president Jean-Claude Trichet has signalled that the bank is ready to raise interest rates again in the coming months to combat potential inflation in the euro zone.

He was speaking to reporters in Frankfurt after the bank's Governing Council decided to leave its main rate on hold at 4%.

But Mr Trichet did not provide any strong clues about the timing of the next rise, beyond saying that he had no intention of changing market expectations for additional monetary tightening in September or October.

Advertisement'Our monetary policy is still on the accommodative side,' he told a news conference. He said the bank 'will continue to monitor closely all developments to ensure that risks to price stability over the medium term do not materialise'.

Euro zone inflation has been in line with the ECB's target at 1.9% or less since September last year, allowing the bank to move rates higher at a measured pace. But ECB officials have repeatedly said they expect inflation to rise by the end of the year due to high oil prices and shrinking spare capacity in the economy.

The bank has raised rates eight times in the past 18 months, each time by a quarter of a percentage point.

Glenbhoy

nesf wrote:

For comparatively developed countries yes, but it's a fairly weak relationship in general terms if you're comparing countries with very different levels of development.

Fair point, however not a factor that is likely to arise to the same extent for countries joining the euro, since there are certain economic hurdles which they must have successfully negotiated prior to joining, in this instance one would not expect too much developmental divergence between Cyprus, Malta and say, Greece.

nesf

Glenbhoy wrote:

Fair point, however not a factor that is likely to arise to the same extent for countries joining the euro, since there are certain economic hurdles which they must have successfully negotiated prior to joining, in this instance one would not expect too much developmental divergence between Cyprus, Malta and say, Greece.

Cyprus and Greece have very close GDP per capita levels, Malta lags both by quite a bit (ie 20K vs 31K and 30K respectively). The reasons for this I can't elaborate on, I'm not familiar with their economies, but there's enough of a difference there to call it significant imho.

Glenbhoy

nesf wrote:

Cyprus and Greece have very close GDP per capita levels, Malta lags both by quite a bit (ie 20K vs 31K and 30K respectively). The reasons for this I can't elaborate on, I'm not familiar with their economies, but there's enough of a difference there to call it significant imho.

Final point on this, as it's not even remotely relevant to the thread!!!
Cyprus GDP per capita - $23,000
https://www.cia.gov/library/publications/the-world-factbook/geos/cy.html
Malta GDP per capita - $21,000
https://www.cia.gov/library/publications/the-world-factbook/geos/mt.html
Greece GDP per capita - $24,000
https://www.cia.gov/library/publications/the-world-factbook/geos/gr.html

I'm not that sad really, I was just surprised that there was such a difference between Malta and Cyprus;)

nesf

Glenbhoy wrote:

Final point on this, as it's not even remotely relevant to the thread!!!
Cyprus GDP per capita - $23,000
https://www.cia.gov/library/publications/the-world-factbook/geos/cy.html
Malta GDP per capita - $21,000
https://www.cia.gov/library/publications/the-world-factbook/geos/mt.html
Greece GDP per capita - $24,000
https://www.cia.gov/library/publications/the-world-factbook/geos/gr.html

I'm not that sad really, I was just surprised that there was such a difference between Malta and Cyprus;)

Heh, discount my figures.

jimmycrackcorm

Glenbhoy wrote:

Would there be a relationship between GDP and popuation size do you think?

Today's Irish Times property section tells us how a house on Ailesbury road was sold last week for a little over 13.0 million.
The same house was bought last year for 12.95 million, looks like somebody took quite a loss - presuming stamp duty was paid.
I reckon:
Sales proceeds - 13.10
Purchase price (12.95)
Stamp Duty ( 1.18)
Agents Fees ( .05)
Bank Interest ( ? ) (We'll assume the buyer had the cash on hand)

Loss (1.08) Million.

Looks like someone's plan to turn a quick million or two went a little sour.

Compared to what it might be worth in the next few years, someone probably saved themselves a bigger loss.

BendiBus

A sharp rise in unemployment reported today. Not good for consumer confidence. When people are unsure about their future employment they're less likely to make big investments.

http://www.rte.ie/business/2007/0706/jobless.html

nesf

BendiBus wrote:

A sharp rise in unemployment reported today. Not good for consumer confidence. When people are unsure about their future employment they're less likely to make big investments.

http://www.rte.ie/business/2007/0706/jobless.html

This was expected no?

nesf

nesf wrote:

This was expected no?

Unfortunately yes and unfortunately thats very small in comparison to whats coming.

SimpleSam06

Mm, census lady came by the house the other day and mentioned that she was running into a lot of recently unemployed construction people while doing her rounds lately.

BrandonBlock

Deleted User wrote:

Unfortunately yes and unfortunately thats very small in comparison to whats coming.

What is coming? Is it the end of the world?? :eek:

http://www.myconfinedspace.com/watermark.php?src=wp-content/uploads/2006/04/pa27.jpg

patrickolee

BrandonBlock wrote:

What is coming? Is it the end of the world?? :eek:

http://www.myconfinedspace.com/watermark.php?src=wp-content/uploads/2006/04/pa27.jpg

lol

SimpleSam06

BrandonBlock wrote:

What is coming? Is it the end of the world?? :eek:

Ah you're right, why would anyone be concerned?

SimpleSam06

BrandonBlock wrote:

What is coming? Is it the end of the world?? :eek:

Or this might be the vested interests version...

Do-more

BendiBus wrote:

A sharp rise in unemployment reported today. Not good for consumer confidence. When people are unsure about their future employment they're less likely to make big investments.

http://www.rte.ie/business/2007/0706/jobless.html

A mate was down at our local Dole office last Monday and said there was about 50 or 60 "new claimants" queing up. Hasn't seen the like of it in years.

Heard Matt Cooper discussing with Plasterers Union rep in Cork the likelihood that many builders will take the opportunity to layoff staff when they break for the builder’s holidays in the next few weeks. So the figures for July/August may well spike up.

What amazes me is that developers are still breaking ground on new developments in less than prime locations.
I was passing through Killeigh Co. Offaly during the week and saw a new start-up. When they are having trouble shifting units in Tullamore for months now, what possesses a developer to start up in Killeigh in a falling market?

miju

Do-more wrote:

what possesses a developer to start up in Killeigh in a falling market?

thats easy. builders make money from building even in a falling market they will still make a healthy profit from selling houses (eventually) even if they are in sub prime locations. in fact they make a slightly better profit with "cheaper" labour

Mailman

Know of one person who is buying two new houses in an new estate in Tullamore. They no longer want to buy them but are being forced to because the contract is too tight to back out of.

miju

ive heard of and read on some other forums as well of a fair few people trying to back out of buying new builds even to the extent of losing €20,000 deposit but the builder is forcing the sale

worrying times