Housing Bubble Bursting

SimpleSam06

whizzbang wrote:

Why is that artificial, if they can't get hired at the full paid price then it is totally normal to lower the price? They are not lowering the price just to feck others over, they are doing it to get themselves a job. Any other action would be the wage equivalent of price fixing which is totally artificial!

Its artificial because they aren't living in the Irish economy. They are living in the much cheaper economy of their home country, and only passing through Ireland, cutting costs here as much as possible.

These workers are prepared to accept a far lower standard of living for the duration of their stay here, which reduces the standard of living for the "native" workers, who then have to compete for jobs at the lower pay levels forced by migrant workers.

Cutting wages isn't making anyone more "competitive", its destroying the middle class and turning Ireland into a third world country, with the bulk of the wealth concentrated at the top. IT workers have already experienced this effect, with the government handing out free visas to any and everyone with an IT qualification, effectively lowering the wages for IT personnel, via the same mechanism.

Colonel Sanders

nesf wrote:

"Men are born ignorant, not stupid; they are made stupid by education."

it is also said that education is never wasted. They obviously point out the flaws in the theory (as they do with every type of economic theory thought).

BendiBus

SimpleSam06 wrote:

The cheap credit hasn't been fuelling anyone's wages except the civil service, real estate agents, and builders.

And retailers, and travel agents, and car salesmen. Consumer credit has created the service sector economy we now live in. Credit pays a hell of a lot of private sector wages. When the credit stops, the spending drops and a lot of service sector workers face a period of uncertainty.

whizzbang

SimpleSam06 wrote:

Its artificial because they aren't living in the Irish economy. They are living in the much cheaper economy of their home country, and only passing through Ireland, cutting costs here as much as possible.

These workers are prepared to accept a far lower standard of living for the duration of their stay here, which reduces the standard of living for the "native" workers, who then have to compete for jobs at the lower pay levels forced by migrant workers.

Cutting wages isn't making anyone more "competitive", its destroying the middle class and turning Ireland into a third world country, with the bulk of the wealth concentrated at the top. IT workers have already experienced this effect, with the government handing out free visas to any and everyone with an IT qualification, effectively lowering the wages for IT personnel, via the same mechanism.

What's the alternative?

(I work in IT, so I'm aware that industries can bust as well as boom, it just forces you to be better at your job and take it more seriously rather than just sitting back and assuming you have a job for life.)

JupiterKid

Has anyone seen the property supplement of the Irish Times today? It may be July now, and the selling at this season has always been relatively slow. But the supplement today was wafer-thin compared to even this time last year. Another anecdotal sign of troubled times for the property moguls.

SimpleSam06

whizzbang wrote:

What's the alternative?

(I work in IT, so I'm aware that industries can bust as well as boom, it just forces you to be better at your job and take it more seriously rather than just sitting back and assuming you have a job for life.)

No, it forces you to do just about any job for a little above minimum wage, no matter how good you are at it. Theres a name for that.

Reducing wages to match third world countries is not an alternative. It only transforms your country into a third world nation. This is the downside to globalisation, as it were, and since this is probably the first time we've seen this phenomenon on this scale, there is no way to predict accurately what will happen next.

Stronger migration controls and working visas would be a recommendation, however.

nesf

Colonel Sanders wrote:

it is also said that education is never wasted. They obviously point out the flaws in the theory (as they do with every type of economic theory thought).

Yeah, but it's people tendency to confuse the word theory with the word fact that creates the problem. It's encouraged by the way our secondary education system is set up, i.e. never question the corpus.

The_Conductor

jmayo wrote:

BTW where will all this mortgage interest relief money come from, Berties suitcase maybe?
With less revenue coming from income tax and stamp duty, lower vat returns from construction and less VAT from retail spending where will the revenue come from?
Maybe with increased taxes on suvs to suit the GP?

Well- we have lower rates of direct personal taxation that most of continental Europe (and conversely much higher rates of indirect taxation). It would be a handy number to simply increase direct taxation. Eventually though- corporation tax etc would have to be revisited- the 12.5% rate is incredibly generous, but its wholly funded through all the indirect taxation we have, which in turn is what fuels wage demands.

Ideally if meddling in sectors such as mortgage interest relief stopped altogether, and a new point of resistance was found for house prices etc- things might begin to stand on their own feet. Its not going to happen though.

Ps- the mortgage interest relief is only at the marginal rate of tax, and bears no relevance to the inflated mortgages most of us have. Even if it were reformed, it would take massive jiggery pokery to have any noticeable effect on peoples net income levels.

PPS- I see from this morning's papers that its now predicted that the next ECB rate increase could be August, instead of September/October....... I feel ill.......

SimpleSam06

smccarrick wrote:

PPS- I see from this morning's papers that its now predicted that the next ECB rate increase could be August, instead of September/October....... I feel ill.......

The US is at 5.25% and the UK at 5.75%... Why wouldn't the EU go up to that level or even higher?

Of course Austin Hughes said back in March 2006 that interest rates would end 2006 at 3%.

Duckjob

SimpleSam06 wrote:

The US is at 5.25% and the UK at 5.75%... Why wouldn't the EU go up to that level or even higher?

Of course Austin Hughes said back in March 2006 that interest rates would end 2006 at 3%.

Well I would think that they would make their decisions on changing interest rates based on detailed and ongoing analysis of the economies being governed.

I would certainly hope they dont make their decisions based on what US/UK are up to. That kind of reminds me of the kid in class not knowing what to write in his test and trying to copy off the kid beside him.

patrickolee

Duckjob wrote:

That kind of reminds me of the kid in class not knowing what to write in his test and trying to copy off the kid beside him.

rofl, qft

Colonel Sanders

can I ask did anyone who took out a mortgage over the last 3-4 years really believe that ECB rate would remain at 2% for the entire term of their mortgage????? Most of the rises over the last 18 months have not been unexpected, why did people not fix rates when the ECB started the rate hiking process (for a couple of years anyhow)?

SimpleSam06

Duckjob wrote:

Well I would think that they would make their decisions on changing interest rates based on detailed and ongoing analysis of the economies being governed.

I would certainly hope they dont make their decisions based on what US/UK are up to. That kind of reminds me of the kid in class not knowing what to write in his test and trying to copy off the kid beside him.

The US, EU and UK economies are joined at the hip, and influenced by much the same economic factors. Still, time will tell. I can certainly see them going to 5.5% in the EU, the Germans in particular are terrified of inflation, which ruined their economy twice in the last century.

ChewyLuey

Colonel Sanders wrote:

can I ask did anyone who took out a mortgage over the last 3-4 years really believe that ECB rate would remain at 2% for the entire term of their mortgage?????

I think its fair to say that many people didn't even know that interest rates were low in the first place when they bought over the last few years, nevermind that they were likely to rise. It almost seemed like a non-issue for many until the gradual rate rises started.

gjim

Cutting wages isn't making anyone more "competitive", its destroying the middle class and turning Ireland into a third world country, with the bulk of the wealth concentrated at the top. IT workers have already experienced this effect, with the government handing out free visas to any and everyone with an IT qualification, effectively lowering the wages for IT personnel, via the same mechanism.

In the words of Ray Bones, what a bunch of bullsh*t. We have more immigrants here than ever and yet our average earnings have never been higher. Countries with high levels of immigration and foreign workers like Switzerland, the UK, the US, Australia, Holland, ourselves have higher earnings both on average and by median than countries which shut their borders to immigration. Places like Germany are belatedly recognising this fact and are changing their policies accordingly. Countries which shut out foreign workers or foreign anything for that matter - capital, trade or knowledge - are invariably poorer sometimes much more so than others. This isn't just my opinion. If you try reading an economics book both the historical record and the mechanism behind these economic benefits have been studied extensively and both completely contradict your view of how the world works.

I'm not attacking you personally; this misconception is commonly held and in fact was part of the basis of the disastrous economic policy pursued by this state until the 60s. Back then, the government actively protected "native Irish" workers from competition from foreigners. So for example, to protect Irish cobblers, huge duty was put on importing shoes resulting in half the country going barefoot. If there weren't a load of Poles around in construction, for example, you'd end up on a waiting list for a year and pay 4 times the price to get your bathroom tiled. Kick the Poles out and yes the Irish tilers can start charging 150 euro an hour but at the expense of the general population and economy as a whole.

As for your concern for IT workers, I'd guess you aren't one? I'm an IT worker and I work beside English, Indians, an Italian and South Africans who've immigrated to Ireland and yet things have never been better in terms of money and prospects for skilled and motivated IT people. To say Ireland is being turned into a "third world country" by the existance of my foreign co-workers is ludicrous in the extreme and highly insulting in fact.

Why not give us a few examples of first world western countries which where reduced to poverty by immigrant workers. I'll make it easier; give us A SINGLE example of this happening. If you can't, it would suggest that your beliefs have no basis in experience or knowledge and that your fear of "johney foreigner" lowering the living standards of everyone else can only be ascribed to xenophobia.

patrickolee

Colonel Sanders wrote:

can I ask did anyone who took out a mortgage over the last 3-4 years really believe that ECB rate would remain at 2% for the entire term of their mortgage????? Most of the rises over the last 18 months have not been unexpected, why did people not fix rates when the ECB started the rate hiking process (for a couple of years anyhow)?

I took out a mortgage 2 yearsish ago. Didn't fix, despite being acutely aware that rates were going to increase. Unfortunately the banks also knew that the rates were likely to go up, so to fix for say 5 years at that time, would have set the rate at around what they are now... 5ish%. Interestingly at the moment, the difference between going variable/tracker is not that different from going fixed for 10 years. What does that tell us about what the banks think the future of interest rates are?

From
http://www.aib.ie/servlet/ContentServer?pagename=ROIPersonalPortal/AIBContent_C/pp_article&c=AIBContent_C&cid=1141323015155&channel=P005

Variable Owner Occupier 5.10%
1 Year Fixed Rate (new business) 5.24%
1 Year Fixed Rate (existing business) 5.47%
2 Year Fixed Rate 5.65%
3 Year Fixed Rate 5.70%
4 Year Fixed Rate 5.80%
5 Year Fixed Rate 5.82%
6 Year Fixed Rate 5.84%
7 Year Fixed Rate 5.86%
8 Year Fixed Rate 5.93%
9 Year Fixed Rate 5.98%
10 Year Fixed Rate 6.00%

Prices may fall as well as rise, past performance is not an indic... you know the rest!

whizzbang

gjim wrote:

In the words of Ray Bones, what a bunch of bullsh*t. We have more immigrants here than ever and yet our average earnings have never been higher.

Here here!

SimpleSam06

This is getting way off topic, so I won't post anything more on this subject. So to wrap it up...

gjim wrote:

We have more immigrants here than ever and yet our average earnings have never been higher.

Correlation does not equal causation. Memorise that phrase. Or maybe you'd like to buy a stone that wards off tigers from me? I've had it for years, and haven't been attacked by a tiger yet.

gjim wrote:

Countries with high levels of immigration and foreign workers like Switzerland, the UK, the US, Australia, Holland, ourselves have higher earnings both on average and by median than countries which shut their borders to immigration.

We're not dealing with a small influx of workers here. We are talking about ten percent of the population over about 5 years. Thats an unreal influx of people. To put it in perspective, it would be the equivalent of 35 million people age 20-30 moving into the United States over a 5 year period.

And once again, you are equating correlation with causation. There is a high influx of immigration to these countries because they are wealthy. These countries are not wealthy because of immigration. Savvy?

gjim wrote:

Places like Germany are belatedly recognising this fact and are changing their policies accordingly. Countries which shut out foreign workers or foreign anything for that matter - capital, trade or knowledge - are invariably poorer sometimes much more so than others. This isn't just my opinion.

There is a massive difference between workers and "capital, trade, or knowledge", and making out that these are equivalent is setting up a straw man.

Also, there are countries like the Netherlands which have some of the strictest immigration laws on earth that are doing just fine.

gjim wrote:

If you try reading an economics book both the historical record and the mechanism behind these economic benefits have been studied extensively and both completely contradict your view of how the world works.

Utter nonsense. Migrant workers represent leakage in the Keynsian injection / leakage model. While you're busy googling that, you can google "ad ignorantiam" as well.

gjim wrote:

Back then, the government actively protected "native Irish" workers from competition from foreigners. So for example, to protect Irish cobblers, huge duty was put on importing shoes resulting in half the country going barefoot.

If you can't see the difference between importing workers, and importing shoes, you have bigger problems than a poor work ethic. Protectionist tarriffs have been used and continue to be used quite effectively by both the EU and the US, in particular with regard to agricultural products.

gjim wrote:

If there weren't a load of Poles around in construction, for example, you'd end up on a waiting list for a year and pay 4 times the price

Nonsense. Have you got any figures for the amount of migrants employed in construction in Ireland?

gjim wrote:

As for your concern for IT workers, I'd guess you aren't one? I'm an IT worker and I work beside English, Indians, an Italian and South Africans who've immigrated to Ireland

And obviously a highly valuable and dedicated one, if you're posting to boards at 11 in the morning.

gjim wrote:

and yet things have never been better in terms of money and prospects for skilled and motivated IT people. To say Ireland is being turned into a "third world country" by the existance of my foreign co-workers is ludicrous in the extreme and highly insulting in fact.

That's odd, I thought IT wages were mostly flat for the last few years, certainly when compared to other sectors...

gjim wrote:

Why not give us a few examples of first world western countries which where reduced to poverty by immigrant workers. I'll make it easier; give us A SINGLE example of this happening.

As I already pointed out in an earlier post, this whole phenomenon is extremely new. If you want an example of a single sector where exactly what I described happened, just take a look at farm labourers in the southern US states when Mexican migrants moved in. Its no longer possible to make a living as a farm labourer in these states, at least if you want to live in the US.

gjim wrote:

I'm not attacking you personally....If you can't, it would suggest that your beliefs have no basis in experience or knowledge and that your fear of "johney foreigner" lowering the living standards of everyone else can only be ascribed to xenophobia.

If you think that people are going to drop their trousers and grab their ankles every time some chucklehead burbles the word "racism", you are in for some awful landing. As for the word "personal", I do not think it means what you think it means.

whizzbang wrote:

Here here!

Thats hear, hear... sigh...

conor_mc

patrickolee wrote:

Interestingly at the moment, the difference between going variable/tracker is not that different from going fixed for 10 years. What does that tell us about what the banks think the future of interest rates are?

10 Year Fixed Rate 6.00%

Prices may fall as well as rise, past performance is not an indic... you know the rest!

That tells me that the money market reckons that 6% will be indicative of an average ECB rate for the next 10 years, it does not tell me that they will not rise above 6% at some point over the next 10 years.

D'Peoples Voice

I'm waiting on the "The property market is fine, things are only slow AT THE MINUTE because people aren't venturing out in the bad weather to look at houses" - you know it's coming!:D

the news for all existing property investors is that while demand may be dropping off, supply is INCREASING at an INCREASING rate!

Bankof Ireland also said the slowdown in the housing market was being overstated and pointed out that house building in the first half of this year would be above the same period in 2006.

http://www.ireland.com/newspaper/breaking/2007/0712/breaking39.htm

digitally-yours

the figures released from the CSO today show the trend in the construction sector.

Index of Employment in Construction, May 2007 (Provisional), April 2007
http://www.cso.ie/releasespublications/documents/construction/current/indexemp.pdf

also if you look at Daft

http://daftwatch.atspace.com/

The for sale houses has broken the 45000 houses for sale barrier !

Whats surperising is that most people havent taken houses off the market despite the market falling they want to sell.This shows the fact that they expect further down turn.

whizzbang

SimpleSam06 wrote:

Thats hear, hear... sigh...

I was going to check but then couldn't be bothered...

patrickolee

conor_mc wrote:

That tells me that the money market reckons that 6% will be indicative of an average ECB rate for the next 10 years, it does not tell me that they will not rise above 6% at some point over the next 10 years.

Yes, I would mostly agree. It does indicate that they anticipate the 'average' rate that they will have to charge in order to make a profit will probably be around 6% over the next 10years. More likely 5.5%.

But if the banks (through the money market) thought that rates were to decrease to, for example 2%, while the variable rate was 5.1%. Would the 10 year fixed then be 3%? Of course not. The 10 year fixed would be slightly higher than the variable, as there is always a risk that the base rate will increase. So the fixed rate will always be skewed slightly higher than what they _think_ mortgage rates will average at, over the future. In other words, they'll always have a buffer to protect themselves (while remaining competitive). So the fact that variable rates been offered by the banks are so close to the long term fixed rates, indicates to me that the banks think interest rates are close to, if not above, their top, over a ten year average.

Colonel Sanders

digitally-yours wrote:

The for sale houses has broken the 45000 houses for sale barrier !

Whats surperising is that most people havent taken houses off the market despite the market falling they want to sell.This shows the fact that they expect further down turn.

Fair point. there has definately been a rush to exit at the top in the type of areas where you look at prices and think 'how the flock are those houses worth that'. However despite a falling mkt there still seems to be a reluctance to lower asking prices by some people in some areas where i have been watching prices. I'm not saying they won't accept less than than asking price just that the asking prices haven't really reduced much if at all (fair enough its a small sample size, just something I've kept track of recently after noticing several houses with for sale signs outside for over a year).

Colonel Sanders

patrickolee wrote:

Yes, I would mostly agree. It does indicate that they anticipate the 'average' rate that they will have to charge in order to make a profit will probably be around 6% over the next 10years. More likely 5.5%.

But if the banks (through the money market) thought that rates were to decrease to, for example 2%, while the variable rate was 5.1%. Would the 10 year fixed then be 3%? Of course not. The 10 year fixed would be slightly higher than the variable, as there is always a risk that the base rate will increase. So the fixed rate will always be skewed slightly higher than what they _think_ mortgage rates will average at, over the future. In other words, they'll always have a buffer to protect themselves (while remaining competitive). So the fact that variable rates been offered by the banks are so close to the long term fixed rates, indicates to me that the banks think interest rates are close to, if not above, their top, over a ten year average.

I'm certainly not an expert in the field but could banks be charging more for long term fixed rates than economic models warrant (if this is indeed what they are at) to take advantage of people who are scared sh!tless every time the ECB meets and want certainty, at any cost?

patrickolee

Colonel Sanders wrote:

I'm certainly not an expert in the field but could banks be charging more for long term fixed rates than economic models warrant (if this is indeed what they are at) to take advantage of people who are scared sh!tless every time the ECB meets and want certainty, at any cost?

Probably not. You would hope that competition in the market would mean that they could not do that for long. They are simply balancing the risk of a possible increase (and the likelihood that it will occur) with the reward of new customers. But you can be damn sure, they won't be losing money!

The_Conductor

Sign of the times- the Spanish Central Bank has ok'ed the practise of 50 year mortgages. Audio from the BBC here.

digitally-yours

Also see what this politician has said

what he is saying is a correct in a way
http://www.belfasttelegraph.co.uk/breaking-news/ireland/article2745735.ece


Banks = lend money and make profit
Selling agents =sell houses and make profit
Investors = invest money and make profit
Sellers= sell house and go for a bigger house and make money Direct cost or indirect costs etc etc
Construction workers or related = their profit depends on the house building activity.
Government=recieves revenue on every sale and tax and wants housing market to be in good shape.

All will be painting the good picture and distorting the market as over rated market means more money in their pockets.



Buyers= want cheap houses and look for best value for money
First time owners= looking for houses which will give them good value over number of years.
people waiting to step in the market=looking for some correction and realistic prices which they can afford


All want to pay realistic prices and are affraid of running into negative equity.

Also with regards to inflation

Rise in inflation = higher prices= increase wages=increasing costs=spending based socitey

Decreese in inflation = Unemployment=less money in hand=prices on downward trend

Also the inflation we had over the years was demand pull inflation not cost push inflation and it means that the prices were purely based on demand not rising costs.

luckat

My house is having a little minor surgery at the moment, and I accompanied a plumber to buy a tap the other day. We called in to a couple of places and he was shaking his head.

In one, he met another plumber who told him he was hardly working at all; he'd been overflowing with work a few months ago.

In another *huge* place that deals only with the trade, he got back in the van looking pale (having left me outside in the van) and said "Last time I was here there were three of the directors outside helping their staff to pack stuff into trucks. Today there was hardly anyone in there, and I've never seen the place so tidy; shows you how much the building trade has slowed."

Just one experience, but still...

And normally I'd be ringing around for weeks trying to find builders with a hole in their schedule. This time I found people straightaway, and those I've asked when setting up the job have an anxious air about them.

patrickolee

luckat wrote:

This time I found people straightaway, and those I've asked when setting up the job have an anxious air about them.

They can get sprays for that

Its really no harm... it was sooo hard to get builders/tradesmen until recently, the foot is finally on the other shoe! Play them against each other, get their prices down. It's a good time for a house minor surgery.