Housing Bubble Bursting

Glenbhoy

miju wrote:

agreed, both sides will hold out for a while yet but come Sept when the next rate rise comes (coupled with another poor "traditional" selling time) its then you will start to see the sellers flinching alot more than they currently have and the blood will begin to run

Yeah, it's been a year now since the market stalled, this time there'll be no election/stamp duty reform red herring - well, there might be as the Sindo seem to be ratcheting up their campaign for the whole system to be radically reformed, that'll be the budget target and explains why they have turned on poor Cowen recently, still nobody is going to buy the 'stamp duty uncertainty' red herring for a second time, are they???

mikemac

It was on Newstalk this morning that developers are lobbying for zero stamp duty in gateway towns.
Afaik and I may be wrong (googled this) but designated gateway towns are Athlone, Tullamore, Mullingar, Dundalk, Letterkenny, Shannon, Sligo, Waterford, Navan and Newbridge

Abolishing stamp duty for first time buyers had little effect as some here predicted, so now the vested interests are pushing for other areas to try this.
This would costs tens of millions and let's face it, most of these towns are expanding rapidly and so hardly need tax breaks

nesf

miju wrote:

agreed, both sides will hold out for a while yet but come Sept when the next rate rise comes (coupled with another poor "traditional" selling time) its then you will start to see the sellers flinching alot more than they currently have and the blood will begin to run

I disagree. It's been too well telegraphed. The market (should) be correcting for it long before it happens.

In theory anyway.

indiewindy

micmclo wrote:

It was on Newstalk this morning that developers are lobbying for zero stamp duty in gateway towns.
Afaik and I may be wrong (googled this) but designated gateway towns are Athlone, Tullamore, Mullingar, Dundalk, Letterkenny, Shannon, Sligo, Waterford, Navan and Newbridge

Abolishing stamp duty for first time buyers had little effect as some here predicted, so now the vested interests are pushing for other areas to try this.
This would costs tens of millions and let's face it, most of these towns are expanding rapidly and so hardly need tax breaks

Abolishing stamp duty on house sales in these towns would have little affect as they would not face high levels of stamp duty even now. Sounds like the silly season is in full swing at the CIF

Glenbhoy

It was on Newstalk this morning that developers are lobbying for zero stamp duty in gateway towns.
Afaik and I may be wrong (googled this) but designated gateway towns are Athlone, Tullamore, Mullingar, Dundalk, Letterkenny, Shannon, Sligo, Waterford, Navan and Newbridge

I don't understand the logic here at all, at the moment virtually nobody has to pay stamp duty on new builds, thus why would it in any way benefit the construction industry to have further stamp duty reform?
Surely, if anything, further reform would make new builds even less attractive than second hand homes?

D'Peoples Voice

patrickolee wrote:

Think you need to check your excel's rounding settings or buy a calculator!

4.7 + 0.3 + 1.3 + 2.5 = 8.8% NOT 8.7%

At least by rounding to a whole figure they aren't pretending to be more accurate!

Open the Spreadsheet,
http://www.environ.ie/en/Publications/StatisticsandRegularPublications/HousingStatistics/FileDownLoad,2277,en.XLS
Worksheet 'house prices % change quarter'
Scroll down to a blank cell and type in the following command '=SUM(B95:B100)' and excel gives you 8.72%.
Hence that's why I said EXCEL calculates 8.7% not a calculator which would have just added like you did, those numbers are rounded to 1 decimal point.

In any case, I was also wrong, because I should have compounded them as someone said, in hindsight can't believe I made that mistake.
Again in the same worksheet, typing in the command '=(1+C95)*(1+C96)*(1+C97)*(1+C100)-1' gives a figure of 8.96% so yes in hindisght I must admit that this is how the Gov must have produced the 9%.
However it doesn't get away from the fact that 53% of that growth came from Q2 2006.

nesf

"Turmoil in financial markets could halt rate rises" (Irish Times)

http://www.ireland.com/newspaper/frontpage/2007/0810/1186425043117.html?digest=1


Hmmm.

SimpleSam06

nesf wrote:

"Turmoil in financial markets could halt rate rises" (Irish Times)

Nyeh it doesn't matter, a tipping point has been reached now. In Japan they put the interest rates to 0% for years, and their housing market still collapsed. The only thing stopping EU rate rises will do is to soften the impact by a small amount, for a few people. Affordability is the key issue in Ireland - when one person can afford a reasonable house, things will be sustainable once again.

chump

nesf wrote:

"Turmoil in financial markets could halt rate rises" (Irish Times)

http://www.ireland.com/newspaper/frontpage/2007/0810/1186425043117.html?digest=1


Hmmm.

Turmoil in the markets may lead to a global recession ... I'd say it safe to say that any which way the dice lands we're in for a rocky road

davej

The suggestion that a financial crisis in the world markets might be a good thing for the Irish property market just goes to show how far gone some of these VI's are.

Not to mention the fact that the current volatility was caused by an overheated property market in the first place..

davej

Gurgle

SimpleSam06 wrote:

Affordability is the key issue in Ireland - when one person can afford a reasonable house, things will be sustainable once again.

Was there ever a time when a single person on an average wage could afford to buy a house by themselves?

tHE vAGGABOND

Was there ever a time when a single person on an average wage could afford to buy a house by themselves?

I was thinking the same thing tbh

A more accurate thing may be to say that two people married, both earning at/near the average industrial wage, should be able to afford to buy a house in some/most parts of the country..

Houses in/near Dublin wont ever be 100k euro, but a couple with a combined income of 80-100k should not have to live in a dump nor indeed should they have to live in Port Laois

conor_mc

Gurgle wrote:

Was there ever a time when a single person on an average wage could afford to buy a house by themselves?

My Dad did. Not sure if his wage was bang on the average, but it sure as heck wasn't too far above it as a young army officer in the early 70's. Maybe 1.2 times average wage at most.

But then again, my parents furnished their first house with hand-me-downs from their parents, which would be, like, oh my god, sooo 1970!

ixoy

Gurgle wrote:

Was there ever a time when a single person on an average wage could afford to buy a house by themselves?

Yes, my Dad did. They got a house back in, what then, was considered out in the shticks (Portmarnock...) and my mum wasn't working. She worked later on to afford a move to a nicer area but we certainly didn't have to live in a crippled life-style.

In fact recently the Sunday Times did an article about how, in England, what would be our parent's generation is leaving a bitter financial legacy for their kids. One of the points was house prices. Now admittedly, it was in the UK but we often see similiar problems and trends. It stated, by way of one area (I can't recall which), that a teacher at one point could have afforde the mortgage repayments on their own, using approximately 10% of their salary. Now day, by equivalence, the same house would need someone on a top salary, whilst renting out the remaining rooms to meet the repayments. Interesting and I'm wondering if a broadly similiar picture could be painted here.

I think it's absolute nonsense that a couple, where both are on the average industrial wage (so say approximately 65k or so between them) could just about afford to get a small 2-bed many miles outside of Dublin. Surely the fundamental economics of this are unsound when the average wages don't give the average house? We should be able to get the 2-bed where we live currently but it's way outside of our target range currently. Madness.

digitally-yours

Shows cleary the signs of the time to come

http://www.bnpparibas.com/en/news/press-releases.asp?Code=LPOI-75W9PV&Key=BNP%20Paribas%20Investment%20Partners%20temporaly%20suspends%20the%20calculation%20of%20the%20Net%20Asset%20Value%20of%20the%20following%20funds%20:%20Parvest%20Dynamic%20ABS,%20BNP%20Paribas%20ABS%20EURIBOR%20and%20BNP%20Paribas%20ABS%20EONIA

This french Giant bank cannot value its assets as ther are too much volatility in market


The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating. The situation is such that it is no longer possible to value fairly the underlying US ABS assets in the three above-mentioned funds. We are therefore unable to calculate a reliable net asset value (“NAV”) for the funds.

In order to protect the interests and ensure the equal treatment of our investors, during these exceptional times, BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for the following funds:

How this will impact the hosuing market !

Looks like rough times ahead !

Also worth a look here

http://www.ft.com/cms/s/8922f3e2-45dc-11dc-b359-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F8922f3e2-45dc-11dc-b359-0000779fd2ac.html&_i_referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Dsubprime+fraudsters

Irish credit market is more or less along the same lines !! easy credit

Borzoi

digitally-yours wrote:

Irish credit market is more or less along the same lines !! easy credit

So your comparing a dodgy net firm with the more standard Irish practice of requiring several months wage slips, P60, several months banks statements.

D'Peoples Voice

digitally-yours wrote:

Shows cleary the signs of the time to come

This french Giant bank cannot value its assets as ther are too much volatility in market

How this will impact the hosuing market !

Looks like rough times ahead !

I think we can say that credit spreads will widen greatly in the credit market!
This should result in banks quickly reducing their offer of 100% mortgages,
in fact to maintain a strong loan book, I wouldn't be surprised to see them reducing their offering to 80% mortgages - on a short term at least.

I see PTSB/ESRI figs out today show house prices have grown by 0.9% over the past year, a long way away from the peak annual growth rate of 29.79% achieved in December 1998.

Colonel Sanders

D'Peoples Voice wrote:

I see PTSB/ESRI figs out today show house prices have grown by 0.9% over the past year, a long way away from the peak annual growth rate of 29.79% achieved in December 1998.

Very true. I wonder how the figure would look if all the 'extras' builders are throwing in with new houses were striped out?

digitally-yours

Borzoi wrote:

So your comparing a dodgy net firm with the more standard Irish practice of requiring several months wage slips, P60, several months banks statements.

That word is used by every company in the world until it goes bust !

I am sure in Irish housing market there are people who have purchased houses who does not match the lending criteria.

I know people who got some relaxations as they knew the people in bank.It happens.

It might be not on the same scale as US but it exists here too that was my point.

BendiBus

Gurgle wrote:

Was there ever a time when a single person on an average wage could afford to buy a house by themselves?

True, it was usually a married couple on a single income that was doing the buying. The era of double income households is very new.

Average house price drops to €302,605

New figures show that house prices fell by 2.6% in the first six months of this year.

The house price index compiled by Permanent TSB and the ESRI shows that the average price paid for a house in June was €302,605, a drop of just over €8,000 since the start of the year.

House prices in June fell by 0.5% compared with May.

AdvertisementMeanwhile, figures from the Central Statistics Office show that construction employment in June fell by 1.1% compared with the same month last year.

It was the third annual drop in a row in the employment index, which covers private construction firms employing five or more people.

http://www.rte.ie/news/2007/0810/housing.html

daveirl

This post has been deleted.

nesf

ixoy wrote:

Yes, my Dad did. They got a house back in, what then, was considered out in the shticks (Portmarnock...) and my mum wasn't working. She worked later on to afford a move to a nicer area but we certainly didn't have to live in a crippled life-style.

Yeah but what my Dad keeps pointing out to me about back then is "yes houses were cheap compared to today but you were lucky to have a job".

Not that house prices at the moment are realistic or anything. It's just that the picture wasn't so rosy back then either.

nesf

davej wrote:

Not to mention the fact that the current volatility was caused by an overheated property market in the first place..

The sub-prime market problems in the US weren't caused by an overheated property market. Booms and busts in Florida etc were caused by it but the sub-prime market problems are stemming from lending practices and how mortgages work in the US (banks can parcel loans and sell them off in the market essentially).

The banks were giving loans to people whose chance of not defaulting was very low. When these people started defaulting or looking like defaulting then the market got jittery.

miju

Gurgle wrote:

Was there ever a time when a single person on an average wage could afford to buy a house by themselves?

yes and raise a family at the same time. my parents bought in 1982 on 1 Dublin corporation workers wage and fed , clothed and pad all the bills on that one wage

of course nowadays it both couples working flat out with a longer 30-40 year mortgage and hoping to spend time with the kids at the weekends if they're not too knackered tired

so thats how out of whack everything has gotten

Afuera

nesf wrote:

The banks were giving loans to people whose chance of not defaulting was very low. When these people started defaulting or looking like defaulting then the market got jittery.

It's a classic case of the real risk being ignored.

I think that the ratings agencies are the real culprit here since they were able to turn very risky loans into top quality securitizations. They were probably making most of their assumptions on trends from the previous 10 years which was a boom period which had very little defaults on mortgages (as people could just re-mortgage, using capital appreciation, to get out of trouble).

The fact that those "ultra safe" securitizations turned out not to be so safe is obviously going to make the whole market very jittery. At the moment nobody knows who to believe anymore. The banks are storing up funds for what they perceive to be some bad times ahead and liquidity is being sucked out of the market at a fierce pace. Loosening credit standards were able to negate many of the interest rate rises in the past, but now we are entering a cycle where credit standards will be tightened up.

miju

cruuuunnnnnnchhhh

nesf

Afuera wrote:

I think that the ratings agencies are the real culprit here since they were able to turn very risky loans into top quality securitizations. They were probably making most of their assumptions on trends from the previous 10 years which was a boom period which had very little defaults on mortgages (as people could just re-mortgage, using capital appreciation, to get out of trouble).

The fact that those "ultra safe" securitizations turned out not to be so safe is obviously going to make the whole market very jittery. At the moment nobody knows who to believe anymore. The banks are storing up funds for what they perceive to be some bad times ahead and liquidity is being sucked out of the market at a fierce pace. Loosening credit standards were able to negate many of the interest rate rises in the past, but now we are entering a cycle where credit standards will be tightened up.

There's a nice article in this week's Economist talking about how a credit squeeze will be a good thing for the markets after the excesses of recent years.

SkepticOne

Here's a graph of the PTSB/ESRI index up to the latest June report. See attached.

Afuera

nesf wrote:

There's a nice article in this week's Economist talking about how a credit squeeze will be a good thing for the markets after the excesses of recent years.

Do you have a link to this, or is it subscription only?

nesf

Afuera wrote:

Do you have a link to this, or is it subscription only?

Subscription only afaik. I get the paper version anyway.

Edit: Found one bit of it: http://www.economist.com/opinion/displaystory.cfm?story_id=9587517

There's more in the magazine itself.