How We Blew the Boom

Sand

You're probably right. Many people lived extravagantly during the boom and saved not a penny—but are now in complete denial about it all. They want to blame the government and the bankers for their plight, when the real responsibility lies closer to home.

This a false tangent to be honest. Property prices have lost value. People are in negative equity, but by and of itself this doesnt affect their ability to sustain those mortgages.

Being made redundant affects that ability. The unemployed arent able to sustain any loan whatsoever. If it is sensible to not borrow any more than you can afford to pay whilst on the dole...

If people are having troubles managing their mortgages it is in a time or record low interest rates, having had no issues sustaining them in a period of high interest rates.

The serious problems are the fiscal crisis, which is purely a government budgetary crisis. And the credit crunch, which is badly affecting business cash flow. People can be blamed for their own losses/problems, but not the fiscal crisis or the epic failure in the financial regulator or the banks mismanagement of their risk. Individuals are amateurs. The government, the regulator and the bankers are supposed to be the experts.

djpbarry

Sand wrote: »

If it is sensible to not borrow any more than you can afford to pay whilst on the dole...

It's not sensible to borrow so much that a few weeks without work forces you into serious financial difficulty. Granted, there are exceptional cases, but putting something aside for a few "rainy weeks" is just common sense. There's also the option of income protection.

Liam Byrne

djpbarry wrote: »

a few weeks without work

VERY flippant, considering the number of people who've been "let go" (or whatever bull**** management-crap word Dell used for it.

Liam Byrne

Sand wrote: »

People can be blamed for their own losses/problems, but not the fiscal crisis or the epic failure in the financial regulator or the banks mismanagement of their risk. Individuals are amateurs. The government, the regulator and the bankers are supposed to be the experts.

And therein lies the MOST worrying aspect; these people don't seem to realise that they've screwed up, or failed.....otherwise they wouldn't be giving themselves millions in bonuses and the Government would be preventing them doing so with OUR money.

But that would involve making the necessary hard decisions and alienating their former Galway Races Tent buddies, which there's no way they'd do.

Yeah, they'll lie and bull**** about what they'd "like" those people to do, implying that they [the Govt] think what the general public think; but actually do something to ensure that happens ? Bigger chance of me winning the lotto..... :mad:

djpbarry

Liam Byrne wrote: »

VERY flippant, considering the number of people who've been "let go" (or whatever bull**** management-crap word Dell used for it.

It was not my intention to be flippant about anyone's current situation. I was simply making the point that preparing oneself for a period of unemployment (with savings or whatever) is just common sense. Being completely dependent on your next pay-cheque is risky business.

jmayo

donegalfella wrote: »

This post has been deleted.

donegalfella, don't you know we don't do responsibility in Ireland.
The government ministers are never repsonsible, the top public servants, the top bank executives and directors, the regulators and the central bank.
This permeates right down to lowest levels.
As I keep saying till I am blue in the face, we are like a nation of adolescents who haven't grown up. We had nothing and then when we got a few quid we wanted everything, we never saved for a rainy day, we wanted fancy trinkets because the guy next door had them.
Mopst people did not want the party to end and called anyone that raised their head to voice concerns a whinger.
Then when it is gone to cr**, we whine and complain and look for someone else to blame.

Sand wrote: »

...
The serious problems are the fiscal crisis, which is purely a government budgetary crisis. And the credit crunch, which is badly affecting business cash flow. People can be blamed for their own losses/problems, but not the fiscal crisis or the epic failure in the financial regulator or the banks mismanagement of their risk. Individuals are amateurs. The government, the regulator and the bankers are supposed to be the experts.

True but who voted this crowd of chancers into power. Everyone knew about bertie and his dodgy finances, everyone knew about how cosy the government were with vested interests of property development, everyone knew how bad the party was from all the long running tribunals, everyone with half a brain knew that the economy was lopsided in it's dependence on construction and consumer spending.
Yet they were voted back into power in 2002 and even worse in 2007.

Even though the writing had been on the wall that the financial regulator was in bed with the banks, I (and i think most other sceptics would admit the same) was appalled at how bad the office really was.

And we cannot just blame that gobsh*** neary alone, it was the entire office which let the banks have carte blanche and do anything they bloody wanted.
It is like everyone shouts about fitzpatrick (the little boll***s) but remember the other directors and his protege Drumm had to have known all the cr** that was going on.
As Shane Ross stated the entire top levels should be rooted out and not just one or two heads who are chopped.

A whistleblower piece of legislation should have been enacted long ago to help the few like the guy in AIB who stood up and put his neck on the line for the good of customers, investors and indeed society.

Permabear

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Dob74

donegalfella wrote: »

This post has been deleted.

We should have saving.

But in this country everything is so expensive.
I know people how have put a 40k depoist down on a house costing 300k.
Since the house is worth 220k now they have lost 40k, and have 31 years left on there mortgage.
We have to pay over the odds for nearly everything. Food, electricity, gas, housing, cars are all for more expensive than most countries.
These are things we need to live and are not luxuries.
The banks forced up house prices by loaning too much money.
Now the taxpayer has to bail them out:mad::mad::mad:
The system is corrupt when the home owner, developer and government are all broke.
The no regulation policy has bankrupted this country and no one wants to take the blame.

In the states its alot easy to save coz the cost of basics is so much cheaper.
I will probably be going back soon.

oscarBravo

Dob74 wrote: »

The banks forced up house prices by loaning too much money.

In cahoots with buyers, who forced up house prices by borrowing too much. It takes two to tango.

djpbarry

Dob74 wrote: »

But in this country everything is so expensive.
...
We have to pay over the odds for nearly everything. Food, electricity, gas, housing, cars are all for more expensive than most countries.

That's generally because salaries have gotten so high in Ireland, relative to other countries. Look at our nearest neighbour for example; the median weekly pay for full-time employees in the UK in April 2008 was about £479:

http://www.statistics.gov.uk/cci/nugget.asp?id=285

Dob74 wrote: »

The banks forced up house prices by loaning too much money.

:rolleyes: Oh please. I suppose the banks forced people to borrow, did they? House prices went up because people were prepared to pay ludicrous amounts of money for property.

Dob74 wrote: »

In the states its alot easy to save coz the cost of basics is so much cheaper.

But the amount you can save depends on your income and spending power, which varies with geographical location. For example, the cost of living in Maryland is likely to be much higher than that in Mississippi, because incomes are much higher in Maryland.

Dob74

oscarBravo wrote: »

In cahoots with buyers, who forced up house prices by borrowing too much. It takes two to tango.

Everyone needs a house to live in.
So if the bank gives, someone with no money 300k.
That will force the price of houses to 300k for everybody.
The rule of three times your earning was not followed.
If fundalmentals are not followed you will end up with a property bubble.

djpbarry

Dob74 wrote: »

Everyone needs a house to live in.

Indeed, but does everyone NEED to own one?

Dob74

djpbarry wrote: »

That's generally because salaries have gotten so high in Ireland, relative to other countries. Look at our nearest neighbour for example; the median weekly pay for full-time employees in the UK in April 2008 was about £479:

http://www.statistics.gov.uk/cci/nugget.asp?id=285
:rolleyes: Oh please. I suppose the banks forced people to borrow, did they? House prices went up because people were prepared to pay ludicrous amounts of money for property.
But the amount you can save depends on your income and spending power, which varies with geographical location. For example, the cost of living in Maryland is likely to be much higher than that in Mississippi, because incomes are much higher in Maryland.

The supply of cheap money to invest in property was ludicrous.
If investors can get loans with no money down to buy mutiple properties it is going to force the price up.
If the average working couple has to get a 100% mortgage(110% for a new car and furniture). That means everyone on a average pay has to get a 100%.
If rules where set that you had to have 20% down, this would have helped keep prices down.
We paid the regulator enough money to do that job. Unfortunatly his laissez-faire ideology prevented him from doing anything.

For the record living in the states is extermly cheap. Compared to this country.
Unlike in this country the price you pay for food in mississippi is similiar to what you pay in major cities.
I was able to save half my pay even after paying rent, car, holidays etc.
I do the same job in this country and can barely save a penny

djpbarry

Dob74 wrote: »

If the average working couple has to get a 100% mortgage...

Why do they HAVE to get a 100% mortgage?

Dob74 wrote: »

Unlike in this country the price you pay for food in mississippi is similiar to what you pay in major cities.

As someone who has lived in both Portland, ME and New York City, I can tell you that your argument is complete nonsense; the cost of living was far higher in New York than in Portland (and probably still is). Why? Because people in New York had (have) more money. If people are prepared to pay more money for a certain commodity, then retailers are likely to take advantage of this fact by raising prices.

Dob74

djpbarry wrote: »

Indeed, but does everyone NEED to own one?

Your right we all dont need to own one.
But I think the consumer should be able to buy a house if they like.
Paying realistic prices. Single people where squeezed out of buying houses and that was a joke.

thebman

Dob74 wrote: »

Your right we all dont need to own one.
But I think the consumer should be able to buy a house if they like.
Paying realistic prices. Single people where squeezed out of buying houses and that was a joke.

You should be able to buy a house if you like? No you should be able to buy a house if you can afford to and you can.

I'm against 100% mortgages too and would be massively in favor of capping mortgages to 3 times a persons wages to prevent such a property spiral ever happening again.

People need to get it out of their heads that they have a right or a need to own a house. You have no right to own a house unless your earning enough to pay for one. You have no need to own your home because you can rent.

Dr Galen

Dob74 wrote: »

Your right we all dont need to own one.
But I think the consumer should be able to buy a house if they like.
Paying realistic prices. Single people where squeezed out of buying houses and that was a joke.

I'd like a new car. Like, I really really want one. But truth is I can't afford it. So I stick with what I've got. Same logic applies to houses. I couldn't afford one, so I didn't get in over my head and buy one.

It shouldn't be about single people being squeezed out of the property market, it should be about people in general, who can't afford to buy property not being able to, simple as that, regardless of your marital status.

Zynks

djpbarry wrote: »

That's generally because salaries have gotten so high in Ireland, relative to other countries. Look at our nearest neighbour for example; the median weekly pay for full-time employees in the UK in April 2008 was about £479:

http://www.statistics.gov.uk/cci/nugget.asp?id=285.

£479 by 52 weeks = £25k. Excluding this historically low of sterling, the average salary in Ireland is equivalent to that. (e.g. £25k @ 1.4 = €35k). I wonder how fair it is to use the recently low value of sterling as leverage for cost argumentation.

djpbarry wrote: »

:rolleyes: Oh please. I suppose the banks forced people to borrow, did they? House prices went up because people were prepared to pay ludicrous amounts of money for property.

Agreed. It is as someone who goes and drinks far too much to a point of alcohol poisoning and then they want to blame the off-license for it. That's why you have to be an adult to buy alcohol, or to take a mortgage. Surprise, surprise!

If there was an issue with excessive volumes of money being made available to the market at overly soft terms, it was of to the government to lay down the rules.

Dob74

djpbarry wrote: »

Why do they HAVE to get a 100% mortgage?
As someone who has lived in both Portland, ME and New York City, I can tell you that your argument is complete nonsense; the cost of living was far higher in New York than in Portland (and probably still is). Why? Because people in New York had (have) more money. If people are prepared to pay more money for a certain commodity, then retailers are likely to take advantage of this fact by raising prices.

I lived in chicago and dallas for 10 years. They are both cheaper than ireland to live in.
House prices in Chicago are cheaper than limerick, cork, galway, dublin.
Pay in Chicago is about twice as much as ireland.
Why because it is extermly difficult to get a 100% mortgage over 100k.
You can buy a nice apartment for 100k which is affordable for a single person.

This country anyone could get a 300k 100%mortgage. Which pushes the price up for everyone.
If you had to have 20% down that would limit the amount people would be able to borrow.
Thus keeping property prices down.

Zynks

Dob74 wrote: »

This country anyone could get a 300k 100%mortgage. Which pushes the price up for everyone.
If you had to have 20% down that would limit the amount people would be able to borrow. Thus keeping property prices down.

The problem is that there was far too much money looking for somewhere to invest, like hedge and pension funds. There just weren't enough investment opportunities. That is why I wouldn't put all my egg in the pension basket. It will just happen again as the total investment capital expectations for returns outsizes what the economy can generate. Money will land in the wrong hands and there will be another correction.

djpbarry

Zynks wrote: »

£479 by 52 weeks = £25k. Excluding this historically low of sterling, the average salary in Ireland is equivalent to that. (e.g. £25k @ 1.4 = €35k).

Fair enough - I guess the Brits are a little more frugal than the Irish. When you factor in the level of personal debt in this country, you begin to appreciate the massive overspend that has taken place during the so-called Celtic Tiger years.

djpbarry

Dob74 wrote: »

But I think the consumer should be able to buy a house if they like.

Should consumers be able to buy a private jet if they like?

Dob74 wrote: »

House prices in Chicago are cheaper than limerick, cork, galway, dublin.

I don’t know about that, but anyway…

Dob74 wrote: »

You can buy a nice apartment for 100k which is affordable for a single person.

I find that hard to believe too, but anyway…

The reason property prices are lower in Chicago than say, Dublin, is because people are not prepared to pay the same sort of money in Chicago. It’s quite simple really.

Dob74 wrote: »

If you had to have 20% down that would limit the amount people would be able to borrow.
Thus keeping property prices down.

Or, ya know, people could take responsibility for their own actions and keep their spending in check.

grahamo

jimmmy wrote: »

One of George Lees main points on the programme was how the government gave in to the social partners, to the extent that average public sector pay was 49,000, private sector ( and without the benefit of the big subsidised pension ) was 35,000 I think he said. A quarter of govt spending is borrowed - the solution seems obvious.

Uninformed rubbish! Statistics can be made to say anything you want them to say. The Public sector is made up of everything from roadsweepers to judges. There is a massive pay difference between different professions.
If average private sector pay was calculated in the same way and professionals salaries were included it would bring up the average to much more than 35000 Euro/Year. I know lads who did a bit of labouring on building sites that earned more than 35k a year a couple of years back.

As for the topic subject, In the late 90's the EU injected a serious amount of cash in the form of grants into Ireland. This gave the Irish economy a MASSIVE boost.
Its all gone now so things are now back to normal and the only people who really benefited are people who had assets or property pre 1997.
The rest of us are stuck with big mortgages for houses that were overpriced.
C'est La Vie!

sovtek

oscarBravo wrote: »

In cahoots with buyers, who forced up house prices by borrowing too much. It takes two to tango.

The banks did more than enough marketing to sell loans to people that couldn't afford it. They have a huge responsibility in this situation.
Yes there is an element of individual personal responsibility in this situation but the people that run things ****ed up and they should shoulder the majority of the blame as well as suffer the brunt of the consequences.

jmayo

Dob74 wrote: »

The supply of cheap money to invest in property was ludicrous.
If investors can get loans with no money down to buy mutiple properties it is going to force the price up.
If the average working couple has to get a 100% mortgage(110% for a new car and furniture). That means everyone on a average pay has to get a 100%.
...

Am I the only one that has copped on to this statement ?
You say the average working couple has to get a 100%mortgage (110% for a new car and furniture) :eek:
Why did we get into this attitude that you buy other things apart from property with your mortgage?
Why did people have to get a new car as well as a property ?
Why did people have to fully furnish, probably with interior designer, their homes immediately ?
Does anybody round here remember when you just used a mortgage to buy property ?
FFS a term loan disconnected from your home is for buying these things you can afford to lose.
Great idea paying over 40 years for a car (a decreasing asset) I will sell definetly within 10/15 at very most.

This is where the some of the ordinary joe-soaps who are now whinging (sorry to use that term but best description here) about how they're in negative equity were the very ones who ran out and bought cars, furniture, had holdiays etc on their mortgages.
This just demonstrates how screwed up and disconnected from reality we had really become.

Sand

True but who voted this crowd of chancers into power.

Voting for option A or option A doesnt really mean a lot of options are open to you. Even Labour had moved to a tax cutting, high spending agenda at the last election. The same tax cutting, high spending agenda they now deride.

Would the opposition have been better dealing with examples of epic, wasteful spending like decentralisation? Fine Gael criticised it but only because they were bitter with envy that Fianna Fail were able to buy votes and they couldny. Enda Kennys only criticism was details - FF constituencies were getting the reward, not FG constituencies.

Would Labour have been better dealing with the social partners? Got a better deal for the tax payer? The political wing of the trade union movement?

You talk as if there was some coherent, economically sensible opposition with clear and concise views and strategies for restoring Irelands competitive edge and leading Ireland on to greater than better things. These great patriots were only let down by those dirty, small minded thieving eejits fumbling in the till.

Even right now, do not delude yourself that FG or Labour are in any way better than FF or would have done things differently or handled things better. The entire Irish political class is depressing to consider - the regular humilitation of Joan Burton and the likes shows just how terrible our so called saviors are. FG and Labour offer a schizophrenic alternative government.

However, regardless of that, Fianna Fail HAVE to be voted out of power at the next Dail election. FG and Labour deserve their chance to be bloody terrible as well.

Even though the writing had been on the wall that the financial regulator was in bed with the banks, I (and i think most other sceptics would admit the same) was appalled at how bad the office really was.

The writing was on the wall for people with the information and analysis to make that determination. This clearly did not include the banks who were assumed to be interested in monitoring their own risk. This clearly did not include the Financial Regulator who was paid to ensure the banks risk was monitored. This clearly did not include the Department of Finance, nor the civil servants who advised the government on economic policy.

But Id imagine the dog on the street did not have the information or analytical tools available to those institutions, and assumed all the money they were spending on the civil service and the financial regulator was actually being spent to back up the assertions that everything was fine.

A whistleblower piece of legislation should have been enacted long ago to help the few like the guy in AIB who stood up and put his neck on the line for the good of customers, investors and indeed society.

Agreed, but such legislation by itself isnt going to protect whistleblowers - white collars in handcuffs will ensure that internal auditors and risk are taken seriously in Ireland so there isnt a need for the legislation to be exercised in the first place.

Oh please. I suppose the banks forced people to borrow, did they? House prices went up because people were prepared to pay ludicrous amounts of money for property.

No prices went up because of a shortage of supply in the late 90s, early 00s. The construction industry didnt take out massive loans based on a "If we build it, they will come" business plan.

They saw the shortage of supply pushing up prices and saw profit to be made. Buyers on an individual basis paid the price demanded of them, they didnt set it.

djpbarry

Sand wrote: »

Buyers on an individual basis paid the price demanded of them, they didnt set it.

Suppose the buyers were not prepared to pay the asking price?

dresden8

djpbarry wrote: »

Suppose the buyers were not prepared to pay the asking price?

Cardboard boxes are cheap.

djpbarry

dresden8 wrote: »

Cardboard boxes are cheap.

Not buying a house of any description is cheaper still.

Sand

Suppose the buyers were not prepared to pay the asking price?

Then they would be stuck paying extortionate rent. Oh right, they should just live with their mothers taking a brave stand against the market price.

Buyers didnt set the price on any individual level. They simply went to the banks looking for the loans needed to buy at the market price. They got them from the banks that assesed the risk and thought "no worries!" If the market price was to be controlled on the demand side whatsoever, then it was going to be controlled by the banks refusing to grant the loans on the basis of the risk.