Do you think property will crash again?

Claw Hammer

Higher interest rates dampen economic activity. They add overheads to business and have the twin effect of forcing salary reductions as well as reducing purchasing power. Values will fall as interest rates rise. Once values start to fall credit becomes even more restricted.

Bob24

ELM327 wrote: »

It can get lower, negative interest rates like the negative german bonds.

Deposit rates are negative already, but can the refinancing rates be negative? (I.e. why would the ECB lend with a negative rate?)

I am not an expert but i don’t think they would (and not sure they are legally allowed).

This plus the announcements they have made makes me think the only way for interest rates is up and the only question is when.

johnp001

Bob24 wrote: »

Deposit rates are negative already, but can the refinancing rates be negative? (I.e. why would the ECB lend with a negative rate?)

I am not an expert but i don’t think they would (and not sure they are legally allowed).

So yeah this plus the announcements the have made makes me think the only way for interest rates is up and the only question is when.

Interesting question, not sure what the legal position is.
Refi rate went to 0% two years ago at ECB. Japan has had negative "call" rate since around that time too.

Zenify

GingerLily wrote: »

Can the ECB have a negative interest rate? Or do you agree the ECB rate cannot be lower?

The ECB do not do surprises. They have been very clear about their future plans. They will cut bond purchases this year and will then start to increase interest rates. Google Mario Dhragi articles and you will see.

Andrew Beef

One of the many points that people are missing is that the ECB (like other central banks) want interest rates to lag inflation.

So when rates increase, inflation will have also increased.

And if you have debt, inflation is very much your friend.

People also need to realise that crashes a la 2008 are actually highly unusual.

And the response of the global central banks has been nothing short of heroic; th left would howl with derision, but we should erect statues of Ben Bernanke and Mario Draghi; these men saved the world.

Wanderer78

Andrew Beef wrote: »

One of the many points that people are missing is that the ECB (like other central banks) want interest rates to lag inflation.

So when rates increase, inflation will have also increased.

And if you have debt, inflations is very much your friend.

People also need to realise that crashes a la 2008 are actually highly unusual.

And the response of the global central banks has been nothing short of heroic; th left would howl with derision, but we should erect statues of Ben Bernanke and Mario Draghi; these men saved the world.

i particularly like jim rickards way of describing the operations of central banks, i.e. 'they believe theyre operating a basic machine and they fully understand its workings, but the truth is, theyre operating a highly complex nuclear reactor'!

Villa05

Andrew Beef wrote:

And the response of the global central banks has been nothing short of heroic; th left would howl with derision, but we should erect statues of Ben Bernanke and Mario Draghi; these men saved the world.

2008 was the bursting of a major bubble. What the central banks did was make money very cheap to reinflate the bubble.

If the bubble is the problem and bursting it is nature's way of curing it reinflating the bubble is a problem for the future.

I'm not sure heroic is the term I'd use

GingerLily

Zenify wrote: »

GingerLily wrote: »

Can the ECB have a negative interest rate? Or do you agree the ECB rate cannot be lower?

The ECB do not do surprises. They have been very clear about their future plans. They will cut bond purchases this year and will then start to increase interest rates. Google Mario Dhragi articles and you will see.

So you agree the ECB rate won't go lower - thanks for clarifying

Bob24

Villa05 wrote: »

2008 was the bursting of a major bubble. What the central banks did was make money very cheap to reinflate the bubble.

If the bubble is the problem and bursting it is nature's way of curing it reinflating the bubble is a problem for the future.

I'm not sure heroic is the term I'd use

Agreed with this and it explains stocks price changes pretty well internationally. But at the same time we also have to recognise that when it comes to property prices Ireland was in a special situation with stupid lending rules and buyers mentality. The factors you describe have applied to any European country (and more) but yet the major crash we had was an exception rather than the rule and some countries (even some not doing great economically) even maintained fairly stable house prices. So it cannot possibley be the the sole explanation for what we have seeing on our property market.

Andrew Beef

There should be statues of Bernanke and Draghi in every US and European city.

Wanderer78

Andrew Beef wrote:

There should be statues of Bernanke and Draghi in every US and European city.

Im not sure if you're joking or not, but obviously I disagree, of course you could argue, both may have had little or no choice to implement the policies they did, but I agree with those I've mentioned, and other opinions, the actions of central banks have not actually solved the overall problems, and have actually left us in any even more precarious situation than possibly before. This can kicking exercise has the potential to backfire spectacularly eventually, in fact, I think it will, i.e. we have not solved these issues, just delayed them. There has been many losers due to the actions of central banks, and there's a possibility we may all eventually become losers, but we simply don't know that for sure yet, time will tell, and only history tells us who the heroes are.

Villa05

Bob24 wrote:

Agreed with this and it explains stocks price changes pretty well internationally. But at the same time we also have to recognise that when it comes to property prices Ireland was in a special situation with stupid lending rules and buyers mentality. The factors you describe have applied to any European country (and more) but yet the major crash we had was an exception rather than the rule and some countries (even some not doing great economically) even maintained fairly stable house prices. So it cannot possibley be the the sole explanation for what we have seeing on our property market.

The answer is in the question
Keywords
Ireland property mentality stupid

Remember the Spanish market prior to 08
1 price for the locals
Higher price for the brits
Highest price for the irish

Wanderer78

Villa05 wrote:

The answer is in the question Keywords Ireland property mentality stupid

I'd actually argue, our relationship with property is actually more so to do with the complexity of human behaviour than the perceived idea of 'stupidity'.

Bob24

Andrew Beef wrote: »

There should be statues of Bernanke and Draghi in every US and European city.

Would be a perfect gathering point for far left activists to protest. The worst of western capitalism and the worst of western communism on display for society to admire :-)

Bob24

Wanderer78 wrote: »

I'd actually argue, our relationship with property is actually more so to do with the complexity of human behaviour than the perceived idea of 'stupidity'.

Agreed to some extend. But I’d still cassify 100% (or more!) mortgages and buying several rental properties in the middle of nowhere with these as stupidity. People stretching themselves financially to buy a place to live is different - they might have been reckless in some cases (with the blessing and even support of our banks and politicians), but at least I can understand why they did it.

_Brian

Ronaldinho wrote: »

Higher interest rates are not going to cause a property crash in my view - it will take job losses as a result of a future recession and/or a massive supply glut.

Job losses as a result of Brexit might get the ball rolling. I think the U.K. will bankroll things significantly for a time but if that doesn’t create a momentum in their economic activity I think they will be hit badly and as our biggest trading partner we would be badly hit as a result.

Wanderer78

Bob24 wrote:

Agreed to some extend. But I’d still cassify 100% (or more!) mortgages and buying several rental properties in the middle of nowhere with these as stupidity. People stretching themselves financial to buy a place to live might have been reckless in some case but I can understand why they did it.

I understand the use of the term 'stupidity', in regards these matters, and I agree with you, but I still standby my statement, the truth is, all humans are 'irrational', including myself at times, hence the failure of the statement 'rational expectations'.

Villa05

Wanderer78 wrote:

I'd actually argue, our relationship with property is actually more so to do with the complexity of human behaviour than the perceived idea of 'stupidity'.

Stupidity Relates more so to govt policy of implementing measures that push up prices, whereas the economy and our people would be much better off if prices were affordable and stable.

We are shooting ourselves in the foot by allowing double digit increases annually

Wanderer78

Villa05 wrote: »

Stupidity Relates more so to govt policy of implementing measures that push up prices, whereas the economy and our people would be much better off if prices were affordable and stable.

We are shooting ourselves in the foot by allowing double digit increases annually

great points, and id agree, in fact id go further, id class these decisions as potentially dangerous to all.

the term 'stupidity' isnt sitting with me at all though, i suspect we re actually experiencing the dangers of 'group think' and 'herd mentality' regarding these decisions.

UsBus

Wanderer78 wrote: »

great points, and id agree, in fact id go further, id class these decisions as potentially dangerous to all.

the term 'stupidity' isnt sitting with me at all though, i suspect we re actually experiencing the dangers of 'group think' and 'herd mentality' regarding these decisions.

The more you listen to everyday news, you get the feeling we are heading into a very dangerous period economically. Global trade deals been fought over, Britain is determined to isolate itself from everyone.. Ireland's economy may stay bounding along, but external global factors could take the bottom out of the country..

Wanderer78

UsBus wrote: »

The more you listen to everyday news, you get the feeling we are heading into a very dangerous period economically. Global trade deals been fought over, Britain is determined to isolate itself from everyone.. Ireland's economy may stay bounding along, but external global factors could take the bottom out of the country..

i fear we re heading into the abyss, but we actually have no real way of knowing this for sure, we might just, as you say, 'bound along', but we dont know that for sure. i do believe younger generations are in real trouble.

Arthur Daley

And this is why people need to get the debt paid down as soon as possible.

Wanderer78

Arthur Daley wrote: »

And this is why people need to get the debt paid down as soon as possible.

how?

_Brian

I hope it holds out another while.
I’m waiting to unload a property and it would really suit me if the value increased by another 15%
I’d estimate considering where it’s kocared it will take maybe 2-3 years.

Zenify

_Brian wrote: »

I hope it holds out another while.
I’m waiting to unload a property and it would really suit me if the value increased by another 15%
I’d estimate considering where it’s kocared it will take maybe 2-3 years.

Just make sure that you remember that there is a lot of people in this position. A good few people will all try sell when they think it's peaked or reached there goal.

Arthur Daley

Wanderer78 wrote: »

how?

Budget surpluses during the 'good times'. E.g. the Apple money sitting in the escrow account. As advocated by almost every Tom, Dick and Harry with 20:20 hindsight when looking back on the Celtic Tiger years from the 2012 vantage point.

If this cools the economy a bit, so be it. Oh there will be squeals, and bloody war, there always are, but if it can't be paid down today, why will tomorrow be any better?

Wanderer78

Arthur Daley wrote: »

Budget surpluses during the 'good times'. As advocated by almost every Tom, Dick and Harry with 20:20 hindsight when looking back on the Celtic Tiger years from the 2012 vantage point.

If this cools the economy a bit, so be it. Oh there will be squeals, and bloody war, there always are, but if it can't be paid down today, why will tomorrow be any better?

please correct me if im wrong, but wasnt ireland a surplus country before the crash?

steve keen has some very interesting views on current surplus and deficit thinking, i suspect he could be right, its largely nonsense in his mind, particularly this idea of governments being a house hold and having to tightening their belts etc, but unfortunately since the eu is designed the way it is, not much can be done about it for the moment, unless it collapses or something radically changes within its structure.

Arthur Daley

Wanderer78 wrote: »

please correct me if im wrong, but wast ireland a surplus country before the crash?

It was, but not enough. With low ECB interest rates, Fiscal policy should have been used to put the brakes on the madness in 2002. But Charlie McCreevy under Bertie's watch declared that 'if he has it he will spend it'. He was sent packing to Europe in 2004 and Cowen was a complete disaster, spending like a drunk. This was the primary reason for the IMF/ECB intervention in 2010, (and not the Banks as primary reason). It then took years to get the spending back down to match tax receipts.

_Brian

Zenify wrote: »

Just make sure that you remember that there is a lot of people in this position. A good few people will all try sell when they think it's peaked or reached there goal.

Indeed.

Wanderer78

Arthur Daley wrote: »

It was, but not enough. With low ECB interest rates, Fiscal policy should have been used to put the brakes on the madness in 2002. But Charlie McCreevy under Bertie's watch declared that 'if he has it he will spend it'. He was sent packing to Europe in 2004 and Cowen was a complete disaster, spending like a drunk.

yea id largely agree with all that, but i fear within our political institutions, the wrong ideas are being used to solve the right symptoms. our economies are behaving radically different post crash compared to pre crash. the fear of excess spending by governments is understandable, but measures such as austerity and conservative spending, i.e. saving for a rainy day etc, have largely failed, and continue to do so, and we re not positively reacting to this.