Thursday, Mar 29, 2007
Why Soft Landings are Impossible in Property Booms
University College Dublin: Irish House Prices: Gliding into the Abyss?
Academic Economist reviews property booms in recent history and explains why the soft landings are the stuff of fantasy.
Posted by royston @ 11:39 AM (191 views) Add Comment
20 Comments
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1. Watch This Space - Help!!! said...
interesting article, may well happen here!!!
2. Scott said...
The author seems very objective. His most significant point is that property is either really going up or really going down, it has never levelled off, even in other countries. Now is not the time to buy folks. I was considering it for the past 6 months out of fear of not being priced out but it was all an illusion. With so many people in mortgage and consumer debt, there will be a crash like you have never seen.
3. Sam said...
wow, figure 1: the bigger they are the harder they fall.
4. rich said...
Seems to apply to the UK just as much as it does Ireland.
5. paul said...
It's a bit anecdotal and unacademic but I can see there has been some analysis. The "fundamentals" Kelly talks about have changed no more in the UK than Ireland, and therefore I can't see how the UK can get off with a soft landing either.
6. royston said...
This is a user friendly version that I think he published in an Irish newspaper - Irish Times, probably. A more academic / technical version of the same ideas is available here:
http://www.ucd.ie/economics/staff/mkelly/papers/housing.pdf
7. Davros said...
It looks applicable to anywhere we've have a speculative housing boom. House prices slow, investors sell up, demand plummets and we head back the way we came at the same rate.
8. Adam said...
What an objective and refreshing article, it seems like there will be no escaping a housing price crash. A very true and basic point, once renting becomes so much cheaper than buying then there will be a crash. Enough said.
9. sold 2 rent 1 said...
Great article.
I think we should rename this website
www.housecontrolleddescentintoterrain.com
I should show my wife this article.
It took some persuading from me to sell her house in Dublin.
10. paul said...
http://www.ucd.ie/economics/staff/mkelly/papers/housing.pdf
Ahh yes, that's a bit more like it.
Nice one royston.
11. sold 2 rent 1 said...
The key thing from the article is any worldwide property slump will last much longer than expected (8-9 years).
I think there will be no buy-in time until 2018.
The forthcoming slump will last an entire economic cycle
We are looking at a Japanese style "lost" decade
12. royston said...
Here is a special message for Glorious Sunshine:
href="http://www.music-scores.com/music-scores/midtemp.php?more=ba_1043_b_2vns"
13. royston said...
14. royston said...
For you, Glorious Sunshine
15. Tara747 said...
Can someone cut and paste the content of the article? I can't open it...
S2R1, do show it to your wife. :)
16. Scott said...
Sold2Rent1,
Japan lost more than a decade. A property in Japan today is worth what it was in 1991.
17. inflation is eating my savings said...
Royston- perhaps the most apt thing about this choice of music is that in the first movement, one violin part is the perfect reverse of the part for the other fiddle. Musical genius applied to boom and bust economics. nice one.
18. sold 2 rent 1 said...
The Economist wrote a similar article back in 2005.
We all know there will be a crash, the only question is timing.
19. sold 2 rent 1 said...
Tara747,
Type "Irish House Prices: Gliding into the Abyss?" into Google and click "View as HTML" on the first entry
For the more detailed article
Type "On the Likely Extent of Falls in Irish House Prices" into Google and click "View as HTML" on the first entry
Try installing acrobat
http://www.adobe.com/products/acrobat/readstep2.html
20. Tara747 said...
Thanks, s2r1. Brilliant article.
Did you show it to your wife?