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Ireland - Housing / Savings / Debt

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Irish SSIA's are all going to begin maturing in 2006-2007.

For those of you unfamiliar with SSIA's, they were a "Special Savings Incentive Scheme" introduced by the Irish government in an attempt to encourage saving.

Basically, the way they worked was, members joined up and could lodge a fixed amount each month up to a maximum of 254 euro. This would be invested in either a bank account earning interest or shares. Unfortunately for them, most SSIA holders opted for the bank account option after the 'then recent' stockmarket crash.

The beauty of the SSIA schemes was that the Government gives holders an additional 1 euro bonus on top of every 4 saved - this was a bonus in addition to the interest/rise in share prices. However, if you took your money out before 5 years was up, you lost your 25% bonus.

There was a brief period when the government were reconsidering the 25% bonus due to a higher than expected take-up of the scheme. However, they have decided to go ahead and give the bonus as planned.

When these schemes mature in 2006/2007, what do you think will happen:

  • House Prices Will Rise
  • People will pay off chunks of their mortgage /debt
  • Stock market will rise (bearing in mind that most SSIA holders are very sceptical of the SM)
  • It'll be stashed in bank accounts earning a whooping 3% (Irish Best Buy) Interest Rate

I reckon those with mortgages and no children will pay chunks of their mortgage and some will probably BTL. Those with children will probably supply their children with housing deposits (a practice that is quite common at the moment in Ireland).

Bear in mind that those who contibuted the maximum to their SSIA's (47% of holders) stand to get a lump sum of around €24,000 - €48,000 for a couple -- a great time to start a business in Ireland selling the likes of the Dixons £8k TV featured on another topic on this board

:D

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I'm pretty sure that a lot of this money will find its way into the housing market. :rolleyes:

Maybe, it could cause the last spurt in growth before it all finally stops - much in the way that the changing of the MIRAS rules in the UK pushed prices to the peak in the late 80's.

Most people in Ireland will simply not accept that anything is wrong whatsoever with the housing market. I am convinced that there is only one thing that will change this view - a hike in interest rates. And that is coming.

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Surveys are suggesting that cars, home improvements and holidays are likely to benefit most from SSIAs. But the surveys don't appear to suggest any significant

effect on the housing market, as the average amounts per person are too low to materially affect prices.

However, there is a perception that SSIAs will push the property market higher and it's perception that sets the mania in bubble markets.

I wouldn't be surprised if the upward movement in prices this year is in some part fueled by the SSIA myth - so it becomes self-fulfilling.

I agree with Flash that the ECB interest rate, or more directly, eurozone inflation is the key to ending the party.

We have a "free money" situation in Ireland. Banks are flooding the economy with Euros at rates way below house price inflation rates.

IMHO, until eurozone inflation is clearly identified as a problem and the ECB is forced to act with higher interest rates, the party here will continue.

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I have Irish family at the grandparent, great aunt/uncle level and the thing people forget about many of the real Irish is that they have always had a fascination about land and owning it. You will rarely if ever find an Irish person of a certain age selling land/property at all - they love to acquire it but are loathe to sell ever. Thats my sweepingly generalised view of the country dwellers (rather than the Dublinites which I do not know anything about) anyway. I don't think you will see the same dumping of BTL or residential investment property over there, more of a slow death via negative equity.

Heard of a big 6 bed house with land in Limerick last week - on at euro 1.5m - went for....euro 2.7m in a competitive bid situation! Since when was any property in Ireland worth nearly two million quid? Madness.

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Heard of a big 6 bed house with land in Limerick last week - on at euro 1.5m - went for....euro 2.7m in a competitive bid situation! Since when was any property in Ireland worth nearly two million quid? Madness.

In Dublin 4 that will only buy something quite modest these days.

Property bulls often say to me, "But why will it fall?". I think that is the wrong question. It should be "How were prices allowed to be bid up to these levels?"

The Republic of Ireland (70,000 sq km) as a whole is the around the same size as Holland and Belgium combined, but with just over 4m people on it - less than the population of Yorkshire (5m - 2001 census).

Edited by Flash

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  • 301 Brexit, House prices and Summer 2020

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