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Duplex

I Will Say This Only Ah Fifty Times

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The Economic and Social Research Institute in Ireland has issued another warning on the Irish property bubble. Phrases such as “massive house price fall” and “house prices could fall by over 30%” are not lightly bandied about by academics in the pay of government. This warning follows a statement by the ECB yesterday warning of the risks of unsustainable asset price inflation.

The ruling Finna Fail party however won’t act to gently deflate the bubble by some combination of fiscal and regulatory action. The government will instead allow the bubble economy to succumb to an inexorable savaging by the forces of globalisation; safe in the knowledge that it can sell this pup to the credulous majority. The busting of the Irish bubble will impact the UK, Ireland is its fourth largest export market and Irish investors pour more money into UK property than any other nationality.

ESRI warns of threat to house prices

By Brian O’Mahony, Chief Business Correspondent

HOUSE prices could fall by over 30% if the economy was hit by a sudden loss of confidence, the Economic and Social Research Institute (ESRI) has warned.

Prof FitzGerald warned, however, of the real dangers for the economy in its over-dependence on the construction sector.

Not only that but borrowers are showing no signs of caution and continue to invest at a very high level.

These are “internal risks” that have to be set against the “global imbalances that, if anything, are growing in magnitude.”

That loss of momentum could then trigger the massive house price fall as unemployment undermined confidence and lenders got worried about borrowers’ ability to repay their debts, warned Prof FitzGerald.

Another Warning

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"HOUSE prices could fall by over 30% if the economy was hit by a sudden loss of confidence, the Economic and Social Research Institute (ESRI) has warned."

This is pointless - Joe O'Public will read that as an extreme outlier of a possibility.

"Sudden loss of confidence" strikes me as being like "sudden loss of braking power" in your car. Sure we all know it could happen, but it doesn't stop us driving at 80mph on the motorway every day.

If road traffic deaths starting going up dramatically, and people had friends and family dying as a result, then they might slow down or stop using their car.

Likewise, people will not listen until there is blood on the estate agents windows, with friends and family being affected.

Despite what is said on this site every day, the crash is by no means here (UK or Ireland). We are still teetering on the brink. If we have started to fall down the other side, it is currently so slow and insignificant as to be imperceptible to the average person.

:ph34r:

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If we have started to fall down the other side, it is currently so slow and insignificant as to be imperceptible to the average person.

:ph34r:

That is to say everyone in the UK except for that subset of HPC members who are not bulls, or turncoat bears who have bought recently. I make that about 99.998% of the population.

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Likewise, people will not listen until there is blood on the estate agents windows, with friends and family being affected.

True the market reacts to fear not risk. :ph34r:

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True the market reacts to fear not risk. :ph34r:

Oh ye of little faith in Irish property fanaticism...

the Irish government will, by one way or many, increase the takings from renters and the givings to mortgage holders. That is of course after the market stalls in 2007 when the last desperate ftb races against the ECB and secures him/her/themself a coveted notch on the property ladder.

Ireland is surreal in the extreme.

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Dunphy was interviewing one of the authors of the report on the radio this morning. Either the press have misunderstood this or she was doing some serious backtracking.

Dr whateverhernamewas was saying that the 30% drop was something they had put into their models to see what would happen to the economy. They were "not saying that house prices were expected to fall by 30%".

Huh? It just didn't make sense.

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Not only that but borrowers are showing no signs of caution and continue to invest at a very high level.

This is something that still makes my jaw drop. People no longer understand investment risk.

I know people who have borrowed money to invest in property in Eastern Europe. This would have seemed ludricrously risky only a few years ago. But now it seems a 'dead cert' for many.

I was talking to someone who told me that he expected his investment in Bulgaria to double over the next few years. "Ok", I said, "You may well be right. That would be adequate compensation for a very high risk investment".

"Oh it's sure to pay off" he replied. But then he went a bit silent as he took in what I'd said.

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This is something that still makes my jaw drop. People no longer understand investment risk.

I know people who have borrowed money to invest in property in Eastern Europe. This would have seemed ludricrously risky only a few years ago. But now it seems a 'dead cert' for many.

I was talking to someone who told me that he expected his investment in Bulgaria to double over the next few years. "Ok", I said, "You may well be right. That would be adequate compensation for a very high risk investment".

"Oh it's sure to pay off" he replied. But then he went a bit silent as he took in what I'd said.

The modern property investor is a gambler by any other name.

In years gone by the banks would not have touched such people with a bargepole. What are the reasons for the laxity of lending policies at the moment? Why have banks chosen to risk money on these punters?

Is it the sophistication of the modern financial system which allows mortgage debt to be packaged and sold to gullible investors?

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The modern property investor is a gambler by any other name.

In years gone by the banks would not have touched such people with a bargepole. What are the reasons for the laxity of lending policies at the moment? Why have banks chosen to risk money on these punters?

Is it the sophistication of the modern financial system which allows mortgage debt to be packaged and sold to gullible investors?

Perhaps the modern property investor feels that because the bank is prepared to lend him the money, it "must be safe".

I've discussed the banking question with a couple of buddies I know at the AIB (one of them quite senior). It seems that they are focused on short-term lending targets, market share over the next twelve months and their next bonus. Oh, and building the Poland business up so that they can start the same thing again over there.

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Perhaps the modern property investor feels that because the bank is prepared to lend him the money, it "must be safe".

Everyone is an investor in LaLaLand. When the ECB rate went up earlier this month RTE evening news aired a piece on this couple in Newbridge/Kildare/wherever. The chick looked incrediously into the camera saying after all they'd done and struggled to get on the ladder etc blah blah, the rate hike was a "slap in the face"... wait til she finds out in the next few years that her property is worth thousands less than her mortgage... and her monthly payments are several hundred higher...

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Ireland has gone completely debt bonkers no doubt about it, understanding of risk is nonexistent, the economy has morphed into a property speculation driven monster.

But look at Bulgaria where thousands of Irish speculators have placed a bet, shock horror turns out its another pyramid scheme.

Hence, the rental prospects for Bulgarian holiday property are poor and the exit strategy (ie who will buy your newly built off plan apartment) is non-existent.

This is particularly true as there appears to be no demand amongst Bulgarians for second homes (they haven't bought their first home yet) nor amongst central Europeans who prefer to holiday in Spain or Croatia.

And when the people of little Mauritius, want to send a chill up the spine of budding debt junkies where in the world do they use as an exemplar, why tis little Ireland.

Consumerism, the lifeblood of capitalism, is threatening to throw huge numbers of people into crippling debt.

Nowhere in the European Union (EU) has consumerism played such a vital part in economic activity as in Ireland. When the world went into recession following the attacks on the World Trade Centre, Ireland’s economy kept booming because of continued consumer spending. This year, the Irish public will spend a whopping €4 billion over Christmas, a 10% increase over 2004, according to the Small Firms Association of Ireland. Furthermore, on 24th December, in the frantic and maddening rush to the big day, consumers will spend €22 million an hour, to the glee of business owners. The Irish will be the most extravagant spenders during the festive season in the entire EU.

Merciful hour! as they say in Ireland

Bulgar shocker

Desert Island

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wait til she finds out in the next few years that her property is worth thousands less than her mortgage... and her monthly payments are several hundred higher...

I haven't heard anyone in the Irish media explain that interest rates are currently at EMERGENCY LEVELS. i.e. only so low as to help the German/French economies out of a hole.

I did hear a senior banker (can't remember which bank) who when asked whether it was sensible for a first-time buyer to take out a 100% mortgage, said "buyers should be allowed to make their own mistakes".

That gives you an insight into the mindset of these sharks. They will lend all the time you can pay. Then when you can't, they will foreclose.

Edited by Flash

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Trust me when the sh@t hits the fan everybody will want to sell and nobody will want to buy. By that I mean those who are over extended debt wise, in neg equity, out of the job. But there will be enough of them to bring the market down to more realistic levels.

CASH IS KING in sofar as the alternative would be having it locked up in an imploding housing market.

The above is in no way to be considered as financial advise DYOR :ph34r:

edit: don't hold your breath mind :D

Edited by Catch22

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That gives you an insight into the mindset of these sharks. They will lend all the time you can pay. Then when you can't, they will foreclose

As the Irish are famously litigious, maybe people are planning some type of national class action against the Banks when things go tits up.

They will have good grounds; misselling, misrepresentation, culpable fraud etc. Of course mass legal action would kill stone dead the market for Irish mortgage backed securities in the global securities market and produce a credit crunch, as no bank would have Irish mortgage debt on its balance sheet. Any enterprising lawyers out there? :D

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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