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Will the property bubble burst at this rate?

Monday January 30th 2006

QUESTION OF THE WEEK

I AM thinking of investing in a rental property. Obviously, the outlook for interest rates and the future performance of the property market is a major concern.

Where are rates likely to go over the next year or so? Also, everybody is talking about a "bubble". But is it going to burst?

Not all bubbles burst. In fact, only 40pc of them do, according to economists.

Is this bubble one of the exploding variety?

All we can do is look at economic forecasts - and most predict further steady growth in the property market in the year ahead.

Last year, property grew by 7pc - and this year it is likely to do slightly better at 8pc, according to the latest outlook from IIB Bank.

The bank's economist, Austin Hughes, said a major new influx of immigrants will shore up the property market.

Earlier in the year, Permanent TSB published its economic outlook and predicted growth of 6pc-8pc for the property market.

Those forecasts are pretty typical - although on the downside, we do get periodic dire warnings from the Central Bank, which is concerned about the level of borrowing out there.

It's much harder to get a prediction about the prospects for the housing market beyond the current year.

That's when the clouds start to appear on the horizon.

Firstly, interest rates will be rising through the year - by 0.5pc-1pc, which will make servicing payments much more expensive.

Did you factor this in?

Payments are likely to go up by €136 per month for a €250,000 mortgage for every 1pc rise in rates.

Everyone will be feeling the pinch, with a corresponding impact on the property market.

Another possibility is that in a few years' time, the major influx of immigrants may decide to go elsewhere, which would hit the rental market hard.

So, the overall outlook for the rental market and property prices generally is good for the year ahead - but there are clouds on the horizon after that.

You could cushion potential future blows by fixing your mortgage.

NIB has held its fixed rates at the same levels they were at before the last rise - ie at 3.45pc over three years, which is below most variable rates, even though interest rates are on the rise. (BT)

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The bank's economist, Austin Hughes, said a major new influx of immigrants will shore up the property market.

So am I right to assume most immigrants to Ireland are Swiss bankers and Arab oil sheiks?

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The bank's economist, Austin Hughes, said a major new influx of immigrants will shore up the property market.

Agghh.

Just the mere mention of this man makes my fists clench and my stomach turn. Then I begin to twitch like Chief Inspector Dreyfus, when confronted with the pathetic excuses of the bungling Inspector Clouseau.

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Agghh.

Just the mere mention of this man makes my fists clench and my stomach turn. Then I begin to twitch like Chief Inspector Dreyfus, when confronted with the pathetic excuses of the bungling Inspector Clouseau.

:lol::lol::lol:

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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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