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Duplex

Bubble Trouble

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The previously bullish turn bearish as the realisation dawns that the Irish economy is at severe risk of a bursting bubble.

Study the property sections of the newspapers and you will begin to see the nature of the problem. Corporation houses in Dublin 4 are being flogged off at €600,000. Modest redbrick homes in Dublin 6 are going for €1.8m. The intrinsic value of the property bears no relation to the price charged for it.

Ireland is now suffering a Japanese-style asset bubble. There are many senior people within the banking system who realise the crazy nature of what is happening. They can do nothing to stop it: some 60% of their loan books are now committed to mortgages or to loans to builders and developers.

Their marketing experts are promoting the notion of “100% mortgages”. Young borrowers are being told to take out interest-only mortgages. Others are being induced into taking on 35-year mortgages. It is only a matter of time before we enter the Japanese-style era of intergenerational mortgages where the loan is passed on to the next generation to pay off.

Can anything be done to stop this madness? The answer is probably not. If a person buys a modest home in Dublin’s south city for, say, €1.75m, they will pay another €200,000 in stamp duties and legal fees on the transaction.

Sunday Times

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Clearly, there are quite a number of people who have made considerable sums from their business dealings during the period of the Celtic tiger, but it is obvious that a large part of the frenzy in the property market is being fuelled by cheap credit. Now this credit is going to become a lot more expensive because of conditions beyond our control.

Duh!

It seems that Ireland is only just waking up to this fact. I am staggered by how many so-called professional, intelligent people have mortgaged themselves to the hilt (on investment property as well their own homes) without "stress-testing" their loan for future rate rises.

I suppose they will blame the ECB now for spoiling the party. :rolleyes:

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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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