Irish Property Is "bombing" As Celtic Tiger Collapses

[Realistbear]

http://www.independent.ie/business/irish/r...ng-1047176.html

Run for cover, cash is king

Sunday July 29 2007

WHERE should you sink your savings in these troubled times?

Property is bombing.

Shares are in freefall.

Cash is king.

Sometimes it is good policy to sit on your cash, bite your lip and watch it dissolve -- slowly. A bit better than sitting on your share portfolio and watching it implode -- quickly. Far better than borrowing in buckets, buying property and sweating it out as the capital melts away .

Today is such a time. Irish assets are a temporary nightmare.

Which Irish assets?

All Irish assets.

Great Crash 2 seems to be unwinding at a furious pace now. Too late to get out now if you are in BTL or are an overgeared OO. House prices are downhill from now on and the descent will be rapid. The Times is reporting 10% falls in some areas of the UK and a "FOREST OF FOR SALE BOARDS" The warning signs are already flashing red.

[DrBob]

Did someone get paid to write that article?

It sounds like a financial advisor's drunken rant! Do you think the author took a dictaphone to the pub and recorded his ramblings after his 8th Guinness?

[jimmyjazz]

Did someone get paid to write that article?

It sounds like a financial advisor's drunken rant! Do you think the author took a dictaphone to the pub and recorded his ramblings after his 8th Guinness?

remember the private eye fictional reporter called Lunchtime O'Booze.

you got to hand it to the irish , when they do something they do it proper.

a proper bubble then a proper crash followed by a right proper wailing and gnashing of teeth,

no half measures with those folks

Edited July 29, 2007 by jimmyjazz

[Mr Yogi]

Great Crash 2 seems to be unwinding at a furious pace now. Too late to get out now if you are in BTL or are an overgeared OO. House prices are downhill from now on and the descent will be rapid.

I disagree about the pace.

I think it will unfold in slow motion. We've definitely reached the point at which the market has ground to a halt. For the Sunday Times to run a double spread like today's confirms that.

But prices won't crash overnight. Most people don't need to sell their homes and so will simply stay put. It is only as more and more people with an imperative to sell accept lower offers that we will see prices slide.

The high point in the property market last time round came in the summer of 1989. Yet prices didn't really start tumbling for a couple of years after that before reaching their trough in 1993. Even the prospect of thousands of BTLers baling out doesn't suggest to me that things will happen any faster this time.

Sorry, but if you STR a couple of years ago you're going to have to wait another 3-4 years before the optimum time to buy.

Please don't jump the gun!

Edited July 29, 2007 by Mr Yogi

[jonpo]

It would be really cool if cash really was king I could wheel out all my predictions I made in 2004 that it would all end in a dash for the cash....

Bear markets all round ? quick dash for the cash

[BandWagon]

It's a good time to revisit this:

"The Economist" has been warning that the Irish property market is in a serious bubble for years.

Pam Woodall has spent years writing about the excesses of speculation. Her opinions were ridiculed, it was different in Ireland apparently.

Those people at "The Economist" obviously didn't understand the Irish economy.

Speaking against Ms Woodall, the ESRI's David Duffy said he expected growth to continue, with a 'soft landing' for the Irish market.

He argued that the key to understanding the housing market was to appreciate that was part of a wider economy 'which has clearly been very buoyant over the period of rapid growth in house prices'. Mr Duffy pointed to demographic factors, significant levels of immigration, economic growth, employment growth and rising personal disposable incomes as the key drivers of the property market.

So now housing is slumping, next we'll see a credit contraction, bank failures, unemployment will rise as builders retrench, economic immigrants will leave.

Economies are cyclical, no boom lasts forever, not even in Ireland.

What a pity they didn't listen.

[PropertyGuru]

The high point in the property market last time round came in the summer of 1989. Yet prices didn't really start tumbling for a couple of years after that]

what utter ********.

[benj]

But prices won't crash overnight. Most people don't need to sell their homes and so will simply stay put. It is only as more and more people with an imperative to sell accept lower offers that we will see prices slide.

I used to subscribe to this viewpoint, but I'm beginning to wonder. True, owner-occupiers may be able to survive through a period of negative equity, and so long as they keep their jobs and continue handing over their money to the bank, many of them they may be able to hold out and not sell at a nominal loss.

But what about all the BTLers who are unable to cover their mortgage payments? They have far less incentive to "stay put", since they don't actually live in these properties. They will surely want to unload their unprofitable investments as close to the top of the cycle as possible. So if they are a significant driver of the housing market - and all the signs say that they are - then the slide could very well be more rapid than in previous downturns.

I am not making any predictions, just thinking out loud...

[Fancypants]

I used to subscribe to this viewpoint, but I'm beginning to wonder. True, owner-occupiers may be able to survive through a period of negative equity, and so long as they keep their jobs and continue handing over their money to the bank, many of them they may be able to hold out and not sell at a nominal loss.

But what about all the BTLers who are unable to cover their mortgage payments? They have far less incentive to "stay put", since they don't actually live in these properties. They will surely want to unload their unprofitable investments as close to the top of the cycle as possible. So if they are a significant driver of the housing market - and all the signs say that they are - then the slide could very well be more rapid than in previous downturns.

I am not making any predictions, just thinking out loud...

you're quite right. The vast horde of BTL numpties are a new factor in all of this, no-one knows how they will behave, but the suspicion is that they will cause the market to drop more rapidly than post-89.

[stuckmojo]

Ireland is done.

Its exponential growth in the last few years made it less competitive than Poland, Hungary or other rising countries which can offer cheaper and far better educated workforce.

[jimmyjazz]

Can I take this opportunity to make a point about HPI and immigration.

It seems that immigration is a very weak causal factor for HPI.

THere is correlation between booming house prices and increased immigration but that doesnt mean the immigration causes the HPI.

It is more likely that the HPI and associated booming economy causes the immigration.

What really causes the HPI is low interest rates , speculative mania etc etc

Milton Friedman was of the same opinion about general inflation (CPI/RPI etc) and wages.

He argued that too much money caused the inflation which in turn caused workers to demand higher wages,.

SO it wasnt the greedy workers who caused inflation (standard wisdom for many years ) but - according to FRiedman - it was the excess money supply which pushed up prices and forced workers to make higher wage demands.

[OnlyMe]

jimmyjazz

Large migrant/immigrant workforces and bubble economics go hand in hand, no controlled or natural growth, just speculation and sucking in more and more resources and people, further pushing up competition for resources, causing inflation etc etc. A virtuous circle of non-real growth, with a growing money supply and debt proppoing the whole thing up and stoking the fires.

Ireland will be truly done if/when the US instigate a plan of taxation that accounts for worldwide profits of US companies to be taken into account when the IRS asseses tax levels. Irish investment now is little more than a corporate tax dogde exercise, 12.% rates, US companies declaring earnings in Ireland rather than home/elsewhere - the US is bankrupt, the US govt needs money and it needs it quickly, it cannot simply continue raising the debt threshold year after year. Ireland's competitive advantage is gone already, never to return.

[@contradevian]

jimmyjazz

Large migrant/immigrant workforces and bubble economics go hand in hand, no controlled or natural growth, just speculation and sucking in more and more resources and people, further pushing up competition for resources, causing inflation etc etc. A virtuous circle of non-real growth, with a growing money supply and debt proppoing the whole thing up and stoking the fires.

Ireland will be truly done if/when the US instigate a plan of taxation that accounts for worldwide profits of US companies to be taken into account when the IRS asseses tax levels. Irish investment now is little more than a corporate tax dogde exercise, 12.% rates, US companies declaring earnings in Ireland rather than home/elsewhere - the US is bankrupt, the US govt needs money and it needs it quickly, it cannot simply continue raising the debt threshold year after year. Ireland's competitive advantage is gone already, never to return.

Good post IMO

Also..

Ireland is a tax haven

[Levy process]

Shares are in freefall.

Not last time I looked, ten minutes ago.

[SHERWICK]

SO it wasnt the greedy workers who caused inflation (standard wisdom for many years ) but - according to FRiedman - it was the excess money supply which pushed up prices and forced workers to make higher wage demands.

Thankfully we do not have excess money supply here in good old Blighty!

Edited July 30, 2007 by SHERWICK

[needle]

Not last time I looked, ten minutes ago.

So its gone up for 10 minutes. Great.

Its still the worst performing stock market in the world this year.

[OnlyMe]

Cashing on on high land prices and exiting from high living costs and wages.

Stick a fork in the Irish economic miracle, its done.

http://www.irishdev.com/newsarticle.aspx?id=5635

Up to 900 Dublin jobs to be Xerox'd

It has been widely reported this morning that part of the outsource deal between Xerox and IBM, staff were notified yesterday afternoon the staff will be offered redeployment options (some overseas) or redundancy.

Initially, when the story broke earlier this year, Xerox had told all staff that their jobs would be safe.

[Realistbear]

Cashing on on high land prices and exiting from high living costs and wages.

Stick a fork in the Irish economic miracle, its done.

http://www.irishdev.com/newsarticle.aspx?id=5635

Up to 900 Dublin jobs to be Xerox'd

It has been widely reported this morning that part of the outsource deal between Xerox and IBM, staff were notified yesterday afternoon the staff will be offered redeployment options (some overseas) or redundancy.

Initially, when the story broke earlier this year, Xerox had told all staff that their jobs would be safe.

Xerox staff to Xerox CEO: But you told us our high paying jobs necessary to pay for our equally high cost mortgages were secure?

Xerox CEO to Xerox staff: I lied.

[lets get it right]

The high point in the property market last time round came in the summer of 1989. Yet prices didn't really start tumbling for a couple of years after that before reaching their trough in 1993. Even the prospect of thousands of BTLers baling out doesn't suggest to me that things will happen any faster this time.

You're talking nonsense. Joint MIRAS tax relief was removed on July 31st 1988.

At which point the market just STOPPED. After months of a complete stand-off where vendors just could not get their heads round the fact their property had not sold within a few days of being on the market - prices started falling.

I put a house on the market in the last week of July 1988 at, admittedly, an ambitious price. I had about 20 viewings in the first week but no offers. In August the viewings just stopped. I chased the market down for 2 years, rejecting a couple of offers along the way that, with hindsight, I should have taken. Prices fell - FROM August 1988 - for about 2 years and reached their nadir in 1990/1991. By the time we left the ERM in September 1992 the property market was already on its knees.

[OnlyMe]

You're talking nonsense. Joint MIRAS tax relief was removed on July 31st 1988.

At which point the market just STOPPED. After months of a complete stand-off where vendors just could not get their heads round the fact their property had not sold within a few days of being on the market - prices started falling.

I put a house on the market in the last week of July 1988 at, admittedly, an ambitious price. I had about 20 viewings in the first week but no offers. In August the viewings just stopped. I chased the market down for 2 years, rejecting a couple of offers along the way that, with hindsight, I should have taken. Prices fell - FROM August 1988 - for about 2 years and reached their nadir in 1990/1991. By the time we left the ERM in September 1992 the property market was already on its knees.

The flagged double Miras withdrawal got all and sundry bidding up prices in an effort to gain the full £60k entitilement amongst couples, like you said after that all those that were willing to pay whatever price to beat the deadline were left stranded and nobody else wanted to enter the market, it went dead, immediately.

The indexes never did reflect what actually happened on the ground.

[Ash4781]

While the Irish housing market has dipped this year following more than a decade of rapid gains, the value of property accounted for 72 per cent of average household wealth last year.

The report forecast that this percentage would fall in coming years as Irish people diversify their investments into stocks and bonds.

While household debt rose 20 per cent to €161 billion ($257,000), this was more than offset by a 15 per cent gain in cash savings, a 26 per cent gain in privately held stocks and an 11 per cent gain in the value of pensions.

Mr O'Sullivan said the Irish were saving about 14 per cent of their disposable income, the highest rate in Europe with Germans coming second on 10 per cent.

http://www.news.com.au/story/0,23599,22169402-401,00.html

What's inflation running at in Ireland ?

[Ah-so]

There was an article out today showing that Ireland had the world's 2nd highest rate of millionaires or something. However, all that wealth is nothing more than the value of property - a value decided on the price property is changing hands for today. When the Irish wake up and realise that the country is now littered with empty unattractive 3-bed semis, the value of all property will crash.

With 20% of the economy in contruction and a huge surplus of residential property, huge personal indebtedness, I cannot see how there can be anything else other than a massive recession. The way it is painted in the article, 3.5% is seen a virtual recession - even the bears are now thinking within the bulls' framework.

[Ash4781]

http://investing.reuters.co.uk/news/articl...OMY-JOBLESS.XML

Ireland's thriving economy has created tens of thousands of new jobs, but a fast-growing population means the unemployment rate has remained fairly static at, or close to, what most consider to be full employment.

Economists are watching labour data increasingly closely, however, for signs that a slowdown in Ireland's once booming property market and lower levels of house building are spilling over into the rest of the economy.

"We expected a bigger percentage increase in claimants on the month. The pace of deterioration in the labour market due to housing-related layoffs is slow," Rossa White, economist at broker Davy, wrote in a research note.

The pace may accelerate in September and October but on the whole employment data looks firm, White added.

"Potential spillover into the rest of the labour market, apart from sectors tied to housing, is a 2008 issue," he said. "We expect the unemployment rate to reach 5 percent by year-end and 6 percent by end-2008."

http://globalpensions.com/?id=me/17/news/27/46753/27/

IRELAND – Battered by a large exposure to domestic equities and volatile stock markets all Irish managed pension funds suffered during July 2007, according to new figures from Hewitt Associates.

The Hewitt Managed Fund Index, a benchmark for the performance of all Irish managed pension funds, returned -3% last month with portfolios weighed down by the large exposure to Irish equities, which was close to 20% of the total fund.

Over this period, Eagle Star was the best performing manager with a return of 3.4%, while Bank of Ireland Asset Management languished at the bottom with a -0.2% return.

Analysing the implications, Darren Prosser, an associate from Hewitt Associates, said the amount of diversification in the Irish managed pension fund sector could be questioned because of its high exposure to the domestic economy.

Prosser said: “It has a huge exposure to the construction sector and banks.”

not looking too good!

[scott666]

I remember about 10 years ago the only time we ever came into contact with the Irish round here (SW Scotland) was when they would come round in vans offering to tar private roads and drives (all very dodgy as you might imagine). Hadn't seen them for a few years until last year a few of them flew over in helicopters to participate in a local pheasant shoot, spending 15-20 grand for a day's shooting (not including the transport costs).