Irish Property Bubble

End of the Cult.

2007-05-06T12:05:00.000+01:00

If I was in any doubt that property has consumed this country utterly, I doubt it no more. I actually wasn’t in doubt to be frank. I mean your powers of observation would have to be stunningly feeble, if you hadn’t noticed by now the obsessive fascination. We all know about the building boom economy, the tens of thousands of empty houses, the absurd price that land in Ireland commands, the property hot spot, off plan, globe trot and the unmerciful serial fleecing of deluded innocents. The evidence is there as plain as the soffit on your semi. This country has fallen victim to a fixation akin to the Easter Islanders destructive Maoi carving cult.

The Irish housing cult is crumbling now however. And the cherry on the apogee has to be the current brouhaha of an election campaign. A profoundly pitiable piss and wind affair, dominated by guess what? Houses.

Stamp duty, stamp duty, stamp duty U turns,
Stamp duty payments, renovations, decorations,
Market value procrastinations,
The boom is getting boomier,
The bust is getting loomier.

My advice? Lay low, keep you head down, and keep your mouth shut if you are tempted to say anything as (your) life threatening as ‘I told you so’.

Dublin House Prices 1970-2005

2007-03-26T18:13:00.000+01:00

The Wave

2007-02-23T15:31:00.000Z

Capturing something as indistinct and slippery as the public mood is difficult. But catching the fleeting moment when that mood changes is much more challenging.

Hunter S Thompson the American writer and originator of all things Gonzo, was particularly proud of this piece of writing which he described as; “probably the best thing I’ve written” He was right to be proud. He describes the feel good zenith of the San Francisco Hippie zeitgeist beautifully.

San Francisco in the middle sixties was a very special time and place to be a part of. Maybe it meant something. Maybe not, in the long run . . . but no explanation, no mix of words or music or memories can touch that sense of knowing that you were there and alive in that corner of time and the world. Whatever it meant. . . .

History is hard to know, because of all the hired bullshit, but even without being sure of "history" it seems entirely reasonable to think that every now and then the energy of a whole generation comes to a head in a long fine flash, for reasons that nobody really understands at the time — and which never explain, in retrospect, what actually happened........

There was madness in any direction, at any hour. If not across the Bay, then up the Golden Gate or down 101 to Los Altos or La Honda. . . . You could strike sparks anywhere. There was a fantastic universal sense that whatever we were doing was right, that we were winning. . . .

And that, I think, was the handle — that sense of inevitable victory over the forces of Old and Evil. Not in any mean or military sense; we didn’t need that. Our energy would simply prevail. There was no point in fighting — on our side or theirs. We had all the momentum; we were riding the crest of a high and beautiful wave. . . .

So now, less than five years later, you can go up on a steep hill in Las Vegas and look West, and with the right kind of eyes you can almost see the high-water mark — that place where the wave finally broke and rolled back.

Hunter S. Thompson Fear and Loathing in Las Vegas

At this juncture in the deflation of the Great Irish Property Bubble it is of course difficult to gauge the zeitgeist. But I think it is changing; and a few years from now it may be possible to look back at this time and see where the wave of folly and greed finally broke and rolled back.

Sign of the Times

2007-02-19T09:38:00.001Z

The much heralded soft landing for the Irish property market is happening right now, according to the banks; the estate agents and Damien Kiberd. That being the case we have an opportunity here folks to witness something that has never, ever occurred in economic history, a soft landing after a prolonged period of rampant speculation in an asset class. So put on the kettle pull up a chair, make yourself comfortable and watch, a never to be repeated, inconceivable (until now) first.

But ah……before you get too comfortable in that chair, I have a confession to make (hangs head). It shames me to admit this but… when I first heard of the prophecy, that an economic miracle was to be bestowed upon this island, I was just a tiny weenie bit cynical. But not for long mind you. I know, I know. How I could possibly question a revelation bestowed on an assortment of estate agents, bankers and Damien Kiberd?. Please allow me to explain my fleeting moment of doubt. You see, I foolishly thought that the old rules of supply and demand still applied, I thought that the Irish were about as indebted as any nation could prudently get; and then some. I looked at the number of empty homes in the country (250,000) and thought, we have sufficient of the houses. Ha ha ha, I laugh now at my foolishness. Oh were it that that was the end of my irreligious uncertainty. You see I thought (don’t ask me why) that in the new ferociously competitive global economy that Ireland’s falling competitiveness would effect our ability to procure and keep high earning productive jobs, I thought that the liquidity gusher that is the Japanese Yen carry trade was unsustainable, I had a notion that rising interest rates and falling real incomes growth might hinder rather than help. I even looked at property markets abroad where prices are falling and mortgage lenders and estate agents are going bust, and thought (please don’t laugh) that this might be instructive.

But mercifully, thankfully I banished these wicked feelings that prevented me from seeing the blinding light that so fortuitously shone upon some bankers, Damien Kiberd and several estate agents. Verily they have been to the top of the market and they have seen the Promised Land (bank).

Ps
The only people busy in the Irish market at the moment are the FOR SALE sign makers. The lads have most of their stock sitting in gardens the length and breadth of the country. You see, when the market was busy they would stick up an agents FOR SALE sign then a few weeks later return and stick a SOLD slip over the FOR SALE bit and then after the new owners had moved in return one last time to remove the sign for good. Not anymore. The sign makers routine has been disrupted of late by the softly softly market . Its no longer erect sign, sold slip, remove sign, its more; erect sign, erect sign, erect sign, erect sign of another agent beside the one for the first agent that you put up couple of months ago.

The sign makers are busy making new signs, as their existing supply ineffectually just stands there, weathering.

Media Bears

2007-01-07T19:15:00.000Z

The media seem to have emerged from the Christmas period like a bear with a sore head in their reporting of the Irish property market. Even The Irish Times the self styled organ of record, and a fervent housing bubble denier has allowed one, less than wholly enthused about things, observation on the venal grand illusion. But this week’s prize for bearishness goes to The Sunday Times and this leading editorial;

Our habit of throwing money around like it’s going out of fashion has only been reinforced by the dawning realisation that a slowdown in the property market may mark the beginning of an end of an era. The construction industry has been the engine of the Irish boom, and the levelling off of prices in recent months will have negative knock-on effects elsewhere in the economy. While there is no evidence yet of a freefall in property values, the possibility of price plunges and an accompanying collapse in house-building activity remains very real, with potentially devastating results.

The prospect of at least two further interest-rate rises before the election will also dampen sentiment in a market that has become notably less bullish in the past year. Always a background preoccupation, the fate of property values is likely to become an even greater popular obsession in 2007.

While house price rises have faded, inflation seems set to become the other defining feature of the year ahead. Provisional estimates suggest our inflation rate is likely to rise from 4.4% to 6% in the short term, and a further destabilising climb cannot be ruled out……..
We are embarking on a period of considerable challenge and no little uncertainty. As the election approaches, voters will have much to contemplate. The game is on, and it’s all to play for.

http://www.timesonline.co.uk/article/0,,2091-2534646,00.html

Now Is The Season.

2006-12-13T12:52:00.000Z

The autumn property selling season has ended. It was a selling season like no other, due to the fact that very little actual selling took place. The once hectic auction rooms are quite now, apart from the occasional stirrings of dispirited ghost bidders; across the land a multitude of hopeful For Sale signs are buffeted by depression driven winds from across the Atlantic. The market’s melancholy mood is indeed strikingly removed, from the hectic exuberance of blooming springtime.

The banks, auctioneers and the government like dutiful doctors fuss about the ailing market; variously offering comforting words, tinctures of interest relief and placebo like soft landings. But what is remarkable about the vested interests reaction to the utterly inevitable is their zealous denial. Denial in the face world beating indebtedness; rising interest rates, a glut of supply, ‘relaxed’ (to the point of comatose) lending standards and a collapsing real estate market in the United States.

But while I am surprised by this denial, I understand it. The bursting of the property bubble will do damage to this country, as have other speculative property market ‘corrections’ in other countries. Nevertheless, that the bubble was allowed to reach such epic proportions, that’s its bursting will cause misery, is much more than unfortunate.

Market Roller Coaster of the Mind

2006-11-14T00:16:00.000Z

Essentially a road map of what we are likely to witness as a nation over the coming months this handy chart is an excellent guide to market psychology from boom to bust. I think the market in general is somewhere between Euphoria and Anxiety, however some of the better informed market participants are probably firmly in the Denial stage. My guess is that the Denial stage in the broader market will arrive sometime in the Spring selling season.

Its a great time to get a commission.

2006-11-12T13:06:00.000Z

Click to enlarge this parody of the American National Association of Realtors latest advertising campaign. The campaign is entitled It's a great time to buy or sell. But can it be both a great time to sell and a great time to buy?

The Bubble has Landed

2006-11-09T16:09:00.000Z

The South East region of England is one of the wealthiest and most densely populated areas in Europe. Agricultural land values in the region reflect its affluent, metropolitan nature, an acre of arable in the Home Counties will cost you £5,429, £2,000 more than an acre of the green stuff in North East England or Scotland. However an acre of land in the South East is cheap as chips in comparison to land in Northern Ireland. An acre of land in the North will set you back a whopping (fanfare)……… £9,750. As far as I’m aware Northern Irish land is no more productive than land in Surrey, Hampshire or Kent. Northern farmers (to the best of my knowledge) haven’t taken to growing fields of poppies or marijuana, so why the hefty price differential. Could it be the spread of that rampant disease, bubbleitis from south of the border?

If you want more information on of the more bizarre side effects of the Irish Property Bubble, check out this link to The Valuation Office Agency in the UK.

http://www.voa.gov.uk/publications/property_market_report/pmr-jul-06/index.htm

New Home Building

2006-10-30T10:07:00.000Z

We are probably building many more new homes than we need. 15% of the housing stock is empty and rental yields are scraping 2-3%. Its surprising that we should have this massive excess of supply at a time when the Irish population is growing so rapidly; with the influx of migrants who have come to our shores to serve us in shops and restaurants and .... aah.... build houses.

Daft Inventory Meath

2006-10-23T11:11:00.000+01:00

The supply of homes for sale continues to grow during the peak selling season in County Meath.

iamfacingforeclosure.com

2006-10-10T10:30:00.000+01:00

"I'm a 24-year-old aspiring real estate investor from Sacramento CA. After going to few seminars I bought 8 houses in 8 months across 4 states with no money down. I fixed and sold 2 and then ran out of cash. I am now facing foreclosure on 5 houses. I'm learning my lessons, finding solutions and blogging about it. Comments appreciated!"

This guy and the mess he finds himself in is attracting a lot of attention in the blogosphere.
He’s stopped taking calls from the banks he owes money because he doesn’t like their bad attitude. He is presently hatching a dastardly and highly convoluted scheme to dump the properties he bought on unsuspecting ‘credit challenged buyers’. Oh and how did he find himself with all this property in the first place? He committed several criminal frauds in obtaining mortgages. And faces the unsavory possibility of some hard time (several years) in what the Americans call the ‘Big House’.

http://iamfacingforeclosure.com/

Vacant

2006-10-04T13:45:00.000+01:00

The number of vacant housing units in the US (9.1% of total stock) is at it's highest since 1960 (when records began). In Ireland the number of vacant units is somewhere in the region of 15%, (according to figures from the CSO) The vacancy rate in the UK is roughly 3% of housing stock. Have we repealed the laws of supply and demand in Ireland? Or are we witnessing one of the greatest speculative asset bubbles in European history?

http://www.census.gov

So, Said Fred..

2006-09-27T17:01:00.000+01:00

"To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end." - Friedrich Hayek 1933
Enough said Fred.
Imagine if Hayek was alive today; looking for a concrete (or timber framed) example to support his thesis that curing a debt binge with more debt was a bad idea. Where oh where would he find a debt engrossed 'guinea pig' to observe,..... no don't tell me... its on the tip of my tongue.

Those Who Ignore The Lessons of History

2006-09-23T23:10:00.000+01:00

Are Youze Talking To Us?

2006-09-13T11:33:00.000+01:00

Jean-Claude Trichet, president of the ECB, suggested last week that the Irish housing market was ‘abnormal’. Abnormal hey?; abnormal sez he, abnormal is it? Why that jumped up little cheese eating surrender monkey! And to add insult to injury a shower of yahoos be the name of Fitch Ratings sez that, we should keep a look out for "macro-prudential stress”. Oi’ll give dem macro-prudential stress, so Oi will. Why cant all these spalpeens away and feck off. I’m off for a good f**kin read of Ireland's Own.

The rating agency Fitch said it now has five countries on watch for
"macro-prudential stress", up from two last year, using a set of indicators. A
mixed bag, they comprise Iceland, Azerbaijan, South Africa, Russia and,
surprisingly, Ireland, where the ratio of private credit to GDP has reached
190pc, the world's highest. The denouement for Ireland may not be pretty, since
it gave up control of monetary policy when it joined the euro.
Richard Fox, the author of the Fitch report, said: "We're still in a global upswing but this lending cycle is already starting to turn in some countries. Credit growth has
been zooming across the whole of Eastern Europe and that has tended to be a
precursor to banking troubles."

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/09/12/cctrade12.xml

The Madness of Crowds

2006-08-05T00:04:00.000+01:00

In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple, and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity.

The one constant in this world is human nature.

http://www.litrix.com/madraven/madne001.htm

A Must Read Study Study of International Housing Markets

2006-08-04T18:58:00.000+01:00

Between 1979 and 1995 house prices in Ireland did not rise in real terms. House prices in Germany have fallen for twenty five years, in New Zealand for thirty years and in Japan, The US and Australia prices have fallen in real terms for 35 years. These and other fascinating facts can be found in a US Federal Reserve Study of international housing markets.

We find that real house prices are pro-cyclical and tend to reach a maximum near business cycle peaks, often after a prolonged period of buoyant growth in activity has raised output above its potential level and inflation pressures have begun to emerge. Subsequently, real house prices fall for about five years and their previous run-up is largely reversed. Real GDP growth slows during the first year or so after house prices peak as do growth rates of private consumption and investment.

House price booms are typically preceded by a period of easing monetary policy with rates bottoming out about three years before house prices peak. Rates then reverse quickly (after the peak) in response to falling GDP growth

House Prices and Monetary Policy: A Cross-Country Study1. The 65-page treatise covers 35 years and housing cycles in 18 different countries including Ireland.

http://www.federalreserve.gov/pubs/ifdp/2005/841/ifdp841.pdf

Of Interest Only

2006-07-25T18:58:00.000+01:00

This report from todays Indo, on growing concerns of the consequences of lax lending by Irish Banks.

A MORTGAGE crisis is looming for first-time buyers over the aggressive marketing of interest-only and 100pc mortgages by banks and building societies, the Consumers' Association said yesterday.

Figures in a research report by Davy Stockbrokers estimated recently that up to four out of every 10 mortgages sold to first-time buyers are now 100pc homeloans. The report also found that the average first-time buyer was being offered a 35-year mortgage in a bid to counteract rapidly rising housing prices.

Yesterday, chief executive of the Consumers' Association Dermott Jewell said the promotion of 100pc and interest-only mortgages was "dangerous and an accident waiting to happen". "We were promised by the financial industry when these products were introduced that they would only be offered to a certain few. That is certainly not the case now."

The words closing, stable, and door spring to mind. Ho hum.

A Miscellany of Housing Stats

2006-07-11T16:42:00.000+01:00

Housing Completions

1998 42,000
1999 45,000
2000 48,000
2001 52,000
2002 56,000
2003 66,000
2004 75,000
2005 81,000
2006 100,000 (est)

Housing Loan Approvals

2000 80,858
2001 69,062
2002 93,136
2003 97,888
2004 104,305
2005 120,637

The Sixth Housing Land Availability Survey June 2004.

12,500 hectares of zoned serviced land in the state with an estimated yield of 367,000 housing units.

National House Building Cost Index 2004.

2.8% year on year. Below general Inflation.

Sources: (CSO, DOE)

Extreme Home Staging

2006-07-10T20:09:00.000+01:00

It seems Americans are hard wired to produce the tawdriest marketing schmaltz conceivable.
But this story of ‘extreme home staging’ is so gag worthy that I’m almost reluctant to repeat it here. So if anyone has a particular aversion to ‘lifestyle’ peddling, please navigate away from this blog, you have been warned.

NEW YORK (CNNMoney.com) -- Home sellers long ago discovered that small touches could boost selling prices - fresh flowers, the smell of freshly baked cookies. Now a real estate developer, Centex of Dallas, is adding in beautiful people.

The experiment in what's called "staging" is simple: Home buyers enter a home and see not just furniture but real people - actors - playing out the life they might lead there. "Staged model homes tend to be sterile and dry - this was a way to put the heartbeat back into the home," said Jim Garfield, spokesman for Roddan Paolucci Roddan, Centex's publicist.

In one performance, the 'model' family spent about three hours pretending it was Mom's birthday. They baked a cake, sang happy birthday and the children drew and framed a picture - of a Centex house. The original cast included a former Baywatch hunk, Jaason Simmons, in the role of Dad.

"It's physically manifesting somebody's dream," said Garfield.

Amanda Larson, a marketing director for Centex, says the idea came about when she sat down with Roddan's creative people and worked out an idea to make the visiting-a-model-home experience "more interactive and more
memorable."

http://money.cnn.com/2006/07/03/real_estate/

I warned you didn’t I.

This ‘extreme home staging’ will no doubt hit our shores as the market slows. Expect to encounter actors in pristine show homes in Mullingar, possibly partaking in a game of familial Monopoly, the child exclaiming, ‘Mammy, Daddy I landed on the Glens Executive Housing Development in Mullingar, I’ve won, I’ve won!’

No Iceland, not Ireland.

2006-07-06T07:45:00.000+01:00

The Financial Times reports on the troubled economy of an island nation in the North Atlantic.

Geir Haarde, Iceland's new prime minister plans to cool his country's overheating economy with a series of reforms aimed at ensuring that the island-nation avoids a hard landing. The comprehensive action plan includes measures to tame a booming housing market, curb wage inflation, improve financial regulation and rein in public spending. "We have given ourselves some breathing space," he told the FT.

Iceland has been the focus of international attention since February when investors, including many hedge funds, concluded the economy was dangerously overheating and withdrew funds, triggering a 30 per cent depreciation in the currency.

Fears of an economic meltdown have since dissipated. But the central bank acknowledges that growth will "go down rather quickly" next year and external economic developments could still trigger a sharper-than-expected correction. The economic boom was driven by the liberalisation of the housing market, tax reductions and overseas investment in power and aluminum projects. The effects of these factors were exaggerated due to the small size of the economy of Iceland which has a population of just 300,000.

As part of his reform package, Mr Haarde, has reduced the amount the Housing Finance Corporation - a state owned body that controls around 40 per cent of the mortgage market - is able to lend to borrowers. He is considering abolishing it in future, he said.

The prime minister has separately reached an agreement with unions to moderate wage claims and end a policy of broad tax reductions and replace it with a reallocation of tax benefits to the less wealthy. Mr Haarde has also halted government spending on some infrastructure projects and is prepared to suspend future spending if needed, he said.

http://www.ft.com/cms/s/0e635268-0c8b-11db-8235-0000779e2340.html

Tech Bubble Looks Like a Picnic

2006-07-05T19:34:00.000+01:00

The Wall Street Journal has this interview with Kenneth Heebner. “To get a lay of the land, we tracked down Kenneth Heebner, who since 1994 has managed the $1.2 billion CGM Realty Fund. It has the best 10-year record of all real-estate-focused mutual funds, according to fund tracker Lipper Inc.”

“WSJ: How is the housing market? Mr. Heebner: A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we’re going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast. These markets could fall 50% from their peaks.”

“WSJ: What has you so concerned? Mr. Heebner: I’m worried that more people will default on their mortgages. Risky mortgages..have been widely used in the last two years. Some people got 100% financing for their homes. It made the tech bubble look like a picnic.”

“As housing prices fall more people will be under water, and these people are just going to walk away from their homes. They are going to say, ‘I’m outta here.’ You’re going to see increasing foreclosures over the next several years. As [home] prices come down, it will create a difficult environment for home builders.”

“WSJ: What data have you most worried? Mr. Heebner: We’re seeing a huge increase in inventories of unsold homes. The role of incentives in selling a home is increasing so the weakness doesn’t show up immediately in list prices. Large price declines will follow in inflated markets.”

PRTB ?

2006-07-05T12:25:00.000+01:00

Following the discovery of a couple of hundred thousand empty homes by Census enumerators recently. I was less than shocked when I unearthed the following statistics published by the Private Residential Tenancies Board.

At the end of 2005, the number of registrations with the PRTB was 83,983 and this was in respect of 53,070 landlords and 150,518 tenants. At 3 March 2006, the number of registrations with the PRTB was 88,593 and this was in respect of 55,685 landlords and 160,251 tenants.

So, as far as the government is concerned, out of an Irish population of 4,200,000, only 160,000 are private sector tenants. Only 88,593 private sector rental properties exist in the state, about 7-8% of the housing stock. When you consider that agents believe that investors purchase roughly 40% of new build output, (running at 80,000 units currently) the disparity between the PRTB’s figures and the probable actuality is remarkable.

There is something remiss in the Irish property market, we have tens of thousands of empty homes, and a private rented sector that barley exists (statistically). Poor Bertie Ahern is labouring in a qualitative information desert, hence his bad tempered fits when pressed on the issue of Irish housing. Shirty Bertie hasn’t a notion, no one has.

http://www.prtb.ie/pubregfStats.htm
http://www.prtb.ie/pubregister.htm
The second link provides a county by county breakdown of PRTB registered properties.

Global Property Cycle Turning

2006-06-30T09:16:00.000+01:00

From MarketWatch. “Evidence is mounting that the global property cycle is turning down, as rising interest rates and heightened inflationary pressures combine to put the brakes on demand for real estate, according to a Morgan Stanley report.”

“‘Due to deflation shocks, global inflation has been low, which allowed major central banks to keep interest rates very low, in turn fueling property,’ economist Andy Xie said. ‘As inflation picks up simultaneously around the world, interest rates are rising everywhere, and the property boom is turning into a bust.’”

“Unlike in previous property cycles, Xie said institutional property investors have been active in shifting capital between different cities, leading to the rare situation where prices gained in unison around the world.”

“‘Innovations in the global financial system have led to a rising correlation of property markets to each other and central bank-policies. It has essentially turned deflationary shocks of the past 10 years into a global property bubble,’ Xie said.”

“He cites some telling statistics to illustrate his point. The value of U.S. housing has risen to 173% of gross domestic product in 2005 from 135% in 2000. And in Australia, housing values rose to 347% of GDP in 2005 from 271% in 2000.”

Bollywood does Banks

2006-06-28T13:04:00.000+01:00

I've just finished making my short film in India (its cheaper). The film is a tale of the murky world of Irish banking. I'm afraid that I couldn't afford English speaking actors so it's in Urdu, but with subtitles. I've attached a short clip to give a flavour of what I hope to be this summers blockbuster.

http://www.grapheine.com/bombaytv/play_uk.php?id=724918

Binge There Done That.

2006-06-23T09:40:00.000+01:00

Its always fascinating to get outsiders view of your country and the Jerusalem Post’s perspective is probably as detached as any. The author of this piece was tasked with finding examples of successful small nations, which might offer Israelis clues as how to grow their own economy, Oy vey!

Two more different nations than the Swiss and the Irish would be difficult to imagine. If they can both achieve success, and maybe even happiness, by going their own different ways - then good luck to both of them. The real question is whether the Irish approach can hold up over the long term - and the answer is quite likely negative. The Irish are flush with the cheap and easy money that the single currency has provided them, thanks mainly to German frugality, and they seem intent on blowing it. In addition to flashy spending of the usual sort - the rate of ownership of BMWs and Mercedes in Ireland is higher than in Germany - they are hooked on a crazed binge of property buying. This encompasses both their own real estate - so that derelict barns in remote country villages fetch six-figure euro prices - and others' too, especially in the developing East European countries, from Poland down to Bulgaria.

Meanwhile, with regard to its infrastructure, Ireland itself remains decades, in some respects generations, behind its West European peers. Israel, itself a laggard, is a paragon compared to the ballyhooed Irish (remember Bibi's extolling of Irish achievements?). Their road network is like ours was 15 years ago, before we began spending money on it, and their rail network seems to be unchanged from 50 years ago. As for Dublin airport, the old terminal at Ben-Gurion on a bad day in August was a positive experience, by comparison.

Fine houses, fancy cars no roads. That's short-termism run amok, a feel-good formula leading nowhere. The Swiss may not know much about feel-good fixes and they may be unfriendly and cold, but they are the world experts on protecting and enhancing the wealth they steadily accrue. As ever, they are much the safer bet.

http://www.jpost.com/servlet/Satellite?apage=1&cid=1150355504324&pagename=JPost%2FJPArticle%2FShowFull

The Lights are off and there’s nobody home.

2006-06-21T00:00:00.000+01:00

Astoundingly, enumerators undertaking the latest census have stumbled across 275,000 vacant homes.

The Irish Independent (19.6.06) reported that 300,000 homes across the country will not be included in the latest census because there was no one at home to accept the census form.

‘Following inquiries among neighbours, postmen and women and apartment block management companies, the vast majority of those dwellings - some 275,000 - were identified as being vacant.’

The government uses the data collected in the Census to inform policy decisions, such as infrastructure development, education and health care provision, strategic and local land use policy, even constituency boundaries. The census asks questions regarding the composition of housing accommodation; number of bedrooms, type of utilities, floor space etc. It seems that following the completion of the census we will have very sketchy or no information on 15% of the housing stock, (that 15% is sufficient to house 800,000 people based on the average household size by the way). So the census of 2006 will be unsound, more a sample than a census.

But a much more disturbing aspect of the discovery of these tens of thousands of ‘ghost homes’, is the revelation that we have more homes than we need. The housing vacancy rate in the UK is about 3% and falling while In Ireland it is 15% and probably rising (given that we will churn out an additional 90,000 units this year). It matters not one jot, incidentally, how many of these properties are available and on the market to buy or let. The fact is that they are there and can arrive on the market at any time.

More proof, if proof were needed, that our country is in the grip of a speculative asset bubble, that is now approaching Tulipmania magnitude.

The Sunday Times Loves This Blog (kinda)

2006-06-18T12:37:00.000+01:00

I was shocked, nay verily stunned, so I was, when I opened my Sunday Times (Ireland) Homes (Section 6), (ST(I)H(S6) and quickly leafed through the property porn to ‘The Market’ section, the only part worth reading. There in ink, not flickering pixels, but good old ink was a reference to this ever so humble blog. Niall Toner, the author and a man who has recently risen highly in my estimation (this morning) wrote these hallowed words in relation to this blog.

‘It makes for an entertaining and occasionally informative look at the market’

Alas Niall also made reference to tents and peeing and armchairs where amateur economists may be found lounging, no doubt resting after all that peeing. And lamentably moan and rant also got a look in. But hey, ain’t no such thing as bad publicity, so thanks Niall for the name check. This particular bear promises not to maul those sheep who have recently noticed a certain, aah….. cognitive dissonance, when pondering the current property mania.

But enough of blogs. Niall makes reference in his section to the fall in clearance rates at last week’s auctions. ‘Fewer than one in four houses put under the hammer actually sold last week’. At one Linsey sales room last Tuesday, nobody at all turned up to bid on three properties on offer’. That’s a pretty good definition of the sound one hand clapping makes for all you Buddhists out there. Has the selling season come to an unseasonably early end? Is the lure of Paraguay v Serbia and Montenegro on the telly stronger than the urge to buy the most expensive real estate on Earth? Have the boys in Bonn in the Bundesbank, put the willies up the buying public? Trees don’t grow to the sky I suppose, but if we are seeing a top, will the lure of 2% net yields be enough to keep investors interest in the market?

What am I talking about? There are no investors in the Irish market. There are speculators who have bet the house (literally in many cases, through equity release on their principle residence) on capital escalation; investors became extinct years ago. What happens next? well look no further than Las Vegas, Phoenix, Florida, The Spanish Costas, New England, or indeed Japan in 1990 for clues.

Yield is Real

2006-05-31T16:13:00.000+01:00

The concept of yield, (an expression of the return the annual income of an asset provides measured as a percentage of it's current market value), is a fundamental investment tool, used to analyse individual investments and to compare alternative investment opportunities.

To explain further. An investment yielding 20% will pay €20 per annum for every €100 invested, whereas with a 5% investment the return will only be €5 for every €100 invested.
Obviously the investment returning 20% is more attractive than that returning only 5%. But hold your horses. Yields tell us more than what return an investment will make.

A high yielding investment reflects higher risk. In order to attract money which would otherwise go to safer investments poorer quality investments must offer some type of compensation. Usually a higher yield. Risk is measured in horse racing in a similar way, the betting market odds, a dead cert offers poor returns, a rank outsider offers the possibility of fantastic returns.

In the Irish residential investment market at present yields are very low, somewhere between 2-3% per annum net on capital employed. This would seem to suggest that the risk involved is very low, but this is not the case. The risk is probably higher now than at any time in the past few decades.

The American Budget Deficit

2006-05-26T15:44:00.000+01:00

I thought I'd write something about the American budget deficit. What is there to say about the deficits ? Well they are big, very big, very very times 9 trillion big. Rest assured that that's big, get out your calculator and play around with that figure, .....awesome. Rather than type a thousand words on the subject, I thought I'd use some graphic representations of the big daddy deficit.

Go to Google type in deficit and read about what is likely to be the the precursor for a rather fraught decade coming our way soon.

The Investment Cycle

2006-05-15T20:07:00.000+01:00

This chart suggesting the various phases of the Investment Cycle was published in 2000. If you think about the run up in the commodities and oil markets over the past 18 months it begs the question; are we approaching the 'growth expectations peak' ?

A Chill in the Air

2006-05-10T08:35:00.000+01:00

The US property market seems to be rolling over, as this report from Theledger.com suggests.

The Federal reserve are in a difficult position. They are likely to increase interest rates again today in defense of the dollar, but rate tightening is putting pressure on the housing bubble and indebted American consumers. I think this is whats called being caught between a rock and a hard place.

Elsewhere, for the first time in nearly a decade, you can smell the anxiety. The
listing agent for a four-bedroom home on Scripps Trail in San Diego informed
other agents in the multiple-listing service that a "very, very motivated seller
will entertain all reasonable offers" and "will help with closing costs." The
house was listed in September at $810,000. After a previous price cut, the
seller is now willing to entertain offers as low as $685,000.The seller bought
the house for $730,000 in 2005, according to county property records, for what
the listing agent said were investment purposes.

http://www.theledger.com/apps/pbcs.dll/article?AID=/20060509/ZNYT01/605090404/1001/BUSINESS

Sherry Fitzgerald Report Spring 2006

2006-05-08T10:28:00.000+01:00

The latest Sherry Fitzgerald Residential Market Report for Spring 2006, published last week, contains the usual sunny appraisal of the future prospects of the housing market. However the report contains truly astonishing information on the composition of buyers of new homes. In the Spring of 2004 Sherry Fitzgerald reported that 57% of new homes were purchased by first time buyers, with investors buying 13%. The latest report has first time buyers buying 33% of new homes, while investors mop up 40% of new home output.

Given that rental growth is flat at best the growth in the investment market is hard to explain.

http://www.sherryfitz.ie/webdataex/articles/278.pdf

What's Hot and What's Not

2006-05-02T15:39:00.000+01:00

The deflation in property prices in the Spanish Costas continues, largley unheraldeded in the media in Ireland or the UK. The once red hot market, which reached a peak in 2002, is now seldom mentioned (well not in polite conversation). It seems markets in Cyprus and Croatia are feeling the pinch also. Prehaps these forgotten markets illustrate the likley fate of other hotspots which presently consume the attention of the fly to let hoards.

SUR In English

General News

Desperate property owners start to lower asking prices to speed up sales

Almudena Nogüés

Flats are taking 32 months to sell

Some owners are accepting offers 30,000 euros below their original price

After seven year long real estate boom with prices reaching exorbitant levels, sales are starting to slow down. Some owners, tired of seeing the “For Sale” sign outside their home for months on end, are finding themselves selling for sums way below what they had originally hoped for, and sometimes even less than the amount quoted on the official valuation.

Professionals claim that one of the main causes of this present situation is that much of the demand has already been satisfied while other potential buyers have been priced out of the market. The threat of rising interest rates has helped to slow down sales along with the fact that “it would have been impossible to keep up the recent rate of evolution of the market for much longer”, explains the national director of the MC estate agency, Juan Felipe Muñoz. Now it is taking an average of 32 months to sell a property.

While experts are avoiding using the word “crisis”, they admit that those people who bought properties in order to sell them on again are now finding it hard to turn the bricks back into cash. Owners can no longer use the amount fetched by a neighbouring property as a guideline as this “often leads to disappointment”, pointed out the president of the School of Real Estate Agents, Cayetano Rengel. “The time when studios fetched 250,000 euros could not go on forever”, he added.

“Now an owner in a hurry to sell has no choice but to lower the price. Someone asking 300,000 at first might easily drop the price to 230,000 after several months have gone by without finding a buyer”, point out sources from Unicasa. Similarly Juan Carlos Cuevas, the manager of a Tecnocasa franchise, said that he is seeing “brutal cuts” in prices. “It’s quite normal for an owner to drop between 18,000 and 30,000 after less than three months”.

Not contented with the usual classified advertising, owners are also seeking new ways of finding a buyer. Over recently months we have seen an increase in advertisements appearing everywhere, from car windscreens to lampposts and letter boxes.

Meanwhile the Association of Madrid Property Developers and international financial analysts predict that the slump in the market could reduce employment in Spain by two per cent by the middle of 2007 and reduce the Gross Domestic Product by 1.3 per cent.

http://www.surinenglish.com/noticias.php?Noticia=8239

Boston Boom Ends.

2006-05-01T19:42:00.000+01:00

News from the US on the continuing slowdown in the once frenetic housing market.

The Boston Globe has this update. “After five red-hot years, home sales have cooled north of Boston and across the state. Gone are the days of multiple bids, price run-ups, and fast sales. Falling prices, rising inventory, and longer selling periods are now the norm, industry watchers say. ‘We’re at a turning point,’ said John Bitner, chief economist at Eastern Bank of Lynn. ‘The upward movement has definitely turned the other way. It’s a buyer’s market.’”

“Home sales in Massachusetts dropped 8.4 percent from January to March, compared with the same period last year, and 13 percent over the last 14 months, according to a report issued last week by the Warren Group. In March, home sales and prices dropped 1.5 percent, with the average selling price falling to $325,000 from $330,000 in March 2004.”

“The slowdown has left a glut of homes sitting idle, and hundreds of homeowners waiting impatiently for the chance to downsize, trade up, or move closer to family or even out of state for a job. Currently, 2,279 single-family homes are for sale north of Boston, a 48 percent increase over April 2005, when 1,538 homes were listed.”

“Eric and Denise Kerble of Swampscott put their spacious Colonial on the market in January for $399,900, betting it would sell fast in a seaside town where the average price tag on a single family house is at least $100,000 more. Now, after more than 100 days without an offer, the Kerbles have dropped their price to $394,900.”

“The couple paid $206,000 for the gray, 1,586-square-foot house eight years ago, outbidding several other prospective buyers. They said they have since spent more than $25,000 on upgrades.”

“‘We hope this does the trick,’ said Denise Kerble. ‘Lots of people have looked
at it, but nobody takes the next step.’

The Kerbles are one of the many Massachusetts families living in limbo, trapped in a suddenly stagnant real estate market that has forced them to put their dreams on hold.”

“In Middleton, competition from new homes for sale on East Street prompted Patrick and Susan McIntire to drop the price on their Colonial that they first listed at $419,900 in November. The house is priced at $399,900, but still has received no offers.”

‘We don’t want to give our house away,’ said Susan McIntire, who hopes to find
a house with more land in New Hampshire. ‘We’ve put a lot of sweat into it. But
it’s also very frustrating trying to sell a house now. There are more places to
live than people looking to buy.’”

“Local realtors say the falling prices and longer marketing periods show the market has come back down to earth after years of skyrocketing sales. With inventories climbing, sellers no longer can name their asking price. ‘Things are much more realistic now,’ said Claire Dembowski, a broker in Swampscott, who is also the listing agent for the Kerbles’ house. ‘Sellers had the advantage for a long time, but now the cycle is going the other way.’”

Credit Where It's Due.

2006-04-29T11:10:00.000+01:00

The rate of expansion in residential mortgage debt in Ireland is astounding. Figures from the Central Statistics Office show that the rate of growth reached 29.4% in February, with €2.91 billion borrowed. However this is not a record that honour falls to the month of December last, when €3,500,000,000 was borrowed, in one month. That's a hard figure to get your head around, so think about it terms of one Euro coins. A one Euro coin weighs 7.5 grams and has a diameter of 23.25 mm. If the banks doled out mortgage debt in coinage they would have had to transport 26,250 tonnes of it last December alone; enough to fill nine hundred three axel trucks. Laid side to side 3,500,000,000 Euro coins would stretch around the globe a little over twice.

While the monthly mortgage debt creation figures are breathtaking, the rate at which this debt is growing is mind-boggling. As house prices rise the amount of debt required to buy increases. In 2002 the rate of growth was 11%; in 2003 12.9% , in 2004 23%, in 2005 26% and the latest figure for this year is 29.4%. As the debt rises ever higher the trajectory steepens more and more.

House Price Inflation Highest Since 2000

2006-04-27T14:13:00.000+01:00

The latest TSB/ERSI House price index released today shows house prices rising at their fastest rate since 2000. The rise expressed as a percentage is a fairly useless statistic as people are paid in Euros not percentages. The monthly rate for March nonetheless was 1.3% , and a spokesman for the TSB suggested that inflation will moderate later in the year. (he hopes)

Ironic that the vested interests always refer to the non-occurrence of a crash as evidence that the bear case is flawed. It could equally be said that the much vaunted soft landing is pretty conspicuous by it's absence.

http://www.rte.ie/business/2006/0427/houses.html

Jens Lehmann Bust my Bubble.

2006-04-26T11:19:00.000+01:00

The German economy is starting to see the stirrings of recovery. The IFO German business confidence survey reached a fifteen year high in March. The rise in business confidence is reflected in the rate of German inflation at 2.3% for April, in excess of the 2.00% most commentators expected. In France business confidence has also risen, an index measuring sentiment among French manufacturers increased to 108 in April, the highest since March 2001, acording to Paris- based statistics office Insee. (The German and French economies account for about half of the $9.4 trillion Euro Area economy.)

So it’s springtime for France and Germany, and for the supply of Euros, as the ECB announced currency in circulation grew at an annual rate of 13.6 per cent in February. How is the ECB viewing this?,

Well M. Trichet’s was heard to remark yesterday;

‘we have to remain credible with whatever risks we have to cope with’

`it's obvious that there are risks to price stability in the euro region,''

ECB council member Axel Weber said in an interview yesterday in the Frankfurter Allgemeine Zeitung. Inflation risks such as oil prices and money-supply growth

``make a normalization of the benchmark interest rate level seem to be in order.''

‘We have to remain credible’, ‘normalization of the benchmark interest rate level’ Translated into pounds shillings and pence; ‘we will increase the cost of borrowing’ The current Euro base rate is 2.5%, commentators now expect that rates will increase twice more to 3.25% by the end of the year. However the tempo and level to which rates will rise depends on a number of factors, including the inflationary impact of oil price rises and improving consumer sentiment in Germany.

That’s where Jens Lehman comes in, if he repeats the heroics of last night, (saving a penalty in the last minutes of the European Cup semi’s) in the World cup final against say Brazil. Well the ‘over the moon’ German zeitgeist, might send consumer confidence soaring.

Irish Property Bubble

2006-04-25T16:23:00.000+01:00

I decided to start this blog, dealing with the Irish property market, for a number of reasons and with specific goals in mind.

1. The state of the property market is a topic which attracts considerable attention, in the established media, in day to day conversation and on the internet. As no dedicated forum currently exists to discuss this hottest of hot topics, I’ve set up this blog.

2. I’m conscious that much of the media coverage in Ireland of the property market is unquestioning of the benefits of the unprecedented inflation in prices. I am also aware that many people are troubled about, both the sustainability of current property prices and wider economic and societal issues, which in whole or part can be attributed to the boom.

3. Quantifying the variables and identifying the metrics required to measure the performance of the Irish property market is difficult. Other property markets, notably the American, benefit from an abundance of statistics. In an ideal world we would have easy access to transaction evidence, sales prices, volumes, buyer type data and rental values etc. All of this information is currently collected by government and financial institutions; however accessing the data is not easy. I would hope that this forum would act as a receptacle for sources and a medium for publishing and discussing the same.

4. Finally I hope that this forum will attract sufficient interest to allow us to make it a source for contributors from as wide a source as possible. With that in mind I’m hopeful that others will be willing to add their insight and knowledge.