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Why Ireland's housing bubble burst

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Re: Why Ireland's housing bubble burst

#81

Post by qwytw »

camgunz wrote: post #75

Like others in this thread I'm not an expert, but it seems to me that the thing every cyclical housing market has in common is a heavily subsidized/credited/backed mortgage market. I think the counterexample is Germany? They build a good amount of housing every year, they watch housing prices very carefully and pull some levers if they tick up or turn down, and they don't store a huge amount of their population's wea…

Germany also has a much more decentralized economy and more spread out population compared to other European countries. There is no city equivalent to London, Paris or Dublin.

For example Berlin's population only started growing in the 2010's (it's was stable or declining since the 1990's) and prices have been growing quite rapidly lately so arguably it just a few years (or decades) behind other major European cities. Munich on the other hand is almost as expensive as Paris.

Re: Why Ireland's housing bubble burst

#84

Post by brendoelfrendo »

randomdata wrote: post #69
gruez wrote: post #62

Earlier quoted context omitted.

>That's driven by the farmland bubble. [...] >The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual. Why is farmland in those areas so sought after? Were canadian farmland historically underpriced? Is the land just real…

1. High prevalence of supply managed (dairy, poultry) producers. These farmers are effectively guaranteed a high income through policy. Said income provides a lot of room to buy land with. Further, the way into these sectors is to buy what we call quota. Dairy farmers in Ontario imposed a price cap on quota back in 2006 in an effort to make it accessible to young farmers. While the fair market value of quota has like…

Do you think the legalization of marijuana has had an impact? I visited a cousin in Windsor back a few months before legalization hit, and the surrounding farmland was experiencing a huge boom in greenhouse construction, I assumed to house marijuana grow operations.

Re: Why Ireland's housing bubble burst

#85

Post by disgruntledphd2 »

Fordec wrote: post #76
adam_arthur wrote: post #53

Earlier quoted context omitted.

How can the blame be put on property developers? Most of property costs can be tied to government policy, re: zoning, interest rates, tax laws etc. The government is usually always the one that could fix the problem by encouraging building. E.g. in the US we have an 18% tariff on Canadian lumber, which artificially increases cost to build (though is meant to protect domestic lumber industry). Many municipalities have…

Most of the government policy at the time can be tied to bribes by developers. Look up "brown envelopes"[0] or the subsequent Mahon (formerly Flood) tribunal. https://www.rte.ie/news/2003/0501/37800-flood/

Most of that happened before the craziness which was 2002 onwards. Like, Dublin planning is messed up because of brown envelopes, but they don't appear to have contributed in the same way to the worst excesses of the Boom.

The corruption was a little more subtle in those days (although I look forward to the coming NANA tribunal).

Re: Why Ireland's housing bubble burst

#86

Post by neon_me »

inglor_cz wrote: post #82
shell0x wrote: post #20

Meanwhile in Toronto a house is $1m+ while salaries are 100k-150k.

A house in Prague will cost you about 600k USD, but the average salary after tax is something like 21k USD. Welcome to Europe :)

Yes, Prague is the extreme place to live.

Re: Why Ireland's housing bubble burst

#87

Post by onlyrealcuzzo »

marvin wrote: post #59
nemo44x wrote: post #44

Earlier quoted context omitted.

Aren’t the rates fixed? If not then it’s a fairly ridiculous trade to take on. If no one has a fixed rate then without massive inflation any kind of interest surge will decimate the country.

Wonder if we’ll have bailouts for the banks or homeowners if interest rates go up. I’m not confident the answer is no.

Banks don't need bailed out if interest rates go up. They have very little exposure to mortgages.

They slice up the loans and sell them as MBSes to the Fed and pension funds.

If interest rates go up ~1% - pension liabilities decrease ~12%: https://www.pentegra.com/wp-content/uploads/2016/12/The-Impa... This is not terrible for pension funds.

The Fed doesn't need bailed out...

Re: Why Ireland's housing bubble burst

#88

Post by qwytw »

raverbashing wrote: post #80
nemo44x wrote: post #64

Earlier quoted context omitted.

Banks package the loans into bonds which are then sliced up and sold to investors. Banks aren’t really in the speculation business as much as the underwriting business when it comes to mortgages. Fixed rates are always a better option for the person borrowing the money as you can refinance if rates go lower, lowering your monthly payment. Variable rate loans are far more regulated for a reason.

> Fixed rates are always a better option for the person borrowing the money Check how variable rates and fixed rates have compared over time Basically, the "fixed rate" very rarely was smaller than the floating rate. Banks know how to calculate the rate ceiling and you're rarely going to win by betting against it. (Why would they risk borrowing it at a smaller cost than the given interest rate at a given time?) Sure…

> Basically, the "fixed rate" very rarely was smaller than the floating rate.

Well that's obviously expected. But by taking an fixed rate loan you're basically betting that the rate will increase in the future. Of course there's a risk that the interest rates will stay close to zero for the next 30 years like in Japan.

Re: Why Ireland's housing bubble burst

#89

Post by inglor_cz »

BossingAround wrote: post #48
BiteCode_dev wrote: post #3

I can't wait for the housing prices to go down, but there is no sign they will in France. They kept going up, even during the covid crisis.

The main question is, what would be the source of the bubble? Is it cheap capital? Fraudulent bank practices? Or is it because people wanted more space during lockdowns while having the sense of financial stability? If the demand increased while supply stayed constant, the price increase is not a bubble. I waited for "the bubble to burst" for years before realizing there likely is no bubble where I am from. Housing's…

My tip is "distrust against the future value of the currency". Bricks do depreciate as well, but not massively.

The bond buying programs of the ECB are pretty expensive already, and the Green New Deal will be mostly implemented on credit. And Europe is already quite deep in debt. So is the USA, but the USA can at least derive some strength from the dollar being the world reserve currency, with no clear challenger in view.

Re: Why Ireland's housing bubble burst

#90

Post by inglor_cz »

neon_me wrote: post #86
inglor_cz wrote: post #82

Earlier quoted context omitted.

A house in Prague will cost you about 600k USD, but the average salary after tax is something like 21k USD. Welcome to Europe :)

Yes, Prague is the extreme place to live.

Interestingly, Warsaw is much more affordable. They also build a lot more condos there. AFAIK around 100 000 new housing units were built in Warsaw in span of just 5 years. That pushes the prices down.
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