Re: Re: Developments in Cork
Each economist or economic body has their own model that they use to make predictions.
Indeed and their own agendas – which is why one shouldn’t listen to people like Dan “Interest rates will stop at 3.5%” McLaughlin from Bank of Ireland – as he has a vested interest in talking up the market.
The best people to listen to are Trichet and the ECB themselves.
A down turn in the property market in Ireland may still only end up being a short blip and last only as long as interest rates are high.
Interest rates are returning to normal – the normal rates for the Euro are 4-5% – this is based on the historical Deutschemark interest rates. Again you should listen to the ECB who say the current environment is “accomodative” – i.e. historically low.
That is unlikely to be for very long.
Yes it is – again read what the ECB says.
The conditions will soon turn right again for investors to return to the market.
Correct – if there is a house price correction of approximately 50%. You should also pay attention to the collapsing American housing bubble – rental yields there were 7%, and yet house prices are falling.
When you say there is a bubble, are you assuming that the demand for property is not very real?
Current demand for property is fueled by speculation on future rises in the price on houses. It is not bought for investment purposes (i.e. based on the rental yield returned by the property). As such, it relies on the “Greater Fool Theory”. To simplify things – it is currently a pyramid scheme. I believe you will also find that up to a certain point, it was easy to find people who wanted to join the numerous pyramid schemes that have been doing the rounds.
The latest “prediction” by some economists is that Irelands population will rocket over the next 15 or so years.
The source? Was it an Estate Agent or a tied economist, who followed it up with “so buy property now”?
If there is a bubble right now it should be short lived as demand picks up once more.
Bubbles by definition burst.
275,000 houses in Ireland currently lie idle, which are complete and not owned by developers and excluding holiday homes (according to the CSO) – a further 95,000 houses are to be built this year alone. There is an oversupply of housing at present. Supply outstrips demand.
I don’t think we will see the same capital appreciation as before but maybe rents will increase to generate better rental yields for investors and reduce the attractiveness of capital appreciation as the real reason for investors to buy property.
Rental yields will need to go up by 250% to reach historic norms – this is at a time with a massive oversupply of housing and if (when) there is a recession, many immigrants will leave in search of work.