Re: Re: Developments in Cork

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#781160
mhenness
Participant

@Bob Dole wrote:

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.

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.

Yes it is – again read what the ECB says.

Fair point. Listening to those who don’t have a vested interest makes good sense (when they know what they are talking about).

@Bob Dole wrote:

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.

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 source? Was it an Estate Agent or a tied economist, who followed it up with “so buy property now”?

A report from NCB today.

@Bob Dole wrote:

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.

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.

I’m currently in a position where I am “trading up”. I have made a 100% gain in the value of my property over the last 4 years. Do you think now is a good time to do this? In a perfect situation I could sell now and wait to see how the market goes over the next year or so and then buy when prices collapse. Not sure if I can wait that long though….

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