Soft Landing for the Bubble

**SSIAs to assist in soft landing - Goodbody **

By Cathal Hanley

Last updated: 29-06-06, 14:14

Irish consumers will be able to bear the cost of higher interest rates as SSIA holders divert their funds to pay off debts, a leading stockbroking firms said today.

Writing in his firm’s latest economic commentary, Dermot O’Leary, chief economist with Goodbody stockbrokers, estimates that the household debt burden will continue to increase in line with higher interest rates.

The burden of covering interest on debt - which was estimated at 5.4 per cent of disposable income in 2005 - is set to rise by 9.9 per cent in 2008 as the ECB increases interest rates.

Mr O’Leary’s bases his forecasts on the ECB increasing rates by a further half point in 2006, before increasing to 3.5 per cent by the end of 2007 and 3.75 per cent by the end of 2008.

He highlights consumer spending as a key driver of growth in the near term. “Following a surge in consumption growth in 2007 of 7 per cent associated with the €15.7 billion released from SSIAs, base effects will contribute to a marked slowdown in the following year.”

The construction sector which has underpinned recent growth will inevitably slow, but some of the slack from slower house builing will be taken by larger infrastructure projects, according to Mr O’Leary’s analysis.

Despite rising indebtedness the overall outlook for the economy remains positive given the favourable population structure and healthy state of the public finances.

“While we expect economic growth to slow to closer to trend levels in 2008, we do not anticipate a sharp adjustment. Moreover, GDP growth of close to 4 per cent in that year would still be impressive in an international context”

Such a scenario would be deserving of the tag of a “perfect soft landing,” Mr O’Leary concludes.

© 2006 ireland.com

More vomit inducing wishful treacle thinking for a “perfect soft landing,” form another vested interest Its only betrays their real analysis, that we are in the grip of a bubble and probably at the peak.

What the Hell is a soft Landing?

Is it an end, do we all get off the good ship Ireland as she softly lands ashore and settle down on this “soft land”, an economic utopian dream.

More Spin. What buybble in History has anything but a fecking roller coaster race to the bottom.

If memory serves any of us, we were told in “hindsight” that 2000 was the soft landing and had avoided a market burst, now what… oh the market is racing off like the proverbial horses over the hill; but Wait shiny SSIA knights in waiting will save us, hmmmm. Why should we believe these experts when they have gotten all their predication wrong for the last 12 months and now are trying to crystal ball the future on the back of despotic governmental schemes such as the SSIA declaring us saved.

Hang on a second I didn’t know the SSIA was designed to be the property sectors lifeboat? What if everyone saves it for another rainy day, only to create another rainy day… see there is logic to these badbody boys.

TO Quote Duplex,

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.

irish-property-bubble.blogspot.c … chive.html

Never one to be swayed by the positive, RTÉ's economics editor George Lee, who was at the press conference, took her to task and pointed out that the OECD has looked at 49 construction booms and “not one of them has had a soft landing. Why is it logical that we will have a soft landing?” he asked.

ireland.com/newspaper/proper … IV_08.html

Their are continaul refences for a soft landing on google from 2002 onwars, so we are still waiting and the longer we waiting the less likelyhood there is eve a chance of a nice SOFT landing.

Anyone for the last few sleds now?

But…

If capacity isn’t take offline as per the new builds info we are getting and demand is consequently kept high. 20,000 yoyos is probably more than enough to see a fair few highly leveraged people through a couple of years of interest payments.

House prices might very well stay static.

Past performance no guide to future performance??? :stuck_out_tongue:

Indeed and that’s the real unknown variable isn’t it.

Just who the hell is holding all this property.

Are they quote unquote investors? Obviously a percentage are but how many in reality and how many people are playing at part time speculation???

The percentages there would determine exactly how this thing plays out and until a meltdown occurs… Well we won’t know will we?!?

TUG

I use the term “investor” loosly, most of those holding investment properties haven’t a notion of investment other than “its going up buy some of that”. You only have to view the DIY property developer TV programmes to see how the hapless “investor” buys a run down property, spends thousands on it then, only because the market is rushing ahead, manages to turn a small profit. When compared to the professionals in this game, the mugs here are being taken for a ride at all stages and nothing short of pure luck (and a helping hand from the production company and host) save their bacon.

With regard to how many properties are potentially ‘investments’, we can gain some insight from the lenders. In 2004 they said 30% of all lending was for 2nd and subsequent houses for the borrower. Reciently I’ve heard a figure of 20% of all new housing stock being sold was purchased by “investors”.

Given that the 30% figure will also include foreign properties, I suspect that 20-25% of all new houses (which would be in excess or 22,000 ‘units’ or so last year) plus a good slice of the existing stock is being purchased by “investors”.

The demographics in Ireland don’t support the rate of house building regardless of what the developers, estate agents and lenders say. So, a large chunk of the new builds and existing stock are being munched up by our friendly neighbourhood “investors”, most of whom believe this is their pension and will return a better retun than a managed porfolio of investments (which by the way it won’t, historically property returns 6-8% pa over a standard persons “working life”, equities return 14-16% over the same period, and most ‘investors’ tell you they wouldn’t touch stocks and shares, show’s what they know about investing!!)

Blue Horseshoe

Go to Krakow

i read in one of the bear bibles “the economist” that if interest rates rose by 1% irish property could be overvalued by as much as 50%, thats a couple of months old as well

so that 700 billion becomes 350 or less as people rush out the door

i think u will see a sharp deterioration in the public finances, the gov will blame the ECB for the mess, and ireland inc declares bankruptcy

The Irish Property Bubble

The long term sustainable property multiple is three times average earnings for an average house. This long term sustainable multiple has been surpassed a long time ago in Ireland.

This has meant that many people cannot get on the property ladder or if they do, it is at a huge cost both financially and in terms of quality of life.

The Irish Property Bubble is caused by:

Zoning - this creates a shortage of land for development and such land as is zoned becomes very expensive
Government opposition to one-off buildings in the countryside - this forces buyers into urban areas and puts pressure on the areas that are developed
Rapidly increasing population with a subsequent shortage of property
Reckless lending by the banks with the collusion of the government, which has become dependent on the income that an inflated property market has generated
Rapidly escalating prices because of the above which has led to property mania

The longer this Property Bubble expands, the more serious will be the fallout when debt exhaustion causes the borrowing to falter. We cannot depend on our government to be prudent about the property market. We the citizens have to take action. It is time to call halt now.

I am calling on all buyers to a ‘Property Buyers Strike’ in Ireland as of July 2006. Please copy and paste this call to as many websites as you know, send it to your friends and ask them to send it to their friends.

except in this case where it was a guide to future performance

Wow, a portal into the past. It is a different country.

Glad to see that worked out so well so.

:laughing:

Speaking of old threads I stumbled across this while searching for background on Richard Douthwaite.
It certainly gives lie to the argument that non-one could have seen it coming, lehmans etc.

It was clear as day prior to the September 2008 credit crunch what was going to happen.

viewtopic.php?f=19&t=12424&hilit=Richard+Douthwaite

Someone should give this to Klaus Regling