When will the property bubble burst?

This piece in the FT today clearly identifies a possible property bubble and a reliance on the construction industry, as one of several sources of anxiety about the potential fragility of the Irish economic boom. As it happens, Leviathan is running tonight on that very same subject. David McWilliams hosts a panel consisting of Managing Director of HOK, Paul McNeive; Evening Herald columnist, Dan White; and co-founder of daft.ie. Politics.ie has a debate already motoring on the topic, where one naive soul believes a crash will only affect property owners.

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  • Crataegus

    Many of us have shared these concerns for some years now. The major worry is how much activity is based on loans secured on property rather than any fall in property price and the direct loss to new purchasers.

    Property prices will rise as long as;
    1 supply is less than demand;
    2 people can afford the increase.

    Property bubbles are dangerous things they can mean a year in the doldrums or they can floor your economy for over a decade. Look at what it did to Japan and the Japanese economy was, and is, fundamentally stronger than that of Ireland.

    One of the reasons I have continually argued for rezoning in NI is to ensure that supply will get ahead of demand at some future date for if it doesn’t prices are based on MUST HAVE rather than simply what is realistically affordable. An economy based on high borrowing is an unstable beast.

  • mnob

    As the demand is being fuelled by low interest rates and a buy to let bubble, increasing the supply would be a really foolish thing to do.

    Increasing the supply will increase the demand, as the demand is based on the unrealistic premise that there is a killing to be made on buy to let (and to a lesser extent holiday homes). Then when the bubble bursts it will hit harder as the economy will have moved to make a quick killing in the property sector.

    It’s exactly the same situation as we had ten years ago with the dotcom bubble – lets not make the same mistakes.

    The demographic timebomb means that in a few years time it’s pensioners bungalows we will need not 4 bedroom houses in Carryduff.

  • Crataegus

    Mnob

    I am of the opinion that in the North there is an underlying housing shortage in many sectors particularly such as sheltered housing and apartments for single people or couples who don’t have families. In some nationalist areas there is a dire housing shortage and it is in part due to different occupancy patterns

    Protestant areas like Tigers Bay are the exception. Good development land and housing no one wants because of the local criminals.

    In my personal experience flat lets are very strong, due to the number of immigrants and houses are being sold long before they are built. It is difficult to say how much of the activity is buying for investment but I doubt if it is in excess of 10%

    The people who buy a house paint it and sells it on in 1 year in the anticipation of profit worry me. They are the ones that are creating the bubble where banks lend ever increasing amounts on the same equity based on a market that is unreal. I would rather see more houses available so that those who genuinely want a home can afford one. If we don’t take the heat out of the system by balancing supply and demand when it comes to interest rate hikes (which will come) we are dammed.

    What you are proposing is rigging the market to ensure bloated profit.