The Irish Economy - Worrying Signs?

chump

DublinWriter wrote:

Anyways, if you don't agree me on the above, just plot a straight line and plot the median between the start of the graph and the end on the Y-axis.

As I said, in the long term, you don't lose money with bricks and mortar.

What's inflation been over that same period?

some links
http://eh.net/hmit/ukcompare/

In 2005, £100.00 from 1971 is worth:
£946.84 using the retail price index

http://eh.net/hmit/inflation/

The second one type in year 1970 til 2005 for the UK

Also http://img.thisismoney.co.uk/calculators/calcPriceInflate.html
Try 100pounds in 1971 and what is worth now (well 2001) by inflation
745% from 1971 til 2001 just inflation

daveirl

This post has been deleted.

whizzbang

DublinWriter wrote:

Me too, as I said in another thread, most 20 somethings experience with market forces is coloured by the dot-com crash and comparing the Irish property market with the global equities market is pure foolishness.

What I think will happen in about four years time is that the property prices will level off at fairly high rates and will just grow in line with inflation, rather than have the double-digit growth levels we've been seeing of late.

How about comparing the global property market to the global equity market. There is a global boom in propert and I would imagine if other countries markets fall then it will spook a lot of irish people and banks. I don't think it is wise to assume that Ireland's property market only depends on what goes on in Ireland.

As for a leveling off of prices please suppy an instance of one market (property or otherwise) that has had a boom equivalent to ours and then leveled off to base inflation rates for a few years. From what I've been this just does not happen!

MG

DublinWriter wrote:

Lovely graph and a great example of "How to lie With Graphs" (go buy the book, it's a classic).

Basically that graph is outlining the entire UK property market.

And there's the problem. Having worked in the UK until 2002, the market in the South East bounced back fairly quickly five years after the crash.

However prices in the North remained pretty stagnant, dragging the whole UK average down. You could have bought a stately pile in Lancs for about 150K in 2000.

Essentially it would be a bit like factoring in house prices in Leitrim/Donegal without factoring in statictical weighting.

Anyways, if you don't agree me on the above, just plot a straight line and plot the median between the start of the graph and the end on the Y-axis.

As I said, in the long term, you don't lose money with bricks and mortar.

I have some questions. Firstly how do you know that the graph has not been statistically weighted by the writers (Nationwide BS)?

Secondly, could you explain what you mean by plotting the median? By my eye the median price is about 70k which, prima facie, suggests that house prices are overvalued at the moment.

ronbyrne2005

that graph is statistically adjusted for house type reigon etc. much if not most of property rises over last 50 years is due to inflation and the fact that most young women now work which allowed house prices to increase substantially as households now generally have 2 incomes. real prices cant rise more than real income growth in medium/long term otherwise property would eat up a larger and larger share of incomes which is not what happens historically-cost of housing is generally a constant % of income and deviates in short term around the long term rate. Its fair to say that housing deviates around its long term trend from time to time and now is a time where it has strayerd from trend-so theres two ways it can return to trend,by a soft landing where houses grow by consumer/wage inflation rate or less and allow their incomes to catch up over several years, or there could be a sharp correction back to trend level.

ronbyrne2005

from new york times
That is to say, where everyone from your wise old uncle to the broker who sold you your house holds it as gospel that real estate is one of the best long-term investments, this longest of long-term indices suggests that, on the contrary, it sort of stinks. Between 1628 and 1973 (the period of Eichholtz's original study), real property values on the Herengracht — adjusted for inflation — went up a mere 0.2 percent per year, worse than the stingiest bank savings account. As Shiller wrote in his analysis of the Herengracht index, "Real home prices did roughly double, but took nearly 350 years to do so."

The house that Pieter Fransz built is a case in point. In 1855, an estate agent named Robertus van Zoelen bought the house for 6,850 guilders. In 1881, his children sold it to a carpenter, Johann Diederich Brinkmann, for 12,100 guilders — an increase of 93 percent in real terms. But when Brinkmann sold it in 1888, it was for 10,000 guilders: a net loss. The next sale, in 1899, at 9,600 guilders, was also at a loss. Fifteen years later, with World War I looming, a real-estate agent named Georges Jean Josef Salen bought it for 10,000 guilders: again, a loss in real terms. And when, in 1955, a woman named Grietje Uitentuis bought the house, the 15,000 guilders she paid was, after adjusting for inflation, less than what the house sold for in 1855. Over the course of a century, Pieter Fransz's house actually lost 30 percent of its value.

This sort of thing isn't surprising to Shiller, who says he believes that the notion that real estate is a terrific investment comes in part from the long-term nature of most purchases. You know that your grandmother paid $15,000 for her house in 1951, and it's now worth $250,000. That sounds grand, but most of the increase is simply matching inflation. An analysis Shiller made of home prices in the U.S. going back to 1890 showed an average annual increase of a meager 0.4 percent. By way of contrast, Jeremy J. Siegel of the Wharton School of Business has calculated that over a 200-year period, the stock market had an average annual real rate of return of 6.8 percent. It's only in recent years, Shiller says, that huge increases in real-estate prices have become the norm and that people have come to expect them.
Besides which, speculation has now gone global — and with speculation comes instability. "Today we see bubblelike activity even in places where there is no land constraint, such as Phoenix," Shiller said. "They have miles of available land, so there's no justifiable reason for the kinds of increases you see there." So while it may have been true in the past that the ups and downs of the Herengracht index would make it a less-than-perfect model for American cities, that's not necessarily the case anymore. As Shiller says, "It's plausible that the sort of volatility we see now will make the rest of the world look more like the Herengracht index."
Amsterdam also turns out to be a pretty good model of recent history. After it had its 17th-century heyday, it settled into a poky, second-tier status among European cities. It was slow to hitch onto the Industrial Revolution, and of course the world wars hit hard. Real-estate prices lagged far behind those in larger and jazzier cities — until recently. The last time that Pieter Fransz's house changed hands was in 1983, when a Hungarian financial adviser and his wife, an English actress, sold it to a pair of doctors for 440,000 guilders. Today, prices on the Herengracht run from one million euros for family houses to three million or more for mansions (the Dutch currency was converted in 2002 at a rate of 2.2 guilders per euro). Even assuming that the house would sell at the low end, and accounting for inflation, this means that after taking three and a half centuries to double its real value, the house has tripled in value in the last 22 years.


The reason, of course, is that Amsterdam is part of the global housing boom. To get an idea of recent history, I asked Babs Persoons, owner of Babs Persoons BV, one of the premier real-estate agencies in Amsterdam's center city, to reminisce for me. "It started in 1998 — prices just went up amazingly," she said as she sat in her office on the Prinsengracht, another of Amsterdam's three grand canals. "For a while, every agent had a queue in front of their houses, and many were selling for more than the asking price. We didn't know that phenomenon in Holland before."

But if this description of the past few years typifies the brave new world we live in, putting it into the perspective of time — rise, fall, rise, fall — leads us back to what may be the oldest history lesson of all: it tends to repeat.

whizzbang

ronbyrne2005 wrote:

from new york times

Interesting articlue, however unfortunatly it is based on fact and reason, which are not currently playing any role in the global property market!

Still, it bodes well for the future. House prices must be in for a large adjustment to being them back into line with historical norms.

Those who don't study history are destined to repeat it

shnaek

But Ireland is UNIQUE. Haven't you heard?

whizzbang

shnaek wrote:

But Ireland is UNIQUE. Haven't you heard?

yes, St Patrick drove out the property crashes.

daveirl

This post has been deleted.

ronbyrne2005

Everyone who bought a while back and have equity think they are now gordon gekko from "wall street"!!!

whizzbang

ronbyrne2005 wrote:

Everyone who bought a while back and have equity think they are now gordon gekko from "wall street"!!!

Its the with all investments, if you make money your think you are a genius, if you lose money "no-one could have seen it coming"

is_that_so

ronbyrne2005 wrote:

Everyone who bought a while back and have equity think they are now gordon gekko from "wall street"!!!

Agreed, it's a fallacy. The "equity" quickly disappears when you try to buy from one the other "Geckos".

is_that_so

whizzbang wrote:

Its the with all investments, if you make money your think you are a genius, if you lose money "no-one could have seen it coming"

Made loads myself and only sold because I had to pay a property deposit. The shares tanked the month after and have never recovered.

whizzbang

is_that_so wrote:

Made loads myself and only sold because I had to pay a property deposit. The shares tanked the month after and have never recovered.

congratulations! but was if fluke or skill!?

is_that_so

A mixture of both but a fluke that I got the price almost at its highest.

whizzbang

is_that_so wrote:

A mixture of both but a fluke that I got the price almost at its highest.

fair play! now lets see if all the Geckos call the top of the property market as nicely as ou called the stock market!

Pa ElGrande

Mr Ahern said: "Recent economic indicators seem to give some people the impression that we are headed for hard times. Undoubtedly some of those indicators are a cause for concern, the main one being the recent rise in the rate of inflation to 3.9 per cent - the highest in a number of years.

"It is worth pointing out that two of the underlying causes of the increase are beyond our control: if we strip out interest-rate increases, and the effect they have on mortgage repayments, and we strip out energy cost increases, the underlying rate of inflation is 2 per cent. In these circumstances, it is incumbent on Government to ensure that all other factors that feed into inflation are managed in such a way as to minimise other inflationary pressures."
</snip>
Jerry Beades, who runs a construction company in north Dublin, believes that a lot of people are using inflationary pressures to try to talk the economy down. "It's not reflected on the ground. You could rent a shoe box in Dublin at the moment, such is the demand. And when you have that demand for renting properties, it's an indicator of the rest of the market," he said.

"Inflation is caused by high oil prices and public spending. It doesn't mean the end is on the way," he said. "We have a good rental sector, virtually full employment, and the public finances are in order. Where's this doom and gloom coming from?"
<snip>
Mr Dunne, who built his third leisure centre in Santry, said he now proceeds with caution. "Businesses and industrialists should be examining their finances," he said. "We have had unbelievable growth in the past 10 years and it just has to level out. I've never seen a graph where the line keeps going up. It has to go down, and I think we are on a downward trend now."

'Prophets of doom' have got it wrong - Bertie
http://www.unison.ie/irish_independent/stories.php3?ca=9&si=1631513&issue_id=14198 [free registration required]

Bertie says everything is fine, we just have to ignore rising energy prices and mortgage payments increases and public service inflation.

Pa ElGrande

Poor trade figures for April have raised serious questions about the competitiveness of the economy, analysts warned last night.

Both Davy Stockbrokers and Alan McQuaid of Bloxham Stockbrokers said the emerging trade figures for the year to date suggest a serious loss of economic competitiveness on international markets.

Exports fell 10% in April 2006 while imports were down 12% compared to the previous month.

Unadjusted exports stood at €6.850bn in April, down 11% on the same time last year, while imports by value were down 8% to €4.671bn.

Economy ‘losing competitiveness’
http://www.breakingnews.ie/2006/06/17/story263768.html

It takes two to tango, the other economies are likely to be slowing down as well, especially Britain were unemployment is also rising.

Pa ElGrande

+ Foreign companies were responsible for 87% of Irish exports in 2005
+ Dell and Intel are Ireland’s biggest exports
+ Irish investors ploughed €30 billion into local and overseas commercial property in the past 5 years
+ Investment of €133m has been made in 75 Enterprise Ireland supported companies since 2001
+ One in five Irish private sector workers are dependent on construction and more than 100,000 will become unemployed within 10 years
+ No Irish-owned company has floated on the Nasdaq Stock Exchange since 1999
+ Most workers in Irish-owned companies have no occupational pension
+ The Irish Government awarded special pay increases to all current and retired public sector workers, including politicians, in return for a benchmarking performance system. Targets introduced are basically unmeasurable and aspirational
+ William Prasifka, the chairman of the Competition Authority, recently said that “in too many areas, Ireland has not willingly embraced competition
+ New Irish housing units are among the most expensive and the lowest quality in the Developed World
+ Since the end of 2003, output per worker in Ireland has been almost static
+ Most foreign companies will have relocated from Ireland by 2025
+ In 1970, Ireland's national debt was as healthy as it is now: just ten years later it was one of the worst in the world

The free lunch has yet to be invented - the tipping point for the Irish economy
http://www.finfacts.com/irelandbusinessnews/publish/article_10006332.shtml

The warning lights are on.

aphex™

Just to counter some of that stuff:

-New companies are opening in Ireland every week. Often offering fairly advanced, high paid, jobs.

-Intel have opened up the Fab24 thing- they're here for a while yet.

-They're bringing more foreign companies here- science ones

-The housing market has risen simply to take into account the fact that there are now 2 workers in the family...
AND..
People are willing to work the rest of their lives to pay for a bit of plasterboard with the extra advantage of being only "5 mins from the luas" ie. (2.5 miles :rolleyes: ) near me at least. What is the luas worth? 20%? Crazy..

Anyway, the crash to me doesn't look so imminent (sadly- i hate the prices). Yes, the foundations are bad and the house of cards is mostly plasterboard, but looks like the builder made it so it'll last a few more years at least.

ronbyrne2005

aphex&#8482 wrote:

Just to counter some of that stuff:

-New companies are opening in Ireland every week. Often offering fairly advanced, high paid, jobs.

-Intel have opened up the Fab24 thing- they're here for a while yet.

-They're bringing more foreign companies here- science ones

-The housing market has risen simply to take into account the fact that there are now 2 workers in the family...
AND..
People are willing to work the rest of their lives to pay for a bit of plasterboard with the extra advantage of being only "5 mins from the luas" ie. (2.5 miles :rolleyes: ) near me at least. What is the luas worth? 20%? Crazy..

Anyway, the crash to me doesn't look so imminent (sadly- i hate the prices). Yes, the foundations are bad and the house of cards is mostly plasterboard, but looks like the builder made it so it'll last a few more years at least.

few new companies are opening and thise that are are creating handfulls of jobs. Intel was already established here so it made sense to stay,chip manufacturers dont go to cheapest labour countries but many other companies that ireland relies on do and will.we dont have an indigenous export sector worth talking about and if you actually read a lot about irish economy you'd realised how precarious the position is.nothing in your post is remotely convincing.the rise in house prices has been much much more than the amount of increase in double income households.

aphex™

I've added a few paragraphs, capital letters, spaces and fixed some spelling mistakes to make your post more legible [where possible], I hope you don't mind.

ronbyrne2005 wrote:

Tew new companies are opening and thise that are are creating handfulls of jobs.

Jobs reported created last week:72 Jobs Monaghan last week & 100 Jobs Cork. Is that a handful?

ronbyrne2005 wrote:

Intel was already established here so it made sense to stay, chip manufacturers dont go to cheapest labour countries but many other companies that ireland relies on do and will. We dont have an indigenous export sector worth talking about.

They could have opened the new plant in Isreal just as well. But no they chose Ireland, even without State Aid.

State assisted companies' exports went up by 1.2 billion last year. I'd say that is worth talking about

ronbyrne2005 wrote:

if you actually read a lot about irish economy you'd realised how precarious the position is.nothing in your post is remotely convincing.

If you actually read my post, you would notice that I did say thing were shakey. However the I did counter the points Pa ElGrande made, for example Intel. I was saying things aren't as black and white as he was saying.

ronbyrne2005 wrote:

The rise in house prices has been much much more than the amount of increase in double income households.

That is the main factor in it, and the rises in wages too.

ronbyrne2005

aphex&#8482 wrote:

I've added a few paragraphs, capital letters, spaces and fixed some spelling mistakes to make your post more legible [where possible], I hope you don't mind.

Jobs reported created last week:72 Jobs Monaghan last week & 100 Jobs Cork. Is that a handful?

They could have opened the new plant in Isreal just as well. But no they chose Ireland, even without State Aid.

State assisted companies' exports went up by 1.2 billion last year. I'd say that is worth talking about


If you actually read my post, you would notice that I did say thing were shakey. However the I did counter the points Pa ElGrande made, for example Intel. I was saying things aren't as black and white as he was saying.

That is the main factor in it, and the rises in wages too.

Apologies for the spelling and legibility as i was half asleep when i wrote that but im sure you got the drift.
Exports rose by 1.2million? big deal irish exports are 88billion approx and inflation is running at 3.8% so if those exports arent growing by around 3 billion a year they arent growing in real terms,in fact exports in real terms have grown little in last 5 years while house prices have boomed ,a country only gets richer by exporting things and not by building houses so this divergence of the economy from export driven to construction driven is extremely concerning and hence the attempts by government to develop more "knowledge based" industry here in the 3billion programme announced last week.
Yes the jobs you report are handfulls.have a read of this article in todays sunday times where it says
Figures from the Industrial Development Authority (IDA) highlight the trend. The authority brought great riches in the early Celtic tiger period. Its achievements in recent years have been slightly underwhelming, however. Employment by IDA companies actually has decreased by almost 9,000 people since 2000. Over the same period, total employment in Ireland has increased by almost 270,000.
Considering the IDA support all these new companies coming in you allude to im sure you find this worrying.
Other economies are miles ahead of us in bulding sustainble economic advantage for the future and this economy is heading down the pan unless things are radically changed.
You talk of Intels descision as if its some form of overwhealming endorsement of Ireland but in fact the reality is Intel are staying (for another decade at least) because they have an already trained workforce and building etc and highly attractive tax rates which is effectively state aid. Also why didnt they build more plants here rather than as they have done recently in israel mexico and eastern europe? and why havent the likes of AMD located their facilities here instead of germany and usa?
Face it Irelands economy is in for a rude awakening over the next decade.

lomb

aphex&#8482 wrote:

That is the main factor in it, and the rises in wages too.

interest rates make up a huge amount of it ,look at historic euribor(interbank rates) here http://www.euribor.org/html/content/euribor_data.html

furthermore confidence, general business, and the 'love of land' emotional value makes up alot also. theres a certain amount of greed involved on both vendor and purchaser sides also, and dodgy agents makes up the balance.

the prices for new apartments has reached crazy levels imho. and certain,y the supply/demand curve will shift soon, of that there is zero doubt.
interesting times ahead certainly;)

Cork

House prices are crazy.

The houses themselves are of varied quality.

People seem to have no problem buying these at crazy amounts of money - at 100% mortgages.

With every boom - they'll be a bust.

Many jobs that are coming in are call centre type jobs - pretty crap.

Irish wage rates do not justify the house prices.

lomb

new property thats being built or most of what was built in the last 6-7 years is rubbish. most of the mature stuff is reasonable, and the older stuff is lovely. the supply demand curve on the rubbish will shift and the builders know it. 80000 units a year with 95% of it being crap, it will be a bloodbath when the young trendies want a proper semi, regardless of boom/bust cycles.

Sponge Bob

lomb wrote:

new property thats being built or most of what was built in the last 6-7 years is rubbish.

not all of it just some of it

most of the mature stuff is reasonable

not all of it just some of it

and the older stuff is lovely.

some older stuff is complete cack with no insulation and tiny rooms and is better off demolished and rebuilt from foundation up.

the supply demand curve on the rubbish will shift and the builders know it.

yes but rubbish in a good area will do better than well built in a slum. The 'Location Location' mantra is a more important indicator than the build quality

80000 units a year with 95% of it being crap, it will be a bloodbath when the young trendies want a proper semi, regardless of boom/bust cycles.

Its NOT 95% crap , the ratio of crap to good is the same as ever. Its probably a lot less crap than late 1960s early 1970s stuff on average . Nearly all of that was complete cack.

Most of that build was semis , giving the lie to the "proper semi" notion.

lomb

Sponge Bob wrote:

not all of it just some of it

not all of it just some of it

point me to a fews decent new developments in dublin 1-24 please that are under 700 grand. its all basically high density cack, it started in the late 90s, 8 houses-12 houses an acre, now its 500 per acre. u call 45 square meters without parking for 450 grand sustainable living in a concrete square 20 meters off the ground reasonable?
the old stuff uninsulated and all has potential for upgrades for small money. at least the title was absolute freehold, now most of them are crippled with leaseholds and slowly delapidating common areas which will probably soak uo 2-3 months mortgage payments for the life of the interest.
developers paying 170 million for 2 acres means that they will be putting up sky high towers. the fact that so many are above means parking becomes something worth 75 grand a space.

Gegerty

The price of oil will break our economy before anything else does.