Booming economy coming to an end?

mckers

A few points, there are officially 300,000 working in the construction industry, don't know what percentage that works out to be. Construction is by far the largest individual employment sector over the last number of years and has been generating supernormal profits for those investing in it.

Somebody mentioned that 40% of new properties built last year were bought by investors, pretty ridiculous really. These investors have huge financial backing behind them, they get virtually 100% interest only loans and are certainly looking towards the capital appreciation route rather than income generation.

On the budget, McDowell did mention that he would like to get rid of stamp duty, which accounts for somewhere between 1 and 2 bn per annum (I think). If we look at this from a pragmatic point of view, the intention of the removal of stamp duty would be to help low income earners to get on the property ladder. As stamp duty is a progressive tax (higher rates of tax on higher property prices), its removal may not have as big an impact on the lower level income earners as one would first think.

There is one change which I would like to see in Budget 2007 - the removal of an interest deduction from rental income. Reasoning - a person paying mortgage interest on the primary residence gets tax relief of approx 600 (if single) and twice that if married. Investors can sometimes be getting 6-10k in relief it they were to buy the same property. This puts owner occupiers at a disadvantage.

Wind power - we might just be getting a little idealistic here. Can anyone tell me how many wind turbines we would need to generate the same level of electricity as a small nuclear power plant? I do agree with wind energy as well as solar power, but it should not be the primary source of energy.

Back to the Irish economy, there are certainly signs of change, 1) pubs are quieter, and many of them are being sold to property developers, 2) large numbers of houses are being withdrawn from auction (many times at higher than the AMV 3) not as much of the SSIAs has been invested in the economy. To be fair, if you want to buy a property, 10-20k from an SSIA won't go too far (especially in Dublin). 4) as far as I know banks are pulling back on 100% mortgages 5) a further .25% interest rate rise is on the cards

There also seems to be a feeling amongst Irish people that we have a god given right to the economic lifestyle we currently have. Having worked with eastern europeans, I have found that a lot of them are far more productive in their work than their Irish counterparts. On top of that, we are constantly given the impression that we are a low tax economy. Maybe that is the case for companies paying tax at 12.5%, but it is certainly not the case for individual, who pay income tax on their salary, and then pay all the indirect/stealth taxes on their after tax salary (i.e. stamp duty, vat, vrt etc). Based on this, it is quite clear that we are in fact a high tax economy and we should be comparing the services provided by our government with the services provided by our Nordic counterparts and even the newly arrived 10 accession countries - no comparison. The quality of life that can be achieved in those countries is far higher.

junkyard

There's no doubt about it but quality of life here in Ireland is gone out the window, its nothing but a rat race now for sure.:(

Do-more

There is no question that with a dynamic economy there are a huge number of potential influences.

There is also no question that Ireland has benefited from the influx from the new EU states, however therein lies another threat to the economy, the majority of these workers are living in rented accomodation and so are highly mobile.

If the investors lose confidence in the housing market and the housing starts take a cosequential downturn, a disproportionate number of those facing unemployment will be immigrants. Many will move on to other countries or return home. This will leave even more investors with unrented properties so they will be getting a double whammy!

As for the energy side of things, there is no question that this Government has really only paid lip-service to the need for more renewable energy sources, what money it has spent (such as the SEI Greener Homes scheme) has been wasted IMO because the focus is all wrong.

Gurgle

junkyard wrote:

There's no doubt about it but quality of life here in Ireland is gone out the window

What are you comparing it to?
Look aroung you - new cars, SKY TV in every council flat, PCs, pubs & clubs, designer clothes, gyms, swimming pools, health spas, beauticians, golf courses, travel agents.

Every possible sign of a society in the lap of luxory.

The country has never had it so good.

D'Peoples Voice

mckers wrote:

On top of that, we are constantly given the impression that we are a low tax economy.

We are, but you must remember how they calculate that, it's EVERY bit of tax collected added up and then divided by the size of our GDP.
Given Ireland's has a relatively high GDP for it's miniscule population etc, our tax take also seems small in comparison. It's not that our tax is low, it's that our GDP is relatively high.
If you look back over the years you will see that tax take has rarely fallen from one year to the next, but our GDP has been growing at up 6%p.a., so as a proportion the tax take is falling. Whether or not individuals experience that is another story!

junkyard

Gurgle wrote:

What are you comparing it to?
Look aroung you - new cars, SKY TV in every council flat, PCs, pubs & clubs, designer clothes, gyms, swimming pools, health spas, beauticians, golf courses, travel agents.

Every possible sign of a society in the lap of luxory.

The country has never had it so good.

There's more to life than luxary items, what I mean by quality of life is that people have no time anymore, its all work, work, work. All people want now is money and they don't care who they stand on to get it.:(

Sonnenblumen

junkyard wrote:

There's no doubt about it but quality of life here in Ireland is gone out the window, its nothing but a rat race now for sure.:(

Got to admit it despite the many fat cats, there are plenty of beautiful rats around these nowadays!

junkyard

Sonnenblumen wrote:

Got to admit it despite the many fat cats, there are plenty of beautiful rats around these nowadays!

Too True.:(

Reyman

chump wrote:

We're had it good for all my memorable adult life (24), I can't imagine what hard times must be like, anecdotes aside. I strongly believe there are a large porportion of my generation who don't believe we'll ever see 'tough' times again.

Hopefully we wont!

Sonny , if the 1980s hits again you'll shake with fear

Mark my words!

Pa ElGrande

chump wrote:

We're had it good for all my memorable adult life (24), I can't imagine what hard times must be like, anecdotes aside. I strongly believe there are a large porportion of my generation who don't believe we'll ever see 'tough' times again.

Hopefully we wont!

The 1980's started off with an oil price hike, followed by a credit crunch (Bank Managers make your life hell when this happens) , high interest rates, high inflation, high unemployment, high emmigration, high taxation, and even then the government could not generate enough revenue, a huge black economy, Adverts in the Evening Herald by handymen "no job too small". Getting a job in this country required pull and the right address i.e. if your address had Ballymun on it, your C.V. went in the bin. At one stage we had the best qualified bar workers in the world, the county council had a waiting list of people who wanted to become bin men. Getting a secure paid job required 5 years experience and a degree, I had neither. The American embassy had long queues of Irish people looking for that elusive work permit/visa, not to mention all the illegal Irish working in America. Bad times come no more.

There is an interview with David McWilliams on the Gerry Ryan show this morning plugging his new show next Monday evening, it's about 30 minutes long, 1 hour into the show.

http://www.rte.ie/rams/radio/latest/Fri/rte-2fm-grs-gerryryanshow.smil [you need realplayer]

Do-more

Spoke to two different business people over the weekend and both had the same story.

The first is in the Jewellery trade and things are normally starting to fly at this time in the run up to Christmas, but this year it's just dead.

The other is in the car trade and the phone just ain't ringin'

Just two cases but something tells me they are not alone...

BigEejit

The 80's .... *shiver* ... after leaving cert in my area, 90% of those that didnt go to college/Fas (Anco) emigrated ... there simply was no work ... my first full time job payed £75 a week (wasnt a lot then either) I only took it for the experience, didnt matter what qualification you had, no experience = no job most of the time.... if there is a massive downturn in the economy, the eastern europeans with either go off looking for work in another country or stay here for the better dole

Afuera

BigEejit wrote:

if there is a massive downturn in the economy, the eastern europeans with either go off looking for work in another country or stay here for the better dole

They won't even need to stay here to obtain the Irish dole...
If they've been signed on for one month under the Irish system, they can then move to any other EU country and receive it there for a 3 month period. I can't imagine many Eastern Europeans hanging around in Ireland without work when they can move back home (or closer to home i.e. Germany) where everything is cheaper, and still get the Irish dole.

BobbyD10

I would like to say that this is an excellent thread with many differing opinions which make it fascinating reading.

So do please continue with your comments and opinions as the economy is changing everyday and factors which effect this are constantly altering which leads to an uncertain months ahead.

Abit more light will be shed on things when the Budget is announced and people will have an idea on how confident the government feels about the economy, and this in turn will change attitudes, with many people thinking of buying a home waiting to see what effect the budget will have on the size of mortgage they may require(hopefully less).

Who knows really what will happen, but from current reports the economy will remain strong and with the estimates predicting a big increase in public spending(dont know if thats good or bad!!!) there is still an air of confidence.

D'Peoples Voice

BobbyD10 wrote:

Who knows really what will happen, but from current reports the economy will remain strong and with the estimates predicting a big increase in public spending(dont know if thats good or bad!!!) there is still an air of confidence.

I must admit that I have never known for so many banks to be offering such great deposit/savings rates. I believe that this will have a major draw on the money maturing from the SSIAs. A lot of peopel I know are saying that ..well I was contributing EUR 254 to the SSIA and I didn't notice it gone, so I might as well start saving EUR 250 with AIB/Bank of Scotland Ireland regular savings account. Therefore what the SSIA has done is turn a lot of people into savers.
In addition people are more anxious not to WASTE their SSIA, so consumption is being held back as part of a wait and see policy. This is backed up by the low rates of inflaiton in ireland (low relative to the rest of the euro area given our employment & economic growth rates).
Hence, I expect Ireland to slow down next year, not grow at a quicker rate! This will mean that we won't get that massive splurge of spending that all retailers are hoping for. In fact, I suspect that a lot ot people will try to reduce their outstanding mortgage. If in the budget, the Governemnt were to offer EVERYONE tax relief on pension contributions of 42%, regardless of whether they were top rate payers or not, then I could see a massive investment of money into pensions!
Either way, you know there is a slow down in the economy if you can walk into a car garage and buy a car, without having to join a waiting list!

Do-more

Just wondering what peoples feelings are on the economy now?

Lots of doom in the media about house prices, altough the vested interests continue to put a brave face on it!

Many reports also that people are not spending their SSIAs (mines going to be paying off the last of a loan).

On the other hand I've got a mate with a high ticket luxury goods business (not cars;) ) and business is booming!

Is the gravy train heading at full steam towards the buffers? Or is it just losing a bit of steam as we go up hill for a bit?

betonit

interest rate hikes have affected demand for goods overall eventhough inflation is still rising (energy, loan repayments). people are saving their ssia's. Dont under estimate the negative affect of a continually weakening dollar. These are contributing to a slowdown. There's alot of uncertainty out there...
The cost of doing business in this country needs to be the primary election issue. If more and more businesses move and are thinking of moving (some of the biggest are considering) then we will be back in 1986. Health, education, transport etc, all very important election issues but if unemployment rises there is no way to pay for these. More to pay in socail welfare less comming in income tax and vat returns. There is a slow down because people dont know whats goin to happen with interest rates, inflation, big multi-nationals. The govt need throw something out there to people at ease.

is_that_so

Not sure where some of these sentiments are coming from, although some perspectives here have been more than a tad influenced by the house price debate. Housing stock does not equal the economy, the economy will go on whether house prices change or not.

Economic growth this year will be between 4% and 5% depending on who you read. This is generally considered acceptable, next year it may go down to 2%-3%, which is a little on the low side. The big danger to all of this is inflation and probably borrowing , although the ECB is helping out on interest rates.

Otherwise we are not in bad shape; 4% or so unemployment, still running a trade surplus, and vacancies in many areas of the economy, construction aside.

I know nothing about construction however if the prevailing attitude amongst some tradespeople is being too busy to bother showing up or quoting obscene prices , well any problems they run into will be of their own making. It is not good business sense to ignore potential business, however small.