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Housing Bubble Bursting
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1) You appear to be detached from reality. The price crash has already started. Whether it is near its end is hard to say. You appear to be implying we should stop property prices falling. You haven't addressed the point I made which is that to force large families into unsuitable accommodation is inhumane and yet that is what will happen if we maintain property prices at their current level. They were unsustainable long before they started falling.
The Irish economy is in deep trouble for a variety of reasons, a key one being a lack of competitiveness on the labour cost front. Net income is tumbling in most households so available cash to buy is falling. This has a knock on effect on prices.
You're suggesting that the only way we can make property prices continue to fall is to carry out the list above - well we don't have to do it because it's happening by iteslef. Unemployment is rising. We have an outward flow of workers at the moment. We don't have to close our borders because more people want out than in right now. The economy is still contracting, all that has changed is the rate of contraction has slowed somewhat. We are in a period of deflation. All this put together does not imply a stabilising of property prices.
1) I'm saying that all over the world from year to year (despite periodic adjustments) property becomes more and more valuable thing and Ireland wouldn't escape this too. So, in Ireland over long term the property prices would continue to grow and would again overgrow the 2006 price levels. And therefore the prices would grow in spite of your accusations in inhumanity.
2) Irish economy was in deep trouble, but now it is on the way out.
3) As of now the decline in property prices has already significantly outstripped the negative economic factors, so as long as those negative factors would be only marginal, there wouldn't be additional room for further sharp reduction in property prices. You should also bear in mind sharp reduction in interest rates which slashed mortgage payments by 25-35%, leaving people with higher net after mortgage incomes (so, overall net after mortgage incomes are now higher than they were just 3-4 years ago).0 -
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1) I'm saying that all over the world from year to year (despite periodic adjustments) property becomes more and more valuable thing and Ireland wouldn't escape this too. So, in Ireland over long term the property prices would continue to grow and would again overgrow the 2006 price levels. And therefore the prices would grow in spite of your accusations in inhumanity.
Typically the very few long term studies of property prices have discovered that they just about match inflation in terms of value growth. Periodic irrational bubbles are usually cancelled out by periodic deflations. The long term average remains the same. Currently, bubble growth in Ireland since about 2001 has not yet been fully cancelled out. We may overgrow 2006 nominal prices but it will be some time before we match them inflation adjusted. You're also carefully avoiding the reality that Ireland is way over supplied for property at the moment and most estimates suggest that property for sale exceeds about a year's demand right now. I'm also going to add by way of nothing that in fact, the property market in Japan has been stagnating for more than 20 years now.2) Irish economy was in deep trouble, but now it is on the way out.
The world is not that simple. Currently the best you can say for the Irish economy is that it has slowed the rate of decline. It is still in negative growth. Unemployment is still growing and this even with an outflow of people from the country. Part of this is linked to the fact that 25% of our economy was construction based and that industry has dried up pretty much. Most of our unemployment comes from the fallout of that industry collapsing.
During that time, however, our exports remained steady which was kinda lucky really.
In terms of the future, courtesy of NAMA, the State is taking on a massive liability and we are looking - still - at major cuts in spending, including capital spending, wages for public sector - and at major increases in taxes. This leads to lower available net income for everyone and that will have a knock on impact on property and on the consumer driven section of the market.3) As of now the decline in property prices has already significantly outstripped the negative economic factors, so as long as those negative factors would be only marginal, there wouldn't be additional room for further sharp reduction in property prices. You should also bear in mind sharp reduction in interest rates which slashed mortgage payments by 25-35%, leaving people with higher net after mortgage incomes (so, overall net after mortgage incomes are now higher than they were just 3-4 years ago).
Interest rates were at an historic low for much of the early part of the bubble and really only started to rise at the end of 2005 which is when property prices first started to show the odd drop. I'd also point out that the fact that interest rates are at historic low and property is still basically unaffordable to the average FTB is a bad sign because typically, current interest rates are not the norm - the historic norm for the lasxt 30 years is about 4-5%. Additionally, the increase in property prices didn't significantly outstrip positive economic growth. Property price increases were stratospheric at a time when other economic indicators were merely growing nicely. The snap back was always going to be monumental and it is not monumental yet.
I should point out to you the number of repossession proceedings is growing; the number of non-performing mortgages is growing per the banks, the number of unemployed is growing.0 -
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1) Typically the very few long term studies of property prices have discovered that they just about match inflation in terms of value growth.
2) Periodic irrational bubbles are usually cancelled out by periodic deflations.
3) The long term average remains the same. Currently, bubble growth in Ireland since about 2001 has not yet been fully cancelled out. We may overgrow 2006 nominal prices but it will be some time before we match them inflation adjusted. You're also carefully avoiding the reality that Ireland is way over supplied for property at the moment and most estimates suggest that property for sale exceeds about a year's demand right now. I'm also going to add by way of nothing that in fact, the property market in Japan has been stagnating for more than 20 years now.
4) The world is not that simple. Currently the best you can say for the Irish economy is that it has slowed the rate of decline. It is still in negative growth.
5) Unemployment is still growing and this even with an outflow of people from the country. Part of this is linked to the fact that 25% of our economy was construction based and that industry has dried up pretty much. Most of our unemployment comes from the fallout of that industry collapsing.
6) During that time, however, our exports remained steady which was kinda lucky really.
7) In terms of the future, courtesy of NAMA, the State is taking on a massive liability and we are looking - still - at major cuts in spending, including capital spending, wages for public sector - and at major increases in taxes. This leads to lower available net income for everyone and that will have a knock on impact on property and on the consumer driven section of the market.
8) Interest rates were at an historic low for much of the early part of the bubble and really only started to rise at the end of 2005 which is when property prices first started to show the odd drop. I'd also point out that the fact that interest rates are at historic low and property is still basically unaffordable to the average FTB is a bad sign because typically, current interest rates are not the norm - the historic norm for the lasxt 30 years is about 4-5%.
9) Additionally, the increase in property prices didn't significantly outstrip positive economic growth. Property price increases were stratospheric at a time when other economic indicators were merely growing nicely. The snap back was always going to be monumental and it is not monumental yet.
10) I should point out to you the number of repossession proceedings is growing; the number of non-performing mortgages is growing per the banks
1) It is far from the true and depends on a particular country
2) They are always cancelled only partially, not fully, and after such partial cancellation a new wave of growth begins
3) In the world there are plenty of countries with much higher level of oversupply but even they now start showing positive signs. Please, don't always rely on the Japanese case alone, as it was highly specific and won't be replicated in Ireland.
4) Wait for the Q3-Q4 quarterly results
5) Reductions in construction sector have been already reflected in the unemployment figures and have limited room for further reductions.
6) At least here you agree with me
7) The negative impact from tax increases and salary reductions was easily outstripped by the fall in mortgage payments and price reductions, so overall impact is positive (people ON AVERAGE are now better off than 3-4 years ago) and together with sharp decline in residential property prices it indicates much better affordability of housing now than it was in 2005-2006.
8) You should refer to the historic Euro interest rates only and ignore interest rates during the Irish Punt era, as Euro is a much stronger currency than the Irish Punt was.
9) So the actual reduction by 30-60% for you is not monumental? What would be for you a monumental snap back? When the 1-bed apartments in Dublin would sell at a price of 1K euro? Or when the large houses on the Angelsea Road would go on sale at a price tag of 5k euro?
10) Relatively to many other countries the number of repossession proceedings and the number of non-performing mortgages in Ireland is near to nothing.0 -
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