Property Market 2020

nerrad01

Borrowing at negative rates is still borrowing, just because i can get €100 and only have to pay back €99 dosent mean its a good thing, the €99 still has to be paid back. FWIW i cant see prices dropping by anything significant, i feel it will definitely cool the market and people buying might be able to make a purchase without 60 other couples turning up

riclad

This is not 2008 , there's no excess lending, houses are not massively overvalued, if there's a recession it, ll be due to company's going out of business, laying off workers due to covid 19,
The income from tourism is zero at the moment,
Sports venues music venues are closed.
Some industry's like airlines hotels will only survive if they recieve government bailouts

pearcider

Nijmegen wrote: »

So, earlier in the thread I noted that the government is supporting the incomes of ~450k who are still attached to their employer. That's actually a really good thing for an economic recovery, and the numbers receiving the payment are gonna drop like a stone.

Add to that then the 600k+ who have actually lost their jobs (ie, on the pandemic payment only) and it's clear that they were workers paying little to no income tax, who weren't qualifying for a mortgage on that basis and may have come out of the workforce but probably didn't come out of the pool of potential house buyers.

As for Irish government debt... The Irish government via the NTMA is currently borrowing to finance that deficit at negative interest rates. They're looking to raise ~€5bn in 10 year notes in their next offering and have a subscription of €50bn to do it.

https://twitter.com/pdosullivan/status/1270279560509165569?s=20

"Generals fight the last war" as the old maxim goes. This isn't 2008.

That’s a nice quote but irrelevant. This is the same war as 2008 and the exact same credit bubble. If you pull up the 20 year chart of any European banks share price, you can see that they all died in 2008 and never recovered. The same negative interest rates that let us borrow short term are destroying the European banks. Once these banks blow up (and they will since they are not profitable and won’t be able to last a long recession like we are facing without more of their loans going bad) and have to be recapitalised and nationalised then we are facing a bond market collapse.

Spreads on government debt can explode overnight and then we go from a situation where we can easily borrow to one in which we can’t. At the moment the waters are calm. But there are numerous storms approaching. Now if the ECB decide to continuously print to support the bond markets in Italy, Spain etc. we may postpone the day of reckoning...but the political will is beginning to evaporate in Germany and France. We are one election away from anti EU right wing governments coming to power in both these countries. They may decide to pull the plug on the euro rather than continue to fund a black hole.

JJJackal

The money used to support jobs will mostly come back on tax - as the government warned all these payments are liable for income tax etc. So the government could potentially see 20% back on income tax (it could be less; it could be more... depends on the job, the base pay etc etc).

People are not buying cars houses going on holidays etc. If this ever ends there will be a rapid sharp increase in spending. You could see alot of new cars bought on the 1st July for example. I was enquiring about going on a staycation. I thought there could be great deals to be had. None yet - there are some deals. And alot of places are quiet full. All this spending generates more VAT excise and so on. Once the pumps open half the country will go on a bender for a week... More coin in.

If we are lucky, the goverment will take on a 30 billion plus loan (not ideal) and alot of regular life will hopefully recover and we can potentially balance the books

Villa05

Nijmegen wrote:

In summary: Incomes are holding up better than expected Developers are back building sites aimed at FTBs No evidence has emerged to say that we have mass emigration on the cards and household formation demand is still there - It was well in excess of supply before Covid, so the current trend does not lend support to the idea that demand will fall below supply as we recover given incomes are holding up

Nijmegen wrote:

So, earlier in the thread I noted that the government is supporting the incomes of ~450k who are still attached to their employer. That's actually a really good thing for an economic recovery, and the numbers receiving the payment are gonna drop like a stone.

Nijmegen wrote:

Add to that then the 600k+ who have actually lost their jobs (ie, on the pandemic payment only) and it's clear that they were workers paying little to no income tax, who weren't qualifying for a mortgage on that basis and may have come out of the workforce but probably didn't come out of the pool of potential house buyers.

Nijmegen wrote:

As for Irish government debt... The Irish government via the NTMA is currently borrowing to finance that deficit at negative interest rates. They're looking to raise ~€5bn in 10 year notes in their next offering and have a subscription of €50bn to do it.

The new normal
Half the workforce dependent on the state for income plus pensioners

The state is one of the most indebted per head of population in the world

Borrow to sort it all out, but everything will be grand and house prices will be rocketing to the moon

JJJackal

Villa05 wrote: »

The new normal
Half the workforce dependent on the state for income plus pensioners

The state is one of the most indebted per head of population in the world

Borrow to sort it all out, but everything will be grand and house prices will be rocketing to the moon

House prices staying the same would probably be the ideal setup.

A fall could place people in neg equity and trouble the banks (obviously those who do not own a house want a fall).

A rise creates even more problems for those who dont own a house.

The_Conductor

JJJackal wrote: »

If we are lucky, the goverment will take on a 30 billion plus loan (not ideal) and alot of regular life will hopefully recover and we can potentially balance the books

We borrowed another 6 billion yesterday (a 10 year loan at a coupon value of 0.274%- which is remarkably good) and set a new record for Irish debt- the sale was over subscribed by >70 billion.

That is ontop of the 18 billion we borrowed year to date.

Department figures are suggesting a borrowing requirement for 2020 'of up to 10% of GDP) which suggests a borrowing requirement of between 38 and 39 billion (while we recorded a primary surplus for 2019).

This time round- we seem to have no issue whatsoever in selling Irish debt to investors- at really quite remarkably generous rates- the kicker of course is that you can't borrow ad nauseum, it'll have to be repaid at some stage. From an exchequer perspective, we're in far better health than many other EU countries.

Hubertj

pearcider wrote: »

That’s a nice quote but irrelevant. This is the same war as 2008 and the exact same credit bubble. If you pull up the 20 year chart of any European banks share price, you can see that they all died in 2008 and never recovered. The same negative interest rates that let us borrow short term are destroying the European banks. Once these banks blow up (and they will since they are not profitable and won’t be able to last a long recession like we are facing without more of their loans going bad) and have to be recapitalised and nationalised then we are facing a bond market collapse.

Spreads on government debt can explode overnight and then we go from a situation where we can easily borrow to one in which we can’t. At the moment the waters are calm. But there are numerous storms approaching. Now if the ECB decide to continuously print to support the bond markets in Italy, Spain etc. we may postpone the day of reckoning...but the political will is beginning to evaporate in Germany and France. We are one election away from anti EU right wing governments coming to power in both these countries. They may decide to pull the plug on the euro rather than continue to fund a black hole.

what constitutes a "long recession"? Any analysis i have seen in Ireland and Europe indicates a return to growth at some point next year. Is your opinion that this will not happen and cause further problems? I thought the proposed rescue package, whatever form is agreed, will satisfy the likes of Italy and Spain.

JJJackal

Hubertj wrote: »

what constitutes a "long recession"? Any analysis i have seen in Ireland and Europe indicates a return to growth at some point next year. Is your opinion that this will not happen and cause further problems? I thought the proposed rescue package, whatever form is agreed, will satisfy the likes of Italy and Spain.

Also this recession is different to say the tech bubble or 2008.

There was an economic flaw that lead to previous recessions.

This recession is due to everyone being locked up and not spending or travelling

Villa05

The_Conductor wrote:

Department figures are suggesting a borrowing requirement for 2020 'of up to 10% of GDP) which suggests a borrowing requirement of between 38 and 39 billion (while we recorded a primary surplus for 2019).

Dublin City Council appear to have negotiated a price of 5.88 million for 10 one and two bed luxury apartments in D4 for social housing

Good job we have lenders with deep pockets to finance that

Hubertj wrote:

what constitutes a "long recession"? Any analysis i have seen in Ireland and Europe indicates a return to growth at some point next year. Is your opinion that this will not happen and cause further problems? I thought the proposed rescue package, whatever form is agreed, will satisfy the likes of Italy and Spain.

The fall is going to be so sharp in the 2nd and 3rd quarter that a return to growth in the 4th is inevitable. The question is how long will it take to get 2019 levels.
A second wave in the winter plus Brexit in the new year are obvious serious risks

Geuze

Nijmegen wrote: »

As for Irish government debt... The Irish government via the NTMA is currently borrowing to finance that deficit at negative interest rates. .

Not quite negative, but very low, yes.

combat14

pearcider wrote: »

That’s a nice quote but irrelevant. This is the same war as 2008 and the exact same credit bubble. If you pull up the 20 year chart of any European banks share price, you can see that they all died in 2008 and never recovered. The same negative interest rates that let us borrow short term are destroying the European banks. Once these banks blow up (and they will since they are not profitable and won’t be able to last a long recession like we are facing without more of their loans going bad) and have to be recapitalised and nationalised then we are facing a bond market collapse.

Spreads on government debt can explode overnight and then we go from a situation where we can easily borrow to one in which we can’t. At the moment the waters are calm. But there are numerous storms approaching. Now if the ECB decide to continuously print to support the bond markets in Italy, Spain etc. we may postpone the day of reckoning...but the political will is beginning to evaporate in Germany and France. We are one election away from anti EU right wing governments coming to power in both these countries. They may decide to pull the plug on the euro rather than continue to fund a black hole.

already talk of a european bad bank to house 0.5 trillion to 1 trillion european debt that will never be repaid...

cnocbui

pearcider wrote: »

That’s a nice quote but irrelevant. This is the same war as 2008 and the exact same credit bubble. If you pull up the 20 year chart of any European banks share price, you can see that they all died in 2008 and never recovered. The same negative interest rates that let us borrow short term are destroying the European banks. Once these banks blow up (and they will since they are not profitable and won’t be able to last a long recession like we are facing without more of their loans going bad) and have to be recapitalised and nationalised then we are facing a bond market collapse.

Spreads on government debt can explode overnight and then we go from a situation where we can easily borrow to one in which we can’t. At the moment the waters are calm. But there are numerous storms approaching. Now if the ECB decide to continuously print to support the bond markets in Italy, Spain etc. we may postpone the day of reckoning...but the political will is beginning to evaporate in Germany and France. We are one election away from anti EU right wing governments coming to power in both these countries. They may decide to pull the plug on the euro rather than continue to fund a black hole.

This is not 2008 Mk II. There is no breakdown in trust between banks, they are in a far better state and there is not the slightest problem with liquidity. Debt at little to no interest rate is not really a problem in the near term and I doubt it is going to be a problem long term either.

I'm still waiting for the drastic negative consequences from the EU QE after the GFC many have been predicting. I'm beginning to no longer believe the old economic theory that governments can't just print money as needed. In economic theory, near full employment should have seen wage rises and resulted in inflation. That certainly hasn't happened. Keynesian economics appears to be a very dead parrot.

Nijmegen

pearcider wrote: »

That’s a nice quote but irrelevant. This is the same war as 2008 and the exact same credit bubble. If you pull up the 20 year chart of any European banks share price, you can see that they all died in 2008 and never recovered. The same negative interest rates that let us borrow short term are destroying the European banks. Once these banks blow up (and they will since they are not profitable and won’t be able to last a long recession like we are facing without more of their loans going bad) and have to be recapitalised and nationalised then we are facing a bond market collapse.

Spreads on government debt can explode overnight and then we go from a situation where we can easily borrow to one in which we can’t. At the moment the waters are calm. But there are numerous storms approaching. Now if the ECB decide to continuously print to support the bond markets in Italy, Spain etc. we may postpone the day of reckoning...but the political will is beginning to evaporate in Germany and France. We are one election away from anti EU right wing governments coming to power in both these countries. They may decide to pull the plug on the euro rather than continue to fund a black hole.

If we go back in the Boards archive, this could be a post from any year 2009-2013. We're still waiting for the patient to die on the operating table. The patient keeps getting up to go out for a cigarette and a drink. Sure they might be unhealthy, but they're not dead.

Have we entered a weird era where Central Banks just print money and we all just pretend it's ok? Yes. Did that a decade ago. Is it working? So far so good.

Villa05 wrote: »

The new normal
Half the workforce dependent on the state for income plus pensioners

The state is one of the most indebted per head of population in the world

Borrow to sort it all out, but everything will be grand and house prices will be rocketing to the moon

House prices in Ireland have become relatively stable rather than rocketing. Again, that's a "last war" type assessment.

As for half the state on welfare, sure that was already the case between pensioners, child benefit, might as well add unemployed for a few years.

As for Ireland being one of the most indebted in the world, actually our debt to GDP ratio had fallen to under 60%. "But that's not a fair assessment because of foreign investment etc!" shout people. Ok. But the bond markets think it's ok and lend us the money so, who cares? It's their money. We'll shoot back up to over 100% (we peaked at 120% last time) and then it'll come back down as people get back working.

Ireland's debt to GDP ratio is a correlation, not a causation with house prices.

nerrad01 wrote: »

Borrowing at negative rates is still borrowing, just because i can get €100 and only have to pay back €99 dosent mean its a good thing, the €99 still has to be paid back. FWIW i cant see prices dropping by anything significant, i feel it will definitely cool the market and people buying might be able to make a purchase without 60 other couples turning up

See above. States generally do not actually pay off their debt, they refinance it and inflation makes the debt smaller (and hence the refinancing cost). Remember when Ireland was crippled with debt in the 1980s and interest rates were through the roof and the country on the floor trying to pay for it? We had an outstanding national debt of £24.8 billion in 1989. We'll run a bigger deficit this year, but the economy is a lot bigger and £1 in 1989 translated to euros today wouldn't buy you a lot of bread.

Again, I think people read the headlines and assume it's going to be affecting house prices when actually what's affecting house prices is the cash in people's pocket and the number of them who want to form a household. Things that, to date, haven't been squeezed enough to drive the 40-50% etc drops some have been fantasising about on here.

Geuze wrote: »

Not quite negative, but very low, yes.

0.285% is effectively a negative interest rate when you account for inflation.

The total effective interest rate on all Irish government debt outstanding at the moment is about 2%. Pretty amazing.

DellyBelly

Geuze wrote: »

2016 median HH gross income


County Household median gross income
State 45,256

Dublin City 47,294
South Dublin 52,759
Fingal 58,795
Dún Laoghaire-Rathdown 66,203

That's not bad. So a couple in dun laoighre have an average combined wage of 132k. That should secure you a nice house in Dublin.

Ush1

DellyBelly wrote: »

That's not bad. So a couple in dun laoighre have an average combined wage of 132k. That should secure you a nice house in Dublin.

It's household income, not per person.

Reversal

DellyBelly wrote: »

That's not bad. So a couple in dun laoighre have an average combined wage of 132k. That should secure you a nice house in Dublin.

That's median household income. Not per person.

Graham

Mod Note

Off topic posts removed while I work out what to do with them.

sheepsh4gger

I wonder what will happen with Deutsche Bank, the word is it's a dead man walking.

If you look at charts from 1919/1919 you can see that there was a second wave. IMHO there's a good chance a second wave will wipe out all of this optimism.

I'm not coming out of my bunker until there's a wave of major bankruptcies. The system needs to be cleared of all of these failing boomer ventures being propped up by central banks. All I see is 'the big 4' everything: big 4 banks, big 4 tech companies, etc. It's just corpos merging and buying their own stock to prop up the share price. There is no productive economy.

The only difference between now and 2005 is the fact that the money faucet is only open to fat cats.

Marcusm

nerrad01 wrote: »

Borrowing at negative rates is still borrowing, just because i can get €100 and only have to pay back €99 dosent mean its a good thing, the €99 still has to be paid back. FWIW i cant see prices dropping by anything significant, i feel it will definitely cool the market and people buying might be able to make a purchase without 60 other couples turning up

The problem is the spending rather than the borrowing!

The_Conductor

Marcusm wrote: »

The problem is the spending rather than the borrowing!

Big time.
While its a relief that we can borrow, it still has to be paid back.

Graham

Much easier to pay back if we manage to keep out of a prolonged recession/depression.

This is probably the only time I'd be happy to see the government spending like drunk sailors on shore leave.

PommieBast

Graham wrote: »

Much easier to pay back if we manage to keep out of a prolonged recession/depression.

This is probably the only time I'd be happy to see the government spending like drunk sailors on shore leave.

Problem is once they start......

JimmyVik

Lets say that story about a vaccine being available in August is true.
I wonder how that will change things throughout the world, never mind Ireland.

JimmyVik

JimmyVik wrote: »

Lets say that story about a vaccine being available in August is true.
I wonder how that will change things throughout the world, never mind Ireland.

There won't be a vaccine available in August.
PPE was a struggle up to recently.

Hubertj

JimmyVik wrote: »

Lets say that story about a vaccine being available in August is true.
I wonder how that will change things throughout the world, never mind Ireland.

I think an effective treatment for acute cases will come before a vaccine is widely available. The hope is an existing anti inflammatory drug will be found to be effective. That will be the game changer short term (if they find 1!)

ngunners

www.rte.ie/amp/1146514/

OECD is predicting the worst recession in the last 100 years during peace times.

Graham

the OECD chief economist also goes on to say:

With crisis responses set to shape economic and social prospects for the coming decade, she urged governments not to shy away from debt-financed spending to support low-paid workers and investment.

"Ultra-accommodative monetary policies and higher public debt are necessary and will be accepted as long as economic activity and inflation are depressed, and unemployment is high,"

Extraordinary times necessitate extraordinary responses.

We can't even begin to guess the impact on the property market until we get an idea of the governmental response. Even then.....

Padre_Pio

Hope for the best and plan for the worst.

Soft landings and leprechaun economics are not going to help if the world economy goes tits up.

Hubertj

Hubertj wrote: »

I think an effective treatment for acute cases will come before a vaccine is widely available. The hope is an existing anti inflammatory drug will be found to be effective. That will be the game changer short term (if they find 1!)

Indeed, this is an example of one......
https://www.4dpharmaplc.com/en/newsroom/press-releases/clinical-update-phase-ii-covid-19-study