Property Market 2020

pearcider

fliball123 wrote: »

What are you basing that on just your gut??

I’m basing it on the fact that this is the longest expansion in US history and it has coincided with a doubling of their national debt from 10 to 20 trillion. They are currently running a fiscal deficit of 1 trillion. A recession, which is long overdue, will push this to 3 trillion. That would be unparalleled in history even in wartime.

Furthermore central banks won’t be able to stimulate demand because interest rates are already near zero and they have been in a titanic struggle since October 2019 to stop them rising with billions of liquidity being injected into the repo market every day.

All forward looking economic indicators are horrible and have been since mid 2019. See Pmi Baltic dry etc etc.

In fact the economy should’ve crashed a couple of years ago except Fed chairman Jerome Powell did an about face on monetary policy and stopped normalizing interest rates “the Powell pivot”. They now know they can’t raise interest rates without crashing the economy even though in a healthy economy interest rates should be much much higher. The train is approaching and the world economy is tied to the tracks.

sweetie

pearcider wrote: »

I’m basing it on the fact that this is the longest expansion in US history and it has coincided with a doubling of their national debt from 10 to 20 trillion. They are currently running a fiscal deficit of 1 trillion. A recession, which is long overdue, will push this to 3 trillion. That would be unparalleled in history even in wartime.

Furthermore central banks won’t be able to stimulate demand because interest rates are already near zero and they have been in a titanic struggle since October 2019 to stop them rising with billions of liquidity being injected into the repo market every day.

All forward looking economic indicators are horrible and have been since mid 2019. See Pmi Baltic dry etc etc.

In fact the economy should’ve crashed a couple of years ago except Fed chairman Jerome Powell did an about face on monetary policy and stopped normalizing interest rates “the Powell pivot”. They now know they can’t raise interest rates without crashing the economy even though in a healthy economy interest rates should be much much higher. The train is approaching and the world economy is tied to the tracks.

And the driver has Coronavirus

JamesMason

sweetie wrote: »

And the driver has Coronavirus

And it's the express. Recession next stop!

Eric Cartman

pearcider wrote: »

I’m basing it on the fact that this is the longest expansion in US history and it has coincided with a doubling of their national debt from 10 to 20 trillion. They are currently running a fiscal deficit of 1 trillion. A recession, which is long overdue, will push this to 3 trillion. That would be unparalleled in history even in wartime.

Furthermore central banks won’t be able to stimulate demand because interest rates are already near zero and they have been in a titanic struggle since October 2019 to stop them rising with billions of liquidity being injected into the repo market every day.

All forward looking economic indicators are horrible and have been since mid 2019. See Pmi Baltic dry etc etc.

In fact the economy should’ve crashed a couple of years ago except Fed chairman Jerome Powell did an about face on monetary policy and stopped normalizing interest rates “the Powell pivot”. They now know they can’t raise interest rates without crashing the economy even though in a healthy economy interest rates should be much much higher. The train is approaching and the world economy is tied to the tracks.

This is a very good post, All the western powers have been tasked for the last decade with getting inflation over 2% and have failed miserably , stock prices are being kept high as theres a buyback frenzy of corporates taking back their own stock in order to shore themselves up from recession knowing that they borrowed at near nothing to buy back that stock and interest rates can only climb so quickly without causing giant problems. The stock market might be doing well but on a tangible corporate spending side the economy is flat and there has been a sales recession for the last 4 quarters.

The chinese middle and upper classes have been haemorrhaging money into foreign investment and its looking like that money may or may not be real which could cause some massive issues when that bubble bursts.

coolshannagh28

pearcider wrote: »

I’m basing it on the fact that this is the longest expansion in US history and it has coincided with a doubling of their national debt from 10 to 20 trillion. They are currently running a fiscal deficit of 1 trillion. A recession, which is long overdue, will push this to 3 trillion. That would be unparalleled in history even in wartime.

Furthermore central banks won’t be able to stimulate demand because interest rates are already near zero and they have been in a titanic struggle since October 2019 to stop them rising with billions of liquidity being injected into the repo market every day.

All forward looking economic indicators are horrible and have been since mid 2019. See Pmi Baltic dry etc etc.

In fact the economy should’ve crashed a couple of years ago except Fed chairman Jerome Powell did an about face on monetary policy and stopped normalizing interest rates “the Powell pivot”. They now know they can’t raise interest rates without crashing the economy even though in a healthy economy interest rates should be much much higher. The train is approaching and the world economy is tied to the tracks.

Powell was a hawk on rates and QE but had a volte face prompted by either the wrath of Trump or the state of the books but nonetheless the tools to fight a recession are non existent since this and the days of the dollar as a reserve currency may be numbered.

nerrad01

this is all way over my head but interesting none the less.

19233974

https://www.telegraph.co.uk/business/2020/02/24/1-trillion-wiped-global-markets-coronavirus-panic-sends-stocks/

Worst one day fall since 2015 so not as minor as previously predicted and it hasnt even started to spread in europe yet.

Mic 1972

19233974 wrote: »

https://www.telegraph.co.uk/business/2020/02/24/1-trillion-wiped-global-markets-coronavirus-panic-sends-stocks/

Worst one day fall since 2015 so not as minor as previously predicted and it hasnt even started to spread in europe yet.

This was to be expected
defenitely not a good time to invest in property

J_1980

Mic 1972 wrote: »

This was to be expected
defenitely not a good time to invest in property

German property stock Vonovia (VNA GR) is only down 1% in last 3 days. iRES reit is actually up over last 3 days.
Residential Property is by far the best perfroming sector in europe. Same in the US, the Bloomberg/REIT index (BBREIT Index) dropped 1.08% yesterday - from its all time high marked the prior day.

The next recession will not make the cost of living more bearable, property will stay expensive. What is being hit is the entire manufacturing sector and to a lesser degree services.
Earnings recession (2021/22) —> collapse in tax receipt —> brutal cut in government services (or welfare) after 2022 - the voter has to decide that. The current expenditure is totally unsustainable in light of the global competitiion from Asia.

Mic 1972

J_1980 wrote: »

German property stock Vonovia (VNA GR) is only down 1% in last 3 days. iRES reit is actually up over last 3 days.
Residential Property is by far the best perfroming sector in europe. Same in the US, the Bloomberg/REIT index (BBREIT Index) dropped 1.08% yesterday - from its all time high marked the prior day.

The next recession will not make the cost of living more bearable, property will stay expensive. What is being hit is the entire manufacturing sector and to a lesser degree services.
Earnings recession (2021/22) —> collapse in tax receipt —> brutal cut in government services (or welfare) after 2022 - the voter has to decide that. The current expenditure is totally unsustainable in light of the global competitiion from Asia.

All i read in there is less money for the people ...less money to buy a house or pay rent. Lower prices

JamesMason

Mic 1972 wrote: »

All i read in there is less money for the people ...less money to buy a house or pay rent. Lower prices

If global stocks crash, will nervous shareholders in REITs liquidate their holdings?

J_1980

Mic 1972 wrote: »

All i read in there is less money for the people ...less money to buy a house or pay rent. Lower prices

There’s nearly full employment and labour shortages is most developed economies.
This coming downturn will mostly be an adjustment of corporate profits. Interest rates went from 5% to zero or sub-zero, yet most companies still have return-on -equity targets of 10-15%. That’s just ridiculous assumption in a world where competition can endlessly spawn based on zero funding costs.

It will hit company profits and high earners first (their income is based on incentive pay, corporate profits, partnership payouts etc.). I doubt we’ll go back to high unemployment again, too much demand for labour.

The biggest loser will be the government as the tax based has been narrowed down so much to that group.

J_1980

JamesMason wrote: »

If global stocks crash, will nervous shareholders in REITs liquidate their holdings?

No they won’t. It’s a save haven asset. As described above. Property stocks are bid heavily in this sell off. Property is a hard asset like gold (unless leveraged but most REITs are 40% ltv only).

Cuddlesworth

Corporations don't reduce profits. If growth stalls, they reduce cost. Usually starting with labour cost.

JamesMason

J_1980 wrote: »

No they won’t. It’s a save haven asset. As described above. Property stocks are bid heavily in this sell off. Property is a hard asset like gold (unless leveraged but most REITs are 40% ltv only).

So, if the Hong Kong property market (which is highly leveraged) collapses, due to recession exacerbated by CoVid, investors will flock to Irish REITs instead of gold? Don't think so

J_1980

JamesMason wrote: »

So, if the Hong Kong property market (which is highly leveraged) collapses, due to recession exacerbated by CoVid, investors will flock to Irish REITs instead of gold? Don't think so

They don’t need to flock to it. It’s enough to keep the safer asset.

One thing to add: I do believe that rents will go down. But so will interest rates, which would offset the yield effect

J_1980

Cuddlesworth wrote: »

Corporations don't reduce profits. If growth stalls, they reduce cost. Usually starting with labour cost.

Usually yes.
Recent earnings season would indicate otherwise. Most banks lowered their roe targets (french banks, ubs, ms) instead of layoffs. The digital transformation does not allow for personnel cuts in many service industries. Cut costs and fall behind.

Can you imagine Daimler cutting research in light of Tesla competition?

Mic 1972

J_1980 wrote: »

Usually yes.
Recent earnings season would indicate otherwise. Most banks lowered their roe targets (french banks, ubs, ms) instead of layoffs. The digital transformation does not allow for personnel cuts in many service industries. Cut costs and fall behind.

Can you imagine Daimler cutting research in light of Tesla competition?

Research and sales are the last to get cut, but what about admin, finance, accountancy, customer service?

Competition also means looking for more convenient shores to set up factories and offices, usually East Europe and Asia.

I like your confidence but jobs have been cut before

odyssey06

Mic 1972 wrote: »

Research and sales are the last to get cut, but what about admin, finance, accountancy, customer service? Competition also means looking for more convenient shores to set up factories and offices, usually East Europe and Asia. I like your confidence but jobs have been cut before

And wages, bonuses, overtime can be cut...
Hiring will stop.
Less people will come here looking for work.
People here will look elsewhere.

Cuddlesworth

J_1980 wrote: »

Can you imagine Daimler cutting research in light of Tesla competition?

They would cut everything. Short term over long term goals, current share price over future revenue. Wait for stocks to vest, sell and run to the next company while touting .

J_1980

Mic 1972 wrote: »

Research and sales are the last to get cut, but what about admin, finance, accountancy, customer service?

Competition also means looking for more convenient shores to set up factories and offices, usually East Europe and Asia.

I like your confidence but jobs have been cut before

Nearly every industrialized, free market country is at full employment ans highest employment rates for decades. Given all the doom and gloom spouted around 5-10y ago, I’m positive about the future for workers/ risk of unemployment.
Years of below inflation wage rises have made Western employees simply too cheap (also usually referred to as “cost of living crisis”). It’s not 2001 anymore when a Polish bloke was €350 a month. The legal security, decent infrastructure etc. here easily offsets most outsourcing nowadays.

Only issue is the heavily unionized german car manufacturing. Wages are way too high for relatively simple jobs there.

Mic 1972

J_1980 wrote: »

Nearly every industrialized, free market country is at full employment ans highest employment rates for decades. Given all the doom and gloom spouted around 5-10y ago, I’m positive about the future for workers/ risk of unemployment.
Years of below inflation wage rises have made Western employees simply too cheap (also usually referred to as “cost of living crisis”). It’s not 2001 anymore when a Polish bloke was €350 a month. The legal security, decent infrastructure etc. here easily offsets most outsourcing nowadays.

Only issue is the heavily unionized german car manufacturing. Wages are way too high for relatively simple jobs there.

From personal experience, the company I'm working for at the moment outsourced about 200 jobs to a number of locations outside Ireland. I was involved in the risk assessment side of the project, I saw the numbers and everything. I agree with you that most emerging markets are starting to pay better salaries but the saving margin is still significant for an Irish company if the same jobs was to be outsourced to another country.

Below is a link to the current unemployment rates in Europe, a few major countries seem to have an issue with employment at the moment



https://www.statista.com/statistics/268830/unemployment-rate-in-eu-countries/

J_1980

Mic 1972 wrote: »

From personal experience, the company I'm working for at the moment outsourced about 200 jobs to a number of locations outside Ireland. I was involved in the risk assessment side of the project, I saw the numbers and everything. I agree with you that most emerging markets are starting to pay better salaries but the saving margin is still significant for an Irish company if the same jobs was to be outsourced to another country.

Below is a link to the current unemployment rates in Europe, a few major countries seem to have an issue with employment at the moment



https://www.statista.com/statistics/268830/unemployment-rate-in-eu-countries/

Yes the 4 south european basket cases with their over regulated labour markets.
I said “free market”.

E.g.
Poland had 14% unemployment in 2006!!!
Now 3.27%.

J_1980

Well anyway, historically the asset class that got pummeled in the last recession usually does fairly well in the next one:



Houses dropped in the savings and loan crisis in early 90’s but were immune to drops in dot.com crash.

Tech stocks survived 2009 without andy defaults and rallied straight out if the block thereafter.

Similarly I wouldn’t expect banks and house prices to correct heavily in the next one.

19233974

Uncertain times ahead thats for sure!

Mic 1972

19233974 wrote: »

Uncertain times ahead thats for sure!

I like your views anyway, you seem to understand markets and trends. I'm looking at jobs being cut and it worries me because i was here when the same happened in 2008

OwlsZat

Wonderful, apartment complexes not even built and already been sold off plans...


https://www.irishtimes.com/business/commercial-property/chartered-land-plans-dublin-s-tallest-tower-on-parkgate-street-1.4161368

https://www.irishtimes.com/business/commercial-property/chartered-land-seeks-buyer-for-650m-dublin-apartment-portfolio-1.3998894

Mic 1972

OwlsZat wrote: »

Wonderful, apartment complexes not even built and already been sold off plans...


https://www.irishtimes.com/business/commercial-property/chartered-land-plans-dublin-s-tallest-tower-on-parkgate-street-1.4161368

https://www.irishtimes.com/business/commercial-property/chartered-land-seeks-buyer-for-650m-dublin-apartment-portfolio-1.3998894

excellent location, nice to see plans for high-rise in the area

SozBbz

I don't see why people are so bothered with the buy to rent model.

I get why people are perturbed by the low numbers of new homes hitting the open market, but surely it doesn't have to be just one or the other. Yes, we need to build more for sale, but if developers want to build long term rental units also, then whats the harm.

FWIW I like the look of the proposed development above - modern urban living with good density. There will always be a market for people at a certain stage in life wanting to rent in town. No reason this shouldn't be catered for.

Also, each unit built increases capacity. Overall capacity will be what will bring stability in the longterm. Its not all about everyone buying their dreamhome, there is need for all types of properties to cater for all types of scenarios.

OwlsZat

Because it's a huge change. The free market means supply and demand brings rents up and down. Build to rent, they don't drop the prices.

It honestly feels like part of an end game scenario to me.