Irish Property Market chat II - *read mod note post #1 before posting*

kaymin

https://www.boards.ie/discussion/comment/119801335#Comment_119801335

Because banks can deposit customer savings not lent out with the ECB and earn 1.5% - no brainer for them to attract deposits from customers by offering interest as long as its less than 1.5%.

kaymin

https://www.boards.ie/discussion/comment/119802082#Comment_119802082

Finance Ireland would need to apply for a banking licence - it is regulated as a retail credit firm - i.e. they can lend only.

N26 and revolut are credit institutions which mean they can offer savings products. But then they don't offer mortgages.

drogon.

https://www.boards.ie/discussion/comment/119802363#Comment_119802363

Nobody knows if ECB will ever go back to negative interest rates, but ECB had them negative for close to a decade and Europe still had a very mediocre growth rate. Personally I think they should have gone positive with their interest rates years ago, when the economy was good. But that would have caused issues with some of the PIGS countries.

i think we have a generation that has gotten used to cheap credit and I think it might be hard for that cohort. No more impulse purchase of an iPhone or a MacBook Pro via 0% finance when they don’t have the money.

DownByTheGarden

The only way out now is to force a recession. They will do that via interest rates. Make no mistake, at this point the plan is a good hard recession. Whatever happens to house prices during that is anyones guess as who loses their jobs in these things is never predictable.

drogon.

https://www.boards.ie/discussion/comment/119803189#Comment_119803189

Well not true, I am sure nobody wants a recession. All they want is to reduce demand by increasing the cost of borrowing.

Inflation is caused by high demand and low supply, be it for housing, rental market, energy etc. That being said there has been cases of price gouging too, if maybe people want what you are selling and you only have limited supply. You can just hike up the price as people have no option but to pay it. Just look at profits of most energy companies.

DownByTheGarden

https://www.boards.ie/discussion/comment/119803312#Comment_119803312

They are going to force a recession. Its so obvious at this point. They left it too late and now its the only option.

drogon.

https://www.boards.ie/discussion/comment/119803333#Comment_119803333

I don’t think so. But as with anyone’s view this is all speculation. We have to wait and see how it plays out.

fliball123

https://www.boards.ie/discussion/comment/119803556#Comment_119803556

Dragon the recession is coming anyone denying this has their head in the sand Ursula said interest rates are going to continue going up until inflation is brought down and it will drag Europe into a recession. Once the xmas spend is gone come January (a month that always sees spend drop off the edge of a cliff no matter how good, bad or ugly the economy is) I think the wolves will be at the door for a lot of people. Big tech companies like Amazon and Alpha are already showing signs of struggle. If you look now the retail sales for Ireland are in for YoY and MoM and its not a pretty picture. Month on Month its gone from +2% to -3.1% and Year on Year its gone from -5.6% to -7% and last year is a year when we were in lockdown mode so a lot of retailers where closed so this year with retailers open sales even with economy open for business this year is down 1.4%. The figures do not lie. I mean this month should of seen a boon with Halloween and people spending for xmas and yet its dropped. There is real panic out there. Inflation, High energy/food prices, Interest rates increasing wages have in the majority of the private sector not come up to meet inflation as business are struggling with the same issues as individuals. Once the new year kicks in and people have had their xmas (as being Irish we like to have one last hooray before the bill has to be paid) you will see the first quarter of 2023 Ireland hitting a recession how bad it will be no one knows.

donnaille

https://www.boards.ie/discussion/comment/119802975#Comment_119802975

Heard they were even buying avocado on toast with credit...

Tonesjones

https://www.boards.ie/discussion/comment/119803333#Comment_119803333

That's not a surprise it's the target. Raise the rates make money expensive =less hiring, less expansion = literally recession.

There's no mystery, it's the definition

DownByTheGarden

https://www.boards.ie/discussion/comment/119803856#Comment_119803856

Only thing thats special at the moment ios they took too long to raise rates and then didnt raise them near enough. Now they will have to overshoot. They now have for force a worse recession than we needed in the first place and its going to hurt even more.

Tonesjones

https://www.boards.ie/discussion/comment/119803973#Comment_119803973

Absolutely. The US fed got on with its monetary tightening while people like Chief EU economist continued to proclaim that the inflation spike was temporary and transitory.

This is a problem with a common currency between so many different economies with differing levels debt. Tip toeing rather than being decisive

drogon.

https://www.boards.ie/discussion/comment/119803655#Comment_119803655

Well just to reiterate the ECB isn’t forcing a recession, nobody will come out and tell you such. But I will agree it is going to be an interesting time, Europe has had extremely low growth rate with negative interest for the last decade, so raising interest rate won’t help. Not to add the other uncertainty that you mentioned.

In terms of housing locally, I always laugh when people blame the last recession on abundant housing and cheap credit. This far from the truth, I bought a house in 2008 and as I have said it before people were outbidding each by as much as 40k right up until March/April 2008. We only found out the abundant houses issues later and the cheap credit just made the crash worst. It was like we were playing musical chair, everything was hunky dory until the financial crash happened in the US.

Thankfully we in a much better position this time. But I would still be worried about a lot of the institutional landlords that have bought up huge properties based on the fact that they can milk high rents. Some have notoriously left apartments empty to keep rents high. People pay high rents during good time, not sure it will last during a downturn.

Jonnyc135

https://www.boards.ie/discussion/comment/119803655#Comment_119803655

I really would take anything coming out of the ECB with a pinch of salt, they are the biggest pile of hopeless, useless, ivory tower living arseholes that have no concept of the real world economy. Come mid 2023, rates will be lowered as corporate debt, businesses, EU debt and private debt cannot take much more interest rates increases with out an absolute melt down in world economies. They will bail everything out and pivot which will shaft the normal people even more by prolonging and greatly worsening the Inflation. Then they will look at changing the CPI basket in order create the elusion that they are winning the battle against inflation.

fliball123

https://www.boards.ie/discussion/comment/119804418#Comment_119804418

Then why bother raising them in the first place? If anything I think the ECB are playing down the amount that interest rates will go up by I can see it going above 4% even higher in the next 12/18 months

drogon.

https://www.boards.ie/discussion/comment/119804418#Comment_119804418

Could be worst, at least the ECB is being sensible. Unlike the Irish central bank!

timmyntc

https://www.boards.ie/discussion/comment/119804754#Comment_119804754

a 4% ECB rate could kill the euro.

The more indebted countries are at real risk from a high ECB rate. The ECB is stuck between a rock and a hard place at the minute, and it really just shows the mad nature of a single currency - some economies would be happy to see higher inflation (inflate away some of the debt, weaker currency better for exports) while others want the rate rise instead. Big divergence in opinions and economic stability in the eurozone, so the ECB have to tread a very fine line with their decisions.

Technically their mandate is to maintain euro inflation at 2%, but really the priority is not to rock the boat and risk countries leaving the euro entirely.

rob316

The US are raising rates at record levels and can't reign in inflation, I'm not sure this policy will work for the ECB either.

fliball123

https://www.boards.ie/discussion/comment/119804890#Comment_119804890

I think that is the whole point bring about a recession and bring down inflation. They have no other tool to do this. Look it will be interesting to see what it goes up by in December, people flagging .5% I think we may see another .75% but a lot of countries are still seeing stubbornly high inflation. Add in the US are up at 3.25% and inflation is still high over there. How else do they quell inflation as I think globally we have a horrible choice so which is worse high inflation rates (while wages are coming no where near to match) or higher interest rates (where people will have to stop spending forcing inflation down). When inflation comes down at least they can control what level interest rates come down by and when.

drogon.

https://www.boards.ie/discussion/comment/119804890#Comment_119804890

4% is nothing relatively speaking. Rates used to be around 14% in the 80s. Even back in 2008, I remember Irish rates was fairly close to 6%. If the ECB fails to tame inflation the euro would be worth nothing, I guess higher interest rates is still better than indebted countries leaving the Europe. Just look at how the brits have done.

https://www.boards.ie/discussion/comment/119804991#Comment_119804991

But imagine what would happen if they wouldn’t have done it! Inflation is caused by increased demand and low supply, increasing interest rate is the only way to sort it. Unless someone else finds a better way.

fliball123

https://www.boards.ie/discussion/comment/119804991#Comment_119804991

Give it time if they keep going for another few % it will kick inflations ass in about 12 months time. Also if Russia and the Ukraine decided they have had enough this would also be a big turn of the pressure valve on prices.

donnaille

https://www.boards.ie/discussion/comment/119805092#Comment_119805092

I believe you're talking about mortgage rates rather than central bank interest rates - can you show me where the ECB rate has ever touched 4%? How are mortgage interest rates from a very short period in the 80's relevant?

Timing belt

https://www.boards.ie/discussion/comment/119803655#Comment_119803655

don’t forget the retail sales include inflation so if sales were identical to last year you should see a 9-10% increase. So the real drop year on year is closer to 17% (7% + inflation)

Timing belt

https://www.boards.ie/discussion/comment/119804890#Comment_119804890

You could see National debt being replaced by European bonds….That will be the only option to manage the indebted countries and raise rates.

this could be the start of a Big debate on where the EU goes from here… moving away from a union to more of a federal set up.

Timing belt

https://www.boards.ie/discussion/comment/119804991#Comment_119804991

While the labour market is still strong they won’t be able to reign in inflation as people can jump jobs for better pay.

drogon.

https://www.boards.ie/discussion/comment/119805181#Comment_119805181

Sounds like a rhetorical question, cause Euro as a currency has only been with us for about 23 years. So is very new comparing the dollar. But if you search online you can find that the highest it has been in its 3.75%

But want to emphasis that I personally don’t think it will get there. I think average for the next 10 years the euro rates will be around 1.5~2% but Irish mortgage holders will pay more than most EU counterparts due to lack of competition (like we already do)

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119804418#Comment_119804418

This is when we see the end of the EU as most of us have known it. The cost of backing out of rate rises and taking the heat out of assets is populism. The EU already had problems with populists and these will get much worse if inflation is not aggressively controlled. I think they will keep going with rate rises and try to blame Putin as much as possible for the next few years of poor Eurozone growth but it is not Putin so much as it is their own incompetence.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119805274#Comment_119805274

As I said two years ago, the only way this party ends is with the ECB perpetually rolling over its bond buying and waving that magic wand to effectively make the debt of Eurozone countries disappear. There is no repayment ever happening from countries in the Eurozone. QE under a new name, rinse and repeat to infinity or until the current crop reach retirement and the populists start to get their puppets in the head seats of the EU and ECB.

Timing belt

https://www.boards.ie/discussion/comment/119806223#Comment_119806223

Is it really two years of you spouting rubbish such as:

-there will be no war it’s only being used to justify inflation

-why has the market reacted to a new strain of covid

-we won’t see immigration like we did before covid

-government debt will be written off

and let’s not forget your favourite when SF come to power….

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119806258#Comment_119806258

The war is being blamed for inflation but the cost of living crisis predates the war and was caused by excessive QE and low for too long rates implemented by life longer civil servants at the ECB.

With COVID, I made the point that there was no data showing that strain to be more deadly and no indication of any additional restrictions at that stage, yet markets were so jittery (as they are in a bubble that is at its peak), they panic-adjusted.

We have lost the well paid tech workers after COVID because we have had effectively zero rentals available the last year, this is true. Funny enough, the big tech slowdown will mask the fact that we had looked the MNC job gift horse in the mouth pre-slowdown by having no housing anyway. It is a fact that the immigration pre-covid is over, war-fleeing asylum seekers and refugees won't be supporting rents and house prices at the levels they are at.

Government debt was created by pushing a few buttons at the ECB. It will disappear the same way, either directly or indirectly via some sort of perpetual bond rollover or some BS new QE bond probably under the guise of something ESG related.

Lastly, SF; they will introduce a rent freeze almost instantly and will panic all the fat cats who do well out of FF and FG that may then look to start selling up and retiring abroad due to the fear that SF will crash the property market. The fear of SF will do more for the housing market than what they will do themselves. In ten years I think we will see a United Ireland with the cheaper housing in the North being a good investment longer term today as that will increase over the next ten years whereas prices in the Republic will be probably similar to what they are today in ten years, but if I had to hang my hat on it, I'd say they will be lower in ten years than they are today.

You left out the other points I said; summer 2021 to go low for long with a mortgage rate and by long I meant 20 years. I also said repeatedly the ECB would change its tune around inflation and embarrassingly raise rates after all during 2022 - this was when the fools were still claiming inflation was transitory and that rates wouldn't rise. This was before the Ukraine Russia skirmish kicked off as well when I was saying it! Short story long; once you read away from the official narrative on these things, it isn't that difficult to see what is really going on. The only uncertainty is the constant wildcard of an ever growing Big State and it's central bankers who are, quite frankly, cowboys and renegades who I do not trust at all as my experience in life shoes me that they work for the already wealthy and at the expense of the John and Mary Taxpayer.