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

Rates won't be higher than 2% max in 5 years as once they start to rise they will choke growth and push the economy into recession and as a result they will need to cut them again to stimulate growth. This has been the pattern for 40 years with rates going lower overtime.

Have a read of the CBI Quarterly bulletin it is very clear on the driver of inflation

In fairness the current crop would hardly inspire confidence that they would manage it carefully either.

In particular regarding property price inflation, thats been going on for almost a decade with 2 of the 3 current government parties overseeing such rises.

Wall Street has gone way ahead of main street. Interest rates are the root cause. It needs to be rebalanced. It should have started 5 years ago

Correct me if I'm wrong, but aren't most of the energy price rises due to supply issues with gas rather than crude? That and carbon taxes, countries shutting down nuclear plants etc

Crude wont go that high, but gas can and probably will go much higher, especially are more countries' grids attempt to decarbonise and add renewables - almost all reserve for renewables is built on gas. Regardless of what happens in Ukraine/Russia, gas prices are only going one way

This time last year central bankers around the world were warning that the financial world was not longer representing what was happening in the real economy. There was a big sell off but that didn't last long as the USA stepped in with more stimulus which send the message that it won't let the stock market crash and as a result you had a massive rally for the rest of the year which sucked in more and more cash as greed set in without any real fear. All that is happening at the moment is that an element of fear is back as investors don't know what the FED will do... Despite the FED signposting their intentions for a long time.

If you are suggesting that interest rates should have started to rise 5 years ago then you probably have forgotten that FED did raise rates by a small amount 4 years as the economy was strong and in this resulted in the economy grinding to a halt and the FED had to step and reduce rates again to prevent a recession.

If people think there is no quick fix to housing costs, raise interest rates to 3% and overnight you'll see a lot of properties coming to market.

Currently housing is such an attractive investment because price inflation & rental yield beats any bonds or savings available - were interest rates to rise, this would be a less attractive investment option, & many corporate entities may exit the Irish market (or downsize).

Near 0% interest rates is always going to lead to asset inflation somewhere - were rates to rise not only property prices but also stocks would likely see a big drop. There aren't many asset classes out there that wouldnt drop with a rise in rates.

Inflation is forecast to be 4.4% this year and dropping to 2.4% in 2023. Unemployment in the Eurozone is still 7+% and until this drops to sub 5% it will influence interest rates. The USA and UK both have unemployment under 5% plus high inflation so they have no option but to raise rates to prevent a wage inflation spiral. The EU as a whole does not have this issue (although some countries do) and can wait longer before they would get into a wage/inflation spiral.

The ECB is not a political party or influenced by political parties so they will not care much if there policy is politicly damaging to any political party.

Rates will rise once the ECB start QT which will have an impact on all market rates (including mortgage rates) in the EURO but this will have no impact on the ECB base rate which I would expect to still be negative or close to zero by the end of the year regardless of inflation because undertaking QT will take the heat out of the economy.

If the ECB and all other economists have got there predictions on inflation wrong and it continued to be 4+% in 2023 then possibly we may see the ECB rate rise to 0.25% but I would only give that a 10% chance of occurring.

Any government would pick higher inflation over high unemployment any day of the week as the tax take increases and the real value of the debt they have falls.

Even if rates rose by 3% it would do little to dampen demand from FTB's as the mortgage repayment cost is not the issue for them. In fact for most FTB's that are paying rent it would still be significantly cheaper to buy even if mortgage rates rose by 3%

I should add that the 3% is over a 5 year period and that is on the assumption that there were no shocks to the economy and that we had 5 years growth similar to what is in place today. If there was a shock to the economy or lower growth rates may only rise as little as 1% over the 5 year horizon.

The other thing to note is that even if rates did rise fast and quickly it would not impact the majority of mortgage holders as something like 90% of mortgages are fixed for 3-5 year period. So they would not initially be impacted by rising rates.

Oil was one of the biggest contributors to inflation in 2021 and last years prices rises will be felt in a secondary bout of inflation in 2022 as the last years oil prices lead to higher prices in the shops of a wide range of goods this year due to higher input and transport costs.

You are right in saying Gas has increased in price more than oil and that will be felt consumers in heating bills and to a smaller extend in prices in the shops due to increased electricity costs (especially fertiliser costs). The main reason for this is that most of the manufacturing of goods takes place in China and there economy is not as exposed to Gas prices. But yet these goods do need to be transported and every boat/Plane/truck will all use Oil.

Some of the data can be found here:

Rising rates would impact landlords as they would be able to get a similar return else where for a lot less effort so you would expect to see them exit the market and reduce the no number of rental properties available which in turn would push up rent prices or where that was capped by the RPZ the actual task of finding a property would be a lot harder.

thanks for posting will take a look

He and his older brother have done fairly well out of blocking new housing developments around Cork City.

Would the dollar be as strong if the stock market was correcting to more appropriate prices.