The economy in two years time

MG

I'm going to stick my head on the block and predict the following for 1 May 2008.

It will be a Thursday
Unemployment will be over 6%
There will be a budget deficit
House prices will grow by less than 0.5%

The slump will be caused by the fallout from stalling of house price increases as supply meets demand, the resulting fall in house building by approx 15% and the consequences of being over reliant on the construction sector for employment, growth and tax revenue.

Agree or disagree?

whizzbang

MG wrote:

I'm going to stick my head on the block and predict the following for 1 May 2008.

It will be a Thursday
Unemployment will be over 6%
There will be a budget deficit
House prices will grow by less than 0.5%

The slump will be caused by the fallout from stalling of house price increases as supply meets demand, the resulting fall in house building by approx 15% and the consequences of being over reliant on the construction sector for employment, growth and tax revenue.

Agree or disagree?

Do you have the current figure for employement and budget deficit/surplus?

ronbyrne2005

quite plausible ,economy can only go backwards from here anyway.

onedmc

U didn't stick your neck very far but even so

1) Yes, it will be a thursday, had to check, leap year of course
2) If there is a downturn many migrant workers will move on. But as un-emplyment is already rising I predict an unemployment closer to 5%
3) This is a no-brainer as sure as no 1, we already have a budget deficit, it just really well spun. This question is how much will the deficit grow by. The spin will be it's not the governments fault coz VAT receipts and Stamp duty are down.
4) This is the hardest to call, house prices are measured by the banks and is based on the size of morgtages taken out so indexes like IPL one will contiune to show rises probablly 2 or 3% (just look at the halifax index in the UK). But stamp duty recipts will drop significantly, and house will be harder to sell.

lomb

onedmc wrote:

4) This is the hardest to call, house prices are measured by the banks and is based on the size of morgtages taken out so indexes like IPL one will contiune to show rises probablly 2 or 3% (just look at the halifax index in the UK). But stamp duty recipts will drop significantly, and house will be harder to sell.

i wonder, personally i think many young people like myself are very gung ho when it comes to paying out for property. weve never known anything but property increases on a vast scale. im prepared to pay personally to get on the ladder and i think many others are also.

the banks on the other hand are somewhat prudent, but if you take many middle aged or elderly people their mortgages are very very small and the propertys value is large. for the bank that means theres zero risk on defaults. this then balances out the 100% mortgages forwarded on 30 year loans then and the risk overall to banks is low relatively.

the bankis appear to be preparing to grant 35 year and 40 year mortgages and some are already issueing 35 year interest only mortgages for up to one year. i perdict property to keep rising for 4-5 years personally on the basis of this real information. the other real piece of information is i believe rates can be fixed at under 5% for up to 5 or 7 years and so this means interest rates are not expected internationally to rise in the euro zone. if they were going to do u think banks could offer such attractive futures??? the talk of rising rates is scaremonegering to cool the market. i dont believe it personally on the basis of this real information.

the only thing that will cool prices is the central bank increasing the capital to loan ratio and there is zero chance of that in this country with the political atmosphere.

a house that sells in dublin today for 400000 will be 600000 in 5 years, and i reakon u can bank on that.

anyone who disagrees doesnt have a grasp on the reality of the market/interest rates/ political will.

as regards supply, it will increase but only in commuter belts where prices will cool dramatically. there is less and less development land in dublin every day and talking to my solicitor who deals in deals of many tens of millions with his clients he reakons development land around dublin is reaching astronimical proportions with developmers hedging their developments in 2 years will be worth alot more than market value today.

all my arguments are based on logic, if anyone can challange that logic i welcome it..

ronbyrne2005

lomb wrote:

i wonder, personally i think many young people like myself are very gung ho when it comes to paying out for property. weve never known anything but property increases on a vast scale. im prepared to pay personally to get on the ladder and i think many others are also.

the banks on the other hand are somewhat prudent, but if you take many middle aged or elderly people their mortgages are very very small and the propertys value is large. for the bank that means theres zero risk on defaults. this then balances out the 100% mortgages forwarded on 30 year loans then and the risk overall to banks is low relatively.

the bankis appear to be preparing to grant 35 year and 40 year mortgages and some are already issueing 35 year interest only mortgages for up to one year. i perdict property to keep rising for 4-5 years personally on the basis of this real information. the other real piece of information is i believe rates can be fixed at under 5% for up to 5 or 7 years and so this means interest rates are not expected internationally to rise in the euro zone. if they were going to do u think banks could offer such attractive futures??? the talk of rising rates is scaremonegering to cool the market. i dont believe it personally on the basis of this real information.

the only thing that will cool prices is the central bank increasing the capital to loan ratio and there is zero chance of that in this country with the political atmosphere.

a house that sells in dublin today for 400000 will be 600000 in 5 years, and i reakon u can bank on that.

anyone who disagrees doesnt have a grasp on the reality of the market/interest rates/ political will.

as regards supply, it will increase but only in commuter belts where prices will cool dramatically. there is less and less development land in dublin every day and talking to my solicitor who deals in deals of many tens of millions with his clients he reakons development land around dublin is reaching astronimical proportions with developmers hedging their developments in 2 years will be worth alot more than market value today.

all my arguments are based on logic, if anyone can challange that logic i welcome it..

dan mclaughlin of bank of ireland has said price rises will slow to 3% next year and he's rarely wrong and he too uses "logic" .if he's right then property will only be increasing by the inflation rate or less so will not be rising in real terms! with costs of buying a property(stamp duty legal fee's maintenace insurance etc) why would anyone buy an investment property in dublin now if they are slowing to zero growth next year??? the rises between now and next year would have to be greater than all the expenses of buying to even make a capital gain over next 12-18 months

MG

At the risk of sounding like someone who doesnt have a grasp on the reality of the market/interest rates/ political will……………….. My predictions are mainly based on this previous posting (below) as well as the fact that the supply deficit will probably be plugged by late 2007 and the current, ongoing demand is for 50-60k houses p.a – the resultant employment loss in the bloated construction sector triggering a recession in the consumer sector, triggering credit tightening & fiscal austerity.

I also take Ron Byrnes point “why would anyone buy an investment property in dublin now if they are slowing to zero growth next year???”. (Zero in real terms anyway). For this reason I can see a sharp correction happening when house prices slow to zero real growth & with rent yields low, there is a real risk of a sudden collapse in consumer confidence in house price capital gains, one of the main factors along with the historic stock deficit, which is driving the property market.


“a report from the ECB recently which listed the factors which probably explain house prices most. It was interesting that from an Irish viewpoint many, indeed all, of thee factors are at the top of their cycle – they can’t get any better from the point of view of inflating house prices. Usually above average returns are based on expectations of future growth. If these factors are at the top of their cycle it is hard to see where this growth could come from. I don’t see any upward pressure for house prices.

The factors are:
1. Household income – obviously this has exploded in Ireland in the last ten years with both wage growth and employment growth. But is their any more room for improvement? Unemployment is already extremely low and any more wage growth threatens competitiveness. At the top of the cycle IMO.

2. Interest rates (real & possibly nominal too) – Real interest rates have been very low, close enough to zero as the interest rate is being set for the slower economies, not for our tiger economy. Nominal interest rates are at historic lows. Outlook is for interest rate rises. Cycle topped out last year.

3. Household formation/demographic factors – Household formation and housing averages are fast approaching the EU average. Baby Boom peaked in 1981 so native population growth in the key 25ish age category is peaking. Immigration has surged but is it sustainable? If cost of living keeps increasing, low cost eastern European economies boom, etc then net immigration may slow. Dependent on many factors and the most open of these questions.

4. Supply side variables – housing supply has probably peaked but is at unsustainable level, accounting for probably 8-9% of employment. The effect of lower supply on housing prices may be more than offset by the economic impact of lower employment levels. Also, we build half the number of houses as the UK even though they have 15 times the population – not sustainable.

5. Financial market institutions & credit availability – never easier to get money. Maybe too easy.

6. Taxes, subsidies & public policies – tax policies have been very generous to property development but the climate seems to be changing here.


So in my opinion, all these factors have peaked (possibly possibly possibly with net immigration continuing at a reasonably high level for a while yet), so where is a continuance of the housing boom going to come from? And given its disproportionate effect on the economy, can there be anything but a crash (real or nominal) around the corner?”

lomb

ur logic is blown partly out of the water by your thoughts alot of property is bought as an investment. there is only 20% bought as an investment not 50% or 100% so investors dont play a large part
also alot of real investors are bargain hunters and arent paying 555000 for a bed bed in sandyford or 2.5 mill for a terraced house in ranelagh. these properties are being bought to live in by occupiers, who themseles or their parents are getting richer everyday.investors are buying houses on the north circular for 1mill that are pre 63s and have rent rolls of substanial figures, they are buying in areas close to the city that occupiers wont buy in like gardner street and worse .

supply WILL catch up but NOT in dublin, property in places outside of 10-15 miles from dublin are screwed long term. il be the first to admit that.
im putting my money where my mouth is at the moment by the way.

ronbyrne2005

lomb wrote:

ur logic is blown partly out of the water by your thoughts alot of property is bought as an investment. there is only 20% bought as an investment not 50% or 100% so investors dont play a large part
also alot of real investors are bargain hunters and arent paying 555000 for a bed bed in sandyford or 2.5 mill for a terraced house in ranelagh. these properties are being bought to live in by occupiers, who themseles or their parents are getting richer everyday.investors are buying houses on the north circular for 1mill that are pre 63s and have rent rolls of substanial figures, they are buying in areas close to the city that occupiers wont buy in like gardner street and worse .

supply WILL catch up but NOT in dublin, property in places outside of 10-15 miles from dublin are screwed long term. il be the first to admit that.
im putting my money where my mouth is at the moment by the way.

investors are still 30% of market,dont underestimate the number of small time buy to let'ers that see property at any price as a "pension" or for the kids etc.
so say 70% of buyers arent investors ,how are they gonna afford houses in dublin if their wages arent rising enough to keep up? i think your logic is flawed and i bet you will get burned in next 5-10 years.

lomb

ronbyrne2005 wrote:

so say 70% of buyers arent investors ,how are they gonna afford houses in dublin if their wages arent rising enough to keep up? i think your logic is flawed and i bet you will get burned in next 5-10 years.

inheritance/equity release from parents/ general inflation is part of it
the other part of it is that normal people wont be living (buying)within 15 miles of dublin without the above 3 points.
prices correcting or remaining flat outside dublin will take the slack that u talk about so you guys are partially right(increased supply,large amount of space to develop, and downward pressure from owner occupiers.)
why is a house in dublin 6 worth 2.5-3 million when the same house outside dublin is worth 1/10th of that. its because some people are rich, and there arent alot of units for sale at any one time. just because u or me cant afford it it doesnt mean someone else can.
property developers are VERY VERY VERY clever. theyd buy and sell or outwit u and me in a heartbeat. they know that scare development sites are golddust in dublin, and prices are going to rise alot more than they are. hence why they are paying what seems crazy prices. in addition the planners know it and are granting permssion near transport nodes for super high density developments due to projections of the shortage..
i think my logic holds water at the moment:)

gurramok

The following section of people haven't been mentioned yet, not sure what category they are in but:
Those that buy a house, live in 1 room and let out the other 1 or 2 rooms to tenants(rent a room scheme yeh but the landlord heavily depends on them for mortgage repayments). Are they buyers or investors in loosely sense?
I know 3 people who are doing this around 28-33 age bracket, 2 have let to immigrants, the other to social housing recipient as he is dead nervous about getting guaranteed rent to pay his mortgage hence state subsidised tenant is better than a private tenant.
If some immigrants decided to hop it because of falling job availibility in connstruction sector which a substantial portion are in, it will hit my friends in the pocket hard.
Another point worth noting is that a huge proportion of immigrants cannot afford property themselves like majority of prpperty seeking Irish hence their demand wont be that high in the future plus they come from traditional 'renting' countries.
On long term, i think the oil problem of now ($73 a barrel) will be a factor in hurting the economy by the OP's date with govts trying to control inflation by hiking ineterest rates unless Nostradamus prediction of the end of the world by 06/06/06 will end our misery

dochasach

Thursday 1 May 2008. Ireland's "Pope generation" is learning about MABS and coping with its first taste of falling house prices, stagflation and a bear market.

The euro has risen to $1.60 which was seen as a factor in several large U.S. based businesses abandoning Ireland for less expensive economies furthur east. Other U.S. businesses disappeared entirely as the property debt and oil driven economy there hit a severe recession, triggered by the California and eastern seaboard property deflation cycle which began in 2005.

Both the dollar and euro have fallen significantly against the Yuan and Yen and slightly less against the GBP. This, and the 95$/barrel cost of oil, have driven rampant inflation in all areas of the economy except wages and housing. The term "property ladder" leaves the pop vocabulary and is replaced with "property albatross." The "SSIA spike" was short lived and shallow, much of the savings having been used to service debt. The downside of this spike triggered the momentum of property deflation. Property prices have just started to fall even in Dublin 4. Of course, it is falling much faster in outlying areas and nowhere does it come close to keeping up with inflation. Sellers are still in denial. Some property stays on the market, empty for months, listed at 600,000 while panicing builders, speculators and neighbors who bought earlier on the upswing cheerfully unload comparables at 400,000. Psychologically, it feels better to bleed wealth slowly, a month at a time via negative income rentals, empty units, interest and inflation than to sell below purchase price. So owner-occupiers and even small-time investors who can cope with increased ARM payments hang on to their property, waiting for a recovery. It only took 14 years for Japan's property prices to begin recovering.

Unemployment is 8% and rising. The construction boom is winding down, 1/2 the immigrants have gone home, or to Germany, whose economy is finally recovering and whose moratorium on accession labor movement has expired. Germany's recovery and the prospect of energy driven inflation forced the ECB to raise its benchmark interest rate to 5%. Banks, burdened with defaults and foreclosures, find it necessary to increase their margins. A 40 year ARM now stands at 8%, but lending criteria has tightened such that only those who can put up a 20% down payment would qualify for such generous terms.

The mixed blessing is that rents have fallen to 1998 levels and property owners are so burdened with the debt of unsellable property that they no longer have the option to emigrate, so Ireland just plows on, she's been through worse. Home-grown businesses, R&D, B&Bs, Guinness (of course) gambling and even farming are making a comeback. All of these now have higher returns than property investment, except for B&Bs. Only those who love it remain in the B&B business because tourism is a shadow of its former self. Inflation, oil prices, urban sprawl and wal-martization have had a huge toll. Planning laws are rewritten to preserve the remaining Irish character in a few villages, the rest could be a strip-mall town, Anywhere,USA.

The FG/Labor coalition is trying to cope with rising crime and a growing deficit. The tribunals are still trying to determine how the stamp duty and other taxes collected during the boom were squandered so quickly. The health system is in a shambles as the Eastern European and Phillipino health workers (who generally don't have the "property albatross" around their neck) leave Ireland for more affordable, more prosperous, more racially tolerant and warmer destinations.

I hope someone can prove that this can't happen.

MG

lomb wrote:

i wonder, personally i think many young people like myself are very gung ho when it comes to paying out for property. weve never known anything but property increases on a vast scale. im prepared to pay personally to get on the ladder and i think many others are also.


a house that sells in dublin today for 400000 will be 600000 in 5 years, and i reakon u can bank on that.


all my arguments are based on logic, if anyone can challange that logic i welcome it..

I’m not sure I see a great deal of logic at all in your posts and maybe what you say about only knowing property price rises is telling. You seem to be saying that people will always pay more, therefore prices will always increase. I don’t agree. Prices are increasing faster than wages so this is not sustainable. Moreover, the historic deficit in housing stock will be plugged by 2010 at the latest, probably earlier (taking EU average as a benchmark) so then we will be producing for current demand only which would require population increases of about 200,000 per year to maintain current output and the associated employment.

On the question of investors, the 20% you mention is a huge proportion when rent yield are minimal and investors are relying on capital appreciation. What I suspect is happening, is that we do have or are close to having sufficient housing stock but we have a large population of renters who aspire to ownership (unlike other EU countries where people are more accepting of never owning a house). So I think maybe what is driving the housing market is renters who want to move out of rented accommodation and buys a new house, and investors who are piling into the market for capital gains.

What will be interesting is when we reach the tipping point. I don’t think this is too far away as with rent yield already low, one would expect investors to desert the market if capital appreciation falls below about 4%. Given our huge reliance of the economy on house building, the knock on effects is likely to trigger further house price decreases as wage levels decrease.

As for you putting your money where your mouth is, I would suggest your chances of getting burned are largely dependant on whether you are an investors or intend to occupy the same house for 20-30 years and whether your income is relatively fixed & dependant on neither house building or consumer spending.

Banphrionsa

Warren Buffet just heavily invested in Home Depot. Some might say that this signals a long term decline in new housing starts, to be replaced by "fixing up" what you have in the US (the world's largest economy). New housing starts are positively correlated with the real estate boom. Does this suggest that Buffet believes the boom is over, or for a real leap of faith, that the bubble is about to burst?

tom-thebox

If you are right the banks will own it all they are here the longest and know all the ploys.

dochasach

Banphrionsa wrote:

Warren Buffet just heavily invested in Home Depot. Some might say that this signals a long term decline in new housing starts, to be replaced by "fixing up" what you have in the US (the world's largest economy). New housing starts are positively correlated with the real estate boom. Does this suggest that Buffet believes the boom is over, or for a real leap of faith, that the bubble is about to burst?

The housing bubble usually helps Home Depot by allowing existing homeowners to take on "fixer up" debt in the form of home equity loans. Also when a home is sold, it isn't unusual for the new owner to want to install new lights, paint a few things, and "personalise" it with Home Depot stuff.

Buffet has long believed that the U.S. was on the front side of a real estate bubble: http://money.cnn.com/2005/05/01/news/fortune500/buffett_talks/
In fact he called this within a few months of the turning point, when a sellers market became a buyers market, seemingly overnight in many cities.

He's one of the richest blokes on the planet but that doesn't necessarily mean he is right. In the case of the real estate bubble, falling dollar and U.S. trade deficit, I'd bet with him. But I don't understand the logic in his home depot investment. Except maybe this. When Sears recently merged with K-mart, it disrupted one of Home Depot's oldest and biggest competitors. (Sears traditionally sold home appliances, paint, tools, gardening equipment... from 1908-1940 Sears even sold mail order kit houses! http://www.searsarchives.com/homes/)

One more thing. When a housing bubble begins to deflate, the first thing that happens is inventory rises, buyers evaporate and houses stay on the market for a long time.

e.g.
http://www.sun-sentinel.com/news/local/southflorida/sfl-zhomesbr25apr26,0,3917618.story?coll=sfla-home-headlines

Then sellers may, in an often worthless attempt to make their house stand out amongst the thousands of others, try paint and remodeling. Hello home depot!

I think maybe Buffet called this one right too.

dochasach

Predictions from 2006. I still hope someone proves this can't happen.

dochasach wrote: »

Thursday 1 May 2008. Ireland's "Pope generation" is learning about MABS and coping with its first taste of falling house prices, stagflation and a bear market.

The euro has risen to $1.60

Actual on 2008-05-01: 1 Euro= $1.5554 2% too optimistic
http://research.stlouisfed.org/fred2/data/EXUSEU.txt

...which was seen as a factor in several large U.S. based businesses abandoning Ireland for less expensive economies furthur east. Other U.S. businesses disappeared entirely as the property debt and oil driven economy there hit a severe recession, triggered by the California and eastern seaboard property deflation cycle which began in 2005.

Both the dollar and euro have fallen significantly against the Yuan and Yen and slightly less against the GBP. This, and the 95$/barrel cost of oil,

Actual oil price on 2008-05-01: $112.52 18% too optimistic

have driven rampant inflation in all areas of the economy except wages and housing. The term "property ladder" leaves the pop vocabulary and is replaced with "property albatross." The "SSIA spike" was short lived and shallow, much of the savings having been used to service debt. The downside of this spike triggered the momentum of property deflation. Property prices have just started to fall even in Dublin 4. Of course, it is falling much faster in outlying areas and nowhere does it come close to keeping up with inflation. Sellers are still in denial. Some property stays on the market, empty for months, listed at 600,000 while panicing builders, speculators and neighbors who bought earlier on the upswing cheerfully unload comparables at 400,000. Psychologically, it feels better to bleed wealth slowly, a month at a time via negative income rentals, empty units, interest and inflation than to sell below purchase price. So owner-occupiers and even small-time investors who can cope with increased ARM payments hang on to their property, waiting for a recovery. It only took 14 years for Japan's property prices to begin recovering.

Unemployment is 8% and rising.

Actual on 1 May 2008 was 4.9%, prediction was 38.7% too pessimistic.

The construction boom is winding down, 1/2 the immigrants have gone home, or to Germany, whose economy is finally recovering and whose moratorium on accession labor movement has expired. Germany's recovery and the prospect of energy driven inflation forced the ECB to raise its benchmark interest rate to 5%. Banks, burdened with defaults and foreclosures, find it necessary to increase their margins. A 40 year ARM now stands at 8%, but lending criteria has tightened such that only those who can put up a 20% down payment would qualify for such generous terms.

The mixed blessing is that rents have fallen to 1998 levels and property owners are so burdened with the debt of unsellable property that they no longer have the option to emigrate, so Ireland just plows on, she's been through worse. Home-grown businesses, R&D, B&Bs, Guinness (of course) gambling and even farming are making a comeback. All of these now have higher returns than property investment, except for B&Bs. Only those who love it remain in the B&B business because tourism is a shadow of its former self. Inflation, oil prices, urban sprawl and wal-martization have had a huge toll. Planning laws are rewritten to preserve the remaining Irish character in a few villages, the rest could be a strip-mall town, Anywhere,USA.

The FG/Labor coalition is trying to cope with rising crime and a growing deficit. The tribunals are still trying to determine how the stamp duty and other taxes collected during the boom were squandered so quickly. The health system is in a shambles as the Eastern European and Phillipino health workers (who generally don't have the "property albatross" around their neck) leave Ireland for more affordable, more prosperous, more racially tolerant and warmer destinations.

I hope someone can prove that this can't happen.

Axwell

Was there any need to resurrect this thread,its from 2006 and predictions for may 2008..its 2009..a year later...

Bandara

and people wrote stuff like this every month since the late nineties, just this time someone got lucky with his dates.

I remember being warned not to buy a house since about 99 as the bubble was going to burst that year (or the next year etc etc etc ad infinitum)

Only the paranoid survive

Borzoi

Hammertime wrote: »

Only the paranoid survive

Indeed:D

and
"Even a stopped clock tells the right time twice a day"

Darragh29

Borzoi wrote: »

Indeed:D

and
"Even a stopped clock tells the right time twice a day"

Haha, I love it!!! I posted on a thread similar to this around a year and a half ago and I said when the real deal comes to town here with regard to the imminent recession, that it would be so bad and severe, that we wouldn't know what had hit us, and everyone called me a f*cking troll!!!!!!!!!!!!!!!!

Darragh29

Darragh29 wrote: »

Haha, I love it!!! I posted on a thread similar to this around a year and a half ago and I said when the real deal comes to town here with regard to the imminent recession, that it would be so bad and severe, that we wouldn't know what had hit us, and everyone called me a f*cking troll!!!!!!!!!!!!!!!!

Haha, you're nothing but a fuc*ing troll Darragh.

dochasach

Axwell wrote: »

Was there any need to resurrect this thread,its from 2006 and predictions for may 2008..its 2009..a year later...

Sorry, no need. I stumbled upon one of my own post 3 years afterwards and 1 year after the predicted date and found some predictions to be relatively close (remember, the only really debate back then was whether it was going to be a continuous boom or a soft landing, I was pretty far out and yet not too far off.)

For what it's worth I think we will be past the bottom of this economic cycle before May 2011, possibly as early as this December. At the moment I'm a Pollyanna, far more optimistic than the media wonks. In 2005-06 I was a crank pessimist practically laughed off the board for doubting the infinite ladder paradigm. Might it be worth going into more detail about what we predict for 2011? If not, I'll be quiet here.

tedstriker

I predict that we're in for about 5 years of high tax and high unemployment. Other people call it a hangover.

dochasach

Borzoi wrote: »

Indeed:D

and
"Even a stopped clock tells the right time twice a day"

Trouble is, I wasn't stopped and stuck on a 'we're doomed' theory. In 1994 I thought Ireland was unrealistically pessimistic about itself and I was right then too. And now I think Ireland is overly pessimistic. It isn't as though we all forgot to be productive, it's that for a short time the bricks in our house were earning more than we were. Being a small country should make recovery quicker without throwing trillions of Euro around.

Predicting last spring's economy proved to be easy but I doubt even a stopped clock lunatic pessimist could've predicted everything that has happened since last autumn, bank runs, the U.S. Treasury and Fed reserve each throwing hundreds of years worth of liquidity at banks who immediately flushed it and asked for more, credit default swaps, Iceland's unravelling... It's as though a flock of black swans descended at once.

I was working on the premise this was just a bog standard property bubble and saw that Ireland seems to be tracking about 18 months behind bubbly parts of the U.S. in noticing it and letting it play out. We are lucky that this problem is severe in other parts of the E.U. so there is little chance Trichet will raise the interest rates as it would've had to if, for example, Germany and France were experiencing runaway inflation now. A severe local recession with high inflation in the big E.U. states would've been a nightmare scenario.