Is McWilliams right ? .. a decade of pain

zod

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqid=41602-qqqx=1.asp

Irish property, like Japanese property in the 1980s and 1990s, will take decades to recover - and will only do so after years of consecutive falls. How much more evidence do we need to conclude that the spin we were sold of the immutable triumvirate of banks, credit and property was a sick joke? The real fair value means that, in a world where house price speculation is over, Irish house prices will have to fall on average by 50 per cent from where they are today to be worth buying. Madly, even after a year of house price contraction, the P/E for the average Irish house stands at over 29 times - twice the historical average for property.

res ipsa

10 years of falling prices, 10 years of prices going sideways,roll on 2026 when d boom starts again!

CDfm

Yup. He is.

Social welfare and lone parents allowances health service budget cuts etc will come and in real terms.

If anyone feels these cuts can be offset by higher taxation -they should think again as the money simply isnt there.

Expect emigration for graduates and forign work contracts for those who can.

The noughties are the new 1980s.

asmobhosca

Yeah hes pretty much right, i think there is a financial tsunami yet to hit a lot of people in Ireland. Most of the country's property developers will go broke and this will lead to more bankruptcies especially for self employed people in related sectors.
I expect the Irish commercial and bankruptcy courts to be mayhem for the next 5 years, we havent even seen the tip of defaults and repossessions yet.
Its going to get worse before it gets better...

Mr. Presentable

Truth? Nobody knows. We are in new territory, and with all due respect to McWilliams, nobody, not even a TV personality, knows what lies ahead. We can only postulate and hope for the best.

CDfm

nipplenuts wrote: »

Truth? Nobody knows. We are in new territory, and with all due respect to McWilliams, nobody, not even a TV personality, knows what lies ahead. We can only postulate and hope for the best.

Not really new territory - the country has had high unemployment and deficits before - except government expenses were a lot lower.

There is no just hope for the best about it - where do you start - social welfare or public service.

Public service benchmarking to reall wages would be a good move.

nesf

CDfm wrote: »

Not really new territory - the country has had high unemployment and deficits before - except government expenses were a lot lower.

In those days our public debt was much higher and our private debt was far lower. This isn't going to pan out a la the 70s and 80s.


We differ in quite a few respects to the Japanese and their particular asset bubble. Our labour force is a lot more flexible just to start with and our banking system a lot more transparent (which is saying something).

Hasschu

The vaunted flexibility of the Irish work force works when the Irish economy is in the dumps and there are many countries that welcome the Irish workers because their economies are expanding. Many Irish workers are now trapped because of high unemployment around the world with work permits being withdrawn or not renewed and certainly no new work permits being issued. The state of affairs now is quite unusual and the Irish gov't will face intense political pressure coming off two decades of prosperity with a workforce that in its wildest nightmares did not envisage what is now playing out. Something that countries with a large immigrant contingent understand is that as unemployment rises the immigrants usually return home leaving a room, flat, house unoccupied. This added burden to the property vacancy rates will cause drops in rents and property values. We are in for more than 10 years of property value pain. The only thing that would cause property values to rise is rampant inflation a cure that is worse than the disease. God forbid if deflation takes hold, that will cause widespread borrower defaults with more people unable to pay off loans and the rest taking much longer. A curse in the Chinese language is " May you live in interesting times."

eamonnm79

nesf wrote: »

In those days our public debt was much higher and our private debt was far lower. This isn't going to pan out a la the 70s and 80s.


We differ in quite a few respects to the Japanese and their particular asset bubble. Our labour force is a lot more flexible just to start with and our banking system a lot more transparent (which is saying something).

Sorry dude I find your optimism bizzare

The budget projections that our budget deficit will total 75 billion over the next 5 years, Add to this Nama borrowing 80 billion add to this the current national debt of 50 billion. Add to this the interest.

Our gdp is currently grossely exagerated due to multinational tax avoidance measures.

The GDP is 170 billion officially.

So in short, our public debt might be lower right now but but not for long and our Private and commercial debt is off any known charts (no exageration)

nesf

eamonnm79 wrote: »

Sorry dude I find your optimism bizzare

I wasn't being optimistic, I was pointing out that it'll probably pan out differently to the 70s and 80s because the fundamental causes are different. At no point did I say that I thought we'd be out of this quickly.