Irish property market bound for recovery

Euroland

When the property markets around the world begin to recover it's time to have a look on the future of the Irish property market without negative paranoia and discuss it.

Pending Sales of Existing Homes in U.S. Rose 6.4% in August

http://www.bloomberg.com/apps/news?pid=20601068&sid=aFH0zI40heAc

Do you believe that the Irish property market would stabilise soon and start to grow slowly by 2011?

J-blk

Pure speculation, recovery in the US or large European countries means nothing with the mess things are still in.

D3PO

the indicators are that there should be some rise in 2011 how much though is questionable.

furthermore if you mean recovery from now or recovery from q4 2010 thats a very different question.

I would think that from q4 2010 levels we will see a small recovery in the market, but if you mean from todays levels I would saw no we wont see a recovery in 2011

gurramok

Also, don't confuse recovery of the economy in general with one specific market which is in the doldrums.

Whats the negative paranoia you on about?

Euroland

D3PO wrote: »

the indicators are that there should be some rise in 2011 how much though is questionable.

furthermore if you mean recovery from now or recovery from q4 2010 thats a very different question.

I would think that from q4 2010 levels we will see a small recovery in the market, but if you mean from todays levels I would saw no we wont see a recovery in 2011

From the buttom whenever it happens (I believe it would happen within the next 12 months)

Euroland

gurramok wrote: »

1) Also, don't confuse recovery of the economy in general with one specific market which is in the doldrums.

2) Whats the negative paranoia you on about?

1) In this topic we discuss only situation on the Irish residential property market

2) I mean negative paranoia and hysteria (over-pessimism) in Mass Media and among Irish people for the last 3 years. I's time to calm down.

gurramok

Euroland wrote: »

2) I mean negative paranoia and hysteria (over-pessimism) in Mass Media and among Irish people for the last 3 years. I's time to calm down.

And no need for positive hysteria either.

Euroland wrote:

From the buttom whenever it happens (I believe it would happen within the next 12 months)

Based on what?

20goto10

gurramok wrote: »

And no need for positive hysteria either.



Based on what?

Speaking for myself, based on a global economic recovery for which ireland will follow suit. It's all about confidence at this stage.

Btw, recovery does not mean back to the crazy days.

bangersandmash

Euroland wrote: »

2) I mean negative paranoia and hysteria (over-pessimism) in Mass Media and among Irish people for the last 3 years. I's time to calm down.

Negativity about property has been in the full public consciousness for 3 years? Really? To me it was spring 2008 before mass media stories about property price falls really gained traction. References to "nay-sayers" and "doom-mongers" were still being thrown around even then. And this year we've seen a plethora of "market bottoming out" stories.

Also I'd be interested to know if you consider news reports about Daft or Myhome statistics as hysteria? In your opinion would analogous reports about price increase statistics have been over-optimistic and hysterical pre-2007?

bugler

2) I mean negative paranoia and hysteria (over-pessimism) in Mass Media and among Irish people for the last 3 years. I's time to calm down.

This must be a contender for the most misleading piece of revisionist rubbish posted on this forum. BOC would be embarrassed by it. 3 years ago we were at the peak of the bubble. Over-pessimism is not something the Irish property market has ever suffered.

gurramok

20goto10 wrote: »

Speaking for myself, based on a global economic recovery for which ireland will follow suit. It's all about confidence at this stage.

Btw, recovery does not mean back to the crazy days.

Yes, a lag factor in recovery. The economy is bound to recover at some point. Its just that the OP thinks the property market in Ireland will bottom out within 12 months with or without a economic recovery here!

Calina

Euroland wrote: »

When the property markets around the world begin to recover it's time to have a look on the future of the Irish property market without negative paranoia and discuss it.

Pending Sales of Existing Homes in U.S. Rose 6.4% in August

http://www.bloomberg.com/apps/news?pid=20601068&sid=aFH0zI40heAc

Do you believe that the Irish property market would stabilise soon and start to grow slowly by 2011?

I only have a few minutes.

Technically, if you are comparing the Irish market with other international markets, there are a few things to bear in mind. By and large, those other markets behave slightly differently to Ireland because they have different regulatory rules and they are at different stages in their economic cycles. While comparing the Irish market with the US market is vaguely interesting since the Irish market has appeared to shadow the US market with a slight lag, I don't believe that the US market bubbled to the extent that the Irish market has and therefore, it's difficult to be certain that the Irish market will peg to its trough and recovery. I'd also add that if I think that the Irish market will behave slightly differently to the US market, it's because I think it will overshoot. So before you do anything you need to look at price falls in teh US versus price falls in Ireland. We still have a way to go.

There's also the issue of bankruptcy legislation being different here, the existence of a moratorium on repossessions (which slows up the falls) and the fact that a lot of new builds are in limbo courtesy of the non-implementation of NAMA yet.

Supply side, we still have an excess of supply over buyers willing or able to buy at current asking prices and it's apparently the case that most properties are lucky to make up to 80% of their current asking price. Time on the market has also ballooned - in short, it's taking longer to sell.

Can I see that swinging around within 18 months? No. And here's why.

1) the vast majority of starter homes in the area of most demand are apartments. There is a glut of them coming on the market. Banks have been demanding monumental deposits on them for the past year and in the interest of prudent lending criteria I can't see that being relaxed. In many cases, that deposit equates to up to a years salary. It's a lot to save in a short space of time.

2) Without the FTBs holding up the market, trader uppers are in trouble. In fact a lot of those are very stuck at the moment because the capital appreciation that was supposed to finance the trade up has been wiped and in many cases then some.

3) Unemployment is running at 3 times the level it was 18 months ago and there has been a disproportionate hit in terms of gender balance. In short, mostly, men have lost their jobs, they are specifically in the area of construction and construction related. We are not going to need much more in the way of new property courtesy of the existing overhang so in terms of re-employing a lot of our 14% unemployed, there are some issues. This is going to have issues in terms of market entrants at FTB level and servicing existing mortgages. I would contend that until you see unemployment drop down below 8 or 10 per cent for at least 3 quarters you will not see huge growth in the number of FTBs entering to prop up the market.

4) the current level of sales prices are still disproportionally higher compared to salaries. There is an historic norm of about 5 times individual salary versus average income. Now there are a lot of figures bandied around for that, but the highest I've seen is about 38K. Five times that is about 190KE but for round up let's say 200kE. Average house prices are still quite a bit above that.

5) We are currently in a period - more or less - of deflation. I think this will start to reflect in salaries which will put more presssure in (4) above.

6) We are paying more tax. In some cases I believe take home pay is at least 10% less than it was a year ago if there is no salary change; many people have taken pay cuts. Again (4) under pressure.

7) Interest rates are at an historic low courtesy of the idiocy of the banks and ensuing economic mess. This means effectively, the only route for them is up. They will not remain at current levels for ever and you need to bear in mind that the banks also need to recapitalise. Interest is one of their main sources of income. Over the past 3 or so years, the initial slow up in price increases and first drops coincided with interest rate rises from the ECB as they started to rise above the insane 2% that Alan Greenspan gifted the world after 9-11. This will have an additional impact on the amount of money loaned to market entrants, our friends the FTBs.

8) Inward migration to Ireland is levelling off and last quarter saw an outflow of population for the first time in almost 15 years. This will have an impact both on rental and purchase demand and this at a time when demand is already very low.

9) Rental yield for the most part is still extremely low and rents are on their way down due reason (8). They are helpfully floored by the ridiculously high HSE payment but that will not fill all the vacant property in the country.

In short, there is a lot to reverse in 18 months there. I don't see it happening. In some respects I would see the current situation as a recovery as it is returning property prices to some form of rationality.

Euroland wrote: »

1) In this topic we discuss only situation on the Irish residential property market

2) I mean negative paranoia and hysteria (over-pessimism) in Mass Media and among Irish people for the last 3 years. I's time to calm down.

This comment in my view is misplaced and deluded. The truth is, there has not been much in the way of negative comment in the Irish media until early this year and I'd hardly call it hysterical. You've opened the thread and if there are those who disagree with you, you will have to put up with them voicing why as I have done above.

Good day to you.

jetski

Depends alot on NAMA & Lisbon 2

trafada

jetski wrote: »

Depends alot on NAMA & Lisbon 2

Why Lisbon 2? It might help a bit in terms of exports but I don't see the yes vote help to break the current crisis. With NAMA, the way I look at it is; in order for the banks to get going they need to get the money of developers, the developers need to get money for the places and the amount of money both parties need can only be got at bubble levels a no-one wants that. Also the amount of debt floating around must be enormous, I read somewhere else that one category of people who may have got badly hit was people who bought years ago and released equity for important things like cars and holidays.

AARRRGH

20goto10 wrote: »

Btw, recovery does not mean back to the crazy days.

I'd like the OP to define what he means by recovery.

Also, I don't believe we are anywhere near the bottom of the market. The vast majority of our houses are still way overpriced, i.e. unaffordable.

johnnyskeleton

First of all, you have to ask what is a property worth now? Is, say a bog standard 3 bed semi worth the €300k+ it was going for in 2006, is it that figure less 40% or some other notional figure for the decrease or is it what the average person will pay/be able to borrow?

It seems to me that even now that if a property is on the market at €200k a person wishing to buy that property would only spend/borrow €150k at most and similar, so even if you could put a notional market price on property, unless that price is the price at which supply meets demand (i.e. at a certain price there will be a buyer for every seller) there will still be a disconnect between that price and what the property will actually sell for.

With that in mind, any measure of house prices is purely theoretical without actual sales to back it up.

I can't see houses selling for their actual worth in the next few years, prices will remain artificially high, supported by the government's various schemes, and they will slowly decline in both nominal terms and in line with inflation after the overall economy recovers (some say that house prices tend to pick up approximately 1 year after the overall economy recovers). As I can't see the overall economy recovering either, nor can I see reckless lending or increased demand I can't see house prices rising at all in the immediate future, unless there is massive eurozone inflation.

MG

Depends what you mean by stabilisation and growth. Stabilisation is possible certainly if you apply a wide definition. Using the PTSB/ESRI index as a benchmark, the index is falling at an annualised 15-18% at the mo. Continuing at this rate might imply a nominal 40-50% fall from the peak by 2011 which appears like a possible bottoming out range. Far from certain though.

Growth, however, is another matter. Everything is against growth this early in the cycle - emigration, tax, earnings etc but possibly even more important will be the psychological damage done. A generation of Irish may look at the housing market with dread.

sharper

If interest rates were going remain permanently at near zero rates then maybe property would start to recover in 2011.

However it's more likely rates will start to increase again around mid-2010 and it's only then you'll see the bottom of the Irish market.

Employment is going down, the population is going down (net emigration), after tax income is going down, the amount of credit available has dropped significantly, the cost of credit will rise significantly and the cost of property ownership (via taxes and rates) will rise.

Many of those factors have barely even started to hit the market here yet. I wouldn't count on a recovery anytime soon.

Amhran Nua

20goto10 wrote: »

Speaking for myself, based on a global economic recovery for which ireland will follow suit. It's all about confidence at this stage.

No, its not the stock market, confidence is much less of a factor in the wider economy.

Euroland wrote: »

2) I mean negative paranoia and hysteria (over-pessimism) in Mass Media and among Irish people for the last 3 years. I's time to calm down.

Even if it does bottom out by 2011 or 2012, it almost certainly won't grow at boom levels, if it grows at all.

sharper

Amhran Nua wrote: »

Even if it does bottom out by 2011 or 2012, it almost certainly won't grow at boom levels, if it grows at all.

Unfortunately people still have an expectation that bubble growth is the norm for property because that's how it behaved here for so long. They think that after 2011 (or whenever) it'll be just like how it was before.

Over long periods property prices generally match inflation. It should be fairly obvious that something as necessary as shelter cannot outpace people's earnings unless there's some constriction of supply e.g. a lack of land.

JupiterKid

Calina's excellent post in this thread hits the nail on the head. The Irish economy is in very serious trouble, much more serious than most of our Eurozone or global neighbours prescicely because of our obscene property and construction bubble that may well go into both history and economics text books as a warning and lesson to future generations of students.

Unemployment is still rising - right back to 1980s levels and the housing market was none too healthy during that decade, was it? (it was essentially stagnant for most of the 1980s). People cannot obtain a loan when they do not have a job and those losing their jobs are going into mortgage arrears and worse.

Emigration is back. Although most emigrating last year were from the recently joined EU 12 countries (and most of these were male, illustrating the collapse of the construction sector), more and more Irish are emigrating or considering emigration as their only option to find work. A falling population means a shrinking pool of potential house buyers.

The sheer overhang of vacant housing built - some of which will never be occupied and may have to be demolished - means that housing supply greatly outstrips demand and will for many years to come.

I reckon an ECB interest rate increase in 2010 is a real possibility as the rest of the Eurozone economy recovers and this will damage our fatally wounded housing market even further - leading to further price drops but also, more worryingly, a surge in mortgage arrears as it could be the "straw that breaks the camel's back" for many homeowners in negative equity and struggling to cope with mortgage repayments after a job loss/pay cut.

Ireland is so out of kilter with the rest of the Eurozone in terms of the economic cycle that it is frightening. We had interest rate cuts in the early 2000s which fuelled the fire of the property bubble and now face increases when the market is still in a state of collapse. These pro-cyclical interest rate trends are worsening the intensity of the economic cycles.

This story is far from over.

Euroland

U.S. Economy on Mend, Housing Poised for Rebound, LaVorgna Says

Oct. 6 (Bloomberg) -- The U.S. economy is on the mend and housing is poised for a rebound, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.
“The momentum in the economy is moving forward,” LaVorgna said today in an interview on Bloomberg Radio.
Housing is close to a turnaround because “we have had a tremendous improvement on inventories,” he said. “We are much closer to a housing bottom than many believe.”

http://www.bloomberg.com/apps/news?pid=20601068&sid=an1vxMc2SMEU

Property market: global house prices begin to steady

The financial crisis has altered the league table of top-performing property markets across the world, with surprising results. International buyers who roam the world looking for luxury city flats, ski chalets or beachside villas will as ever check out the rearranged global pecking order before making their purchases.

The latest Global House Price Index from Knight Frank shows that Israel is outstripping the rest of the world with property price growth of 12.5 per cent. It is the only country to show double digit rises in the year to June, due in part to it being land-poor, cash-rich and population-heavy.

Norway also seems to be showing steadiness in a crisis, with growth of 5.3 per cent in the second quarter of the year, on top of 4.1 per cent in the first.

Areas such as Dubai that had been booming at an astonishing rate in 2007 have seen prices plummet. "Prices are still falling in Dubai, but the rate of decline has slowed sharply," says Liam Bailey, head of residential research at Knight Frank.

"The second-quarter drop was only 7.5 per cent compared to a massive 41 per cent during the previous three months." Sales are beginning to pick up a little, so developers are trying to complete their projects, the flagship being the luxurious Palm City on land reclaimed from the sea.

Second-home owners who favour Italy will be relieved to see that prices are still dropping – by 1.3 per cent in this last quarter, a slower rate than before. "Buyers who have been looking for two or three years are now deciding the time is right," says Rupert Fawcett, Knight Frank's Italian specialist. "Either prices are adjusted or sellers may negotiate."

Prices in Spain are still sliding 2.7 per cent, dragged down by an oversupply of new homes on the Mediterranean coast. Taylor Woodrow de Espana is about to tour England (September 13-23) with property exhibitions of unsold stock, offering one-off discounts of up to 41 per cent.

The shock waves from the banking crisis are beginning to abate, however. The house-of-cards effect caused prices to drop in 88 per cent of the countries that submitted data to the index at the end of 2008.

By the first quarter of this year only 48 per cent of countries were still recording falls. According to this latest report the drops were still accelerating in only 25 per cent, prompting talk of "tentative recovery".

Northern Scandinavia remains something of a safe haven. "It seems to be recovering well, with prices increasing during the second quarter in Sweden by 3.6 per cent and Finland by 3.9 per cent," says Andrew Shirley who also worked on the report.

"This is probably because prices didn't increase to the same extent as other areas did during the boom. There has also been a sharp slowdown in the number of homes being built. In Sweden, 45 per cent fewer houses were started in the first half of 2009 compared with the same period last year. And in Norway, new starts have fallen to their lowest level since 2000."

Great Britain, too, has managed to stabilise, partly because there are so many who need to move and too few houses for them to buy.

Even in America, where subprime loose-lending led to the global crisis, there has been a steadying, with a 1.3 per cent increase in the second quarter following 7 per cent cuts in the previous two quarters.

So there is a feeling of calm spreading around the world. "It seems that prices are starting to bottom out," Shirley says.

But the market is still fragile and patchy. Prices in Bulgaria, for example, fell 9.7 per cent in the second quarter, while in Thailand, values also fell 5.6 per cent after an increase of 2.7 per cent in the first quarter, underlining that one season of recovery is no guarantee that prices will continue to increase.

"Further falls are always a possibility while credit flows remain constrained and the global economy struggles to recover from recession, but it does appear that the worst is behind us," adds Shirley in a comforting tone.

http://www.telegraph.co.uk/property/overseasproperty/6162147/Property-market-global-house-prices-begin-to-steady.html#

AARRRGH

Euroland wrote: »

U.S. Economy on Mend, Housing Poised for Rebound, LaVorgna Says

Oct. 6 (Bloomberg) -- The U.S. economy is on the mend and housing is poised for a rebound, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.

In fairness now, a bank is hardly going to say we're no where near the bottom. It is in their interest to get the market moving again, so I would dismiss that article altogether.

Also, Joseph LaVorgna is known for trying to talk things up.

If AIB, BOI or RBOS said something similar, I would hope most people would have the sense to ignore it.

professore

Calina wrote: »

I only have a few minutes.

Technically, if you are comparing the Irish market with other international markets, there are a few things to bear in mind. By and large, those other markets behave slightly differently to Ireland because they have different regulatory rules and they are at different stages in their economic cycles. While comparing the Irish market with the US market is vaguely interesting since the Irish market has appeared to shadow the US market with a slight lag, I don't believe that the US market bubbled to the extent that the Irish market has and therefore, it's difficult to be certain that the Irish market will peg to its trough and recovery. I'd also add that if I think that the Irish market will behave slightly differently to the US market, it's because I think it will overshoot. So before you do anything you need to look at price falls in teh US versus price falls in Ireland. We still have a way to go.

There's also the issue of bankruptcy legislation being different here, the existence of a moratorium on repossessions (which slows up the falls) and the fact that a lot of new builds are in limbo courtesy of the non-implementation of NAMA yet.

Supply side, we still have an excess of supply over buyers willing or able to buy at current asking prices and it's apparently the case that most properties are lucky to make up to 80% of their current asking price. Time on the market has also ballooned - in short, it's taking longer to sell.

Can I see that swinging around within 18 months? No. And here's why.

1) the vast majority of starter homes in the area of most demand are apartments. There is a glut of them coming on the market. Banks have been demanding monumental deposits on them for the past year and in the interest of prudent lending criteria I can't see that being relaxed. In many cases, that deposit equates to up to a years salary. It's a lot to save in a short space of time.

2) Without the FTBs holding up the market, trader uppers are in trouble. In fact a lot of those are very stuck at the moment because the capital appreciation that was supposed to finance the trade up has been wiped and in many cases then some.

3) Unemployment is running at 3 times the level it was 18 months ago and there has been a disproportionate hit in terms of gender balance. In short, mostly, men have lost their jobs, they are specifically in the area of construction and construction related. We are not going to need much more in the way of new property courtesy of the existing overhang so in terms of re-employing a lot of our 14% unemployed, there are some issues. This is going to have issues in terms of market entrants at FTB level and servicing existing mortgages. I would contend that until you see unemployment drop down below 8 or 10 per cent for at least 3 quarters you will not see huge growth in the number of FTBs entering to prop up the market.

4) the current level of sales prices are still disproportionally higher compared to salaries. There is an historic norm of about 5 times individual salary versus average income. Now there are a lot of figures bandied around for that, but the highest I've seen is about 38K. Five times that is about 190KE but for round up let's say 200kE. Average house prices are still quite a bit above that.

5) We are currently in a period - more or less - of deflation. I think this will start to reflect in salaries which will put more presssure in (4) above.

6) We are paying more tax. In some cases I believe take home pay is at least 10% less than it was a year ago if there is no salary change; many people have taken pay cuts. Again (4) under pressure.

7) Interest rates are at an historic low courtesy of the idiocy of the banks and ensuing economic mess. This means effectively, the only route for them is up. They will not remain at current levels for ever and you need to bear in mind that the banks also need to recapitalise. Interest is one of their main sources of income. Over the past 3 or so years, the initial slow up in price increases and first drops coincided with interest rate rises from the ECB as they started to rise above the insane 2% that Alan Greenspan gifted the world after 9-11. This will have an additional impact on the amount of money loaned to market entrants, our friends the FTBs.

8) Inward migration to Ireland is levelling off and last quarter saw an outflow of population for the first time in almost 15 years. This will have an impact both on rental and purchase demand and this at a time when demand is already very low.

9) Rental yield for the most part is still extremely low and rents are on their way down due reason (8). They are helpfully floored by the ridiculously high HSE payment but that will not fill all the vacant property in the country.

In short, there is a lot to reverse in 18 months there. I don't see it happening. In some respects I would see the current situation as a recovery as it is returning property prices to some form of rationality.




This comment in my view is misplaced and deluded. The truth is, there has not been much in the way of negative comment in the Irish media until early this year and I'd hardly call it hysterical. You've opened the thread and if there are those who disagree with you, you will have to put up with them voicing why as I have done above.

Good day to you.

Excellent, I would add one other item, demographics.
The baby boomers that peaked around 1975 that initially kick-started the demand for housing mostly have houses now. The following generation is not as large. Added to the fact that there was a wave of returning irish immigrants and in later years eastern europeans. None of these factors will be at play in the next 10 years or so. If anything demand will further be suppressed by emigration.

The_Conductor

D3PO wrote: »

I would think that from q4 2010 levels we will see a small recovery in the market, but if you mean from todays levels I would saw no we wont see a recovery in 2011

Funnily enough- Q4 2010 now appears to be the concensus for when the ECB is likely to commence increasing base rates......?

The_Conductor

Euroland wrote: »

U.S. Economy on Mend, Housing Poised for Rebound, LaVorgna Says

Oct. 6 (Bloomberg) -- The U.S. economy is on the mend and housing is poised for a rebound, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.

Sorry- but precisely what does this have to do with the Irish market?
You're continuing to try to extrapolate people trying to talk up the US market with some magical 'bottom' being on the horizon for Irish property.

On top of Calina's excellent post- I would add that according to the Economist- our budget deficit accounts for almost 60% of total expenditure in 2009- and even allowing for the agreed 4 billion cuts in expenditure annually for 2010,2011 and 2012- we will still hit a national debt ratio of over 200% by 2020 - alluded to by Brian Lenihan at the weekend- when his projections showed a continued contraction of the economy for at least another 3 years- and potentially up to 40% of gross tax revenue going towards servicing interest on our national debt......

There are far more economic snakes in the long grass that have yet to make their presence felt, than politicians are willing to admit or the public are willing to countenance.

If I was younger and without ties to the country- much as I'd hate to do so- I'd be seriously studying where I could emigrate to. New Zealand and Canada would be near the top of my wish lists.......

Euroland

smccarrick wrote: »

continued contraction of the economy for at least another 3 years

Noncense. Analysing the national statistics trends you would immediately notice that Irish GDP will resume its growth at the end of 2009, while GNP growth will resume in Q1 2010.

Euroland

smccarrick wrote: »

Sorry- but precisely what does this have to do with the Irish market?
You're continuing to try to extrapolate people trying to talk up the US market with some magical 'bottom' being on the horizon for Irish property

I am just saying that the Irish residential property market has had enourmous fall over the last 3 years (between 30 and 60%), and now, on the global uptrends in the economy and property markets, It won't escape the uptrend and would follow it too.

Euroland

smccarrick wrote: »

On top of Calina's excellent post- I would add that according to the Economist- our budget deficit accounts for almost 60% of total expenditure in 2009- and even allowing for the agreed 4 billion cuts in expenditure annually for 2010,2011 and 2012- we will still hit a national debt ratio of over 200% by 2020

Budget deficit and level of public debt have nothing in common with the residential property market. Yes, they should be cured, but they have no direct connection with the property market.

Euroland

professore wrote: »

Excellent, I would add one other item, demographics.
The baby boomers that peaked around 1975 that initially kick-started the demand for housing mostly have houses now. The following generation is not as large. Added to the fact that there was a wave of returning irish immigrants and in later years eastern europeans. None of these factors will be at play in the next 10 years or so. If anything demand will further be suppressed by emigration.

Last year was the highest baby boom in Ireland, and the young parents, awaiting the last 3 years for the property prices stabilisation, are now eager to buy something to have a place for growing their kids. Thousands of people had to postpone their property purchases for the last 3 years, and now when the bottom is near, it is the right time for them to buy, before the investors flock back into the residential property market, or it would be too late.

The_Conductor

Euroland wrote: »

Noncense. Analysing the national statistics trends you would immediately notice that Irish GDP will resume its growth at the end of 2009, while GNP growth will resume in Q1 2010.

God, you are optimistic. While I would be thrilled if you're right- I genuinely do believe you are not. You are extrapolating massively in an international context and presuming its valid to apply it to an Irish context. The fact of the matter is that Ireland, while not unique, is in a far worse position than almost any other country. Can you name any other country who are funding almost 60% of their gross expenditure from borrowings? In the 1980s- at least personal debt was at extremely manageable levels- we don't even have that cushion now though.

Euroland

AARRRGH wrote: »

In fairness now, a bank is hardly going to say we're no where near the bottom. It is in their interest to get the market moving again, so I would dismiss that article altogether.

So, would you dismiss the American official statistics?

Euroland

smccarrick wrote: »

God, you are optimistic. While I would be thrilled if you're right- I genuinely do believe you are not. You are extrapolating massively in an international context and presuming its valid to apply it to an Irish context. The fact of the matter is that Ireland, while not unique, is in a far worse position than almost any other country.

You are probably unaware of the recent problems in Eastern Europe and Africa, but even there numbers are now on a positive trend and people are upbeat on their economies and property markets. The World is now already on the uptrend.

spockety

Euroland wrote: »

Last year was the highest baby boom in Ireland, and the young parents, awaiting the last 3 years for the property prices stabilisation, are now eager to buy something to have a place for growing their kids. Thousands of people had to postpone their property purchases for the last 3 years, and now when the bottom is near, it is the right time for them to buy, before the investors flock back into the residential property market, or it would be too late.

Where are all these homeless families putting their head down at night at the moment...?

oflahero

Euroland wrote: »

You are probably unaware of the recent problems in Eastern Europe and Africa, but even there numbers are now on a positive trend and people are upbeat on their economies and property markets. The World is now already on the uptrend.

You're on message alright. Where's the gaff you're currently selling, exactly?

There's a simple reply to all this tosh that you've been peddling - where's all this buyer money going to come from that gets the Irish property market onto an upward trend?

-We have the highest level of personal debt per capita in Europe;
-We are borrowing massively every day to plug the massive public finance gap;
-There is massive oversupply in the domestic housing markets (granted, a lot of it is apartments in 'commuter' locations);
-The ratio of asking prices to average salaries are still well over the long-term average, and salaries are going nowhere but down for both public and private sectors;
-Tough budgets are on their way;
-Interest rates are at historic lows and yet lending is relatively nonexistent, because;
-The Irish banks are technically insolvent.

There will be a while to wait while Ireland watches a global upswing before we follow suit. And that does not include this current 'dead cat bounce' equities rally thanks to current sliding dollar fears. The only thing that can pave the way to your optimistic worldview is debt erosion thanks to hyperinflation - not a target I see on the ECB's charter.

AARRRGH

Euroland wrote: »

So, would you dismiss the American official statistics?

Who compiles the statistics?

Euroland

JupiterKid wrote: »

1) The Irish economy is in very serious trouble, much more serious than most of our Eurozone or global neighbours prescicely because of our obscene property and construction bubble that may well go into both history and economics text books as a warning and lesson to future generations of students.

2) Unemployment is still rising - right back to 1980s levels and the housing market was none too healthy during that decade, was it? (it was essentially stagnant for most of the 1980s). People cannot obtain a loan when they do not have a job and those losing their jobs are going into mortgage arrears and worse.

3) Emigration is back. Although most emigrating last year were from the recently joined EU 12 countries (and most of these were male, illustrating the collapse of the construction sector), more and more Irish are emigrating or considering emigration as their only option to find work. A falling population means a shrinking pool of potential house buyers.

4) The sheer overhang of vacant housing built - some of which will never be occupied and may have to be demolished - means that housing supply greatly outstrips demand and will for many years to come.

5) I reckon an ECB interest rate increase in 2010 is a real possibility as the rest of the Eurozone economy recovers and this will damage our fatally wounded housing market even further - leading to further price drops but also, more worryingly, a surge in mortgage arrears as it could be the "straw that breaks the camel's back" for many homeowners in negative equity and struggling to cope with mortgage repayments after a job loss/pay cut.

6) Ireland is so out of kilter with the rest of the Eurozone in terms of the economic cycle that it is frightening. We had interest rate cuts in the early 2000s which fuelled the fire of the property bubble and now face increases when the market is still in a state of collapse. These pro-cyclical interest rate trends are worsening the intensity of the economic cycles.

7) This story is far from over.

1) The Irish economy now is doing well, the only problem is our public finances, which have no direct connection with residential property market. Public finances can be improved by adjusting the public costs, starting from 0-40% salary reduction in the public sector on the case by case method, and reducing costs in other areas (redicing long-term unemployment benefits, etc)

2) The unemployment growth now near its end, balancing at 12.6%

3) Look back to the Irish experience of the early 90s or to the experience from other countries, where small emigration didn't make any serious impact on the property prices (only mass emigration, when at least 10-20% of population emigrates, can make significant impact on the property prices). Moreover, as soon as the companies start to create new jobs many of those emigrants would return back to Ireland.

4) With the overhang you have to look area by area, as most of the overhang was built in the areas where initially no one would buy. While in the sought after areas with restricted construction opportunities the prices soon would stabilise and go up. This is what I was saying right from the start: Irish residential market soon will follow the global route of property market segmentation. It is normal in other countries when the property market devided into 10-100+ different segments, each of them analysed individually.

5) The ECB rates would go up only when they (the ECB) would see clear signs of recovery in all economies and property markets.

6) I agree with you, however it could be tackled through full privatisation of lending/depositing/and operational facilities of all Irish banks, so the actual morgage rates and availability of credit facilities would be fully in the hands of the State, which then would manipulate them in the interests of the State and the Irish people, rather than in the interests of a small bunch of greedy bank owners.

7) The story is far from over, however now it is on the uptrend. I'm positive.:)

Euroland

spockety wrote: »

Where are all these homeless families putting their head down at night at the moment...?

With their parents or renting

Euroland

AARRRGH wrote: »

Who compiles the statistics?

You can check it on their website

J-blk

@ Euroland - this is the multi-quote button:



Learn to use it instead of having 4-7 posts in a row to answer previous comments FFS...

AARRRGH

Euroland wrote: »

The World is now already on the uptrend.

The small amount of positive information we've had recently is only due to the US/UK/etc. governments pumping billions into their economies. They have now stopped doing this (as they can't afford to continue doing it) so things will return to being negative.

If you combine this with people all around the world losing their jobs and defaulting on their mortgages, things are only going to get worse. And for Ireland specifically, we have a lot more problems than the average country. Certainly Ireland is screwed for at least 5 or 10 years, probably longer.

It seems you want to believe things are getting better. I'm sorry, but you are deluding yourself.

smcgiff

Euroland wrote: »

So, would you dismiss the American official statistics?

Euroland,

You need to do two things.

1. Put forward and argument as to why the US statistics have an affect on Ireland.

2. Counter Calina's arguments.

As it stands I'm inclined to believe that 'The Only Way Is Down'

AARRRGH

Euroland wrote: »

1) The Irish economy now is doing well, the only problem is our public finances, which have no direct connection with residential property market.

Come on now, you're living in a total fantasy land. I can't debate with people like you.

Believe whatever you want to believe, but be prepared to be disappointed.

The_Conductor

Euroland wrote: »

Last year was the highest baby boom in Ireland, and the young parents, awaiting the last 3 years for the property prices stabilisation, are now eager to buy something to have a place for growing their kids. Thousands of people had to postpone their property purchases for the last 3 years, and now when the bottom is near, it is the right time for them to buy, before the investors flock back into the residential property market, or it would be too late.

You are making a lot of assumptions.
Yes- last year was a boom year for babies in Ireland- but this does not mean people have been waiting 3 years of property stabilisation to buy property. Certain property classes are always going to have an inherent demand for young families- notably the 3/4 bed semi with a garden. The fact of the matter is the vast bulk of construction over the past 12 years- has not been in this category. Most people did not wait (3 years or whatever)- you have over 380,000 who bought into the buy an apartment now, trade up later balloney. These people are now in negative equity- unable to trade up- and their apartments which they were supposed to able to offload to firsttime buyers are of little interest to most people.

At present its simply not the case that the vast bulk of people who have not purchased are waiting for the long awaited property stabilisation- most are struggling in their day to day lives, with unemployment, wage cuts, increased taxation, cuts in social welfare entitlements, increases in indirect taxation at every turn- and a lending sector that at long last are beginning to exercise a modicum of common sense with their lending multiples.

People don't have money- and they are going to have even less money- thats why they're not buying.

The_Conductor

Euroland wrote: »

Budget deficit and level of public debt have nothing in common with the residential property market. Yes, they should be cured, but they have no direct connection with the property market.

No- they do have an effect on the probable direction of taxation however- which in turn has an effect on people's net income- and while it may be causal in nature- people's net income is going on a rampant downward trajectory......

Euroland

oflahero wrote: »

1) There's a simple reply to all this tosh that you've been peddling - where's all this buyer money going to come from that gets the Irish property market onto an upward trend?

2) -We have the highest level of personal debt per capita in Europe;
3) -We are borrowing massively every day to plug the massive public finance gap;
4) -There is massive oversupply in the domestic housing markets (granted, a lot of it is apartments in 'commuter' locations);
5) -The ratio of asking prices to average salaries are still well over the long-term average, and salaries are going nowhere but down for both public and private sectors;
6) -Tough budgets are on their way;
7) -Interest rates are at historic lows and yet lending is relatively nonexistent, because;
8)-The Irish banks are technically insolvent.

9) There will be a while to wait while Ireland watches a global upswing before we follow suit. And that does not include this current 'dead cat bounce' equities rally thanks to current sliding dollar fears.

10) The only thing that can pave the way to your optimistic worldview is debt erosion thanks to hyperinflation - not a target I see on the ECB's charter.

1) From people's savings, lending and investors (local and foreign)
2) We also have one of the highest salary/income levels in EU and the world
3) Irrelevant, explaned in my previous post
4) The overhang situation was explained in my previous post
5) These ratios (both locally and globally) aren't fixed and have a long-term growth trend due to the increased demand for residential properties (fast growing population, increased standards of living, etc) from one side and limited supply fom the other side (lack of zoned land in cities and towns, building restrictions, etc), so, please, don't stick to the ratios of the 50s or 70s
6) Irrelevant, explaned in my previous post
7) Just wait a litlle bit and you would see the uptrend on the number of given new morgages
8) I agree, but with the help of NAMA (or other similar actions: i.e. bank privatisation after previous bancruptcy) the situation soon would be improved
9) Ireland is already on the upswing, following the others
10) There is no need for hyperinflation, current injections would be enough to improve the situation

Euroland

smccarrick wrote: »

No- they do have an effect on the probable direction of taxation however- which in turn has an effect on people's net income- and while it may be causal in nature- people's net income is going on a rampant downward trajectory......

Yes, however a few percentage point increase in taxation would not divert majority of people from buying so much awaited own home. Such increase in taxation more likely would just slightly decrease their spending habits, i.e. going less to pubs/restaurants or buying less expensive food/clothing, less alcohol, etc

oflahero

Euroland wrote: »

1) From people's savings, lending and investors (local and foreign)
2) We also have one of the highest salary/income levels in EU and the world
3) Irrelevant, explaned in my previous post
4) The overhang situation was explained in my previous post
5) These ratios (both locally and globally) aren't fixed and have a long-term growth trend due to the increased demand for residential properties (fast growing population, increased standards of living, etc) from one side and limited supply fom the other side (lack of zoned land in cities and towns, building restrictions, etc), so, please, don't stick to the ratios of the 50s or 70s
6) Irrelevant, explaned in my previous post
7) Just wait a litlle bit and you would see the uptrend on the number of given new morgages
8) I agree, but with the help of NAMA (or other similar actions: i.e. bank privatisation after previous bancruptcy) the situation soon would be improved
9) Ireland is already on the upswing, following the others
10) There is no need for hyperinflation, current injections would be enough to improve the situation

Your position can be summed up in one - the current crisis we find ourselves in that was caused by cheap credit can be solved by: more credit.

At some point the lenders will be looking for their savings back. And we're already far too much in hock.

Our economic situation won't be fixed by a 'recovery' in the property market. It'll be fixed by a downwards 'recovery' to realistic levels, when we as a nation realise that diverting capital that could be used for productive purposes instead to uselessly pumping up the price of shelter purely for a feelgood factor, might not actually be a good idea.

This is understandably hard for people who have bought during the last 10 years, who naturally do not want to think of themselves as being in negative equity.

Low property prices = recovering economy, as people have more money to spend and invest.

Trying to extrapolate a link between a rise in property prices from current levels to a more productive economy is bubble thinking. Hopefully we are past bubble.

Snickers Man

Euroland, you're a shill.

You need to read Calina's excellent post, or if that is too much you need to find three small pieces of data and do a simple sum.

1) What is the total housing stock in the country?

2) What is the average occupancy per dwelling?

3) What is the total population?

I suspect you are in a business which will have that information readily to hand but if not, play this clip from a recent Late Late show. Skip to 19 minutes in.

Answers a)1.94 million b) 2.8 persons c) 4.4million

ie we have enough housing for an extra million people. You want prices to go up? Get breeding!!!!

The_Conductor

Euroland wrote: »

1) From people's savings, lending and investors (local and foreign)

The public at large do not have savings- on the contrary- we have one of the highest level of private indebtedness in Europe. We went on a major credit splurge, which now has to be paid back. Investors have gotten burnt- and don't see value in Ireland- even after NAMA- our 2 major banks need another 17 billion just to repair their capital ratios, never mind get lending again (source this weeks Economist). The money is not out there.

Euroland wrote: »

2) We also have one of the highest salary/income levels in EU and the world

Its falling rapidly. Also- while we may have high headline salary/income levels- our purchasing power is only marginally above the EU average on a parity scale (source Economist again)

Euroland wrote: »

3) Irrelevant, explaned in my previous post

How is the fact that we're borrowing 410 million a week irrelevant? Public expenditure is going to be cut- and taxes are going to rise. People are going to have a lot less money to spend on everything- including housing.

Euroland wrote: »

4) The overhang situation was explained in my previous post

You may have given 'an explanation'- however its only valid if you have an incredibly rose tinted view of where the economy is going.

Euroland wrote: »

5) These ratios (both locally and globally) aren't fixed and have a long-term growth trend due to the increased demand for residential properties (fast growing population, increased standards of living, etc) from one side and limited supply fom the other side (lack of zoned land in cities and towns, building restrictions, etc), so, please, don't stick to the ratios of the 50s or 70s

Ireland's population is not growing. Our birth rate may have increased- but at a slower rate than net outward migration in 2008 (source CSO). If you imagine we are going to have increased standards of living for a considerable period of time- I think you're dreaming. Things are going to get a lot worse for all of us before they get better. Also regarding a lack of zoned land- its simply not true- in some parts of the country there are sufficient landbanks zoned to last over 100 years......

Euroland wrote: »

6) Irrelevant, explaned in my previous post

How are tough budgets irrelevant- people are going to have less money- and the tax incentives that drove a lot of development over the past 15 years- are most certainly a thing of the past.

Euroland wrote: »

7) Just wait a litlle bit and you would see the uptrend on the number of given new morgages

Compared to what? Boom years- or current depressed figures? Its easy to show an increase from a depressed base- but its far better to compare it to a historic set of data, rather than an appalling quarter. Even the most pessimistic people expect there to be some sort of a 'dead-cat-bounce' possibly even a series of them- this doesn't infer a recovery though- simply the establishment of a series of support levels at which relative affordability is reached at different periods of time. As people's incomes fall- so too will their ability to pay any given asking price- and so ad infinitum.

Euroland wrote: »

8) I agree, but with the help of NAMA (or other similar actions: i.e. bank privatisation after previous bancruptcy) the situation soon would be improved

Even after NAMA- AIB and BOI require another 17 billion to repair tier 2 capital ratios (before they even get lending again). Under state aid rules- the government are not going to be allowed simply subvent these funds- they will have to go to the open market for them. With the best of will in the world- the only reason for investing- is if the return is high enough and if the investment is guaranteed. The Irish government guarantee is being renegotiated at present based on the template supplied by the Commission- this is far less favourable to the banks than the original guarantee. The lending sector have already signalled that this means they will have to increase their lending margins to offset their increased costs- which is going to hurt mortgagees even further- and make it less likely that new mortgages are going to issue- or when they do- they will be for lower amounts. One thing feeds into another.

Euroland wrote: »

9) Ireland is already on the upswing, following the others

Ireland is not on an upswing. The rate of our decline is slowing- there is a difference between an upswing and things not disimproving at the same rate. Our Central bank is currently forecasting a GDP contraction of 4.8% in 2010 (ontop of the circa 16% in 2009). They've not been the best with their forecasts in the past- given, but even with the best of will in the world we're looking at stabilising sometime in 2011- with a GPD possibly 35-40% down on peak figures, and when growth does return- its likely to be in the very low single digits, the 'tiger growth' is very much a thing of the past.

Euroland wrote: »

10) There is no need for hyperinflation, current injections would be enough to improve the situation

Current injections are helping the situation- to the extent that low levels of growth are already being recorded in France and Germany. This however means that the tap is going to be turned off- and then the excess liquidity brought back in by higher interest rates. Stated ECB policy is a normalisation of interest rates over a 3-4 year period (where normalisation is said to be overnight rates of 4.25-5% rates). Wonder what rates like this, along with a normal margin (which is not being charged by Irish institutions for political reasons at present) will do to the Irish consumer and their demand for housing?

The_Conductor

Euroland wrote: »

Yes, however a few percentage point increase in taxation would not divert majority of people from buying so much awaited own home. Such increase in taxation more likely would just slightly decrease their spending habits, i.e. going less to pubs/restaurants or buying less expensive food/clothing, less alcohol, etc

People have already cut these discretionary spending habits to the bone- I've seen the Chambers Ireland figures- they make incredibly depressing reading. A few percentage points increase in taxation (and a few percentage points cuts in gross pay across the board in the public sector) will make a big difference for most people- because they have already chopped things to the bone. Something has to give. Add increased interest rates into the equation- and you will have half the population suicidal, never mind thinking about purchasing housing and cars........