Morgan Kelly on property: "we are very far from the bottom"

Dionysus

Over on The Irish Times tonight they are reporting on Kelly's speech last night in Kilkenny. Kelly is still shouting but nobody in power is listening. The Irish Times and other media outlets continue to promote property while NAMA uses our taxes to promote property and, ultimately, another property boom. I didn't buy during the boom. I studied and worked away while renting. I cycled everywhere and usually just spent money on stuff I needed. I saved money. Property prices should have fallen much more than they currently have but because of Irish state intervention in the property market, property prices are not falling to their real level. Through bailing out developers and using taxes to encourage house purchasing as in the latest NAMA initiative, the Irish state is keeping property overvalued. Furthermore, the financial future of the Irish exchequer is now firmly tied to creating another property bubble so it can get its money back. In other words, my taxes (and the taxes of tens of thousands of others who didn't buy in the boom) will be used by the Irish state to keep house prices high and prevent us from buying a house at its real market value. We are paying for the idiocy of the sheep who bought houses in the boom. Irish government policy on the property market amounts to "We made mistakes with the last property boom, but we'll get out of it by creating another property boom". It's infuriating (and much more besides) how all the so-called capitalists are, after all, the most keen to socialise their loses by getting people like me to contribute to bailing them out.

It cannot be said enough, but few people are actually stating these truths. In this context, Morgan Kelly is still, sadly, an isolated breath of fresh air when he comments on property prices in Ireland.

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Property 'not yet at bottom' - Kelly

IRISH TIMES REPORTERS

Irish property prices have yet to hit bottom and as a result the final bill for bailing out the banks is likely to be in the region of €90 billion to €100 billion, economist Morgan Kelly said last night.

In his Hubert Butler Lecture to the Kilkenny Arts Festival, Mr Kelly said: "we are very far from the bottom" of the property market and added it would take a decade for the economy to recover from the fallout.

While prices had fallen by 50 per cent, he said “almost no transactions were taking place at that price” and with unsold properties starting to accumulate, Mr Kelly said “we are very far from the bottom of the market”.

He also estimated Ireland’s national debt would rise to between €240 billion and €250 billion by 2015, far higher than the current Government estimates of €200 billion. He said that there was no way the country could repay this.

The UCD economist said the Irish economy would require a decade to recover from the current crisis.

Addressing the extent of property price inflation, Mr Kelly said that by 2007, “we were building half as many houses as Britain which is 15 times our size”. A consequence of this building boom was that the price of an average Dublin home cost “15 times the average industrial wage”.

Mr Kelly also said banks had become aware of the problems in the Irish property market in 2006 when there was a fall in the number of people taking out mortgages. Despite this, he claimed many bank economists were telling people at the time that there would be a “soft landing” so they would continue buying houses.

Mr Kelly described the bank guarantee that followed as “Cowen and Lenihan’s idea of shock and awe,” which, designed to frighten speculators, turned out to be “shocking and awful” for the country.

He said the real mistake, however, was not passing the guarantee, but sticking with it.

The economist said Central Bank governor Patrick Honohan could have walked way from the deal but decided that the losses were manageable.

Mr Kelly said the next problem Irish banks were likely to face was “organised opposition to repayment” with the possibility of some “Michael Davitt-type figure” emerging.

Referring the euro zone debt crisis, Mr Kelly said: “I think eventually it will be solved” as it was in Germany’s benefit to remain in the euro.

Predicting “very large ECB loans to Ireland, Spain and Italy,” Mr Kelly said even if Ireland were to receive favourable terms the country faced very deep problems.

Mr Kelly described as “catastrophic” the recent US spending deal that allowed the debt ceiling to be raised, but avoided raising taxes to try and plug the widening deficit, and said "as the US goes under that will hit Ireland very, very badly".

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orourkeda

but you cant lose on property

Bipolar Joe

In capitalist Ireland, property loses on you!

7sr2z3fely84g5

i get laughed for saying this,but i think the amount we poured into the banks would had been enough to launch an space shuttle,quote from nasa itself!-

http://www.nasa.gov/centers/kennedy/about/information/shuttle_faq.html#1

Q. How much does the Space Shuttle cost?
A. The Space Shuttle Endeavour, the orbiter built to replace the Space Shuttle Challenger, cost approximately $1.7 billion.

Q. How much does it cost to launch a Space Shuttle?
A. The average cost to launch a Space Shuttle is about $450 million per mission.

bnt

I agree: the multiple of annual salary is a pretty fundamental measure of affordability, and so much trouble could have been avoided had mortgage brokers stuck to the 3x - 4x multiple throughout the last decade. I noticed, last week, that some banks are going over this again (5x - 6x) - but even if you can get a mortgage of that size, it doesn't mean you should. We can't trust the banks or brokers to tell us what's affordable to us.

Note also that salaries are dropping for most people - and that's going to feed back to the prices too. Yes, they have a long way to come down.

Zebra3

<insert youtube clip of Bertie promoting the virtues of suicide>

amacachi

bnt wrote: »

I agree: the multiple of annual salary is a pretty fundamental measure of affordability, and so much could trouble could have been avoided had mortgage brokers stuck to the 3x - 4x multiple throughout the last decade. I noticed, last week, that some banks are going over this again (5x - 6x) - but even if you can get a mortgage of that size, it doesn't mean you should. We can't trust the banks or brokers to tell us what's affordable to us.

Note also that salaries are dropping for most people - and that's going to feed back to the prices too. Yes, they have a long way to come down.

Salary multiples are usually a good indicator but it's rare to have a huge surplus of housing stock like we have. without government interference the market should adjuect to a level below what is usually thought of as "normal", at least until the excess supply is reduced.

dev100

Wait till the States go into another recession... And wait till we start getting higher taxes etc. Then you will things begin to happen

Dangerous Man

I sometimes wonder why Ireland isn't on fire.

RantingRichie

Dangerous Man wrote: »

I sometimes wonder why Ireland isn't on fire.

We're a shamefully passive race - any other country would be on the streets.

Jesus Wept

Brooklyn Black Surface wrote: »

i get laughed for saying this,but i think the amount we poured into the banks would had been enough to launch an space shuttle,quote from nasa itself!-

http://www.nasa.gov/centers/kennedy/about/information/shuttle_faq.html#1

What is your point, that we could have spent it launching a space shuttle? Space shuttles are also a massive waste of money.

Killer Pigeon

Who care.

In 2 hours the markets are going to open after the weekend and the world will end.

This has been a weekend in which the US credit rating was downgraded and in which an Italian & Spanish bailout has become apparent.

Basically the world will fall apart in 2 hours (1am Irish time).

Solair

Can you just imagine where we would be now if those billions wasted on a property bubble had been invested into the productive economy and venture capital?

Even during the boom, Irish start-up IT companies and other innovative companies couldn't get funds from banks or investors here and ended up going to California or elsewhere.

The banks and other investors were more than happy to pi$$ money away on property developers but they couldn't even be bothered to meet with innovative startups in many cases.

There are still people in Ireland, including many supposedly intelligent commentators, who seem to think that a property bubble and high property prices are a good thing.

The reality of that property bubble is that it leeched all of our financial resources, concentrated them up and put them into the pockets of a few speculators at the top of the pyramid.

High property prices mean that everything is too expensive. High house prices / domestic rental prices means high wage demands and lower standards of living.

High commercial rents are passed on as higher consumer prices as shops, restaurants, manufactures and others have to cover this overhead.

Yet, I still see articles that are wishing the market would increase again.

The ideal situation is an innovative, vibrant economy where houses and property are things you use to live in and cost a reasonable price, not something to gamble and speculate the future of the nation on!

What we are witnessing is not really a crash, it's a reality check and a very nasty correction back to what property should have been worth here in the first place.

I would suspect that we will be back at 1990s house prices before long and it will eventually find a floor but it won't be anywhere near the levels that are being talked about by many people.

Finnbar01

RantingRichie wrote: »

We're a shamefully passive race - any other country would be on the streets.

Too true. However, what good would rioting do us?

mickydoomsux

Dangerous Man wrote: »

I sometimes wonder why Ireland isn't on fire.

Because the secret is...... things aren't that bad in the grander scheme of things.

dev100

mickydoomsux wrote: »

Because the secret is...... things aren't that bad in the grander scheme of things.

YET!!!!

Chuck Stone

We've turned a corner.

The best is yet to come.

They may take our lives but they can never take our freedom.

Never have so many owed so much to so few.

Mission acomplished.

Tell 'em about the honey mummy.


etc etc etc

mickydoomsux

dev100 wrote: »

YET!!!!

And how long have we been saying that now?

The sky has been falling for an awfully long time.

Ulysses Gaze

Ah but sure doesn't Morgan know that the Smart, Ballsy guys are buying up property now.

'It's never good or bad time to buy. It's always a good time to buy.'

dev100

mickydoomsux wrote: »

And how long have we been saying that now?

The sky has been falling for an awfully long time.

Well Ill probably get lambasted but here goes so far we have had small tax increases For some people they are massive!!! but in my humble opinion when we have to really start repaying all this money back and the government start to really hit our pockets by increasing taxes and making up new charges to pay for it . Then you will see what a recession looks like.

drunkmonkey

A house is worth about 15 years it's rental value in a normal market.

Take a 2 bedroom in Temple Bar now.

Rent: €1200pm x 12 x 15 = €216,000 - True value give or take €20k.

Buy: €225,000

That was meant to show the difference in asking house values versus their real value. I'm glad this is after hours or it would have been an epic fail of a comparison.

Maybe someone can give a better example, but that one just proved values are about right and Kelly is talking through his ass.

washman3

Dionysus, well said. that is one of the best posts i've ever read on BOADRS.IE
Kelly has been correct from day 1 and he's still correct. he is, like McWilliams, now a hated figure in the media and property circles. they have upset the cosy cartel involving developers,speculators,regulators, bankers and politicians. Most of us always knew that NAMA is a total scam designed to save the contributors of the Galway Tent, at the enormous cost to the ordinary person. if this scam can be kept going for a few years there is a chance that these scum will recoup what they have "lost".
the plan was to shelve these properties for 10yrs approx,hope that the market would recover and start selling again. this of course was ludricious and now our European paymasters and the IMF see through this scam.
I firmly believe that the current NAMA firesale was ordered by the Troika.
A lot of the truth had been hidden.
FF/GREENS and the GOMBEENS colluded to keep property prices up and the present Government is doing little to change this. Hopefully their hand will be forced even more by the Troika.
We need to see the greedy individuals that caused this mess to be punished. have we seen any of these people on a dole queue yet.? No.!
Instead, a Sunday paper today has revealed a list that have "retreated" to
the Algarve.
These people are no better than those who are "exiled" yet manage to send huge shipments of drugs into Ireland.
We are hearing thrash like, "we are where we are", "we all partied", "time to move on" etc. This is code for,"let those who caused this walk away scot-free"
Amazingly we will still have apoligists (vested interests) having a go at people like you and me when we post comments here, but like the Troika we can now see through these poor deluded souls.
Morgan Kelly said in 2008 that house prices would fall 90%.
We are rapidly heading that way,so have no qualms about renting for now. you WILL be rewarded for being prudent during the "boom".!!!

NIMAN

Does this guy says things cos he likes people talking about him in the media?

Self-publicising?

Jesus Wept

drunkmonkey wrote: »

A house is worth about 15 years it's rental value in a normal market.

Take a 2 bedroom in Temple Bar now.

Rent: €1200pm x 12 x 15 = €216,000 - True value give or take €20k.

Buy: €225,000

That was meant to show the difference in asking house values versus their real value. I'm glad this is after hours or it would have been an epic fail of a comparison.

Maybe someone can give a better example, but that one just proved values are about right and Kelly is talking through his ass.

The rent market isn't a free market either though, it is massively propped up.

abakan

drunkmonkey wrote: »

Maybe someone can give a better example, but that one just proved values are about right and Kelly is talking through his ass.

Has anyone bought the apt in Temple bar for 225,000?

I dont think you can take one example of Morgan Kelly being wrong from one very popular place to live in Dublin. I know right up and down the country both rents and house prices are still high and need to come down.

Unfortunately Morgan Kelly is right
Its a pity we didnt heed the advise that the minority were shouting while in the boom, instead we believed the all 'bull' we were spun as a country

7sr2z3fely84g5

if anyone seen that program "freefall" it highlighted the bankers where getting savage bonuses for their work so where very happy to keep the bubble afloat.

homerjay2005

Dangerous Man wrote: »

I sometimes wonder why Ireland isn't on fire.

why would people riot when they are getting 1000s of euros each month for free off the state in welfare and health payments?

Absurdum

Dangerous Man wrote: »

I sometimes wonder why Ireland isn't on fire.

rain

goalscoringhero

drunkmonkey wrote: »

Maybe someone can give a better example, but that one just proved values are about right and Kelly is talking through his ass.

I presume you mean values as in how the market valuates such property.
The problem here is that there is no market, as in, there is no (free) market.
Some auctions may give an approximation to the real value, but given the fact that most people cannot get a mortgage within reason from the banks (the banks won't provide the mortgage) there simply is no market.
The uber-wealthy who can provide the money for a new house from their pockets are not sufficient. They cannot buy up all the property that's up for sale. No buyers means no sales.
Which means prices need to go lower in order to create a market. That's what Kelly is hinting at.

fatalll

Dangerous Man wrote: »

I sometimes wonder why Ireland isn't on fire.

What will that achieve??

desertcircus

drunkmonkey wrote: »

A house is worth about 15 years it's rental value in a normal market.

Take a 2 bedroom in Temple Bar now.

Rent: €1200pm x 12 x 15 = €216,000 - True value give or take €20k.

Buy: €225,000

That was meant to show the difference in asking house values versus their real value. I'm glad this is after hours or it would have been an epic fail of a comparison.

Maybe someone can give a better example, but that one just proved values are about right and Kelly is talking through his ass.

There's a couple of problems with this. First is fallow periods: it's fairly normal to assume ten months' occupancy per year. Second is actual rental prices: there's no two-bed in Temple Bar asking 1200 a month on Daft. In fact, the average seems to be 1050. So ten months' rent of 1050 totals 10,500 a year. Multiply that by fifteen years, and the total you come to is €157,500, almost seventy thousand euro below the asking price being asked for the one two-bed apartment in Temple Bar for sale on Daft.

That's on the assumption that rents will remain the same, and that the mooted huge decrease in rent allowance will have no negative impact on a market where 50% of tenants are on that selfsame rent allowance. In other words, even before the price floor for rental property is reduced by maybe 20-30%, the asking price is almost 150% of the realistic price.

Killer Pigeon

~26 minutes until the end of the world.

skelliser

note the crazy salaries being paid in NAMA.

Anyone with any intelligence know from the start that NAMA was and is a scam.
But of course the naysayers were told to shut up and pull on the green jersey.

the vast majority as seen here in after hours couldn't give a toss either. They rather turn a blind eye or try and out do each other with witty replies.

Jesus Wept

Killer Pigeon wrote: »

~26 minutes until the end of the world.

What market opens, Japan?
What is it about this drop in the exchanges that is capturing the imaginations of boards.ie members? Haven't there been bigger one day/one week drops over the past few years?

Killer Pigeon

The-Rigger wrote: »

What is it about this drop in the exchanges that is capturing the imaginations of boards.ie members?

Insanity, I call it.

Senna

Unfortunately the rent/ratio for working out prices does not work here. We have a huge supply of unoccupied houses 350k. If even some of these house were allowed onto the market and let the market dictate the price, house prices and rents would fall massively.
We have NAMA openly admitting that they cant allow large scales property sales as it would reduce house prices by half over night, what they are basically saying is "we cannot allow an open market were people can buy a property at its real price, instead we'll dip feed houses onto the market, dragging out the downward drop in house prices for 5/10/15 years".

Sear brilliance.

drunkmonkey

desertcircus wrote: »

There's a couple of problems with this. First is fallow periods: it's fairly normal to assume ten months' occupancy per year. Second is actual rental prices: there's no two-bed in Temple Bar asking 1200 a month on Daft. In fact, the average seems to be 1050. So ten months' rent of 1050 totals 10,500 a year. Multiply that by fifteen years, and the total you come to is €157,500, almost seventy thousand euro below the asking price being asked for the one two-bed apartment in Temple Bar for sale on Daft.

That's on the assumption that rents will remain the same, and that the mooted huge decrease in rent allowance will have no negative impact on a market where 50% of tenants are on that selfsame rent allowance. In other words, even before the price floor for rental property is reduced by maybe 20-30%, the asking price is almost 150% of the realistic price.

Yea I kinda new it wasn't a great example. But this is after hours and it's late.

The house I rent probably gives a better view.

3 bedroom semi, bought as investment property by a pensioner for €220,000 just over 3 years ago.
Currently renting it for €550pm, giving it a value of €82,500

No houses for sale currently in that estate as nobody will sell and nobody is buying, what is happening though is the council are snapping up anything that comes up for rent, for council houses and affordable housing, there given homeowners 10 year leases at a little over the going rental rate.
This is causing 2 problems, one it's keeping rents artificially high and secondly it's preventing property coming onto the market as most propel will take the 10 years guaranteed rent and make up the shortfall themselves.

The government are up to their necks in this house game, through councils, Nama and departments I probably don't even know about.
I can also see debt forgiveness happening as well. There going to drag this out for as long as possible in the hope that it all kicks off again. When in realty this is the last thing we need as it's only
holding off the end game not preventing it.

concur4u?

ok im in need of a basic accountancy/economics explaination pls

so the imf are putting up a 1/4 of the bailout
the ecb are putting up 3/4 of the bailout
we will be in need of this loan for the next 3 to 4 years just to keep the goverment in pocket for the everyday running costs of the nation

the ecb is basically the germans and the french looking to keep the euro currency intact and make some in interest while their at it?

whats in this for the imf apart from the interest theyll make off the loan?

who are the imf? were do they get their money to lend broken countries?

also who exactly do the yanks owe trillions to ?is it the federal resevere ?

also whats the deal with the chinise who or do they owe?

can someone connect the dots to show me the big picture here pls

dev100

concur4u? wrote: »

ok im in need of a basic accountancy/economics explaination pls

so the imf are putting up a 1/4 of the bailout
the ecb are putting up 3/4 of the bailout
we will be in need of this loan for the next 3 to 4 years just to keep the goverment in pocket for the everyday running costs of the nation

the ecb is basically the germans and the french looking to keep the euro currency intact and make some in interest while their at it?

whats in this for the imf apart from the interest theyll make off the loan?

who are the imf? were do they get their money to lend broken countries?

also who exactly do the yanks owe trillions to ?is it the federal resevere ?

also whats the deal with the chinise who or do they owe?

can someone connect the dots to show me the big picture here pls

The americans owe the chinese the money

2ygb4cmqetsjhx

The Americans owe the Chinese trillions? That explains why they are so fat. How many chop sueys can I buy for 14 trillion american?

Zebra3

concur4u? wrote: »

ok im in need of a basic accountancy/economics explaination pls

so the imf are putting up a 1/4 of the bailout
the ecb are putting up 3/4 of the bailout

There was no bailout.

There was loan sharking.

skelliser

The IMF are basically the lender of last resort.
They are proped up/funded by the big economies of the world.
Its hq is in new york and its usually run by a european.

If a country cant buy debt from the markets, the IMF will step in and offer to fund the country for a number of years at x amount interest.
In return they are in charge of the books and thus countries must introduce austerity to keep getting money.

In our situation and contrary to the medias opinion the IMF have actually been our friends! giving us a much lower interest rate, at one stage suggesting a rollover of debt; vetoed by Obama's Genthner in the FED and generally hinting/suggesting to our european "friends" that there should be debt forgiveness.
All of which was ignored.

policarp

Dangerous Man wrote: »

I sometimes wonder why Ireland isn't on fire.

Because we're piss artists and we'd have no trouble putting it out. . .

naughto

Killer Pigeon wrote: »

~26 minutes until the end of the world.

i see your still here

concur4u?

skelliser wrote: »

The IMF are basically the lender of last resort.
They are proped up/funded by the big economies of the world.
Its hq is in new york and its usually run by a european.

If a country cant buy debt from the markets,

the IMF will step in and offer to fund the country for a number of years at x amount interest.
In return they are in charge of the books and thus countries must introduce austerity to keep getting money.

In our situation and contrary to the medias opinion the IMF have actually been our friends! giving us a much lower interest rate, at one stage suggesting a rollover of debt; vetoed by Obama's Genthner in the FED and generally hinting/suggesting to our european "friends" that there should be debt forgiveness.
All of which was ignored.

who are the markets? excuse my ignorance but iv had my head in the sand the last few years

Killer Pigeon

naughto wrote: »

i see your still here

Dude, do you not see the fire and brimstone outside?

sock puppet

Myla Nutty Cheekbone wrote: »

The Americans owe the Chinese trillions? That explains why they are so fat. How many chop sueys can I buy for 14 trillion american?

Not quite. They owe about a tenth of that.

concur4u? wrote: »

who are the markets? excuse my ignorance but iv had my head in the sand the last few years

Banks, pensions funds, other governments, local councils etc. Anyone who invests their money.

7sr2z3fely84g5

skelliser wrote: »

note the crazy salaries being paid in NAMA.

Anyone with any intelligence know from the start that NAMA was and is a scam.
But of course the naysayers were told to shut up and pull on the green jersey.

Agree the allowance of been able to transfer properties to their spouses and been able to move abroad and be practically untouched and been paid for their corporation was absolutely disgusting.

They should had left the banks henchmen take care of them instead.

And i may add you will be all paying for new uniforms for the banks you own-
http://www.breakingnews.ie/ireland/aib-offers-new-uniforms-to-staff-
bill-could-reach-16m-515460.html

it is reported the AIB plans to spend up to €1.6m kitting out its staff in new uniforms.

According to the Irish Examiner, the bank, which is owned by the state, sent a memo to employees saying anyone who wants a new uniform can have one.

It is estimated that there could be as many as 8,000 staff throughout AIB's retail division — which includes branches and business centres in Ireland, the North and Britain, as well as the company's head office.

Based on these numbers, it is estimated that replacing all the uniforms could cost as much as €1.6m.

naughto

na sure id have to open the curtains to look out and iam afread if the dark:eek::eek:

skelliser

concur4u? wrote: »

who are the markets? excuse my ignorance but iv had my head in the sand the last few years

International Bond markets.
Its were traders, companies and countries buy and sell debt.

If you remember the merchant of venice - my word is my bond!!
A bond is just a fancy word for a promise and of course interest our in the case of bonds they call it yield.
Bonds come in different forms and over different time scales, usually 3, 5 and 10 year bonds.

The market is in a constant state of flux, with analysts and traders looking to buy and sell debt and make a profit.
In our case the markets saw that ireland was basically bankrupt cause we built a nice ponzai scheme of houses and thus wasnt a good investment, thus our yields grew to over 10%. Which means the interest payments alone would mean we are in a debt spiral ie. no way of actually paying the principle back. The debt would just grow and grow.

At the moment the markets and scared ****less and everyone is running for cover. Spainish and Italian yields have hence grown higher.
There is no way the IMF our the ESF can bail them out cause they are simply too big.

which brings us to today.

Also The markets are usually ahead of our idiot politicians by about 6 months. From the politicians point of view who wants to be the leader who brought in the austerity, the IMF and thus pay a hefty price at the ballot box- see Fianna Fails result.

Zebra3

skelliser wrote: »

In our situation and contrary to the medias opinion the IMF have actually been our friends!

Wtf???? :rolleyes:

The IMF along with other outside interests instructed the unhung traitors of FF/Greens (backed by FG) to move private debt onto the taxpayer.

:mad:

In return the Irish taxpayer gets raped.