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

Timing belt

https://www.boards.ie/discussion/comment/118002902#Comment_118002902

I agree the rule is a good idea in principle if all countries abide by it but from day one we saw financial gymnastics with private partnerships to get around it.

What they really need to do is split the debt to capital investment and running the country.

Leasing properties when it is cheaper to buy is just a waste of money.

ittakestwo

Hmm. It is written into the Masstrict treaty that the ECB can't let European inflation go above 2% in the long run. Alot of the recent printing was done to avoid deflation. But if this leads to inflation then the ECB are obliged to raise interest rates to bring it down under 2%.

Wanderer78

https://www.boards.ie/discussion/comment/118003925#Comment_118003925

jesus, these are not my 'theories', this research comes from respected sources, both academically and non academically, i.e. im just the messenger!

yes, public money can cause issues, as mentioned, but in a modern developed economy such as ours, these issues are highly unlikely, baring i mind, our current inflationary issues are primarily related to serious supply side shocks.

i have limited knowledge of Argentina, but i believe most such cases are primarily due to similar supply side shocks/issues, and nations running their economies on debt in foreign currencies, i.e. dollar based economies etc

there is in fact no such thing as a free market, all markets interact with state institutions, globally, and theres also sufficient evidence to support, stronger state interaction in certain markets, actually creates more stable markets, Singapore and its property markets being a perfect example.

yes, id absolutely agree, money creation in both the public and private domains, which is used in non productive means, does indeed lead to inflation in markets, our property markets are a perfect example of this, as thats exactly what we ve been experiencing, i.e. property price inflation from both the private sector money supply, i.e. credit supply, and public sector supplies, qe, etc etc

the only way to break this cycle of a primarily private sector money supply, is to run perpetual deficits, and become more reliant on public money supplies, public financial institutions etc, if we dont, we remain stuck in this positive feedback loop of ever rising property and land prices. but of course we must also implement other measures to reduce this rate of growth of prices, and to bring it more inline with wage inflation, which is now completely out of sync, which in turn means, many workers simply cannot get access to property markets, in both rental and purchasing markets

J_1980

https://www.boards.ie/discussion/comment/118003999#Comment_118003999

The last time this was tried was under LBJ’s “Great society”. 10/15y of misery followed by Reagan/Thatcher. There’s a reason why these 2 won 2/3 landslides.

Big government simply doesn’t work. And pls don’t mentioned “but Scandinavia…”, these have the lowest debt ratios in Western Europe.

just hoping that Biden's build back better is over quicker than LBJ nonsense. World is far more competitive in 2021 than in 1965.

Marius34

https://www.boards.ie/discussion/comment/118003667#Comment_118003667

It doesn't disagree anything about my comment. City land is more expensive, than somewhere in County Meath. You would not find a plot for semi-D, for 61K in Dublin City. Maybe in Darndale.

mcsean2163

I

https://www.boards.ie/discussion/comment/118003999#Comment_118003999

It sounds to me like you've read or heard of the deficit myth.

https://www.amazon.co.uk/Deficit-Myth-Modern-Monetary-Economy/dp/1529352525/

This assumes that the world will tolerate whatever the US does.

We're not the US.

Also, China v USA, who knows.

McWilliams has been parroting this crap too. Following his advice of guaranteeing the banks wasn't such a good idea unless you liked paying senior bondholders in full.

Pussyhands

https://www.boards.ie/discussion/comment/118003998#Comment_118003998

Unless "in the long run" is quantified in the treaty then they'll avoid raising rates substantially as long as they possibly can. They, like the US fed, have said they're not gonna care about the 2% limit for now because there's been so little inflation in the past decade.

The last decade has been pretty decent for the economy with low inflation yet the pricks in suits want to devalue our money. Scumbags.

The idea that you need inflation for a strong economy was proven in the last decade to be nonsense.

Wanderer78

https://www.boards.ie/discussion/comment/118004027#Comment_118004027

jesus christ, where do people get off with this conservative crap, its clearly obvious in the data presented, that this stuff simply works, the intervention of state measures, particularly in times of crisis, works, covid and pup payments are yet again, more evidence of this. and again, 'stronger' state interaction in certain markets, at certain times works, again, Singapore etc, i.e. its not the size of government, but the details of government interactions. its amazing when people still use Reagan and thatcher, when reality has shown since their governments, globally, we have experienced far more frequent and serious economic crashes, in particularly in relation to property and land!

yagan

Refocus back on property a minute. A common narrative I heard during the Bertie years to justify going deep into mortgage debt was that 1970s inflation would erode it, which over a decade later hasn't happened. I know plenty who've yet to see the nominal value of their property match their 2006-08 price tag.

Inflation as a debt destroyer was pushed as a certainty but when that didn't materalise bailouts paid by everyone and future generations happened. At current rates the post WWII babyboom which exploded the demand for debt will not be repeated in this century if UN projection hold.

Anyone holding out for inflation a debt release will be waiting.

Wanderer78

https://www.boards.ie/discussion/comment/118004318#Comment_118004318

funnily enough, we have been discussing property markets, we actually need inflation now, in order to deal with our cumulative debts, particularly our global private debts, by having low inflation, we re starting to struggle to service these debts, and maintain some sort of economic functioning and growth. again public debt is the only true way forward out of this, but it must be used in the right ways, and not for asset speculation

yagan

https://www.boards.ie/discussion/comment/118004363#Comment_118004363

What is not appreciated is the relationship between global population doubling from the mid 1960s and mid 90s and the effect it had on demand for debt.

That growth multiplier that drove the boomer era debt simply isn't there now and the Irish bank guarantee couldn't defy gravity. That older generational belief in inflation as a debt shrinker is now being replaced by a public appetite for wealth redistribution and that's being reflected in the shrinking of the FF and FG vote.

cnocbui

https://www.boards.ie/discussion/comment/118004318#Comment_118004318

I have been accused of not understanding basic economics when I have said I believe the inflation evaporating government debt was a nonsense. Time has proven me right.

Timing belt

https://www.boards.ie/discussion/comment/118004363#Comment_118004363

To much inflation will cause problems with servicing the Government debt as rates will rise to combat it and in turn increase the servicing cost of the debt. To little inflation will also cause issues as people won't spend because they believe they will be able to purchase a good at a cheaper price in the future.

Increasing Public Debt only works as long as there is confidence in a country. If investors loose confidence because there is to much debt then yields will rise to entice them to purchase the debt but with this increase yields comes higher servicing costs of the public debt which in turn erodes investors confidence further and you end up in spiral yields going higher. It's QE that is maintaining the balance at the moment and allow government debt to increase as the central banks are the ones buying it.

America are able to increase public debt because it is the global currency with everything from oil, diamonds, exchange rates all priced in USD. If for example the debt celling was not raised and they defaulted on a bond payment investors could quickly loose confidence in the Dollar and the chances would greatly increase of them ending up with hype inflation.

The biggest issue that exists at the moment is that the risk is not being priced correctly because rates are being kept artificially low thanks to QE and in turn the majority of assets are overpriced including property as investors chase yield and take on more risk.

Timing belt

https://www.boards.ie/discussion/comment/118004852#Comment_118004852

If it is wage inflation then it will erode debt but this is not the type of inflation we are seeing at present.

Sierra Oscar

Inflation and QE aside, I find the broader uncertainty when it comes to the international economy rather extraordinary at the moment. There are some serious dark clouds on the horizon and it's having very little impact on market sentiment currently either internationally or domestically. I mean, we have a supply chain crisis globally which is impacting on a multitude of industries, and we have an energy crisis in Europe which seems to be unparalleled in living memory. I've BBC News on in the background and they are briefly discussing how energy intensive manufacturers are having to cease production and there is the risk of entire industries collapsing. It is remarkable. The fact that key market indexes are doing so well is giving a lot of commentators comfort ... but then we come back to QE. Is it not obvious what is happening?

It's all OK though, the fundamentals of the economy are strong ... demand is strong. That's why such crises have arisen and it will iron itself out and will have little impact on peoples lives. Or so we are told anyways!

yagan

https://www.boards.ie/discussion/comment/118005035#Comment_118005035

Absenting what's happening in the UK what inflation are we seeing at present? Energy prices can fluctuate all the time, little wind across Europe in September for instance meant a dip in wind generated power which pulled demand for LNG and oil. Also the post pandemic building materials spike continues to abate as production gets back up to speed.

Rents seem the most obvious runaway cost, but that's a matter of local planning rather than global supply prices.

Timing belt

https://www.boards.ie/discussion/comment/118005058#Comment_118005058

The energy crisis originates in China with their energy needs growing faster than their production of Coal. This added with the trade war with Australia has China turning to the GAS market and in turn pushing prices up in Europe as Russian gas goes to china.

Wanderer78

https://www.boards.ie/discussion/comment/118004055#Comment_118004055

yes elements of this thinking is coming from both kelton and mcwilliams work, but not entirely, but many a time of both been proven right, but again, not entirely, we have got to stop with this balanced budget nonsense, it is causing astonishing damage, particularly for younger generations, i.e. your kids, grandkids, nieces and nephews..... its also important to note, mcwilliams advice was in fact to implement a 'temporary' banking guarantee, but doing what we did, we in fact completely exonerated the whole fire sectors, in particular the finance sector, and theyve gone about their merry way, davy etc....

Sierra Oscar

https://www.boards.ie/discussion/comment/118005080#Comment_118005080

We're seeing inflation across a wide range of goods and services, CSO figures have inflation running at 3% economy wide currently. Not insignificant.

10% transport. 7.3% housing / utilities. Significant construction inflation costs too, 8.3% currently. These increases impact on people when it comes to their day to day expenses. I don't think its insignificant and solely related to energy costs. You say the pressures are alleviating, but the opposite is happening currently according to the CSO. Inflation at 1.6% in June vs 3% in August. We're still waiting on September figures but the suggestions are that it will be higher than 3%.

International monetary policy makers are obviously hoping inflation is a temporary phenomenon as economies reopen, but the weeks are turning into months at this stage. Covid starting to become a distant memory for some.

mcsean2163

https://www.boards.ie/discussion/comment/118005080#Comment_118005080

Silicon

https://www.metalbulletin.com/Article/4009219/Global-silicon-prices-hit-record-highs-amid-Chinese-shortage.html

coal

https://edition.cnn.com/2021/10/11/economy/china-power-crunch-economy-intl-hnk/index.html

Fertilizer

https://www.bloomberg.com/news/articles/2021-10-08/fertilizer-index-soars-to-record-threatening-higher-food-prices

Etc.

I think nearly every commodity is hitting highs.

I expect a pullback/ slow down in some areas due to Chinese property market crash.

ittakestwo

I read here that construction material costs are rising 30% plus. I was talking at launch time to my sister who is a QS and asked her about this. She said overall material cost are running about 10%. She said only some materials such as steel is rising quickly due to supply shock caused by the pandemic.

timmyntc

https://www.boards.ie/discussion/comment/118005110#Comment_118005110

I'm not even going to engage with the merits (or lack thereof) in permanent deficit spending, however the fact of the matter is that EU fiscal rules forbid us from permanent deficit spending - given our already high debt-to-GDP ratio, we were (and will be post covid) prevented from growing that debt-to-GDP ratio any further.

So can you please drop it, its pie-in-the-sky stuff and has no real bearing on the current or future reality of the Irish property market.

Timing belt

https://www.boards.ie/discussion/comment/118005118#Comment_118005118

If we compare prices in August 2022 to August 2019 (Before covid) they have risen by 1.85% overall.

The CSO headline figure of 3% has a base effect built in by comparing deflated prices in 2020 along with the impact of VAT rates returning to normal rates.

CorkRed93

https://www.boards.ie/discussion/comment/118005161#Comment_118005161

steel and timber have rocketed

yagan

https://www.boards.ie/discussion/comment/118005118#Comment_118005118

The main event between June and August was the post pandemic reopening, so until we get a few post pandemic quarters it's extremely premature to assert that that three month inflation snapshot is a new norm.

mcsean2163

https://www.boards.ie/discussion/comment/118005110#Comment_118005110

Like temporarily putting someone on life support. He uses that crap to try and shift the blame.

We're in an economic union. The only thing we could do is default in our debts. Say 50% of the most recent maturing €100 billion and then start buying back the other €150 billion at the new discounted rate. That would be pain now. €150 billion is probably manageable.

The other option, petition EU for a debt haircut like Greece got. As it stands I think the odds of escaping a day of reckoning are declining, unless the euro enters hyper inflation, unless you're a farmer...

yagan

https://www.boards.ie/discussion/comment/118005313#Comment_118005313

Timber has fallen 65% from its May high on the Chicago futures market, but that's not a headline that helps venders frighten buyers into panic.

Sierra Oscar

https://www.boards.ie/discussion/comment/118005338#Comment_118005338

I agree that it is far too early to call and I think there's so much uncertainty regardless. However I would caution any thought that discounts either possibility currently. The US are months ahead of us in terms of reopening and their inflation rate is still stubbornly sitting above 5% when the Federal Reserve thought it would have dropped off. It's not as 'transitionary' as they first thought and they've begun to acknowledge that. We're seeing that many input costs are reaching all time highs right here and now. I don't really understand how inflation can lessen significantly in the coming months considering the impact of those increased input costs take months to be felt for the end consumer. As you say though, more time needed.

enricoh

https://www.boards.ie/discussion/comment/118005380#Comment_118005380

Sod Chicago, i wish it had dropped 65% in Irish builders providers!

I read construction inflation is at 8% this year. Will fianna fail be able to resist throwing petrol on the fire on budget day?! I doubt it! The boom is to get boomier, to rob a line off Bertie!

yagan

https://www.boards.ie/discussion/comment/118005508#Comment_118005508

https://www.boards.ie/discussion/comment/118005338#Comment_118005338

I think the commodities and materials shortages will even out, but there is now labour shortage issues starting to appear, and that's globally with China I believe having hit the milestone this year of peak workforce.