Irish property prices "floating on air" ?

silverharp wrote: »

far too early to say that, you can either compare this to the UK market in the late 80's if you are an optimist, however I dont remember the financial sector falling off a cliff then, or you can say this is more like Japan due to a similar distress in the financial sector, if that is the case Japan had 14 straight years of falling prices so compare your metrics to Japan and you will get an idea of either the time involved or the price fall required to find a bottom in the market
My "guess" going forward is prices will have to fall well below European averages as no new foreign investment coming here will compensate irish workers salary wise and the nature of an unwinding bubbles almost sets in stone that the market will overshoot to the downside. Personally I wouldnt get back into the property market until I could get a rental yield of 8%-10%

I don't think it's far too early to say an opinion should not be disregarded because it seems very (wildly) pessimistic (maybe we got lost in translation there, what I wrote was a bit cryptic now that I read it again). I wasn't agreeing with it; I was pointing to (possibly) where the train of thought is coming from.

On the Japanese point, that's what I keep hearing as a reasonable benchmark for the current situation. 56 quarters of falling prices being a 40 per cent reduction on 1991 prices.

BenjAii wrote: »

To me this also begs the question about where our growth will come from when we do finish the recession. If we had a construction industry at more "sustainable" levels i.e not responding to another bubble, but actual real housing needs, and not housing as a quasi-pyramid scheme, would it be enough to put us into growth.

You have to wonder is our golden era of multi-national inward investment over; China, India & Eastern Europe being far more the competition they were for that than during the 1990's.

In which case what industrial or trading capacity will be develop to give us growth ? We are a making all the right noises about the knowledge economy, but I wonder how much more it is than just talk at the moment.

I'm quite sceptical of emerging markets like China and India. China appeared to have a limitless amount of labour available, and that's great for manufacturing of low to mid skill level, but there were signs of growing wage demands due to labour constraints. In the last year we've seen just how open the economy is to international events and reductions in demand--a figure I heard was 700,000 new unemployed in the last year. However, I don't know if the government is implementing the right policies to move from a manufacturing ("dirty" industry) to a "knowledge economy." They have massive resources to invest in higher education, be that in the arts/human sciences, business, or technology and we'll have to wait to see if they can make the transition.

Also, where the country stands on property rights, particularly intellectual property rights is confusing. As a communist country, which it hasn't been for years, it's a muddled area. They're moving towards ethical & equitable, so to speak, capitalism and before companies commit more to the country that would need to be, either implicitly or explicitly, ironed out. I'm no expert on China though, but capacity constraints must, at some stage, come through. It can't continue on 10% + growth ad infinitum.

I'm ever the optimist for Ireland. I believe we do have a, relatively, educated work force but quite poor political representation that hasn't taken steps needed for improving our infrastructure; particularly telecommunications vis-a-vis fibre optics. Raising taxes during a downturn was short sighted, the budget should never have been at a level whereby it was only balanced during an unsustainable boom period (5-6%+ growth). I'd agree with silverharp on the need to find a direction of being more competitive cost wise. Relying on being a tax haven isn't particularly a safe hedge on our future position, there's only so much that transfer pricing will do for us :pac:

On the noise about being a knowledge economy, I'd say you're not far off the mark, especially recently. Free, and well funded, third level education has positive externalities that are quite unquantifiable, despite what some other (crustier) economists in academia think. The ideology of a knowledge economy, and what is pragmatic in our current situation are at opposite ends of reality. It seems to me that we really don't know where we're going, or what kind of an economy, so to speak, we should be.

silverharp wrote: »

its easy to pick up the wrong tone from a post, I'm bearish so I agree with the prof, and would agree with your last paragraph, its down to time and price, the Japanese situation was unique in that the the country had massive savings to thorw at the problem so stretched out the time for prices to fall to fair value. The Europeans and US have less resources to throw at this so my guess is that the price target will be reached sooner and as markets rarely turn on a dime , there could be several years of stagnant prices before all the bad debt and losses are squeezed out of the system, so would not be in the slightest bit surprised to see depressed asset prices for a decade or more.
I guess there will be plenty of false starts that will confuse people

the song below "happy days are again" was written in 1930 lol
http://www.youtube.com/watch?v=gqsT4xnKZPg

For a view at the other end of the tree of projections, the OECD's preliminary outlook report (last week) said this:
"Activity is contracting as the severe housing market correction has weakened the wider economy, and the weakness will persist well into 2009. Growth will recover in 2010 as the housing construction cycle bottoms out and the financial turmoil wanes.

To support the stability of the financial system, the ceiling on the deposit guarantee scheme has been raised and the government has introduced a scheme to guarantee bank liabilities. A fiscal deficit has emerged as revenues have slumped. Fiscal policy should be allowed to support demand in the near term but once the recovery is underway substantial measures will be needed to restore medium-term sustainability. Competitiveness needs to be improved; the outline national pay agreement may help but more is required to boost competition in network industries and sheltered service sectors."

I'm generally an optimist, but that seems a little too optimistic for me. I wouldn't agree with attempting to spend/throw money at the problem to escape the recession; Japan failed to do that and now has the highest debt to GDP ratio in the developed world.

Some of the 1920s and '30s songs really are quite relevant in theme for us. Another than comes to mind is blue skies, nothing but blues skies (1927) for not so long ago

So, we're in line for some decent movies soon? Maybe there is light at the end of the tunnel.

Observations I've made lately;

• Interest rates are headed for new lows. This will inevitebly lead to increased money supply and inflation. Inflation will support wages. Those 2 factors will support hous prices (compared to if they had'nt been there)
• Was at Lunch with 2 of head guys from IDA and they are of opinion that FI is at very high levels now, but these are smaller employers taking advantage of the R&D tax breaks by and large.
• We imported temporarily a large percentage of our construction workforce, many of whom are now gone
• I'm actually surprised at the robustness of house prices to date, given the unprecedented credit squeeze and comparisn to the stock market.
• Real house price gains since the turn of the century are averaging low single digits (don't believe me, do the maths)
• House prices generally do not overshoot on the negative side, they are generally overly sticky (which is obviously bad)
• Stock of unsold housing in Ireland has stopped increasing since mid summer, so we're headded for 6 months of supply demand equilibrium in sales terms.
• Ireland Inc is still the only english speaking country in the EU, and that holds tremendous advantages
• Ireland Inc is still closer to Boston than Berlin in economic terms and that holds advantages
• Dublin was recently noted as one of the few cities in Europe which are nuclei for blossoming industries along with Stolholm, helsinki etc, and asuch will continue to attract foreign labour and investment

I also hold a negative sentiment with many reasons backing it up, but I just wanted to balance things out a little. There is too much one sided debate. I think house prices should and will go down furter, but bottom line is we're not used to recessions and are beatign ourselves up to much over it.

http://daftwatch.atspace.com/

Technically supply has to be in equilibrium with demand as the number of houses coming onto the marke is shown to be in line with the number coming off. We can speculate that there are many coming off as they can't be sold, or that the seller prefers to take it off rather than reduce price. but the dact remains, inventories are not increasing for the first time in over 2 years.

I can't rember the source of the article comparing the new industry cities of europe, if I find it I'll post. The jist was that industries such as software and finance were finding nuclei in cities mentioned. Scandanavia has the particular problem of not being able to attract enough properly qualified staff.

Yes I should have said Ireland was the only english speaking country in the EMU not EU.

I'm not lying about my convesations with the IDA. Expect plenty of job announcements over the coming year

We can speculate that there are many coming off as they can't be sold, or that the seller prefers to take it off rather than reduce price. but the dact remains, inventories are not increasing for the first time in over 2 years.

i think it is people giving up. there is a clear drop of 450 houses in the afternoon of dec 1st (yesterday as i write). i dont think they are sales.

rental properties are still accelerating, and the surplus there continues to grow expoentially.

I might jump in and buy some irish property but I am waiting till I can get a 4 bed in dundrum for 100k.

I think I will have to wait till 2015 though

for prices to really crash it has to get bad. You would need to get to 10% unemployment. Massive jobs lossed would have tgo happen. Credit would dry up and people would have to start leaving the country.

You see Irish prices are way higher than they should be, there is no way a house in dollymount should cost as much as beach front in california.

Ireland is at the mercy of US corporations, without them most people would not get jobs at all.

Like now, yes but it will take a few years to take affect.

Main thing is that, it will not be the case that a first time buyer will be able to swoop in and get that dream house for 100k rather than 500k.

There will be no FTB, no loans, no jobs, etc

all the people that would think that they could afford a house in such a situation are sadly mistaken.

The goverment is going to have to raise taxes significantly. They have no choice with the amount of unemployment, so you may see rates up to the 80s level.

People who make 500 a week will be after tax getting 200, they wont be able to afford anything and hence a bigger mess.

again, its not going to be pretty and the only people able to buy will be those with cash that didnt need to use it to stay alove.