AIB latest report "House price rises can't be sustained - John Beggs"

i thought the rte report wasnt great,they had an estate agent on for gods sake! everyone knows what he's gonna say, if i was presenting i say to him "mr estate agent isnt it impossible for you rule rule out a property crash? " and "you would say that wouldnt you" or something along those line.i though the economist guy barely got started and didnt really address many of the fundamentals,he commented mainly just on levels of debt and other things which people wouldnt grasp as meaning a correction is nigh.the fianna fail guy was a joke,is he really a TD? epitomises everything that is wrong with fianna fial and this country,"ah sure if ya can afford a few pound a week more if your mortgage rises you'l be grand" fecking gombeen.
 
I was working last night so didn't see the report(but got a call from g'friend saying I was wrong about a collapse,because the guys on Prime Time said so!!!),who was the Feena Fowler?
 
Ecb chief economist warning on our situation ,im sure sure bertie will say "ah sure everythings fine ,dont mind dem eurocrats" but this guy is close to the interest rate setters and probably knows exactly where rates are headed. markets are forecsting 3.5% rates by dec06 so mortgages rates could be 4.5% by jan07.
Despite the rate rises i just heard a report on radio from HOK i think that 2nd hand prices in dublin were up 10% in first 3 months of year,thats 10% for the 3 months not annualised! the estate agents says they are now upping their forecasts for year from 12% to 18% increases for 2nd hand prices in dublin! this is a sure sign of the madness and mania that exists before crashes,people are getting in at any price despite wages not rising much and interest rates rising.i think we are on course for a drop in real terms by end 2007,bertie must be getting very worried with ecb increasing rates and pesky journo's and economist questioning the sense of the market in the run up to an election.
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One of Europe's top bankers has warned that Ireland's economy could be in danger of over-heating.
Chief Economist at the European Central Bank, Otmar Issing has said mortgage growth rates pose a threat to Ireland's economy.

Mr Issing said policy vigilance by the Irish Government is required in order to ensure that the increasing number of mortgage loans does not damage the economy.

He has warned the Government they cannot be complacent and says it is possible for them to prevent the problem, if they tackle the issue immediately.

Mr Issing's comments came in the wake of yesterday's CSO announced that inflation has hit a three year high of three and a half percent.

Last week the ECB said it was worried about an 11 percent rate of house price inflation in Ireland.

It also said it believed current rates of house construction are too high.
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bearishbull said:
Ecb chief economist warning on our situation ,im sure sure bertie will say "ah sure everythings fine ,dont mind dem eurocrats" but this guy is close to the interest rate setters and probably knows exactly where rates are headed. markets are forecsting 3.5% rates by dec06 so mortgages rates could be 4.5% by jan07.
Despite the rate rises i just heard a report on radio from HOK i think that 2nd hand prices in dublin were up 10% in first 3 months of year,thats 10% for the 3 months not annualised! the estate agents says they are now upping their forecasts for year from 12% to 18% increases for 2nd hand prices in dublin! this is a sure sign of the madness and mania that exists before crashes,people are getting in at any price despite wages not rising much and interest rates rising.i think we are on course for a drop in real terms by end 2007,bertie must be getting very worried with ecb increasing rates and pesky journo's and economist questioning the sense of the market in the run up to an election.
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I just want to point out again that the methods used by the estate agents to calculate house price rises are extremely suspect. DNG like SF use a 'basket' of properties (approx 500) and assess how much they think they would go for if they were on the market today. It is a tiny sample statistically speaking and isn't based on any real completion figures. Thus, both DNG and SF price indexes have been showing price rises far in excess of the ESRI and DOE for the past 2 years.

It drives me nuts that the media report these uncritically and give them the same weight they give to the ESRI and DOE reports which are based on much more robust data (and funnily enough show dramatically less price rises)
 
bearishbull-have you reproduced the text of an entire article that is available online? Again?
 
A tale of two countries. The report below discusses the predicaments of New Zealand and Spain as they battle to defeat the economic damage that debt fueled housing bubbles have caused their economies. The author suggests that New Zealand is better placed to see off a deflationary recession because it maintains control of monetary policy. Spain due to its membership of the Euro is faced with having to swallow the pill of deflation in incomes in the absence of a rise in productivity.

I wonder what would happen if the pain of recession was such that political pressure to leave the Euro mounted in Spain?







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Duplex said:
A tale of two countries. The report below discusses the predicaments of New Zealand and Spain as they battle to defeat the economic damage that debt fueled housing bubbles have caused their economies. The author suggests that New Zealand is better placed to see off a deflationary recession because it maintains control of monetary policy. Spain due to its membership of the Euro is faced with having to swallow the pill of deflation in incomes in the absence of a rise in productivity.

I wonder what would happen if the pain of recession was such that political pressure to leave the Euro mounted in Spain?


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I don't think he knows what he's talking about with regard to the Spanish economy. The unit labor cost in Spain that he talks about is still very low relative to the other major EU countries. The inflation or "loss of competiveness" as he calls it is nothing new in Spain, has been going on for years but was accelerated due to entry in the Euro. Spain's old economy as a cheap manufacturing base for textiles is now truly blown out of the water with the emergence of China so it needs to repurpose itself for the changed environment but this was inevitable; Euro or no euro.

The housing bubble is well acknowledged over in Spain as like Ireland, the Spanish see renting as dead money and want to buy their own home at any price. The housing market is split into two types here which may shield the Spanish somewhat. The costas contains the holiday homes which many foreigners from Germany, the UK, Holland and Ireland have bought (many as investments). The cities and towns where the jobs are contain homes which are bought by owner-occupiers and therefore not likely to be affected so much if there was a downturn in the market.

Having said that though young Spanish are now looking at 50 year mortgages since affordability has gone out the window. Some young families buying now could be facing a life of debt and they could get hit really hard if interest rates keep moving up.
 
Hi Afeura
To quote from the article; the issue in Spain is falling productivity relative to wage inflation, and a large current account deficit.


For its part, Spain too is running a staggering current account deficit of around 7 1/2 percent of GDP. Though smaller than that of New Zealand, Spain’s current account deficit is also unsustainable by almost any reasonable measure. Spain’s external deficit is the result of a housing-led consumer boom and a worrying loss of international competitiveness as Spanish productivity increases have woefully lagged behind corresponding wage increases. Over the past five years, Spain’s unit labor costs have increased by around 20 percent more than those of Germany.
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Hi Duplex,

Falling productivity relative to wage inflation implies that there is an increase in the unit labour cost. I still maintain that the ULC in Spain is low when compared to the likes of Germany, France and the UK.

The current account deficit in Spain is very high indeed but compared to the US which has a current account deficit of nearly 6 1/2 percent of GDP, it's not totally out of line with the current climate. Prolonged low global interest rates have encouraged this situation and I think everyone will end up suffering for it.

I get the feeling that this article was written with the intention of bashing the Euro/EU a bit and I don't think it's totally justified based on the arguments put forward.
 
yeah but how many in dublin? prices in my estate have risen 40% in 16 months! the densities are too low for a modern city,eventually over next few decades we will build higher densities but it's not easily done as there not a huge amount of large brownfield sites within dublin,if we were to build a city from scratch on the site of dublin now we could get two or three times as many people into city without going too high rise.
 
bearishbull said:
yeah but how many in dublin?
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Well the article suggested 1,935, an increase of 13.6%

This AIB article gives a bit more commentary to the figures

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i'd like to see figures for housing stock in dublin ,we havent got great stats on housing market in this country
 
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