# Threats to economy from interest rates and property



## bearishbull (2 Apr 2006)

found this article in the sunday times from normally very bullish damien kiebard. seems young people with mortgages and personal debt will be worst hit in any slowdown in property and wider economy(commonsense would obviously tells you that without an economics degree!). seems to suggest people buying to let could cause market to turn when capital appreciation slows.if consumer and property sectors slow we could be up the creek without a paddle.both government and economy seems far too dependant on property sector which in turns fuels the property sector further in a positively reinforcing virtuous circle but it isnt sustainable and can go in reverse too.
http://www.timesonline.co.uk/newspaper/0,,176-2113977,00.html


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## CCOVICH (2 Apr 2006)

Is there anything new here?  Aren't interest rates and our economy's dependency on construction/property been cited as the main threats to our prosperity by anyone who is bearish/realistic about the near/medium-term future of the Irish economy?


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## bearishbull (2 Apr 2006)

CCOVICH said:
			
		

> Is there anything new here? Aren't interest rates and our economy's dependency on construction/property been cited as the main threats to our prosperity by anyone who is bearish/realistic about the near/medium-term future of the Irish economy?


 
yes but its  interesting to plot this evolving situation with increasing bearish sentiment in media and greater questioning of the vested interests propaganda.
i suppose im wondering how bulls out there envisage this economy in ten/fifteen years time given the unsustainable dependence on certain sectors.
i think we're highly vunerable and a property correction would have wide spread implications for the economic and social fabric of this country.


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## CCOVICH (2 Apr 2006)

Judging by the posts in the long and now closed thread on The Future Price of Irish Properties, we don't seem to have many bullish contributors on AAM who are interested in entering into such a debate.


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## bearishbull (2 Apr 2006)

surely bulls beleive we can overcome our dependence on certain unsustainable sectors? maybe some will enlighten us. 
another article in sunday times says our moves to a knowledge economy(which may allow us to overcome the dependence on certain sectors) is being hindered by dramatic falls in competitiveness.theres a lot of negatives hanging over irish economy. im not confident for our future.
sunday times.
IRELAND’S economic success is at risk unless it embraces offshore outsourcing, moves up the foreign direct investment (FDI) value chain and shuns its “idiotic and short-sighted defence of self-interest” including support for EU Agricultural subsidies, a leading business figure said last week. 
In a speech to the Irish Stock Exchange’s Reuters Irish Forum, Niall Fitzgerald, the Reuters chairman and former chief executive of Unilever, said Ireland would lose out to low-cost, low-tax competition from eastern Europe and China unless it learnt to “adopt different attitudes towards low-cost locations”. 
"We need to see them not only as the competition, but also as a means by which to improve the efficiency of our own businesses. Logic dictates that we should transfer activities to the locations that offer the optimal combination of cost and quality,” said Fitzgerald. 

Referring to Ireland’s “surprisingly low” ranking of 17th in a World Economic Forum (WEF) league table of the competitiveness of economies, he said: “Ireland can no longer compete for inward investment on the basis of a low-cost economy or a competitive tax regime. Attracting a different type of investment in higher value-added areas must be a primary objective.” Ireland was ranked fifth in the WEF table in 2000. 
“Improving Ireland’s research capability is crucial. To date, most of the employment generated by FDI has been at low points along the value chain, in manufacturing and support functions. There is much more to do to change how the outside world views Ireland as an investment destination.” 
The National Competitiveness Council’s most recent report concludes that Ireland is relatively weak in areas that will be required to drive the knowledge economy. 
In terms of its level of “technological readiness”, which includes innovation, spending on research and development and collaboration with universities, the country is ranked 31st by the WEF. He said Ireland needed to fast-track infrastructure plans if it was to remain competitive. “Unless Ireland focuses on maintaining its business-friendly environment, business will go elsewhere,” he said. “Have we become complacent now that we’re a fully paid-up member of the rich club? Playing catch-up is easy. Staying ahead of the pack is tougher.”


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## Calina (2 Apr 2006)

I'm wondering if I missed something. The Indo yesterday had a load of articles on what would happen in the event of a property downturn yesterday. They could have been pretending given the date...but still and all...I thought it was interesting given that a few weeks ago no one was discussing the possibility openly, apart from the usual doomsayers. 

I've mixed feelings. Realistically - regardless of what happens, life tends to go on anyway. 

I'm not sure what rising interest rates would do to the property market, and by extension the rest of the economy, but I would like to see it slow down rises in property value and I would like it to usher out the era of long term mortgages. 

Rising interest rates should, by definition, cause less money to be available for discretionary spending. This could have an impact on say, weekend travel plans, and high-cost consumer items. What's interesting in Germany (apparently) is that although the economy is massively strong on the export front, it's very low on consumer confidence. The UK is not altogether strong on consumer spending either. Realistically, I think that this could be the first thing to take a hit, assuming that property prices themselves aren't immediately affected. Since everyone says they won't be, I'd have to assume that belts elsewhere would have to be tightened. 

I'm not so sure how much of our growth is consumer driven, so I don't know what the knock on from there would be. 

There's also the possibility that landlords, taking interest rate hits will look to increase rents - I've seen this in letting ads lately; I'd be interested to see how that will pan out because although rents are up, so is availability.


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## redo (3 Apr 2006)

15-20 years ago, when young people were trying to make a decision on whether to rent or to buy, the decision was nearly always to rent.  The main reasoning behind it?, not wanting to be "tied down" with a mortgage.  The implication here is that shifting property was extreemly hard and could take up to 6-12 months.  The other, no credit from the banks.

A lot of self publicity from Davy's (You'll hear a lot more from economic think tanks in the coming weeks, grabbing a slice of the airwaves and being talked about) over the last week indicated, in order to restore a proper yield into property investment, house prices could fall instead of rents rising.  I suspect that it won't be an "either or issue", rather than a combined effect.  Rents won't remain static and will increase marginally due to FTB's taking cover from falling/static house prices, along with people who don't want to be "tied down"

With projected increases in interest rates, downward pressure on house prices can only increase.   In fact, history tells us that rents should nearly always be higher that mortgage repayments but with cheap credit sloshing around, even Johny shoeshine boy, can become a "property investor".

The effects are predicable.  

Replays of the builders strike out in Ballybrack, with Irish labourers giving out about foreign nationals getting jobs instead of them.  

Banks only lending to Rocket scientists and public service employees.  The private sector will see jobs losses akin to NEC.

Income taxes will increase ("We have to get the money from somewhere" will be the Governments auto-reply)

A lot of recent BTL investors demanding legislation to warn people about the implications of long term investments.  The same battle cry from people who lost out in pyramid schemes.


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## Rico (3 Apr 2006)

The economy needs drivers whether it is construction,pharmaceutical,IT. Do not see construction as a 'dependency', it is hardly likely to dissapear with an increasing population and requirement for development of infrastructure. A slowdown in this sector would not be a catastrophe.
The main problem with our economy is interest rates which we have no control over. We need higher interest rates to cool the property market and particularly speculation. The interest rate is unlikely to go above 4% base with the sluggish large EU economies and is the best thing that can happen. The last ten years have brought us in line with some of the richer ecomonies and there seems to be an element of panic from some people that the whole thing is going to fall apart. We need capable management from people like Michael O' Leary build stability going forward.


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## shnaek (4 Apr 2006)

Rico said:
			
		

> We need capable management from people like Michael O' Leary build stability going forward.



We won't get that. We will get political 'management' which this year will see around a 20% increase in spending with no discernable benefit. Then, when times get tight as the construction industry slows we will face higher taxes to pay for this extra public spending. Higher taxes will affect the economy slowing it further. Unless you are tied to this country I would have an escape plan in place, unless you feel like paying for all this waste in the near future.


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## soma (4 Apr 2006)

Rico said:
			
		

> The economy needs drivers whether it is construction,pharmaceutical,IT.


More accurately, what the economy (or any economy) needs are (multiple) thriving sectors which generate long term employment & preferably a number of these sectors will be competive internationally and be strong exporters which will have a positive effect on the national balance of payments. Minor exceptions aside, this is not what Irish construction sector is about.



			
				Rico said:
			
		

> A slowdown in this sector would not be a catastrophe.


Sure, only 200k work in construction, with countless others indirectly employed, and sure it only represents 60% of the books of the mortgage banks. A drop in the ocean really. 



			
				Rico said:
			
		

> The main problem with our economy is interest rates which we have no control over.


You're half-right.. interest rates are a "problem".. but ask yourself this.. *Why* are the *lowest interest rates since World War II* something to be concerned about in a "booming" economy..? Could it be perhaps that the economy is a paper tiger fueled by credit..


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## Duplex (4 Apr 2006)

Sometimes I wonder if it’s worthwhile questioning the widely held belief that the Irish economy is sitting on firm foundations.   Public opinion is based largely on perception rather than gritty reality (as any good propagandist will tell you) I think that it may be pointless spelling out some of the more, ‘discouraging’ facts about the economy, such as the reliance on the footloose American multinational sector for 70% of our export sales.    It is probably the case, that allowing what will most likely happen, happen, makes more sense than flapping ineffectually at this late stage.   

As far as Michael O’Leary managing change in the more vital aspects of our society, such as health or efficient infrastructural development, I’m not so sure.   O’Leary at Ryanair, sets the rules and ‘governs’ by edict.  If he were given the task of applying his highly effective management style to Ireland Inc. He would have to operate within existing laws and mores and realize change buy consensus, a much more challenging job.  

The only way that inefficiency in the broader Irish economy will be addressed is by pressing necessity.  When the majority of sectional interests see change as being advantageous/ vital, to their well being and future prosperity.


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## joe sod (20 Apr 2006)

Just read today in the independent that the IRS (US taxman) has just hit Symantecs Irish arm with a $1 billion taxbill for alleged transfer pricing  among its irish subsidiaries. Symantec is involved in the Norton Anti-Virus product and employs 600 in Blanchardstown. If this is successful it could be detrimental to US companies operating in ireland. Heres the link

http://www.unison.ie/irish_independent/stories.php3?ca=35&si=1600306&issue_id=13934


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## bearishbull (20 Apr 2006)

interesting times article about irish economys reliance on american multinationals.
http://business.timesonline.co.uk/article/0,,16849-2140480,00.html

_More worrying is evidence of Ireland’s dependence on the screwdriver plants of foreign multinationals to create jobs and pay bills. A recent study by economists at Trinity College, Dublin, of the effect of globalisation on the Irish economy revealed that American companies accounted for 77 per cent of the Republic’s total exports, with domestic-owned firms accounting for less than a tenth of the total. Moreover, in 2002 foreign multinational investors paid €2.6 billion in corporation taxes to the Irish Government, 56 per cent of the total paid by companies in that year and almost 10 per cent of all tax collected._ 

_This is not sustainable and the Irish Treasury’s golden goose could be strangled more quickly than Common Agricultural Policy subsidies. Even among Irish-American senators in Washington, such a huge subsidy to a foreign government will not stand_


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## conor_mc (20 Apr 2006)

Failing to encourage indigenous companies to conduct large-scale R&D with proper incentives has been a huge mistake over the last 10 years. 
The potential revenues and generally healthy effect on the economy far outweigh the costs involved.

MNC's or Construction, which will be the first pillar to fall?


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## tiger (21 Apr 2006)

One big problem I see with the current situation is for pensions.

In the past people had 20-25 year mortgages, so they probably had up to 20yrs of mortgage free earning before retirement when they could pump the money into their pension.  If people are buying later and have 30-35 year mortgages, where are they going to get the time and money for a pension?


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## joe sod (25 Apr 2006)

http://www.finfacts.com/irelandbusinessnews/publish/article_10005560.shtml

another article on Symantec getting a huge tax bill from the IRS relating to its irish operations.


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## Duplex (25 Apr 2006)

An ERSI report released today suggests that the Irish property market is 'probably a bubble'.  They suggest that at current prices an over valuation
of 15% exists.  As prices continue to rise its likley that the size of the bubble will increase.  

So what happens now? 


http://www.bloomberg.com/apps/news?pid=10000085&sid=a0xF9Dyx1aaI&refer=europe


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## Glenbhoy (25 Apr 2006)

Re the Symantec tax isssue, there is a strong possbility they will beat the IRS claim, or if not beat it at least substantially reduce the liability to a a few hundred million.  The IRS are basically chancing their arm on this, in the hope that they will get something out of it, or at worst scare a few firms into recognising more taxable revenue in the states.  If a transfer price can be shown to be economically justifiable there should be very little they can do.


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## conor_mc (25 Apr 2006)

Duplex said:
			
		

> An ERSI report released today suggests that the Irish property market is 'probably a bubble'. They suggest that at current prices an over valuation
> of 15% exists. As prices continue to rise its likley that the size of the bubble will increase.
> 
> So what happens now?
> ...


 
Worse yet, its saying we had an overvaluation of about 15% in 2005 (I think they were quoting an OECD report) - must be heading for 20% at this stage easily enough.


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## Duplex (25 Apr 2006)

The estimation of overvaluation was based on 2005 figures, since when things have moved on, so to speak. 



http://www.rte.ie/business/2006/0425/economy.html


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## beattie (25 Apr 2006)

Will the appreciating euro have any knock on effects in industries whereby we are already feeling the pinch. If the Fed is close to calling a halt and the ECB soon to increase I think we could see $1.30 sooner than what many would have expected

http://www.rte.ie/business/2006/0425/germany.html


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## Howitzer (25 Apr 2006)

beattie said:
			
		

> Will the appreciating euro have any knock on effects in industries whereby we are already feeling the pinch. If the Fed is close to calling a halt and the ECB soon to increase I think we could see $1.30 sooner than what many would have expected
> 
> http://www.rte.ie/business/2006/0425/germany.html


 
One effect is that, since oil is priced in dollars, the inflationary effect of rising oil prices may not fully feed through. Exports, to america, will suffer but if that's not your market then it's actually beneficial.


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## Purple (25 Apr 2006)

> Exports, to america, will suffer but if that's not your market then it's actually beneficial


 And anyone who supplies US multinationals (or works for them) will suffer since they cost everything in dollars.


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## bearishbull (25 Apr 2006)

strong euro relative to dollar isnt necessarily a bad thing,if us multinationals are selling in euro's then the price they get for their goods will rise in dollar terms.


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## joe sod (26 Apr 2006)

"Re the Symantec tax isssue, there is a strong possbility they will beat the IRS claim, or if not beat it at least substantially reduce the liability to a a few hundred million. The IRS are basically chancing their arm on this, in the hope that they will get something out of it, or at worst scare a few firms into recognising more taxable revenue in the states. If a transfer price can be shown to be economically justifiable there should be very little they can do."

Im not so sure, i think there is a big change of sentiment by the IRS. The american government needs alot more money to support its spending. Also what Symantec is at is really hurting the american balance of payments. Effectively it is licensing an irish subsidiary to sell american technology in europe as if it were an irish export but the actual technology is developed by its american operation. So basically other countries like ireland and china etc are reaping the benefits by boosting their own balance of payments and government revenue. So I think in future the IRS is going to make it very difficult for multinationals to continue this practice.


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## beattie (26 Apr 2006)

joe sod said:
			
		

> "Re the Symantec tax isssue, there is a strong possbility they will beat the IRS claim, or if not beat it at least substantially reduce the liability to a a few hundred million. The IRS are basically chancing their arm on this, in the hope that they will get something out of it, or at worst scare a few firms into recognising more taxable revenue in the states. If a transfer price can be shown to be economically justifiable there should be very little they can do."
> 
> Im not so sure, i think there is a big change of sentiment by the IRS. The american government needs alot more money to support its spending. Also what Symantec is at is really hurting the american balance of payments. Effectively it is licensing an irish subsidiary to sell american technology in europe as if it were an irish export but the actual technology is developed by its american operation. So basically other countries like ireland and china etc are reaping the benefits by boosting their own balance of payments and government revenue. So I think in future the IRS is going to make it very difficult for multinationals to continue this practice.


 
Agreed, the political climate in the US is becoming ever more hawkish, look at the immigration issue, both Republican and Democratic parties are trying to outdo each other and the IRS will probably feel emboldened to go after some companies like Symantec.


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## Glenbhoy (26 Apr 2006)

> Effectively it is licensing an irish subsidiary to sell american technology in europe as if it were an irish export but the actual technology is developed by its american operation. So basically other countries like ireland and china etc are reaping the benefits by boosting their own balance of payments and government revenue.


The problem is that the IRS will have to prove that the initial transfers were at levels which would indicate that the transactions were not at arms length, this will be difficult to prove because it is subjective, in addition, one imagines that Symantec had and will continue to have the benefit of top notch legal advice on their transfer pricing structure.  I agree that this is something the US are trying to clamp down on, but in my opinion that will require new legislation (presuming that Symantec did indeed have expert advice initially), for me this is more like a warning shot across the bows, Symantec will pay a few hundred and all parties will be satisfied.  Maybe the simplest way forward is for the US to reduce CT rates??


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## bearishbull (28 May 2006)

My neighbour sold his house(3 bed terraced house in glasnevin) this week and he got a figure which is 40% more than a identical neighbouring house got in Jan 05. thats around 25% per annum inflation , is anyone else seeing these increases around dublin? i gather apartments are'nt rising by anywhere near as much. This really is madness with interest rates rising, incomes only growing by 4-5% and prices rising from already very high levels. im getting more and more worried about how this boom is gonna end,if there truly was a large shortage of housing why are rents lower in real terms than they were 5 years ago and not rising by more than general inflation!


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## thewatcher (28 May 2006)

I agree,house price inflation is now out of control.If it continues at this rate i can see the crash within 12months.


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## beattie (28 May 2006)

That is an incredile appreciation of an already overvalued asset IMO, any sensible government would do something about it before it spirals out of control.....


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## redo (29 May 2006)

It is starting to feed on itself now.  25% increases will only encourage more people to buy now


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## ubiquitous (29 May 2006)

beattie said:
			
		

> any sensible government would do something about it .....



any suggestions?


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## Howitzer (29 May 2006)

ubiquitous said:
			
		

> any suggestions?


 
Run a large budget surplus. 

Any direct intervention merely distorts the market on a short term basis.


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## redo (29 May 2006)

ubiquitous said:
			
		

> any suggestions?


Scrap stamp duty on houses.  It may drive up ASKING prices but should increase supply


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## soma (29 May 2006)

redo said:
			
		

> Scrap stamp duty on houses.  It may drive up ASKING prices but should increase supply


This post will be deleted if not edited immediately H.. that would make things worse. Do you not remember what happened when the FTB stamp duty reductions came in..? Every shed in dublin overnight shot up to 317k.

What would help IMO is a US-Style annual property tax based on appraised value and/or a tax on second properties and/or higher capital gains tax on investment properties. However any of these measures are extremely unlikely to happen as the government would be slaughtered in the next election if they did this.


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## whizzbang (29 May 2006)

soma said:
			
		

> However any of these measures are extremely unlikely to happen as the government would be slaughtered in the next election if they did this.


I think they are just hoping it all holds together until after the elections in 2007 then they may do something about it. If it crashes before then they are fecked and they know it.


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## Howitzer (29 May 2006)

whizzbang said:
			
		

> I think they are just hoping it all holds together until after the elections in 2007 then they may do something about it. If it crashes before then they are fecked and they know it.


 
Why would they be fecked? The govt, in reality, has little or no influence on what investments people make in their private lives. I stubbed my toe on the bed post this morning, I didn't blame Bertie for my own carelessness. 

It would be an incredibly childish attitude for someone who enters into a very serious financial arrangement to then blame the govt for their own fiscal ineptitude if things went wrong.


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## whizzbang (29 May 2006)

Howitzer said:
			
		

> Why would they be fecked? The govt, in reality, has little or no influence on what investments people make in their private lives. I stubbed my toe on the bed post this morning, I didn't blame Bertie for my own carelessness.
> 
> It would be an incredibly childish attitude for someone who enters into a very serious financial arrangement to then blame the govt for their own fiscal ineptitude if things went wrong.



I think if people get into serious negative equity they will look for someone to blame. People will say the governement shuld have prevented the crash happening or they will blame something the government did for causing the crash. Either that or they will blame the government for not bailing them out. 

In any event I find it hard to believe that the great masses will accept it is their own fault. People are smart, crowds are stupid.


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## ivuernis (29 May 2006)

Article from today's Telegragh in the UK which is very bearish on ECB rates outlook, and more specifically on the bearishness of Germany's Bundesbank. 

Ignore the world's biggest central banks at your peril

Might require registration to view article.


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## colc1 (29 May 2006)

whizzbang said:
			
		

> I think if people get into serious negative equity they will look for someone to blame. People will say the governement shuld have prevented the crash happening or they will blame something the government did for causing the crash.


 
Its all pot luck investing in property at the end of the day though by keeping CGT so low they are keeping prices up I think in the UK its 40% someone correct if I am wrong please


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## gearoidmm (29 May 2006)

redo said:
			
		

> Scrap stamp duty on houses.  It may drive up ASKING prices but should increase supply



Where exactly do you propose that the shortfall in the tax take should be made up if stamp duty was scrapped?  Increase income taxes? Cut benefits/wages in the public service?


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## colc1 (29 May 2006)

ivuernis said:
			
		

> Article from today's Telegragh in the UK which is very bearish on ECB rates outlook, and more specifically on the bearishness of Germany's Bundesbank.
> 
> Ignore the world's biggest central banks at your peril
> 
> Might require registration to view article.


 
Re: this article 
"Housing loans (ex Germany) grew 19.4pc in the year to March, on top of the 17pc surge the year before. Spain is a disaster waiting to happen. In Portugal it has already happened."

Do people reckon this applies to us too?


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## Glenbhoy (29 May 2006)

> I stubbed my toe on the bed post this morning, I didn't blame Bertie for my own carelessness.


Ah, but you can blame him for the 18 hours delay in getting treated at the A&E (you were'nt drunk were you? If so Enda would have you thrown in the drunk tank instead).
Get well soon.


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## ivuernis (29 May 2006)

colc1 said:
			
		

> Re: this article
> "Housing loans (ex Germany) grew 19.4pc in the year to March, on top of the 17pc surge the year before. Spain is a disaster waiting to happen. In Portugal it has already happened."
> 
> Do people reckon this applies to us too?


 
I guess so. I imagine we're just a blip on the ECB's radar though. We could be in for a shock if the Bundesbank in Germany is really pushing for higher rates faster than the ECB is raising them.


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## thewatcher (29 May 2006)

ubiquitous said:
			
		

> any suggestions?


 
I'd scrap stampduty on houses up to 1 million for FTB's/Owner Occupiers.
I would be aware of numerous people that would have deposits down on their 3rd and 4th properties,with no investor stampduty paid,no tax on rental income etc. this is exactly what is driving the market.
Hard pressed people who are just trying to get a home to live in are competing with speculators everywhere.Now people will say revenue will get them in the long run,the problem is they need to be taken out of the market now.From what i can see there is no enforcement,only where an honest solicitor steps in and informs his client of his obligations,this is what the Government will be blamed for in the shake up.


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## gearoidmm (29 May 2006)

thewatcher said:
			
		

> I'd scrap stampduty on houses up to 1 million for FTB's/Owner Occupiers.



Again, I repeat, given that these make up ~60% of the market, where do you propose to raise taxes to pay for the shortfall when you scrap stamp duty.  would you suggest a property tax as in the US or a rise in income taxes.  It all sounds great in principle but we are no longer running big budget surpluses and taking all that money out of the government coffers would be problematic.


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## redo (29 May 2006)

gearoidmm said:
			
		

> Where exactly do you propose that the shortfall in the tax take should be made up if stamp duty was scrapped?  Increase income taxes? Cut benefits/wages in the public service?


 What shortfall?  The government has a budget surplus of 1 1/2 billion last year.


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## soma (29 May 2006)

redo said:
			
		

> What shortfall?  The government has a budget surplus of 1 1/2 billion last year.



largely due to the stamp duty you are proposing to abolish..


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## ivuernis (29 May 2006)

The problem now is that almost any measure brought into to alleviate the burden on FTB's will either cause prices to possibly drop (e.g. bring in a tax on properties other than the primary residence) or further fuel the property mania (e.g. abolishing or lowering stamp for FTB's/owner occupiers). It's a catch-22 situation and I think the government will just put their head in the sand and hope for the best.


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## thewatcher (29 May 2006)

ivuernis said:
			
		

> The problem now is that almost any measure brought into to alleviate the burden on FTB's will either cause prices to possibly drop (e.g. bring in a tax on properties other than the primary residence) or further fuel the property mania (e.g. abolishing or lowering stamp for FTB's/owner occupiers). It's a catch-22 situation and I think the government will just put their head in the sand and hope for the best.


 
There is a tax on property other than your ppr,the problem seems to be that it's not being enforced thereby allowing speculators to drive the market.If stamp duty was scrapped for ftb's/owner occupiers and investors/speculators were made to pay what they should be paying then they would be no longer driving the market,and this would make up for the loss of revenue from the ftb's/owner occupiers.Besides,stampduty is not going to keep the country running into the future so all this money should not be seen as a permanent revenue into the future,once the building boom stops all that revenue will dry up anyway,maybe then you could reintroduce stampduty for that part of the market.I would tend to agree with you that it's possibly to late for anything now and we are in for a bumpy ride.


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## Neffa (31 May 2006)

Very interesting comparison of the Irish lending/borrowing binge vs. the UK's from figures released today. It looks to me like Ireland is about to overtake the UK as the most indebted consumer economy in Europe.

http://www.thisismoney.co.uk/mortgages/article.html?in_article_id=409505&in_page_id=8

"The level of mortgage debt in the UK has nearly reached £1 trillion, according to figures from the Bank of England. 
 
http://www.askaboutmoney.com/
Total net mortgage lending rose £8.5bn in April, bringing the total owed on property to £999.2bn, the Bank said. "

So the UK with 58.5m people recorded a €12.3bn increase in April and total debt of €1450bn (roughly)

Meanwhile, according to the Central Bank today [link below] Ireland (with 4.2m people) recorded growth in mortgage debt of €1.8bn (220% higher on a pro-rata basis than the UK) and total debt of €106bn (roughly in line with the UK on a pro-rata basis).

[broken link removed]

And the UK housing market is in the toilet, whilst the Irish market keeps running and running. 

Rocky times ahead, I think.


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## gearoidmm (31 May 2006)

On interesting nugget from the central bank report via finfacts.com:




> The annual rate of increase in credit card debt, which is included in term/revolving loans, rose to 17.3 per cent in April, following an average growth rate of 15.5 per cent in the twelve months to March 2006. This was the outcome of a larger than usual increase in indebtedness and a marked fall in payments received during the month.



So people were using their credit cards more in March and were paying off less.  This despite the fact that consumer spending actually decreased overall that montha gainst expectations.  Could this be the first sign of the interest rate rises starting to bite?


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## conor_mc (31 May 2006)

gearoidmm said:
			
		

> So people were using their credit cards more in March and were paying off less. This despite the fact that consumer spending actually decreased overall that montha gainst expectations. Could this be the first sign of the interest rate rises starting to bite?


 
To be honest, I'd say this is just the SSIA money burning a hole in the pockets of those who still have a few months to go before they can cash in.


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## bearishbull (31 May 2006)

irish economy=
imports- cars clothes electronics food oil raw materials labour nearly everything except the houses we build  

exports- financial services(which can and do move to cheaper locations) food and multinational produce such as pharmaceuticals and technology assembled here as taxes are low low low,multinational manufacturing can and will leave here 

exports are stagnant while imports power ahead, we cant stay rich by building houses and importing stuff.


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## Duplex (31 May 2006)

Otmar Issing the now former chief economist of the ECB has allowed his Teutonic mask to slip on his departure. He’s not happy about divergent labour costs across the eurozone and falling competitiveness. This Telegraph piece singles out the ‘Club Med’ nations, I wonder if Ireland has slipped below the radar? 

So will the Germans be happy to see the Euro follow the dollar down the pan, or will they soon be dusting down the Deutschmark plates they’ve probably kept in storage. 




> In a parting shot before stepping down today as the European Central Bank's chief economist, and dominant force, Dr Issing said the stark differences in wage inflation across the eurozone were storing up future trouble.
> "The continuing divergence in unit labour costs has caused some member states to lose a substantial degree of competitiveness. This can cause big tensions," he said
> "Some of these countries have manoeuvred themselves into a difficult situation. They must do everything to change course," he told the German daily Handelsblatt.
> While he did not name the culprits, Dr Issing was clearly fingering the Club Med quartet of Portugal, Greece, Italy, and Spain, all of which failed to kick their inflationary habits after joining EMU.


 
Intersting to note Issing's views on the growth of M3 money supply and the inflationary imapct.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/05/31/cnotmar31.xml&menuId=242&sSheet=/money/2006/05/31/ixcity.html


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## Glenbhoy (31 May 2006)

> Dr Issing said the stark differences in wage inflation across the eurozone were storing up future trouble.
> "The continuing divergence in unit labour costs has caused some member states to lose a substantial degree of competitiveness


Did he not realise that labour costs were divergent across the EU?  The Spaniards get paid feck all, the Italians are worse off again though, cos whilst their wages are abysmal, cost of living is pretty high.  Additionally, since these economies (particularly Italy) are having a rough time, I  can't see wage inflation being overly rampant.
Interesting to see this article was in the last great bastion of The Empire!


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