I think many are calling the end of the Irish property mania too hastily. Yes, we have evidence of asking prices being lowered and a slow market, however, what we can not ascertain for certain just yet is if this is a fundamental change in sentiment or a temporary stand-off while we wait to see (a) how far more the ECB take the interest rate hikes and (b) what changes the government may take on stamp duty in the coming budget.
If, and I'm postulating here, the ECB stop at between 3.5% and 4.0% (I think there is a good chance they will do this in 2007 whilst not discounting further rate hikes down the line in late 2007 onwards) and the government abolishes stamp duty for FTBs on new or secondhand houses upto 381k then I think there is fertile grounds for an upswing (abliet a minor one) in 2007. In such a scenario FTBs who may now be sitting on the fence in 2006 will come back to the market, thus re-invigorating prices up the chain. Gains will be small, in the low to mid single digits, but enough so that the oft hoped for "soft landing" will have been proclaimed to have arrived lulling most into a false sense of having dodged the bullet in Ireland (because don't forget people things are different here!)
The ECB, having initially reined in inflation (temporarily) due to current monetary policy coupled with a stable oil price floating around $60 barrel and a steady but not inflationary growth in the Eurozone will be forced at some stage to start ratcheting up rates again when (and it's just a matter of when and not if this happens) oil prices really start to go up, i.e. $100+ barrel. The Irish property market, having being lulled into the false dawn of a soft-landing and a belief that rates will not go much higher than 4.0% will suddenly be faced with another tightening cycle by the ECB but this time there will not be no escape route via SSIA money or further changes in stamp duty rates. Then the Irish property bubble will truly be put to the test.
Just my current thinking on where this is all headed. Feel free to rip it to shreds or convince me otherwise but I think there may be a few more twists and turns yet which may delay the inevitable for another while.
If, and I'm postulating here, the ECB stop at between 3.5% and 4.0% (I think there is a good chance they will do this in 2007 whilst not discounting further rate hikes down the line in late 2007 onwards) and the government abolishes stamp duty for FTBs on new or secondhand houses upto 381k then I think there is fertile grounds for an upswing (abliet a minor one) in 2007. In such a scenario FTBs who may now be sitting on the fence in 2006 will come back to the market, thus re-invigorating prices up the chain. Gains will be small, in the low to mid single digits, but enough so that the oft hoped for "soft landing" will have been proclaimed to have arrived lulling most into a false sense of having dodged the bullet in Ireland (because don't forget people things are different here!)
The ECB, having initially reined in inflation (temporarily) due to current monetary policy coupled with a stable oil price floating around $60 barrel and a steady but not inflationary growth in the Eurozone will be forced at some stage to start ratcheting up rates again when (and it's just a matter of when and not if this happens) oil prices really start to go up, i.e. $100+ barrel. The Irish property market, having being lulled into the false dawn of a soft-landing and a belief that rates will not go much higher than 4.0% will suddenly be faced with another tightening cycle by the ECB but this time there will not be no escape route via SSIA money or further changes in stamp duty rates. Then the Irish property bubble will truly be put to the test.
Just my current thinking on where this is all headed. Feel free to rip it to shreds or convince me otherwise but I think there may be a few more twists and turns yet which may delay the inevitable for another while.