Threats to economy from interest rates and property

[gearoidmm]

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?

 

[colc1]

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?

 

[Glenbhoy]

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.

 

[ivuernis]

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.

 

[thewatcher]

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.

 

[gearoidmm]

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.

 

[redo]

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.

 

[soma]

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..

 

[ivuernis]

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.

 

[thewatcher]

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.

 

[Neffa]

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.

 

[gearoidmm]

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?

 

[conor_mc]

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.

 

[bearishbull]

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.

 

[Duplex]

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

 

[Glenbhoy]

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!