Saturday, April 29, 2006

Credit Where It's Due.

The rate of expansion in residential mortgage debt in Ireland is astounding. Figures from the Central Statistics Office show that the rate of growth reached 29.4% in February, with €2.91 billion borrowed. However this is not a record that honour falls to the month of December last, when €3,500,000,000 was borrowed, in one month. That's a hard figure to get your head around, so think about it terms of one Euro coins. A one Euro coin weighs 7.5 grams and has a diameter of 23.25 mm. If the banks doled out mortgage debt in coinage they would have had to transport 26,250 tonnes of it last December alone; enough to fill nine hundred three axel trucks. Laid side to side 3,500,000,000 Euro coins would stretch around the globe a little over twice.

While the monthly mortgage debt creation figures are breathtaking, the rate at which this debt is growing is mind-boggling. As house prices rise the amount of debt required to buy increases. In 2002 the rate of growth was 11%; in 2003 12.9% , in 2004 23%, in 2005 26% and the latest figure for this year is 29.4%. As the debt rises ever higher the trajectory steepens more and more.

Thursday, April 27, 2006

House Price Inflation Highest Since 2000

The latest TSB/ERSI House price index released today shows house prices rising at their fastest rate since 2000. The rise expressed as a percentage is a fairly useless statistic as people are paid in Euros not percentages. The monthly rate for March nonetheless was 1.3% , and a spokesman for the TSB suggested that inflation will moderate later in the year. (he hopes)

Ironic that the vested interests always refer to the non-occurrence of a crash as evidence that the bear case is flawed. It could equally be said that the much vaunted soft landing is pretty conspicuous by it's absence.

Wednesday, April 26, 2006

Jens Lehmann Bust my Bubble.

The German economy is starting to see the stirrings of recovery. The IFO German business confidence survey reached a fifteen year high in March. The rise in business confidence is reflected in the rate of German inflation at 2.3% for April, in excess of the 2.00% most commentators expected. In France business confidence has also risen, an index measuring sentiment among French manufacturers increased to 108 in April, the highest since March 2001, acording to Paris- based statistics office Insee. (The German and French economies account for about half of the $9.4 trillion Euro Area economy.)

So it’s springtime for France and Germany, and for the supply of Euros, as the ECB announced currency in circulation grew at an annual rate of 13.6 per cent in February. How is the ECB viewing this?,
Well M. Trichet’s was heard to remark yesterday;

‘we have to remain credible with whatever risks we have to cope with’

`it's obvious that there are risks to price stability in the euro region,''

ECB council member Axel Weber said in an interview yesterday in the Frankfurter Allgemeine Zeitung. Inflation risks such as oil prices and money-supply growth
``make a normalization of the benchmark interest rate level seem to be in order.''

‘We have to remain credible’, ‘normalization of the benchmark interest rate level’ Translated into pounds shillings and pence; ‘we will increase the cost of borrowing’ The current Euro base rate is 2.5%, commentators now expect that rates will increase twice more to 3.25% by the end of the year. However the tempo and level to which rates will rise depends on a number of factors, including the inflationary impact of oil price rises and improving consumer sentiment in Germany.
That’s where Jens Lehman comes in, if he repeats the heroics of last night, (saving a penalty in the last minutes of the European Cup semi’s) in the World cup final against say Brazil. Well the ‘over the moon’ German zeitgeist, might send consumer confidence soaring.

Tuesday, April 25, 2006

Irish Property Bubble

I decided to start this blog, dealing with the Irish property market, for a number of reasons and with specific goals in mind.

1. The state of the property market is a topic which attracts considerable attention, in the established media, in day to day conversation and on the internet. As no dedicated forum currently exists to discuss this hottest of hot topics, I’ve set up this blog.

2. I’m conscious that much of the media coverage in Ireland of the property market is unquestioning of the benefits of the unprecedented inflation in prices. I am also aware that many people are troubled about, both the sustainability of current property prices and wider economic and societal issues, which in whole or part can be attributed to the boom.

3. Quantifying the variables and identifying the metrics required to measure the performance of the Irish property market is difficult. Other property markets, notably the American, benefit from an abundance of statistics. In an ideal world we would have easy access to transaction evidence, sales prices, volumes, buyer type data and rental values etc. All of this information is currently collected by government and financial institutions; however accessing the data is not easy. I would hope that this forum would act as a receptacle for sources and a medium for publishing and discussing the same.

4. Finally I hope that this forum will attract sufficient interest to allow us to make it a source for contributors from as wide a source as possible. With that in mind I’m hopeful that others will be willing to add their insight and knowledge.