Monday, February 19, 2007

Sign of the Times

The much heralded soft landing for the Irish property market is happening right now, according to the banks; the estate agents and Damien Kiberd. That being the case we have an opportunity here folks to witness something that has never, ever occurred in economic history, a soft landing after a prolonged period of rampant speculation in an asset class. So put on the kettle pull up a chair, make yourself comfortable and watch, a never to be repeated, inconceivable (until now) first.
But ah……before you get too comfortable in that chair, I have a confession to make (hangs head). It shames me to admit this but… when I first heard of the prophecy, that an economic miracle was to be bestowed upon this island, I was just a tiny weenie bit cynical. But not for long mind you. I know, I know. How I could possibly question a revelation bestowed on an assortment of estate agents, bankers and Damien Kiberd?. Please allow me to explain my fleeting moment of doubt. You see, I foolishly thought that the old rules of supply and demand still applied, I thought that the Irish were about as indebted as any nation could prudently get; and then some. I looked at the number of empty homes in the country (250,000) and thought, we have sufficient of the houses. Ha ha ha, I laugh now at my foolishness. Oh were it that that was the end of my irreligious uncertainty. You see I thought (don’t ask me why) that in the new ferociously competitive global economy that Ireland’s falling competitiveness would effect our ability to procure and keep high earning productive jobs, I thought that the liquidity gusher that is the Japanese Yen carry trade was unsustainable, I had a notion that rising interest rates and falling real incomes growth might hinder rather than help. I even looked at property markets abroad where prices are falling and mortgage lenders and estate agents are going bust, and thought (please don’t laugh) that this might be instructive.
But mercifully, thankfully I banished these wicked feelings that prevented me from seeing the blinding light that so fortuitously shone upon some bankers, Damien Kiberd and several estate agents. Verily they have been to the top of the market and they have seen the Promised Land (bank).

Ps
The only people busy in the Irish market at the moment are the FOR SALE sign makers. The lads have most of their stock sitting in gardens the length and breadth of the country. You see, when the market was busy they would stick up an agents FOR SALE sign then a few weeks later return and stick a SOLD slip over the FOR SALE bit and then after the new owners had moved in return one last time to remove the sign for good. Not anymore. The sign makers routine has been disrupted of late by the softly softly market . Its no longer erect sign, sold slip, remove sign, its more; erect sign, erect sign, erect sign, erect sign of another agent beside the one for the first agent that you put up couple of months ago.

The sign makers are busy making new signs, as their existing supply ineffectually just stands there, weathering.

31 comments:

Anonymous said...

I love the "landing" word in Soft Landing.

In any other market (e.g. Lawn mower sales) a decrease would be called "decrease, slowdown, etc". For "landing" read "Armageddon".

Anonymous said...

Great article Duplex!

I can't figure out why banks like BOI are hitting all time highs at this point.

I Wonder if/when these stock prices will begin to reflect the new dose of reality being served up in the property market !

Duplex said...

I suppose if we had had a hard landing it would be over with by now. But these darn soft landings go on and on getting softer and softer. Flaccid landing.

I was wondering when the state of the housing market might reflect in the banks share prices. The liquidity gusher remains uncapped for now though, but the banks exposure to property.....

Anonymous said...

"I looked at the number of empty homes in the country (250,000)"

Are all these investment properties ? Won't a large % of these be holiday homes ?

Duplex said...

Anon; the number of empty homes discovered by the CSO was 275,000.
As they have no census data for these properties it's impossible to say how many are holiday homes and how many are empty speculative bets on house price inflation.

See my post of 19 June regarding this revelation.

Alex said...

At some point in time, a killing will be made by those who can deliver efficient maintenance of empty homes.

contradictifier said...

Its a curious thing about banks isnt it - the more money they give away the higher their valuation?

Because of course, as soon as a mortgage is given out, its paid right back into the banking system.
Imagine the proceeds of a sale are paid into a bank, Say €100k.
The bank, due to the magic of fractional reserve banking, can now loan out about 5x that amount.
The bank can now loan out 500k to another few purchasers, this will largely be paid back into the banking system at some point.

And on and on and onanism (its Irish for "banking")

jockeire said...

I have moved from the UK into Ireland and am seriously reluctant to purchase a property- I don't know how long we'll here- could be 5 years, could be 20. But before we can even buy a house:
+ we need a ticket from the government that costs 7.5% of the value- they call it stamp duty.
+ Secondly, the bulk of properties are presented in shameful condition and we'd have to pay to do them up.
So to purchase we have hefty up front costs, into an uncertain market, and a potentailly limited timescale over which to get a return on such a risky investment. We cannot be the only "immigrants" who face these concerns!! How sustainable then is the oft-trotted-out argument, "Ah- but we've got immigrants to help sustain ouir prices!" Perhaps this needs some more research? Are we considered to be lemmings that can't wait to jump over the cliff with the rest of you ...?

Brina said...

Great work.

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