I know it sounds strange,but is there signs of economic revival?

[Cassandra Syndrome]

This is nothing like as bad as the '80's nor will it be.

The ND is not as bad as it was then and no you can't count in the NAMA money without also counting in the assets acquired for that money, we also have very nearly twice as many people in work now as then, a much wider base to start building tax income from. We are maybe 3/4 years away from a balanced budget, but we are on the road to it now, it took us 10 years in the late '70's and the '80's to even make a start on that.
Back then when we did make a start the economy just had to take the pain of the cuts in spending with little or nothing in the way of stimulus, now, we have a 12% saving rate to absorb any increase in taxes without affecting personal spending + 5 billion a year in spend on the NDP.

IMO the property market doesn't have a lot further to fall, it may go down a little more from where it is now, but it will come back quickly to present levels once the bottom is reached.

For new employment we are heavily dependent on a pick up in the world economy and while nothing is certain, that prospect is looking a lot better now than it was this time last year.

It's not going to be jolly hockey sticks for quite a while yet and because of interest payments on the ND we are not going to see an increase in living standards for a fair few years, but between last year and the first half of this year, I do believe we will have seen the worst of it.

BTW do you work for the ESRI?

[toxic avenger]

1. By all accounts NAMA will be buying at or close to bottom.

I don't know whose accounts they would be, perhaps the same people who told us BofI shares were a steal at 15 Euros a share...

2. NAMA as 10 years to play with or as long as is necessary.

It is going to need more than that I fear. Even so, I can't see the idea of State as mass-landlord surviving even that long - I see a 'cut and run' at some point (perhaps under a FG government, who knows?)

3. The only way, long term, property values can fall further is if everything, all wages and all materials fall along side them and even then only by the same percentage.

This is the argument often put forward by developers that they can't sell under cost. I beg to differ. They will have to (and I mean the cost of those already built). Short of a national demolition programme, the glut on the market will compel it.

4. We won't have a boom in repos, that makes no sense for anyone at this time.

But the evil day can't be put off forever, and the banks are going to have to make at least some money back at some point - even if they stagger it as long as possible or government wags its finger. Again, I see a cut and run at some point in the not-too-distant future.

5. Commercial rents will come down to reflect the new property values, has to happen, will happen.

Agreed, but it's the fall in those commercial property values that has to yet happen, they are massively over-valued on the basis of (potential) rental yield kept ridiculously high for reasons best known to the landlords (who seem happy enough with large percentage vacancies so long as they don't need to review their rents down). It might be that the recent ban on upwards only rent reviews could precipitate the inevitable fall, but a fall there has to be...

[Michael Moloney]

I claim no expertise in economics ....

That is a certainty

the recession was at its nadir in Jan Feb and Mar 2009 and has improved since ....

I'll point out in 5 years time how flawed this statement was

An if you think this is bad you obviously dont remember or weren't born in the late 70's and 80's !!!!!!! That was genuine poverty!!!!....

I was in business all through the 80's and in college in the 70's and was part of it all, there was severe poverty then and there is severe poverty now but if the levels of poverty that are out there now are unknown to you, well you will be in no doubt about the severity of it in the short to medium term.

However, my post was on the state of the economy now and the consequences, and as been outlined in other posts the situation for the Irish economy into the future is far more serious that in the 80's. There is just no comparison.



Michael Moloney

[I'mVeryGladYouAskedMeThat]

it's the fall in those commercial property values that has to yet happen, they are massively over-valued on the basis of (potential) rental yield

[gatsbygirl20]

No Fair, TA! Tonic's post gave a lovely warm fuzzy glow of and happiness and reassurance that all will be well, and then you had to come along and spoil it with your facts.

Actually Tonic : Toxic... just one letter difference... you're not each other's alter ego are you?!

I really would love to know which one of you will be proved right.....It was great reading Tonic's post, it seemed very plausible. But so does Toxic's.

Reading back on ancient threads on this site before the crash---Youngdan, etc, some excellent, informative posts----the pessimists were proved right. There were many believable arguments put forward pooh-poohing the idea of mass unemployment or hard property crash....all incorrect, as it turned out

I remember the 80s. I paid huge tax and was one of the few in my family (as PS worker) with an actual job in this country. Things were bad, but there was more social solidarity. Less hatred. Terrible emigration. Lots of establishment lies about there being no money etc....Tax amnesties later showed where at least some of the money was.....

I am not learned enough in economics to contribute much except to say.......from observation and anecdote only, things seem to be getting very bad, with business closures, empty shops etc., ....an eerie silence descending......like before an earthquake, or a hurricane......

[hiding behind a poster]

I really don't think we can get any lower

Look...........

Yeah, but they got dumped by Sony. Truly, the national revival starts here.

[hiding behind a poster]

Your welcome MoC.

And another thing the real price of petrol hit a record today of 1.30 Euro per litre.

That's not a record - I had a petrol car until late 2007 and I remember paying 1.43 a litre.

[hiding behind a poster]

Two main points in reply. Firstly, that all depends on the assets having been bought at the market bottom, or near enough to it. Any further falls, as you must surely agree, make it a much worse situation. If the value of the assets fall appreciably, we're in a right pickle.

To be fair to Tonic, I think the point he was making was that the NAMA-related part of the national debt (if you include NAMA in those figures) is money spent on the purchase of assets. And while its self-evident that NAMA won't get back what its paying for the assets, it will get back some of it - so you can't write the whole NAMA figure off as a debt that will have to be repaid from future tax revenue. Because at least some will be repaid from NAMA sales.

And that's my second point - property values, both commercial and residential, are going to fall quite a lot further. We are not anywhere near the bottom yet. In terms of residential property, we have the fact that there are 340,000 units lying empty,

Two things - some of those 340,000 are holiday homes, so you can't really count their emptiness as relevant. Secondly, I think a lot of the worst examples of construction excesses, like the duplex developments outside towns in Roscommon, will NEVER form a part of the property market, for the simple reason that no-one will ever want them. As such, if in future someone who lives near Dublin, has a bit of money and wants a house, goes shopping, he won't even look at such properties. He'll look at what he wants, and that market will adjust accordingly. Meanwhile, there'll be a zombie market for worthless crap.

[toxic avenger]

To be fair to Tonic, I think the point he was making was that the NAMA-related part of the national debt (if you include NAMA in those figures) is money spent on the purchase of assets. And while its self-evident that NAMA won't get back what its paying for the assets, it will get back some of it - so you can't write the whole NAMA figure off as a debt that will have to be repaid from future tax revenue. Because at least some will be repaid from NAMA sales.

Yes, I grant that. But it's still some fall ahead of us, as I said somewhere in the region of the mid-double-figures percent. That's quite a hit on the sale value that NAMA will get for its assets when it offloads them (and I'm guessing that a ten year hold as state landlord is not going to happen, even if price recovery were to happen then - I'd put money on a cut-and-run at some point before then, perhaps by your own party). I'm guessing that even accounting for what NAMA will recoup we'll still be looking at (if we include it in the debt GDP figures) close to, if not above, 100% for a number of years.

Two things - some of those 340,000 are holiday homes, so you can't really count their emptiness as relevant. Secondly, I think a lot of the worst examples of construction excesses, like the duplex developments outside towns in Roscommon, will NEVER form a part of the property market, for the simple reason that no-one will ever want them. As such, if in future someone who lives near Dublin, has a bit of money and wants a house, goes shopping, he won't even look at such properties. He'll look at what he wants, and that market will adjust accordingly. Meanwhile, there'll be a zombie market for worthless crap.

The holiday homes are not going to form a large chunk (and even with them there might be a necessary fire-sale if their owners, including those abroad, have been hit by the downturn). As to the other part, again yes, there are developments that will never be anything other than empty slums, but they nonetheless offer a supply alternative, even in rural Roscommon, that will ensure that residential prices in more desirable locations still have to have to operate below a certain ceiling. If people can only spend so much money, and nothing in the town is in their price-range, they have the alternative there. So when you say the market will adjust properly, it will, but through the existence of large alternative supply, even in crappy developments in a field in the country.

[The_Big_Fellow]

That's not a record - I had a petrol car until late 2007 and I remember paying 1.43 a litre.

We were not in the midst of the severest recession since the 30's then.

The pace of decline has slowed down, but given the rate that it was going last year it had to. There are few though who agree that we are undergoing a revival overall.