Jan 26th Bubble News Update
Fxstreet.com: ECB's Stark warns of inflation risks, says growth outlook favourable "...key ECB interest rates still low..."
Bloomberg.com: European Money-Supply Growth Is Fastest in 17 Years "Low interest rates are still one of the main reasons for dynamic money supply"
Among other factors, interest rates rises have caused the irish housing market to stall and begin to drop. The ECB guys are reminding people that rates are STILL LOW, that coupled with a booming europe will see interest rates rise far higher than the evil economists working for EA's and banks have been predicting. Interesting times ahead.
Thanks to Damien for the news links above.
Update to the price drop list to follow tomorrow.
posted by JaneyMackers @ 8:08 pm
3 comments
3 Comments:
Report sees a fall in house building
Tuesday, 27 February 2007 15:00
More than half of mortgage brokers are reporting that they are approving fewer loans than a year ago, according to a survey by Davy Stockbrokers.
The stockbroker is also forecasting that the number of new homes built will decline for the first time since 1993. It expects 82,000 houses will be completed this year compared with 88,200 last year.
Davy Stockbrokers says house prices have been flat for the past six months, and it expects prices to be unchanged month-by-month throughout 2007.
AdvertisementSix interest rate rises since December 2005 have made it harder for young people to buy property. Davy says a couple who in the past were marginal as to whether they would get a loan now need 5% more disposal income.
As first-time buyers find it harder, rents have also risen by 7% in the last year.
In 2001 the number of new homes bought by first time buyers was 63%. Now that figure is 33%. But the fall in new houses being built will have an economic side effect. Every drop of 10,000 in the number of completions will slice one percentage point off economic growth.
Did Moore tell Michael?
Sunday March 18th 2007
MOORE McDowell, that likeable but crusty old UCD lecturer, is a man of unique paradoxes. A fish out of water.
He is an entertaining economist.
He is an intelligent Fine Gaels upporter.
He has a beard, but is not a member of Siptu.
Last Thursday, he continued sending contradictory signals as a guest on Pat Kenny's RTE Today programme.
Moore warned that the upcoming election was a battle to lose.
Moore's brother Michael, leader of the Progressive Democrats, is unlikely to welcome the fraternal advice, but he will ignore it. Michael's party has steered Ireland into the choppy waters that Moore is forecasting.
Moore did not tell us whether his forebodings on post-election Ireland meant he would go so far as to vote for the socialist Left, simply to land them in the manure business; but his message was clear: the next government will face economic problems on all fronts. The happy times are over. A poisoned Irish economy is about to be passed on to Bertie's successor.
Problem number one: Bertie's successor will be Bertie. Moore's little brother could be the runner-up. Or, in Moore's view, one of the unlucky winners.
Moore is currently a sane Irish voice of cautious heresy. As turmoil devastates the world's stock markets, other more compromised commentators are urging complacency. Every collapse is greeted by the same chorus: it is a "correction". Ireland's entire financial services propaganda engine is in full throttle.
Scores of worse than useless economists, on the payroll of the banks or insurance companies, are offering deeply flawed opinions. At times of crisis, clever eggheads with household names and inflated reputations are wheeled out to prophesy paradise in the middle of Sodom and Gomorrah. The message has been muttered in unison: hold your heads; stay calm; this is a hiccup. The sub-text: save our industry, our fees, our commissions.
They must think we are all muddled as monkeys.
Almost every prophet in the business has been bought off, body, brain and soul, by a bank or astockbroker.
Not Moore. Which means the opinion of the Tanaiste's brother is worth a pause for thought.
Especially when it does not coincide with the Tanaiste's.
The other message worth hearing is the view of the stock marketitself.
The market (not its discredited apologists) has an impartial ring about it. It is the cold ring of real money being lost or won. It tolerates no waffle or spoof. And the message from the world's markets is pretty clear: take cover.
The message from the Irish market is the most ominous of all: head for the hills.
Ireland's stocks have been among the worst performers in the world in March. We have made Wall Street, the Footsie and European markets look like an oasis of prosperity. Sellers of Irish stocks have suddenly surfaced at home and abroad. Last Wednesday when the Dow had fallen by just under 2 per cent and the Footsie by 1.5 per cent, Irish stocks plunged by over 4 per cent.
Only back in February, when world markets had stagnated, we developed a life, almost a euphoria, of our own. Now, as markets fall, we are suffering a dramatic setback. Ireland is no longer flavour of the month. Our fragile economy has been rumbled. Or as Moore would put it: "This is an election to lose".
But why the sudden change in sentiment?
It is partly the drip-drip feed of multinational desertions in recent weeks. It is partly fears about the US economy. But our steeper local market fall is mostly due to Ireland itself. And above all, it is due to Ireland's obsession - and our Achilles heel - property.
Irish bank shares are tumbling away because property valuesare tanking. New houses are not selling because Irish banks are no longer lending so much. Higher interest rates have put mortgages beyond the reach of first-time buyers. Demand is falling.
Last year, 60 per cent of all lending by Irish banks was for property.
Watch the price of development land start to slip as demented developers find themselves left holding shrinking babies. Bankers are already beginning to show signs of nervousness.
While developers will soon have sleepless nights, their bank managers will have nightmares.
God love the bankers, but only when he has forgiven them for landing us in this mess.
Our beloved bankers have been doing exactly the same as the guilty American lenders. In the United States, the market fall and mortgage crisis have been caused by what they call "sub prime" lending to clients affectionately known as "delinquents".
"Sub prime" lending is reckless lending to high-risk borrowers.
"Delinquents" are those who cannot repay the banks. Defaulters. Maybe they are not so delinquent after all.
So American banks are in danger. Defaults are growing because the housing market there is wobbling.
Canny observers, like former Fed chief Alan Greenspan, are warning that US citizens will soon have less money to spend, as the banks squeeze their mortgage clients. Growth will slow or even come toan end.
Bang on.
Now, is that a familiar story? Name another country where the banks have lent recklessly to buyers of property who cannot repay the loans. Name another country where property has been booming on borrowed money for a decade. Name another country where debt is a way of life, even a badge of honour. Now, where are Ireland's home-grown "delinquents?" Battered by the banks.
Ireland's banks are mortgage banks, lending mostly for property and construction.
Ireland's economic boom is property-led.
Property is not just the cornerstone of our prosperity. It is the basis of the boom in Irish shares. Each annual fall of 10,000 new houses built means a loss of 1 per cent in gross national product. The property sector claims as much as 25 per cent of economic activity.
Fourteen per cent of our jobs are in the construction industry.
Feeling uncomfortable?
Join the club. Holders of Irish shares have sensed this. That is why Ireland's stock market fell by 382 points - 4 per cent last Wednesday after far more modest falls overseas. It was not (as one broker, desperate for an excuse, laughably tried to explain) because AIB and CRH went ex-dividend on that day!
The largest quoted company - AIB - is a property play. So is the second largest, CRH. And so is Bank of Ireland. And Anglo Irish Bank. And Irish Life & Permanent. Not to mention DCC, with its recently much-publicised proposed sale of Manor Park Homes. And Greencore. And Abbey. And McInerneys. And . . . The Irish stock market is lopsided into property. So is the Irish economy.
Expect to hear the estate agents' oily soothsayers, the bankers' hired guns, the insurance outfits' spinners, the stockbrokers' bullshitters and other assorted chancers providing all manner of reassuring medicine in the coming weeks.
Ignore them. Watch the property market. Prepare to exit. Man the lifeboats.
Note instead what Moore McDowell might have muttered to Michael: "This is an election to lose".
By considering current scenario, i can say that market situation is still not good and recession terror is continuing. I don't know how long this recession is going to continue but it stayed there for very longer period.
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