It’s Official, we are in a recession: Irish recession 2008

I had said back in January that we were on the cusp of a recession, that this would have started out in Q1 and only be realised further down the line. I was wrong, my estimates flawed by a few weeks. Having taken it in the neck from many colleagues I am now partially smug, but more so disappointed because to be honest it means that all the talk of ‘it might happen’ is no longer considered doom and gloom, instead it is fact.

This news is already being reported as far away as New Zealand! How did they get this story the day before we did? Something to do with the international date line I assume, the CSO (Central Statistics Office) released this information today and we had two quarters of negative GDP meaning that we are officially in a recession. How does it feel to ‘officially’ …

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It's Official, we are in a recession: Irish recession 2008

I had said back in January that we were on the cusp of a recession, that this would have started out in Q1 and only be realised further down the line. I was wrong, my estimates flawed by a few weeks. Having taken it in the neck from many colleagues I am now partially smug, but more so disappointed because to be honest it means that all the talk of ‘it might happen’ is no longer considered doom and gloom, instead it is fact.

This news is already being reported as far away as New Zealand! How did they get this story the day before we did? Something to do with the international date line I assume, the CSO (Central Statistics Office) released this information today and we had two quarters of negative GDP meaning that we are officially in a recession. How does it feel to ‘officially’ …

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No to Government Bail Outs

WHAT: Peaceful demonstration to protest against Government bail outs of property developers.

WHERE: Outside the Dail at the junction of Molesworth Street and Kildare Street in Dublin 2

WHEN: Thursday 25th September at 1:30 p.m.

WHY: Bailing out the property market is a mistake and will only benefit people who took risks.

“You cannot mortgage the generation of tomorrow for the benefit of the generation of today to buy into an asset that’s falling in value – let the market reach clearing price”

Excerpt of Karl Deeter on Newstalk 106FM, Discussing Government Bailouts of Irish Property Market – 16th September 2008

John Gormley is in contravention of his own parties policies, the Green Party website clearly states that it wants to “Progressively limit the amount of money that lending institutions can lend for house purchase in order to reduce the price of housing” now that it is actually happening should the Government wade in with tax money to fill the gap? No, the wiser choice …

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If I’m going to do your job at least pay me for it… the M50

There are now new ‘gateless’ tolls on the M50. And one thing that means is that the people who used to work there are now gone, furthermore the ‘gates’ won’t break because they are not there, meaning there are no engineers required, nor will the coins that accept the change be breaking when some wise arse throws old 50p coins into it resulting in tailbacks. Then of course there is the security, every day armoured trucks had to go out to the toll plaza (in fact I’m surprised the place was never raided) and bring in all the money. So given that the tolls will now work for a cost close to free – assuming the depreciation on the new kit is written off over time and taking the energy the cameras use as negligible in comparison to what all the old costs added up to – why does it cost more? And an even bigger question is why do I have to pay more and yet do the job for them as well?

It’s one thing to ‘self service’ …

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If I'm going to do your job at least pay me for it… the M50

There are now new ‘gateless’ tolls on the M50. And one thing that means is that the people who used to work there are now gone, furthermore the ‘gates’ won’t break because they are not there, meaning there are no engineers required, nor will the coins that accept the change be breaking when some wise arse throws old 50p coins into it resulting in tailbacks. Then of course there is the security, every day armoured trucks had to go out to the toll plaza (in fact I’m surprised the place was never raided) and bring in all the money. So given that the tolls will now work for a cost close to free – assuming the depreciation on the new kit is written off over time and taking the energy the cameras use as negligible in comparison to what all the old costs added up to – why does it cost more? And an even bigger question is why do I have to pay more and yet do the job for them as well?

It’s one thing to ‘self service’ …

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So with lower house prices you make big savings right?….erm…kind of…

There has been much talk in the papers from many respected sources giving people the message that ‘now that prices have dropped its a good time to buy’. I think that the true nature of what purchasing a property boils down to needs to be examined before such a statement can be shown to be true or false.

Firstly you have to look at what you are actually getting and then you have to consider what it will cost you over the long term and do a like for like comparison for the same time last year, I think that not using 2007 as a control is one fundamental flaw that commentators are making because you can’t simply look at something and say that because its cheaper today it makes sense, if you do happen to believe that please call me immediately as I happen to have some cans of dog food that I was selling for €600 last year but you can have them at a steal for €300, but hurry, they’re going like hotcakes!

Anyway, moronic inklings aside, …

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A different idea for bailing out the property sector.

There is a bailout coming, we saw the makings of it for a long time, first there was the talk of the central bank about the underlying strength of Irish financial institutions, the constant lobbying for something to be done for the property & construction sector, then articles stating blatantly that a bailout would occur if there were problems. Now we have read that the government are going to make plans to help first time buyers because mortgage funding is not as readily available as it used to be.

Let us start on the right foot, first time buyers never had it easy to begin with (I actually did an article on this exact topic before – click here). They were either being hit with stamp duty, the need for deposits or other issues. Now the Government are looking to bail out people who haven’t even bought property yet and that is an error.

There are a few …

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Tom Parlon, preaching to the subverted.

I don’t often take swipes in this blog but today there is a difference, somebody or some one (preferably a qualified psychiatric professional) has to have a serious one to one with Tom Parlon of the Construction Industry Federation (CIF) because he has finally crossed the Rubicon that divides reality from fantasy land and turned his attention towards the utterly insane, namely by stating in the Sunday Business Post that the solution to the economy is more houses.

Just when we are hearing how there is a massive oversupply, how in three years 250,000 houses were built to satisfy a demand of about 130,000 required, and when prices are falling out he comes with this little gem. Supply outstrips demand, and his response is ‘more supply’. Perhaps it would be wiser for the CIF to employ an actual builder or engineer to do his job rather than a politician who has no experience in doing the job of the people he represents.

In his article he points out that for every 10,000 houses built that …

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Financial Literacy: What is a Mortgage? How do mortgages work?

Financial Literacy posts are designed to be more than just a simple definition, they are aimed at putting financial concepts into easily understandable terms and to give an example or two to demonstrate the answers.

Today we ask: What is a Mortgage?

By definition a mortgage is pledging a property to a lender as security in return for a mortgage loan. While a mortgage is not an actual debt it is evidence of a debt and is the legal instrument used to transfer an interest in land from an owner to a lender on condition that it will be given back to the owner once the terms of the mortgage have been satisfied.

I am a big fan of pictures so we shall use a few to show what happens.

Let’s take the example of ‘Joe’ who wants to buy a house. He must save up a deposit as loans require ‘equity’ it gives the bank some security in the sense that it means the person is vested in the purchase (they stand to lose …

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How bank margins are likely to be set in the future

We have seen the rise of the ECB (European Central Bank) over the last three years and the possibility of more is never far from the mind of the ECB. The current cost of mortgages however, is not solely tied to the prices set by the ECB, instead it is down to banks piling on lending margin [that makes loans more expensive to the consumer but more profitable to the bank].

It is important to think about this when you think about where your money is going to be going in the future, margins have widened from about 0.5% or there abouts to more than 2% in many cases meaning that there is a 1.5% uplift in the actual mark up the bank is charging, that translates into an extra €375 per month on a mortgage of €300,000 (in interest payments only!).

The chances are that we will not see margins go as low as we did in 2005-2007 any time soon, and even if we do …

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