Problems of the Irish Housing Market

The Irish housing market has faced a drastic increase in price of homes over the last 30 years. Of course inflation has contributed to the increase of the cost of homes, but inflation cannot nearly explain the massive jump in prices of Irish homes. More specifically, costs of housing has jumped more than five times the cost of a home 30 years ago.

So what does explain the massive rise in costs of property prices? Could it be that increase in salaries contribute to the rise of price in homes? I know that the average income today is much higher than it was 30 years ago. However, the rate that average income has increased over the last few decades is nowhere near the amount that housing prices have increased.

The maximum mortgage loan a homebuyer can be granted is his or her average salary multiplied by 3.5. According to the Irish Mirror, the average take weekly income of an irish person is €734 per week. Multiply this by 52 and you have €38168 before taxes. Even income before tax …

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Is there or is there not another housing bubble?

In reference to No evidence of another Irish housing bubble, IMF says by Peter Hamilton on 26 June 2017 in the Irish Times.

The answer is no but close monitoring is needed. A Washington-based company, the International Monetary Fund (IMF), has confirmed there is no housing bubble in Ireland. Even with the quickly rising prices of property and an increase of mortgage approvals, IMF realizes this is significant but it is not a housing bubble… yet.

There is no statistics to show there is an imbalance of the pricing of houses. However, there is an increase demand for housing that could lead to an imbalance, especially with the Central Bank’s mortgage lender rules and the help-to-buy scheme for first timers. IMF has recommended close monitoring of the market to make sure a bubble is not formed.

The likeliness of this increase of housing demand should …

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Dr. Conor McCabe – deserves a PhD in slagging!

I wrote a chapter in a book called ‘What if Ireland Defaults‘ on possible effects on the mortgage market, I was kind of proud of it until I read a review by Dr. Conor McCabe (who should be given a doctorate in humour too because his slagging ability is sublime).

The contribution by Karl Deeter of Irish Mortgage Brokers is so inane and devoid of anything resembling human intelligence that a paintbrush tied to the arse of a monkey would have produced a better result—certainly one with more beauty and colour. His contribution is so full of typesetting mistakes and grammatical errors that it’s hard to believe that the editors did anything more than cut and paste and check the word count. “The myriad of opinions boil down to a binary choice,” “that’s taking [sic] from first-hand experience . . .” He actually sums up his piece with the line, “Time will tell.” Karl Deeter’s laptop is where clichés go to commit suicide.

Everybody in our office got a real kick out of him taking …

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The 4 year plan (synopsis) in simple English [including some sarcasm]

The idea behind it:

A plan to reign in out our spiralling deficit and national debt.

Why do it?

Because without this or something like it we are up $h1t creek royally (paddle optional).

Should you be happy about it?

If you are a masochist then yes, if you are a sadist then perhaps, otherwise no good news – except that with any luck we get economic growth back and sort out our mess once and for all. The big failure is the absence of a pain-plan for the bank, the taxpayers got one minus any anaesthetic, financial institutions once again (as always) are off Scott free.

GDP expected back on moderate increase this year due to strong export growth of 6% in real terms (real: considering inflation/deflation so +2% in a -4% deflationary environment = 6%).

Numbers losing jobs is slowing down – in Govt. speak they call this ‘stabilization of the labour market’. Deleveraging (paying off money) and high savings are causing a drop in …

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Debt/GDP or Debt/GNP are either of them a good metric?

We hear about Debt/GDP all the time (national debt/Gross Domestic Product; total output of the economy) and the standard argument is that we should be looking at Debt/GNP (national debt/Gross National Product; GNP strips out non-Irish domiciled output – what remains here).

The question should perhaps not be ‘which is better Debt/GDP or Debt/GNP’ it should be is ‘Debt/G-anything’ the relevant metric? There are a few reason for why GNP and GDP are both lacking, in fact it distorts a true view of our Deficit

1.    It’s a thing of the past – both examples are historical by nature, they change and that is why any conversation on GDP and GNP is a constantly movable feast. Imagine if I asked you to drive across the country and describe the scenery to me, but you could only do so by telling me what you saw in the rear-view mirror? That is what GDP & GNP are about. Debt/GDP levels in Europe soared after …

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Nassim Taleb on Debt

Nassim Taleb says in this interview that the debt problems of 2010 are worse than those of 2008, he has re-released his now famous book ‘Black Swan’, and his core belief presently is that recession is not the issue, debt is the issue. Fragility is exacerbated by high levels of debt – we can see that from an Irish context on Sovereign Debt/Bank Debt (whether the problem is real or perceived).

One of the most poignant things Taleb talks about is the failure of stimulus, and he rightly points out that Greece is not being asked to ‘stimulate’ their way out of their debt issues, they are being asked to look for austerity solutions, perhaps Keynesian beliefs might be shunted once again into history?

The point holds true in our opinion, high levels of debt are a wealth destroyer and inhibitor to prosperity, the drag on economies, in particular our own, will be evident for many years to come.

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Irish Banking. How does it play out?

I used to be in a Chess Club, and one thing it taught me (apart from how to lose using the Kings Gambit) is that you can often see a general result long before you see it exactly, when you are a piece down and can’t control the centre of the board you know you are in trouble, but how and where the checkmate occurs is unknown, game theory can’t tell you precisely and reverse integration from the end game may not bring you to where you started from, but the player knows instinctively that they are up against the wall.

Sometimes appearances can be deceiving, you might think you are fine and you are not (2003-2009), other times you can get caught up about losing a pawn but you are in fact gaining ground (2010), albeit painfully and slowly.

I believe the same can often apply to markets. Today we will look at the reasons for why we believe the banks are going to survive and furthermore, what the results will be of their survival.

The core belief in …

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