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Unleash the McQuaid redux! All this talk about an improvement in the housing market… April 30, 2012

Posted by WorldbyStorm in Uncategorized.
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Perhaps I’m far too cynical, but when I read Dan O’Brien in the IT telling us about Central Bank research that says:

Irish house prices were undervalued by between 12 and 26 per cent as of the end of last year.

And:

If correct, property prices could rise suddenly and significantly if the causes of the undershooting in prices were removed.

And then continuing:

The main reasons cited for the continued fall in prices are a lack of investor confidence, negative future house price expectations and an uncertain macroeconomic outlook. Additionally, “the requirement for substantial deleveraging within the Irish financial system and the associated issue of mortgage credit availability are also considered as significant reasons for the decline” according to the report.

I turn once more to Alan McQuaid of Bloxham, who although speaking from the belly of the beast has, at the least, a degree of consistency to his pronouncements. As noted before the weekend:

However, he said, there was unlikely to be a significant improvement to the market until the employment situation improved.

“Irish consumers will want to see the housing market stabilising before they feel confident about the economy overall. Even allowing for the Budget 2012 initiatives to boost the property market, as well as lower interest rates from the European Central Bank, the short-term risks to house prices remain to the downside in our view,” he said.

“Although the March data are a step in the right direction we don’t see any significant improvement in the housing market until the employment situation gets better and bank lending returns to some sort of ‘normality’, which is still some way off in our opinion.”

And has some wise words too as regards lending…

But analysts warned against too much optimism over the figures.

”Although these latest banking figures are encouraging to some degree, particularly in relation to the deposits side, the underlying message from the data is still one of overall weakness and difficulties in the sector,” said Bloxham’s chief economist Alan McQuaid.

”The bottom line is that Ireland remains a long way from where it wants/needs to be as regards credit demand/availability to get the domestic economy moving again. The reality is that until the banking sector crisis is fully resolved and things improve on the labour market front then the supply/demand for credit will stay subdued in our view, severely hampering the overall recovery prospects for the economy as a whole in the process.”

And there’s something uniquely depressing about reading the following in the SBP this weekend. Discussing the fact that there have been fifty homes sold this year in the €1m plus range – and accepting that compared and contrasted with the height of the boom that may be a pale shadow of what took place then, we are treated to the following:

Savills director Ronan O’Hara said the majority of the houses changing hands for more than Ђ1 million were not being sold on the open market, but quietly and without any advertising or publicity. He said the reduction in stamp duty rates in the last budget had made larger homes more attractive.
“It has made a difference. Many of the sales have been to couples with good salaries who are trading up from modest homes to trophy homes,” he said.

Trophy homes? Haven’t we been down this road once before in recent years and has nothing been learnt?

Maybe it’s me, but it seems there’s a bit of a media campaign to talk up the housing market, quite in defiance of the actuality.

Though if at the highest levels there’s a ‘recovery’ it seems to fit with what Garibaldy noted on Sunday about wealth in the UK and what Michael Taft has written here about the impact of the financial crisis on various sections of the society…

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1. FDR - May 2, 2012

For me the most depressing thing about all of this is the strong suspicion that the Irish obsession with property and property ownership at all levels in society is merely in abeyance rather than cured for once and for all. Testament to this is the fact that reliably, every Thursday, the ‘most read’ article online in the IT is the colour/porno piece on whatever gaudy trophy home is on the block. So the sense is that many people are just waiting for prices to fall ‘a bit more’ & mortgage finance to become more readily available, before pouncing on a house upgrade. Then we’re on the merry go-round again, for potentially a second bubble in the same asset class within the same generation. One hopes that if they have any shred of rationality left people have started to diversify their capital, by currency, geography, asset class rather than pinning hopes & dreams on yet another new house (and this should be the case even if your capital is small….).

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LeftAtTheCross - May 2, 2012

One might debate the extent of the “many people” you mention above. I suspect it’s a smaller “many” than it might have been 5 years ago.

Just on another piece of news there yesterday, and agreeing somewhat with your point about not learing lessons, or repeatedly doing the same thing while expecting different results, I was gobsmacked that the main news story yesterday was that planning permission had been granted for a Chinese Trading centre in Athlone. Apparently it will be 14 times the combined size of Blanchardstown and Liffey Valley. Like what this economy really needs is more commercial retail space?? Could NAMA not have lodged a planning objection or something? Lunacy. Just to pick up Conor McCabe’s narrative in Sins of the Father, this story is all about €175m being invested in concrete to entice international capital to rest it’s head in Athlone so that land speculators, developers, bankers and politicians can have a small slice of the passing action, yet it’s spun as great news for the Athlone / midlands / national economy because it will create construction jobs. No mention of the failure of the economy and those vested interests to use their economic and political power to create local industry instead, to create lasting employment using local capital rather than merely acting as facilitators to global capital.

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WorldbyStorm - May 2, 2012

FDR, agreeing with LATC’s caveat that probably there was a smaller cohort than the media might like to pretend, there’s an awful lot of truth in what you’re saying. I think you’re spot on re the dangers of a second bubble.

LATC, if I had more time I’d write a lot more on issues like that Chinese Trading centre, but there’s not enough to deal with all the issues coming up. I felt exactly the same as you – gobsmacked is a great way of putting it.

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2. Dashed hopes of growth? What hopes? « The Cedar Lounge Revolution - September 20, 2012

[...] over the past three years in relation to house price figures as they sank yet further down. I quote from last April: But analysts warned against too much optimism over the figures.

”Although these latest [...]

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3. Another fall in residential property prices… « The Cedar Lounge Revolution - November 30, 2012

[...] is so precipitate as to be almost laughable. Moreover one Alan McQuaid knows this, for this April he noted the [...]

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