August 18, 2010

Collapsing house prices? We ain't seen nothing yet

Posted in Irish Independent · 142 comments ·

THE most comprehensive report on the Irish property market is out and it evidences the total destruction of wealth of a certain generation. According to the wonderfully detailed work done by Ronan Lyons at, asking prices countrywide fell by just over 4pc in the second three months of the year — a slightly larger fall than in the first quarter.

The average asking price nationally in the second quarter of 2010 was just over €224,000 — 36pc below its 2007 peak. The acceleration in price falls will come as little surprise, but the question now is how can a generation whose balance sheet has been so totally vaporised ever start spending again?

Back in 2007, I wrote a book called ‘The Generation Game’, which focused on how the generation between the ages of 30 and 40, who had got into the housing market via huge mortgages, would be financially eviscerated. This group was termed “the juggling generation” because they were trying to juggle being good parents and good workers, while still paying these huge mortgages.

The book focused on a generational gap between these commuter-workers and the older generation, many of whom had become accidental millionaires as a result of an unexpected windfall from the housing market.

Obviously, negative equity would swing against the jugglers in the predicted bust, much as positive equity had enriched the accidental millionaires in the boom. In the book and the related documentary, the housing boom was painted broadly as a massive transfer of wealth from one generation to another.

The figures from show just how extreme the negative equity trap now is. Prices in Meath, for example, have fallen by 38.4pc from peak to trough.

The figure for Louth is over 40pc; Kildare’s is 36pc and Wicklow’s 36pc. These were the counties that were growing fastest during the boom.

The question is, where next for the property market?

Are we at the bottom or is there yet more negative news in the pipeline?

During the evolution of a housing crash, there comes a time when the fall in prices tells us less than other indicators, such as the time it takes to sell, the total stock of houses in the market or the amount of houses coming on to the market.

The time it takes to sell gives an indication of how realistic the asking prices actually are. All around the country, estate agents’ windows are full of houses — but if they are not selling, then the price asked is of limited value in determining the next phase of the market.

So, for example, the average time to sell is four months in Dublin, whereas it is up to a year in Connacht and 10 months in Munster.

The suggestion here is that prices in Dublin — having fallen by 50pc in the city centre since the peak — are not at the bottom yet but might be getting close.

In contrast, the rest of the country has a long way to fall.

The other concern, given what we know about unemployment and negative equity, is how many of the sales are forced sales, rather than voluntary sales? How much of the new stock reflects bankruptcy, rather than people thinking: “Okay, now I might put the house on the market because I think there is more activity”?

In terms of where prices go, it is now crucial to understand the change in mass psychology.

A property crash normally ushers in a period where people choose to rent over buying, particularly with so much choice out there and with so much uncertainty about job prospects.

Furthermore, to assess whether a house is good value or not, the prospective buyer has to do some basic maths to see why he should buy. And whether we like it or not, for a housing market like Ireland’s to clear, investors need to come back into the game.

Let’s look at it from the perspective of the investor, by looking at the return to buying houses now through the prism of yield. What percentage yield does an investor have to get to make it worthwhile investing in bricks and mortar for rent?

LET’S do the sums. With government bonds yielding more than 5pc, it’s fair to suggest that an investor would need to get a yield of at least 7pc from housing. So taking the average house price at €220,000 and the average rent at €863 per month, we see that the investor gets — with these prices and these rents — a gross yield of just over 4pc. This is before he takes into account his funding costs. Why would he bother getting into the market just yet?

In order to make a 7pc yield at the present average rent, the average price of houses would have to fall to €135,620. This suggests a huge further drop in average house prices here.

This is quite stark reading, particularly when you consider that house prices overshoot, both on the upside and on the downside.

So even without the overshooting process, the investor would be crazy to get into the market at these prices. So too, therefore, would the renter be mad to buy the house that he is in at these prices.

Prices would have to fall by another 30pc for the renter in the commuter belt to choose buying over renting.

This is the central inconsistency which exacerbates the generation trap in Ireland. For the housing market to clear, prices have to fall much further; the basic maths can’t be fudged. But when this happens, the negative-equity trap will tighten on the recent home-buying generation, whose only crime is that they were born in the wrong decade.

So for Ireland to recover, there will have to be a ‘lost generation’ who will be largely shut out of whatever economic future this country experiences.

This generation trap is the poisonous legacy of the Ahern-Cowen years.

“A lot done, a lot more to do.”

Yeah, right.

  1. adamabyss


  2. Egg Timer comes to mind .

  3. ste

    2 examples. Finland: & Japan:

    It took Finland 10 years to get back to where they were and Ireland is in a much worse situation than they were. Dublin prices are more likely the ones to recover in 10 years but I can see prices outside the capital not returning for much longer.

    Hitting the bottom doesn’t really mean we’re going to bounce straight back up.

    • Gege Le Beau

      I listened to a presentation by the Japanese Ambassador on this very topic, I got the distinct impression the Japanese never really recovered, they just kept pumping money into the banking system plus some stimulus, which can’t do.

      Unemployment is the key, near to impossible to have a ‘jobless recovery’.

    • Gege Le Beau

      I listened to a presentation by the Japanese Ambassador on this very topic, I got the distinct impression the Japanese never really recovered, they just kept pumping money into the banking system plus some stimulus, which we can’t do.

      Unemployment is the key, near to impossible to have a ‘jobless recovery’.

      • adamabyss

        Thank God I got a job (not really, I’m an agnostic) – at least until I start university in Sep/Oct). Started Monday. I won’t mention the name of the multi-national as they are paying my wages, but you would swear you were working in a semi-state (or state) body with the amount of wastage and bad management. Deco, you are right in saying that the whole philosphosy of management in this country needs to change if we are to drag ourselves out of this mess. A ‘manager’ passed by my station yesterday and questioned something wrong with the product – I explained that it was due to a technical change in procedure further down the line. I wasn’t trying to shift blame. Seeing as he hadn’t caught out the new boy, he finished off the situation by saying ‘ah well we’ll leave it for now then’, although it was something that obviously needed to be corrected. Hope I don’t get sacked for this! Have kept it vague for obvious reasons…

        • Deco

          Adam, just concentrate on learning real world skills. It takes a long time to get above this sort of nonsense. Believe me, we have all seen it. Be careful in your first job. And build good working relationships with whatever professionals that you meet. Keep away from the pretenders. Be patient and learn precisely. Gravitate towards those who take the work seriously, and who are diligent. Especially learn from anybody is not the older more experienced hands – who tend to take quality more seriously than some of those influenced by post Reagonomics era ‘get rich fast’ scheming and ‘Loadsamoney’ nonsense.

          Always think of the long term. Even the worst run places, rely on professionals to carry everybody else. Those with a professional ethos are always freer because they know that they have the stuff that matters between their ears. In the long run this is what matters.

          Outside work, you can comment that the Irish concept of management needs analysis, and fixing.

          My advice, be diligent, be patient, be very clear in your communication, be rational, and always get things done to a high quality level.

          • adamabyss

            Thanks a lot Deco. Priceless advice.

          • Gege Le Beau

            Excellent advice Deco, fautless.

            Also, ‘listen more, talk less’, you learn way more both for the job and for life, the world is full of talkers but only a few say something worthwhile, and they are often the measured people who know the quality of a few words rather than the quantity of many (however my posts do go on a bit, so you will have to forgive the seeming contradiction :-).

          • adamabyss

            Thanks to both of you. I will treasure the advice as I progress (I hope) with work and study and endeavour to put it into practice, as I hope I have already to some degree.

          • johnDIvory

            Well said Deco! Champion advice! You may never make a fortune but you’ll always be a winner.

  4. Gege Le Beau

    As a card dealer in a Las Vegas Casino said to me in 2005, “you seem like a nice guy, cash in your winnings kid, and take your nice girl for dinner, this place wasn’t built on people like you winning”. I took his advice.

    The same can be said for the Irish economy, only those guys in the boardroom, controlling the security cameras, those on both sides of the deal made the money, the majority out of life necessity or ‘big plan’ theory bought in to a rotten game. The majority now pay the price in terms of negative equity, levies, pay cuts and unemployment.

    I am neither economist nor financial wizard (wish I was at times to make sense of everything that has been said here and elsewhere) but when you look at rising unemployment (ironically it has finally called around to the financial services sector, people who sold mortgages and other ‘financial products’), massive deficit (and rising), dramtically increased job insecurity, oversupply of housing, and general cluelessness about where we are headed, it all seems to add up to a bust flush.

    I will be amazed if Ireland doesn’t experience a housing crash between now and Sept. 2011, there are already fire sales of houses at rock bottom prices with fitted kitchens and applicances as sweetners. The game from the outset was rotten with greed, it did not put people first nor was it properly regulated by a government that grew fat and complacent on the windfall. To my mind, the system has to fall/reset and that means housing at a lower prices, one agent I offered a figure on said to me over the phone: ‘”we haven’t gone back to 1995″ and promptly hung up. I thought he was in denial/didn’t get it (obviously holding out for the highest amount). I think we will end up at those levels. I stayed out of the property game, saw some people flip houses and do ‘well’ (banked the difference etc), I know others in trouble with unemployment, living a hand to mouth existence, giving the pretence that things are normal. I am sure it is a common story across the country.

    David, you mentioned that the parents of the 30-40 year olds became accidental millionaires (not all obviously), well these people are in some cases subsidising the inflated mortgages of their unemployed children. Debt/mortgage trap, where some have handed the keys back to the bank and headed to England and Australia.

    A double dip, or as Reichs points out the ‘one long big dipper’ will finish the job, then you will see the true nature of the economy ~ more Paper Tiger than Celtic Tiger.

    • Deco

      Robert Reich has given serious criticism of both Bush and Obama administrations over their eagerness to bailout Wall Street, while most of America is heammoraging productive capacity and real wealth. The casino economy has run aground, and he has said as much.

  5. pcor

    Thanks David – your clarity shines through the great murky mess that Fianna Fail has made of our beloved country. I invested in Buffalo NY where I can buy a double rental unit for <30k with gross return of 20%; OK, after maintenance, vacancies, etc, I am down to 10%-12% yield but who would even consider buying here? You 4% would disappear in insurance, repairs, wear & tear and vacancies. People might have justified that negative return when there were crazy capital gains to be had – but now we know that was all a lie driven by greedy banks, incompetent governance and idiot leaders.
    Let me know if you decide to start a new political party – that seems to be the only realistic way to stop this madness!

    • adamabyss

      Don’t think David is going to get into that quagmire. I asked him about it at his book launch last year and he was decidedly non-plussed.

  6. suonish

    “You 4% would disappear in insurance, repairs, wear & tear and vacancies.”

    And tax!!! Ooops… It’s going to be some fun around here when Revenue decide to investigate people with more than one property. Most people I spoke to who ‘bought in Bulgaria’ or similar, didn’t even know they were supposed to pay tax on their rents.

  7. htzSdLSkV

    If we had our own currency and we did devalue it, our imports and exports will remain defined in US$ or € Euro. The real value of property which could be bought and sold, would, in time, also be defined by its value in major external currencies. The only real effect of devaluing our currency is to reduce our wages and the value of saving or mortgage balances.
    So, instead of a currency that we could devalue as needed, can we not invent a system that ties wages and mortgages to a standard Pay Unit. Eg;- The minimum rate of pay is €8.65 so let that be 1 PU. A person earning €17.30/hr would be on 2PU /hr etc. The PU could vary against the Euro and could be set as part of our national budget. Those in hardship so caused, should be eligible for increased social welfare help.
    So employers would want the Pay Unit/Euro as low as possible, while lender and the rest of us would be voting for a government who can sustain a high Pay Unit/Euro. When the government reduced the Pay Unit/Euro ratio, they would also be hurting their tax take, as tax on wages would still be calculated in Euro. But like all employers, this would lower the public sector pay bill.
    Assuming that we retain the current rules regarding the free movement of money within the EU, so wise saver and investors would choose the a strong currency in which to invest/save. So savers would not be hurt as in a normal devaluation.
    In what way could we do better if we had our old Punt re-instated and for it be devalued/overvalue? 

  8. Deco

    In the binge era, when David McWilliams made an announcement concerning the nature of the property market being a bubble, (or indeed if Hobbs, Lee or Gurdgiev said anything about property), there was always a saturation level response from the ‘official experts’. It was always along the line of ‘this place/time is different’.

    Strangely, enough those people who used to take part in this co-ordinated response to improve the perception of the real estate bubble, have all been rather scarce in recent years. (with the exception of honest Tom in the CIF). This means that you will not benefit from their persepctive. Thanks to internet technology, you can now engage in binge era nostalgia, and find out how the now silent experts would have responded to David’s article.

    • Deco

      Hilarious quotes from TV property ‘guru’ Liz O’Kane in an interview with Moncrief.

      “But sometimes I don’t think economists know what they’re talking about.” (Was she talking about Marc Coleman, Dan McLoughlin, Dan O’Brien, or Austin Hughes ?)

      “2010 is going to bring great things for us.” (sure, the weather has been an improvement…)

      “Don’t listen to negative people. If you can avoid them, don’t listen to them.” (alright we will listen to Brian Cowen, much more inspirational and uplifting….)

      • Gege Le Beau

        As George Carlin said about the American dream: “it’s called a dream because you got to be asleep to believe in it”.

        Barbara Ehrenreich ~ How the Relentless Promotion of Positive Thinking Has Undermined America

        • Deco

          Gege – thanks for the quotation concerning the lifestyle dream. It makes a lot of sense. Heavily promoted here by an obese minister for health.

          Concerning ‘pretend positivism’, one of the contributors a while back called Shane Dempsey, used the phrase ‘veneer’. A lot of the look positive, fixed smile, hard sell nonsense is that. It started in the US, and it went into overdrive in the binge era here.

          • Gege Le Beau

            @ Deco – Neither PD policies nor the Minister are advertisements for a sustainable lifestyle. By their fruits etc…….

            Anyone who chants the ‘closer to Boston than Berlin’ mantra needs to take serious stock. Failed ideology as we now see.

  9. paul77

    Need some advice people.

    I am thinking of buying a house for 160000 (needs a lot of work, approx 15000), other houses in the area are priced betwen 190000 and 200000 (better spec).
    It is close to my job (saves 100 euro a month petrol), my mortgage will be 600 euro a year (5 year fixed ) minus goverment mortgage assistance.
    The property was above 300000K at the height of the boom, sick of renting, am I mad to go for it, could the price fall much more for this property?, don’t mind taking a hit once its not another 10 – 20 percent!.

    • Bamboo


      Calculate how much you need to put into the property to make it liveable or to bring it to the same spec as the other properties in the same area (190000 and 200000 ). If it only needs a lick a paint then that’s OK. If you need to put in a new kitchen, bathroom toilet (downstairs), etc , etc. It is not cheap. Builders rates haven’t come down unless you take in Polish builders. All this hype of builders rates going down is not true as you are most likely dealing with a small builder. I found it extremely hard to get builders quotes. I approached 12 builders, 6 of them never showed any interest, 2 came with ridiculous quotes, 2 with OK quotes but after checking references it turn out that they didn’t have the experience or skills.
      Put a total to all that work and see if you come out to the 190000 or 200000. And when it is all finished let’s say next year, try to think how much the property is worth.
      Best of Luck

    • Gege Le Beau

      My sixpence, numbers look reasonable Paul77, the old reliable still applies: ‘location, location, location’, that for me is the basis of any deal, in fact it is funny because I looked at a house last night, similar price but location was appalling, so no deal.

      One must also factor in personal circumstances also and the unexpected like wage cut etc, if it has a decent size bedroom you could if stuck rent it out at €400 per month reducing what you pay off the mortgage, but then this is a bit like sharing/renting, but necessity will dictate. Only you know all the variables, your gut should tell you what you need to know. Try to give yourself as much mental space so that you know if caught out you have a fall back position if need be, the good only plan B and C.

      A friend purchased a solid, 3 bedroom house for €150,000 and will do the work on it, he looked at all the variables and went for it and I thought he was right to do so, even in the current climate as will get a return in time but intends to live there for the foreseeable future, only 2-3 years ago it would have been unimaginable that he would have got it at that price, meant to be.

      A €15,000 investment in the house sounds reasonable, I imagine places need that. One of the key aspects a friend told me is the potential for re-sale in 5-10 years, as it may indeed take a decade for things to rise enough for you to make a tidy sum which will enable you to move on or up. If you like it as a home then no need but always a handy ‘get-out’ option knowing that you can shift it if/when circumstances change, which invariably they do.

    • StephenKenny

      Given the fact that over 80% of Germans rent, I would ask yourself what the social and economic drivers are, that have driven you to this clear desperation to buy.

      In terms of the idea of a ‘property driven economy’, we aren’t out of the denial phase yet. I know I still hear many people saying things like “The economy can’t really recover until property prices stabilise and start to rise”.

      At the broad level, we’ve just had a couple of years of unprecedented economic stimulus. Literally trillions of $, and £, and € have been poured into the economies, and the question is will it reverse the decline, or will it just give a period of slower decline.

      As Gege Le Beau mentioned above, the Japan example is interesting, although only an example. Since their property bust in 1990, prices have fallen about 75% and have not recovered, in spite of Japan having low unemployment and an incredibly successful high tech economy. Their continued government stimulus has pushed up government debt to a level of over 200% of GDP during that period.

      One of the big arguments out there at the moment is whether the US & European economies have, effectively, been living in a debt-generated La La Land since the 1990s – some argue since the 1970s. This isn’t a discussion you’ll find anywhere in the mainstream media, but, possibly surprising to some, a lot of mainstream business and economics journalists are very involved – just not on their employers time.
      If you doubt either of the points in the above paragraph,, and most people do, I would refer you to a couple of books, and
      Both books are written by the Economics editor of the UK’s Daily Mail, and the Business editor of the UKs Guardian, newspapers (or the other way round). If you have any knowledge of the UK newspaper world, this might seem a bit odd since one is left of centre, and the other right. Journalists, these days, simply have jobs, and do as they’re told. Don’t believe them – they don’t.

      • Gege Le Beau

        @ Stephenkenny, points valid, but Germans rent within a German context (culture of it, decent apartments (saw plenty of Berlin), reasonable rents, tenant rights etc)…….we have nothing close to it, so I understand home ownership in our environment especially in a time of falling house prices.

        Not sure about the €40 DIY, sure people cut their cloth etc, but you get back what you put in. An investment in a property -furnishings, redecorating etc can lift a property immeasurably, if you are talented in this department (I am not) then go for it, otherwise be aware of being ‘too cute’ with corners.

        Horses for courses.

        • michaelcoughlan

          Hi Gege,
          You forgot to mention another point many Germans are patently aware of. This is the fact that when your country can be invaded by massive armies from both east and west simultaneously it tends to colour your thinking as to whether owning a house or piece of property is something worth doing if you could be driven from it and have it taken from you by the invading army. The same type of thinking pervades the minds of the citizens who live in Hong Cong since it’s reunification with China.

          • Gege Le Beau

            Hi Michael,

            I am not so sure the thought of invasion or war has an influence. I have a sense it is more to do with culture, education and the ‘German experience’. As one poster previously indicated with the David McSavage clip ‘the Irish obsessession with property’ has a lot to do with our shared historical experience. Historical, property defined individuals in a sense, just as an absence of property ownership both then and now ‘defines’ people (this is obviously not literally true but a perception, but it does hold for certain sections of the population), again well depicted in the clip available on Youtube, which I thought quite brilliant.

            I presume we have something in common with the English sentiment that a person’s home is their castle, there is also the very real attachment for the Irish with the land, which again has historical associations.

            After WWII, I think Continental Europeans knew with the advent of the atom bomb that the next time they played ‘lets invade the neighbour’ it would be the last, hence the Coal and Steel Pact, EC, EEC and EU.

            Naturally there are a lot of Germans who also own houses, I just found in Berlin and places (the bigger cities), renting apartments was the way to go, and there was none of stigma associated with that lifestyle in Ireland, where the pressure to buy a ludicrously priced house was part of the overall game. Remember ‘get on the ladder before it is too late’, which seems like sheer idiocy now. Germans and others looked aghast at what we now know to be onerous mortgages.

          • johnDIvory

            I was lucky enough to befriend a Spanish family maybe 10 years ago living in a large town on the East coast of Spain. Dad worked as a line maintenance man in a local factory, mum stayed at home and looked after the family. Both of the kids went to University. They had one ancient family car and a couple of scooters to get around on and they had a lifetime lease on the apartment they lived in. I have to say that the quality of life these people had and still have was second to none.

      • Tumbrel Cart

        StephenKenny is quite accurate when he says that Ireland is still not out of the denial phase. In fact many of the contributions to this article sounds like discussions at a property convention. The best thing that could happen would be introduce a maximum house price of €100,000 throughout the country. It would stop forever the property insanity that has and is continuing to destroy the country. People would be able to work for less and the economy would become competitive again.

        The idea referred to that “we have been living in a debt-generated LA LA Land since the 1990″ has a lot of resonance. Not being a bookworm I would welcome a synopsis of the ideas. Personally I blame the nonsense of globalization and the consequence convergence of labour rates. The idea that western economies can virtually stop producing all the necessities of life and make livings selling coca cola, gucci and U2 songs while paying up to 20% of their own populations to do nothing is utter disingenuous bullshit. Particularly as the owners of these enterprises generally find novel ways of avoiding taxes and keeping their wealth to themselves.
        McWilliams is correct in his analysis of house prices, even if he has not factored in a small premium that an owner occupier will pay just to be ouut from under a gombeen landlord’s jackboot.
        At the end of the day the house price must be paid for by rent or mortgage. Not being an economist are they not the same thing in economic terms?
        PS I though that all the landlords were British ogres and that they were driven out about 100 years just like the Tuatha DE Danann of old. Maybe they just morphed in Fianna Failers .Jesus but the Irish are a stupid people.

    • Deco


      firstly, I think it the price of the house is below 127,000 there is no VAT. So you should be aiming to get it below that number, because you wil save a lot of money.

      If you get told about repayments just switch off the ears. Always think in terms of the absolute top number.

      Buy the best DIY manual you can get for 40 Euro. And get the tools in discount shopps. Go to the nearest old established, family run hardware shop. Don’t go to the main chain DIY outfits, because they will sell rubbish. Pick some place, that the chap the other side of the counter knows a fair bit about repairs, and will actually take an interest in helping you out. Preferably where the person the other side of the counter is over 40, and intends to make a living out of helping DIY people for the next 20 years. And then when you buy stuff you will get free advice. When you have the DIY manual you will be well prepared to talk about stuff. That free advice, will save you a lot of money.
      That way you can bring down the repair bill.

      Oh, yeah, and get herself to be reserved about the condition of the place, when the auctioneer is showing you around the place. If she can refuse to go inside one room because of the smell then that would help. That will unsettle the the estate agent, and might earn a price drpbe worth a price, in an effort to make your mind up. Estate agents talk away, and they are trying to make your mind up for you. Give them no clues about whether ot not you are interested.

      If you are single male even better, because single males tend to have a mercenenary approach – because single males decide everything in very utilitarian terms, and tend to decide everything on price. If they tell you it is near the pubs, socialising locations, tell them you don’t drink, so can drive.

      One last trick. I heard about this manoevre.

      Get a bank draft for 75% of the amount. and the end of the discussion, put it on the table for the builder/auctioneer. Then say – here you go. They will say that isn’t enough. Then say, alright, we’ll leave it then. Fold the draft and put it in your pocket. And walk out. Chances are they will not let you out the door. That is the estate agents commision sitting in front of them and they will not let it walk out the door. I know of one incident where that happened before, and it worked.

      Oh yeah, and have a copy of the above article from the newspaper visible under the back window of the car, or better still a copy of “Follow the Money”. The estate agent will think you informed manner against them.

      You hold all the best cards in the pack. Best of luck !!!

      • Deco

        Paul – a good DIY manual, and free advice from a long term outlook, family run hardware shop will save you a fortune. If you have relatives who are prepared to help out in return for favours, then this is a big plus. Hire a tradesman to do various sections as you need to hire a tradesman. Hiring a contractor, who then subcontracts to others is expensive and makes little or no difference to quality. Hire one tradesman at a time, and serve as the go-for/labourer for that tradesman while he is involved.

    • michaelcoughlan

      Hi Paul77,
      You have inadvertently asked an honest question which has drawn a myriad of responses none of which I feel helps you with your decision. I would like to start my response by stating that I am neither an economist nor financial adviser but I am skilled educated and experienced in construction and property. In order to give you an honest answer to your question you would need to provide more information than you have. One thing I can tell you straight away is that there is a world of difference between price and value. Another thing I can also tell you is that the price of anything including property is set only by the market, not you, and the market is simply enough buyers who are willing and capable of paying the money required to satisfy your need to enter into a transaction to sell the house in your case. If you are in a position to wait you can influence the market however it is the only real power you have. You haven’t stated how old you are, whether your job is in private employment, self employment or the public sector. You haven’t stated your level of income either. You haven’t stated whether you will buy the property on your own or whether you want to stay in the house for ever, move on and sell, move on and rent etc. You haven’t stated whether you will be paying cash or are hoping to borrow to fund the purchase. You haven’t stated which part of the country you are in. I can provide a few pointers which will make your decision a bit easier though. One thing to bear in mind is that the current circumstances are like nothing since the 1930’s when speculation on the stock markets in the US (there we go again) led us into the great depression. I refer to what is going on in the world right now as the greater depression. If you read my previous posts you will see that they are consistent but before I dispense my two cents worth I would like you to know that I still feel that our great Republic is going to be looking at some sort of negotiated structural default on sovereign debt in the New Year. This means that there will be overnight wholesale cutting of government spending in all areas reducing what spend there is in the economy even further. This will surely knock prices as opposed to value down even more. Because the banks fucked up so badly on their business model funding their day to day expenses from wholesale money markets and irresponsible lending interest rates will continue to rise so that the money the bank is making covers its costs on a going concern basis. This will reduce prices further. Reducing the amount people can borrow will drive prices down more. Increased taxes on the misfortunes who can’t leave Ireland will reduce spend in the economy and borrowing power reducing prices further. These pointers alone could paint a rather depressing picture but if you want to live in this property as your family home for a long time longer than 15 years at least none of these things should bother you and I would go ahead and purchase the property so long as you factor in two very important considerations; Is my job safe enough to withstand what is coming down the tracks, and how much further of a drop in price can I sustain before I myself would be in serious negative equity. One other consideration which you may have overlooked is the fact that you could acquire a small site and procure planning permission for a modest house which could be extended as your needs arise going forward. I would put in a well which will circumvent the water tax in the pipeline, a solid fuel stove capable of heating water, and evacuated solar tubes on the roof to supplement water heating, and a boiler converted to run on biodiesel all of which I have in my own house. Everything except the stove as far as I know is grant aided by SEI. If the mortgage were modest rent from a spare room could substantially reduce you mortgage payments and allow you to invest spare cash in gold, bonds, green energy, emerging markets etc to diversify your investment portfolio. I personally would choose the latter option as construction costs have also fallen by a third since the recession. You would have a new house with new technology capable of being heated for a fraction of the fixer upper and a house which you could have your own design input to suit personal tastes/requirements etc. One thing also to bear in mind is that most of the other commentators have said proceed with the purchase but observe caution. I read this that there is still a market in Ireland even though we have had such an enormous crash and if you have a well designed low cost modern family home I’ll bet you will still find a buyer should you need to sell.

      • paul77

        Many thanks to everyone for the sound advice!, much appreciated. I will give some more details.

        House was valued at approx 300K hieght of boom.
        The house is worth 160000K now.
        I have a deposit of 30000K
        Which leaves me a mortgage of 130000K
        35 year mortgage.
        Needs approx 15K put into it to bring it up to scratch (guts of which I also have saved).

        I’m buying on my own.
        I work in a multi national company and just got a promotion to one of the few departments that are expanding.
        Mortgage repayments will be 600 euro per month on a 5 year mortgage, (minus 100 approx mortgage relief per month)
        I will have approx 1400 – 1500 left over to spend per month.
        It is a few minutes drive from my job which will save approx 100 per month in petrol.
        I might rent a room (not sure on this)
        I am 33 years old.

        And last but not least the only reason I did not buy some 2 bed apartment over the last 5 years is because I listened to the likes of you fine people!…a big thank you!

        • Deco

          Paul not sure what advice to give.

          I would say wait until the weather gets a bit cooler. Every year we see For Sale signs going up in spring. But by October (6 weeks away) things have changed. I have a theory that there is a seasonal element in people deciding if they should move. But you can check on daftwatch or email Ronan Lyons to see if this is true. And maybe wait for more bad news. The worst that can happen is somebody else puts 160000 and gets it. You will have to assess the likelihood of that yourself based on local supply/demand factors. (for privacy reasons – don’t tell us).

          Aim for below 127000 so as to get out of one less bill.
          Let’s say you assume that you negotiate with a deposit of 45000 (30 plus 15). And that within three months it will be near to 50000. I know it might sound strange – but a lot of bank branches would be desperate to get 50000 in cash onto their balance sheet, plus a loan for 75000 in place of a house. Especially in a property bust, when they are under massive pressure. Banks are in the money business not the house maintenance business. At 125K, you are left asking for a 75K loan. This is manageable. But negotiate hard.

          This is another option. With 50000 Euro in one account ask to talk to the bank manager, and ask the bank manager if they have any houses for sale. It is a very direct way of doing it. Chances are they have a list of them that they want to move. If you buy a house by this means you will get out of having to pay a solicitor or an auctioneer. Again, this is all bringing down the size of the mortgage. (In Germany people buy direct from the banks a lot).

          You don’t actually need the 15K upfront to do the repairs. In fact it is shrewder to pay the repair bills as the repairs are carried out. This is another means of reducing the size of the initial mortgage, and therefore the time required to pay it off/the interest rate charged. It will be a temporary inconvenience that will be resolved gradually over the coming year. It will save you money.

          The fact that it has to be repaired might reduce the quantity of potential buyers.

          Let’s assume that you spend the next 12 months doing repairs on a monthly budget basis. When that is over you will be saving money until you realise that you have enough to pay it off and get debt free.

          Find out the total cost of the mortgage, and divide it by your savings plus rent. This should give you an idea of the shortest possible period to get free of debt. Aim to reduce the size of the mortgage – and thereby get debt free sooner.

          If your car drives less, then it will last longer, need less servicing, etc… This will push out a car purchase. This strengthens your financing position.

          Perhaps people in this country should thing in terms of years until they get debt free. This means deposit / month savings = > number of months to clear the deposit. And then try resolve how to get a lower interest rate.

          Stretching the mortgage over 30 years will allow the bank to charge a higher interest rate, and over a longer period. This suits the bank, because they have fatter margins and a better profit from you. Unless you can lock in a low rate (which I doubt they will allow). And then there is inflation. Unpredictable.

          If prices are dropping, or are unrealistically high, then it makes sense to play a waiting game, you get stronger as your deposit gets larger, and the price moves downward.

          And watch for bad news events – they will make it easier to get a price reduction.

          Be careful of professionals who are designing the mortgage to be as big as possible, and to last as long as possible. They have themselves in mind. Aim for the exact opposite for your own benefit.

          • paul77

            Hi Deco,

            Many thanks for the advice. You have said “if the price of the house is below 127,000 there is no VAT. So you should be aiming to get it below that number, because you wil save a lot of money”.
            Could you please explain this?, is 127000 to do with the mortgage?

            The house i’m looking at is 160000K, not sure if I could get a house for 127000, at least not for a good while, as I said i’m kind of sick of renting at this stage…

          • Deco

            Paul, I don’t know for absolute certainty, but I know that at 127000 there is a cutoff and stamp duty does not exist below it. This is something like 5-7% (check out what the correct number is). I don’t know what the VAT cut off is.
            So the objective of aiming to be below the 127000 mark is to cut out paying stamp duty. Stamp duty is giving the government money and getting the government jet flow overhead in return. It is possible that the GP will be pushing for that limit to be removed, because prices are dropping, and as Dermot Ahern says, people are saving too much.

            Ask Ronan Lyons for advice. Check out Daft to see what the local supply/demand situation is like. This will tell you how much stalling matters you can get away with. Try and figure out the dynamic. Unless there is an employment boom in the area (unlikely). People with jobs bid up the prices of houses. People worried about their jobs save for the rainy day.

            The main point of David’s article is that there could be more decline in the next 18 months. Now, if you are saving during this time period, your hand is getting stronger – especially if you are in negotiations with a bank. As long as the car can make it. If the car needs replacing then your savings don’t accumulate. The objective here being to push down the loan requirement and thereby not get landed with a massive loan (which means loads of interest for the bank).

            One last issue, ECB interest rates. German residential propery prices have moved upwards. The labour market in the Netherlands, Finland and Austria might also be tightening too much. The ECB is in a dilemma because Greece and Spain are disaster zones. The way out of this is to raise taxes in Germany/Benelux. But the current government in Germany is not keen on increasing taxes. And Dutch politics has moved to the economic right-influenced by the corruption in Brussels, and the bailouts to the PIIGS. This will not happen. ECB interest rate policy is therefore difficult to figure out. The Bundesbank will be pushing for an interest rate increase, as rates are unrealistically low. Italy and Spain will be pushing for cheap money. The question is ‘how much of an increase will the Bundesbank get ?’

            This a country where 19 Billion Euro per annum is being borrowed to maintain the pretence of prosperity. This is the cost of maintaining the Irish lifestyle. It is preventing a wholescale collapse in property prices amongst other objectives by keeping up the volume of currency in circulation. It is unsustainable. Not sure when it will stop. It is really an issue about the bonds makret. We are seeing the Chinese prop up the PIGS bond market so that the Euro area will buy products off China. And Brussels, for the same institutional reasons as Washington before it, is falling for it hook line and sinker….

          • Malcolm McClure

            michaelcoughlan and Deco:

            Thanks for the excellent contributions above that will help a lot of people. Practical advice like these enhances the value of DMcW’s site immensely. I’d just add that it’s better to buy the worst house in a good area (if intending to invest in improvements) than a run-down house in a second rate area of equal cost. Also don’t go overboard on fixtures quality but try to match the neighborhood average quality. And money spent on gardens beyond making them presentable will seldom provide additional value on sale. You might negotiate a reduction in price for an over-large garden as few FTBs have time to look after them.
            A parameter that is worth considering when buying domestic property is the realized sale value per square foot or sq. meter. This factor tends to provide a realistic basis for value comparison within a neighborhood.

        • michaelcoughlan

          Hi Paul,

          You pay no stamp duty if you are a first time house buyer or are buying a subsequent new house under 125m2. Vat is charged by the builder in a new build/development situation but isn’t charged subsequently if the person is selling their home or an investment property where they haven’t registered for vat. Vat isn’t applicable on houses below 127k as far as I know. You have indicated that you are 33 years old. This fact is going to determine what you do right now. You haven’t indicated whether you have a partner or whether you are married or not but you have said you will buy on your own. The reality for you is that should you decide to purchase any property including this one you are not going to see any appreciable increase in real terms in the value of the property for 10 to 15 years at least which will take you up to near 50 years old. If you think you want to live in this house as your home until you retire then buy the property as your home and make it your home. If however you think you will want to sell on again within 5 years or so I would continue to rent and save because rents will continue to fall or remain at the level they are now for the foreseeable future. If I were you what I would do is I would figure out where it is I would like to finally settle and obtain a mortgage to acquire a site in that area either with planning permission or capable of being obtained. I would get a modern well insulated home designed capable of being extended in the future to suit new requirements as needed. I would only incorporate cost effective green technology in the design. I would build the house as my principle private residence which it is and I would rent it taking advantage of the rent a room scheme whereby you are allowed to take in up to 10000 Euros pa in rent without any income tax liabilities and the tenant income would pay for most of the mortgage until you were ready to move in. When I moved into the house myself I would use my savings to pay down the mortgage. I would only do this having factored in the most important bit of information which is; IS MY JOB SAFE ENOUGH TO WIYHSTAND A SOVERIGN DEBT CRISES NEXT YEAR AND THE INCREASE IN TAXES WHICH WILL BE COMING DOWN THE ROAD?

          • paul77

            Many thanks again for all the sound advice, I think I will buy now as I think I am ready to do so. I am not looking to make money as such as you will never get to cash in your property unless you are willing to sell and move to another country, I just would not like to pay for a property thats 30 percent cheaper in a few years, The house as I have said has dropped in and around 50 percent at present.
            The house is a respectable area, nothing to classy, all are semi detached private houses. If I lost my job tomorrow I would have a decent redundancy to keep my going for a few years if needed, but it looks safe enough as it is not dependent on this country in any respect for its financial return. Again many thanks for the advice people!

          • adamabyss

            Best of luck Paul with your decision and future.

  10. ‘Pushing through Soverign Austerity Programmes’ – it is on this basis only that Kown was voted one of the top ten leaders of the world by Newsweek (& Elitist Club du Monde).Selective considerations ignore his dismal past performances and the forthcoming crash that will follow in due course.

  11. Stickarm

    I was going to quiz the figures, but I just realised David has adjusted those gross yield figures so that they assume stamp duty at 9% has been paid.

    I’m reading a book called “Dying of money” by Jens O Parsson published in 1974. On page 78, there is a quote, “In inflation, the first faculty that becomes anesthetized is the ability to weigh up real gain against real cost, and consequently the fringe activities blossom and become positively parasitic.” Its a little bit clunky but sums up the gospel David is preaching quite well.

  12. Puschkin the Black and White Cat

    Price of a house in Ireland three methods to calculate.

    Method 1 , Houses as an investment

    If a Dublin-3-Bed-Simi was an investment the income would be rent, the current rents are about 1,050 per month. To give an investor 1,050 a month at 8% the house would have to valued at 160,000.00.
    This is the normally accepted international return.
    Method 2 , History of Price falls. (Morgan Kelly, UCD)

    Mr Kelly says that on average in a bust house prices lose 70% of what they gained in the boom resulting in a drop in house prices of almost 50%.
    However Ireland has the potential to be worse.
    Deciding when the boom started is not that easy.
    But if a house was worth 100k before the boom started,increased to 350k at the peak then almost 70% of the gain of 250k is expected to be lost i.e 175k.
    This would bring the 350k down to c175k.
    This is broad and complex but the figure is directionally in line with other estimates. This takes inflation etc into account. This takes into account 48 boom/bust cycles in Europe in the past 50 years.
    This puts the average value of the Dublin-3-Bed-Simi at 175,000.00 (best, may be much lower)
    Method 3 , Used for 70 years, tried and trused,based on income.

    The price limit used by all mortguage lenders up to 1990 was value of home = ((Main-Wage*2.5)/0.80).
    That is , a home should never exceed 80% of the main wage multplied by 2.5.
    The average wage taken was that of a Civil Servant/Teacher on mid-scale wage 52,000 pa.
    This pegs the value of Dublin-3-Bed-Simi at (52,000*2.5)/0.8 = 162,000.00
    The average and therefore the value of Dublin-3-Bed-Simi today is 165,000.00 Euro (best possible value). Until this number is accepted we cannot move on. This number is absolute and cannot be otherwise. It’s a best (highest) possible figure and may be lower.

  13. barry1969

    David-your maths are a bit suspect or not clear. You quote a return of 4% GROSS on rent of 863 for a property worth 220k. That does not add up!! Are you working off 10 or 11 months rent??

  14. barry1969

    Im afraid to ask this but what will be the value of 1 beds in Dublin then? I recall One beds in Kilmainham selling for 50k in mid 1990s.

  15. stiofanc02

    I figure I know how he comes up with the 4% but the truth is that the average rent, I believe, is WAY below this figure as far as I can tell. Try something like €675 or below. Talking to landlords in many different property types this holds up. Great article anyway. David is my financial compass.All the best Steve

    • barry1969

      How the heck do you arrive at avg rent anyway-add all properties together from letrim to ballsbridge? Ludicrous. Im renting a one bed in Dublin for 725-explain how that fits in? As for his maths-suspect.

  16. I wonder how NAMA selling off property might affect the house prices. Perhaps speed up the decline by pumping property into the market?

    • michaelcoughlan

      Hin Marcus,

      I can’t see Nama selling off propery. It’s designed to work out the property in other words to drip feed the propeerty back in to the market to keep the prices up in order to maximise the return for the tax payer.

      • That depends on how well it’s managed though isn’t it? I wonder if political pressure may yet see NAMA trying to make a quick buck at the expense of long term profit to make up near future budget deficits.

      • econarchist

        The government will be tempted to get Nama moving fairly soon but the main reason will not be to get the income from property sales. It will push it along to create construction jobs and to create an impression of stability in the property market in the run up to the next general election in less than two years time. They can then announce that their economic policies are a success and some sections of the media will agree with them, just like RTE and the Irish Times reported that the recession was over a couple of months ago.

        I am not ruling out the possibility that house prices will crash before then, just saying that the government will try everything it can to prevent that from happening. They won’t be too bothered if it happens after the election. If they win, they have another five years in power anyway. If they lose, they can blame the new government for the crash.

  17. StephenKenny

    One classic sign of a market bottom in an asset class is when it is universally viewed as being almost insane to invest in it. The end of the previous equities bull market, for example (towards the end of the 1960s), was a time when equities were simply known to be a bad investment. Period. It was the time to buy, but the problem was that every fibre of your being told you not to.

    As I see it, there are a number of possible roads from where we are:
    Firstly, as a result of the massive stimulus, we could have a mini-bubble in assets – property, equities, etc. This would be followed by a god awful crash in almost everything, as there would have been little or no actual actual wealth creation to underpin the assets.
    Secondly, we could have a Japan like stagnation – 20 years of massive effort, resulting in very little in terms of asset/wealth rises.
    Thirdly, we could just be witnessing a stimulus-induced positive blip, which would be followed by another down leg in what is a deflationary correction to the massive, 20-40 year, credit inflation period.

  18. The book ‘The Pinch’ also talks generally about the Boomer generation shafting Gen-X

  19. Caligula

    For anyone in severe negative equity and can’t pay their mortgage I have the following advice. Stop paying your mortgage completely, don’t pay any other bills, save as much money as you can and buy a plane ticket to Australia. Then when you’re in Australia declare yourself bankrupt. Get permanent residency in Australia by blagging your way into a job and getting them to sponsor you. Then laugh at the thought that you’ll never have to face another miserable Irish winter ever again as you soak up the rays on Manly Beach.

  20. Emigrant lass

    Sorry but need some advice also,

    Unlike Paul, unfortunately I’m in the opposite situation…
    My fiancee and I at the time made the stupid decision to buy a townhouse in a city in the southeast of Ireland with 100% 35 year mortgage of 280,000 euro. Depressing I know! We were fixed for 2 years and luckily I had asked to go on tracker rate after that and we are now on 2.1%. Needless to say I got a mortgage over seven times my salary!!I was working in a very successful multi-national company until we moved to Australia in January 2009 as my partner was in the construction industry and we needed to leave.. I resigned after over 3 years but will be able to get a job back there if I go home..We are now obviously in negative equity. The location of the house is great so we never have a problem getting it rented although we have come down in our asking price for rent of over 100 eur monthly. I loved the house and said I would never let a dog into it and now we have a couple with a dog renting there but I thought it was better than nothing! Eventhough this only pays for 2/3 of the monthly repayments.
    My dilemma is that my finacee and I have never missed a months repayment since 2007 and I’m beginning to feel like we are pumping this money into a house where we only had planned to live for a couple of years until we got married and built a home. I’m lucky enough that I will be given a site just outside the city from my father to build on. So we are here in Australia making sure that our Mortgage is paid for and saving money to build also. I need good advice as up until now I have been told to keep paying on the mortgage as we won’t have a hope of getting help from the bank to build our house if not..
    I must add though though that I have been very sucessful with a job here since I came and have the option of sponsorship for four years. My partner is on serious money here also! The only thing is, I’m really keen to go home for July 2011 so thinking of working in the sponsorship until then. Alot of people would cristicise me but my parents are in their late seventies so I would love to go home to Ireland.. I was thinking of keeping up with the repayments until we have our new house built and not worry so much about the townhouse after that. Getting married in Autumn 2011 which is probably another waste of some of our savings!
    I would be very grateful for some advice from someone who has their head well screwed on as I didn’t back in 2007!!

    • Stickarm

      keep paying as otherwise, your credit rating will be trashed…I know it sticks in the craw but you will be alive for another 40/50 years on average.

    • michaelcoughlan

      Hi Emigrant Lass,
      First of all the most important bit. Congratulations on your upcoming marriage! Up until the birth of my beautiful baby daughter (even if I do say so myself) the day I got married was the best day of my life! I can assure you if I could recreate that day no amount of money in the world would prevent me from doing so. You will never consider the money you spend that day as a waste of money because quite frankly we are all only passing through. Congratulations also on your successful move to Australia! My wife and I are planning to go by next summer for the exact same reason. You may not be aware of this but you have fulfilled an unspoken aim of the government by emigrating which relieves the pressure on social welfare, you contribute to Eire by sending home hard currency and your vote is no threat to them from Australia. Is the mortgage on your property interest only of a full repayment mortgage? I would be able to advise better if you could provide this info.

      • Emigrant lass

        Thanks for the uplifting comments and sound advice. I reckon we will stay paying the repayments on the ‘doghouse’. By the way we are paying principle and interest on the full amount of the mortgage. We thought that to ask interest only for a year or more while we were away in Australia would cripple our chances of getting another mortgage! I have been advised by our bank that since the site is worth quite alot, we could get full building costs for our house if we wanted. Needless to say this was last year and I’m not counting on them either so saving hard! And I certainly never want to go down that road again of making the banks a fortune and crippling ourselves in the meantime.

        • michaelcoughlan

          Hi Emigrant Lass,
          Since you are paying a full repayment mortgage it is easier to now advise you. In Ireland you are entitled to take in rent on the rent a room scheme of up to 10000 euro without being affected by income tax from your principle private residence. There is no capital gains tax on the sale of a principle private residence. There are a number of tax related considerations for you to be aware before you make your final decision. Should you return home and build your house on the site your “dog house” will no longer qualify as your principle private residence. This means any rent will become liable for income tax. There are a number of deductions allowable. Only 80% of the interest part of the mortgage is allowable against tax. You can also write off estate agency fees and an allowance for wear and tear of the furniture of 15% pa I think against this income. You can also write of house insurance and repairs etc. You must register the property with the PRTB and also pay currently €200 charge pa which is a new tax introduced on second homes which are non principle private residences. Also if you rent the property within 5 years of purchasing there is a claw back situation where any stamp duty you may not have paid at the time of purchase will have to be repaid. Since you are resident in Australia any tax due will be payable in Australia as part of the calculation of your worldwide income but you should receive an allowance for any tax paid here under a double taxation agreements between Ireland and the Australian Government. One very important consideration to be aware of is if the status of the “dog house” becomes an investment property should you make a capital loss that is selling for less than you bought it for you can carry forward this loss against future capital gains you may have from other investments as far as I know. You won’t be able to do this if the property remains your principle private residence and you sell at a loss. As far as I know Houses in Australia are grossly overvalued so I wouldn’t buy there. If you feel your earning power is such that you could build the new house without a mortgage then do so. Construction costs have dropped here on average by 30%. Any extra funds could be used to reduce the mortgage on the existing property. I wouldn’t be coming home any time soon as things will not improve here for several years in my view well over a decade.

  21. Hi Lass ,
    I do not wish to give you advice rather instead to contribute to your debate on your ‘new opportunity’.I like to think positive in all cases it’s best policy.Were it my case I would commence building my new home immediately and seek finance to do so.I assume you will build it cheaper than a ‘non-builder’and thus make a paper gain anyway .
    Timing action / decision making now is more important than the ‘pure logic’ of procedure .In this case build before you sell the existing house with or without ‘the dog’ in situ.
    My policy is that the value of the home you live in is never too low and usually irrelevant irrespective of the loan value as long as you can afford the repayments .After completion of the new home you can then sell the ‘dog house’ and any loss can be incorporated into the positive equity of the new home .We are only talking about ‘paper profits in your case not cash profits’.
    I believe this would support your morale and allow your family to look forward to having you near them in the future.

  22. Anyone see this about our GOM1 “Unloved at home, ‘fiscal taskmaster’ Cowen wins praise from foreign press”

    Obviously his little media foray Paddy’s Day some Newsweek reporter caught Cowen on screen pumping out his rote lines about fiscal austerity, foolishly took the bait and said, hey, ‘This guy must be doin a good job, they’re not on the streets over there and apparently queuing up to take his medicine!’. Then he wrote the Newsweek story below: LOL, can we believe anything that’s written in Newsweek anymore since its been sold by the Washington Post?

    Sidney Harmon who hasn’t a clue about media purchased Newsweek from Washington Post for €1 assuming all the debt €30million debt

    BTW anybody see the bizarre piece on Pravda RTE with David Murphy confront Fingleton at the airport yesterday? Twas like a boy whose just made his communion attempting to doorstep the priest with critical questions about the priest’s integrity and honesty!

    Someone should hide Murphy’s suit and tie for a week?

    Nah, the frightening prospect of RTE/Murphy turning taxpayers advocate is too much to take all at once:) Feck it, just take the top ten loans and Fingers before a public televised tribunal and go through the A-Z of how they got the money from Fingers? Now, that would be real TV and real news!

    Great article D once again, thanks! Yeah prices have a long way to fall. NAMA is artificially inflating them. NAMA, the developers and banker’s digout, was meant to falsely balloon prices back to their former glory, wasn’t it?

    Cowen having poleaxed Ireland Inc with his d(rrrr)eadful policies that got us into this mess. Completely banjaxes the place with bank bailouts, socialisation of the banks and Arnotts, and the mess down at the NAMA ‘Dawn of the Dead’ Kronenburg morgue.

  23. Davo Full Moon –

    next tuesday is the full moon and ‘the Pull’has already commenced since yesterday .We are now watching the eclipse of the ‘aliens of davo’ gather together on a cyberspace to reveal their good news via newsweek about our ‘great leader’ King Kown 2nd renown for ‘rail talk’ and housing his best plonks to cork off on his arrivals at anyplace near you.
    In true spirit of all great apes he will perform at the arts festivals all this week his nostril dance with eye catching mouth openings.

  24. Tull McAdoo

    David refers to Ronan Lyons work over at, so I think that in order to clear up some of the above questions about rental income, how things are in different parts of the country etc.Ronans latest report is linked below.Good work Ronan.

  25. Tull McAdoo

    Closer to home Fingers said yesterday that he felt “some remorse” for what happened over at Nationwide.
    O.K. Mickey Fingers i’ll make it easy for you “give back the effin million you took in an unearned bonus and then go and sin no more, Or to put it another way lets put a price on that remorse.;-(

    • Deco

      Fingers operates under the assumption that you can get away with anything, if you just engineer the correct perception in the general public. This apology is a meaningless gesture. Fingers was into charity (like all the other crooks in Ireland, they do it to appear giving and concerned), and all sorts of other stunts. All about creating the correct image. And then behind it all he is grovelling for himself and running a business like as if it is an extension of his social life.

      The solution is allow Nepoto (as I call INBS) to fail. And then the creditors can sue Fingers for negligence. It will cost the taxpayer nothing, and will serve as a warning to the rest of corporate Ireland to cut out the BS.

  26. Tull McAdoo

    The Times carried a story yesterday about how Brian Linehan manages to speak out of both sides of his mouth. I hope this story finally nails down the fact that Brian Linehan is just another FF gombeen not fit for any office.

  27. Tull McAdoo

    Bad news for Carrick on Shannon with the announcement from MBNA that they were making people redundant in their Credit Card section. Well now, what with the floods, emmigration, ghost estates, unemployment, and so on, surely to God this part of Ireland must represent all the failures of the past decade or so. I know it’s a dubious honour but does anybody think that County Leitrim represents FF’s vision for Ireland, and where it was always going to end.?

    • Deco

      Friday evening – and there has been a jobs boost news concerning google. (though it is of no use to people in Carrick-on-shannon in the midst of all those empty housing estates).

      Call me a bit suspicious, but I reckon that there is a reason why good news is issued at the end of the week, but I cannot figure out why. Maybe because that is the time in the week when people get around to spending their money ???? Maybe it is to ensure more money goes to the publicans and the government tax system….

  28. G-bone

    Hi – can David or one of the other people who have commneted on this article clarify something for me. Average rent is quoted as being 863pm and with average house price at 220k, this equates to gross yield of 4.7% but is referred to as being gross yield of “just over 4%”. David then states that “in order to make 7% yield at present average rent the average house price would have to fall to 135620. 863pm = 10356pa, 10356/7% = 147942. The article has its merits but why are calculations presented in such a way so as to exaggerate the situation even further, these calculations (which I believe to be incorrect) overstate what average house price will need to fall to to achieve 7% yield by 12322, not an insignificant amount. Perhaps I am missing something?

  29. bico

    I can think of an example of someone who purchased a one bedroom apartment in dublin 1 last year , for € 180 000 . These units are now achieving a rent now of €950 per month. That would give you a gross yield of 15% and they are let within a week . It would be a typical investor property , which means that the fundamentals for buy to let properties have changed in central Dublin. The falling rents are a problem , but then management fees are falling as well and demand is strong. By the way, these units aren’t for sale anymore as the unsold units have been taken over by NAMA. It is a tale of different property markets really and I can imagine that it will be responding differently in the coming years. If there is a surge of immigration again it will be of people moving to the cities to take on jobs in offices and they’ll likely be young singles/couples rather than families looking for houses in outer outer suburbia.

    • G-bone

      hi bico – your figures are incorrect. 950 pm = 11400pa. this means it would take 15.79 years to PAY BACK the 180k but the yield is nothing like 15%. 11400/180000 = 0.06333 = 6.33% yield. I posted similar question earlier today querying David McW fifures – can anyone pls answer my question???

      • Tull McAdoo

        @ G-Bone, let me take a run at this rental thing and see if I can clear it up for you. Just remember we are talking gross yield and also bear in mind that the investor will only collect 11 months rent each year with the 12th month rental going to management company for fees, upkeep, etc. So with that in mind here we go……
        135620 (David’s figure) at 7% gives a return to the investor of 9493.4… now if you divide this figure by 863 (rent) you get 11 months.
        So there you have it, if the investor collects 11 out of the 12 months rental and the rental is 863 p.m. then they get 9493.4 which gives the investor a 7% return if the property is priced at 135620.
        David say’s gross yield because there may be expenses out of the 9493.4 fig. Remember that the normal management fee of 1 month rent in every 12 collected is always counted as a totally separate item.
        I sure when the investor is running the figures by their Banker they would say that the total yield from rent would be 863 x 12 = 10356 which represents a gross yield on a 135620 property of 7.64% but as I have pointed out above the investor only gets to keep 11 months and most Bankers would know that.
        David’s way of outlining it is just a bit of short hand so to speak, but you can be sure his bottom line figure would be correct, and I’m sure he would have checked it before going to print. Hope above has cleared up some of the “short hand” and not glazed your eyes over too much .LOL.
        Anhow man I’m on the 7 o clock to Darwin, its gulp down the rest of this coffee, head for the gate and its me and Skywest and a hi di hi, later keep the faith and all that old shit. Tull.

  30. coldblow

    David talks about a lost generation, overwhelmed with debt. Govt policy seems to be to let things drift, or at least do nothing radical to address the problem. The implication is that these people are expendable and that the govt feel they have enough support from the ‘winners’ or ‘survivors’ (job/ property holders) to carry on doing nothing. I wonder if they have. Crotty refers to the extinction of a million during the Famine barely raising a murmur. So this should be rather easier to justify – after all nobody’s starving.

    • Tumbrel Cart

      Coldblow. You are probably close to the mark in your assessment. They may not have enough support but they will try to tough it out. However national default is just around the corner and this should unleash forces that even your shit-arse cute Fianna Failer will not be able to contain or deflect.
      It some ways the interest and bank debts being hoovered up to pay financiers could be compared to the food ships that left Ireland during the famine in order to pay landlord rents. Then it was all dead money badly needed by a dying people. It is still dead money but people are not dying, yet.
      Former President of Tanzania once asked the Paris Club (International bankers) if Tanzania must starve its children to pay its debts. He was answered with a stony silence.

  31. StephenKenny

    @Tumbrel Cart
    The debt spiral argument is not really very complicated, and goes something like this: Over the past XX years (XX being 10, 20, or 40, but most especially the past 10), various governments have used low interest rates, and other methods, to encourage borrowing and spending. While the borrowing and spending is going on, the economies boom, but when it stops, the economy goes into reverse. Every time it goes into reverse, the governments uses yet other tools to encourage another spell of borrowing and spending, and so have another boom. The result has been XX years of continually increasing debt. Few people would argue that this has happened, and that it is unsustainable.
    The problem, and therefore the discussion, comes around the scale, rate of increase, and future results. At one end of the spectrum, they argue that it’s manageable, that with restructuring of economies, it will just pass without any real problem. At the other end of the spectrum are people who are forecasting the total collapse of most of the world’s advanced economies, anarchy, and so on.
    The difficulty is, of course, vested interests, of which there are many. These difficulties surface in the form of misleading financial, economic, and social indicators.
    Until fairly recently, for example, things like GDP and inflation were not really quantified. The 1970s was a period of significant inflation in most of the advanced economies, so there started to be reasons to quantify inflation (how much should state pensions go up, for example). So they started to produce indicators of inflation, GDP, and so on. Very quickly, these ‘indicators’ morphed into ‘targets’.
    If the inflation rate is going up, or the GDP going down, there are broadly two approaches you can take: To put it crudely, you can fix the problem, or you can fix the published rates. It doesn’t take a genius to see that the latter is not only easier, but also has a 100% success rate. This problem also applies to companies, e.g. earnings per share, just as much as it does to governments.
    This isn’t necessarily about a conspiracy of evil people, but is much more about a company wanting to hit it’s quarterly earnings targets, politicians worried about a forthcoming election, or politically motivated people wanting to enhance their position.

    This problem is absolutely massive, and is the driver behind most of the problems out there. Here’s a very simple example: How much the the US government’s economic stimulus during 2007-2010? You’d think it’d be obvious someone’s bound to know, or be able to find out – to the nearest $! I mean, someone in the government has to write a money transfer form of some sort, and get it signed, for each bit. You’d think it’d one thing that would be really clear. Not a chance. There are far too many groups who want the total, or their bit, to be understated, so one estimate only includes this bit of it, but excludes that bit. e.g. All the US broker dealers (Goldman Sachs, JP Morgan, etc) were allowed to borrow as much money as they wished directly from the US government at 0.5%, and then lend it straight back at about 2.5% – is that ‘stimulus’?

    Over the past few years I’ve read hundreds and hundres of examples. In the context of the US & UK stock markets, you may have heard of HFT (High Frequency Trading). Very fast computer programs that place millions of orders per day for stock trades. They account for about 70% of all trading on the main markets these days. There are two problems. Firstly, although a lot of the orders go through, the majority are cancelled later. A placed order effects the share price of the stock in question, and so effects another ‘indicator’ – the market index (Dow Jones Industrials, S&P 500, FTSE 100, and so on). With millions of such orders per day, it is perfectly possible to ‘drive’ the market index in a direction of your choice. You want evidence? The NYSE is, in reality, a huge computer. The NYSE sells the right for other computers to be located physically close to their computer, thus lowering the network access time between the two.

    GDP? In 2002, during the recession, the US government decided to include a thing called Owners’ Equivalent Rent in the calculation of GDP. OER is the amount that a home owner would have to pay to rent an equivalent property. Putting it into the GDP calculation means that an owner is deemed to be ‘paying themselves rent’ for living in their house. Using GDP, which is the indicator that is used, the recession finished, nicely.

    I could go on and on and on, but it’d get dull. You can look up, and keep track of, all this stuff for yourself. You could start at Mike Shedlock’s blog ( and take a look at his list of links.

    Be warned. This is the dreaded blogosphere. The bloggers vary from the ex Chief Economist of the IMF, to crazies. Many are experts in their fields, ex-chief statisticians, traders, and so on. Many aren’t!

    When the US sneezes, the rest of the world catches a cold. Maybe it’ll inspire other experts to tell us what they actually think.

    • Tumbrel Cart

      Many thanks for your excellent explanation. While I had somewhat intuitively rationalised debt fuelled growth, the manipulation of economic data was very new to me and a real eye opener.

      The concept of (OER) Owner Equivalent Rent takes the biscuit. The value of the house is added to GNP when the house is built but an imputed equivalent rent is added annually forever for people who own their homes outright. So retired people that own their own homes and don’t work at all are significant producers of wealth. Somebody should let them know. They may want to cash the cheque!
      No wonder Goldman Sachs and JP Morgan profits recovered so rapidly.

      The old saying of lies, damned lies and statistics comes to mind

      Thanks again for your help.

  32. El Duderino

    As one of the “Lost Generation” I cant help but feel that all bad news becomes a self fulfilling prophecy in the end. Unfortunately, David has been shown to be bang on. Can I ask all what measures this generation can take to avoid being lost in the history books. I’m currently working (and practicing some of that good advice accompanying this article) very hard to get somewhere.

    Articles like this make me feel like I should just muddle through as trying to rise above the chaff is pointless.

    • tony_murphy

      El Duderino


      And the following books had a profound effect on me:

      George Orwell – nineteen eighty four
      Aldous Huxley – a brave new world
      The richest man in Babylon
      Peter Hitchens – Abolition of Britain / The Cameron Delusion

      Beware of media / propaganda.
      Turn off your TV, no soap operas, no celebrity stuff
      If you drink/smoke – cut them out. For me, these are Ireland’s biggest problems

      Keep working hard

      • Deco

        Check the documentary “The Century of Self” (secondary title “the manufacturing of consent”.

        (I would even go so far as to describe it as the manufacturing of contempt – because envy and contempt are domineering emotions that are whipped up to induce consumption and excessive consumption. This is entertained by both left and right (just look at the Blair/Brown debt inducing economic policies in Britain). The problem with envy and contempt is that they are the reverse of concepts that provide personal and communal liberation.

        You will never see The Century of Self on a mainstream media outlet. Our Advertising sponsors would not approve.

  33. StephenKenny

    One extra little thought. If you want a really nice, clear, view of how the US, UK, Irish, Spanish, and one or two other economies, have been working, you could read: ‘Anatomy of Greed’ by Brian Cruver. It’s about his time at Enron, but you’ll quickly see that if you replace ‘Enron’ with ‘The Irish Economy’ (or UK, or US etc) it is a beautiful, snug, fit. They made a film of it, “The Crooked E: The Unshredded Truth About Enron”.

  34. StephenKenny

    You might think I’m a doom and gloom merchant. The news is broadly bad now. But it will end, and if history is anything to go by, it will end when the night is at it’s darkest. When you can almost touch the all pervading feeling of tired hopelessness, it is ending. The dawn will be spectacular, it will be like spring after a really hard winter. Just remember, whatever is happening now, it will end. Absolutely certainly. I’m looking forward to it, but in the mean time, I’m starting a new company. It’s not as if no one has any money, and I think I have something that will roll along, until a dawn take-off.

  35. StephenKenny

    Or maybe it won’t, We shall see.

  36. wills


    If the real market equilibrium price returns to the market, despite the oligopolies attempt to make sure this does not occur, but if it does occur and the free market forces and invisible hand work through the rigging, we will be visited upon by massive interest rate increases to keep the yoke of the debt money system alive and well on the outsiders / have nots.

  37. John Q. Public

    Another sobering thought is the fact that we are left in the dark as to what NAMA are going to do with empty housing estates and blocks of apartments aka ‘toxic assets’. A small percentage of these put on the market would plummet rental and home prices further. It all adds up to a dangerous over-supply of potential homes, whereas if they were offices it would be less detrimental for us. Dr. Constantin Gurdgiev of TCD suggested blowing these assets up with dynamite so we can start afresh.
    I think we, as sensible citizens should hire the A-TEAM to clean this place up! They could clear out all the dysfunctional bankers who still have their jobs, the cronies etc. who made Ireland what it is today.
    And good riddance to Bank of Scotland, they should never have come here, they fuelled the property delusion. Think about it, they can just dump their losses on us and walk away. We will have to deal with their gambling mistakes for years to come.

  38. insider

    On my last visit I was surprised at how prices had not dropped as much as I had expected. That said I spend most of my time in D4 hanging out with the likes of Tull so I see higher than average asking prices. But I kept asking myself how are places selling if so many people are in negative equity, the banks are not lending and there is so much job insecurity. It just does not make sense but then again these asking prices were not reflective of reality. I figured prices in Dublin need to drop by at least another 25% before I would be remotely interested.

    That said there are some very attractive assets in Ireland right now – I’d say unmatched anywhere of Europe and I’ll be looking for my next Irish holiday pad soon as the market looks to bottom out. I like michaelcoughlan’s advice – will look into those heating gadgets as it fits perfectly with my next project tx Michael. I’m not yet convinced of double dip due to mixed company results and some M&A activity (BHP why oh why?) happening but I’m certainly not in any rush to invest in a falling market – why take the risk? There is no catalyst for Irish house prices to rise over the short term but as StephenKenny says there will be a new dawn – good on ya buddy no doom and gloom there that’s positive thinking.

    Buy for the right reasons and you won’t go wrong.

  39. Property Utility Costs : the providers of these services need to be watched closely now .They also influence property prices too .
    Very serious happenings are currently on-going and I am not the only victim.
    On Wednesday 4th August while I was on-line in this site from my office and during the holiday season ( office closed)and after returning from vacation from France my telephone lines suddenly started disappearing .I decided to ring Eircom only to be told that they were cutting off my lines .For the record I owed the sum of €297.73 for a bill that was issued on 16th July 2010 for a rental period 16th July to 15 th Aug 2010 .I gave the service section person a piece of my mind and was only fed none sense as though he did not care what my situation was .He also said they had not checked my last payment made before disconnecting and blamed the recent bank holiday week end for that.Before the conversation was finished he decided with spite to finally cut off the broadband thus my internet just plonked out of existence in front of my eyes.
    Their excuses was that the invoice says ‘pay immediately as services maybe withdrawn without further notice’.My previous bill was paid in July .
    What other utility providers will I receive such obnoxious behavior from will remain to be seen in due course .It certainly points to me that we have not heard the full stories yet and these actions will certainly delay any stability returning to property prices in the near future.
    So beware ‘you are being watched’.

  40. Tull McAdoo

    Good piece and worth the read by Krugman in yesterdays Times. Nice to see he has’nt lost his sense of humour, “austerians” indeed!!.

    • Deco

      Contrary to Prof. Krugman’s views, I think the problem in Ireland is not Austerity – it is debt.

      In fact, the Irish state is borrowing 19 Billion Euro per annum to sustain the Irish lifestyle, and a very ineffieicnt state system. The government and the banks are trying to prop up the property market, by a range of means, including NAMA. Mostly by restricting market availability and talking things up. We even have GP TDs suggesting that some estates get knocked down.

      So, I actually wish to propose that the government in Ireland is not implementing Austerity. The state has contained itself in some areas (often the wrong areas – like immunization programs fro example, and taxing pensioners). But for the most part, the state has got agreesive with taking more money from the people by various taxes both direct and indirect. This has been augmented by local authorities. This is not austerity. This is expansion of state revenue collection by vertical means (those who pay already get asked to pay even more – Bono and Denis O’Brien can hold their Irish passports and continue as normal).

      Real Austerity would be if they sorted out the quangoes. Real austerity would be if they stopped all the waste in local authorities with all sorts of schemes and programs. Real Austerity would be rationalizing the state to make it deliver more with less. Cowen still the second highest paid prime minister in the world, the soccer coach is the second highest paid in the world, the ESB chairman and the HSE Chairman are overpaid, etc..etc….Real austerity was what happened in East Asia in 1998. The point of real austerity is to make resources get allocated more efficiently to productive activity. In Ireland we have convinced ourselves that this is the responsibility of the multinationals, what is left of a diminishing export sector. This conveniences your average voter in the pub because he doesn’t have to get up off his backside and do some thinking.

      Real Austerity was what happened in Taiwan, Malaysia, Korea, Thailand after 1998. And interestingly enough those countries are rebounding strongly now.

      What we have seen under Cowen is a hamfisted, and badly informed attempt at austerity that has saved very little money, and has just annoyed people with a series of stealth taxes. Cowen has set out to please people as much as possible, except in any area where IBEC needed a policy delivered (Lisbon, the banks, NAMA, etc).

      Krugman should not use Ireland as an example of austerity. He should use Iceland – because that is real austerity. Ireland is austerity for beginners. The problem with Greece is that Greece does not have a productive bases sufficient to service it’s lifestyle expectations. Greece has made a decision to have a good time. Greece has fully embraced the modern Western way of life, have whatever your whim desires and don’t worry about the bill. Therefore there is a debt build up, so as to maintain the lifestyle. And no corresponding build up of productive capacity to service the debt.

      Basically, austerity comes around as the nasty end result of ridiculous lifestyle expectations taking hold in a population, and the financial system not being able to maintain the funds flows to maintain this.

      Mostly, we are presented with a choice between austerity and default. Like Bertie Ahern, we are dithering on the issue, and we are not able to make up our minds on either.

      Therefore, Prof Krugman – Ireland is not austerity. Our politicians, who are stridently liberal (conservative is a term of derision amongst all Irish politicians except the part of FG that likes to connect with the British Tories). You can be certain that Ireland’s politicians will not take us down the Austrian route to economics. They might endorse neo-Liberal economics from time to time. But they will not follow the Austrian route.

      • Deco,
        I’m off to Béal Na Bláth on Sunday morning to hear Brian Linehan give the oration. It’s a first for Fianna Fáil and somewhat of an opportunity to deliver some concrete insights for the future from a man who has been battling not only a public crisis, but also a savage personal one.
        I doubt it is an ego trip.The public mood down these parts won’t take too kindly to politspeak and PR. Too many people are hurting.
        We need and expect something inspirational.

        Will Brian Linehan lay down the future there? Will he stake his claim to being Taoiseach by outlining hitherto secret plans for the rejuvenation of the Country?

        Time will tell.

        He’s probably the only Minister with conviction, intellect and tenacity around at the moment, even though he’s learning on the job and has made some horrific errors of judgement, albeit based on selected, self-serving information by those who should be arraigned for aiding or abetting conduct tantamount to plotting against the State.

        I’m hoping for a Lemass / ML King / Ghandhi moment. The time is long past for a true Statesman to rise and he has the abilities combined with the qualities. In breaking with tradition by speaking, he is demonstrating the same courage as Sean Kelly when, as President of the GAA, he led that organisation to fulfil it’s part in bringing peace to this country.

        This latest article from David would have been timely exactly one year ago. That it is still valid today is a savage indictment of failed policies. We’re getting sussed rapidly by the markets therefore a massive speech is required from our Minister for Finance, aka The Real Taoiseach,the day after tomorrow.

        Else the guy might as well just announce his retirement and waffle on about breaking moulds and we all being in this together.

        Which won’t do at all.

        • tony_murphy

          Lenihan is dancing to the bankers, hedge funds and builders tune. Sorry F, but he is a disaster for ordinary citizens

        • @Furrylugs “He’s probably the only Minister with conviction, intellect and tenacity around at the moment”

          Michael Collins would turn in his grave if he knew Brian Lenihan was glove puppet of the bankers who got us into this mess and in so doing has betrayed the people the Irish revolutionary heroes stood for.

          When it comes to economic matters, Brian has shown himself to be a dunce. Put his support of NAMA on top of that and we have a Gombeen of epic proportions.

          Instead of “I’m hoping for a Lemass / ML King / Ghandhi moment” avoid disappointment and expect a dumbass one instead:)

          • Should Anglo employees be given an extra bonus by Lenihan for discovering losses at current €24.3 bn instead of previous €22 bn, with all the extra work this involves? MAybe we should index increasing bonuses to increasing losses?:)

          • Sadly, Dumbass carried the day but at least potholes weren’t mentioned.
            What a waste of diesel and time.

    • Deco

      About time some accountability was forced on RTE.

      RTE should be broken up. Anyway in the age of the internet, less and less people care about RTE anymore. The state should cut it’s losses and get out and allocate the money somewhere else. Handover TG4/RnaG/LyricFM to Udaras na Gaeltachta, and sell the rest. And enforce competition policy this time.

      • Deco – that will only happen in your sleep .Decisions will follow the next influence about us.Think of someone who has charisma and lady charm and who can sell us long legs and scantly dressed can can ladies on stage .Think of Moulin Rouge and Pigalle .Then you might arrive closer where the new morph of RTE will go.Think of new hair pieces and lots of make up and botox and finally face lifts .We wont mention offshore and private monopoly and soccer .There will be a revolution in the Irish Media and he is already doing his home work on where the ball will land next.
        Maybe a thought of Berlusconi will conjure something of who will dictate what we will watch and pay for in the next generation.
        When that happens God be with RTE/Pravda.

    • Louis is right and kudos to TV3 for their efforts. RTE has gone so civil service, its light entertainment gone mad.

      Pile together its cacaphony of home produced mostly unlistenable/unwatchable ‘light entertainment’ it blends into a music, the kind of dirge music heard in a dictatorship on the death of a leader, perhaps this signals the death of freedom, democracy and free speech.

      No challenging documentaries, no penetrative, revelatory, probing journalism, only Pravda RTE lip services to the status quo that got us into the mess. And hey, eg there’s a feast of crap that needs to surface from the banks but don’t expect RTE to bring it to you soon!

      Opponents to the status quo are challenged with innocuous and boring critical commentary that ‘keeps balance’ by rubbishing dissent in a stale blend of dull appeal to the same status quo it jealously guards. As for the disgusting salaries..nuf said!

      RTE Radio does a better job apart from LightE, all of which ‘entertainment’ should be dropped in favour of public information/education programmes.

      EG programmes specialising in music and the arts, documentaries and specialist services probing different sectors of Irish society perhaps with involvement from the university sector, could be fertile ground for success? A form of adult education? RTE doesn’t have to be the way it is?

      Overall its supermarket piped music at best, at worst an unending dirge lulling the mind to sleep, and who would want that, only the powers that be?

      Should we really expect anything else? After all, they fund it, but so do we? Are we too zombified as a nation to be incapable of doing anything about it? It would appear for the moment we could be! On the other hand, try listening/watching the media in the US and Pravda RTE is a paragon of free speech.

  41. Deco

    On the initial page of the moderator of the itulip website, Eric Janszen, interviews Elizabeth Warren. They discuss what Janszen called the FIRE economy [ Finance, Insurance (including pensions, derivatives, welfare ponzi schemes run by bankrupt governments), Real Estate ].

    At the end, Warren basically makes the point that the entire system is spent (borrowed out). In economic terms this means the resources have been squandered on all sorts of selfish empty, ridiculous uplifting nonsense schemes. Mostly at the behest of modern sophisticated consumers in the pursuit of lifestyle trajectory.

    • Gege Le Beau

      Really useful Deco, learned something, good term too ‘FIRE’ economy, perfectly applied to Ireland and the house certainly looks like it has been torched by arsonists.

  42. Deco

    An article concerning the “new poor” in the US. These are people who are heavily in debt, who do not have the means to service debt levels, and who are formerly part of the American Middle Class.,1518,712496,00.html

    It might also deserve commenting that the State of California is in a extremely tight budgetary predicament. In fact it has built up masive deficits, in addition to ridiculous commitments that have basically hamstrungs it’s ability to rescue itself. In many ways it is in a deplorable financial condition. Several municipalities in California have already threatend bankruptcy in addition. It should be noted that during the Great Depression, that California was booming relative to the rest of the US, managing to increase it’s income and population in tandem while most of the US struggled through the dreary 1930s. So for California this is a predicament with no historical parallel. This means that the State of California is stretched in it’s efforts to provide for people who need assistance.

  43. Garry

    Either you’re desperately stupid or just desperate.

    You’re hoping that the guy who has guaranteed his mates debts with your money, has created a framework for fraud via NAMA, has been caught out by Eurostat while attempting to pass off bailouts as investments… who has turned the country into a debt servicing machine on behalf of his cronies…

    And who by giving the banks all of the money now has ensured the creation of a new landlord class, but this time corporates not brits. as inevitably the banks seize all assets whose debts are not performing but which they can make money on (The others are laundered, first into NAMA at a loss to the taxpayer, and then back to the cronies via another loss on the taxpayer)

    Lenihan has courage, tenacity and intellect… the problem is it is being employed against you.

  44. Gege Le Beau

    I was a little suspicious at first but listened nonetheless!

  45. Ireland – the latest from USA

    ‘Elevated Risk #2:

    Last week Irish government bond yields returned to a near extreme spread against German yields. The reason: Anglo Irish Bank, which is already nationalized, needs another EUR 20+ billion from the Irish government.

    The market is again bidding up the credit default swaps on Irish banks and yields on Irish government debt. Recently the government had to pay-up for a short term debt offering, to the tune of 76 percent more than it did for a similar offering just three weeks prior – nearly double the yield!’

  46. Germany – the latest from USA

    ‘Elevated Risk #5:
    Uneven Euro-Zone Economic Performance

    The German central bank this week raised its estimates for 2010 growth from 1.9 percent to 3 percent. I wonder how that sits with its austerity-laden neighbors to the south. As time passes expect the political fallout to build.

    Germany is in much better shape than other euro-zone members.
    Sure, it may seem like these threats have already been handled. The European Financial Stability Facility and the ECB’s involvement in the euro zone government bond markets have given a reason to conclude that the problems in Europe have been solved …

    But when push comes to shove, we’ll likely find that all of the $1 trillion worth of promises made to stabilize confidence in Europe won’t materialize. And we’ll see the weak countries that are living with tough austerity and the strong countries that have committed to transfer tax payer monies to the fiscally less responsible saying “no more.”

    In sum, any one of these rising risks could become the catalyst for another round of sovereign debt fears – which could easily turn into debt defaults and contagion, making safety and preservation of capital the priority.’

  47. [...] According to David Mc Williams’s latest article” Collapsing house prices? We ain’t seen nothing yet” [...]

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