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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Sun Jun 13, 2010 12:50 pm 
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Quite right. Bloody ridiculous question !


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Sun Jun 13, 2010 1:10 pm 
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Mossy_Heneberry wrote:
September wrote:

How would that make you bankrupt? Rising property prices would surely be result of lower unemployment, strong wage inflation and unprecedented boost in productivity. If only reckless lending practices are restricted by then, we should be OK.


There's is nothing wrong with rising house prices in an economy where the fundamentals are sound. The problem is, they are not.


That is why they are falling down. But this is hypothetical situation, so obviously rising prices would mean excellent fundamentals. High prices means there would be lot of buyers bidding over 300k properties, and providing there is restricted access to credit, it means we suddenly become rich, cash rich ;-) If higher price levels were sustainable due to extremely good economic output we would not in trouble.


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Thu Aug 19, 2010 7:51 pm 
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I think long term steady sustainable growth would be the best, but for now definitely falls, prices are just too high.


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Thu Aug 19, 2010 8:09 pm 
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September wrote:
Mossy_Heneberry wrote:
September wrote:

How would that make you bankrupt? Rising property prices would surely be result of lower unemployment, strong wage inflation and unprecedented boost in productivity. If only reckless lending practices are restricted by then, we should be OK.


There's is nothing wrong with rising house prices in an economy where the fundamentals are sound. The problem is, they are not.


That is why they are falling down. But this is hypothetical situation, so obviously rising prices would mean excellent fundamentals. High prices means there would be lot of buyers bidding over 300k properties, and providing there is restricted access to credit, it means we suddenly become rich, cash rich ;-) If higher price levels were sustainable due to extremely good economic output we would not in trouble.

Yep, onwards and upwards. The sky's the limit. The only way is up baby.

PS. Even in an economy where the fundamentals are sound, rising house prices is bad...
Fall or fail...

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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Wed Sep 01, 2010 2:05 pm 
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yoganmahew wrote:
Yep, onwards and upwards. The sky's the limit. The only way is up baby.

PS. Even in an economy where the fundamentals are sound, rising house prices is bad...
Fall or fail...


Imagine that everyone is so productive, that they generate 10^9$ GDP per capita so Ireland would be 4 Trillion $ economy - we could make cold fusion car engines, immortality drugs, dig gold and so on. It would be really cool, and rising house prices would be just a side effect. Do not think about Ireland now, think about Ireland as it could be in some alternative reality. I would guess we are closer to developing anti gravitation that to property price rises now...


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Wed Sep 01, 2010 3:18 pm 
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I set this as an exam question once and very few people tried to answer it.

"Is is inconsistent to support a rise in house prices but oppose a rise in the price of a pint?"

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Jesús Encinar, cofounder and CEO, Idealista.com


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Wed Sep 01, 2010 6:06 pm 
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JoseAntonioPP wrote:
I set this as an exam question once and very few people tried to answer it.

"Is is inconsistent to support a rise in house prices but oppose a rise in the price of a pint?"


Its a very good point...

Sadly we live in a society where we have been conditioned to putting a significant % of our after-tax income into one asset, which we are told will provide for our future, so naturally we want it to increase in value. In fact we want it to increase more in value than not only the price of a pint, but also the price of a holiday home in Spain /California (where we may aspire to retire to and live like Kings, 30 years from now).


Property became such an easy ride for so long, that resources and capital were wastefully deployed into one asset which did nothing to further our productivity or improve our competitiveness globally. It didnt create any real wealth. It was never really going to, because a 400 sqft 1-bed apt can be replicated a million times over, every iteration using cheaper materials. Its not as if we had just invented the wheel.

Its no surprise that places like Germany have a low home-ownership rate, yet are possibly the worlds best nation at improving productivity and their own competitive position relative to the rest of the world. They don't invest in something if it doesnt look like it will yield a 10% + return p.a. or do something useful.

We did the exact opposite. Became over obsessed with one asset that we cannot export, created a tax structure that encouraged us to build property we did not need and ignored all the warning signs that we were risking heading into a multi-decade crisis after years of waste.
What are we left with now? Apartments we dont need or want, hotels that will never be filled and banks, that quite frankly have become walking zombie's.

All that GDP, when we called ourselves the richest nation on earth, was financed with debt. The debts still need to be fully repaid, yet we have little to show for all that money we borrowed. Who cares if MrX can borrow EUR 1million to buy a banana and sell it to someone else for EUR 1 million. Yes, 2mln EUR of GDP was recorded, but nothing of any use was left behind, except the 1mln loan that still exists and grows at an interest rate bigger than the return on the banana.

I think as a nation we have just proved how a high level of GDP, when that GDP is financed with external debt and put into an unproductive domestic asset will eventually lead to wealth destruction not creation.

It was a classic fallacy of the boom years in Ireland that GDP = Wealth. Yes, it is, but only if its generated from activities that will provide a return greater than the interest rate on the debt and/OR is mostly funded from domestic savings. In our case, neither applied as it went into a low return asset, that collapsed in value and we borrowed from abroad for the majority of the GDP growth

We took the easy option for 10-15 years and now will pay a price for who knows how long as we struggle with the highest levels of debt of any nation in the world (Govt + Private + Corporate) and an economy that has few other natural sources of growth to pick up the slack and pay off those debts.

If one good thing comes from this crisis, it will be that the next generation will hopefully have the courage to say 'no' and pursue other sources of wealth creation by actually creating something useful that people in this country and other countries need and want. Hopefully, at some point they wont have to emigrate and the banks will be more willing to take risks in financing new business ventures / ideas, as opposed to just saying "No, but we could lend you X to buy this shiny new apartment!"


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Wed Sep 01, 2010 6:29 pm 
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September wrote:
yoganmahew wrote:
Yep, onwards and upwards. The sky's the limit. The only way is up baby.

PS. Even in an economy where the fundamentals are sound, rising house prices is bad...
Fall or fail...


Imagine that everyone is so productive, that they generate 10^9$ GDP per capita so Ireland would be 4 Trillion $ economy - we could make cold fusion car engines, immortality drugs, dig gold and so on. It would be really cool, and rising house prices would be just a side effect. Do not think about Ireland now, think about Ireland as it could be in some alternative reality. I would guess we are closer to developing anti gravitation that to property price rises now...


We could do most of that with the Anglo money

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(Le Petit Prince, Antoine de Saint-Exupery)


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Tue Sep 07, 2010 4:41 pm 
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bilbot79 wrote:
September wrote:
yoganmahew wrote:
Yep, onwards and upwards. The sky's the limit. The only way is up baby.

PS. Even in an economy where the fundamentals are sound, rising house prices is bad...
Fall or fail...


Imagine that everyone is so productive, that they generate 10^9$ GDP per capita so Ireland would be 4 Trillion $ economy - we could make cold fusion car engines, immortality drugs, dig gold and so on. It would be really cool, and rising house prices would be just a side effect. Do not think about Ireland now, think about Ireland as it could be in some alternative reality. I would guess we are closer to developing anti gravitation that to property price rises now...


We could do most of that with the Anglo money


But what use would it be for Ireland to become let's say manufacturing center if there was no banking system... :x


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 Post subject: Re: Would it be better overall for house prices to rise or f
PostPosted: Tue Sep 07, 2010 6:16 pm 
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September wrote:
... - we could make cold fusion car engines, immortality drugs, dig gold and so on.


Cool. We'd be able to commute from Dingle to Dublin, wouldn't care if it took a year, and would have gold-plated bath taps in our tiny overpriced apartments. 8DD

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