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NEW RESEARCH HAS found that changes in the housing market are likely to have more of an impact on the economy in Ireland than in other countries.
The study also provides proof that people will reduce their spending while they clear outstanding debts.
The latest report from the Economic and Social Research Institute (ESRI), entitled ‘Consumption and the Housing Market: An Irish Perspective’, reveals that a reduction in debt levels is most likely to occur in households that have the money to do so, resulting in a slowdown in consumption.
Less well-off households are likely to be unable to pay off any debts, and so find it difficult to deleverage, the research suggests.
While this may seem obvious, the households with money are the ones who are usually expected to be spending and boosting the economy.
“Crisis”
“The recent financial crisis has highlighted the relationship between the Irish housing market, real economic activity and key fiscal variables,” said Kieran McQuinn, ESRI economist and one of the authors of the report.
“Micro-level information provides rich insights into the nature of these relationships, particularly in light of the financial crisis.”
The report highlights that changes in ‘housing wealth’ have a relatively large impact on how much we spend in comparison to other countries.
This suggests that it will have a significant impact on the real economy.
Recent figures have revealed a slight easing in the rapid increase of activity in the construction sector.
However, suppliers are now taking advantage of the sector’s massive growth, with input cost inflation rising sharply.
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Households with more money will also buy more households. This will accelerate as repossessions really crank up. Noonan will continue to deny there is a housing bubble as cash buyers force first timers out of the way and into the rentals they just bought. Banks will “punt” on this ponzi scheme again but not lend to job creating SME’s
I do hope my crystal ball is lying to me.
yeah, won’t be long until the wheels come off again.
being forced to shoulder 42% of total European bank debt from the financial crisis in 2008 doesn’t help either.
with politicians like ours, who needs enemies?
A plague on all of their houses.
Ireland has a housing market?
A couple of bust Zombified Irish banks that aren’t lending.
A couple of bust Zombified foreign banks trying to sell up and get out that aren’t lending.
A few thousand families all wanting to buy the same 5 or 10 half decent family homes with a garden in south Dublin bidding against 10′s of thousands of lazy cash millionaires aimlessly buying houses just to protect their cash from a Cyprus style cash grab.
Not to mention a plethora of crooked estate agents and their cronies in the middle buying and flipping homes for a quick 50k-100k profit thanks to our lax, unregulated casino style property industry “legislation”.
Ground breaking stuff
There’s plenty more where that came from.
So people with money spend it and people with no money can’t spend it.
I had to pick myself up off the floor after that one.
People with lots of money either hoard it or buy property. People with little or no money are trapped in unsustainable mortgages and are unable to spend. So we have “won’t spends” , ” can’t spends” and politicians who are incapable of understanding the blindingly obvious about the grossly adverse impact of austerity measures.
Save for our LPT, save for our water taxes, save for health treatment and save for everything else.
The only way of responding to hostile Government policies which favour the super wealthy is no stop spending, consume as little as possible and minimise to the extent that you can spending on big ticket items such as cars, large televisions, stadium tickets. Cut down consumption. Don’t spend. And eventually the government will get the message.
This country is going to be goosed again, this time only far much quicker than the last time, but folk here love their cool – aid.
Wow. It seems ““Micro-level information provides rich insights into the nature of these relationships, particularly in light of the financial crisis.” Which I translate as: “We talked to several what are colloquially known as ‘human beings’ and they mostly said ‘We’re fecking broke’. Except for a guy named Dave. He was ‘grand’.”
Always good to learn from others mistakes – your own fault if you decided to have too many kids and too large a mortgage.. Something I and others can learn from so as to live better lives. Boom.
Dave at first I had no idea what you were talking about then I realized you thought I meant you when I used the name ‘Dave’ above. In fact I said Dave because it’s a common name and I was thinking of my friend Dave who is in fact always ‘Grand’. You are not him. But somehow I will endeavor to carry forth without knowing you.
Boom!
Looks like every Dave is grand so
I know many a Dave like you, you all seem to have the same chip on your shoulder and sing the same tune ” ME ME ME ME ME ME ME ME ME” it’s pretty typical of a Celtic tiger cub
Talk about stating the bloody obvious, people get paid for this research?
Austin, interesting you should ask that. The next research paper is actually on that very question! Are people paid to confirm common sense? It’s a difficult question and needs massive research resources.
Another topic to be researched is ” are desperately ill children, whose medical cards are revoked, adversely affected by restricted access to health services?”
This is bull$hit really as some of those who can afford to clear debt are using the excuse of others not paying to do the same – i know of a guy locally no longer paying his mortgage and is spending money like there is no tomorrow
Tech guy, you made that up. You know no such person. That’s the mythical nonsense of strategic default.
Unfortunately i do – cant pay mortgage but spent 8k on a bicycle
I know of a guy who knows a guy who knows another guy that knew another guy that actually knew a guy that knew another guy that didn’t know of a guy that wan’t a “strategic defaulter.”
Oh we’ll if you “know of a guy locally” who does it, then that’s pretty much scientific proof, isn’t it.
*well
Techguy is that your REAL name?
The point is that in a low to zero infation economy, if you have the money the most sensible option is to pay down debt because inflation is not reducing it’s real value. You also know that deferring purchases has no cost penalty and may even have a cost benefit if we slip into deflation.
Left unchecked however we get Japan. Business can’t prosper ( and provide employment ) as the market learns to expect ever falling prices – and delays spending until it happens.
I rent and always have so I have loads of spare cash
You won’t be so flush when your mammy asks for some money towards the bills.
Original, Colin. I do not live with my mother.
Also I mean to say I rent from a landlord rather than rent money from the bank to pay off interest on a high-risk high-commitment loan.
In a few years time, when all your friends are finished paying their mortgages and you’re still renting, you won’t feel quite so smug. And it will happen, Sparky.
That sounds great, delighted for you.
I’ve tears in my eyes from your wonderful & moving posts .
Haha in a few years time my friends who bought will still be in severe Negative Equity and stuck in their shoeboxes that they bought in the boom whilst I will have amassed significant capital and put it to use in other ways, including property ownership with a very very low LTV (and a mighty lower purchase price :-) )
What’s wrong Dave?
You’ve been mouthing on here for the last year that you were going to pick up a cheap repo in South Dublin?
Did you “sit on the fence” too long Daveyboy?
Did you “miss the boat” Daveyboy?
“Haha in a few years time my friends who bought will still be in severe Negative Equity ”
For someone who seems to labour under the impression he has his finger on the economic pulse of the nation, the recent upturn in the housing market seems to have gone unnoticed by you. ;o) )
Nevermind though, I’m sure you’ll age magnificently in your rented Zoe Development ;o)
Don’t worry CPM I’m on the ball and it’s all working out perfectly :-) thanks to not being in the boom I’m far wealthier than my poor Negative Equity friends and it’s onward and even further upwards :-)
Morning gathering! Still no job?
No idea why you would think I want to buy in South Dublin but sure go ahead and tell me I do anyway :-)
Not sure how you accumulate spare cash in the current rental climate. I guess you are living in the middle of nowhere.
No,Michael ,Dave wasn’t here for the boom , yet he’s being punished .. Look ,I’ll let Dave tell you ..
D4 buddy, good job and rent == same as mortgage interest payment
@ DaveMac
No Job?
I have my own successful business.
So technically, I suppose your right, for a change.
Back to work now Daveyboy.
You’ll have to convince your bosses to bring you to the Philippines when their Irish tax loophole is closed.
I doubt it’s successful because you spend all your time on here lobbying for debt relief so you are clearly screwed haha. Are you Jerry Beades by the way?
Are you Jerry Beades !! Priceless !!
No I’m not Gerry Beades DaveyBoy.
Are you Alan Shatter?
Or Phil Hogan?
Or Richie Boucher, or Biffo maybe?
Nah.
A disillusioned teaboy?
I’m a young, debt-free high-tech worker with solid savings who does not like people who got themselves into debt looking for forgiveness and blaming ‘de banks’ for their Negative Equity woes.
Dave ,ffs , get onto your local T.D and start the ball rolling ( preferably a Labour T.D ) Tell him /her the story that you’ve been regurgitating here for the last two years .. Tell them that you want people thrown out of their homes and onto the streets , go on ,be pro-active ;)
We’re all sick of you and your sob story now .. You’ve missed out again because you want a cheap repo in D4 ,but there won’t be many repos in that address ,because ,that’s where all the “rich” people reside ;) Utopia for dopes !
Haha Thomas, pathetic attempt to put words in my mouth.
Thomas, ‘we’ meaning all of your accounts? Sad man, just sad!
“Dave,” I’ve the same amount of accounts that you use on here (1)
Someone with your name was murdered recently so the decent thing to do would be to close your account.
Changed my surname ,Dave ! Account will stay opened !
So let me get this straight debt is bad for the economy? Well I’ll be a son of a gun!
Nice to see that the people in power are doing all that they can to reduce the debt burden on citizens and to ensure that another housing bubble is not in the makings… oh wait…
The economy is like a diet; all things in moderation. Unfortunately in most democracies the government attempts to create a boom leading into the next election. If they win the rein back for 3 years and then lit rip again. If the opposition win the wring their hands and say sorry can’t keep the promises yet, the other lot left things much worse than we thought so three years of belt tightening and then a giveaway budget. Unfortunately, now and again they lose control and we get screwed, like now. The trouble is the present government are trying to create some headroom to have a giveaway budget for 2016 in time for the next election. And we the people fall for it every time.
Should we note that owning property today is a lot more expensive than it was in 2007?
Water charges per year;
Electricity and Gas Charges up massively;
Household tax;
Increases in insurance costs due to levies and the like….
Should I go on!
Clear your debts the new fashioned way ;)
“people will reduce their spending while they clear outstanding debts”
This. Changes. EVERYTHING.
Whats all this talk i hear about debt and bubbles,i hope i dont upset the usual negative tone here, but i am mortgage and debt free,dont owe anyone a red cent for a long time,never borrowed money i couldnt repay, and i can now afford to spend like there’s no tomorrow, no im not an ex gravy train politician or banker on a massive pension ,just a hard working self employed who has never asked the state for anything and always lived within my means, a lesson perhaps on how to stay solvent and not go down the path to socialism,which says the state (the taxpayers) should be responsible for everything, and reject those who preach against private enterprise,who are this countrys only hope of providing enough jobs that country so badly needs
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