Call for Papers: Central Bank Conference “How to fix distressed property markets?”

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8 replies on “Call for Papers: Central Bank Conference “How to fix distressed property markets?””

The property market is not distressed, it is recovering from distress. The property market was distressed over the period 1995-2007. The ‘fix’ would have been higher interest rates, tighter lending standards and a property tax. By 2007 there was no ‘fixing’ the market other than to stand back and hope it deflates quickly.

You make a good point JF.

Loans in respect of buy to let units in arrears are expected to rise to 40,000 in 2013.

Capital repayments on 5-year interest only loans will fall due.

The Troika is urging a change in the law to make it easier to reposses investment properties.

How long will that take?

Spose one could nationalize all the housing/property/land stock next Friday at 5pm. A bit radical perhaps, but it would sort out the ‘market’. Then default within the EZ. A bit radical perhaps, but it would change the landscape and really p1ss off the ECB and a few other pirates and slave traders in the dodgy financial system. Compulsory tillage to follow with crash courses in economics of bartering. Rent Cobh to Tehran for an oil deal, rent Shannon to Putin for a gas deal, sack the upper echelon dodgy governane minders, get back to the real economy and become the most vibrant economy and society in Europe. Simple really – one de-financializes economy and society. Vatican status to the IFSC for a substantial rent of €20 billion pa or they can go elsewhere.

What planet are the people organizing this conference living on? As Johnny Foreigner points out, the market was distressed between 1995-2007. It has been recovering since 2008.

The main thing the authorities can do to help the recovery is to stop intervening in the housing market and let the market work. Stop pressuring the banks to provide new loans at loss-making rates. Let the developers go broke. Stop using taxpayers’ money to try to rig the market through NAMA. Allow supply to come onto the market. Stop trying to push the cost of the property bubble onto the next generation by trying to keep housing artificially expensive. Let the market work.

Ireland’s future depends on us regaining competitiveness, which means improving productivity and reducing costs. This includes reducing housing costs. The people working in the central bank should know this. But somehow they just seem to keep thinking: “Improving competitiveness is hard work. If only we had another property bubble we wouldn’t have to worry about competitiveness any more.”

If I am not mistaken the reason we are in such an economic quagmire is not as a result of a property boom but more or less because of the mismanagement and over reliance on the sector. Why not start from scratch and create another bubble? Only this time have the foresight to cool it before it bursts? For example if we look at the amount of incomplete housing stock, hotels, development properties in the state at present and also consider the vast vestiges of wealth created through acquisitions whether private or compulsory. Creating another incentive scheme like Section 23 reliefs would help finish a lot of unfinished properties and help to alleviate demand and rising prices in the rental sector. Couple this with zero stamp duty to be paid (as per Michael Noonan’s policy for commercial property sector) on disposl if held for a certain period of time and investment would be an attractive option. This would allow the market to find it’s feet. Also property prices would come within attainable ranges for mortgage purposes. The spin off from the extra jobs created in construction, conveyancing, trades work etc would help to improve the velocity of money in the economy at present which is stifling growth. More affordable housing would go some way to prevent our young professionals leaving our shores and keep revenues to the exchequer coming in. Old Age Dependency ratios no doubt will be another time bomb given the figures we see on emigration on a weekly basis. Perhaps some of these ghost estates could be sold with the development potential of retirement villages in mind. I don’t purport to have all the answers but believe a serious carrot is needed to get investment flowing both into and within the country. Any criticisms or ideas welcome.

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