IMF Multi-Country Report: Housing Recoveries: Cluster Report on Denmark, Ireland, Kingdom of the Netherlands—the Netherlands, and Spain


9 replies on “IMF Multi-Country Report: Housing Recoveries: Cluster Report on Denmark, Ireland, Kingdom of the Netherlands—the Netherlands, and Spain”

Are these IMF reports any better than a McWilliams op ed? No, they’re worse!

What do these mean?

1. “rental market flexibility” – a Pilates class exercise?

2. “high-multiplier stimulus measure” – a triple dose of ?

3. “reform” – Schumpeterian creative destruction?

4. “tax and pension reforms to ease liquidity constraints” – a laxative?

5. “Labour mobility” – fleeing negative equity?

I noted with interest that the IMF headquarters are located in ‘Foggy Bottom’ in DC. Seems about right.

A depressing snap shot of conditions on the ground in Spain. Recovery nowhere in sight.

The contrasting experiences of Ireland (and Spain) with that of Germany are a core element of the paper on which the Alphaville post is based.

It is already clear that the politicians, the relevant departments and other interested parties are intent on outdoing the Bourbons in the matter of dealing with the past as as far as construction boom and busts are concerned. And the Central Bank?

Housing (domestic to use as your home) cannot ‘recover’ from a serious boom – like the 350% increase we had here in Ireland. It should if the credit market was operational experience a ‘revert-to-mean’. This process would normally take about 18 months for each 12 months of ‘boom-time’. There were 120 months (in total) of boom, so we should expect 180 months of ‘reversion’. So far, we have had 72! due to the liquidation of unpayable debt being effectively stopped-out by politically motivated interventions.

One aspect of this glacial correction are the almost permanently low-interest rates. If interest rates were to increase, and much of the high-risk legacy debt is still in place, then bad things will happen in the residential property sectors.

The Irish residential housing ‘market’ is not a single, competitive market, but a variety of heterogenous, non-competitive demi-markets. So, one or perhaps a few of these markets may be performing (stable or rising prices) whilst the remainder continue to deteriorate. Its the performing one that is stuck into your face, not the deteriotrating ones. The whole business is like treading on thin-ice: quite treacherous. The ice may hold your weight, or collapse with little warning.

Basically, the Irish residential housing markets will only ‘recover’ in parallel with a ‘recovery’ in the both the levels of full-time employments and median wages. And that is just about to happen …? Indeed!

An Irishman Brendan Simms of Cambridge University gets an article published in (Berlin) on the origins of NATO being Waterloo. Titled: “Was ist Europa und wo hort es auf?”. A search on Brendan Simms should get it. His book “Battle for Supremacy from 1453 to Today” is discussed.

The report describes insolvency measures introduced in Ireland but did not comment on the very low uptake/implementation. It also did not say if these measures were actually effective, or likely to be effective, in achieving what intended or how they reflected the trade-off between the need for deleveraging versus the risk of immediate drops in output. They say there were more things that could have been done in Spain and Ireland without providing cogent analysis of what was done. We can conclude that insolvency reform should still be on the agenda and under review in Ireland but we are given no more insight.

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