Hey, It Could be Worse; You Could be a Homeowner in Ireland

From the Irish Times:

Warning that house prices may fall by 80%

IRELAND WILL see more demolition than construction of houses over the next decade, as the economy struggles to recover from the collapse of the housing market and the emergence of “zombie” banks, UCD economist Morgan Kelly told the conference.

In a presentation that drew several collective intakes of breath, Mr Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.

“Construction, but not demolition, of residential and commercial property will fall to zero for the foreseeable future,” he said.

Low levels of education among those employed in construction – where worker numbers peaked at about 280,000 – meant retraining would not be straightforward.

Recovery will be slow: “It has taken us 10 years to get into this situation – it will in all likelihood take us 10 years to get out of it.”>>>MORE

From Econompic:

The Irish Dr. Doom... or Just an Exaggerating Economist?

Professor Roubini has nothing on Professor Morgan Kelly from the University College Dublin. Back in February 2007, Prof. Kelly predicted:

The expected fall in average real house prices is in the range 40 to 60 per cent, over a period of around 8 years. Such a fall would return the ratio of house prices to rents to its level at the start of the decade.

By January 2008, Professor Kelly felt this 50% decline was overly optimistic:...


An 80% decline in nominal terms would be extreme (it would bring home values back to levels seen in 1993), but Professor Kelly's 80% decline in real terms means home prices will drop to a level not seen since.... well I can't find data going back that far, if it even exists.

From FT Alphaville:

I, Ireland

What happens when a triple-A rated sovereign government’s credit rating is cut? Quite a lot of unpleasant things really.

Sovereign rating transitions - at the top end of the scale - are always extremely messy affairs. Losing a triple-A rating matters much more than losing a double-A rating for any institution. For governments, all the more so.

In the eurozone there has always been a quartet of nations with a somewhat unstable rating position: the PIGS. That is, Portugal, Italy, Greece and Spain. Rating agency S&P though, in a slew of rating announcements this week, has affirmed Italy’s A+. So we need a new vulnerable I on the cusp of downgrade.

Step in, Ireland. With a triple-A rating.
S&P warned Ireland’s rating was on watch for downgrade last week. As the Irish economy tumbles the fear is that the country will go the way of another I: Iceland.

The government is preparing for drastic public service cuts: the kind of measures that are being undertaken to try and preserve the government’s rating. As the Irish Times reported yesterday:

THE MAJORITY of the €2 billion that must be cut from exchequer spending this year will have to come from pay cuts for civil and public servants, unions will be told by the Government next week.

Meanwhile, a public service union leader has warned members that the International Monetary Fund could be brought in if the Government cannot cut borrowing and bring the State’s finances back under control.

Yes, it’s serious enough that the IMF is being banded about as a possible saviour. Idle speculation? No....MORE