I think There's a flaw in you argument allmoyne. Money stuck in investments of any kind are of no use to a struggling economy. The likes of us with our cash stuck in bank shares or bonds or savings accounts will not further the growth of an economy one little bit. If investors had trillions stuck in European banks today we would be of less use to europe than one couple getting married and setting up home together.
That's why Europeans deposit rates are negative. They want people with money saved to say fcuk it we'll spend it. That's why they lower rates as well in a deflationary economy. That €100 you don't use to service your mortgage isn't worth saving so you spend it. Spending money generates economic activity. Saving doesn't.
So what happens to people with money that are determined to save and not spend. Your right, they chase yeild and take their money someplace else. To another country if deposit rates are better possibly. The currency devalues. ....ect ect you know the rest.
deflation is more of an issue in the eurozone than anything resembling inflation
growth is very weak
a weak euro suits business
i see nothing whatsoever which suggests interest rates are likely to rise anytime in the next two years , the usa did not experience anything like the recession europe did and it is only talking about raising them in around six to nine months
property value increases help banks loan books and the hallmark of this eurozone recession has been goverments willingness to assist banks when ever nescessery
Agree with most of what you are say but if by some chance Europe is forced to follow USA and rise rates(when they do), this will stagnate property for a while longer. This is what I see coming.
If rates rise, young people will not be able to borrow as much capitol. If you look at rates even from a cyclical point of view ,they are long over due a rise. Also banking can not function without a proper rate environment.
Property has a few hard years ahead, if rates start to move, and I believe its coming sooner than we all would like to believe!
..noonan could well raise interest rates to prevent market speculation and slow down the reduction of inventory; just as he has done with elimination of capital gains tax..at this point with GDP growth of 4.7% it might be reasonable to apply the brakes ..
..ADR has to recover; US market was done almost 300 points yesterday ; ADR fell off parity and recovery was due.. Though it did bring BKIR higher today , AIB also recovered slightly today, was excessively volatile today ; at the end of March 2015 it may well be at the current price anyways..
Property has had totally unsustainable gains this year and that tax break is responsible for a fair bit of it. Cash buyers will account for between 50 and 35% of sales this year as buy to let investors take advantage of the break. Obviously, Noonan is happy with the surge because by announcing numerous times it will end on Dec 31st he is insuring its success. Practically every potential investor will be drawn out this year leaving very few active for the next couple of years any way
It doesn't mean property will die a death. It just means gains next year will be way lower and more realistic. Lack of supply in key areas and banks lending more money will sustain some gains. There is pent up demand still there but despite all the adds the banks are cherry picking. That won't last for ever. For banks to grow revenue they need borrowers. As sure as bust follows boom they will losen the purse strings.
Thanks S1. Great discussion. Like the analogy re. elephant. I remember one spike in the adr over several days, a few years ago, when the home share and adr were trending south. The adr-led spike took the home share up about a euro and 4x that in $$ in the US. That was definitely a period when the adr dominated direction.
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