New Record Highs
Property Prices look very likely to hit the 10% year on year growth that we in Pangea
predicated at the start of this year. Everyone is familiar with the demand story but the
strength of the economy here vs the weakness in the rest of Europe could create a big
issue.
We could write this every month…. only up for prices in the near term
ECB Interest Rates & Irish Bank Rates :
The ECB rate could well now fall faster than we expected in the summer with rates potentially falling another 0.75% by year end. This is really a bad news story. Economically the outlook has gotten worse in Europe especially in Germany which has a huge impact on the Euro. Germany and France could well fall into recession in 2025 ….. whilst Ireland will be booming. This creates an economic challenge.What happens in Ireland’s economy makes nearly no impact on the Euro overall. It does not impact the ECB when setting interest rates. This is what we saw in the Celtic Tiger times – a significant divergence between mainland Europe and Ireland’s growth rates – leading to major imbalances and flows of money
Irish Economy / Housing Demand
Remains (too) strong
There are still limited signs of any slowdown in the Irish economy or housing market. The excessive budget giveaway will pump up the prices of everything in the economy and guarantees in the short term a booming economy. With so much money being forced into an economy the only way is up in the short term. The total waste of money will however have longer term consequences. The risk as we outlined above is that you will see a major divergence between mainland Euro countries and Ireland. What will then happen is that the lower interest rates and potentially additional European Central Bank measures could be deployed in 2025 to fight off recession in Europe arrive at a time when you cant get anyone to build you a bike shed for less than €300k in Ireland. This could be a major problem. Money will then be getting shoved into the Irish economy from both sides – the Government with its excessive budget giveaways and the ECB pumping in money via lower rates to fight off the slowdown in Europe.
What’s next for the Irish Property market?
High Growth
Prices may well grow by another 10% next year as the high wage growth , government stimulus, strong population growth and falling interest rates combine to make a turbo charged demand side of the property market. The “worst case” scenario may well be a mild recession in Europe and a strongly growing (or spending) US economy. This lowers our currency Vs the dollar – which will increase our net exports and bring in even more gushing corporation tax – it will also lead to lower ECB rates which will fuel property price growth. Strange times may lie ahead and the government for sure have not prepared adequately for them. With ever more flexible lending products coming to the market expect to see both more Bank debt and more cash being pumped into the property market. If we look back on what happened before – between the euro being launched in 2002 and 2005 Germany was in a near constant recession – it was called the sick man of Europe at the time. As a result the ECB lowered interest rates to revive the Germany economy. However that was the last thing Ireland needed as we were in the throes of domestic giveaway budgets – our original, when I have it, I spend it era. These lower ECB rates combined with an Irish government pumping money into the economy led to unsustainable growth in the country. 2025 lookout. Signs of this excess are everywhere – wage growth at >6% + house price growth of >6% should not equal government expenditure growth of >6%…. with inflation now at 2%. This is a formula for trouble – As the Irish Fiscal Advisory council and others have already highlighted. But what about the third leg of the last crisis ? Excessive mortgage lending – surely this wont be back? To the same level as Celtic Tiger times … no. But its increasing all the time now. New Lenders offering new products (especially equity release products) have come to the market in 2024 and when this is combined with the ever growing juggernaut that is the Bank of Mam and Dad (38% of buyers have used this “bank”) we will see ever greater sums of money pumped into the demand side of the property market.
“If you are a property owner releasing equity is best way to fund any major expenditure you have coming up.”
If you would like an initial consultation to assess how much you can borrow/save
and what your pension, insurance and investment options are please contact us
info@pangeamortgages.com or call 01-442 5064 // 085-8600728
