Jump to content
House Price Crash Forum

Recommended Posts

Many on here use Japan as the example of how deflation can take its grip on a nation following a large credit fueled boom.

This view is incorrect. The fundamentals supporting Japan after the 1990s are very different from the UK's position now.

For these reasons inflation is the bigger fear than deflation over the longer term picture (5-15 years).

Japan was a huge creditor nation, huge saving nation, huge exporter when it went pop. The Yen moved from something like 600yen/dollar to 90yen/dollar now the past 30 years or so.

The combination of these fundamentals created their deflationary spiral.

The UK's position is quite the opposite.

I'm not saying we won't get short bouts of deflation but a Japanese style slump, I can't see it based upon the facts.

Thoughts...

Edited by ringledman

Share this post


Link to post
Share on other sites

AMA and Ireland’s Bovine Bubble

Author: Jaedi

4 Aug

NAMA (National Asset Management Agency) has more in common with cows than one would imagine…

Livestock, specifically cattle, and their produce, are by far the greatest output of the farming sector in Ireland. The bubble referred to in the title of this article, however, refers not to the cows, but the land on which they graze. With the exception of Luxembourg (an anomaly due to its diminutive size), Ireland has the most expensive agricultural land in Europe.

Why, you might ask, is there such as wide chasm between prices for agricultural land in Ireland and its European average? Why do prices bear no relation to agricultural productivity or the income stream one would expect to achieve from such an investment?

I present exhibit A – a listing from Henry O’Leary, a real estate agency that seems to specialise in rural plots of land. Some of these plots are already zoned for residential development (normally a single house). I draw your attention to the purely agricultural land i.e. with no planning permission for residential development.

hol-agri-property-list

First up, is 114 acre property with an undisclosed guide-price. I guess they don’t want to scare off potential buyers, so we’ll move swiftly along to the second property:

Dromore, Glandore in West Cork.

(hover the mouse cursor over the blue boxes in the screenshots below to see the pop-up comments)

No doubt this second property is a fine plot of agricultural land and a veritable bucolic wonderland of sea views. Ok. So the price? It comes in at a modest €1,000,000. That’s SIX zeros i.e. €1 million or approaching US$ 1.5 million at current exchange rates.

I hope you were sitting down for that – sorry for not warning you. Once your heartbeat has managed to re-establish its normal rhythm and your grasp of conventional wisdom is sufficiently twisted to accommodate this insanity, allow me to remind you of a very important issue – the emotional welfare of the cud-chewing, methane-farting residents of those fields.

The scenic value of those ocean views for our dear bovine friends more than justifies the 7-figure asking price of this “non-residential agricultural holding with ocean views”. You could even name it Bovine Vista!

But wait, maybe we’ve missed something:

“within walking distance of Glandore village, it has extensive road frontage and given the location this farm could prove an exceptional investment should planning permission be obtained even for just one house”

An important detail indeed. No need to even consider the cows, so. You’ve got a chance that some idiot in the County Council makes a mistake in the planning application process and grants planning permission. The minor detail of actually paying to have the property developed can be overlooked for now.

With my best wishes to the sucker who sinks his current and future life savings into Bovine Vista, I must, lamentably, continue to the next property for sale:

Butlerstown, Bandon, West Cork

Once again, this is land zoned for agricultural use – a whole 17 acres of it – which means only €59,000 per imperial acre (or US$85,000 at current exchange rates) or for a more internationally recognisable figure – a paltry €145,000 per hectare.

In the case of this property, let’s consider for a moment the hypothetical (and fortunate for the buyer) circumstances of the land being rezoned by the County Council. The land would obviously be worth much more than its agricultural output would suggest. The reality is that the guide price of this agricultural holding already prices in a significant chunk of the speculative gains the buyer MAY make in the event of that improbable rezoning. There must be something I’m missing…

“The agricultural qualities of this land which are superb no longer form the foundation upon which the valuation is based, it’s positioning adjoining Barryroe GAA Grounds and being in close proximity to Lislevane Village are far more likely to dictate the outcome of this sale.”

Now I see – I missed the nod and the wink. I guess I was mistaken in relation to the previous property too. It was no idiot in the County Council but a wily opportunist who deftly made a slip of the pen (or more likely an openly agreed determination by collusion), resulting in the fortunate mishap of planning approval for development of the property. So with this infallible investment strategy in mind, we should consider the pricing strategy – pick a very high figure and double it.

Is Ireland “Special”?

Considering that agricultural markets are global, we should expect some convergence of prices among agricultural regions with similar physical and climatic conditions. Only land with similar characteristics should be compared because factors such as soil quality and climate influence productivity greatly. Ireland’s climate is, admittedly, very suitable for livestock farming, but this is insufficient to explain the valuations. In fact, the difference is so large that it cannot be attributed to domestic factors.

The arch-nemesis of the natural environment a.k.a the Common Agricultural Policy of the European Union, is another factor that should not be disregarded. CAP subsidies, however, do not explain the disparity because they should push up agricultural land prices by similar amounts throughout Western Europe (the new EU member states will not benefit from full CAP subsidies until 2014 after the current 7-year budget expires). Even allowing for a recent drop, a recent report by Savills Ireland, a real estate company, reports that average agricultural land prices in Ireland average at about €40,000 per hectare. Even in other parts of Western Europe such as France – itself a wealthy and productive exporter of agricultural produce – the price per hectare in the more expensive regions for agricultural land averages at under €7,000 per hectare. I should mention, though, that other countries show signs of (less severe) bubbles including the UK, Denmark, Benelux and Italy.

No, Ireland is not special and this is simply another bubble waiting to burst. The urban property bubble in Ireland was also “justified” by arguments such as the positive demographics, but that, in hindsight, was obviously was a fallacy. In fact, the Ireland of today is a country of net emigration, as young people once again leave in search of work abroad and recently arrived immigrants return home. Agricultural land will eventually return to levels corresponding to the financial return on its agricultural output just as urban rental property is dropping to a realistic level suggested by its rental yield.

The Fallout – Last Man, NAMA and the Environment

Obviously, the last man in will be worst hit. This is the risk that any individual takes when making an investment (especially in an asset price bubble) and, as such, does not concern me.

NAMA (National Asset Management Agency), a.k.a the Taxpayer, the subject of much attention recently for its proposed acquisition of much of the toxic property debt of Ireland’s banks, will be exposed to this bubble. As these toxic property loans largely consist of loans to developers, it is to the property developers we should look. Their viability depends to a large degree on the valuations of their “land banks” which are often undeveloped agricultural land adjacent to urban areas. I wonder what NAMA’s bill to the taxpayer will amount to once the developers are faced with the bursting of this bovine bubble.

The two examples above are far from any city, however, the emphasis placed on proximity to any kind of village or hamlet with the objective of inflating the price serves as a warning to accountants now attempting to place a value on the property loan bank assets that NAMA is about to acquire on behalf of the State.

Finally a word of advice to tourists – visit Ireland while you can. Its last remaining remnants of natural coastal beauty are being destroyed thanks to the collusion of property developers and local government officials. Our only hope is that the collapse of the urban property bubble takes this rural property bubble down with it!

Share this post


Link to post
Share on other sites

Bank manager on remand over alleged theft

By Kristy Sexton-McGrath

Updated 29 minutes ago

Bendigo Bank manager Colin Carleton disappeared from his home at Atherton on July 13.

Bendigo Bank manager Colin Carleton disappeared from his home at Atherton on July 13. (Queensland Police)

* Map: Atherton 4883

* Related Story: Missing bank manager found and charged

* Related Story: Bank manager missing amid branch financial audit

A far north Queensland bank manager who disappeared amid an investigation into millions of dollars of missing money has been remanded in custody.

Colin John Carleton, 55, disappeared earlier this month after more than $3 million went missing from Atherton's Bendigo Bank branch, south-west of Cairns, where he was the manager.

Carleton was found by police last night at a campsite at Cape Tribulation, north of Cairns.

He appeared in the Mareeba Magistrates Court this morning charged with one count of stealing as a servant.

He did not apply for bail and has been remanded in custody.

:rolleyes: They got one

Share this post


Link to post
Share on other sites

:rolleyes: They got one

I don't know how someone sneaky enough to steal 3 million isn't clever enough to immediately take a flight to some far away country and get their friend in Ireland to remit some of the ill gotten gains. Must be pure arrogance.

Share this post


Link to post
Share on other sites

Many on here use Japan as the example of how deflation can take its grip on a nation following a large credit fueled boom.

This view is incorrect. The fundamentals supporting Japan after the 1990s are very different from the UK's position now.

For these reasons inflation is the bigger fear than deflation over the longer term picture (5-15 years).

Japan was a huge creditor nation, huge saving nation, huge exporter when it went pop. The Yen moved from something like 600yen/dollar to 90yen/dollar now the past 30 years or so.

The combination of these fundamentals created their deflationary spiral.

The UK's position is quite the opposite.

I'm not saying we won't get short bouts of deflation but a Japanese style slump, I can't see it based upon the facts.

Thoughts...

"The Yen moved from something like 600yen/dollar to 90yen/dollar now the past 30 years or so. "

Say what? :huh:

Share this post


Link to post
Share on other sites

Many on here use Japan as the example of how deflation can take its grip on a nation following a large credit fueled boom.

This view is incorrect. The fundamentals supporting Japan after the 1990s are very different from the UK's position now.

For these reasons inflation is the bigger fear than deflation over the longer term picture (5-15 years).

I think this is what you want to happen rather than what actually will happen. No-one knows if deflation or inflation is the future we face. The ball is still in play.

Share this post


Link to post
Share on other sites

Japan was able to tread water for 20 years trading with the rest of the world and never purged it's banking system.

Japan has never fixed it's problems, it's hardly a ray of light for what's going to happen. Just who is the rest of the globe going to trade with?

Share this post


Link to post
Share on other sites

"The Yen moved from something like 600yen/dollar to 90yen/dollar now the past 30 years or so. "

Say what? :huh:

More like 250 to 300.

Going back 40 or 50 years it was generally at 360.

Against the Gbp it was 1,000 in 1970, 750 in around 1977, 250 five years ago and 133 now. I can see a bit of a trend there.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.