European Salon de News, Discussion et Klatsch - 15 May | 124 comments (124 topical, editorial, 0 hidden)

Exposing the lie of the land | David McWilliams

Take a long look at the chart below. Digest it. Maybe look again if you have to. This happened in the most sophisticated economy in the world.
This is what happened to the price of development land in Japan. Prices roared upwards and then collapsed, ending up below where they started at the beginning at the boom. This is likely to happen here; development land is likely to settle back to 1996 prices. We haven't seen the half of it yet. When we hear some property lads talking about green shoots, this chart should be enough to tell them to snap out of it.
But we can't seem to snap out of it. We are still caught in the trap. We seem to believe that the price of houses and land will miraculously rise again some time soon. This will not happen. It can't and shouldn't. In fact, houses prices are likely to fall another 50 per cent from here before we see anything like the bottom.
International comparisons bear out these forecasts. Until now, many Irish people have clung to the myth of what I call `Dunnes Stores economics'. You know it: it is the school that suggests ``the difference is we're Irish''. Well, the bad news is that being Irish makes no difference at all. It offers no protection. What happened to the Japanese will happen here and, in terms of the recovery, the sooner the better.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Thu May 14th, 2009 at 06:59:33 PM EST
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Re: Economy and Finance (none / 0)

Do you have a more detailed graph, showing Japan's "green shoots"? That might help in responding to the optimists.

by gk (gk (gk quattro due due sette @gmail.com)) on Fri May 15th, 2009 at 01:12:06 AM EST
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Re: Economy and Finance (none / 1)

This is not specific to the property market, but here's a green shoots assessment from RGEMonitor's recent newsletter, (so no link) Green Shoots Or Yellow Weeds?

Japan
Has Spring sprung in Japan? Some are seeing signs of green shoots.
Industrial production rose 1.6% month-over-month in March (the first gain in six months), while exports were up 2.2%. Japan's Economy Watchers' Survey has picked up from its record-low in December 2008. Meanwhile, the government's roughly $150 billion fiscal stimulus package, announced in April, is expected to provide a big jolt to the economy.
When you scratch the surface, however, these green shoots seem like nothing more than flights of fancy. Industrial production may have risen m/m in March, but production was still in freefall in y/y terms, dropping 35%. And while most analysts agree that the fiscal stimulus package will boost growth, most see this as only a short-term phenomenon.
Exports, production and capital expenditure have collapsed and the seeds of recovery are not yet visible. Given Japan's anemic domestic demand, most analysts agree that economic recovery depends upon the future course of Japan's exports. That means a recovery will depend heavily on an upturn in overseas economies or a restructuring of Japan's domestic economy.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri May 15th, 2009 at 05:21:24 AM EST
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European Salon de News, Discussion et Klatsch - 15 May | 124 comments (124 topical, 0 editorial, 0 hidden)