Is NI economy going broke?

Mistral001

It was thought by many two years ago that house prices had levelled out. Now we know that they fell by a massive 15% last year and still keep falling. More worrying is that consumer spending has dropped by a massive 9.6% (UK average is 1% I think) in the last year in Northern Ireland (UTV thursday's UTV live Tonight). These sort of figures make Greece look like having a strong economy.

Can anybody see any light at the end of the tunnel?

yorkie98

Mistral001 wrote: »

It was thought by many two years ago that house prices had levelled out. Now we know that they fell by a massive 15% last year and still keep falling. More worrying is that consumer spending has dropped by a massive 9.6% (UK average is !% I think) in the last year in Northern Ireland (UTV thursday's UTV live Tonight). These sort of figures make Greece look like having a strong economy.

Can anybody see any light at the end of the tunnel?

The situation in NI is rather unique and basically I think we are suffering a harder bump back to earth than other regions because the growth in property was disproportionately high here and also there was extreme greed in the property market with buy-to rent bidding wars (and lots of shill bidding) making it virtually impossible for ordinary people to buy a house for the old-fashioned reason of living in it..
While all this was going on, wages did not increase particularly significantly and now we are facing other challenges such as fuel poverty and our high dependance on heating oil and cars which is spiralling out of control. In essence, we are having to tighten our belts tighter than most and spend less on the high street.

Luckily, I beleive that we are one of the most resilliant regions and will survive better than most as we don't have to look back too far to a time where we had much lower expectations and standards of living so adjusting back a little shouldn't hurt too much.

x12yhp

Ditto to what Yorkie98 has stated.

With regards to property it is worth pointing out that many did believe that we were levelling 2 years ago but they were the same people who refused to believe that a crash was ever possible. Any thoughtful analyst would have asked what was going to hold the market steady 2 years ago. There was no answer because prices were still out of reach for many. I do believe that the market is 'getting there' but the majority remain stubbornly believing that their house is worth X-hundred thousand and are unable to sell. Of course, at present, we have the secondary problem that people can survive with these dillusions (thanks to rock bottom interest) so there really is nothing there to suggest that things are going to change soon. So unless (a) buyers suddenly get more cash, (b) sellers choose to get real or (c) sellers are forced to get real, we are stuck in this rut.

As for the wider NI economy... that is rather difficult. We are short of real industry and tall on public sector. This is not at all a good time for the latter and the only real hope for the former is that the proposals for corp tax come through and bring some investment.

highrisklowreturn

yorkie98 wrote: »

Nice to hear some intelligent input from the lowest common denominator of our society.
I'm sure you have nothing to worry about from the economy as long as the dole keeps bringing you enough money for Buckfast, Fegs, hair gel and money to get your spider fringe trimmed every week or so...

I suggest you get back to what you are best at, drunkenly driving a D-Turbo around without insurance, looking for slegs and eating kebabs..

I engage in none of the said acts, although they appear worthy past times and is inspiring that the tax-payer can be material sponsor to such activities.

A.L.D.A

NI economy needs a more efficient and extremely frugal administration up on the hill and at council level. The savings should be used as tax brakes for schemes that make our economy more efficient and in creating an environment that encourages productive industry.

We need to reduce our dependence on imported fuel and I would consider local energy production of prime importance. If Scotland aims to be self sufficient in energy production (without oil) why can't NI?

Tourism is another sector that lacks the capacity to attract more visitors. It needs investment and better marketing.

I regard reduction in consumer spending as good as most of the consumption is to purchase imported goods. Consumer lead growth is a nonsense if you are not also producing goods and services to pay for the consumption.

Personally I would like to see higher tax take on many non essential consumer goods. I would also like to see tax penalties for goods that are not constructed to last, ie, not fit for long term purpose.

On housing I am deeply concerned and do not believe that this will end well. We are not going to return to the house price levels of the 80's and unless construction levels improve a higher percentage of the population will never own their own home.

That's my rant for the day.

Mistral001

yorkie98 wrote: »

Luckily, I beleive that we are one of the most resilliant regions and will survive better than most as we don't have to look back too far to a time where we had much lower expectations and standards of living so adjusting back a little shouldn't hurt too much.

That is a good point.

x12yhp wrote: »

Ditto to what Yorkie98 has stated.

With regards to property it is worth pointing out that many did believe that we were levelling 2 years ago but they were the same people who refused to believe that a crash was ever possible. Any thoughtful analyst would have asked what was going to hold the market steady 2 years ago. There was no answer because prices were still out of reach for many.

As for the wider NI economy... that is rather difficult. We are short of real industry and tall on public sector. This is not at all a good time for the latter and the only real hope for the former is that the proposals for corp tax come through and bring some investment.

I think there are thoughtful ananlysts about, but you don't hear from them often. Also, I am glad you mentioned industry. I rarely gets a mention, but its health is crucial as far as I can see.

A.L.D.A wrote: »

I regard reduction in consumer spending as good as most of the consumption is to purchase imported goods. Consumer lead growth is a nonsense if you are not also producing goods and services to pay for the consumption.

I quoted the consumer figure because it was so dramatically different from the UK average. The UK national consumer spending is down about 1% and rarely moves by more than a few percent every year. The fact that it has gone down by a massive 9.6% in NI seems to be bordering on the unstable. It could be because people are spending less on luxuries, but is it only because of that?

HouseACA

Have to agree with ALDA regarding the consumer led economy not being sustainable. Buying stuff in and selling between ourselves will not help the recovery. Our location on a small island inhibits our potential to manufacture and export, but I think we could have definite potential to look towards future tech, software development, green energy etc and try to lead the way with developing these.

And our tourism ind. needs to pick up a lot. We have a some big sites for visitors but facilities need improving.

As for house prices? I can't call it to be honest. Obviously high prices help no one as it sucks a lot of money out to be paid to banks. Will prices fall further given the low interest rates for the foreseeable future? Will inflation kick in a wipe the value of the debt away? Who knows?

oldhand

Mistral001 wrote: »

It was thought by many two years ago that house prices had levelled out. Now we know that they fell by a massive 15% last year and still keep falling. More worrying is that consumer spending has dropped by a massive 9.6% (UK average is !% I think) in the last year in Northern Ireland (UTV thursday's UTV live Tonight). These sort of figures make Greece look like having a strong economy.

Can anybody see any light at the end of the tunnel?

It could be the "light at the end of the tunnel" is just another train coming.

x12yhp

HouseACA wrote: »

As for house prices? I can't call it to be honest. Obviously high prices help no one as it sucks a lot of money out to be paid to banks. Will prices fall further given the low interest rates for the foreseeable future? Will inflation kick in a wipe the value of the debt away? Who knows?

This is unfortunately still not totally appreciated. A lot of people made a lot of quick cash thanks to high prices and the fact that the present situation means that many fewer have realised losses means that a lot of sellers still consider their home as a piggy bank.

As for what is coming... well low rates seem to be going hand in hand with inflation elsewhere and that seems to also lead to the continual (slowish) drops in housing. On the other hand as inflation increases... well that needs controlled with rates (well should be) which will make money more expensive to borrowers and thus force prices down. So realistically both scenarios are pointing towards further drops. At present we are falling through the air and seem to be more focused on finding a helium balloon than landing safely.

motorguy

x12yhp wrote: »

So unless (a) buyers suddenly get more cash, (b) sellers choose to get real or (c) sellers are forced to get real, we are stuck in this rut.

Within your solution (a) its worth pointing out that the banks are extremely reluctant to agree mortgages at the moment leaving a lot of people who could otherwise afford to buy...

A.L.D.A

x12yhp wrote: »

.

As for what is coming... well low rates seem to be going hand in hand with inflation elsewhere and that seems to also lead to the continual (slowish) drops in housing. On the other hand as inflation increases... well that needs controlled with rates (well should be) which will make money more expensive to borrowers and thus force prices down. So realistically both scenarios are pointing towards further drops. At present we are falling through the air and seem to be more focused on finding a helium balloon than landing safely.

As a matter of interest here are the historic UK yearly rates of inflation.

http://safalra.com/other/historical-uk-inflation-price-conversion/

The low levels from about 1993 are not the norm. The current higher rates of inflation may inevitably lead to higher wage demands and that will in turn feed inflation. Also all that quantitative easing will eventually increase money supply somewhere and again that will tend to increase prices. Best option is high inflation and depreciating value of money. A few years of that will sort many a problem out. What matters is the rate of interest against inflation (positive or negative) and not the actual interest rate. Rate of wage growth is also a factor.

Another possibility is stagflation and that we really do not want.

I don't see Inflation returning to 2% in the next 3 - 4 years and I don't see base rates increasing any time soon. The government has to engineer growth. So base rates will be kept low and QE3, QE4, QE5 ....... will happen in an attempt to inflate some life into the economy. If unemployment is not falling in the lead up to the next election they will no be re-elected.

If you are fortunate to have large sums in the bank the question facing you is how to avoid loss due to inflation?

One point on housing, on the low end the numbers for buy to let is starting to make sense again so I don't see much room for further falls in that section of the market. I think next Spring, early Summer could well be the bottom on low and medium value houses, but in truth it is a guess as all it would take to throw us all into a tail spin is a Greek default.