P.I.G.S.

[Bar the Bull]

It is all tax (excluding and including social security). So it includes VAT, capital and corporate tax. The percentages given are as a percentage of GDP

In fairness to Ireland, these figures probably underestimated the tax burden we faced in 2007. Because GDP overstated Irish economic activity, as it includes profits of multinational corporations in Ireland. And because such taxes are taxed at 12.5%.

However, since we have stopped buying houses, our capital tax take (which was much more punitive than other countries) would be a lot lower now.

All in all, our problems were because we borrowed too much money.

 

[clivex]

So for all those saying "its nothing to do with us guy, it was the bankers and the goverment" just who do you think is going to pick up the bill?

Its pretty obvious to me that when countries such as Ireland and Greece are keeping tax rates artifically low, then everyone in that country is benefiting at that time.

 

[Soary Stars]

Bar, is it reasonable to think that the electorate should all be economists ? I don't think so. We vote people in to form a Government (In Ireland and Europe) and run the show while the rest of us go about our day to day. We expect them to make fuck ups and perhaps their forecasts for the economy might be a little optimistic or pessimistic depending on the Governments agenda at the time. People than go about their day to day in the environment that the Government has created or allowed to develope. Most people lived comfortably in that environment. Plenty over did it.

However no one expected them to oversee the bankrupting of the Country and the Banking systems collapse and than to pass on that private debt to private Citizens. The notion that somehow everyone is to blame for simply living is not a runner. Sure plenty where irresponsible and should and will pay (hopefully) but most were not. I suspect the same is the case in Greece, they didn't all own 2 houses and have 4 holidays a year etc. yet they find themselves Bankrupt .

It's not a two-tier situation of innocent citizens and politicians.

There are journalists aplenty in Greece, newspaper based & all the others.
There's external news sources, too.
Internally there are other types - economists, bankers(!), professors.
The whole country isn't blind & deaf except for the politicians.

 

[Sheikh]

It's not a two-tier situation .

I believe it is.

 

[Euronymous]

It is all tax (excluding and including social security). So it includes VAT, capital and corporate tax. The percentages given are as a percentage of GDP

So the UK's figure doesn't take into account Council Tax, Road Tax and NI. Do other people get violated with those kind of taxes like we do?

 

[Soary Stars]

Oh and I'm regretting the thread name PIGS, should be 'Greece'.
Ireland isn't known for long-term graft, corruption, laziness whatever.
Who built the infrastructure of the British & Americans back then?
Irish work for a living ... the citizens of the other place? I won't say it.

 

[Bar the Bull]

Bar, is it reasonable to think that the electorate should all be economists ? I don't think so. We vote people in to form a Government (In Ireland and Europe) and run the show while the rest of us go about our day to day. We expect them to make fuck ups and perhaps their forecasts for the economy might be a little optimistic or pessimistic depending on the Governments agenda at the time. People than go about their day to day in the environment that the Government has created or allowed to develope. Most people lived comfortably in that environment. Plenty over did it.

However no one expected them to oversee the bankrupting of the Country and the Banking systems collapse and than to pass on that private debt to private Citizens. The notion that somehow everyone is to blame for simply living is not a runner. Sure plenty where irresponsible and should and will pay (hopefully) but most were not. I suspect the same is the case in Greece, they didn't all own 2 houses and have 4 holidays a year etc. yet they find themselves Bankrupt .

No one expected them to oversee that alright. But they did. And we voted them in. Who else's fault is it?

We benefitted from low taxes. Extremely low taxes. And now it has gone wrong. Who else should pay for it? The only other answer is the people who lent us the money. And we will possibly pay more for that in the long run in the form of increased rates on borrowings (but maybe not).

Here is something that might provoke interest. The figure given is an average tax rate for four stylised households (a single worker with no children, a single worker with two children, a married couple with one earner and no children and a one-earner couple with two children). The figure for each economy includes family cash transfers, paid in respect of dependent children between five and twelve years of age. All figures come from the OECD.



So we were actually getting money from the government, and also getting roads, schools, hospitals etc. It was fucking handouts all round.

Loads were irresponsible / made mistakes. And life is tough. If you make a mistake, tough shit. You pay.

If you borrowed €500k to pay for a house that is now worth €250k, tough shit. Nobody should bail you out. That is not "simply living", that is making a monumental financial fuckup. An understandable one, a common one, but a fuckup nonetheless.

 

[Soary Stars]

I believe it is.

People believe what they like.

 

[Bar the Bull]

So the UK's figure doesn't take into account Council Tax, Road Tax and NI. Do other people get violated with those kind of taxes like we do?

Sorry it does include council and road tax. NI is both included and excluded, depending on whether you look at the upper or lower bar. And most other countries get shafted by NI or the equivalent (Germany in particular).

 

[clivex]

The trouble with those (usualy on the left, who rarely get economics anyway) that simply resort to the blame game is that they never offer a solution to anything

The only way the country at large can effectively wash their handfs of any responsibility for the banking and goverment's failures is to have allowed the banks to have gone to the wall

Think that one through....

 

[Sheikh]

So to summarise, the chap with the wife and 3 kids with an average education and an average wage who buys an average house for his family and buys that house with money he borrowed from a 'reputable' Bank egged on by the Government can go fuck himself. Nice.

 

[Grey]

then everyone in that country is benefiting at that time

The people being asked to pay for all this are not necessarily the same people who benefited when times were good. Apart from those only entering the labour force since the collapse, who will now have to pay for the sins of their elders, many of those who worked and paid taxes during the boom years were adversely affected by them.

Younger people starting out at the bottom of the pile were having to move further and further out from Dublin/Cork/Galway to buy houses they could afford and both spouses had to commute. Traffic volumes on the roads greatly increased and there were tailbacks everywhere. The quality of life did not improve for these people, and most of them are now trapped in negative equity.

Others were forced to climb on the property ladder and take out oversized loans because they had no security as tenants. Landlords had the right to increase rents from year to year by whatever the market would provide, and rents on many flats and houses were going up by 20% per year, sometimes even more. People stretched themselves as far as they could, including borrowing from parents and relatives in order to get the money together to buy a place. Through no fault of their own, their desperation to have a secure roof added fuel to a market already on fire.

The government did nothing to curb the bubble, not even when people were closing perfectly good businesses - hotels, filling stations, factories - because the land was worth too much if sold for apartments. When the real economy started to be harmed in such an obvious way action was needed, but the government, the banks, business leaders, the media, developers and related professions were seized by a deadly mix of liberal ideology and complacency, and nothing happened until the market crashed, loans could not be repaid, the banks collapsed and a huge hole appeared in the government finances left by the disappearance of stamp duty.

That's a long list of people who were responsible, but it's being left to other people, many of whom were themselves victims of the boom, to pay their bills.

 

[Bar the Bull]

So to summarise, the chap with the wife and 3 kids with an average education and an average wage who buys an average house for his family and buys that house with money he borrowed from a 'reputable' Bank egged on by the Government can go fuck himself. Nice.

No. He can pay back the money he borrowed.

Because I can guarantee that chap wouldn't be paying the money back if his asset had appreciated by 50%.

 

[clivex]

So to summarise, the chap with the wife and 3 kids with an average education and an average wage who buys an average house for his family and buys that house with money he borrowed from a 'reputable' Bank egged on by the Government can go fuck himself. Nice.

So whats the goverment supposed to do? Pay his mortage? Pass legislation to making price falls illegal?

Unbelievable...


Grey. The generational thing is tough but thats just the way it is, in the same way that previous generations have benefitted.

Whats the alternative? Reapaymnent of the loans over shorter periods? Not going to happen is it?

 

[clivex]

Others were forced to climb on the property ladder and take out oversized loans because they had no security as tenants. Landlords had the right to increase rents from year to year by whatever the market would provide, and rents on many flats and houses were going up by 20% per year, sometimes even more. People stretched themselves as far as they could, including borrowing from parents and relatives in order to get the money together to buy a place. Through no fault of their own, their desperation to have a secure roof added fuel to a market already on fire.

Something wrong here...

As we know, building as going on all over the place and yet there was still a housing shortage? Where there hadnt been one a few years previous?

Was the popualtion really exploding at a faster rate than construction could cope with?

And if that was so, why are there now suddenly loads of half built houses?

Frankly I dont for one minute believe that this bubble market was driven by necessity

 

[Grey]

Grey. The generational thing is tough but thats just the way it is, in the same way that previous generations have benefitted.

Whats the alternative? Reapaymnent of the loans over shorter periods? Not going to happen is it?

It's not just a generational thing, there are people of all ages who lost out. It's a point worth making because not everybody benfited from the boom, not everyone was on the pig's back, and not everyone deserves a lecture.

Regarding alternatives, I don't see any, unfortunately, except to get the interest rate being charged for the bail out down to something more reasonable.

 

[Bar the Bull]

Very good post, Grey. Although I agree with you that tenancy laws need amending, I believe that more people bought house because:

a) they felt envious of the money their peers had "made" on their houses

than

b) tenancy laws made it too unstable for them to countenance renting.

The only way in which I would reckon it might have made sense to buy rather than rent in 2005 to 2007 would have been if you had kids. Mortgage payments on the house I am living in now would have cost me 2.2x the rental price if I had chosen to buy it in 2007.

I am 32, and most of my friends are aged 30-35.

There are 10 "Lucan lads", who I go on stags with.

Over the period 2003 to 2008, 8 of them bought flats/houses.

Of the eight, only one had a child when the house purchase was made.
Of the remaining seven, two bought more than one property.

 

[Bar the Bull]

It's not just a generational thing, there are people of all ages who lost out. It's a point worth making because not everybody benfited from the boom, not everyone was on the pig's back, and not everyone deserves a lecture.

Regarding alternatives, I don't see any, unfortunately, except to get the interest rate being charged for the bail out down to something more reasonable.

That still won't do it, as our economy is snookered.

 

[Grey]

Something wrong here...

As we know, building as going on all over the place and yet there was still a housing shortage? Where there hadnt been one a few years previous?

Was the popualtion really exploding at a faster rate than construction could cope with?

And if that was so, why are there now suddenly loads of half built houses?

Frankly I dont for one minute believe that this bubble market was driven by necessity

The population rose by half a million in little more than ten years. That would be equivalent to about 6 million on a UK scale, so you can see that there was demand, but it reached the circular point where immigrant construction workers were coming to build housing stock for immigrant construction workers.

But I'm not claiming the bubble market as a whole was driven by necessity, merely that tenants were driven to buy if they could because they couldn't know from one year to the next if they could continue to afford to stay where they were.

 

[Bar the Bull]

As we know, building as going on all over the place and yet there was still a housing shortage? NO THERE WASN'T Where there hadnt been one a few years previous?

Was the popualtion really exploding at a faster rate than construction could cope with? NO

And if that was so, why are there now suddenly loads of half built houses?

Frankly I dont for one minute believe that this bubble market was driven by necessity

 

[Bar the Bull]

But I'm not claiming the bubble market as a whole was driven by necessity, merely that tenants were driven to buy if they could because they couldn't know from one year to the next if they could continue to afford to stay where they were.

But they couldn't afford to buy!

I would like to see your evidence of rental price increases of 20%.

 

[Soary Stars]

Some people are wondering when the housing market will get 'better' meaning prices go up.
To benefit who?
Some people are wondering if the buy-to-let market will get 'better', meaning rents will go up.
To benefit who?

Some people are lining up to get money out of other people's pockets.

 

[clivex]

The fact that the market has subsequently found what is probably its real level more or less answers the demogrphaic point

 

[Grey]

But they couldn't afford to buy!

I would like to see your evidence of rental price increases of 20%.

Agreed, they couldn't afford to buy, but some banks were giving them loans at 110% of the purchase price.

When I was briefly back in Ireland in 2000, living in a rented house in Blackrock, the rent went up by 25% one year and we were asked for a further 15% the following year. Rents rose sooner (and later started falling sooner) than purchase prices and was one of the reasons why in some of the following years more houses were bought by prospective landlords than owner occupiers.

 

[Bar the Bull]

Grey,

I just checked, and you are not far wrong. In 2006 - 2007, rental prices were going up by 10-12%, which is a lot more than I thought.

However, this was after heavy falls earlier in the decade. 2007 rental levels were still below those seen in 2002. Inflation adjusted rental levels were trending way down throughout 2002 to 2011, even allowing for the brief spike in 2006 to 2007.

So although there would have been a brief period when rental prices were increasing "in some cases" at 20%+, this does not tell the full picture, which is of renting becoming more and more affordable.