Japan - What we have to look forward to...


#1

globalpropertyguide.com/Asia … ce-History

https://www.globalpropertyguide.com/template/assets/img/CO-JPP-F09.gif

At least we don’t have earthquakes… :open_mouth:

Hmmm…

https://www.globalpropertyguide.com/template/assets/img/CO-JPP-F08.gif

Probably a likely prognosis for Dublin rents.

Sounds familiar…

So outside of the global economic recession, we have all this to look forward to… :nin


#2

The asset bubble in Japan affected both commercial and residential property:


pimco.com/EN/Insights/Pages/ … risis.aspx

The Irish residential property index initially looks similar to the Japanese residential index:

https://www.statusireland.com/data/charts/Irish-House-Price-Index-Since-1996.jpg

Comparing the Japanese residential index, on the left, with the Irish Index, on the right:
statusireland.com/statistics … Index.html
statusireland.com/statistics … -1996.html

Peak Bubble -10 years:

Peak Bubble -5 years:

Peak Bubble +3 years:

Peak Bubble +16 years:

Does any of this sound familiar?

atimes.com/atimes/Japan/LD07Dh01.html

pimco.com/EN/Insights/Pages/ … 02008.aspx

pimco.com/EN/Insights/Pages/ … risis.aspx

imf.org/external/pubs/ft/wp/2000/wp0007.pdf - PDF


#3

#4

derekbrawn.com/IntlPrices.html

Click on the Ireland versus Japan Tab

Our prices increased a lot faster and have fallen a lot faster


#5

Therein lies the madness.

Japan’s manufacturing base was the flesh that the zombies fed on to prolong the pain.

Ireland has ???

NAMA looked like an attempt to manufacture a state-backed, debt-based alternative for the zombies - which, as it turns out, is a pretty dumb thing to do on the eve of a sovereign debt crisis!

Japan bubble really kicked off post 1985 after the Plaza Accord:
en.wikipedia.org/wiki/Plaza_Accord

Ireland had 2 bubbles really - a pre-Euro accession, export driven one and a post-Euro accession, credit driven one. Unfortunately the crdit spree came immediately on top of the export boom - which meant all the exuberance of the first bubble got magnified by the second.

We will eventually revert to the mean - NAMA, or no NAMA.

All the damage was done in the credit spree years. What has to come now is the repairing of the economy.


#6

Some toweringly scary (and very compelling) charts in this thread, but amongst them all I find this one most interesting:

A lot of people on the Pin say Dublin rents still have some way to fall. I have contested this for two reasons:

  1. Rents do not need to fall that much further to be affordable wrt wages (meh, maybe a bit in line with ongoing wage deflation, but not a massive amount).

  2. More importantly, nor do rents need to fall much further to make yields make sense. Rather, if rents stopped falling right this minute all that tells us is that house prices are 30% - 40% overpriced. In other words, the numerator and solution (rent and yield %age) are correct as of now, it is only the denominator (prices) that needs to change for the equation to balance. That’s why I love the graph above as I think it shows precisely this: rents reach their plateau quicker than prices and stay there waiting for prices to catch up (or should that be, catch down??) eventually making the yield numbers make sense.

Erm, I’ll be embarrassed if I’m reading that graph wrong, but that’s my amateur take on it!


#7

I’m not sure what the rent supplement payment was in Tokyo or Kobe in those days… :stuck_out_tongue:


#8

Exactly. Take that out of the equation and you’ll expose another treacherous cliff currently hidden by the financial ILM of Government.

ILM = Industrial Light and Magic (before anyone goes crazy…)


#9

The other consideration for rentals is supply. With an excess of apartments relative to demand, prices of apartments will fall. Yields will look attractive, so a new load of investors may pile in. The result would be an excess supply of rental properties with the result that rental prices will fall as competition to get full occupancy increases. If rents fall, yields will become depressed again resulting in lower prices until they become attractive again. I think rents/apartment prices are in a lock-step that will see them ratchet down rather than slide.


#10

And more importantly jobs… Although, rent supplement and the interest supplement payment for the unemployed makes it less of an issue currently but the flight to the cities in Japan is unlikely to be repeated in the same manner in Ireland.

We simply don’t have the real economy they had which proved a stabilising factor in rents as people moved into the cities. There will be an element of this but it’s going to be minor in comparison and is lost in a wave of empties and obfuscation at the minute.


#11

The other consideration for rentals is that we surely live in the most renting-hostile nation there is. Did the Japanese look down their nose at renters? They seem to favour renting now even if buying property would satisfy any rental yield for a prospective investor. I don’t see that happening here.


#12

Yes indeed that’s where Ireland’s economic trains comes right off the tracks while the Japanese Maglev train shoots off into the horizon at a billion miles an hour.

What is the Irish economy all about?

What was it designed to do?


#13

Actually the comparisons between Ireland and Japan are quite realistic and the Japanese government has artificially supported private sector landlords for years… eg most public sector employees in Japan get subsidized accomodation. (of about 50% of the cost with the overall limit varying depending on the city (rural areas are up to about 250 Euro with urban areas correspondingly higher)). Most cities also have the equivalent of “council housing” where people on low incomes can live for VERY low rents, sometimes as low as 20 Euro per month (and these, often quite old, properties are filled up first, it is only when there are not enough houses that rent is paid to private sector landlords). I also note that these benefits, in addition to wages etc, are systematically following deflation/inflation trends to ensure that employees can maintain a certain standard of living.


#14

Well, I tell ya… If there’s any student out there who wants an interesting dissertation, there it is…


#15

Its going to be interesting to watch the differences in the EU & USA approaches to the same problem.

The USA is printing money and credit out of thin air to try and plug the holes, not just in their TARP, but also government deficits.
Basic economics tells us that this only leads to a short term fix, with long term inflationary and currency consequences.
This inflationary effect may be subdued or delayed as the FED is giving free money to the banks, who in turn are (currently) hoarding it in an effort to bolster their balance sheets.
So, few of this fresh cash and credit is (for the time being) making it onto the street.
When the banks feel safe enough to lend once more, there will be so much cash flushing around their balance sheet that inflation will be a foregone conclusion.

The EU is taking a whole lot more germanic approach to its problem.
Yes, the ECB have had QE and various bond buy-backs, but nothing in the same size as the states.
They are also at pains to stress how they view QE as nothing more than a temporary measure.
The ECB want people who took on debt to pay it off through hard work.
It is the long way around, but undoubtedly the right one if your aim is to keep inflation down and your currency strong.

With regards to stimulus packages, if theres a salutary lesson in what Japan did wrong, it concerns misallocation of funds.
From my understanding, the various japanese (non-bank) stimulus packages were ploughed into loss-making ventures and unnecessary capital projects - think international airports in Leitrim or Mayo.
They threw money at problems without any concern for the law of diminishing returns.
Eerily similar to what is happening to the states at the moment, as their stimulus packages fail to result in anything more than a temporary blip on the way down.


#16

"House prices have been falling faster than rents. Therefore gross rental yields are relatively high."

…god. Wait 'till the canny/savvys get a load of that! :neutral_face:


#17

anyone dare to translate this into the human and social cost?


#18

We won’t be able to afford to cook our fish either?


#19

It’s simple.

It’s mind over matter. I don’t mind and you don’t matter… It’s hardly as if we were living in paradise beforehand maybe we’ll transmogrify into a more inclusive, balanced, sane and rational society, the cost benefit analysis will be fascinating.


#20