double dip recession
A few years ago there were three key European countries labelled the property hotspots; countries with the fasted rising house prices:
England (UK), Spain and Ireland. This was around 2005. Of course other countries from the Baltic's to the Adriatic were in the same league, but these were new, emerging markets. In those days the experienced investors made a quick calculation:
Take the rent for a property per year and relate it to the property value - what is the yield.
If the yield is below what you get in any secure investment then there is little incentive in joining the so called "buy-to-let" market. Some people pointed out - don't let it - just buy and sell it the rising market and you can make a profit just in the time it takes to do the paperwork. In Spain people were buying of plan on green sites and sold along the way as the buildings started growing into the sky making good profits - while it lasted. Slightly more restricted but along similar lines many projects shoot up like this in Ireland and the UK.
Why do I think that?
First let's be clear - I am not discussing statistics and numbers. They will prove anything we want them to.
I am looking a what will happen and how real people will feel it. Statistics may prove my view wrong and I would be more than glad to find I was wrong in a year's or two time.
We are not discussing how we got here - that's another, important lesson.
This is about the need to save, to cut the deficit and there is no way we will save later by spending more now. We need to save now. All employers do that, all households do that, the local councils have to do that and regional and national governments as well.
This prognosis can be underlined with a lot of statistics and bankers "science" - but it is also common sense and the milkman, the butcher and the baker down the road can tell you that (if you still have them). Otherwise you can take out a subscription for the FT (Financial Times) or the Times as provided for now by Rupert. The bottom line will be the same.
House prices in the countries with strong historic real estate equity growth (UK, US, Canada) will remain flat for a while to fall back in line with the more logical rate of doubling the value every 10 years which suggests an annual average increase of well below 10% - far more realistic than 25% on equity.
Stocks slip amid evidence economy is slowing - NEW YORK - Investors cashed in some of their recent gains Wednesday after the Federal Reserve gave them more confirmation that the economic recovery is slowing. The Dow Jones industrial average fell ... [BN-Net Economy News]
The mixed news continues. The double dip recession looks very likely just as this data from the US indicates.
Look at Japan and the good news is close to the bad one. Greece is still digesting the reforms and "fires" flare up here and there. In Spain the Prime Minister cancelled his August holidays and stays in the office to boost moral and to prepare legislation that could still spark trouble when the temperatures cool for the autumn.
.... bright. When will we get better economical weather?
The truth is no one knows. That is the bad news.
The good news is it will get better. How do we know? Well it has been like this for millennia - for thousands of years and it is human nature.
Reading through the news tickers on m&m - News - the picture of the world economy is far from clear. It goes up here and down there. The next day the messages are in reverse and on day three we have more bad news with the public debt rising everywhere.
Cutting public debt now and risk another dip - the double dip recession - or wait and spend to fire up the economy?!?