Ireland’s inventory of assets is being repriced in the face of collapsing demand and a shrinking money supply. The achievable market price of all assets is moving lower as fewer buyers and less money compete for the same stock.
The fall in the price of Irish houses is well documented. But all other classes are now being affected too. Everything from second hand cars to bathroom furnishings is getting cheaper.
One example is in the second hand car market, where depreciation is happening faster than normal. When I bought a two year old VW Golf in 2006 for €18,650, my research indicated that it would depreciate at a rate of about 10% p.a. That rate of depreciation held until the economic crisis gripped the country in 2008. In mid 2008 I estimated, using a mark to market valuation, the value of my car at approx €15,000. In the six months since then it’s value has fallen to approx €12,000, an annualised fall of around 30%!
The only asset not declining in value today is cash, whose purchasing power is increasing as Ireland enters monetary deflation. All of this is good news for cash ready consumers, but bad news for the “asset rich, cash poor”.
Tags: assets, cars, cash, crash, deflation, economics, ireland, price, recession, value
