Tuesday, 3 June 2008

Property Crash and economic slowdown - Part Two

As opined on this site previously, it really looks like the shameless, steroidal pumping-up of the property sector by the Government through tax breaks and shelters for the well-off and comfortable (some of them politicians) - even during the height of that very boom - has ended with inevitable consequences.

You can't base an economy on building houses, and you can't base real wealth on credit. Now it's time those Celtic chickens came home to roost. Luckily for them, it should be a lot cheaper for them to find somewhere to live in the current climate.

For many years now - especially since 2006, when the madness was at its worst - ordinary young working people have been priced out of the market due to properties being snapped up as investments by the already housed and affluent, who have been aided by tax breaks and shelters such as Section 23s which allow investors to write off rental income against tax on all of their properties.

Potential homes have been flipped, bought-to-let, and simply let lie idle in the expectation of capital appreciation (caused by this very same speculative activity in the market). Such nonsense is unsustainable in the long-term, and now the whole shebang is rapidly sinking into its shaky foundations.

An Irish Independent report claims one quarter (ONE QUARTER) of construction jobs are going to disappear by the end of next year. Gombeen Man wonders how many of these will be foreign workers currently paying rent into the greedy pockets of the new Irish landlord class who have borrowed heavily to get into the buy-to-let game?

If 65,500 construction workers are made unemployed (that's the figure quoted), it's fair to assume that a good number of them will be workers from abroad who will follow jobs elsewhere. That's a lot of empty buy-to-lets, is it not? And selling won't be an option for any Paddy Last wannabe rackrenter who got into the game as late as 2006, as their "investment" is now worth less than the sum they paid/borrowed.

Wait now for the unprincipled opposition to start whingeing about stamp-duty (even though stamp duty did not hinder the market in the boom years) and financial bail-outs for stung investors.

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