Mark Keenan’s “The Market” column, which runs in the Sunday Times' “Home” supplement, is always worth a read.
Keenan remembers how, in 2003, The Economist ran an article suggesting that Ireland’s property market was overvalued by 20%. There was a massive backlash, with one Irish newspaper quoting “evidence” from the director of an estate agency to “prove” the estimation was blatant scaremongering.
The same estate agent later threatened to pull advertising from the Sunday Times if it did not amend its market coverage more positively.
“The Market” column asked, at the time, if it was considered a form of heresy to express anything other than a positive outlook about our property market – pointing out that most of the “evidence” quoted against the Economist article only highlighted that Irish buyers continued to buy.
(And now we are all paying for it.)
Keenan said that current prices equate to those of the first quarter of 2002, and are still dropping by “a percentage point and a bit” each month. Meaning that if they continue to do so until the end of the year, the Economist’s 20% less of 2003 values will have been spot on. If however, he concludes, they keep falling into the following year, the Economist will have been guilty only of understatement.
I, for one, would love to know what the same Economist analyst would have to say about the Irish property market now… I imagine the price-drop forecast might be revised downwards still.
Certainly, that seems to be the view of Martin Walsh, ex head of lending of EBS between 1988-2003. He predicted in April 25th's edition of The Irish Times that prices could still be overvalued by 30%, and ran two graphs to illustrate - one showing price trends in Germany and Ireland (with an index set at 1996) and the other showing the ratio of house prices to average industrial earnings in Ireland since 1953. Walsh set the "average pre-bubble" ratio at 5.3%.
A picture, they say, speaks a thousand words. Is a graph not yet more verbose?