While some might question the use of the word “advanced” in relation to Ireland, there is no doubt that economic gravity must make itself felt, and that "the more prices rose before the peak the more they have to fall after the bursting of the bubble”, as O’Rourke puts it.
It is always instructive to check the credentials and motives of economic forecasters, and to simply dismiss the utterances of any who are attached to banks, building societies, brokers, the government or any other vested interests.
When economists attached to such institutions – including the supposedly venerable ESRI – were telling us in 2006 that the housing market was in for a soft landing, it was only the likes of David McWilliams, Alan Ahearne (since gone over to the Dark Side and silenced by a job in government) and Morgan Kelly who were speaking sense - forecasting the landing would be anything but fluffy. Tellingly, the former was an independent “celebrity economist” and the latter two were attached to universities.
So maybe this guy is also worth listening to? Never mind Parlon, Lenihan and all the rest of them. Nama only exists because property loans were unsustainable. The banks are on public life support for the same reason. The only thing that makes sense for the housing market, and subsequently the economy, is serious deflation.
Add in the fact that the prospect of a property tax has not been dismissed, water charges are in the, erm, pipeline, the banks can’t lend what they used to, and migrant workers from the 10 accession states admitted in 2004 will have unrestricted working rights throughout the whole EU from next year – resulting in fewer potential tenants for buy-to-let investors – and that 70% figure might become a reality yet.
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11 comments:
I saw this guy (http://www.hsdent.com/) present in Dallas in May and he was great. He also said that they've researched every bubble back to the south seas bubble in the 1700's and they always deflate back to where they started once fundamentals, rather than emotion, kick in. He even said he believed it so much he started to rent in 2007 (and this from a multi-millionaire).
Made me feel better about renting for a bit yet myself! But seriously - there's still €600k plus semi-d's in Dublin. That's just crazy! It's got to go down.
Hiya Denis. Thanks for the link.
Yes, I've been trying to put a year on that myself - ie, when fundamentals were replaced by emotions (spurred on by tax incentives). Late 90s? Then I suppose you have to account for wage inflation since then, and all the rest.
You're spot on re prices. I'm looking at what your ordinary Joe and Joanne get paid, and there are an awful lot of people on not-so-great money here, and houses still look dear enough to me.
GM I think thats the fundamental question with regards to this, was it the emotions or incentives which were in place first? Was it the collective emotional response of the buying and investing public, or was it political investment incentives, which caused Joe and Joesphine to think they were property tycoons? Or was it TV, magazines, post thatcherism, pre millenium tension, post millenium tension, EU economic policies, the EUs reaction to inflation, or just the Irish need to own property? Who can say? Who genuinely wants to know here? Ermmm not very many..... But despite that, if the venerable institutions who were there to prevent the very thing which happened, dont act in the publics interest, then the house of cards will fall. These same institutions were telling everyone that the ship wasn't floundering when it was. (This crucial aspect should have been the check which stopped the inflation at its scource).
Can house prices drop any more? Well maybe, but they will eventually go back up. Whether or not they reach the dizzy heights again is another thing altogether......
Maybe in 30 years, D. ;-)
Yes, a bit quiet on this one - though getting a fair few views. Property comment fatigue, I think...
"Property comment fatigue, I think..."
Those interested have already left......;
Given that there are from 301,000 to 352,000 empty houses in the country (not including holiday homes)I can't understand why properties have not dropped 70% from their peak levels yet. Added to that we have rising unemployment and rising interest rates.
the attached is a little out of date April 2010.
http://www.riai.ie/news/article/riai-commissioned_research_confirms_number_of_empty_houses_unknown_outside_/
@Ella 09:02 Two possible reasons: 1 Home owners are just unwilling to lower the asking price or 2 Well it is Ireland...
A 70% drop would be great but I can't see it happening. The key question is why hasn't it happened already?.
I think the answer is that most of Ireland's surplus is owned by people who made a killing in the boom and are under no real pressure to sell.
We should remember also that the mistake people made in the boom was to think it would never end. The mistake they are now making in the bust is to think it will never end.
We will have another boom, and then a bust and then a boom and then a bust... and so on. This is how it goes.
My guess is that within 5 years we'll think that €500,000 for a 4 bed house in Ballinamore is cheap.
Mike
@ Dakota, yes, two perfectly reasonable explanations.
Two interesting articles may be closer to the truth than Prof. Kevin O’Rourke,
Vincent Browne 'Ignore elite's agenda - we are still a rich country'
http://www.irishtimes.com/newspaper/opinion/2010/0728/1224275616446.html
In the Independent
'11,000 new houses built as 300,000 still lie empty'
http://www.independent.ie/national-news/11000-new-houses-built-as-300000-still-lie-empty-2278269.html
Did you ever get the feeling you are missing something?
Mike
Mike, even the Government have factored in (as much as they factor in anything) a timescale of something the region of 12-15 years for the Nama debts, so I think your figure of 5 years is a bit optimistic.
There's no doubt there is still a rich elite in this country though. The two Brians have done their job admirably.
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