February 5, 2006

Irish property pyramid can't rely on Polish foundations

Posted in Celtic Tiger · 31 comments ·

A few misguided individuals had apparently been suckered into a classic pyramid scheme where the price at the top is dependent on new mugs coming in at the bottom. Thousands of euro were lost.

The logic of a pyramid scheme is simple: as long as more people throw their money in, a select few will get out with enormous returns. These lucky ones will obviously vouch for the ��miracle�� of a scheme which produces money as if by magic. Their enthusiasm is infectious and others hoping to get rich quick begin to throw money at the scheme. The notional asset in question can be anything; the common denominator in all these schemes is that they are based on hot air.

It is greed which drives people into a market where they can remember the price of something, but not its value. So a pyramid scheme is a fraudulent system of making money which requires an endless stream of recruits for success.

Recruits (a) give money to recruiters and (b) enlist fresh recruits to give them money. A pyramid scheme is called a pyramid scheme because of its shape. If a pyramid were started by a human being at the top with just 10 people beneath him, and 100 beneath them, and 1000 beneath them, the pyramid would involve everyone on earth in just ten layers of people with one conman on top!

Thus, in no time, ten people recruiting ten more people, and so on, would reach ten billion, well in excess of the earth�s population. If the entire population of earth were five billion and we all got involved in a pyramid scheme, the bottom layer would consist of about 90 per cent of the planet – ie, about 4.5 billion people.

Thus, for 500 million people to be winners, 4.5 billion must be losers. Is the Irish property market displaying characteristics that are akin to a pyramid scheme?

Last week, we heard that house prices in Dublin were increasing by �230 per day at a time when average post-tax wages are rising by just under �5 a day.

Let�s just take that in. Are you getting that queasy feeling? Well, don�t fret: I have been worried about house prices since the turn of the century! So, too, has the Central Bank. Its latest bulletin, issued last week, examines the associated indebtedness, arguing that ��a situation whereby debt is increasing at a rate that is more than three times that of income is clearly unsustainable��.

But others argue that, while the Jeremiahs have been banging on about the crash for years, not only has the crash not come, but the boom has continued to roar ahead. Moreover, people are getting into more and more debt to finance this.

For example, last year we increased our borrowing by an extraordinary 29 per cent and, thus far, mortgage defaults have not been much of a problem. So is it game, set and match to the cheerleaders? Not exactly, because they don�t have the faintest idea when or how it is all going to end either. For as long as the Jeremiahs have been saying it�s all going to end in tears, the cheerleaders have been confidently asserting that prices will plateau out as soon as supply catches up with demand.

But this has not happened. Supply has far outstripped demand, by most demographic measures. In fact, supply has expanded so massively that the construction industry now constitutes a bloated 14 per cent of the economy.

In recent months, the future of our housing market and our prosperity has been put on the broad shoulders of our immigrants. The new argument is that, even though domestic supply has caught up with our own demand for housing, the 70,000 new immigrants a year will keep demand – and prices – motoring. So, the more immigrants, the higher house prices.

But the problem with this argument is that all studies of immigration show that at a certain stage, the cost of housing affects the choice to come here or not. A recent study by the ESRI – entitled Rising House Prices in an Open Labour Market, and written by David Duffy, John Fitzgerald and Ide Kearney – suggests that, not only will the rise in our house prices have a significant impact on the amount of new people that will come here but, more interestingly, the high cost of houses will drive the immigrants back home when they reach settling-down age. Let us examine the 120,000 or so Polish workers who are here. Will they all stay? Hardly! Again, new economic studies indicate that the decision to move to another country is now a temporary one.

The young Polish workers are emigrating by text. They are being bombarded by texts from friends and moving as a result.

If they don�t like Ireland, they will go home. If you doubt this, check out Ryanair�s website: 40 per cent of its new routes are to Poland, Slovakia and other central European locations. If you ask Polish workers whether they plan to stay here, the vast majority say no. These patterns are typical. They want to settle in Poland, and now they can. They will take the money they�ve earned here and then find value back home. Unless Poland and its economy revert to communist torpor, opportunities will emerge for them back home and they will go.

This happened here. The Irish emigrants of the 1970s,1980s and early 1990s came home in their tens of thousands – close to a quarter of a million Irish emigrants have returned here since the mid1990s.This pattern is likely to be repeated with Poland, and the price of houses will actually accelerate this process.

So, far from being the underpinning of further price rises, dependency on the ��immigrant factor�� contains the seeds of its own destruction. When our immigrants tire of living three to a room, ten to a house, they will reassess the Emerald Goldmine. Magda from Krakow will wake up one day after five years here and think: ��Hold on a second, I�m 30, in a serious relationship with a lad from Gdansk and I�ve no prospect of ever affording a house in Mullingar for my family – time to go.� This lifestyle choice will be repeated by thousands all over the country.

But what might pull them home apart from lifestyle choices? There is no reason to believe that the Polish economy will remain in the doldrums forever, tied as it is to the German economy. It seems likely that, as Germany emerges from its post-unification coma, Poland will recover too. If these economies do turn around, Poles will return home. Euro interest rates in Europe will rise in tandem.

Where might that leave us, with our enormous mortgages, investment properties and our massive housing overhang the product of today�s building splurge?

As we have seen with Australia over the past 12months, interest rates do not have to rise enormously to hurt an excessively borrowed population – particularly those at the bottom layer of the pyramid.

  1. humph

    In reference to Australia , house prices in Sydney have
    fallen by 10% since their peak in 2003.One of the factors
    was indeed a few small interest rate rises ( bank Standard
    Variable rate is now is 7.32% )
    Another factor in my opinion was people were just not
    getting value for money!It is this factor I would see
    influencing an Irish crash. From what I see ,I will not be
    returning to Ireland to live in a 2 bedroom hovel that
    costs more than a 4 bedroom house 10km from Sydney city

  2. Peter

    Hello David
    I work for a company in Galway city for a residential
    letting agency.What a demand for houses we have from
    people from Eastern Europe,I would say 70% of our
    properties are rented to people from Eastern Europe and
    more and more each day.What that saying? As longs as its a
    good and clean property it will be rent full time and the
    landlord will be able to support the morgage.I think if
    that people from other countries stop coming here to work
    and the demand stops then we are in trouble and until that
    happens the prices of houses/apartments will keep going up!
    Its all about demand and interest rates!
    I bought a small apartment in the city center 8 years ago
    when I was 18 with no money or help from family,just got a
    morgage and extra loans for deposit.I stuck my neck out
    when I was so young and I was pennyless but today I am
    rewarded for it.If your over 35 now and wishing for that
    bubble to burst and it may soon, but remember all those
    people out there that took the chances and worked hard to
    start getting on that propery ladder while others sat in
    pubs spending all the weeks wages.Finally I do think it
    will slow down in the next few years for everyone to have
    a home.
    In 1996 I bought a one bedroom apt in the city

  3. Aidan

    Very interesting article. I think that you are spot on with
    your observation about Polish people. There are a few
    fundamental differences between the Polish mentality and
    the current Irish mentality.
    Firstly, Polish people are very risk averse. Many still
    have the mentality that it is better to save and buy a
    small house for cash than to get a mortgage. It seems
    incredible in this day and age but this attitude is related
    to the fact that housing is still so cheap there that you
    can buy a house there for cash. My wife is from Zielona
    Gora and we are thinking of buying a place there. There are
    beautiful 60m2 apartments near the city centre for about
    40,000 Euro. A couple saving like mad on good salaries in
    Ireland or the UK could easily make that in a few years.
    Secondly, Polish people are still very tied to marriage and
    settling down. Many intelligent, beautiful Polish women I
    know want nothing more than to settle down and have kids. I
    don’t know any Polish woman who puts career before family.
    This contrasts greatly with the Dutch attitude all around
    me where having kids is really a lifestyle choice and being
    an ueber career woman is an acceptable choice.

  4. Aesop McFadden

    Media reports on the subject of house prices increasingly remind of the boy
    who cried wolf. Journalists seeking the sensationalist headline have
    anaethetied Irish public so much to the dangers of the property bubble in
    Ireland that we no longer pay any heed to the warnings. We listen more to the
    reassurances of biased econmists working for the mortgage providers than
    we do to the Central Bank.

    However the real problem is that the vast majority Irish public have no
    interest in seeing house prices moderate. Obviously anyone working in
    construction, solicitors, surveyors, autioneers, banks don’t want to see the
    gravy train come to a shuddering halt. Existing home owners smile everytime
    the ESRI index jumps. No policitcan would get elected on the the promise to
    lower property prices. This “me fein” attitude to property prices in ireland is a
    symptom of the Celtic Tiger economy and ironically will ultimately herald it’s

    Aesop McFadden

  5. Pete

    Although as a non-house-owner I would love to see this
    pyramid scheme collapse, I’m not convinced by this article.

    I’d really like to see some stats showing that supply has
    exceeded demand. It just doesn’t feel that way on the

    As for Magda heading back to Poland when she’s 30, she
    might (if there’s a job for her to go back to), but she
    might then just be replaced by a younger Pole. Or her
    serious relationship might be with a lad from Mullingar.
    I’m sure there are some immigrants living 10 to a house,
    but plenty live comfortable lives and run nice cars. They
    may not have any intention of staying here, but as long as
    Ireland offers better opportunities than they can find
    elsewhere, they will stay. It will be many years before
    the Polish economy is good enough to trigger mass returns.

    In the short term, I see 2 possible triggers for a house
    price crash:
    First, the SSIA’s. The sudden surge of available cash is
    bound to cause an upward spike in house prices, but when
    that cash is gone, what will hold the prices at their new
    Second, interest rate rises. As you say, it only took a
    very small interest rate rise to turn the Australian
    property boom to bust, a rise (from memory) from 6% to
    6.5%. That’s an 8% increase in people’s mortgage
    repayments. The likely ECB rate rise in a few weeks (again
    from memory) from 2.25% to 2.5% represents an 11% increase
    in people’s mortgage repayments. How many of those can
    people take?

  6. Paul

    Hi David,
    I enjoyed your article.

    I’m with you on this one.

    I live in North Wicklow and work in South Dublin and on my
    daily travels on the M50 I am amazed at the amount of
    property construction along the M50 corridor.
    I just can help but wonder what is driving ‘demand’?
    I can’t afford any of these properties in South Dublin but
    wonder who can afford 700k EUR on that 3-bed duplex with
    magnificent Junction 13-M50 views.
    I mean there are hundreds of new housing units coming on
    stream in South Dublin (Carrickmines Manor & Carrickmines
    Green are two examples) but still in Wicklow prices are
    also on the up and up also. There has to be a ‘hole’ in
    demand somewhere.

    My mind often springs back to the ‘100% mortgages for 1st
    buyers’ announcements a while back one could also most
    hear the Banking Industry thinking ‘How can fuel demand,
    things might slow up’.

    I’d also be interested in hearing more on the Australian
    experience over the past 12months, I had read that prices
    had slowed up but hadn’t heard much else…

    [Feel free to edit my comment if necessary]

  7. Joe

    OK David, time to call it, if you dare! Notwithstanding the
    fact that we might talk ourselves into a downturn when do
    you think we might see a downward trend? Will it be the
    next ECB interst rate hike or the one after? Will we last
    until post USA presidential election when that particular
    piper will have to be paid? What’s the most likely timing?

  8. John

    Couldn’t agree more David, it seems to my uneducated eye
    that the economy looks increasingly unstable. This
    property boom is unsustainable and the fatuous commentary
    by estate agent and bank economists is not helping the
    situation. I wonder which genius came up with the wheeze
    that immigrants were bound to buy all of our over-priced,
    badly built, poorly serviced starter hovels? Is there
    anything that can be done at this stage to halt the
    impending train-wreck?

  9. johnbennett

    I think the long awaited bursting bubble is not too far
    away now. Dan Mcloughlin bank of ireland’s main economist
    and one of the main chearleaders of the celtic tiger
    economy is predicting that the ECB interest rates will be
    at 3.5% at the end of the year and the euro will rise to
    1.30 against the dollar. What ever you think about Dan
    mcloughlin he has been very accurate in predicting the
    fortunes of the celtic tiger economy. He was spot on at the
    beginning of 2005 in predicting that the dollar would be
    strong against the euro during 2005 when everyone else was
    saying it would continue to fall.

  10. adrian

    The government has encouraged the arrival of our eastern
    colleagues by having he most relaxed access to work
    approach in western europe. This relaxed approach was taken
    approximately two years ago in order to prop up a dipping
    rental market.
    The reality is that the property bubble has been luckier
    than Delores Macnamara. It ducked and dived nothing managed
    to touch it….the dot com bust, 9/11, euroland stagnation,
    foot and mouth, war in afghanistan, war in Iraq, rocketing
    oil prices. Long may Delores be lucky and you’re looking
    good honey, but this market looks ugly and its lucky days
    are numbered!

  11. Tom Farrell

    Hi David,
    I think you need to unpeel a bit more the the ’70,000
    immigrants’ per year argument. For example, the Irish Times
    Feb 7 editorial describes new numbers from the Central
    Statistics Office Quarterly National Household Survey from
    last year. It shows that there were 159,300 foreign workers,
    representing 8 per cent of the total of 1,989,800 in
    employment. Can 8% of the workforce (who are ostensibly on
    ‘lower paid’ jobs, thus are probably paying low-end rents)
    really prop up the entire property bubble? Maybe the
    interesting metrics would be a) what % of all rental
    properties are rented to immigrants, and b) what % of the
    total rental market (in €m’s) is contribution from immigrants?
    I agree with the train of thought in your article as a
    whole. I just wonder are you overplaying the immigrant
    dynamic and underplaying some other dynamics?

  12. Gearoid MacRuaidhrigh

    Hi David, I enjoyed the article. I just thought it was
    worth noting the amount of responses to this particular
    article, which deals with house prices, compared to your
    more general pieces. I suppose you could simply put this
    down to the now near universal interest in property in
    Ireland but I think it highlights a widespread underlying
    anxiety with the market.

  13. tony mc coy

    if you agree with the “pyramid” argument you would have to
    be extremely concerned for the people who pay €280k to
    €330k for small 2 bedroom apartments in the likes of
    Finglas, Blanchardstown etc etc. Even Eddie would agree
    that this is not value for money !!!!

  14. David Mc Williams

    Thanks very much for all the comments. We are all clearly
    sensing something nasty brewing. I’ll keep coming back to
    the theme and keep the mails comming.

    Best regards,


  15. Christian

    What will it be that tips the scale, well no one knows and
    in many ways its futile t predicte, but merely to note,
    something will happen. I agree witht the above poster,
    PROPERTY is currently in the back, side top bottom & front
    of everyones mind to some degree. Even those without a
    mortgage or non-owner (talk about the North, feck that are
    you propertied or not propertied…)

    If a bust don’t happen then Ireland will in economic terms
    be responsible for rewritting the book. There ain’t nothing
    new under the sun this ain’t gonna happen.

    1 more year. Maybe, as we edge closer to election, maybe.

    My fear is if FF don’t get in and a coalition do they may be
    faced with the largest Economic BUST Ireland will have seen
    compliments of the current property orgy being beeam and
    broadcast across the airways and gracing our barely dry
    broadsheets. That won’t be fun since they have been out in
    the cold during the good Years watching the Clowns at FF inc
    pissing the money against the wall.

    Rest assured, the percieved-value of Irish Land is what is
    truly propping up this fantasy world of money & men.

    I mean come on we are the 3rd least densely populated state
    in the EU (we’re a little America, and no I didn’t need to
    read your book David to know this) so weres the crisis.
    We’ve loads of room & time to build all we need!! Right?



    Hello, right?



  16. eoin


    You are clearly right that the immigrant population is helping push up rent
    and possibly property prices. At least, if the immigrants were not here it is
    clear that the prices would be lower: clear supply and demand.

    The question still remains though. Is supply greater than demand? Is there a
    bubble regardless of the demand? There are 80,000 houses built a year. Is
    that not more than enough for 70,000 immigrants per year. If we assume the
    immigrant numbers are under-estimated ( which I am sure is the case) even
    then is 80,000 supply enough, or too much?

    The question is not rhetorical ( although I tend toward believing over supply)
    because I do not know how what the average number of bedrooms per newly
    constructed house is. Is this info available anywhere?

    An interesting resource is Daft.ie. You would know as a contributer that their
    quarterly report shows rental prices at about 80% of where they were as the
    average of 2002 rents : and an even greater difference from the 2002 peak.

    Mapping the costs of rent to the costs of paying a mortgage on the same
    house would be instructive. Normalizing them both at 100 for Jan 2002, we
    would see rents fall to 80, and mortgages rise by the cost of the average
    house rise in four years plus the cost of money: by the end of the year that
    may be a normalized increase of say 50% ( 150 on our chart).

  17. Deco

    I read a book by Phillip Coggin, the Financial Times
    Economics correspondent. The book was called the money
    machine. In it he explains that if somebody puts money in
    the bank, the sum becomes a liability on the Banks books.
    To keep it looking as if the bank is in control, the bank
    then has to offer the money out as fast as possible to keep
    their balance sheet looking positive. At the same time
    Irish banks operate in a monopoistic manner with regard to
    administration charges and this pushes up their
    Both effects together are used by the top level management
    in Irish banks to justify the bonuses and pay that they

    We have in effect a banking system acting as a multiplier
    on the economy via the property market. We have a
    government that consents to this, due to it’s effect on the
    tax revenues via once off events like house stamp duty and
    VAT, and record employment in the construction and home
    furnishings industry.

    The problem is ….. that it works the other way alos and
    the multiplier can turn in reverse if there is a decrease
    in the level of money that comes into the economy via the
    traded sector.

    And the traded sector is getting it harder to compete due
    to rising costs. This includes the cost of housing, but
    also the costs of supporting overly expensive public
    infrastructure projects, some of which are badly designed.
    And some of which are contributing to consumer inflation
    via monopolistic charges (for example the M50 Toll).
    We also have benchmarking, and public sector bodies that
    convert wealth into politics while public concerns get
    sidelined (eg. the health boards).

    In short we are making systematic errors today, and will
    have to pay the price tomorrow when the wheels start
    rolling off the wagon.
    And at some stage the new economies in the Eastern Europe
    as well as East Aisa will have improved their methods of
    attracting investment and some of the older economies will
    have remedied their ways (as is slowly happening by rather
    unusual means in Germany and Scandinavia). Ireland seems to
    be slowly but inexorably on the road to getting fatter,
    when the other economies seem to be striving (often
    battling internal vested interests) to get fitter.

    Are we to then expect the Taoiseach of the day to appear
    before the nation and give us another speech along the
    lines of “I want to talk to you tonight on a matter of
    grave national importance…we have been living beyond our
    means for some time now.. it is time for us to tighten our
    belts” ?
    I reckon by that stage Dan McLoughlin will be in the
    Bahamas in his early retirement as far away from the
    debacle as a Bank of Ireland bonus package can take him.

  18. BB

    Is there any gas left in the tank to push prices further ?

    We used to be able to purchase a ‘Gaff’ on three times our
    income – now we need close to ten or even higher multiples.

    We used to be able to purchase with one good bread winner -
    - now we need a minimum of two working their ass off.

    Interest rates at record lows – but hey, they look like
    they’re only going in one direction now.

    We used to borrow up to a max of 90% of value – hey, we
    need 100%

    We used to borrow over 20 years – hey , make that 30 to 40

    Stamp Duty – dont even go there – at least one years total
    net income – even more.

    Result – Over €400K necessary to buy a second hand corpo
    Gaff in Dublin. That’s over half a million US of A Dollars

    Conclusion – Of course there’s gonna be a serious
    correction – Our greed is gradually turning to fear – the
    correction will start when ECB base hits 3% – certain to
    be September – but maybe even June !

  19. David Mc Williams

    Thanks for all the comments. There are more than a few
    articles in each one. I’ll keep ploughing this particular
    furrow. Thanks again, D

  20. richard

    I have agreed ENTIRELY with you on this matter, for years. I admire your courage, in speaking out.
    Its not a popular position being one of the first people to stand up and say ‘ the emperor has no clothes’.

    I think that as well as higher interest rates, it will also take the loss of jobs (in multinational co.’s etc) before we see lower house prices.Inflation is bringing this closer, as well as the east european countries ( Poland etc.) who joined the e.u. in 2004.
    The AVERAGE hourly wage in Poland is equivalent to €2. In China (non e.u.) its equivalent to €0.50c.
    These are the AVERAGE, and not the MINIMUM hourly wage rates.

    I think that some of those new east European e.u. states are also offering 0% corporation tax rate for foreign multinationals.They make our 12.5% rate look big.

    But you just can’t get ‘through’ to people who are about to buy a house.
    Their eyes just glaze over, and they then start to laugh at your caution.
    Its like as if an alien has landed, and put some zombie type of drug in the public water supply.

    I wonder if the government had imposed more strict Mortgage:Salary
    ratios, could house prices have been kept lower.

    The weekend after the 2002 general election, you had Bertie Ahern as a guest on your TV3 weekend
    programme ( named ‘Agenda’ ?).
    You raised the house price issue with him. You pointed out that everywhere else that house prices had surged significantly, they had subsequently crashed eg. u.k. in late 1980′s.

    Bet that you didnt think then that come the 2007 general election, the house price issue would be just as topical.

    Your rationality will have to win in the medium to long term.
    Irrationality can only prevail in the short to medium term.
    All markets are driven by 2 things -Greed, & Fear. That’s the cycle.
    It will soon be time to start calling ‘apartments’, just plain ‘flats’

  21. David,

    Great article!

    Stock market and housing bubbles come and go, and then a correction. Ireland is tied into the global economy and it is enevitable that her housing market will correct.

    Here in the US, we have experienced a correction despite historically low interest rates.

    Sub prime lenders have gone out of business and borrowers are being forclosed beacuse they cannot pay their balloon ARMS. Lenders have put greater restrictions on new loans and while capital is available, loans are harder to get. Lenders are getting burnt and the forclosure market is heating up. Why should Ireland be different? It’s called supply and demand and the scenario described will happen in Emerald Isle.

    Then a Lament for the Celtic Tiger will be released by the government.

    It would be nice to return to County Clare, but not any time soon since cottages in the Burren go for the price of Soho lofts here.

  22. Owen

    Without even wanting to get into will-they-wont-they-fall house pirce debate, i would ike to point out that in the same way that over the last 10 years there has been a huge industry and incentive behind keeping house prices rising, there is now a huge, generally media based, industry behind calling for house prices falling and a collapse in the property bubble. There’s going to be a program on RTE next week that predicts up a crash of up to 33% in property prices. Does anyone actually see this happening (short of unemployment rising significantly, ie towards 6%+, ie 200-300k jobs losses). Does anyone want to bet that most of the contributors to the RTE program have little or no actual property investments and are generally bitter about the fact that their more risk taking colleagues are so wealthy??? David, i think ur excellent and love hearing ur opinions, but the fact of the matter is that even since u wrote this article house prices have risen by a further 10%+. Yes they are stagnating now (which is overall a good thing), but they could still fall by 9% or so and remain higher than when u wrote this article!

  23. Owen

    Ok, my maths was incredibly poor there (im hungover, gimme a break), should have said that jobs losses (net of job creation, which is still growing) would need to be 30k or so. Ooops.

  24. Joe Gleeson


    This article is good, but as you say, Pyramid selling is based on selling ‘hot air’. Property is a bit like precious metails, (It always has a value over time). Apartments might not hold their value as well as other types of property. One important reason for the start of the property boom was the increase in two income families, all competing with each other, driving up the price of property. The Celtic Tiger has driven up property prices even more.
    When the downturn takes place the property prices may not fall to the levels of the depressed 1980′s market. Then a decent 3 bed semi could be purchased for €25k. A similar house now costs a crazy €440. A formula based on available income (2 earners), and interest rates might give us clues to future prices. The SSIA is cushioning things at present. The next few years will be the real test. I reckon the 3 bed semi (now €440k, mortgage rate 4.6%, 20.24k interest per year 100% mortgage) might look like this for first time buyers in another two years, not allowing for inflation.(est value €360 , mortgage rate est 5.6%, €20.24k interest per year).Allowing for inflation price est = €360k*1.10 (5% per year). = 376K. The only real losers might be those that are buying now, e.g. that 3 bed semi ( mortgage €440k, mortgage rate 5.6%, 24.64k interest per year(still not that much more but caught in negative equity!)) (Any changes in Stamp Duty, Salaries across sectors, would obviously have an effect (good/bad) on future prices. E.g. If salaries go down people will become squeezed on mortgage payments, and a spate of reposessions might take place. Banks would sell properties for the value of the mortgage. However only people with large mortgages will be squeezed. This in inself will not have as big an effect as the slump of the 80′s.Remember interest rates then were around 18%!. If interest rates rose to this level again in two years the typical 3bed semi would look like this for first time buyers (est price €112k, interest rate 18%, €20.24k interest per year). Allowing for (high) inflation (est price = €112k*1.26 (12% per year compounded) = €141k ).
    A table of possible prices for this typical 3 Bed (based on having 20k for interest repayment per year) . Any future inflation/salary increases would have to be added to these prices as purchasers would have more income to pay back the interest on loan, and therefore the scope to bid more for a property. The index linked price would then give a more representative picture in comparison with todays values..

    Int Rate 3 Bed Semi price
    4.6% = €440k
    5% = €405k
    6% = €337k
    7% = €289k
    8% = €253k
    9% = €224k
    10% = €202k


  25. Jacek

    Well, as for Polish – many of them are to stay – the real property prices in Poland skyrocketed and there is little chance for them in Poland – for average salary in Warsaw you can buy 0.27 of square meter. Current average
    price of a square meter in Warsaw is 2600 EUR !!!

    And Warsaw is a traffic nightmare – a lot of traffic jams
    1 hour drive during rush hours from city border to the center is nothing unusual.

    A small house 1.5 hour one-way drive from city center in rush hours is currently over 1/4 million EUR.

    Compare it to Ireland and you will see that it may not be worth to come back at all …

  26. Lonely Expat


    my departure from the Isle shortly before the boom was followed by a period of self-approbation and anxiety: had I slept through the lecture dealing with radically different laws of economics – if not, when would the inevitable price correction permit an affordable return? Any mention of a “correction” or “soft landing” gave immediate pariah status; from economists with vested interests, friends and family alike (also vested).

    For anyone with doubts concerning the future, read Desmond Norton’s “Ireland – a small open economy”. Probably no longer on the compulsory reading list and very unfashionable but nevertheless appropriate as it teaches the fundamental concept of value – which appears to have been lost in the mists of the past decade.

    One factor that may cushion the inevitable very hard landing is that there may be some remaining expats who would return once prices reflect value rather than hot air. But this would be too late to be of benefit to those who are about to lose their speculative shirts.

    Looking forward to a time when pub conversation no longer focusses on property prices and mortgages – normality as we once knew it and hopefully not in the too distant future.

  27. Andrew

    David, well done on telling it as it is. You have come in for a lot of derision over the years, then again you have made a nice few quid out of it yourself. But I don’t begrudge you that. It’s small change when you consider what the developers have made. If anyone needs proof of an over supply here. Take a look at a town like Drumlish in Co. Longford. Juts look at the amount of houses for sale there. I come from around there and these houses are empty. Why were they built in the first place? There was certainly no demand for them. If they are rented out (which is rare) they are rented to foreign construction workers building houses in the next Drumlish. This scenario is replicated in every one horse town across the country. What has really taken my breath away during this property frenzy is the ferocity of the vested interests in keeping this thing going. Uncritical media and a wasteful unimaginitive government. We had economic growth and could have handled all of this better and at least spent the money on really sorting out the important things, like public transport, health etc. We are light years behind the rest of Europe and that includes Britain in these areas. What a wated opportunity. I don’t see my future here. Having returned from living in Europe ten years ago I at least know what a decent quality of life is and we ain’t got one here!

  28. Patrick

    Hello David,
    Yes the FF corruption, the debate of many a tribunal (taxpayer’s expense of course), will come home to roost eventually and very soon. Life and life’s work is NOT about having a brass key for a fully furnished “exclusive” 3 bedroom semi D in a good area (tomorrow’s drug ridden slum), a place to eat (take aways), sleep and launch the 2 hours commute to work.
    The new era is follow the work: Europe, USA, Australia….where ever and move as often as possible to maximize what is in your pocket and minimize what is in the property developers pocket (the unnecessary middle men compliments of FF party who put 40% to 60% on the price of property and the mortgages of people they “represent”). “I’m all right Jack” the “status quo brigade” who voted them into power will not be all right and FF wipe out is imminent. I’m delighted they are in power to reap what they have sown over the last 20 years and will be delighted to be reaping some of the aftermath. Stick to your guns. The message has been clear and on target for some time. The vested interest groups will resist but not fund the prevention of collapse. I look forward to an Ireland that has public representatives and folks who don’t sell out for a couple of Euros. Our “cute heurs” have sold Ireland’s very soul very cheaply. Yes crash on the way…it’s just economics.

  29. adult chat network…

    Irish property pyramid can’t rely on Polish foundations…

  30. We’re effectively a country in denial. The current economic situation is highly precarious as we’re continuing to invest our hard/accidental property wealth in yet more property. In particular I’d like to single out the comments by the Taoiseach about “irresponsible criticism” of the Irish property market by the media as the most irresponsible drivel I’ve heard in years. Perhaps he was thinking of all that stamp duty revenue. I’ve heard arguments that the “smart money” has diversified into Eastern Europe. Sure, there’s money to be made but how smart is it to invest millions in a developing country you don’t know, competing with other supposedly smart Irish people for the same apartments, zoned land etc.? In some cases, we’re merely relocating the same problem of Irish people blowing an artificial property bubble to another country. For the government to improve the situation they need to honestly face the failure of vision of the past 10 years and incentivise corporate investment in the same manner they’ve so successfully done with tax relief schemes for property investment. In the booming Chinese economy, the entrepreneur is king. It’s about time we learned to understand that property development is fundamentally different and won’t bring with it the indigenous intellectual property, brands, employment etc. that’s vital for the country to progress. On the plus side, when the dust settles we’ll still have a well-educated workforce, Many wealthy individuals and a better infrastructure than before. Let’s build on these foundations.

  31. richard

    I originally made a post on feb 9th 2007, expecting a property crash also.
    Funny there have been no new posts since September 30 2007, on this issue.The reason is that the secret is now already out. Property is now a four letter word. It had to happen.

    Everybody knows now that ‘McWilliams’ was right, all along. Fair play to you David. One question is now how many people will emigrate OUT of Ireland. This will also have an impact on the property market /rental market.
    ‘Apartments’ in scummy areas will soon be called just plain ‘flats’ again. Also, lets start calling ‘muffins’ just plain ‘buns’ again, and lets start charging less for them.

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