January 27, 2008

Fundamentalists still preach the false gospel of property

Posted in Celtic Tiger · 31 comments ·

Spin masters continue to tell us that our economic fundamentals are sound, but they keep changing the fundamentals.

In the past week, various ‘experts’ have been wheeled into radio studios around the country to explain two things: first, why the Irish and global stock markets are so volatile and secondly, why Irish house prices are falling dramatically.

The most ridiculous aspect of this theatre is that most of these guys either work for banks and stockbrokers or estate agents. They are the fundamentalists. If you close your eyes, you could imagine them emerging with long beards, Kalashnikovs and a copy of the financial equivalent of the Koran under their arms, believing in the fundamentals. Last year we were told there would be no problem because Ireland was different. Our fundamentals were sound.

However, each month, the particular fundamental that was guaranteeing our glittering success seemed to change. Some days, we were different to the rest of the world because we had a young (or was it a growing?) population; sometimes it was because we had lots of immigrants or maybe it was because our housing stock was old, or we had restrictive planning – or was it because we had lax planning? Other days, we were catching up, we were high-tech, we had permanently low interest rates. I could go on, but you get the message.

Like Islamic fundamentalists, Irish property fundamentalists were driven by exceptionalism. Islamic fundamentalists preach that Islam is different, and Irish fundamentalists preached that Ireland was different. We now know that what they had to say about Ireland was codswallop.

These guys were the propaganda department of an orchestrated financial coup d’etat that took place in Ireland over the past few years. An unholy alliance of banks and property developers was allowed to create a property bubble that greatly enriched a tiny few at the expense of thousands of ordinary people.

How can you possibly take these propagandists seriously? Initially, they told us that prices could only go up, and those not ‘‘on the ladder’’ would rot in eternal monetary damnation. Then we got the mysterious soft landing. At the height of the binge, this became an almost quasi-religious term a bit like transubstantiation – you know, something that doesn’t stand up to scrutiny unless you are prepared (and many good people are) to suspend some of your more critical faculties.

Few people questioned the logic of the soft landing, and those who did, in time honoured religious fashion, were branded as heretics by the fundamentalists. Let’s re-examine the soft landing idea. Think about the imagery of a soft landing.

We have a picture of a superhero with a Rolex in the cockpit pulling levers, fighting with the elements, decelerating and getting the angles right. He is the safe pair of hands when everyone around him is losing his head.

The key to landing is to remove the uplift from the air using the tilt of the wings, so the plane almost drives smoothly into the runway. The tilt is controlled by the pilot using his cockpit instruments. Remember, he is disoriented, so he has to trust the tools at his disposal to give him altitude readings and speed of approach.

The margin for error is minimal: if the pilot releases the uplift too late, the plane will smash nose-first into the runway; too early and the aircraft will drop like a stone onto the ground, bounce and try to take off again.

The pilot adjusts the rudder, wings and balances the machine. He straightens the plane, eyes up the runway, drops the wheels and engineers the aircraft towards a soft landing. Everyone claps.

Now try to picture this with no pilot, no flight instruments, no air-traffic control tower, no tail fin, no fuel and, most importantly, no power over the wings. Yes, I’d be saying the rosary too.

The Irish property market is an out-of-control aircraft, full of petrified screaming passengers, with neither a pilot nor working controls. We abandoned our economic levers when we joined EMU in 1999.Like a doomed plane, the market can only go up and, when it stops going up, as it is doing now, it falls to earth. The severity of the fall is based on the pull of financial gravity.

Because of EMU, we now face the added problem of a housing market slump when interest rates are not responding.

No other country has ever faced this dilemma. Typically, at the first sign of trouble, a country cuts its interest rates to as close to zero as possible in order to avoid a credit meltdown. The US did this in 2002 after the dotcom crash, avoiding a recession. And that is what the US is doing today. However, the stock markets seem to have decided that the US will not avoid a recession this time.

Now the fundamentalists have changed their tack. Out goes the soft landing and in comes the short sharp correction – which is commonly preceded by the reassuring adjective ‘healthy’. The correction slipped into the lexicon just after the soft landing was discarded, some time in November.

When you look out for it, you will hear it in almost every utterance from the fundamentalists. Ironically, the fundamentalists have abandoned the fundamentals for now and we are being introduced to our new friend, the healthy correction. Today, we are being spun the line that the fall in house prices is good for us.

The fundamentalists don’t believe this and have been doing all in their power to prevent it, but they have reverted to this mantra as away of buying time. It is also crucial to accept the new fundamentalist line that the ‘healthy correction’ will be short-lived and that house prices will recover in early 2009 when – guess what – the fundamentals (which presumably have taken off on a bit of a break to Krakow) will reassert themselves!

This is all pronounced with such certitude, despite the fact that all the historical evidence from around the world says the opposite – housing slumps typically last for years, up to five years, and even ten in some cases. There is no real reason to believe that Ireland will be much different from other countries. So prices are likely to keep falling for some time. But the positive side of all this is that it gives us a chance to think up a Plan B.

I’m writing this column from Davos, where many of the world’s leaders in politics, finance and technology are meeting. Nobody here is talking about property. The talk here is about what’s next. The major point of discussion is how can countries best harness their people’s brain power. These industry leaders are not in denial, they are not pretending that the world stands still. They are looking at global trends and figuring out ways to react to, or even shape, these events.

This is what we should be doing, rather than repeating mantras, like fundamentalists, to the false god of property.

  1. Malcolm McClure

    So the new false god is to be Brain-power, is it? Then I fear Ireland has scant hope of salvation in that direction. Assuming brain-power follows the normal distribution, then from population size alone, there are 315 TIMES more Chinese than Irish at any particular intellectual ability level on that curve.
    Taken with the fact that top American universities can afford to attract the cream of the crop world-wide, how then can Irish universities compete? I fear the future for us is “back to spuds and butter, with a rasher of bacon on Sundays”. Maybe Dev was right all along?

  2. John Q. Public

    Malcolm, we might be stuck for a few comely maidens though! One thing we won’t be stuck for is foreign workers, there are too many here to compete against our own workers and pose as a threat to the existence of the nation as a cohesive whole. We have to look at the definite areas of growth/stability in our economy-public sector, IT, financial sector etc., balanced against areas of decline-manufacturing, construction etc.
    Is securing employment for Irish nationals in the short term a good priority as we adjust to future global trends or is it too late for that? David, you talk about the housing bubble/binge, what about the renting binge? Due in part to masses of immigrants coming here fueling demand. For landlords the fundamentalists seem sound-minded with their 21% vat return on investment property etc.
    Maybe we should all learn a few fundamentals here first before we worry about what China and the rest of the big boys are doing.

  3. Aidan

    Can any one here try to explain these incredible increases in rent that are occuring in Dublin at the moment? Will they continue? I would of thought that at some point that once all the property in the Docklands and other areas of Dublin that are unoccupied or unsold begin to enter the rent market. They will begin to create downward pressure on rent, thus causing problems in relation to repayment of loans for many landlords.

  4. Malcolm McClure

    John Q: Surely David is mistaken to identify “fundamentals” as merely the distinction between a soft landing and a healthy correction. The true fundamentals of Irish economics relate mostly to agricultural potential, probably enhanced by global warming. We have fertile soil, plenty of rain and a long growing season. We just need gale-resistant varieties of barley and oats and local cooperative abattoirs to restore economic primacy to agriculture.
    This land once supported ten million Irish people, mostly beyond the Pale. Let’s consider whether that again can be a sustainable objective. Otherwise the Chinese will come, buy us out, and do it for us.
    Over-emphasizing brainpower only makes productive people grow fat behind their desks and nurtures exotic tastes that require imports to satisfy.
    If our mortgage hull caves in, out-board capital and its fueling blow-ins will be detached from our stern and we’ll be left to punt along a boggy backwater.

  5. AndrewGMooney

    David’s image of a Property ‘plane crash’ is interesting in that people behave differently in such dire circumstances. Some go into denial. Some lash out at the steward/stewardess in anger, whilst others sensibly adopt the brace position and attempt to remain calm and rational, knowing their ability to survive is enhanced by rational thinking rather than blind panic.

    Greed and Fear. Bulls and Bears. This story is old, yet, once more: It’s being retold before our eyes.

    Whether it’s sub-prime USA, nationalised Northern Rock UK or Paddy Last’s collapsing property pyramid: It’s the Governments of Nation States who should be taking the lead, getting a bucket of cold water and throwing it over their deluded citizens. But they won’t.

    “Vote for me, I’m going to give you many many years of painful penance for your excesses!”

    Can’t see it being popular. Well, Thatcher managed it, but she was a one-off. Thank Christ.

    I’m confused by the idea of Ireland benefiting from an exodus of foreign labour in a downturn, as if that will ‘grow the shrinking cake’ for ‘indigenous’ GAA Irish. The foreigners will only take their skills, ambition and purchasing power elsewhere. Probably on the boat to Holyhead. If the C21st Irish National Project is to double your population, capitulating to knee-jerk racism/nationalism will get you nowhere fast. You could always blame the English somehow! Or the ‘tinkers’. Until the Roma and Bulgars arrive in force. If the goalposts aren’t suddenly moved….

    If I lived in Eire I’d be more worried by the following scenario:

    Poland, like Ireland 20 years ago, throws off it’s strangulating Catholic Clericalism and chauvinist attitudes to women. It’s economy surges in tandem with a Germany that has finally absorbed the equivalent of 17 Liverpools after Unification. A new trading bloc emerges running from the Rhine/Ruhr to the Urals. Gazprom enriched Russia joins the party. The ECB does what the Bundesbank has always done and always will do: Ensures sound money by any necessary interest rate level, whilst exploiting new markets in Ukraine, etc.
    Will Ireland be reduced to Italian ‘lira longing’ for it’s own lost Punt?

    The young Poles I know here in England are, mostly, ferociously ambitious, tenacious and have a work-ethic that even my Dad would have balked at. But they won’t stay. They will put up with living six to a room in Brum or Dublin only until they have acquired the English language skills and the start up Capital to get their own show on the road.

    In Britain there’s complaints about a few indigent East Europeans: Yet silence about Polish plumbers and dentists. What happens to Eire and the UK if Mittle-Europa booms, as it surely must? Instead of seeing young East Europeans as a once-in-a-lifetime gift of able-bodied, Christendom enculturated talent, they are viewed with the same suspicion and negativity that Paddy was in 50s London and Birmingham (No Irish, No Blacks, No Dogs, etc).

    What will Europe’s ageing population do to keep it’s societies going as young Italian, English and Irish women increasingly simply throw in the towel and abandon the idea of family life as altogether too expensive, onerous and unfair?

    I guess there’s 10 million Turks waiting for their day in the mist and rain of the Brit-Irish Isles, whilst some of us are collecting buy-to-lets on The Bosphorous!

    I used to be called a jealous spoilsport for not ‘believing’ in the Celtic Tiger after the late 90’s. Now I’m a ‘prophet of doom’ amongst my Irish friends. No I’m not. I just never saw what was backing up all that ‘paper wealth’. I still don’t. And until someone shows me a nascent Irish Nokia in a cutting edge industry, I’ll remain agnostic.

  6. “Aidan said,

    on January 28th, 2008 at 10:20 am

    Can any one here try to explain these incredible increases in rent that are occuring in Dublin at the moment? Will they continue? I would of thought that at some point that once all the property in the Docklands and other areas of Dublin that are unoccupied or unsold begin to enter the rent market. They will begin to create downward pressure on rent, thus causing problems in relation to repayment of loans for many landlords.”
    The high rents will remain for properties located within reach of central Dublin.
    1 Immigrant workers need the rental property location to be right to access their workplaces-mostly in Dublin-otherwise they join the long “commute by car” brigade.
    2 the continued influx of workers from abroad to fill the many call centre jobs etc in the big american companies setting up here to avoid paying taxes in the U.S.will keep the letting market firm.
    3 The spending of huge sums by Fianna Fail (still) , in rent supports for the numerous economic refugees awaiting judgement, and still arriving from outside Europe.
    Fianna Fail will prop up the construction lobby and the property market in any way it still can,-for as long as it can- with taxpayers dosh
    4 Those who are postponing buying are also propping up the rental sector.

  7. G

    To John Q. Public:
    I am a foreigner and I have been working in a Irish company for the last 2 years in IT.
    My company had trouble to recruit someone with my skills and if they had randomly choosen someone they might have serious trouble right now. I think foreigners are a great opportunity for Irish companies to grow properly and create more job and wealth.
    Moreover since we are paying taxes, spending loads of money in Irish economy, tourism and rent we are not really useless.
    If the economy slows down, we will leave and you won’t have to worry about paying pension, healthcare, social welfare, unemployment benefits. Yet, most of Irish tallented people got the opportunity to become manager since they have someone to manage …

  8. Dan Hayes

    Read David’s other article in the Business Post about the ethos of the Davos “locals.” It should serve as an Irish role-model.

  9. shtove

    Not just hung – drawn and quartered too!

    The housing market is a 747 that grew and grew as it flew through the air. Now it’s circling the country, seeking a place to land – but all the runways are too small.

    Faith in the power of central planners to manipulate markets is touching: the US bond and treasury markets are currently giving the Fed the finger, and I think laying blame for the credit boom at the feet of EMU/euro/ECB misses the point – the lunatic lending came about because of fictitious capital created by private banks. Fictitious capital drove everything up, and when fictitious capital stops swirling around everything lands hard, regardless of policies that target interest rates.

    If central authorities are to blame for anything, it’s their failure to insist on sound book keeping by those banks, who made a mockery of reserve requirements with their off-sheet investment vehicles and mark-to-myth accounting. But that failure is world wide, not just in Dublin or Frankfurt.

  10. eoin

    Too optimistic Joh McD

    The “continued influx” of immigrants depends on the economy continuing to boom, which is unlikely this year: a likely year of recession. In a recessionary year, net jobs are lost. If this number is 80,000 ( to pick a number) then a net influx of 80,000 immigrants would mean that 160,000 jobs would have been lost in the Irish economy and 80,000 people drafted in from abroad ( at what only be lower wages). This is very unlikely to happen. any government which allowed it to happen would lost most of its chances of ever being in government again, and in any case labour laws in general disallow the laying off of people ( or firing) with the aim of replacing them with other cheaper workers. There are some ways around this ( close your hotel for “refurbishment”) but not very many.

    I think people dont get that migration is Net. They think that if the immigrant population is 80,000 a year it is somehow non-cyclical, or that were it to fall it would be impressive to see it halfed, or remarkable if it dropped by 75% to 20,000.

    Not so. In 1992 the net migration was outward 50,000 people ( all Irish) in a year of 2% growth. Which wasnt enough to create jobs for all of them. The problem is that outward migration increases in recessions, and inward migration nearly ceases.

    Lets get back to the 80,000 net migration figure. Lets say that consists of 100,000 people coming into the country every year, and 20,000 leaving ( people leave even in boom times). In a recession we can imagine the number of people leaving increasing by a hundred percent or more. Lets say to 50,000( This figure is less than 1992 when 70,000 people left and 20,000 people came in) . Its a recessionary year so inward migration collapses. Not to zero – that never happens – but lets say it slightly more than halves – to 40,000 a year. Much higher than 1992.

    Net migration is now -10,000 a year. Migration is cyclical.

    The reason rents are increasing have very little to do with market realities. I think that owners are passing on mortgage price rises. this will last for a few months at most. House starts are collapsing but completions are still coming online. And there is plenty of spare housing. As owners panic they may try and sell their rental properties, temporarily taking them off the market.

    Expect rents to collapse in the second half of the year.

  11. Wessel

    The most fundamental of fundamentals is that a market economy is cyclical and that David is all you have been saying thusfar. Now the “prose” bit about landing planes and all that is entertaining, but guess what, the old plane is going to fly again. If you consider house price YoY change, house price inflation has been in a downward trend since 2000! Agreed that we are in a deflationary phase at the moment, but the supply tap has been closed big time and that means a strong possibility of supply shortage once the inventories are depleted, given that it takes a number of years (especially with Irish planning laws) to rev up supply again. Thus a prediction of a change in the cycle end of 2009 is not rocket science.

    Granted that the past housing boom had all the hallmarks of overindulgence (greed-driven) and that usually means a sharp correction, but to grab the rosary as if this is the end of property as a reliable asset appears to me to be as spurious than the claims of your so-callled fundamentalists that the market will just go up and up.

  12. Rob

    Just a note regarding the rental questions. I don’t really believe that rents will collapse. What will happen is that centrally located houses and apartments will always rent for high enough prices. In fact the old adage of location, location, location will ring true in this regard. what will happens is that prices of houses and rents will decline in poorly located areas i.e. outside the M50 belt. Face it, the commute that most people will suffer is only going to worsen so renting nearer the city centre will seem even more attractive. There is a limited enough supply of good apartments near the city centre, however there well may be a slight drop in prices 3/4 miles outside the city centre. Don’t forget rents barely rose at all and in fact in real terms fell from 1999 to around 2004/5 so there was also a fair bit of catching up to do. That said anyone with cash may well pick up a bargain this year. Apologies for the dublin-centric nature of this posting, tá a fhios agam go bhfuil níos mó saoil ann taobh amuigh de Bhleá Chliath!

  13. geoff dickson

    The universal characteristic of all politicians is that they never realize when it is time for them to move on.
    For Bertie Ahern, that time came in the last millenium.

  14. paddy cullen

    Currently there are a lot of house builders who are holding on to their stocks of unsold houses. However, most of these guys will probably be forced to sell the properties at distressed prices to meet overdue construction loans. I can see the exact same happening with investors and their “highly priced” properties, at some point in time they will have to lower rents to get the tenanats in to cover their mortgages.

    I personally think that rented accommodation will become more plentiful because of what might be happening in the buying market. Investors in property will have no choice to rent out their properties, since buyers may be less interested in buying given the current climate in the market.

  15. tim obrien

    First-time buyer here. I suppose its too late now but i just bought in Athlone and i intend to rent out a couple of rooms. Does anyone have any positive to say about this transaction? Do ya reckon 20k or somet could be knocked off me new house?

  16. Rob

    There are lots of positive things about buying in Athlone. I am assuming you intend on living in it? If so that’s fine and renting rooms out will bring 7,000 p.a. tax free. The people will be/are already being hard hit, are those who bought on the premise of making a quick buck. Those intent on living in their purchases are on much firmer ground, provided they can cover their mortgages of course! The market should never had kow-towed to the investor the way it did, it was insane. People in difficulty will be those finding they have to fork out 400 plus euro pm to subsidise a mortgage of an ‘investment property’ (they are not living in). They are in effect giving today’s cash to prop up an asset falling in value (i.e. nightmare scenario). People intent on staying put in properties they can afford will be fine, don’t get caught up in this ‘losing equity’ nonsense if you are not selling. You will be fine.

  17. tim obrien

    Thanks for your input Rob. Yes i will be living in the house and renting a room or two. Cheers Rob that puts my mind somewhat more at ease.

  18. Dave H

    I am one of many Irish people in the 25-35 age group who has yet to buy a house. I have been gleefully watching the prices drop over the last year hoping that someday sooner or later I can nab myself a fairly priced home, possibly a bargain even, and avoid the fiancial sword of damocles I see hanging over so many of my brethren.

    Watch out for the developers offering gift incentives as they struggle to maintain a high price in their estates and apartment blocks… Free Cars for everyone who pays full whack for their Gaff!!!

    No Thanks Mr.Seller. I think I’ll wait a little longer…

    Renters out there, you are not alone!!! Keep the faith!!! :-)

  19. George

    Good to see that people like David McWilliams have the courage to tell the truth in a time when everybody is wearing pink sun glasses and don’t see the black pitch in front of them. Ireland..prepare for very bad times…this is history like it always has been…
    how can a household with debts for the next 35 – 40 years, hope of better times…
    dont you see that all this wealth was not your money…………..my college next to me who has the same salary like me bought a house for 530k….he thinks he owns it..in 40 years…am I stupid to rent…
    this is what the Irish Government calls wealth….this Government made the people belive they are rich with things they don;t own…
    David you are right about plan B but is not going to happend…this is a passive Government and I know because I work for them…
    I feel sorry for my friends who are not only worried about their jobs but even about their mountains of debts….
    am I pessimist, no no exactly the opposite…this is the picture wiht the economy here:


  20. Rob

    yes, there does seem to be a definite tightening coming. It is interesting to note that when prices were going up the developers were screaming don’t interfere with the market, now that the shoe is on the other foot, they are shouting interfere! interfere! I would say a couple of things in favour of perhaps buying in a few years if prices come down more. Firstly low interest rates look like they are here for a while making money cheap, secondly the current dip if it does make a property affordable then think buying it. The key to it is affordability, it you can stress test your mortgage and still afford it, then give it serious consideration. After all renting is dead money, no two ways about it. That said ridiculous prices are still being charged for three-bed semis and a dose of reality will do us all a world of good. I think greed got the better of a lot of Irish people and how we voted a Government back in who wined and dined the developers (at the Galway Races) who are jointly responsible for this mess beggars belief.

  21. eugene

    “The key to it is affordability, it you can stress test your mortgage and still afford it, then give it serious consideration.”

    Affordability, the mantra of the estate agents and developers is by and large nonsense as a criteria for buying a house ( clearly I admit a house has to be “affordable” but…)

    1) The real cost of a house the the payments you will end up paying at the end of term. Clearly a 40 year mortgage is going to cost you a lot more than a 20-35 year loan. Banks are not too different to loan sharks. Imagine you have a loan with a loan shark for 500 euro a week for two years. You cant make the payments. he sends the heavies around and before they break you legs they offer you a new 5 year loan for 400 euro a week. Affordability increases ( the weekly cost decreases) , but the total cost of the loan also increases. Is this man you friend? As an addendum to that people who think they have equity in their house are often deluding themselves. With a 40Y 100% loan you would need to see the value of the house more than double to match repayments. Having a 10% nominal increase is not all that.

    2) Affordability is really only at the time of purchase of the loan. Ireland ( thanks to the ECB) had historically low interest rates two years ago. That will never happen again ( and nor will the ECB – whose mandate is inflation busting not economic growth – reduce rates this year. I get the impression they think the neutral rate is 4.5% plus, and in a strong inflationary environment we might see 5% pluss). Since the “stress test” was limited to a 2% increase in rates it wasnt much use two years later. Future affordability might be a better criteria for a laon. The fact that affordabilty increases when the interests rates drop is obvious for variable rate mortgages, it is not a “good thing” because the interest rates will go up from historical levels, and future affordability decrease.

    So yes, renting is dea money. The banks in Ireland needed to be curtailed, though. In France, which in the Euro zone, payments on loans have to be max 30% of gross take home pay after tax. Someone a 75K equivalent salary I know could get a 20 year loan there for 140K, just. This keeps their house prices low. Increasing “affordability” by increasing the term of the loan – which French banks are curtailed from doing – would eventually see house prices rise to the level at which the average french household can “afford” to pay 30% of their post-tax income. Affordability will remain the same, per week, house prices rise, and the winner are the developers, banks, and older generations.

    Affordability is a mugs game.

  22. Rob

    Yes agreed affordability is important but i would never suggest a 40 year mortgage, which is crazy talk,
    as really that is almost renting by another name. Affordability is future affordability in my view (otherwise what is it?) I don’t really see interest rates returning to the high old days and in that sense will be low.
    I think German rates have been much above 5 per cent for a long time. Just as we should not be afraid to question the property market, in the same way i do think there may be a good buy out there in time. The one thing we should also be aware of, in talking to older people who bought years ago, they all seem to say that the first 5/6 years of paying the mortgage were tough (and these people didn’t spend like we did, i.e. one car if even, holiday?, flat screen tvs etc, dining out). In a way there is a lot of moaning going on but people sure ain’t curtailing their spending.

  23. eugene

    “The one thing we should also be aware of, in talking to older people who bought years ago, they all seem to say that the first 5/6 years of paying the mortgage were tough”

    Actually this is where affordability leaves you down once again. In the eighties the interest rates were high, and so was inflation. Both are good for debtors. The high interest rates, if historically high, could only fall. The time to no worry too much about affordability is when interest rates are high, not low. Inflation eats into the real debt, and increases the nominal value of your wages. Contrast this with the people who spent the same percentage of their income 2 years ago when the ECB rate was 2%.

  24. George

    I would advice all house buyers to wait another year and the house prices here will be 40% of what they are now…there is absolutely no reason why the property market should catch up like they say…there is no demand for property any more…a simple fact of life: offer meets demand or better in this case offer chocked demand…in fact the demand was met 5 years ago…
    the prices for commercial property were dictated by the land prices and not businees prices…what small business can afford to pay 10k monthly on rent if it will only make 12k a month. Well the 10k rent comes as a result of 20million paied for the land…
    and the developer today doesnt take into the consideration the fact that a businees has to make money first…
    The developers planned to build buildings and sell them on, but now that they are not selling they find out that to make a profit out of it the rent has to be huge…
    unfortunately there are no more new business hapening and the result is thousands of office spaces are empty…
    there is absolutely no interest for businessman to invest in this country at this stage
    ..now the buble is to see very clear for everybody..look at UK… they know what happend in 80is…is history people no scienc…drop the pink sun glasses and face the reality….

  25. shtove

    Renting is only dead money if you consider the roof over your head to be a financial investment for the future – a pension. Otherwise, you’re simply paying the market price for an essential service.

    The money you save every month by not getting stuck with a ridiculous mortgage on your principal residence can be put in to genuine investments – you know, stuff that yields dividends and other regular income.

    So how’s the pension doing? If asset deflation sets in, getting in to debt on residential property will become as profitable as renting – ie. not at all – for decades.

  26. Malcolm McClure

    During the period November 2006 to November 2007, Dublin house prices declined about 5.6%, measured in Euros. During the same period, both gold price and Brent crude price increased by about 30%. Gold and oil prices are measures of real value, that suggest that the value of the euro has decreased by 30%. Of course, this kind of invisible inflation is ignored by those who have chanced their arm on a long-term increase in property prices, measured in euros.
    The actual value erosion of your property investments in just over a year has now reached 40%.
    Perhaps it is time to Wise Up and start dabbling in commodities that most people need to buy on a daily basis? But beware the 30-year-cycle.

  27. Kevin Buckley

    Mr McWilliams,
    Read “The Dignity of Difference” by Jonathan Sacks, the Chief Rabbi of the U.K. or at least checck it out on Amazon. You and he are onto something.

  28. Declan

    Dear David,
    I have read many of your articles and I tend to agree whole heartedly with you on many aspects of the downfall of our celtic tiger economy. I believe that we are in the middle of a perfect storm. The downturn in the US economy,the fall off in construction, the increase in interest rates and fall off in manufacturing employment leaves us with a very bitter pill to swallow.
    But what I don’t agree with is your opinion that EMU was a bad thing. I think that the governments incompetence is the problem. The EMU took monetary policy off the table for the politicians which I believe is a good thing. Fianna Fail failed to use fiscal policy to cool the economy at a time when it was badly needed.
    The Bacon Report issued a number of recommendations that could have slowed the property train but this was ignored as it threatened the various property magnates that attend the FF tent in the Galway races annually.
    If this report had been implement properly we may have seen a slow down in construction earlier and a “healthy correction” earlier when we could have sustained it!
    The withdrawal of monetary policy is a good thing, I would really love to know how much insider trading went on in the past when Ireland controlled its own interest rates. The resultant devaluations in our currency that took place during the late 80′s and early 90′s no doubt made plenty of traders “in the know” very wealthy.
    Now that this luxury has been taken away from our Central Bank it should allow for a more stable control on pricing but only if this is matched on the other side by adequate Governmental controls.
    Bertie and the boys have been on the gravy train for a long time now! Once it hits the wall the politicians who come after will have a major mess to tidy up!

  29. Fianna fail always created the s**t -in their long history in office- for somebody else to come and clean up after them.
    The three “tions” were the backbone of their fiscal policy: inflation,taxation and devaluation kept the wheel turning nicely for decades.
    They have bought enough of the electorate (public service unions, farmers etc) with their own money to retain power at the expense of the common good and the result will be a very divided society in the coming decades-far worse than the two tier society/ american style-that they worship so faithfully.
    Given their track record of corrupt practices in land rezoning-which is continuing to this day countrywide-but openly and arrogantly, with almost every flood plain in the country now a potential building site.And by the way- Fine Gael are their partners in many of these exercises in stroke politics, in local councils all over.

  30. jim gavin

    we appear to have covered every rant old and new here from fundamentalist developers landing planes to the flood planes.citizen kane has left mammy to rent or watch not sure(age 25-35)he is keeping the faith (she is keeping her fingers crossed)…estate agents have been asked to hand over the guns they were putting to peoples heads.was it greedy house buyers or developers who drove prices up?was the re-mortgage used to buy the cars to go to the galway races?the piper is waiting to be paid!{all together}it must have been someone else who called for the tune!!!

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