April 16, 2008

Why we're falling out of love with 'property porn'

Posted in Irish Economy · 31 comments ·
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‘Men don’t pay prostitutes for sex, they pay them to go away” However distasteful this joke, it captures an extreme version of the phenomenon that could be described as post-coital comedown. Men, who moments earlier were in a state of delirious arousal, where they would have done, said and promised anything can become, after sex, certainly sleepy, sometimes distant and even hostile.

Now before you get up on your high horse about the type of man I am, I am simply referring to the well-documented, much misunderstood and scientifically proven (by dozens of academic surveys) observation that humans may do and say things when they are aroused sexually — things that they would never dream of when they are in a calm, collected state of mind.

The power of sex changes our decision-making and makes a mockery of ideas like rationality.

While sex is one of the most powerful passions known to man, other passions can be aroused in us, which means that sometimes, rather than behaving rationally, we can let our emotions take over.

This behaviour flies in the face of the central premise of economics, because modern economics contends that humans are rational and logical.

The evidence from real life, rather than economic theory, is that we can be rational and logical but we can also be hotheaded, shortsighted, giddy and excited. (A fantastic new book called Irrationally Predictable by Dan Ariely explores the economic implications this idea in detail.)

Scientific studies reveal that many of us have a dark side which lust awakens. While we acknowledge its existence, we underestimate the power of passion and the influence it has on us the moment we “lose the head”.

Armed with these observations, let’s consider the property market over the past few years through the prism of lust and the dark side.

In addition, let us look at the future of the property market from the point of view of repentance and morality. The contention in the rest of this article is that the next few years will see an aversion to property, which will be almost moral in tone.

Most markets that suffer boom and bust cycles go through an investor love affair, which is followed by an aversion, which borders on hatred. This is “once bitten, twice shy” for financial markets.

When people realise what they have done in pursuit of greed, they try to repent. They vow to change their behaviour. They acknowledge the dark side and try to move on.

But the dark side is powerful. It’s worth examining again what it does to us in a property boom.When faced with the financial aphrodisiac of profit, many of us behave as many men do moments before sex. We lose the run of ourselves, become possessed by a mania and get carried away.

Ireland became enthralled by the cult of property and like ancient cults a whole new set of rules and regulations prevailed.

The first rule was that economic and financial logic went out the window and was replaced with a superannuated version of “hope value” and a cultish conclusion that we had seen the true light and “this time it was different”.

Such excitement was/is best captured in the property supplement which can best be described as “pornography for the middle classes”. Every kitchen is “spacious”, every bedroom “inviting”, every bathroom “alluring” and every opportunity “unique”.

The stimulated buyer is enticed by suggestive advertising, which promises financial delights. At the height of the boom, when tiny shoeboxes were being bought for ludicrous prices, the market left the realms of normal pornography and began to take on the characteristics of financial fetishism.

Like the fetishist who is bored with the missionary position and needs to spice up his sex life with weirder positions, stranger games and more bizarre demands, the financial fetishist is drawn to take bigger risks, make more outlandish calculations and break all sorts of accounting taboos to satisfy his lust for property and it’s handmaiden, capital gain.

Now that the market is tanking and the extent of our weakness for property porn is being exposed, Ireland is being forced to face up to the choices and weird practices we engaged in when the inferno was at its hottest, when the temptation was greatest and when our behaviour was most questionable. Ireland is now being asked to confront our dark side and account for our full-on embrace of “homoeroticism”.

“Homoeroticism” is a financial state of mind where every financial fetish was indulged in the pursuit of a home.

So no location was too exotic, nor any financial package too ludicrous not to be entertained in pursuit of a home/house/apartment. Homoeroticism is now giving way to a new state of mind called “Homophobia”.

Homophobia describes a repentant period when every investment to do with property and homes will be avoided.

Homophobia — the aversion to any investments in homes or houses — is not new. Amateur students of financial history realise that this happens all the time. The Japanese took 20 years to get over their boom and property prices in Tokyo have not recovered to the levels they were at in 1989.

Another good example was the dot.com crash, when many investors took years to touch technology companies again.

Quite apart from a psychological form of financial probity whereby bad behaviour has to be paid for, homophobia will be supported by the banks that encouraged such financial promiscuity in the first place. Today the banks are tightening credit conditions, calling in loans and admonishing the very people they lent to in the boom.

Far from a bottoming out this year as some “vested interests” are suggesting, the housing market is likely to get far worse due to a combination of post-boom psychology and a dramatic change in the way banks finance property.

We are in a period where cash is king. This will mean that profit or earnings, rather than some speculative value, will increasingly be used as the yardstick to value property.

So using this value, do we have any idea what the average property investment yields? How much money is it making for an investor after tax? These are the types of considerations that will dictate financing during the period of “homophobia”.

Irish house builders are trading at four to eight times their earnings at the moment. If we applied the same ratio to the 200,000 investment properties bought in the past five years, let alone the one in six Irish houses that are empty, how low could the property market go?

Brace yourself for the come down. Brace yourself for homophobia!


  1. Johnny Dunne

    David, if you had € 5 million to invest you could buy an established, innovative trading company with a track record and leadership position in it’s growing niche market throwing off cash of €800k a year or else you could buy a ‘sexy’ house in Foxrock for € 5 million generating a rental income of less than €50k a year. Using comparable valuations is this ‘trophy’ house worth only €400k? Which is sustainable?

  2. I love your metaphoric language David. Only you could combine sex and property so potently.!
    The powerful cabal of irish based developers who have so much property sitting on their books are now regrouping and their loans (which they cannot repay) are obligingly being rewritten by the banks as covering “build To let” investments and the terms extended, whereas they are nothing of the sort.´
    These builders have no intention of flooding the letting market either, and bringing down rental rates.
    Question. Would the banks facilitate you or I, if we were unable to keep up the payments on our modest mortgage?.No they would foreclose and sell/ auction off our house for whatever they could get for it.?
    So why should they not do the same with the large blocks of empty apartments all around Dublin.?
    No doubt the banks rescue packages will be explained as necessary to prevent a “meltdown” in the housing market,( or perhaps even a few banks going under..)
    Surely a serious meltdown is necessary to restore sanity to property prices.
    One law for the rich developers..another for Joe citizen- whats new.!
    I live in Spain and have just perused the latest Irish Times property for sale supplement, and not only does it seem that sellers are in denial of all reality- the asking prices seem to be even higher than last year!!
    G.U.B.U. is an acronym from the C.J.H. era which truly applies to everything irish-to this very day.!
    David you are the most unwelcome biblical prophet of doom.!

  3. MK

    Hi again David,

    I’ll stay away from the sex analogy, because that is an encyclopedia (or indeed universe) all of its own!

    > modern economics contends that humans are rational and logical.

    But is that really the case? I think there are many theses out there which contend that neither humans nor the markets are totally rational. If they were, prices would not vary as much as they do and we would not have any over-extended booms/bubbles and subsequent busts/slowdowns. I am in the camp where the market is not (in fact never or only very briefly) priced at the ‘correct’ value. Property, like shares, are either over-priced or under-priced at any point in time and there are many influences such as lemming effects going on. Home-phobia being one such example.

    Whether property values become depressed enough to be under-priced remains to be seen. Many believe that pre-the-property-value-boom most properties were under-valued and some correction went on, but it clearly went too far. Whether we have an under-shoot or the oft-mentioned ‘soft landing’ remains to be seen. Once there is a 20% drop from the peak (300k average value) we will see, but property has many local factors so mileage will vary.

    MK

  4. Barry

    Could someone-perhaps even David himself tell me what he means by the last two lines of his article-about builders selling at eight times their earnings or something like that? He then goes onto talk about 200,000 investment properties and what it means for them. Please explain!

  5. [...] that McWilliams fella is getting a bit carried away. I don’t know what to think about our house extension now. Anyway I’m off home to wrap [...]

  6. Stephen Kenny

    Barry
    I think that David’s referring to the P/E ratio of the builders – i.e. the price to earnings ratio of the building companies on the stock exchange.
    Stock Exchanges are inherently forward looking (you buy a share because of what you expect will happen), so a P/E ratio of 4-8 is basically saying that the share traders on the stock exchange think that the builders are a bad bet.
    It’s a bit of a black art, but shares generally trade with P/Es around the early ‘teens.
    In this context, a low PE ratio therefore generally means that share price has already fallen, and the market is waiting for the earnings to fall.

  7. Shlock

    John wrote: “Would the banks facilitate you or I, if we were unable to keep up the payments on our modest mortgage?.No they would foreclose and sell/ auction off our house for whatever they could get for it.? So why should they not do the same with the large blocks of empty apartments all around Dublin.?”

    If you owe the bank twenty thousand and can’t repay, you have a problem.
    If you owe the bank twenty million and can’t repay, the bank has a problem.

  8. VincentH

    Property is and will be a rational investment. And it is the climate of a gold rush which drives people to excess. But what we have at the moment amounts to the salting of the mine, which will give false readings. Over the past thirty odd years, with the shift to capital from labour, we have had the elements where equivelant of wage inflation would happen in capital. The fixation on inflation, if it meant all inflation would be a good thing, but over the years we have a situation where rather than wage inflation, the price of the property compensated. A situation which was going to collapse, eventually.
    The only thing that mattered, if you got out in time.
    In the seventies, many out of date bits of law, designed to protect renters and rather than update, ideology got in the way, so, were scraped. All of the english speaking area did this, while the actual effect was to destroy the certainty of the income recieved. What is delightful here is that the whine of the land league was lost to the ear so easily.

  9. paddy cullen

    The big question that David should try to address is whether or not there was a Buy-to-let bubble inside the housing market bubble ?? And what are the possible implications of this bubble bursting ??

  10. Maxdiver

    VincentH.

    I would disagree that “property is and will be a rational investment.”

    I would say that it is rational to expect to have shelter – esp. if you have progeny.
    However, much of the current problems have been caused by hype and the expectation that prices will rise.
    Greed is rational i guess – but property is (as we have seen with 15% drops in year) not a rational investment.

    David is right that “cash is king” – why buy and lose money (through depreciation and mortgage) when you can rent.

    Remember – until a few weeks ago maybe, people were saying that prices would never fall – house prices only go up – how we feel in a few years time will be along David’s lines – Homophobia

  11. Rob

    Buy to own to live in a property is still a good idea provided its affordable. That was always the key which i think got lost when the banks were lashing out money and the punters were grabbing it. There was a good article last week about which i can’t locate at the moment which basically said a) buying is for a minimum 5/6 years, b) don’t be too concerned about negatative equity, people buy cars all the time which depreciate immediately. A house may depreciate but it is a required necessity. 5/6 years of capital repayments should beat negative equity anyway unless the market collapses completely i.e. 800,000 house worth 500,000 5/6 years later. If you are down 50 to 100 K now I wouldn’t be too concerned, anything more, well maybe you were nuts buying it in the first place. c) Location will always be strong factor, transport links etc. Cheap house in the middle of nowhere, no good.

    I think buy to let properties will suffer enormously in the medium term IF the property was too expensive to begin with e.g 430,000 (full mortgage) 2 bed apt, max rent now 1400 to 1500 (and people are bargaining). Owner will have to subsidise an asset that will not increase for the forseeable and will possibly fall in the short-term. That uses up a lot of spare cash in a time where cash is king.

  12. GOM

    Sounds reasonable, Rob although there are supply side dynamics to be applied too. I agree that buying a house for the long-term is the way to think. Although people who bought at the height (October 2006 before slide started?) will be most at risk of never getting back to equity with the value of their house so will lose out more. That said, the amount anyone pays over the lifetime of the mortgage is way in excess of the value so perhaps value is not the most appropriate reference point – the cost of money over the lifetime may be more important to watch and people should not be afraid of switching every 5 years or so if they can get a better deal.

    An interesting dynamic is the reduction in the number of products out there. I think I saw a massive contraction in only a few months in the UK reported this morning (1500 down to 400?) which suggests that many people will be out of luck for approval in the short-medium term when the same happens here. It may be a good strategy for a second-time buyer, i.e., someone who wants to move into a second house which they will plan to be in for 5-10 years to wait until third/fourth quarter when the market is down further and can afford the products on offer at that point, i.e, who don’t need an 80+% mortgage. For potential first time buyers though, the rental market is probably the only option until they can pull together a decent enough wedge for a deposit.

  13. John Q. Public

    GOM, best point made yet. After 25 years of paying a mortgage you are going to be very deep in the hole as the yanks say relative to the actual value of the house. This is due to the fact that you are only paying the interest off for years before you pick away into the equity of your shoebox. As Eddie Hobbs told us some time ago ‘a house is not an investment’ at least not anymore and still it scares people when they think of negative equity in the short term.
    It is these sort of potential buyers, the sort that would never sell on anyway that are causing the market to fall because of the worry of negative equity coupled with their own meanness as they are waiting to get the best deal.
    They will stay cute in a paradoxical way, waiting for the prices to fall while wasting money renting a place.
    It is the better educated people who will grab the bull by the horns and just buy now because they can live with the repayments, they have better career prospects and aim to ‘climb’ the property ladder rather than just be on it.
    For those that will never sell on in the future anyway, why worry about negative equity as long as you can meet the monthly repayments?

  14. dave

    Hi,

    David, just heard you and Tom Parlon on drivetime today (April 17). Tom Parlon is a shill who’s opinions are that of the highest bidder who will buy him. Please continue your work. You are one of the most HONEST, objective, and articulate commentators out there. Please continue to stand up to and refute these bullys of the truth. These peddlers of nonsense and fear with their illogical, deliberately obsfuscating arguments, who care only for themselves and their cronies, and care not one iota for the greater well-being of Ireland and her people.

    Dave M

  15. Rob

    After 25 years you wil more than likely own your home mortgage free, even if you have a greater term, say 30-35 years after year 10 you will probably accelerate the term and wages go up and as the debt in real terms decreases. Mar shampla, in 15 years time a 200,000 mortgage left on your house will not seem huge when wages are 60/70 K thats presuming that a) Ireland still exists and b) There are still jobs to be had.

    As far as I can see property still beats a pension and I wish David would maybe come on and analyse this scientifically. But say you bought an apt. as an investment for €250,000 (over 25 years) and you need to pay 200 € (averaged out) per month extra (on top of rental income) to meet repayments. Lets say you pay it off after 20 yrs and the apt is worth 350k? You’ve spent the guts of 50,000 in supporting it and paid tax of 20,000 in selling it. You pocket a lump sum of 280 grand. Does that beat a pension? I think it does. I think the OECD in their recent report are getting at the generous benefits that property in Ireland offers re. tax (no property tax etc).

    Getting to the scenario John Q, right now (and as always) affordability is key. If you can live comfortably (and perhaps today modestly!) once mortgage payments are made then that is the key question.

    Parlon is a moron. The quicker him and other numbskulls realise that the over-inflated property game is up the better. The capital lifeblood has been sucked out of Ireland on property, meanwhile ignoring rising costs, actual real job creation etc. Weep not for the developers/CIF/Business lobby.

  16. mishko

    Our frisky young hero McWilli
    Has discovered why markets act silly
    Now a science once dismal
    Appears less abysmal
    He won’t let his dark side win, will he?

    http://news.bbc.co.uk/2/hi/health/7342923.stm

  17. Malcolm McClure

    David: Clearly your sexual analogies are intended for a popular readership in the Irish Independent, but they divert attention from the credit crunch now facing all the banks.
    Today the Royal Bank of Scotland (Ulster Bank here) announced that it is raising a £10 Bln rights issue.
    Tomorrow is the first anniversary of Allied Irish Bank’s launch of $2.25 billion in five-year extendible notes for which the first repayments become due next month. As AIB have already scraped the bottom of the pot, please give us the benefit of your banking expertise and explain how these these real issues will affect the stability of the Irish banking system.
    At launch:
    MOODY’S Aa3 SETTLEMENT 4/26/2007
    S&P A-PLUS PAY FREQ MONTHLY
    FITCH AA-MINUS
    *INITIAL MATURITY 5/19/2008; FINAL MATURITY 5/18/2012
    What rating would they get today?

  18. Jonathan

    John Q.
    It would be fair to say that some will never take the leap because they are always holding out for the best deal but there are plenty, like myself, who know the writing in on the wall with regard to the outlook for house prices.

    I’m currently renting a new house that has/had a price of 210k, but lets just say it’s currently 200k for ease of calculation. My rent, on the other hand is about 7k a year. Assuming that inflation is 4% and the house stays at the same price then 8k will be lost from its value in real terms. Throw in a 5-10% drop, forecast for the next year alone, and you can see why I wouldn’t touch this with a barge pole (buying wise). Rent is not wasted money. This is a myth. You pay for a place to live, for the use of a property. The repayments for a 200k loan come to about 14k a year at 5%. I can have the difference, 7k a year, saved in cash which I can invest in rising assets rather than a falling one. As my cash holding increases and the house price falls I can negotiate a better mortgage as I have a better loan to value ratio. As David has said along with many of the comments here, cash is king for the short term.

    The notion of the property ladder is a bit of a crock if you ask me. EAs have bandied this one about a lot during the boom. “Don’t miss out, get on the ladder blah blah”. In a bubble the “property ladder” is merely a pyramid scheme where the ones coming in after you make everybody above a bit richer but when it winds down the one at the bottom pay.

    E.g. Houses not too far from where I grew up in Dublin were going at 900k and upwards during the peak. Obviously this is crazy money for a 4 bed detached in an OK area. Secondly, somebody I know was actually looking to buy this kind of property at the peak of the market. Was it because they were loaded, had a great job and great prospects??? No, they were ordinary PAYE, average joes; they were just further up the pyramid scheme because they had bought pre-boom. On the other hand if I strolled into the bank having just been offered an executive salary of, say, 150k the bank would offer me about 4.5 times this (4.5 x 150k= 675k). Not quite enough for a mid level house in an OK area. Clearly there is something wrong with this picture.

    I’ll enter the market all right, but only when some normality returns. When the house I’m renting, which is a fairly run of the mill entry level type, falls to about 5 time the run of the mill salary in this area (obviously I’m not in Dublin anymore) I’ll be back in.

    I think its also disingenuous to call people who wait to get the best deal mean. We are entering uncertain times where day to day necessities like fuel and food are rapidly increasing in cost and the economic outlook is uncertain. Interest rates may increase to curb inflation rather than decrease. In this context it does not make any sense to take on anymore debt that is absolutely necessary.

    Rob,
    Agree with the Parlon/CIF/builders lobby comment. I can’t believe what passes off as news these days. How many times have we seen the [pick one] Davy Stockbrokers, CIF, AIB, Douglas Newman Goode, SherryFitzgerald, report on the outlook of the property market on the TV or the papers, telling us how interest rates will fall or the market will rebound or that rental income has increased and the outlook is sunny.
    I’m gobsmacked that the media lets this run unchallenged. These vested interest surveys and accompanying opinion are presented as fact without any countering opinion more often than not. The media have let us all down badly.

    #
    John Q. Public said,

    on April 17th, 2008 at 9:08 pm

    GOM, best point made yet. After 25 years of paying a mortgage you are going to be very deep in the hole as the yanks say relative to the actual value of the house. This is due to the fact that you are only paying the interest off for years before you pick away into the equity of your shoebox. As Eddie Hobbs told us some time ago ‘a house is not an investment’ at least not anymore and still it scares people when they think of negative equity in the short term.
    It is these sort of potential buyers, the sort that would never sell on anyway that are causing the market to fall because of the worry of negative equity coupled with their own meanness as they are waiting to get the best deal.
    They will stay cute in a paradoxical way, waiting for the prices to fall while wasting money renting a place.
    It is the better educated people who will grab the bull by the horns and just buy now because they can live with the repayments, they have better career prospects and aim to ‘climb’ the property ladder rather than just be on it.
    For those that will never sell on in the future anyway, why worry about negative equity as long as you can meet the monthly repayments?

  19. Rob

    Great stuff Jonathan, while i don’t entirely agree with all your points its great to see a robust analysis of the property market. Its this kind of debate that the politicians etc should have be leading, not left to punters to pick up the pieces. To their credit, the Greens and Labour were making noises but a) it was either ignored or b) wasn’t loud enough.

    Although not a FF supporter at all, i think McCreevy was a strong-willed guy who may have recognised the dangers that were building and would have taken action. Its only a hunch but i think he is ‘maverick’ enough to have taken some tough calls to lessen the property inflation.

    On the actual property front I think a few factors that are not strictly economic need to be thrown into the mix. You might be willing to buy although it is dearer than renting if it gives you ownership a place you want to live in. For example you could rent in a desirable area but in reality your security of tenure depends on the landlords circumstances. For long-terms plans, in my book anyway, it is worth paying more (in effect a premium) for the security of tenure that ownership brings. This is underpinned always by the golden rule that once your mortgage payment is made each month you must have a decent amount of cash left over to live on.

    A desirable place to live will of course have factors such as access to shops, schools, transport links etc. The difficulty is as I see that in Ireland it will always be relatively expensive to live in such areas, that is why the next year and a half may be a great time to target such a buy. Don’t forget just as there were hysterical comments as the property market rose there is similar stuff going on now that the market is falling. I don’t necessarily believe that prices will in fact fall as low as some people are expecting. It will come down to the location, location stuff etc. If people see something decent they can afford, in an area they want to live in, then go for it is my advice. I would agree however that some of the stuff around is ridiculously priced. 4 beds for 850k etc, rubbish. If you talk to property agents, as I did with one yesterday, people wishing to sell are knocking a good chunk of the asking and its sold. A house i know (in an over-rated area) has had sale agreed sign up (at a ridiculous price) and is now back on the market.

  20. Rational

    The fundamental value of all houses, taking account of location, demographics etc, will be accurately reflected in a few years by the following formula:

    (Monthly Rent) X 100

  21. Stephen Kenny

    The stockmarket always outperforms property, as an investment, over the longer term, which is not really a shock, since the stockmarket represents, or should, the highest achieving part of our economies.
    It would be interesting to look at this scenario: One person borrows 200k and invest it in a broad share portfolio, and another person borrows another 200k and buys a property. Both are paid off over 25 years.
    The person with shares would have to use the income (dividends) to pay rent, while the home owner would receive no income because they were living in their investment. Both have the advantage of leverage. Who would be best off after 25 years? Ignoring tax for a moment, I’m reasonably sure that over a randomly selected 25 years period over the last 100 years, certainly in the US & UK, the share owner would be significantly better off. Each would achieve capital growth (rising share price, and rising property price), and each would have somewhere free to live (dividends would pay the rent, and the property owner would own outright).
    Tax is levied very differently between the two, in some cases favouring the property owner, in some cases not (many US states have huge property owning taxes).
    Given that investing in businesses is inherently better for the economy than owning property (business generates exports, and a hugely greater velocity of money), why is property so favoured as an investment (by those who define the taxes, as well as those who invest)? Starting from a position “where no one owns anything”, and everyone needs somewhere to live, then properties would have to be bought by someone. But all existing properties are already owned, so that isn’t the case.
    If first time buyers rented, rather than trying to buy a property, and borrowed a large sum and invested it in a broad range of businesses.What would happen?
    OK, there’re a lot of problems with this: If a young person walked into a bank and said “lend me 200k to invest on the stockmarket” the meeting would terminate very rapidly; Some might borrow the money and just go on a 200k spending spree; Some might invest weirdly, and badly; How would the money get into the new economy if everyone just invested in the top 100 companies?
    Given David’s previous comments about forging a new economy, it seems to me that a partial route through this could be found, partly around the tax rules, and partly around the loan rules. The problem of irrational exuberance wouldn’t go away, dotcom, as well as property, bubbles have plagued us in recent years.

  22. Rob

    is that a joke Rational?

    House in south dublin mar shampla rents for 2000 a month, are you saying that it will sell for 200K?

  23. Rational

    100 times rent AT THE TIME THE OSCILLATION BOTTOMS. With inflation, rent will be more than 2000 at that time.

  24. Rational

    P.S I don’t know why South Dublin is considered special. Have you ever actually been to Ranelaigh for example? It is a kip!

  25. AndrewGMooney

    Very droll DMcW. I read this article on the Independent.ie pages- agreed with the comment that “homeroticism” and “homephobia” are more apt / amusing coinage:
    But you need to take it further. Much further. Get that whip out…

    How about S&M Property Bondage?
    How about allowing yourself to be trussed up like a turkey and flogged to within an inch of your life for the next X years paying increasing interest on a depreciating asset?

    Paying it to that Big Daddy Loan Manager in The Suit who promised you all that orgasmic profit pleasure – but now he’s got your ass, sorry, signature, on the dotted line: You find out you’re suddenly handcuffed to the bedposts of your off-plan condo in Miami or Malaga: And he has second charge/lien on your suburban Dublin home?

    They say that in sex, pleasure and pain can’t be entirely separated. I wouldn’t know much about ‘that kind of thing’! But it would appear to be true for Property Porn.

    Ah, but you just had to keep coming back for more, didn’t ya bitch? And the thrills had to get more and more bizzare. 105% mortgages, 5 x income, negative amortisation, ever higher levels of intoxicating leverage to keep the party going. The property porn equivalent of poppers or grainy footage of b/j’s on the floor of Studio 54.

    And before you know it: You’ve found yourself in that property porn circle of Hell where Max Mosely pays £2500 for a 5 hour spankathon with barely credible ‘Deutsch’ slappers in Chelsea. And tells you it’s normal behaviour.

    And just like Max, now everybody knows your ‘secret life’….
    Actually, they know it because they’ve been ‘at it’ too! Despite their ‘respectable’ appearances.

    Suddenly, this weird Sex-Porn-Property lark doesn’t turn you on no more, and no amount of bank-fuelled Viagra or flat-screen tableaux of lubricious semi-built time-shares on Sunny Beach can help you get wood. You feel……deflated. Emasculated. No longer the small-town, big-swinging property dick. You just feel like a limp prick. But there’s no way out, just like some nightmarish damp climate Hotel Calipornia: You can check out but you can never leave……

    You thought you were gonna get the ride of your life, but now you find: You’re the prison bitch…..

    ‘modern economics contends that humans are rational and logical’ : Except when they’re in the midst of a decade long property asset inflation orgy?

    PS: this post is meant to be ironic. I’m using crude language knowingly. With intent: Stop Prisoner Rape.
    http://www.spr.org

  26. Its better than poor David´s erotic equation!
    God!- if I was not already a home owner I would think twice about buying one- after reading this, three times..

  27. Jonathan

    Hmmmm, I have started wondering again about the rental laws, or lack thereof in this country. Because the rights of a tenant are considerably less here than in the continent a lot of people are adverse to renting long term. Add to this the lack of good rental accommodation for families and you have an anti-renting pro-buying population. This feeds into what Rob said about people being willing to pay a premium to own their own home.

    From a purely economic perspective there are a number of advantages to having a mobile and flexible workforce, i.e. a renting workforce. Obviously a lot of people rent within a certain demographic and age group but the preponderance of the population owns their residence. I can’t help but wonder what might happen if the rental housing stock was improved for family living and the rental laws were changed to encourage people to rent long term and migrate around Ireland as necessary. Would industries flourish outside big cities where costs were cheaper and the added mobility would mean that workers could be more easily attracted. Skills, expertise and knowledge would geographically diffuse more easily. Foreign skilled workers would be more likely be willing to spend a spell (2-5 years) in ireland renting. Owning a house acts as a ball and chain. While you can still move to another area of the country you are, a. less inclined, and b. it takes a lot longer to do so.

    Naturally, too much moving about has disadvantages in terms or planning for schools and the like. Also in terms of community building there are problems so a balance has to be struck.

    Any thoughts on this??

  28. Barry

    I think John Q is wrong about advising people to buy who never plan to sell on -as negative equity will not matter in the long term Why buy something for X amount of money if it will be say twenty thousand cheaper in a few months?

    I know the old saying is that rent is wasted money but Im not sure if that is the case at the moment. Im sure John Q agrees with me that Property has a long way to fall yet and depending on what you want to buy ,its likely that you would pay less on rent than a mortgage. If you save say 20-30 grand by waiting thats a huge amount in terms of intererst payments saved. Especially if the period is only a year.

    I also think people should consider the fact that ECB rates could rise again. Yes I know people put up with 11% plus in the 1980s but many probably had their houses reposessed.

    2009 is the earliest anybody should think of buying.

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