May 19, 2014

A sneaking sense of déjà vu

Posted in Banks · 83 comments ·
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If you were worried about the Dublin property market entering bubble territory, then the government’s plans unveiled during the week, makes that bubble more, not less likely.

The Construction 2020 document is long on aspirations and short on detail. There is lots of talk about task forces, reviews, strategic groups and consultation groups, but in terms of initiatives, there’s nothing. The government says it wants to achieve 60,000 jobs in the construction sector. No one can argue against that. There are tens of thousands of construction workers on the dole and anything which can give these men a chance to work again is laudable.

The other objective is to get the construction sector cranking up to build as many houses as are necessary, so that we don’t find ourselves permanently faced with today’s dilemma where young couples are being priced out of a rapidly rising market by older ‘cash buyers’.

The government has decided to help first-time buyers with a ‘help-to-buy’ scheme, the likes of which was introduced in Britain two years ago. This will involve the state underwriting some of the mortgage so that if the banks get into difficulty in the years ahead with defaults or a massive price crash, the state will pay out. The state is calculating this will help first-time buyers get access to funds because it will coax the banks to lend.

The state is dealing with the housing problem as if the solution is to be found in economics – or classical economics, at least – but this is not the case. The housing market in Ireland is driven by deep psychological urges on the part of most Irish people which renders the old-fashioned laws of supply and demand not just obsolete, but dangerously inaccurate.

Traditional economics says that when the price of something goes up, as is happening now in Dublin housing, buyers will get put off by high prices and will stay out of the market. In contrast, sellers will respond to high prices by seizing the opportunity to sell. In addition, builders will respond to higher prices by building more.

This is actually not what happens. The opposite happens.

People who want to buy respond to higher prices by panicking and wanting to buy more now – not less – because they are worried about prices rising even higher. This means that when the price goes up, demand doesn’t fall, it rises. This is the first mistake of applying economic solutions.

The second mistake is the behaviour of sellers. Traditional economics says sellers will respond to higher prices by selling to take advantage of today’s prices, but this doesn’t happen either. Sellers see house prices rising and think that if prices keep rising, they would be mad to sell now, so they wait to avail of yet higher prices and profits next year.

So, instead of supply increasing when prices rise, supply actually falls as sellers wait. Thus the laws of economics are turned on their heads. In terms of new supply, yes it comes on stream, but only slowly. It takes a long time for an entire sector to grind up a few gears. In contrast, psychology changes instantly.

Finally, one last aspect which impacts on the movement of house prices is herd behaviour.

The government is focusing on the travails of the individual buyer with its ‘help-to-buy’ scheme, rather than thinking of the collective. What is good for the individual isn’t always good for the collective.

In housing, everything I do impacts on you, and everything you do impacts on me, even if you have no idea that that is the case. So if I bid over the odds, it throws down the gauntlet for you to do likewise.

Think of it a bit like a football match. Imagine you are watching a game and everyone is sitting down. So we can see the pitch. Then the guy in front of you stands up and doesn’t sit back down. You have to stand up. But that forces the guy behind you to stand up too, and pretty soon most of the stadium is standing up uncomfortably when we should have all been sitting down.

The economy works in the same way. Every actions prompts a reaction, and soon each price increase prompts another one, and prices go out of control. This is exactly what happened in Britain in response to its ‘help-to-buy’ scheme.

Look at the chart. Remember the ‘help-to-buy’ was supposed to make houses more affordable and look what happened.

Chart UK House prices

In Britain, there have been two phases of ‘help-to-buy’. You can see that the reaction to both has been more money chasing the market upwards and prices are now sky-rocketing. This is much more pronounced in London.

If we go down this route, the dynamic of the London market will repeat itself in Dublin. Like London, Dublin houses prices will pull away from the rest of the country as they are doing now. South Dublin will turn into Ireland’s Knightsbridge or Kensington, while the rest of the country will lag way behind.

This will make the already wealthy of south Dublin wealthier, and make the young generation, who are simply looking for a place to live, ever more indebted.

We need to break the link between banks, credit and houses and to do this we need to give less credit to the housing market – not more – while encouraging new builds to start soon.

The best way to do this would be to force the banks to lend, not against the collateral, which is today’s house price, but against the average house price for the last 20 years. At a stroke, we would eliminate the situation where rises in house prices facilitate more credit and drive prices yet higher. Without this lending dynamic, house prices couldn’t rise.

Also, the state could implement a ‘use it or lose it’ approach to planning, whereby a developer who owns residential land has to build within three years, or the land reverts to industrial zoning. That would increase supply overnight.

These are practical measures which could be introduced tomorrow, and would stop house prices spiralling and increase new home building rapidly.

If we don’t do something like this we are on the same road we were on between 2000 and 2006, and we all know where that road led us.

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David McWilliams writes daily on international economics and finance at www.globalmacro360.com

 


  1. Tull McAdoo

    Another sleep in Adam ?

  2. Bamboo

    But who is pumping in the money in this new building boom?
    With every new building boom the prices will go up again and again. The developer and builder will look after the price hike.
    Does the government really think that a new generation of young families has come on the market that isn’t aware of the crisis of the last 6 years?
    Is priory hall type disaster forgotten?

    Are we starting all over again then? Is that the idea?

    • michaelcoughlan

      “But who is pumping in the money in this new building boom”

      Rich Dubliners with cash on deposit. Its not coming from developers because banks aren’t lending for development.

  3. cooldude

    Very interesting article. The government is hell bent on creating another bubble in housing despite all the hardship the last one caused. The lack of easy credit would have curtailed this embryonic bubble but the government has now waded in to interfere in the lending market. Like most government interventions this will probably end badly. I have heard that the new building regulations which were brought in in March are a nightmare for small builders. Seems like more stupid over regulation.

    • michaelcoughlan

      Regulations were ignored by the previous crowd. What’s supposed to happen is that and engineer is to sign off to say the property is constructed in accordance with planning and building which was basically ignored in many cases.

    • DB4545

      How about legislation to have non-recourse mortgages? If the banks risk having keys handed back and debt tied to the property and lender with the bank having no recourse to pursue the debt that might force Banks to make realistic valuations and lend in a responsible manner. But why would they when they know they’ll be bailed out again? An alcoholic isn’t going to be responsible when they know they can party all night and someone else picks up the bill. I enquired about a property in Dublin 7 last Thursday. Went from 140k Thursday to 179k today. I had someone else show interest just to make sure I wasn’t bidding against myself. And I was. The usual suspects up to the usual tricks. The vulture funds have picked up the corpses and are setting out their stalls. And people are being sucked in again.

      • DB4545

        I valued it at 120k plus 30k for refurbishment. They’ve suckered some poor idiot into forking out 179k and possibly more for a property worth at best 155k after refurbishment. And the banks will have given loan approval based on a totally false valuation. The politicians and bankers couldn’t give a rat’s ass the party is about to start for them again.

      • Colin

        Non recourse mortgages? That would be too sensible, so it’s a non runner.

        • GF

          Non-recourse mortgages?

          For residential mortgages only, law made that all principle private residential mortgages must be non-recourse from point X onwards. Simple. Really really simple.

          I guarantee you the banks would no longer, ever, make those massive loans, and if they did a least the buyer could hand back the keys.

          I had a house in the boom, sold it, still renting in Dublin. Lived in this flat for 4 years, paint crumbling in the bathroom and truly horrible throughout but great location. Landlord finally painted the bathroom after 3.5 years of complaining. One exact week after painting it he arrives and tells us that we have to sign a new lease because it is the fourth anniversary of our tenancy (basically scrubbing any security of tenure we should have in a western country). He then told us our rent was going up by 45% because the expense of painting the bathroom and the new property tax meant he had to?

          Why is it law that after four years you have to become a new tenant again? It’s not to protect the tenant I guarantee it. We pay every single month on time, have made many improvements from our own money, and each time he enters he actually states how lovely we keep the place (20 year old blue coaches which we cover in throws, own art work and mirrors, new curtains, long list of improvements can’t be bothered writing).

          The level of rent is stopping us from getting the deposit saved fast enough, now prices are zipping up it will be out of our reach unless we trade in our parents for ones that have loads of money.

          Why, after four years of perfect tenancy, can our rent go up by 45% without any law to protect us? Why is the landlord able to threaten (in smart hinting language) that we will not get our deposit back, or that he will not give us a good “Landlord reference”, if we cause him “trouble” over the rent increase?

          I digress, but it is all the same point, if all principle private resident mortgages HAD to be non-recourse I truly feel the banks would use better judgement over the long term and house prices would be less likely to go nuts. And if they did go nuts again at least people could walk away.

          I have sent private emails to four TD’s from different parties asking about their thoughts on non-recourse mortgages, none replied – that was three months ago.

          I have written to the same TD’s asking about security of tenure, one replied with a link to Threshold… because if I am asking about rent security I must be unemployed, and on the welfare and basically not a functioning member of society (for information we earn over 100k between the two of us, we are destroyed by PAYE/PRSI/USC tax).

          I am leaving this country. We are taking our family and leaving.

          • Colin

            I don’t blame you for deciding to leave. Good decision actually. All the best with everything. Let the landlord find some eegit to pay the exorbitant rent.

            No to Gombeenism!

          • DB4545

            I’d just like to give a landlords(one property)view on the subject. I like many gobshites bought in the boom with the view that it would be a “good” investment and provide a pension on retirement. I have a child with a disability and I wanted to ensure that when I pass on she was in secure housing without placing a burden on my other child.I rented it out to a family for 1000 euros per month. Happy days the mortgage and all expenses were approx 850 Euros. I thought I was a financial genius. The rents moved up and the market rent should have been 1300 euros. I still charged 1000 euros as they seemed like a nice family and as the mortgage was covered I didn’t want to be greedy. I let that run for three years effectively giving 10800 euros to the tenant. I’ve always painted the place every two years and the grass was cut during the summer. The crash happened driving rents down and my “nice” family didn’t take long to get the rent down to 850 euros. But my mortgage was now 1480 euros. They eventually decided to leave at short notice working out the Deposit as the final month’s rent. When I checked they were gone and so was a brand new three piece suite (890 euros). One of the bathrooms had to be re-tiled and the toilet and WHB was cracked and had to be replaced (670 euros). I went to the Guards but they said it wasn’t theft it was a civil matter. It’s coming round now but I nearly lost the family home in the process. There are bad landlords and bad tenants but I’ve tried my best to be fair. There are horror stories on both sides.

  4. Contrast the UK and Ireland policy with that of Singapore (from the article linked above):

    “The big difference is that since 2009, Singapore’s government has chucked bucket after bucket of cold water onto the overheating housing market. It’s clamped down on loans, jacked up stamp duty, punished people who sell property they’ve bought only recently – and levied punitive taxes on foreigners buying homes. In short, almost every policy urged on David Cameron over the past few years – and left unwrapped – has been deployed by Lee Hsien Loong. The message is simple: Singapore doesn’t welcome property speculation. But the island’s dentists and middle managers and other cautious savers are welcomed by the overseas agents of Berkeley and its competitors, offering rental units in the no-questions-asked capital of the world.”

    • Colin

      The difference between the UK and Irish governments is that the UK ones don’t want their construction tradesmen to rot away on the dole, unlike in Ireland where your choice is dole, jobbridge, emigration or return to education and a path towards a jobbridge job. In other words, the government try to fix a problem in the UK, and in Ireland they try to ruin you by doing nothing at all.

    • Bamboo

      Thanks for the link Adam,

      Let me just add to what is said about Singapore in the above link. Singaporeans are proud to be Singaporeans and like to flaunt their wealth. Well, I am talking here about the Singaporeans from the Chinese community. Other communities (Indian, Malay, Afrcan) are only tagging along. Unless you’re a “whitety” (white European) as they call it or a Eurasian (people of European and Asian mix with an English sounding accent). Then you’re talking -Really Talking. Just look around the billboards in Singapore on the high streets. They all have images of Europeans men and women, as that is what sells. When you mention London then it is a very easy sell.
      Every family’s ambition is to send their kids to England for their education. Not only for the education but also for the status you instantly get when you kick start a career. Apart from that, the kid may pick up the almighty British accent and that is the most truly the valuable asset you can have for your future career and social status. Singaporeans like to speak their English (SEnglish) but even better is a British accent.

      Many northern Europeans have bought a home in the sun at the Mediterranean. They are lured into buying these properties by clever marketing, as we all know. Some made a profit but most are stuck with unwanted property and can’t flog them off. The initial honeymoon phase has faded away dramatically.

      Singaporeans buy up properties via a syndicate machine. A family then flaunt around how many properties they own but in fact they own just a percentage of the property. Nearly all of them don’t have sufficient financial resources to buy a property single handedly. So when we talk “cash rich”, we should really say syndicates. Each (innocent) individual family who subscribe to a syndicate still have to be educated in understanding the concept of supply and demand.

      In my own experience in looking for rental accommodation is that properties on the market this time last year is still unoccupied this year and still with the same price tag. Only a handful understands the simple concept of supply and demand. Comparable rental accommodation is still at most a quarter or even less of the price Dublin. Singaporeans really believe that we in Europe have the spending capacity and that is simply because of the exchange rate. The truth is that European can’t buy in their home country. They can only afford somewhere else outside Europe. (See Second Home Programs in many Asian countries). Again, a fact that is not fully understood by Singaporeans. Soon these syndicates are competing against each other.

      Quote artcle: “It’s clamped down on loans, jacked up stamp duty, punished people who sell property they’ve bought only recently – and levied punitive taxes on foreigners buying homes.”
      This only applies to those Singaporeans who don’t belong to the Chinese community. Protest or riots are clamped down by jail punishment or deportation. All with a minimal court hearing.

  5. Tull McAdoo

    Unlike myself (who has pursued a career in financial/economic engineering of all sorts for decades), my wife has always remained grounded in “reality” as she likes to call it. Reality being reflected in the price of bread, butter and potatoes etc! While she has no particular affiliation to Ireland, she does have opinions which she has formulated after years of listening to me “go on about Ireland”.

    My wife has decided that another property bubble is going to happen because the people who run Ireland “don’t know how to do anything else”. I suppose she does have a point given that most of the politicans have come up through the county council gombeen process.

    It will be interesting to watch how these vulture funds that have been drawn into Ireland by NAMA sell offs etc. maximise the return on their portfolios. Will they complete projects that have been on hold by investing further capital? Will they by extension create jobs and other economic activity?
    Will there be any social dividend in terms of social housing? an issue discussed recently by Fr. Peter mc Verry when he talked to Maid Marian and outlined how 6 “new”people were becoming homless each day before concluding that after 40 years involved with homless people that “the situation is worse now than at any time since he started”.

    • Colin

      Question: Why can’t McVerry’s Church authorities put some temporary accommodation units together on church grounds for the new droves of homeless?

      Answer: Because the users of this accommodation would wreak havoc on church grounds, stealing from the church, vandalising the units and displaying general unsociable behaviour.

      Strategy for do-gooders like McVerry: Better for unelected priests with access to all media to get into a flap and force the problem onto the taxpayers, rather than deal with it themselves.

      • CorkRob

        And why exactly would it be the church’s problem in the first place ???

        • Colin

          It’s called the ‘you touch it? you own it!’ principle. Works very well in the private sector. Keeps those who like to interfere in things in check.

  6. eurotom

    2 simple points…..

    #1 If help to buy is available to all that want it at the same time …then that cohort will chase the existing supply.

    #2 If the “help to buy” scheme here does sharply elevate prices then that makes it more probable that the banks will call the governments guarantee

  7. Deco

    Berlin has the same footprint as Dublin, but three times as many people. It still manages to have large urban parks, and public infrastructure space.

    Urban residential housing density in Dublin, is barely even urban. Look at West Dublin, and you see this very clearly.

    The problem is the density of residential housing units is simply too low, for the demand that exists. We need to build up.

    How about a spatial strategy for the area to the east of the M50 ?

    Or even a “strategy” ?

    Redistibution of some state functions out of Dublin also makes sense to locations like Athlone or Naas/Newbridge. Would it be possible to move the HQ of the banks to Waterford or Limerick (both in a chronic state currently) ? They have first rate third level institutions and good social infrastructure. Not as snobby as Dublin 4, but it would help the people running the banks to mix outside their own social circle and get to meet people from different income groups (whom they seem to be deliberately avoiding).

    • Colin

      Deco,

      Dubliners want an underground metro system, city parks, as well as their house with both front and back gardens, and even some with side gardens. Boston or Berlin? Yes please, best of both, thank you very much.

      Limerick or Waterford relocations would be greeted with shrieks of horror by the D4 set, mountains would be moved to prevent this happening.

    • CorkRob

      And why would they want to do that, seeing as they’re successfully avoiding us at the moment ??

  8. Grey Fox

    It is a terrible indictment when a huge segment of society has lost all confidence in the Bank and Public Representatives to make the right decisions, the implications are not worth thinking about although we are living through those same times right now, David you said ” The state is dealing with the housing problem as if the solution is to be found in economics – or classical economics” there just seems to be no economics model, we have watched and are watching Banks that have existed for decades and more implode before our eyes, a case in point is the 86 year old ACC Bank which was set up for very good reasons and it could be argued with excellent forethought and a couple of madmen over few short years brought this Bank to its knee’s and now it exists simply in a Debt management role for its new owner Rabo. The rest of our Banks are on life support but remain in a vegative state with very poor prospects. I have met so many people who rolled over facilities, refinanced or took what the thought were lifesaving loans in 2009/ 2010 and it is now evident that the Banks were simple looking for “good paper” in a misguided attempt at repairing balance sheets or desparate attempts at raising funds from Central Banks. Touchy Feely talk about construction jobs and increasing housing stock is just that, hyperbole, if there wasn’t elections looming would the story be the same? we have had a couple of sneaky looks behind the curtain recently with reference to increasing taxes and “Clarence Hayes” referencing the Budget and the need to take more 2 Billion planned, could this be nearer to the truth of the real discussion going on under the Cabinet Table.

  9. StephenKenny

    Bamboo. You have to look at it from the point of view of the politicians and senior public sector staff. The economy is in tatters, employment is in tatters, and their positions depend on ‘doing something about it’.
    The problem is that to fix the underlying problem – increase wealth generation – is incredibly hard, and takes decades. Taxpayers will have to be just a lot poorer. A whole load of really unpopular decisions will have to be made – all various degrees of bad. Their opponents will be promising a land flowing with milk and honey by Tuesday fortnight. All this bad stuff is absolutely inevitable, no one doubts it, but the question is ‘when’?

    They could voluntarily go this route, which would actually be better for the 99% over the medium term, but would kill them in the polls, so there wouldn’t be a medium term.

    All the time, there is the option to just tap into people’s willingness to believe in the pixies and fairy dust of property price increases, and the effect of the surge in borrowing that goes with it.

    Actually, they have no real choice. Because most countries haven’t been run by adults for at least 20 years, there is no longer any social force encouraging us to do the economic equivalent of ‘eating our greens’ or ‘washing our teeth’. We actually believe that eating sticky buns is good for us because the sugar rush feels so good.

    Sure, there’s always been politicians keen to sacrifice others interests for votes, but there was a degree of balance too – older politicians (safer in their positions), the serious element of the media, social movements, etc. Now, there’s effectively none.

    We’re going to have to go to the point where no one in their right mind would want to invest in property, before it goes away.

    • Grey Fox

      Problem is, whenever we think that everybody is in their right mind out pops one mothertrucker who is not and is equally backed by a Banker who is also out of his mothertrucking mind and its off we go again.

    • Tyler

      @Bamboo

      “We actually believe that eating sticky buns is good for us because the sugar rush feels so good.”

      exactly right !

      empire’s bestial monetary brainwashing – resulting in self-serving irrational behaviour

      start at 24.45 to end

      http://www.youtube.com/watch?v=m_-7e81rVd8

      • kinsele2

        True I think that for a lasting long term solution and fixing the underlying problem will take decades and a lot of unpopular decisions, but to just get us to the mess we are in now people have been pushed to the limits of what they can or will endure.
        This deal sounds like a pre future crash guarantee for the banks, and they’d be mad not to take it up. It’s encouragement to be reckless as again they won’t actually have to take on any risk.
        The underlying problem that people who will take up these loans probably can’t afford them and housing is still well out of realistic reach for most can stay put as a dirty little secret, at least until the pictures of young families moving into new homes and construction workers happily working away are up in time for the next election. FG “getting the country moving again” by building a tree house on top of a rotting bog :(

    • McGoo

      >We’re going to have to go to the point where no one in their right mind would want to invest in property, before it goes away.<

      Yes, exactly. Not only have house prices not dropped far enough to justify a rebound, the psychology of the housing market has not hit absolute rock bottom either. The glimmer of hope never went away. Numerous examples is history tell us that a crash is not over until the market has utterly capitulated, and the last bull has become a bear. That will be a great time to buy property, but we won't because, by definition, we'll all be bears. And it has not happened yet!

    • Bamboo

      Of course the ruling party has to do something to get their votes again in an upcoming election. They look at what is the most pressing and current issue among the people and take action accordingly and do the talk of what we all want to hear. This is in line with every election campaign.

      The link that Adam suggested to read is a significant one. Foreign syndicates buy up properties. These syndicates are again built out of small-scale investors.

      So if the government is serious – do you think these investors are ordinary Irish young families? Then the government imo must have very little respect of Irish people if they think that coming up with such party propaganda is as simple as it sounds.
      Is the government trying to develop the same Singapore style syndicate culture to create a new building boom?

      • StephenKenny

        The difference this time is that there is no obvious opposition to policies that are exacerbating the problem. There is no popular movement, political, social, media-led, etc, to bring counter arguments, and explain why it’s wrong, why it won’t work, and what the alternatives are.

        With no contrary forces, the pressure is simply maintain the status-quo, at whatever cost, and at the expense of the majority.

        The investors are professional investors, from various commercial backgrounds, and, certainly the one’s I’ve come across, are looking to take a short term gain (3 years, something like that) from the Irish property market.

        If you want to know whether this simple sounding propaganda will work, one clue is to look at the UK, where the property market is now directly backed by the government, and it’s racing.

  10. michaelcoughlan

    Hi,

    Better balanced article than yesteryear re housing. You make the same mistake as you say in the article; good ideas but short on detail.

    My two pence worth is the existing banking system can’t be reformed. So fuck it. Let’s create a secondary one which runs simultaneously. So why not recreate a credit union or a mutual bank to specialise in lending mortgages only as you said based on a 20 year time frame for valuations. We must keep sociopaths like fingers out this time (remember he was more interested in coming first than winning as his mutual which tried to be a bank was an abject failure).

    One other thing you forgot rent controls sorely need.

    I disagree re planning. What you could do there is to tax at 70% cgt any property which was flipped which HADNT been developed to STOP in the tracks rampant speculation on land itself rather than buildings.

    Michael.

    • CorkRob

      Excellent idea on the CGT – perhaps a similar escalating tax could be levied on sites that are not developed within 3 years of FPP being granted.

      Similarly, why not place a 25+% (or up to 50%) stamp duty on all house purchases made by non owner-occupiers ? That would slow down the cash investors in their tracks and give the 1st time buyers a chance.

  11. CorkPlasticPaddy

    I said it before and I’ll keep on saying it, and that is the only way you’re going to get ‘change’ of any sort in this country is to boycott all of the politicians who are members of the mainstream parties and just vote for independent candidates next Friday. Doing that will teach the idiots that we’ve had for politicians down through the years that we the citizens have had enough!! Party politicians have only two loyalties to themselves and their parties!! They don’t give a toss about the ordinary people of this country, so, you know what you have to do from here on in. Vote for non-party candidates!!!

    • SMOKEY

      D.R.I.P. on them. It is the only way, a DRIP campaign. DRIP on them, Don’t. Return. Incumbent. Politicians.! DRIP on them.

      • Tyler

        @CorkPlasticPaddy

        Well anyone who votes for these two clowns or anyone of their ilk,would want to get an immediate G.P. referral to a psychiatrist!

        http://www.youtube.com/watch?v=6_dSwiNXmC4

        The current “known knowns”…enda and gilmore are liars,frauds and don’t care for the children of this country and our future generations !

        This toxic treasonous waste needs to be jettisoned asap,or it’s metastasising austerity camps for the peasants !

        Then,post waste disposal, a creative GROWTH based action plan and policies to urgently address our crumbling physical economy and our health service must be a priority – as it’s in smiodairíní and our people are suffering terribly!

        Some cuts don’t heal !

        Vote for CHANGE

        The Future beckons

  12. Colin

    Let’s play a game called, spot the elephant in the room……

    Look!!!!!!

    Vacant houses
    Total housing stock grew to almost 2 million homes, of these almost 290,000 were vacant on Census night giving a vacancy rate of 14.5 per cent. Leitrim had the highest overall vacancy rate with over 30 percent of homes vacant. Donegal was next with a vacancy rate of 29%.

    http://cso.ie/en/newsandevents/pressreleases/2012pressreleases/pressreleasethisisireland-highlightsfromcensus2011part1/

  13. Bank of Ireland Mortgage Write Off

    For the record a client of mine has had a mortgage written off from €150,000 incl legal fees and o/s unpaid interest to €32,000 .It has not been officially recorded yet it is a fact and was settled in the Masters Court .

  14. “A government big enough to give you everything you want, is big enough to take everything you have”.

    The international banking system is artificially supplying more and more money to the general supply and this gives artificially low interest rates. This provides artificially stimulated demand in whatever sector people deem appropriate. This can never be forecast and is always a “surprise” when it happens.

    Interference in the economy by banks and government both result in misallocation of resources and severe distortions in the economy and then in society in general.

    This is a world wide problem as the Ponzi banking, fiat, debt based currency system is in use in most countries.

    The only long term result is a collapse in the economy either by slow strangulation or a traumatic reset. which remains to be seen. This will result in social imbalances and resultant problems which are unsolvable by government as the governments are ruled by the money masters creating the conditions.

    • The only real solution is to change the money system and ditch the current one.
      This will not be advocated by any politician or economist who wishes to retain their current position or job.

  15. Adelaide

    “The government has decided to help first-time buyers with a ‘help-to-buy’ scheme.” Sorry, David, that’s a bit of a stretch, it’s a pre-election thought-for-the-day forgotten-tomorrow sidenote suggestion in a quango paper.
    Cormac Lucey wrote a similar article yesterday on the same topic in the Sunday Times ‘Business Section’. His conclusion, it’s all BS. The government will do diddly squat as per their proven record.

    His other points, house prices still have a further 20% to drop / it’s time to introduce a universal guaranteed income / for me the following was the most interesting, without social welfare we’d be the poorest per head in Europe.

    • Tyler

      @Adelaide

      “without social welfare we’d be the poorest per head in Europe”

      That’s for sure :(

      But our overlords are not going to ‘permit’ present levels of social welfare support continue of course,right? They’re gonna slash and burn there too! We can count on that!

      check out Kyle Bass [start at 22 mins for just 1 minute ...i find he clears the foggy dew]

      http://www.youtube.com/watch?v=VBPZ58dzjfE

      A neurosis is an inability to see oneself,as one Truly is.
      In Real world terms,Ireland is just as bad [and worse!] as Greece and that’s with the ‘current’ environment of low interest rates.If however rates move up,[ remembering the non-linear nature of our debt],our economy detonates !!

      ..yes these rates don’t look like they’ll go anywhere North of where they are now,any time soon,but any [of many many!]‘black swan’can trigger a sudden chain reaction in the systemic financial system,which may result in Ireland [currently hanging on by it's finger nails over the vertical debt cliff !]to be in the firing line and destined to be first casualties of being napalmed,again!

  16. DarraghD

    I won’t pretend to have the same gift of foresight as our accomplished host, but I do believe we will see rent controls and/or trailer parks, in the very near future in Dublin. What we are seeing now is a massive political crisis unfolding in relation to housing in Dublin. The Labour leadership appear to be walking around in a state of absolute shock, they are looking at a complete and total wipe-out in the upcoming local elections, and this collapse in support has gathered momentum well before Fr. Peter Mc Verry came out informed us yesterday, that Dublin is witnessing the worst housing crisis he has ever seen, in 40 years of working with the homeless in Dublin.

    There is a continuity, and a very particular context to this new housing crisis. This is the ultimate play out of the crippling policies of austerity over the last 6 years and in particular the last two years, when the screw was particularly tightened on the squeezed middle class, with all sorts of stealth taxes, the USC, a 2% VAT rate rise, a 42% income tax rate that kicks in at 32K, the average industrial wage, a Property Tax ,now Water Charges, and before long, a Universal Health Levy, and a probable Pension Levy.

    Make no mistake about it, Labour are going to be getting it in the neck for this, as their pitch during the last election, was that if we wanted to be protected from this very scenario that we are seeing being played out, which is working people being kicked out of their homes due to some murky capitalist agenda, then vote for a socialist Labour Party, and don’t forget, before this serious housing crisis hit the headlines, Labour were already hanging onto the ropes.

    So the only thing I can see happening in the short term, (because you can’t build 60,000 housing units overnight), which will be required for political expediency and political survival, will be that either massive trailer park type solutions will become a new and fairly immediate feature of life in Ireland, or else we will also be seeing rent controls introduced very imminently as some sort of a blunt legislative tool which will attempt to make housing affordable in the very short term, until construction can catch up.

    So even if the government fell next week on this very serious and emerging crisis in relation to housing, the crisis is still there and is growing by the day and in a real time digitally connected world, images of newly homeless families, where one or both partners are actually working, are now being forced to live in cars, will soon be circulating on an daily basis on social media and in the mainstream press. In fact this is already the case, and make no mistake about it, this crisis is the perfect storm for Labour.

    Fr. Peter Mc Verry is absolutely right, the government may well fall on this crisis, they are already hanging off the ropes before this crisis hit, but the crisis is so serious that even if the government fell next week, sorting out the issue of housing will require extraordinary intervention, along the lines of massive trailer parks and/or rent controls, which lets face it, would probably get held up with a constitutional challenge.

    The next month will be very interesting, I see a general election on the horizon very soon, Labour will be annihilated on Friday, even before the elections on Friday, they are walking around right now looking like Bishop Brennan after he was kicked up the arse, they are literally numb at how they are now the subject of such hatred in Ireland on the campaign trail, and they are most likely finished as a mainstream political party in Ireland.

    • Bamboo

      Simply superb post , Thanks Darragh
      do you have your own blog somewhere?

    • Adelaide

      Hi DarraghD
      What makes you think there will be “a massive trailer park type solution.”?

      Six years into a mortgage crisis, and what?. And the looming rental crisis is a similar beast, the inability to afford one’s accommodation. The same for the legacy upwardly commercial rental problem, what happened? Nothing happened.

      We live in a conservative capitalist country that voted for the ‘business friendly’ Fine Gael. There is no profit in helping the poor. Besides the Irish have shown since the foundation of the Republic that they have little regard for the poor and the vulnerable, especially poor children, it is the absence of civic mindedness that condoned and will condone the ills of our society, sadly chronic homelessness will be tolerated like every other shameful episode of our non-republic non-society.

      • Pat Flannery

        Adelaide, as usual I agree with you.

        I have tried for a long time to understand why the Irish are so contradictory in their humanity: they are first to respond to an international humanitarian emergency yet are blind to social injustice at home.

        I wonder if there is any truth to the allegation that Maynooth inculcated a deep subservience to the State in its priests through a form of “Gallicanism” brought here by refugee French (moral and theological) professors early in the 19th century, shortly after Maynooth was founded in 1795. If that is true then we were taught the worst of both worlds by our priests: abject subserviency to BOTH the Pope and the State.

        I don’t know how else to explain the deep conservativeness of the Irish people. Their acceptance of authority is unusual to say the least. And nobody can deny the influence of the Catholic clergy over the last 200 years. Is there a connection?

        • Tyler

          @DarraghD

          Trailer parks are most certainly on the cards …maybe not a prevalent feature in the next 5 years,but certainly in 10 !

          Undeniably,this is direction and trend that Ireland is currently taking — a cul-de-sac in the f*cking ghetto !The pathway to life-long serfdom,for present and future generations !

    • Colin

      Why not simply scrap rent supplement payments, which would force landlords to accept lower rents from their welfare tenants, and in the process, saving taxpayers hundreds of millions every year?

  17. DarraghD

    HI Bamboo, thanks for that, no blog, maybe I should set one up?!? I post here the odd time… I am amazed at how this FG/Labour gov appear to be absolutely bamboozled, post Friday will be very interesting I reckon…

  18. Paul Mooney

    Only two things need to be done.
    1a Abolish local authority rates. b Abolish LPT. c Abolish stamp duty.
    Replace these with a site valuation tax.
    2. Remove leverage from the property market ie all property must be bought with 100% cash.
    Problem solved.

    • DB4545

      Paul please get real. 100% cash means most people couldn’t get in. The entire market would be controlled by an elite if it’s not already. I’ve said it above. Non-recourse mortgages would make the banks lend prudently knowing that if they assess the market and the client incorrectly they get handed back the house keys and have to pick up the bill. As we found out they can engage in reckless lending again and the taxpayer will pay the bill again. If the banks want to party let them know they’re responsible for the bill. No need for complex bankruptcy laws. If they lend like a reckless idiot to a reckless idiot they pay for it. Simple effective and efficient. That’s why Switzerland is one of the wealthiest countries on the planet.

      • Paul Mooney

        Hi DB4545,
        My argument is that ALL property is purchased with cash ie residential, commercial, farm land etc. This removes the element of speculation from property. The banks could then get on with lending for productive purposes.
        Under my proposals the vast majority of people would rent. As nearly all citizens would rent and not just the poor and young the rental protections would become much stricter.
        Also we would see the emergence of a professional landlord industry. Pension funds would build up portfolios of residential properties for rent. They would invest for income rather than speculation.
        Renters would have security of tenure and pension funds would get a steady income flow.
        Renters would be much more flexible in their use of space. When young they would rent one bed apartments. If they marry and have families they would expand into larger homes and when they get older and their kids leave they can downsize back to one beds.
        The 100% rule along with a site valuation tax would ensure the efficient use of space. Citizens could get on with being productive and stop worrying about property prices.

  19. Posted but under moderation. Seems to happen with more than one link in the post.

    Your comment is awaiting moderation.
    May 20, 2014 at 6:02 pm
    If you had money to invest?
    would you put it into bonds? so little return on investment with record low interest rates, I don’t think so. Bonds valuations are a bubble.
    would you invest in stocks. I don’t think so even as the stock markets hit record highs, trading volumes are thin. Another bubble? perhaps.
    Where to invest cash? somewhere you can see it and hold. As an owner occupier it is generally giving home and shelter and as an investor a modestly higher return. Property markets in a bubble? perhaps.
    Leave in cash? Little return, any of which is taxed and inflation producing more and more currency? some other currency? Oops all currencies are printing more of the same. another bubble in the value of the buying power of your currency? an hours labour only buys half the value of goods and services it used to but it still diminishes. Was the wage level paid a bubble now in collapse?
    seems like hard assets immune to inflation are the only answer, but where to go is the question? Land, commodities, art, antiques?
    John Williams suggests the buying power of the US dollar is in collapse and soon to go into freefall. will all other currencies follow as hyperinflation takes over? What then.
    http://usawatchdog.com/dollar-on-the-brink-of-disaster-john-williams/

  20. Here is the next bit

    Never mind the local, regional or national politics, look at the large picture. All governments manipulate all things in the process destroying the price discovery mechanisms of the marketplace. There are no longer any free markets.
    What is not in a bubble, you may ask. That which is ridiculed and denigrated! And what might that be?
    http://investmentresearchdynamics.com/

  21. Tyler

    a super article

    http://laroucheirishbrigade.com/2014/05/12/chinese-official-elaborates-chinas-railway-going-out-strategy/

    “Chinese researchers at the Applied Superconductivity Laboratory of Southwest Jiatong University, led by Dr. Deng Zigang, are developing a maglev train prototype to run inside an evacuated tube, which could potentially reach supersonic speeds,up to 1,800 MPH. The limit to the speed of a maglev system is not the maglev technology itself, but the ‘aerodynamic drag’the vehicle encounters at high speeds.”

    “…The original patent for this system,using high energy-flux-density superconducting magnets,was,in fact, ranted to two scientists working at the Brookhaven National Laboratory in New York, in the mid-1960s. Magnetic levitation transport systems,developed initially in the U.S. and Germany,have only been commercially deployed in Japan and China ; indicative of the multi-decade collapse in trans-Atlantic productivity as compared to the Asian thrust in to high-technology applications.

    We can all see the intent here,as we can the Future directionality in their ‘mind’s eye’ – of creatively wielding Science to achieve mankind’s goals of increasing the energy flux density (i.e. Development and Growth) of the Real economy, that serves the Common Good.

    Ireland is being left behind [ left–for-dead more like! ] in the spewing dust of neo-fascist austerity programmes,as our ‘drag’ effect in achieving escape velocity,is due to our insufferable foreign Debt load,which will continue to weigh us down,suppress and sabotaging our progress and inevitably shrink the current base of economic activity and will only serve to asphyxiate any Future growth,to the point of apoplexy!

    We are in a TRAP! That’s Real !

    We need to face head-on ,our visceral fear of change

  22. Tyler

    All we have now is unsound ‘beliefs’ in “dirt-to-prosperiyt” dogma and ‘faith’ is not a pathway to Truth,right? We use reason as a pathway to discover Truth in every endeavour of our lives,but then with it comes to Truth in economics,the blind trust in so-called free markets actually blinds us to what ‘could be’,if we wilfully combine our creativity and Science.

    Faith is not a virtue and there is no choice in belief.We need to divorce ourselves from these anecdotal economic doctrines,proffering delusions through a monetary lens.It’s evidence that determines whether or not our perception of reality is reasonable and in conjunction with the world,as it REALLY is. So lets deal with reality,on reality’s terms – repudiate our illegitimate debt and escape the abyss we now find ourselves.

    Science is the pathway to Truth and The Hamiltonian Scientific and Modern economic approach [sans odious debt]is a path to Growth and a bright Future of Hope [ btw an economic model refined by our very own - Mathew and Henry Carey]

    Money is a Vice.We can’t continue to ‘build’ our economies with strategies of usury and speculation!

    We often reject what we ought to be embracing – Science – the principle of GROWTH and increases [in orders of magnitude ]in the principle of energy-flux-density, that pervades in the history[evolution] of LIFE as we now know it,or rather as Science has demonstrated.

    Religion of money informs our thinking on economics.This must end if we are to extradite ourselves from serfdom

    The Hamiltonian Credit system v. empire’s monetary system [ to defeat Wall St and Fascism]

    ["we can never see past the choices we don’t understand", the Oracle told Neo"]

    The Matrix is not Real. Empire however, is Real.

    CHOOSE the red pill

    4mins
    http://www.youtube.com/watch?v=PKwq7b2i-vc

  23. DB4545

    Tyler I think I said it to you before when you were using another name. You need to get out more and have a few beers and get your c**k sucked. It may not make you a better person but at least it might make your comments more engaging.

  24. Deco

    The inherent absurdity of it all is inescapeable.

    State policy is devised to drive up the price of real estate, and it does exactly that. In fact this is the second time it has done it in twelve years.

    And now pressure builds for state policy to do the opposite.

    Banks are more important as a factor in the decision making process than people.

    The EU is more influential as a factor in the decision making process than the people.

    And the markets are to be pleased, before the people are to be served.

    Welcome to a country called Euroland. It could be worse. We could have EU rules withe Greek local conditions.

    • Tyler

      @Deco

      “The inherent absurdity of it all is inescapeable”

      +1

      And in fairness Deco,is it any wonder that the only [absurd] world perspective the majority of people [including myself] have,is a money-centric one.

      Afterall,we were raised in an almost Vegas-like environment, where this populist “addicted to money” [another solid offering from our host!] mindset was/is socially nurtured,encouraged ,rewarded,valued!,almost religiously.

      Just as there is a cultural acceptance,by most,of drinking excessively [despite the harms]we have a misguided belief system,that’s rarely challenged,where we[like the character Greg Moore in the earlier youtube clip ]“further our survival” primarily in the passionate pursuit of the almighty $$$$, [despite the harms]and this,as a life-mission,is embraced by our culture…absurd?

      And in this inebriated monetary state-of-mind,with free ‘hits’ of Dopamine from ENDLESS sources,we are waaaay more easily manipulated,,distracted,conned,snared and the FEARFUL state of mind that we might have to go without our next ‘fix’,makes us easily controlled….and blinds us to what easily could be -with change and hope for a Future in our mind’s eye

      Money is just more indoctrination /brainwashing – steering us away from the Truth of where and how to discover Real Value in our lives.

      Money is a drug – we all know this – a silent epidemic infecting and poisoning our minds [to varying degrees]

      On so many levels,we need desperately to escape from Plato’s Cave

      Only Full bank separation will work.That,or the 4Horsemen coz the system is collapsing.That’s just observable fact.The game is up !that’s where we are in real-world terms,as i see it

      http://www.telegraph.co.uk/finance/comment/10822521/Only-full-separation-will-make-our-big-banks-safe.html

      [Alexander Hamilton was never ‘bedazzled’ and saw money for what is Truly was and the Threat it posed to his vision and his scientific economic models ought to be taught in primary school

  25. Deco

    Current events make David’s book “Follow the money” look increasingly relevant – possibly more relevant now than previously.

    DMcW, you can always rely on the machinations of the Dublin real estate sector to put you back in fashion.

  26. Tull McAdoo

    “Who will rid me of this meddlesome Priest” was I am sure the thought that entered Enda’s head after our old friend Fr. Peter mcVerry described “our leaders” solutions to the homless problems as “saying nothing” and “waffle”. Padre Pete went on to question whether the gubberment was trying to SOLVE the problem of homlessness or MANAGE the problem.

    The problem can be SOLVED very simply by giving someone a home as they will then, no longer be homeless, simlple you would think.Putting forward solutions like housing people in old army barracks and such like is what the Padre called MANAGING the problem, without solving it.

    Fr. Mac has hit on something here which is very very significant when it comes to understanding the dynamics at play, at present, on how this depression/ recession and its attending austerity is being MANAGED without the underlying problems being SOLVED….

    So a big thank you from me in any case to my new pal and brother in arms Fr. Peter mcVerry and his insightful view , so on that note take it away Matt Corby my fellow countryman, all the way from a balcony in Melbourne…..Brother…..Goodnight Ireland.Sleep well.

    http://www.youtube.com/watch?v=IglwAVcuE6c

    • Colin

      Can I have a free home too? I don’t own one, I can arrange my landlord to evict me by simply not paying my rent anymore, rendering me ‘homeless’. I’d move back to Ireland in a heartbeat if they gave me a free home. Then I can get my act together, make loads of money, and keep my free home. It’s a great country! Where do I sign up?

      • paddythepig

        You need to go on Joe Duffy show and start sobbing uncontrollably.

      • Tull McAdoo

        It’s o.k to admit that you need help.I would see it as a mature approach to problem solving.

        If the only thing keeping you away from Ireland is an affordable home, then that to me is further evidence of the failure of housing policy in the private and public sector in Ireland.

        I’d go as far as saying that housing policy is being badly MANAGED and not SOLVED.

        • paddythepig

          My buddy was trying to rent his 3-bed duplex in the Dublin suburbs which he paid big money for, and where he raised his young family. Young mother comes along to view it, one of several properties being offered by the council, and she says it isn’t good enough for her. Not big enough, not enough garden space, not near enough to mammy … no no no.

          So she gets her way, and Council put her up in a dwelling that ticks all the boxes.

          A couple of months later, my buddy meets herself out and about, and exchanging pleasantries she enquires where he is now.
          He says they are back in the duplex. Her response?

          ‘Awwwwwwww’.

          Aw shucks.

          What a great country.

          There’s a big difference between an affordable home, and a free home. The working poor don’t want to pay for the pipedreams of Peter McVerry, Fergus Finlay or Father Sean Healy.

          We all know that in Ireland, playing ‘an beal bocht’ gets results.

          The genuine poor are the ultimate losers.

          • Colin

            And where are the young fathers (are we even allowed to ask this question)? They make babies, change girls into mothers, and then lift to phone to McVerry saying their ‘mot’ and kids need a decent home! It’s a great country, I keep telling ya!

  27. Shatter The Illusionist The Dynamic :

    €70,000 Lump Sum

    Choice 1 – He Refuses – Tax payer keeps the €70,000 ; and

    Choice 2 – He Accepts – Shatter keeps €35,000 net , Tax payer keeps €35,000 ; and

    Choice 3 – He Accepts …..but ….but…but…he gives it to Charity —

    Shatter claims tax relief of €35,000 , Charity receives €70,000 and Tax Payer receives NOTHING …and LOSES €70,000 .

    ….Shatter The Illusionist ….supported by the invisible pen of his assistant QUINN of Labour .

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