Back at the height of the boom… October 25, 2012
Posted by WorldbyStorm in Economy, Irish Politics.trackback
Michael Taft has done a deconstruction job on Eilis O’Hanlon’s piece in the Sunday Independent from this last weekend. And very timely and comprehensive it is too. But on a slight tangent there was one line in the original piece that had me spluttering into my tea… it is the one that goes as follows:
As symbols go, a garda sergeant’s wife who can’t afford to feed her children because of the recession has it all. No wonder it was, for days, the most read story on the Irish Times website, with correspondingly huge interest on RTE and in social media, where it was plugged relentlessly as a damning indictment of the Celtic Tiger gone wrong.
Not everyone was wholly sympathetic. Some felt that those who bought houses at the height of the boom were getting everything they deserved; others wondered whether the country had lost the run of itself when people earning €75,000 — or possibly €65,000, depending on which page of the Irish Times you read — are now claiming to be victims.
Very interesting line of thought from O’Hanlon there – no doubt about it. And yet, and yet, I can’t help but think of one of her colleagues, chap by the name of O’Connor who at that very same ‘height of the boom’ in 2007 wrote under the heading The smart, ballsy guys are buying up property right now:
Tell you what, I think I know what I’d be doing if I had money, and if I wasn’t already massively over-exposed to the property market by virtue of owning a reasonable home. I’d be buying property.
And having thrown that caveat about ‘if I had the money’ then promptly took out a rhetorical shotgun and blasted it into smithereens when he continued in the same breath:
In fact, I might do it anyway. You don’t even need money to buy property these days.
Why not, pray tell?
Imagine if you walked into the bank and said, “Listen, guys. I want to gamble a million on the stock market. I have 100 grand myself, will you guys lend me 900 grand at really low rates and I’ll pay you back over 40 years? In fact I won’t even pay off the principal, I’ll just pay off the interest.” They’d laugh you out of it. But substitute gambling on the property market for gambling on the stock market and they’ll fall over themselves to give it to you.
Which is why I’m not entirely convinced that all those who bought houses at the height of the boom were getting everything they deserved – even if some deeply unwise decisions were taken albeit signed off on by a media and banking sector only too eager to push product.
And that being the case perhaps it might be sensible for the Sunday Independent and indeed other organs of our media to be a little less forward about condemning those who took the very advice that was to be found in their pages week after week after…
“They have put out the eyes of the people, and complain of them that they cannot see.”
One of the problems of engaging with some like O’Hanlon is that one end up spending most of the time trying to deal with the specific nonsense they spin by arguing that the line taken is typical of the orthodoxy. However, by doing so there is only really an engagement the rhetoric rather than the substantial facts that people like O’Hanlon and O’Connor avoid.
In one sense O’Hanlon is right to challenge the Irish Times meme of the squeezed middle by choosing to focus on a household that takes in 75K a year when 60% of households earn less than 38k.
http://www.irishleftreview.org/2012/10/19/income-distribution-data-shows-central-banks-agenda/
But O’Hanlon’s point ultimately is to push the idea that the so called ‘celtic tiger’ and the property bubble was fueled by people buying houses, even though owner-occupancy declined during those years while house prices increased many times more than the average industrial wage. That is to say that it was fueled by ‘demand’, even if that demand was crazed and myopic.
These charts are from Conor McCabe’s talk in Dublin last week and show ower-occupancy during the height of property bubble declining while prices shot way beyond the average industrial wage.
http://www.irishleftreview.org/2012/10/22/ireland-shadow-banking-system-audio-slides-18th-oct-12-dublin-talk/
When the property bubble is being discussed by the Sunday Indo and the Irish Times the focus is on the bit that their readers can relate to, the prices of individual houses. Very little is made of the fact that the prices of houses increased often because of the speculation on land that were developed on, including the speculation on land being bought by developer to build commercial property. Of course, much of this is valueless now and sitting in NAMA.
The real dynamics behind the rising cost of houses is rarely discussed. Instead the focus is on those who had the resources to buy the more over-priced houses.
Just to stress, not criticizing your take here WBS, just mentioning it as you brought our attention to it.
Sorry, those charts didn’t appear. Here they are again:
http://dublinopinion.com/test/wp-content/uploads/2012/10/Increasinghouseprices.jpg
http://dublinopinion.com/test/wp-content/uploads/2012/10/OwerOccupancyinIreland1961_2011.jpg
Might also be worth observing that there’s a difference between people buying houses as an investment and people buying them because they need somewhere secure to live. This difference is often forgotten by people in the first category.
Information about that is available too. It seems to be about a two thirds less than the primary dwelling market. From 2011
“there are 603,385 residential loans in the cleaned sample, of which 509,152 are Primary Dwelling Home (PDH) loans worth €67
billion and 94,233 Buy-to-Let (BTL) loans worth €19.6 billion.
http://www.centralbank.ie/publications/Documents/Mortgage%20Arrears_181111_Web.pdf
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