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11) Is there any chance that given this new current economic forecast, will we engage in a re-think of our economic strategy eg less State ownership, reduction in number of public sector workers, removal of guarantee of State pensions for new public sector workers, greater investment in indigenous entrepreneurs (particular non-US exporters), a new approach to current government spending (including accountability for waste), improving competitiveness, forcing unemployed (6months +) to work, restrictions on personal credit etc (any other suggestions welcome)? Answer: Will we F*&K (as the Bailey brothers might say).

Property developers and other inward investors in Ireland have enjoyed lavish investment and tax breaks in recent years - Bertie Ahern is, as has been observed on another thread, more or less bought and paid for by these guys. Too much of the country's tax revenue has been dedicated to this relatively small collection of people at the expense of the national infrastructure. Trickle-down economics are a fiction. There is a failure at the heart of government policy to recognise the most obvious thing - that wealth creation is a two-way process - it depends on both the entrepreneurs and the people who work for them. Unduly rewarding the former at the expense of the latter is ultimately self-defeating. For Christ's sake, we still don't have a decent surface on the laneway that is the road from Cork to Dublin - after all this time and with all this wealth sloshing around. Our poor infrastructure affects businesses too and it deters inward invesotrs. If this were France the Cork-Dublin road would have been built in three months, to a high standard and for a fraction of the cost. (BTW did anyone every find out where that 10billion overspend on roads actually went? There must have been a lot of suitcases full of cash leaving the country. Just think what we could have done with that!)

The idea that public sector workers are nothing but a drain on the economy is also pernicious. The public sector is part of the infranstructure on which entrepreneurs rely in ways many of them don't even understand. IBEC are out of control - there is far too much emphasis on their perspective which in any case always comes down in favour of short term gains at the expense of long-term security. It's bizarre the influence they wield over government policy. To take one example that might surprise people - I was recently told by the head of a vocational education centre that FETAC (Further Education and Training Awards Council) have disbanded their inespectorate role and are devolving all the responsibilities for marking and maintaining training and educational standards to the centres themselves. This means that there is now no longer any independent means of controlling the standards of vocational education in any vocational centre in the country - and the reason it has happened is because IBEC specified that it should be like this so that businesses can be flexibile about what qualifications they might like prospective employees to have and what their own obligations to training them might have to be. There is no way this can be sold to the electorate as anything other than a dumbing down of the labour force. Where on earth can that possibly get us? It's near suicidal commercially in the long run. And very likely the thin end of the wedge for other sorts of second and third level education. There are serious questions around practices at certain universities already - lecturers marking their own students' work, grades being jacked up so that the record looks good etc etc.

And what has this all got to do with the price of fish - well the property crash anyway - it's just particularly illustrative of how atrociously Fianna Fail have wasted a golden opportunity - have completely fail to manage the opportunity that they had - by focusing so exclusively on one aspect of the management of the economy. Even last week Ahern was claiming that there was a 'demand' for 6,000 new houses. But there are 210,000 empty houses in the country! It just jobs for the boys again, isnt it? Dont'w worry guys, I'll see you alright. Somebody needs to take him to one side and explain that, er, property development is not in fact the solution to ever problem the country faces. Besides, we might like to retain a field or two on which to be able to have a picnic or remind ourselves what countryside actually looked like.

Maybe not. but i think the rael question is, Are we haeding for a property crash? why? and what will this laed too?

This is an interesting email I was forwarded by a friend 2 days ago in response to the RTE programme. I think its interesting. I should say I do not work for the company that did it, nor does anyone I know, I am just doing this for debate. I expect some of you may have seen this email given the nature of your work in economics but doubt all have.

PRESS RELEASE

April 17th 2007


‘FUTURE SHOCK – PROPERTY CRASH’ PROGAMME IRRESPONSIBLE JOURNALISM SAY CBRE

Property consultants CB Richard Ellis today dismissed last nights Future Shock – Property Crash’ programme, which explored the possibility of a housing market crash in Ireland over the next few years, as ‘irresponsible journalism’. Whilst the housing market is to some extent outside the core remit of CB Richard Ellis, who focus specifically on commercial property, they feel it is necessary to comment on last nights programme on the basis that such unbalanced negative speculation could ultimately unnecessarily create imbalance in the Irish economy and property market overall. According to the property consultants, no-one is denying that there has been a notable change in the performance of the Irish housing market in the first quarter of 2007, compared to the extraordinary market conditions witnessed this time last year but the biggest threat to housing market performance is actually confidence. They believe that airing sensationalist programmes like this focussing on ‘what if’ scenarios’ will actually serve to further fuel negative sentiment rather than facilitating the welcome soft landing that has been emerging in recent months.

CB Richard Ellis says that it had been expected that a combination of higher interest rates and increased supply would ease demand to some extent in the first half of 2007 and that this would inevitably result in an easing in the pace of price appreciation. However, they say that no-one anticipated the negative impact that recent political interference and unfounded negative commentary in the media in recent weeks would have on sentiment and confidence levels. They say that we are now in a situation where all the fundamentals that have been supporting the Irish housing market for the last decade are still intact but the pace of buying activity has essentially halved as a result of nervousness and uncertainty. On this basis, the company take particular issue with the unfounded doomsday scenarios presented in last nights programme which they feel will only fuel this negativity further.

For many years, the independent research team at CB Richard Ellis, Ireland have been dismissing many of the sensationalist reports that have predicted the demise of the Irish housing market, particularly those like last nights programme that use examples of boom-bust scenarios that have occurred in other economies. According to Marie Hunt, Director of Research at CB Richard Ellis “The property market is in simple terms a sub-set of economic activity and the fundamentals that have been driving the Irish housing market for many years now are completely unique and cannot be compared to other economies. No other country can boast the levels of economic growth that have been witnessed in Ireland in the last decade; no other country has generated the level of employment generation that Ireland has seen; no other country has seen the phenomenal population growth and levels of immigration that Ireland has witnessed and no other economy can match the decline in the average household size that has materialised in Ireland in recent years. It is simply technically incorrect to assume that that Irish house prices will decline significantly simply on the basis that this has occurred in other economies where the fundamentals were so different. It is also irresponsible to suggest that the ‘negative equity’ scenario that occurred in the late 1980’s in the UK could occur in Ireland considering that Irish lending institutions are working under the remit of the Central Bank and continue to stress-test potential borrowers to 2% above ECB rates. The sensationalist approach of last nights programme is in our view irresponsible as property is a very important issue and ultimately the general public will take the sentiments expressed last night on board when deciding whether or not to make what will essentially be the biggest financial decision of their lifetime. Would-be first time buyers who have heeded equally dramatic and incorrect predictions in the past have lost out significantly as they ‘sat on the fence’ and watched prices escalate because of the underlying fundamentals in Ireland. All we ask is that the media consider these fundamentals and adopt a balanced, informed and considered approach when dealing with such an important issue”.

CB Richard Ellis agree that it now appears that we will have to adjust to somewhat lower economic growth in Ireland over the coming years and the natural result is that property market performance will in turn decline. However, they say that we should not be entertaining negative speculation and unfounded worst-case doom and gloom scenarios when all that is being experienced is a levelling in the extraordinary pace of growth we previously experienced. They say that last nights programme should be dismissed as fiction and that a soft landing for the Irish housing market is still possible and is the most likely scenario.

ENDS
For further information, please contact

Marie Hunt
Director of Research
CB Richard Ellis
1 Burlington Road
Dublin 4
Ireland

Tel + 353 1 6185543
Mob + 353 87 2727115
E-mail marie.hunt@cbre.com

My main issue with the programme was the treating of the experience of the UK on Black Wednesday as anyway comparable evidence to what might happen in Ireland given our current demographics in particular and the fundamentals in the economy at present. Using Japan is equally spurious.

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"Everyone hates Fianna Fáil except the electorate."

Unattributed correspondent, 1960s.

Why is using Japan spurious?

If memory serves me correctly, the crash in Japan was caused by an overinflated property and stock market?

For Marie and her soft landing followers, the Nikkei was at 39,000 in 1989, it is now at 17,000 18 years later.
Ah but sure those Japs wouldn't be half as clever as us Paddies, that sort of thing couldn't happen here.

Don't see what a report from a property company has to do with economics.
Riiight. In other news, independent researchers at a Bulgarian property developer have discovered that Bulgarian property is a great investment.

The program mentioned 40 bubbles that resulted in 40 crashes, not just Japan and the U.K. The researchers could not find a single instance where a building boom of anywhere near the scale that Ireland experienced ended in a soft landing.

Can you find one?

The RTE program is available to watch here for anyone who missed it.
http://www.rte.ie/tv/futureshock/

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So unbalanced negative speculation causes imbalance in the Irish economy and property market? Accepted.
But what about unbalanced positive speculation? What do CBRE have to say about that? Don't they think it exists and that it's been par for the course for the last decade or so? (Property p0rn as David McWilliams calls it.)

This is basically an admission that the market isn't built on decent fundamentals. If it was, all the Cassandras in the world couldn't talk it down.

So journalists, programme-makers and commissioners of programmes have a duty to facilitate CBRE's chosen economic outcome?

What infantile rubbish.

Poor her. Poor CBRE. I will make sure to think of their frail emotions next time I open my mouth, lest I surprise them and upset their predictions.

The South Sea company was unique, the developments leading to the stock market boom in the late 1990s were astonishing and unique. But that didn't stop investors overvaluing the real economic value that had been added and (importantly) extrapolating it forward. "It's different this time!" is the catch-cry of the person about to lose a lot of money when they caught up in sentiment and easy credit.
The idea that rising property prices cannot be overvalued because of real fundamentals is lunatic. There are real fundamentals behind all pre-bust booms, just as there are starry-eyed muppets saying it's different this time.

Incidentally, what does Ms. Hunt think of residential property investors piling into assets that yield 3 percentage points below the cost of borrowing and maintainence? What would she say to one of her commercial clients who showed interest in a similar arrangement? Or would answering that be unfounded negative scaremongering that upsets her predictions?

WTF? Did prudential regulation not exist in the UK in the late 1980s? Sure, there wasn't Basle II, but UK banks were stress-testing away during that period. Incidentally, for somebody quoting Central Bank supervision as evidence of banking prudence, she's very quiet about what the Central Bank has actually had to say on the subject of Irish banks' lending to property. Or perhaps they too were being unfounded.

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Romanes eunt domus

This surprises me quite a bit. Isn't it now a statutory requirment under the updated Residential Tenancies Act ?

Which TD's , any names?

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Did Rody give back the Audi ?

If the tenancies are not registered they cannot get a tax deduction for mortgage interest against the income.

But then, this would only be of concern to those reporting the rental income!!

Good post Libero.
The argument for a 'soft landing' is a tissue of lies. All this ********************e of 'talking ourselves into a crash' is a desperate attempt to shift the blame for the disaster that is the Irish Property Market.