Dan O’Brien had a good piece in Saturday’s Irish Times about house prices in Ireland.  But a couple of comments should be made.

Firstly, Dan (or the sub-editor) gave the piece the title “How low can house prices go?”  While the article was interesting in many respects, I don’t recall him answering that particular question.  OK, so headlines are always making false promises which the actual article fails to deliver;  not exactly Man Bites Dog.  Also, if you read the article expecting to see Dan’s own view, you would have been disappointed.

In fairness he does say “If the 2011 rate of decline in residential property prices continues for another 12 months, prices will fall by about 15 per cent from their current level. Given the headwinds facing the market, that is more likely than not.”  And he also notes that the Banks’ Stress Tests had a baseline assumption “that prices will fall by a further 20 per cent before the market hits bottom. In their worst-case scenario, the decline would be almost 30 per cent. That would bring the fall from the 2007 peak to 59 per cent.”

But it would have been nice to have the personal view of the Economics Editor of the Irish Times on the matter.

Secondly, and more surprisingly, Dan doesn’t seem too hot on the calculation of percentages.  Two sentences in the article offer contrasting views on the extent of the rise in Irish house prices during the bubble phase:

Compare “In the decade from the index’s start date, in early 1997, Irish property prices quadrupled” with “Although the US did not look out of the ordinary in the property-price rises it experienced from 1997 to 2006 (130 per cent compared with Ireland’s 400 per cent), it has suffered the second-worst rich-world crash (after Ireland)…”

Surely Dan doesn’t think that if a number quadruples, it has risen by 400%?  Surely he knows that it has only risen by 300%?  Must be an error by the pesky sub-editor again.

David McWilliams blogged this week about Middle class dying a slow death

“This is the central dilemma for all of us: we need to ‘lock in’ cheap property as a competitive advantage for the country, but that means trapping the property-owning middle class in a brace, where their debts remain static but the value of their assets falls……

……Whether we like it or not, with the balance sheet shattered, some form of debt restructuring for Ireland’s private sector is a given.”

This must not happen.  If middle class means anything, surely it means taking responsibility for one’s own actions. Bailing out former property junkies would be a scandal. I don’t want to pay taxes, and have my children pay taxes, so that Fianna Fáil can pander to imprudent fellow travellers.

I spotted a written answer this week to a parliamentary question from Fine Gael TD, Olivia Mitchell.  She had asked the Minister for the Environment, Heritage and Local Government about the problems in publishing sale price data for residential property and about progress with a proposed legislative solution.

Minister of State Michael Finneran gave a written answer which was full of the usual prevarication and evasiveness, and he noted that “the Data Protection Act currently precludes the publication of data relating to specific sales prices achieved for individual houses without the consent of the purchaser and vendor involved in each transaction”.

However, in the course of his long-winded reply, a particular phrase he used was a classic:  “In terms of house prices, like housing markets throughout the world, the Irish housing market has moderated [my italics] significantly over the course of the last 18 – 24 months”.  

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For a balanced and informative overview of the Irish banking crisis, I recommend “Resolving Ireland’s Banking Crisis” by Patrick Honahan in The Economic and Social Review, Vol. 40, No. 2, Summer, 2009, which is available online here.  

Described as a “Policy Paper”, it is written in a calm, dispassionate manner; however, if one deconstructs the understated and analytical prose, one is left in no doubt that we taxpayers are victims of a massive failure by our highly-paid regulators to do their job properly.  Read the rest of this entry »

Many people will make the reasonable assumption that if there is to be an annual property tax on residential property (and there certainly should be), then the current high rates of Stamp Duty on purchases of such property will be reduced at the same time.  This highlights a potential transitional problem.  In particular, unless     Read the rest of this entry »