THE COMICAL PADDIES STRIKE AGAIN
Dec 26th, 2007 by Conor McCabe
On 7 December 2006 the Irish Times asked Dan McLaughlin, chief economist Bank of Ireland for his predictions for the Irish property market for 2007. He said:
‘The year 2007 will be another strong one in terms of transactions. We are likely to see something of the order of 85,000 to 90,000 houses built again. Mortgage lending will probably rise also, by around 20 per cent, something of the order of gross mortgage lending of €28 billion. The combination of the buoyant supply plus higher interest rates would suggest that we are in for a period of modest house price inflation - something in the order of 3 per cent per annum in 2007 and 2008. We need a couple of years in which house price inflation lags behind personal income growth to rebuild affordability. That would be a benign scenario. I don’t think conditions are in place for a steeper correction. We would have to have the economy being a lot weaker for that to happen.”
In 2007, Mortgage lending fell by 25%. House prices fell, nation-wide, by 6%. House completions stands at 56,405 for the first 3 quarters of the year, headling towards around 70,000 completed units.
Last week, Dan has this to say about 2008.
Bank of Ireland chief economist Dr Dan McLaughlin said there were signs of untapped demand in the market.In the bank’s quarterly Irish Property Review published this afternoon, Dr McLaughlin said buyers appeared to be holding off because of concerns for the economy and the cost of homes.
Dr McLaughlin said: “Affordability looks set to improve for the average borrower; incomes will rise and the rate cycle appears to have peaked.”
Commenting on projections in the review which shows mortgage lending likely to drop by around €5.5 billion to €34.5 billion, Dr McLaughlin said the building sector had responded promptly completing 10,000 fewer units this year compared to last.
He estimated there would be 20,000 fewer homes built next year - 30,000 off the record 88,000 completions in 2006.
The Irish Times failed to mention that Dan made a complete balls of his predictions last year, so, in the interests of fairness, we just thought we´d do our bit to bring his comical paddiness to the fore.
By the way, Dan is paid a fuck-load of money for such insights as “buyers appeared to be holding off because of concerns for the economy and the cost of homes.” And all printed uncontested by the impartial newspaper that paid €50 million for a property website.
There you go.
See, I’m telling ya, regime change. That’s what we need around here. I’m personally in favour of a bloody coup. This will of course achieve nothing but might possibly make the rest of us feel better by putting the gimps who feed us this Orwellian shite up agin the wall. Still, in some ways (when pointed out as being such a pile of manure) it does add some entertainment to an otherwise dull backdrop. Good catch there Conor, keep it up. Though clearly the absent mindedness of the populace has become all that is necessary, Winston Smith and his fastidious re-writing of history will never be required as long as we have Starbucks, Debenhams, and Big Brother to distract us.
The Finfacts blog has a skeptical view of Mr. McLaughlin too. Writing back in May to highlight a very realistic op-ed by former economist at the Central Bank, Michael Casey, Michael Hennigan writes:
What galls me is that when economic advice is sought by the media, they run to these fuckers with a vested interest. Perhaps it’s understandable in some cases - such as the Irish Times, whose conflict of interest in relation to property has been brialliantly elucidated on these very pages. But what about RTE? Why do they insist on pulling in talking heads from Banks and other institutions which are clearly determined to keep blowing into the bubble - even as it pops before their very eyes.
Apart from the serious negative consequences of having all our eggs in one basket, and the opportunity cost of not investing in startups or industry, and the negative consequences of the political weight of a preponderant lobby like construction and the huge ties it has with political parties, there is another cost to this bubble. And it’s the pain that comes with the clap that follows such an outrageously inflated market. As in most cases, those who suffer most will be at the bottom of the heap - those who lose their jobs over the next couple of years in (probably) substantial numbers.
I heard people quip that the poles and others will simply return home. First, we don’t know if they will, or how many will. And anyway, why is it ok for an immigrant to lose his or her job. (It might be especially devastating for an immigrant - they may have to, and not just chose to, return home, after upping sticks and taking family and all to Ireland). But besides, the cheap ‘poles can go home’ comment (which I heard today at lunchtime) is wide of the mark. The vast bulk of people who are employed in construction and dependant industries are Irish. If a swift contraction does take place, it will be devastating for many. Think of those in their early 50s say, employed with CRH - as truck drivers, machinists, mechanics. Where do they go when they are out of work? Answer: nowhere. And think of this on a huge scale from Woodies employees, to plumbers, to painters and so on. True, some among these groups done well during the boom, but for many of the ‘ordinary workers’, it was merely a time when perhaps pay was good and work consistent. Now they will lose that and perhaps end on the dole queues. Meanwhile those who creamed off the real money will see smaller numbers passing through their books, but they will hardly face hardship. As always, the ordinary man pays the real price.
But what about RTE?
I think it’s imagined that such people are working at the coal-face of commercial lending, so have an insight. Nothing wrong with asking them their opinions on these things, but those opinions are never challenged, and there is no attempt to get beyond simple soundbites or to do anything other than accept them at face value.
As Fintan O’Toole mentioned in the media bite interview RTE is the only Irish media organization that isn’t reliant on ad revenue from those involved in the property market (although there are loads of ads for banks, and of course Eddie Hobbs plugging Brendan Investments). This was mentioned in the context of the reaction (in Independent News and Media portals mainly) to their Future Shock program on the property market a while ago. They also did a recent Prime Time program on the relationship between the property market and local councils, which was followed up on Questions and Answers.
But still, you are right. There is a reluctance to look beyond the surface of these things and to try and understand why such a bubble was allowed to develop in the first place. RTE also had loads of property programs on the go at the same time, with their resident estate agents describing a slump in the housing market as ‘a buyers market’, while producing elaborate make over programs that could only encourage people to spend lavishly on their new Commuter Belt homes. As if Manhattan chic or art-deco design compensates for the two hour daily commute. Also, people pay for such things by re-mortgaging their houses in their effort to live the life they are told they should be living while money is still relatively ‘cheap’. While personal indebtedness has started to slow down slightly it clear that it was boosted for so long not by an expansion in the overall economy but by the relative price of property. Once that price begins to fall consumer spending will drop also.
But the reality is that most people haven’t benefited from the so called Celtic Tiger. As the economy cools down they are going to find very few real gains despite the hype. Reading the predictions in the papers today, provided by lobbies such as the Small Firms Association or IBEC, the talk was positive despite the rumblings of economic meltdown. However, what was paramount was the need to reduce labour costs. These people never miss a trick.
[…] duty every week; ditto in the Sunday Tribune which is effectively from the same stable. As we have said before, this nonsense percolates through the Irish Times as […]