BLEARY-EYED PROPERTY MESSAGES FROM IRISH TIMES*
Apr 4th, 2008 by Conor McCabe
The Irish Times portrays a schizophrenic relationship with Irish housing today (Friday), with one article assuring us that it is better to buy in Dublin than rent - and another one warning us about the ongoing property price crash.
Writing in the Finance section, Laura Slattery says that
AFFORDABILITY FOR first-time buyers continues to improve as house prices fall, according to the latest edition of the EBS/DKM Affordability Index… The average first-time buying couple is better off buying than renting today if they intend to keep their property for more than three years, according to an analysis by DKM Economic Consultants - even if Irish property prices fall as much as 10 per cent in 2008.
DKM Economic Comsultants base their analysis of purchase as a better option than renting thus:
Typical first-time buyers are better off buying than renting, DKM director Annette Hughes said. The consultants assume prices will fall 10 per cent this year, before rising at an average of 3 per cent over the next six years.“By year four, the buyer would be better off by almost €5,000, and by year seven - even after selling his property and paying transaction costs - the buyer would be better off by almost €41,000,” Ms Hughes said.
However, in the article, “Buyer Be Aware”, Laura Slattery writes that
Nobody knows what is going to happen to house prices,” says Annette Hughes, director of DKM Economic Consultants, which yesterday published an analysis in Irish Property Buyer magazine saying that buying is more economical than renting. “You are better off to buy rather than rent, unless house prices fall forever,” says Hughes. But that would be “an unreasonable scenario”, she adds quickly.”
This is the same crowd who told us in last year’s Irish Times, 1 February 2007, that then was a good time to buy.
In an article entitled, “Affordability improves for first-time buyers”, Laura Slattery (again) wrote:
First-time buyers are now using a smaller chunk of their net incomes to repay their mortgages than they were in December, the latest EBS/DKM affordability index suggests.However, the improvements in affordability for buyers are sparking concern that house prices may soar again in 2007… Annette Hughes, director of DKM Economic Consultants, said there was a risk that the improved affordability for first-time buyers, combined with lower levels of housing supply and an imminent peak in the cycle of rate hikes, could be enough to generate a fresh surge in house price inflation.
Forecasts that house prices would grow by 3 - 6 per cent in 2007 represent “quite a sharp slowdown” that Ms Hughes said she did not anticipate happening yet. Her view was echoed yesterday by Bloxham Stockbrokers economist Alan McQuaid, who said it “would be no great surprise” if house price growth picked up again.”(Irish Times, 1 February 2007)
Prices in fact fell by ten per cent.
Laura Slattery also tells us in today’s Times that “Nobody knows how many unsold or abandoned houses and apartments there are dotted around the country, but at the last count there were at least 45,000 second-hand homes for sale.” Not exactly correct. We have a fair estimate as to the size of empty housing in Ireland - thanks to the 2006 census, and the dichotomy between housing construction and actual households in the state. for more, see here.
So. Last year they were telling us to “get in quick” before house prices rose. Now, they’re telling us that it’s going to be cheaper to buy than rent - while also telling us to beware buying anything because prices will continue to drop.
Well, at least they’re 33% correct.
These so called analysis are a joke. I read it the other way around. If you buy a house now it sets a maximum “adjustment” in the property market that can happen before you start loosing money. So if houses prices fall by more than 6% next year and don’t recover in 2009 then what?
Also in light of their assumed 6% drop in 2008, they fail to explain why you would not be even better off waiting until the end of 2008, wouldn’t you be even better off then.
Finally they fail to anticipate the drop of first time buyer interest relief after five years to a maximum of 100 per month for a married couple. Also I bet they don’t factor in tax relief on rent paid when comparing renting versus buying.
Anyone who buys and looses should sue these guys down the line.
Excellent points. you’re right. They talk about a drop in prices in 2008, and then say buy now.
If the industry says stop buying until 2009, prices really will slump, so there is a reason for different opinions and analyses being published. It’s a balance between trying to be realistic and keeping consumer confidence buoyant. It’s not so much a cross-eyed outlook on the housing industry as much as airing of different studies and views from within and outside the industry. If The Irish Times had an editorial today saying one thing about the housing market and an editorial tomorrow saying another thing entirely that contradicts the previous one, that would be a different scenario. All papers will have different views expressed in its pages. And of course papers have invested interests as they are businesses and rely on advertising. However, I don’t think the kind of schizophrenia, as you see it, exists. Editorials are where you get a paper’s ironclad stance, not in the quotes and summations from its reportage. No publication is that homogenous.
I’d buy that if it wasn’t part of a trend that throws some light on the editorial decisions of the finance section. Usually, we get the press release and the interview with the expert who usually works for a bank or an estate agent, telling us everything’s fine. Here we have at least some acknowledgment of the overwhelming evidence that the property market is, to say the least, unstable.
Truth is nobody really knows what’s going to happen. The journalists are just quoting the people you’d assume to be most qualified to talk about this stuff. There’s no consensus so that’s why the coverage might appear schizophrenic; isn’t that better than everybody singing from the same hymn sheet? You’d be complaining about that too if that was the case.
I think you give too much credence to the influence of newspapers on the property market. Buying a house isn’t like buying a tin of biscuits; people spend months or even years deliberating before they buy a house and seek a variety of opinion before they do so. An editorial in the Times isn’t going to make them rush out and splurge.
Isn’t the point, though, that these newspapers seek to make money through property advertising, and as such, are institutionally disinclined to present the state of the property market in a way that would negatively impact their advertising revenue? So, in reports on property, one would hear talk of ‘dramatically improved first time buyer affordability’ instead of ‘you’d be better off keeping your hard-saved cash under the mattress’.
It’s true about the irish Times and its reports. I mean, what could the investors of €50 million in a property website possibly gain from talking up the market?
“Isn’t the point, though, that these newspapers seek to make money through property advertising, and as such, are institutionally disinclined to present the state of the property market in a way that would negatively impact their advertising revenue?”
That’s a bit of an assumption to make. If a newspaper accepts advertising it is automatically, implicitly incapable of presenting the truth seems to be your argument. Might as well not read any of them or watch TV or listen to the radio for that matter if that’s the case.
The Irish Times Ltd’s business depends on property, true, but it also depends on its paper being seen as an impartial, objective commentator. Does the Times want to be losing readers down the line who felt conned into buying overpriced houses now?
“what could the investors of €50 million in a property website possibly gain from talking up the market?”
That’s a disingenuous argument. You suggest they are talking up the market and as proof you offer only that they would have a lot to gain if they did, not any evidence that there is an editorial decision to do so. I might have a lot to gain by mugging a rich person on the street; doesn’t mean I’m going to do it though. At the same time you say their reporting is “schizophrenic”, ie multiple viewpoints are being expressed.
I think it’s quite a safe assumption to make, since my argument is that it is fundamentally incapable of presenting the whole picture because decisions on what to publish and how to publish it are underpinned by financial interest. I don’t see how this is all that controversial: newspapers are businesses and, like any other business, those who work for them will carry out their duties in line with business priorities. If you know what side your bread is buttered on, you don’t go about your duties in a way that fundamentally undermines the business objectives of the firm, but in any case, the firm’s recruitment policies will usually filter out the type of people who would be inclined to do these things. If it applies in other businesses, why not journalism?
It doesn’t mean that you should stop reading the paper, but it helps to be aware of the limits to the usefulness of the information it presents.
That is not the only proof I offer. Indeed, I have written more than a few posts on this point. This is just the latest one.
Also, the Irish Times has NEVER been an impartial newspaper. In fact, such a thing - an impartial newspaper - does not exist. The Irish Times is a moderate, conservative newspaper that has shifted to the right in recent years.
I do not know of any historian who would use the Irish Times as an impartial newspaper, or even as the newspaper of record. It is a national newspaper, with a strong Dublin bias in its outlook and reportage. Indeed, there is a strong case to be made for saying that the Irish Times is a regional newspaper with a national distribution.
I know the Irish Times sees itself as the paper of record, but it’s a self-appointed title.
And it’s not just the Irish Times that has been doing this - bias in reporting the property market, over-reliance on estate agents for clarity statements, etc - the Irish Independent has been at it as well.
“If it applies in other businesses, why not journalism?”
NUJ code? Long-standing journalistic ethics? Maybe I am grasping at straws given the shortcomings in our media but you seem to discount even the principle of honest reporting.
“such a thing - an impartial newspaper - does not exist.”
Maybe so but the Times et al would aspire to tell the truth as they see it. This is of course not the same as telling the objective truth (let’s not get into philosophical arguments about what is truth) but you are suggesting not just that their reporting is informed by their background and outlook but that they are prone to wilful distortion for commercial gain - knowingly obscuring the facts as they see them - which is another thing entirely.
To be fair Conor, the Irish Times has a greater claim to be the paper of record than any other daily publication in Ireland. They are the only paper who routinely carry the full text, or where not possible, the essential abridged texts, of significant statements or publications, such as the patten report, bertie’s resignation and so on.
On the regional issue. For sure the IT has a Dublin bias. You hear little of the regions, but that is probably true of any “big national” newspaper which gets loaded up with government policy, parliamentary coverage, world news, features for ABC consumers, and so on. Also, to the extent that our national debate lacks a regional dimension, I think it’s a wider flaw. We hear about Galway when the water is full of shit or about Tipperary when there’s a rezoning mess, and so on. But we don’t hear enough about the challenges facing our 1.6m rural inhabitants.
Regarding the main point: the bias in the property debate. Absolutely spot on. I laughed the other day when I saw the heading in one of the papers saying that interest rate reductions are now unlikely. One of your posts had mocked how the IT had quoted a property agency, I forget who, saying Trichet’s last statement pointed to a reduction in rates fairly soon, when in fact, the statement said the opposite.
Sure, there are honest reporters. And then there are the reporters who, like many of us, for the sake of an easy life and wolves away from the door, convince themselves they are honest, or, simply abandon critical thought when working.
If a principle of honest reporting is generally observed in newspapers, I imagine it is observed in the same way that the principle of corporate social responsibility is observed, i.e. only to the extent that it does not negatively impact business objectives.
“you are suggesting not just that their reporting is informed by their background and outlook but that they are prone to wilful distortion for commercial gain - knowingly obscuring the facts as they see them - which is another thing entirely.”
Really? What I’m saying is that they tend to give one side of the story - the estate agents side, of which they happen to be on. I’m not saying that the Irish Times is prone to wilful distortion for commercial gain - rather that its financial interests are not ours. As you said, it gives the truth as it sees it - I’m showing the parameters of that truth - as well as highlighting where the Irish Times and its estate agent experts have got it wrong in the past.
Tomaltach, a small point on the paper of record thing. There is no such thing in historical research. There are sources - and all are good depending on how you use them. And you use all of them that are available. Historians give as much credence to the Sligo Champion as to the Irish Times. It depends on what is the subject matter.
The Irish Times has this idea of itself as the newspaper that historians read as the “first draft” of history - and that is something that historians do not do at all. It’s a source, as good and as flawed as any other - but that’s all it is.