Mind your house
The current uptick in some property prices has more to do with supply and demand than boom and bust – plus a link to the Banter podcast on the housing market
There are few issues as guaranteed to get Irish people as hot under the collar as the property market. The massive swings and roundabouts in housing prices over the last 15 years have been cited time and time again as one of the major causes of the economic mess we found ourselves in when the music suddenly stopped in 2008.
We’ll never know if the austerity measures of the last few years would have had to be put into place had the Irish banks not acted the eejit during the last decade with their willingness to borrow to every Tom, Dick and Harry who wanted to buy or build a gaff, especially in places where gaffs shouldn’t really have been built. Irish banks weren’t the only games caught out, but they’re the ones who whose losses have brought all the woe we’ve had to deal with for the last few years.
Of course, there is also the fact that the aforementioned Tom, Dick and Harry should have known what they were getting themselves into when they went cap-in-hand to the bank but, again, that was part of the mania which dominated the economic discourse here for so long. The fact that we still beat ourselves up about the housing market is probably continued punishment for that outbreak of lunacy.
All of which means that the fact the house prices in certain parts of the country are on the rise again is something which is treated with a mixture of horror, suspicion and anger in many quarters. But the facts can’t be ignored: Dublin prices rose 10.6 per cent in 2013, while prices outside the capital fell again. There is now a two-track property market developing in Ireland, with demand for houses in the capital outstripping demand outside Dublin. In fact, you could argue that there’s probably a three track market with demand in certain areas in Dublin higher than elsewhere. It’s not back to the madness of the previous decade by any stretch of the imagination, when people were cheerleading the fact that house prices were going up by the hour, but it’s a change nonetheless.
What we have here is, as David McWilliams pointed out recently, a simple case of supply and demand rather than boom and bust. He also makes a good point about why many Irish people are looking aghast at this simple economic fact: “when things are good most people don’t think that the good times will end and when things are bad most people think things can’t ever get better.”
Of course, the fact that prices for family homes in certain areas of the capital isn’t exactly new. There has been plenty of anecdotal evidence from those who were seeking to buy such houses over the last few years that there was solid demand in the capital pushing prices up, even while there was doom and gloom in other economic quarters.
It’s what you would expect. Just because the Irish property boom resulted in housing estates in little villages up and down the country didn’t mean that people necessarily wanted to live there. The boosters may have believed that pushy talk about “getting a foot on the property ladder” may have led people to buying those properties, but the recession, job market collapse and banking disasters changed all that. The unfinished estates up and down the country were part of that mania which seized some – though most certainly not all – of the population at the time.
Those estates should also point to the fact that mad house prices alone don’t make a vibrant, strong economy. Whatever about the craziness of the boom and bust years, the fact remains that the Irish economy was over-reliant to a scary extent on the property market as an economic driver. Between the thousands who made a living building and doing up gaffs to the money raised for the Exchequer from stamp duty, property was a wild ride which many became addicted to and believed would never end.
As a new reality takes hold – though you can already hear interested parties talk about the need to build more gaffs in a country which still many empty gaffs, albeit in the wrong places – it will be fascinating to see if the temptation is resisted to do the dog again with property. Perhaps recent events have diluted the Irish nation’s fascination with owning a piece of land? Time will only tell.
We recently gathered together a bunch of interested parties to look at what was going on in the Dublin housing market for a Banter discussion. Ronan Lyons (economist at Daft.ie and Trinity College Dublin), Colette Browne (Irish Independent columnist), Karl Deeter (adviser and analyst at Irish Mortgage Brokers and Advisors.ie) and Dr Loran Sirr (lecturer in housing studies and urban economics at DIT) did some prodding and poking about housing in Dublin, from changes in the rental market to the increase in price for family homes located in certain prime suburbs to the provision of social housing. You’ll now find a podcast of the discussion here or you can subscribe to the weekly Bantercasts in the iTunes store here. Bantercast is produced by Tanya White for Old Hat.