FINALLY, 10 years after London had its catastrophic housing boom, Dublin looks like going the same way. It is appalling news; appalling, and will inevitably end in tears.
For few things are as socially destructive as a land prices boom. A few people make money. The already rich probably become richer. A new caste of state agents and conveyancing come into existence and make themselves fat. The owners of big houses will be able to buy down and then have a great deal of surplus to spend on restaurants and holidays and conspicuous consumption.
No good will come of this. None. The money that these people will spend will not be conjured out of the thin air. It will have climbed up from the bottom of the ladder. The young married couples and young single people who want to get onto the housing ladder will have to chase after rungs which are vanishing up the price scale.
The money they put down ascends to the rich, and moves sideways, to the middlemen who arrange such transactions. And those unfortunates on the bottom rung are going to have, to work harder and to allocate a disproportionate part of their, income to repaying banks and building societies.
They will not be dining out or enjoying long holidays in Tuscany. But those who arrange their transactions or the already insufferably well to do will meanwhile gather in their designer leisurewear to discuss balsamic vinegar and designer olive oils. Those at the bottom of the ladder will lose resources upwards; and those nowhere near the ladder will soon reconcile themselves to the certainty that they will never get on it.
Bitter Underclass
No single feature created the estate bound bitter underclass of London more than the housing boom of the late 1980s. Once the bottom rungs of the ladder were removed from their grasp, there seemed no reason for them to save the street corner, drugs, the odd feckless mugging or two, served to fill in their day.
The already criminally inclined were given an excuse"; those not so inclined found themselves being drawn into new, downwardly aspiring peer groups, in which success was seen as betrayal, and property was something one broke into.
Property booms are terrible things. Terrible. They not merely reward the already rich and the zero, risk enablers like solicitors and estate agents, but they enrich the clever manipulators of the market; they neither sow nor reap, but the harvest comes their way anyway.
Big players weigh the market, in their direction; and because they control one of life's necessities - homes, houses - virtually everyone dances to their tune. Most economically productive people enter the housing market, sooner or later. It is one of the cultural and economic norms of our society; we even issue tax benefits to people for engaging in this form of investment.
A rising house market not merely plays on the greed of the housing suppliers; it plays on the legitimate fears of ordinary people. For this is unlike any other purchase they will make in their lives. This is not like buying a banger which barely leaves the forecourt before it whimpers and dies. This is buying forward. Young adults ignorant of finance will be making a commitment which will be exacting monthly repayments in 20 years time.
Negative Equity
We have seen what happened in London. We know the blanket of misery which ensued when "negative equity" made its final, inevitable and fell appearance; as it happened there, so will it happen here. But we do not need to look to London to understand the evils of the housing boom. We had something similar here 16 years ago, when farmland began to attract insane prices.
What happened? Did the banks try to control this insanity? They did not. They behaved like unregulated banks always behave, lending more and more money to farmers - who were paying wildly uneconomic prices for lands which could never repay the money which they cost.
A reckoning was a certain and in due and deadly course came.
Banks foreclosed on debtors who were inescapably trapped by their land purchases. Some farmers committed suicide - we shall probably never know how many. Many families passed into penury.
The banks which fuelled and even encouraged this tragic madness are again issuing loans, regardless of security. One hundred percent mortgages are now a commonplace as property prices in Dublin rise by the thousand every day. And with interest rates so low, it seems so sweet and reasonable that young people should commit themselves to borrowing so much.
Interest rates will not always be so low; and housing prices will not inevitably continue to rise as they have done. A slump will happen; and that slump will not wipe out the banks which have been encouraging this, madness, but the most vulnerable, the most unlucky, the most injudicious of their clients.
And these people will not be ruined because of frivolous greed, a fair enough fate for anyone who enters a stockmarket or a casino, but because they sought one of the necessities of life, and found instead economic disaster.
Unstoppable Soliloquies
I do not know what financial instruments are available to the Government to compel banks and building societies to restrict loans to, say, 75 per cent of a property's worth. Unless the Government does not curtail this idiocy, a terrible price will be paid for, not least because they cause the most stunningly inane, but quite unstoppable soliloquies at parties:
Well, there's this house down the road, only three bedrooms, not four like ours, and it's only got one teensy bathroom . . . Stop, if you value your life. I have heard this conversation 50 times before ... And the back garden is tiny No, no, not another word, I can be deadly when provoked ... And it's going for £200,000 . . . Please, please, anything but this, anything ... And we paid only £34 for our house last September.
Silence! I warn you, I am armed and dangerous... and an estate agent friend thinks our house must be worth at least £2 million this week and probably £3 million next . . . Aaaarrrgh . .