Housing correction already greater than many realise


A significant element of the population are getting on with their lives and are in the market buying at what appears to be good value, writes Mark FitzGerald

WRITING ON THE occasion of the death of Éamon de Valera, the late Fine Gael senator Alexis FitzGerald (no, he was not a relation - though he was a remarkable man) noted that every Irishman who writes about de Valera must go through the "red door".

For all have "something to declare".

My declaration is largely visible. I run a property advisory firm. As such, I presume, that some may purport that anything I write must be accompanied by the caveat "well he would say that wouldn't he"?

This thought process of having something to declare seems to be one in which the Financial Times are in agreement. Back in early May the newspaper did a survey of economists questioning their view on the future of the British housing market.

However, they also qualified this by asking everyone, even the governor of the Bank of England, Mervyn King, whether or not they owned their own home, intended to move etc.

As regards the Irish economy, as recently as 13 weeks ago the ESRI reminded us that there is a danger that Irish society could be transfixed by current very real difficulties, missing the opportunity to plan and prepare for a better future in the next decade. In my view this advice has since been ignored by many commentators and indeed some news bulletins in terms of their sense of proportionality.

The truth of the matter is that we had a Celtic Tiger created by our own people, which contributed to the transformation of the country but wasn't necessarily fair. This was due in the main to the fact that while the tiger had been hoped for, its reality hadn't actually been anticipated in terms of infrastructure.

Consequently, there are today many people experiencing a pressure on their quality of life through long commuting, high childcare costs and significant mortgage payments.

The State, in my view, should shoulder the majority of the blame for this state of affairs. There is a tendency among some media pundits to spread the blame elsewhere. To me, this misses the point of ultimate responsibility which is with the State, not the private sector.

Indeed, the fact that parts of the private sector may be an economic beneficiary from the lack of infrastructure, is a distraction in placing where the ultimate responsibility lies.

In fairness to the State, successive governments over decades, gave over huge amounts of their time to resolving the political situation in Northern Ireland - one of the world's most intractable political problems.

When one reflects on it, it is perhaps understandable, that something else suffered due to the priority given to the North. Planning for an infrastructure perhaps understandably, simply didn't gain government management attention when possibly it could have.

Our job now is to regain our competitive advantage, deliver on infrastructure, and have a sustainable society that gives all our children, not just some of our children, a bright future.

Already this is beginning to happen, painful and all as it is for many people in selling their house.

For my part, I am of the view, that the correction is already greater than many pundits realise.

While the correction may not be complete it is certainly advanced. People now have a greater choice of houses at a more affordable level. As Sir John Templeton, the late eminent investor and philanthropist said: "The time to invest is at the moment of greatest pessimism."

Moreover, let us remember, it is just three months since the ESRI published their very positive view of the medium-term prospects of the economy, which pointed out that between 2009 and 2014 the population of Ireland will increase by a further 298,000 people, which has a knock on impact in terms of demand for more rather than less houses.

The report also forecast that by 2014 the annual GNP for each one of us will reach €40,680 up from €32,600 in 2004 - an increase of €8,000 per head for the decade, €12,000 for the decade from 1994-2004. Some achievement if it can be delivered, particularly if it occurs in the context of more affordable house prices.

In a nutshell, next time around it looks like we are going to have a lengthy period of sustainable prosperity and a more just society with public services delivering fairly to all our people.

Undoubtedly many of our people are holding off buying their first home or indeed moving house even if family requirements are pressing. On the other hand, a significant element of the population are getting on with their lives and are in the market buying at what appears to be good value.

Only time will tell with the benefit of hindsight, which segment of people were financially the wiser. What we do know already, however, is that when the recovery comes to be acknowledged, the choice of housing available to people will be less than it is today.

For the property market the result of the Lisbon Treaty was a disappointment, but equally we shouldn't necessarily be transfixed by it.

I would be optimistic that our political party system will be mutually supportive and responsible in helping our Government find a solution. Ireland has a good track record in skilful diplomacy in solving seemingly intractable European political quandaries.

• Mark FitzGerald is chief executive of the Sherry FitzGerald Group of estate agents