Have you noticed a certain recurrence in the Irish property game? How come over the past few decades, every time the government intervenes in the housing market to make houses more affordable, the intervention makes them less affordable, and ensures that the first-time buyer is more indebted?
The whole point of the intervention is to make accommodation cheaper, yet this never seems to work.
Could it be a national conspiracy whereby the establishment tolerates high prices for accommodation and therefore, higher returns for the construction industry, the property business, its “commercial handmaiden” the banking and finance sector and, of course, landowners?
According to such an argument, this is how an economy captured by the interests of one extremely powerful sector develops, and the State simply rubberstamps it and collects the taxes.
There’s a lot of merit in this answer, and it helps frame the discussion about accommodation in Ireland through the prism of one sector extracting rent from the rest of the society.
An interesting aspect about the extractive role of Irish property is how subtle and collusive it is. If it were simply a matter of one sector gouging the rest, the rest would eventually revolt. But this doesn’t happen because there is something far more duplicitous going on; let’s call it the duplicity of collusion.
Group Experience
If you can inveigle others to collude with you, you can create a group experience in property where enough people’s self-interest is tied up in rising prices.
Therefore, as long as the conveyor belt of generation after generation house-buying continues, this game can continue with the capital gains at the top underwritten by the people coming in at the bottom, each person hoping to get out at some time in the future.
As a consequence, paying ridiculously high prices for accommodation while living in one of the least densely populated countries in Europe could be seen as an extra “tax” levied on workers for the privilege of living on this benighted isle. As long as they are part of the game, getting on the conveyor belt as some stage, then everyone’s a winner, sort of.
The economic rule of thumb states that house prices should be approximately three times your annual salary. At the height of the boom, house prices in Dublin were over 12 times the average annual salary. Post-crash, houses became “more affordable” at six times the average annual salary. Now, we can see the trend is returning with house prices already at 9 times the average annual salary.
People’s attitude to house prices change the minute they buy. Before they buy they want prices to fall, once they buy they want prices to rise.
In the short term, who pays to keep this ticking over?
The aspiring teacher, nurse, garda, back-office clerical worker, the people who pay either through rents or mortgages. While these commuters might not have well-paid lobbyists to agitate for their interests, they do vote. Every few years they can give the thumbs up or thumbs down to whoever is in power.
Such is the democratic leverage of the suburbs which links house prices to the electoral cycle.
This explains the periodic and spectacularly unsuccessful state interventions. The government’s latest help-to-buy scheme was unveiled this week.
In a nutshell, the help to buy scheme offers first-time buyers a way to circumvent the Central Bank’s borrowing recommendations by offering 1,000 potential borrowers low-interest-rates mortgages. The lower the interest rate, the more you can borrow and still stay within the crucial limits the Central Bank has set for monthly repayments as a percentage of disposable income.
Validate high prices
It’s a debtors’ charter that will propel more people into more debt. Rather than explore options to bring down house prices, the State has decided to validate high prices and make houses more affordable by allowing people to incur more debt, not less.
Now let’s think about the individuals involved here. If you are locked out of the market, a scheme like this must seem like “manna from heaven”. So let us not be surprised if first-time buyers welcome this move.
But, like every advantage incurred in a competitive environment, it is only an advantage if you are getting it and no one else is. If everyone has the same advantage, the unique benefit is nullified. Prices rise, everyone pays more, and the only person who benefits is the person selling.
We call this in economics the “paradox of aggregation”; it refers to the phenomenon where what is good for the individual is not always good for the collective.
How does it work? Imagine you are at an Irish soccer match. You have good seats and a decent view but when Ireland work the ball up to the opposition box, the lads in front of you get excited and stand up. They have no idea that in seeking to get a better view, they’ve obscured yours. You have to stand up and this forces the guys behind you to stand up and so forth. In no time, the entire stadium is standing when they have all paid to sit.
The Government’s new initiative will work in a similar way.
Much of the population is complicit in the property game. Until there is a realistic alternative providing secure tenure in the rental sector, home ownership rates are always going to be exceptionally high in Ireland. Therefore, human behaviour and group psychology is going to be as significant in determining Irish house prices as economics.
Basic Rules
When houses prices rise, the first rule of traditional economics says demand will fall. But once you introduce group dynamics into the equation, demand doesn’t fall – quite the opposite. The basic rules of economics don’t apply.
People panic and, fearing further price rises, bring forward their buying decisions, making further price increases a certainty. So rising prices lead to rising demand, not falling demand.
The first-time buyer panics, prompting the voting-conscious politicians to react. Their senior civil servants – who are well on the property conveyor belt and therefore, personally vested in rising prices – deploy classical economics to what is as much a group psychology dilemma as a market failure.
These initiatives are a political success only if the individual voter forgets the collective. And the property conveyor belt grinds on.
That’s quite a depressing read. Perhaps suggest some solutions David?
David, it appears you stopped writing this article a few paragraphs short, i.e. the conclusion is missing. Are you pointing to another imminent property price bubble, that will be followed by another property price correction (crash)? Are you saying that there could be another problem brewing for the banks funding the property price increases? Thanks, Mitchell
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David Irish society (and most other English common law societies) are going around in circles in relation to the housing market. There are large vested interests who use the housing market as the vector to accumulate wealth and gather taxes. Bricks and mortar do not increase productivity or make a society wealthy. House purchase (in common law Countries) is like a toll bridge through which most individuals must pass in order to accumulate a basic level of wealth. Business loans are secured (at least initially) on any real estate equity accumulated. At this toll the vultures (developers, banks, insurance interests,… Read more »
Hi, The article is only half thought through and finishes without a conclusion. I don’t do conspiracies. Here is an insight: why are only the first time buyers being helped and not the people growing their families.? Ans: the scheme is not designed to help buyers of any description. The hedge funds who bought the land from nama need more bullet stoppers coming in at the bottom of the ponzi scheme to keep it going as do the financiers providing the moola. If growing families were supported the guberenment would lose the tax revenue from the parent giving up the… Read more »
I would have thought rising prices are not generally in the interest of the average owner? If you have only the one house and you want to trade up (quite a lot of people do), the differential will be greater and your choices increasingly limited/expensive? Retirees might want to trade down, so it benefits them, but how often does this happen, compared to the former situation? Imagining how much money you would have if you rendered yourself homeless is pretty irrelevant, surely?
one word …….and
What do you propose – who is in charge – where are the checks and balances?
Good article. I think that you underplay the political lock that house price inflation has on Irish society. In addition to the points that you make we have: – Property owners tend to be older and have a greater propensity to vote than those who do not – The consequence of debt leverage is that property owners’ incremental wealth gains from rising prices are greater than the incremental costs to the renter – Home ownership is the foundation of financial planning for retirement and enjoys preferred tax treatment to voluntary pension contributions or stock market investment – The greater influence… Read more »
This is a reply to an email I received from the FG government about the rising costs in the property market in 2015 – only worth reading to save you reading any new waffle from their new minister! The Minister for Finance, Mr Michael Noonan TD, has asked me to respond to your email in which you expressed your opinion on proposed Government policies to support the housing market. The Minister would like to assure you that the Government is aware of the ongoing developments in the housing market and the need to adopt a comprehensive approach to address those… Read more »
Increasing house prices create a wealth effect which drives consumption. Without it,demand would stagnate.Breaking the correlation is not in the interests of the majority who own property. Clontarf has house prices higher than the London and Nyc averages. Ditto D four,six,18 etc.Three grand a month is the usual rental for a 4 bed house inside the M50.The scary bit is future demand from half million adults who live with parents. Aodhan O Riordan supports limitless immigration, yet opposes a new housing development in Raheny.Hypocrisy ??
Metropolitan Hillbilly
Agreed. The current tax regime favours property investment over all else. Mortgage interest relief …….. why?
“Article left a few paragraphs short” Never were truer words spoken. Well here’s one of the missing paragraphs. Rules for private house sales and purchase. 1. The vendor must sell the property if the current offer equals or exceeds the price that the property was put on the market at and there are no more bids. 2. If the buyer’s offer is accepted there is no backing out. 3. The bidding incremental is fixed and based on the difference between the first and second bid. eg if first bid is 300k and second bid is 310k the bidding increment is… Read more »
The problem is a lack of supply. All interventions must support improved supply. The problems of gazumping & sharp practice by sellers all disappear with adequate supply.
The edit function is terrific. A great addition. I have just realized it is there and used it. It will prevent many add on entries as instead one can edit one’s original posting to correct and delete and add to..
Plus one +1
The governments new initiative provides full term mortgages at 2.5% similar to the rest of europe. Are the limits still not the same as central bank limits? 3.5 times 72,000e (max) The only new houses on the market are 350,000e houses at the moment. The 250,000e mortgage customer is not going to drive up the new house market. We do need a 250,000e market though. I rarely agree with the Daft Trinity guy but he was 100% on the money in last Sundays Indo. If the 1,000 govnt mortgages are based on their ability to acquire cheap debt, then its… Read more »
Rising housing prices is not an Irish problem. It is a world wide problem. It is one of the spin offs resulting from the use of dishonest money. With the advent of debt based money being used particularly since 1913, the formation of the federal reserve, the economy is steadily layered with unaffordable debt and the attendant interest charges. (sounds like your described home buyer does it not). initially the interest rates of 8-12 % are afforded. It gets a little tight lower the interest rate. it gets a little easy , raise the interest rates. There comes a point… Read more »
In answer to it’s not possible.
F^ck that.
Change the law.
Starting with Dutch or Blind auctions.
For the pedants I’m not talking about tendering and business contracts, I’m talking about a situation where a private citizen is buying a property to live.
(You can nail down a fuller definition if you want)
Have a referendum if necessary.
The defeatist, it can’t be done posts being put up here is music to the politicians.
Mission Impossible it ain’t, mission difficult I accept.
BTW really like the new site.
Most of the problems fixed.
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http://www.alive.ie/media-watch.html
http://www.jpost.com/Diaspora/Setting-history-straight-Poland-resisted-Nazis-540092
Irish Times:
“Phil Hogan: It has been a suprisingly good year for the European project”
I do enjoy a good joke.
https://www.youtube.com/watch?v=et81bi2pqw8
As suggested above, the real culprit of the housing crisis is a function of artificially low interest rates as promulgated by the operators of our “fake” money. *Today’s MIDAS (Tuesday) Good afternoon Bill, As usual, a good analysis of today’s market action. Found Rory Hall’s piece hitting the target that all Americans’ should be focusing on, The FED. To add a bit more to this fraud that we have been saddled with (in the Quadrillions), is this report from the White Hats Report http://whitehatsreport.com/ #63 – #ARRESTtheFED http://whitehatsreport.com/2018/01/24/1400/ or http://whitehatsreport.com/2018/01/24/1400/ that starts to detail (with supporting documents) the methods used… Read more »
Background Remember in 2014 when the Vatican Bank admitted to finding “hundreds of millions of Euros” off balance sheet? Say what???? Whoops. Vaican Finds Hundreds of Millions of Euros off balance sheet Vatican Discovers hundreds million euros off balance sheet We found it incredulous that NO ONE has questioned this. Of course we’ve documented in our reports how the politicians use the Vatican Bank as their money laundering haven so we weren’t surprised to hear this although we were surprised they admitted it publicly. However, due to the media being owned by the cabal, a string that could’ve been pulled… Read more »
Solutions should always be based on data. Not emotions or a self pity victim culture. The median income in Ireland is 33,000euro A couple with joint earnings of 70,000e have a net monthly income of 4,000e A 200,000e mortgage @3% for 25yrs costs 940e a month. Outer Dublin, Cork, Galway, Limerick need housing schemes for 250,000euro houses. People paying 25% on net income on housing are not victims. Social housing is required for most households earning below the median income. David spends most of his projects hinting at more tax for property. Taxes are needed for social housing and our… Read more »
David proposes that their is a national conspiracy afflicting the housing model of the Irish State. . . But, Texe Marrs is certain that there is an international conspiracy afflicting the housing model, & all other material matters, of every country in the world ; Even, those few — e.g.s Iran, Syria, & North Korea — still refusing the imposition of a Central Bank on their nation are impacted. Indeed, that Central Bank would be “private” Central Bank. And, it would be essentially owned by The Rothschilds. . . TWEET ; Henry Makow? @HenryMakow Reader: “This is probably one of… Read more »
“”The United States is now at a defining moment. Will there be a restoration of the rule of law, or will Washington’s elite continue to give cover and a pass to fellow members of the Ruling Class (a descriptive phrase coined in these pages by Angelo Codevilla)?
The question: Is there sufficient decency and courage in the midst of Washington’s swamp to compel the pursuit of justice wherever in the Ruling Class it leads and then to prosecute the lawbreakers — whomever they are?””
https://spectator.org/subverting-the-electoral-process-democracys-highest-crime-and-misdemeanor/?utm_source=American+Spectator+Emails&utm_campaign=488e9893cd-EMAIL_CAMPAIGN_2018_01_31&utm_medium=email&utm_term=0_797a38d487-488e9893cd-104365713
Thus, the only way forward, according to the Central banks, was to increase the amount of money printing, leverage, asset values, and debt. (don’t you think this affects the housing market like nothing else?) While this policy can work for a while, it doesn’t last forever. And unfortunately, forever is now, here….or soon to be here. So, it might be a good time to look around and see how good things are now because the future won’t be pretty. To give you an idea the amount of leverage in the markets, let’s take a look at a chart posted in… Read more »
It should be clearly understood that we are charged interest on currency we are REQUIRED to use, paid to banksters who neither own the money nor pay a fee for it. This is the biggest con job going. And as the master thief himself, Alan Greenspan said, in his own words, “There is no other agency in government that can overrule actions that we take”. Those actions include creating stock market crashes, raising and lowering interest rates without regard for economics but with an eye on THEIR bottom lines and the determining of who gets loans for projects and businesses… Read more »
Ref. Housing ; . Bedsits ; And, they still exist even with some minuscule improvements & semantics . Pseudo-Flats . Flats . Pseudo-Apartments . Apartments . Pseudo-Condominiums . Condominiums So, the official paradigm is that we must cope with : 1_ too little amount of existing housing 2_ too little amount of “being built” housing . //////////////////////////////////////////////////////// . But, won’t the supply situation be even more “too little” when the likes of C.I.J.A. get there own way to the detriment of the populace [ aborigines & foreigners ] in a land [ Ireland ] already on the brink of breakdown… Read more »
Like the new site layout. I read the comments here a lot. Never posted. I just find it surprising that people that you meet in day to day life seem to accept the adoption of policies that are to the detriment of most working people AND their children and now even their grandchildren- re: house prices . I suppose if people vote FG FF repeatedly you can only blame the electorate. Even when we see it written in black and white in articles that the idiots in charge are working against you and not even pretending anymore to work for… Read more »
While the Irish State — Financialists [ they who practise equity from lending with interest ; Thus, NOT Capitalists ] + many of Professions + some of lesser, many of mid, & most of senior, Civil SERPENTS + election Politicians + some of Corporate Ireland + EU [ e.g. ECB ] — are f..king around the lesser populace [ Irish aborigines, & foreigners ] with trying to have a living space, China + Israel are double-crossing the USA & enriching each other. Implications for employees of USA multi-national plants here ? Then the implications for the housing market ? .… Read more »
Block chain, crypto gold accounts
https://dollarcollapse.com/blockchain/gold-backed-cryptocurrencies-icing-already-tasty-cake/
Some things said in that video are a Russian propaganda – i.e., contrary to what the video and some newspapers claim, not only the US has not attacked Poland diplomatically, but the US State Department issued an official statement in which they write (this bit has not been quoted in any major newspaper in the British Isles): “We understand that phrases such as “Polish death camps” are inaccurate, misleading, and hurtful.” They couldn’t be more clear – could they? Of course, Russia’s (and Germany’s) goal is to conflict Poland with the US (and with the UK). But Other things said… Read more »
https://alethonews.wordpress.com/2018/01/28/is-putin-profoundly-corrupt-or-incorruptible/
Rising interest rates begin to be noticed. 10 year bond approaching 3%. Keep eyes peeled.
http://stockcharts.com/h-sc/ui?s=%24TNX&p=W&yr=13&mn=6&dy=0&id=p48744005471&a=575327743
A feature of complaint in some of the posts is the sinister censorious policy of Youtube.com.
.
I think that a suitable, even though unwieldy, nick-name for Youtube.com would be The-Dreadful-Few-Tube.com.
Yes, I could give the truth-inspired one that rhymes ;
But, I do not have the chutzpah to do that.
Early lyrics of ; z “Goodbye Dollar Broke Road ; Hello Golden BRICS Road” z z HEADING ; Ruble Has Now Totally Displaced Dollar in International Trade in the Eurasian Economic Union . SUB-HEADING ; The share of ruble trade between Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan is now 75 percent. Just 19 percent is now in US dollars. . (RT) Feb 1, 2018 . Goodbye Petrodollar . The ruble can play a greater role in the former Soviet republics, according to the Central Bank of Russia. The Russian currency is seeking to compete with the US dollar in trade… Read more »
And, yee think that yee are stuck for how to pay for things ?
z
Here, have a gander at how the other half does it ;
z
z
https://twitter.com/HenryMakow/status/959529849407918080
Here is the Memo !
z
There will be implications for this article’s topic ;
Because, interest rates in Irish State will be affected by it over the next year or so.
z
z
https://twitter.com/johnddavidson/status/959477770609885184
New site same avalanche of shite from truthist.
A growing number of homeless & roofless adults resort to committing criminal offenses of the most petty type with purpose that they get arrested & sentenced to prison for lengthy or even life imprisonment ; There & then they hope to eat when otherwise outside as so-called free citizen they are actually starving in addition to suffering violence & other hardships as homeless + roofless persons. . But, what happens when its a seven year old child wanting to be in the pen … so that they do not have to endure the indoctrination perhaps ? . Well, here is… Read more »
Social Engineering policy of commission & omission in the housing scene with aim of ridding the nation of private property [ And, that would be a grave injustice ; Private Property to each citizen is essential ; Indeed, Private “Real” Property ; i.e. Land or Land + Dwelling ] by Deep State of Irish State through the Civil Serve-Piss & Election Politicians & Quangos & many of Professions & of course the local Banksters, streamlines with more than 1 nefarious agenda exposed here ;
.
.
https://www.naturalnews.com/051058_2030_Agenda_United_Nations_global_enslavement.html#
Benjamin Franklin’s famous saying: “When the people find that they can vote themselves money,
that will herald the end of the republic.” has generally been presented as applying to welfare and direct government giveaways.
It, of course, also applies to property prices.
Property prices and social effects. For some reason or other, I was looking at crime rates in the south of England, and discussing various aspects with an interesting bunch of people. In some of the posher parts, there is no crime at all. It seems that this should read no ‘reported’ crime, as reporting many crimes has such a detrimental affect on property prices, as to more than negate the benefit of any insurance claim. The result is that enterprising burglars are making hey in the £500-£5,000 sector – expensive garden equipment and so on – in the confident knowledge… Read more »
Tony, I saw your reply to my e-mail notification, starting with “Grze Raised in Briton, there was never any confusion” – but for some reason, I couldn’t find any “reply” button to that reply so I’m posting my reply here: 1. You might find it very interesting that the British-Germanic connection hypothesis has recently suffered a massive blow due to the latest research of Stephen Oppenheimer: https://www.youtube.com/watch?v=KgqjLMESS78 2. Further light on Ireland’s earliest history and cultural identity in the light of the latest genetic and geological research is thrown on that issue in my review of the book of our… Read more »
“World’s Richest People Lose $68.5 Billion in Stock Selloff
The fortunes of the world’s 500-richest people dropped by $68.5 billion Friday as equity markets swooned with investor worries about the pace of interest rate hikes in the U.S. Warren Buffett led the declines, shedding $3.3 billion to end the day at No. 3 on the Bloomberg Billionaire Index with $90.1 billion. ”
https://www.bloomberg.com/news/articles/2018-02-02/world-s-richest-people-lose-68-5-billion-on-rate-angst-chart
With today selling off it will be another 100 bilion. Are you not glad you are not rich, or thought you were?
https://www.geni.com/people/Breoghan-King-of-Galicia/6000000003148532995
I should be about 300,000th in line to the Irish throne !!!!!!!