After years of falling prices, many hoped that such house panics couldn’t happen again.
It is like a 2005 nightmare all over again. In south Dublin a strange new phenomenon has emerged. It is, believe it or not, queues of hopeful house buyers – young parents with children – driving around looking at houses on a Saturday afternoon.
After years of falling property prices, many hoped that such house panics couldn’t happen again, but we were wrong.
These young parents bought small apartments in the mid-Noughties just before they had kids because this was all they could afford. Fast-forward seven years and they are all in negative equity but need to move out of the cramped apartments.
The problem is that so many want to move at the same time because whatever else might have happened over the past 10 or so years, their children are growing up at the same pace. Because of the baby boom today’s Dublin thirtysomethings find themselves, yet again, in a competitive property spiral made all the more problematic by negative equity inherited from the first boom.
In a sense, this is the generation that has been screwed twice.
They bought apartments in the Noughties not because they were being reckless but because they thought they were doing the responsible thing. The responsible thing then for the vast majority was “not to get left behind”, so they took the plunge with borrowed money in order to create a home for their impending families. Now that the young families have outgrown the apartment, they are all coming into the market for bigger houses at exactly the same time.
When you hear economists talk about the economy, it is usually measured in terms of sterile numbers like GDP or the balance of payments or something equally remote. But the economy is about people and the hundreds of thousands of individual small decisions taken each day at the kitchen table are, when aggregated together, what we mean by the economy.
If house prices rise once more, many thirtysomething parents will try to move as soon as possible, once again pushing up house prices in large parts of Dublin. The major problem in parts of the suburbs is that most of the housing stock was built in the 1960s, 1970s and 1980s and because people are living longer, the housing stock isn’t changing hands quickly enough.
This lack of available accommodation due to the longevity of one generation that is having an impact on the life of another generation, may well exacerbate trends that are already evident.
For example, Irish people are getting married much older than in previous generations. This is partly the result of a variety of economic trends, which have been amplified by the recent recession. But getting married later is not without its societal costs and evidence from the US indicates that getting married later impacts on different groups in society differently. Could the same impacts be observed here, and could the recent rise in house prices exacerbate these trends?
In America, marriage seems to acts as social ballast in people’s lives. Married twentysomethings tend to be happier and less maladjusted. For example, twentysomething men who are unmarried, especially singles, are significantly more likely to drink to excess, be depressed, and report lower levels of satisfaction with their lives, compared to married twentysomethings.
Thirty-five per cent of single or cohabiting men reported that they were “highly satisfied” with their lives, compared to 52pc of married men. For women the corresponding figure was 33pc of single women and 29pc of those cohabiting, both figures trail far behind 47pc of married women who are highly satisfied with their lot in life.
Like Irish adults, Americans of all classes are postponing marriage into their late twenties and thirties for two main reasons, one economic and the other cultural.
Culturally, young adults have increasingly come to see marriage as something they do after they have all their other ducks in a row, rather than a foundation for launching into adulthood and parenthood.
While the above trends have been going on for two decades, in the past few years, the lack of youth employment opportunities, the assumption that young workers will work for experience rather than money and the stubbornly high cost of accommodation are amplifying these marriage trends.
In Ireland, when one income was enough to support a family, men left school at a young age and went to work in a trade, which provided for their wife and family. Now that is no longer an option. They need to finish school and then many feel they have to follow that with at least four years in university followed by work experience before they are ready to ‘settle down’.
For Irish women, particularly those with third-level education, getting married later allows them to achieve certain milestones in their careers and, as a result, postponing marriage is good for balance sheets.
In 1977 the average age of grooms was 22.6 years. Today it’s 34. In 1977 the average age for brides was 24 and by 2010 it was 32.
But we can truly see the change in marrying age when we note that in 2010 in Ireland, only 4pc of grooms were under the age of 25 while 33pc of grooms were aged 35 and over on their wedding day.
When we see house prices rising again in certain areas and youngish parents pitted against each other in yet another example of the failure of the Irish planning system to anticipate the impact of demographic change, it is easy to conclude that we’ve learnt nothing from the bust.
People are getting married later and this trend will continue; we are having lots of babies just having them older. As these children grow up, these families need bigger houses and more space.
Its an extraordinary indictment of Irish public policy that six years after a property crash, a bubble is emerging in parts of the capital city while large parts of the country are home to ghost estates and all the while, people are postponing marriage and settling down precisely because they can’t afford it.
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Good morning All
Seems as if there must be good steady jobs around if the property market is being bid up. This is the two tier economy I commented on before. Some are doing ok and others aren’t. This will lift a number out of the negative equity they are in. Hopefully these are not tracker mortgages but fixed rates for longer terms. Buyers will have stability if that is the case. Who is buying the housing being sold by these move up buyers? There are gaps in this story. As for planning being wrong. Who needs that type of planning anyway. Let… Read more »
I think there are a lot more pressures on accommodation than just a longevity of one generation. What about the largely uncontrolled political refugee problem. I would say this is the biggest scam afflicted on this country. My understanding was that in order to claim political asylum, the asylum seeker must do it at his/her first port of call, not their chosen destination. England and Frances fobbed hundreds if not thousands of these chancer’s on to our shores, illegally. Also, there are the economic migrants vying for specific language orientated jobs with the multinationals, most of which are beyond the… Read more »
WOW!! Those are powerful Marriage and happiness stats. So, people who co-habit are less happy than single people but the happiest people (on average) by far are married people. As a race we want freedom and excitment but need stability.
The giant parasite that is Dublin continues to suck the life out of the rest of the country and has now begun to consume itself with another property bubble.
The average age of marriage is a lot easier to keep down when divorce is illegal. The average age is 34 for a groom but only one third are over 35 suggesting those that are remarrying later in life are pushing up the numbers significantly. I’d be interested in seeing the stat for first time marriages
“This lack of available accommodation due to the longevity of one generation that is having an impact on the life of another generation, may well exacerbate trends that are already evident”
Time to increase supply don’t you think?
“yet another example of the failure of the Irish planning system to anticipate the impact of demographic change”
David, are you up for outlining the demographic changes for the next generation, your best bet on their implication and the actions needed. A simple timeline so our busy ombudsmen (sorry TD’c) can assimilate quickly!
Jccusack
Thats a great idea. let me try to rummage around a bit.
Thanks
David
In light of these clusters of rising house prices one would imagine that the banks will aggressively repossess their mortgage-arrears houses in those desired enclaves of South Dublin and resell them while the market is HOT. How will this then affect the prices? If the supply outgrows the demand the prices will drop and there will be middle-class backlash. But the opposite is true, if demand remains greater, then their local house prices will continue to rise and instead of a backlash will be a polite approval of repossessions. A national sea change will occur in attitudes to repossessions as… Read more »
Houses in Dublin are still over-priced. We have a dysfunctional, mis-managed country and economy. We are not a productive economy, strip out multinationals and the unaffordable public service and we have an economy in the same league as Greece. You can go to Silicon Valley where houses are significantly cheaper compared to the average salary, facilities are better and there are millions of well paying jobs in a 50 mile radius. Yet, somehow we think houses in Dublin are worth more. It must be because all the houses built in the boom were architectural gems and that our fantastic infrastructure… Read more »
This story needs alot more detail to make a complete story: 1. Ok, the apartment owners who now have kids and want to buy a house story makes sense, but how are they going to escape the negative equity of the apartment? 2. Where is the money to buy coming from? Are banks lending? Is it mostly cash buyers? Loans from parents? 3. Why are they buying instead of renting? Does buying make financial sense at current prices? 4. Are the fundamentals in place to make this mini-boom sustainable, or is it just a bull trap triggered by the ending… Read more »
[…] Irish economist (although at this stage it might be better to describe him as writer, because he probably hasn’t been a full time economist for a very long time) David McWilliams has written this morning about the terrifying prospect of another property bubble emerging in Ireland. It is worth reading. […]
David, the more you talk about this property bubble the more I think property pornography and I am sorry to say this is beginning to sounds like another spruiker talk. All terms and concepts that you have dedicated articles about.
Observation. I live in a Dublin South Central area that has always been borderline crummy. It’s always been OK, you know, but a bit on the crummy side. Well, the rot has truly set in as a consequence of five years of “blankety blank etc”. It’s now definitely not OK or even Ok’ish but most definitely gone crummy. No upkeep, general dilapidation etc worsening on a daily basis. Here’s the thing, we had an opportunity to buy a house in the area a few years back but I predicted this slide and we abstained. Perhaps the buyers of these South… Read more »
Somehow I get the feeling this is happening all over Asia Adelaide. They let it rot and it is worth nothing anymore till property developers, banks and the likes come in to buy it all up. It took Amsterdam some years to let the red light district rot in hell. Till the banks came in and revamp the lot again with higher prices of course. It was a great success but somehow I think there are no natural forces in play. It is all planned.
Let’s see what is really happening. Remember back in those heady days before the bust? It was all private-led, profit-driven development and, sadly, it is still seen as the only game in town. NAMA, for example, the single most significant government intervention in the real estate sector, is wholly focused on harvesting the monetary value of real estate, even if this means sitting on vacant properties for the next decade. So it’s all very well bearing witness to emerging demographics. The fact is that this is seen as a personal boon by our planners and policy makers. As a signed… Read more »
Until we get our collective heads around the fact that we MUST create a whole new economy based on the simple reality that the old one is killing us, we are simply wandering around in a fog of denial. The old economy is dead, which we soon will be if we do not accept that simple fact. It was based on burning fossil fuels which has brought life on the habitat we call home or “earth” to the verge of distinction. Our new economy MUST be based on hydrogen, the cleanest and most abundant element in the universe. We already… Read more »
Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein
This South Dublin bubble is a mirage. It is an extremely rarefied market of particular dwelling types at particular price points (the upper end) in very particular locations. The number of transactions is, relatively speaking, tiny. The number of mortgages given is even tinier, with a large cash element to the purchases. Meanwhile prices in most other areas of the country — including areas of Dublin, continue to fall. It is delusional to think the madness of the noughties is returning. That was facilitated by exactly one thing — hundreds of billions of hot credit flowing into the country. That… Read more »
I agree with ps200306- without cheap and available credit there will not be another bubble just some fools with more money than sense outbidding each other
“Our society is run by insane people for insane objectives…. I think we’re being run by maniacs for maniacal ends … and I think I’m liable to be put away as insane for expressing that. That’s what’s insane about it.” – John Lennon, Interview BBC-TV (June 22, 1968)
Hi David, lots of bubbles around the world.Take a look at this article
http://brazilianbubble.com/watch-out-for-a-crash-in-uruguays-property-market-as-argentinian-investors-withdraw-funds/
Construction in Punta del Este dropped to a 50%. But housing prices don´t drop in Montevideo. Yet, prices at Punta del Este triple Miami´s ones.
Best, Guillermo
Provincial towns like Limerick, Waterford, Dundalk, Athlone, Leterkenny are in dire circumstances. And SE Dublin wants a property binge. I get the sense that there is something completely out of whack with the Irish economy. A large problem is that we have a high degree of centralization of economic activity in one county, and a completely dysfunctional planning policy inside that county. The spatial residential distribution inside Dublin is completely at odds with the actual living requirements of the population. Everybody thinks they deserve a garden, and to be able to drive around Los Angeles style. It is completely unsustainable… Read more »
New concept – the mini-urban-apartment. This is becomming increasingly popular in North American cities. Instead of getting a mega mortgage for the house of your dreams, get the house where-ever it is cheap, and then have a mini-apartment for urban access, when you need it. Actually it has been going on for three decades. The apartment is like your own hotel room close to the central business district. Arrive on a Sunday night, and stay there while you need to be in the business district. Then telework, or stay in your home for the rest of the time. Thanks to… Read more »
Just wondering…but it the Irish banks were headquartered in Ballyfermot or Newbridge, would there still be a housing binge in Cabinteely ?
I mean would the staff in the Irish banks still think that housing was the source of wealth instead of making stuff/repackaging material/etc ?
I have the impression that if our planners would make all places they did not want inhabited uninhabitable until the habitable places prices hit the right level.
A lot of apartments could be re-engineered to be much more effective as family developments. For example, apartment living could for little extra cost be made more family friendly simply by getting pairs of units knocked together. There is no advantage whatsoever in moving to a housing development notwithstanding the costs of maintenance thereafter which become higher as house gets older.
Careful you! You’re using that logic stuff again..
David, “Go East”. When one generation declares war on another generation, other than their own offspring…When ‘artificial scarcity’ is manufactured by colluding goverment planners, banks and media advertisers…When ‘crony capitalism’ prevents the Market from reacting and responding to demographic housing needs…When faux-nationalistic tub-thumping is used to enforce ‘social solidarity’ on behalf of bankrupt bankers and property speculators…When the rituals of dating and courtship are rendered impossible by voracious assaults on work-life balance…THIS is what happens, and what is coming from Tokyo Bay to Dublin Bay: http://www.dailyfinance.com/2010/08/06/japans-economic-stagnation-is-creating-a-nation-of-lost-youths/ I regard Japanese youth as pathfinders and rebels: far, far more rebellious than the… Read more »
The NAMA bubble.
Pathetic.
And what is just depraved is the way the underclass and the not yet born are the backs on which this ponzi economics tumour has been grown.
Pass the sick bucket.
Vomit!
I read the article and made a couple of comments above which on re-reading and reflection like most of the comments here make us sound like a wailing wall. David perhaps a more sober title might be “Six years after the property crash a tragedy has emerged”. I watched a lady on the late late show describe the tragedy which lead to her partner’s suicide.She and her partner bought an apartment in Priory Hall. The development was a textbook example of what happens when there is no inspection or enforcement of building codes, no enforcement of planning regulations and widespread… Read more »
DB4545, I went through your input above again and yes, you’re abosulutely right. Great posts and thanks.
Greg Palast: Secret memo reveals Larry Summers involved in deal that helped setup the global economic crisis that effects everyone.
https://www.youtube.com/watch?v=azn0POUC3Ug
The Real News Network.
If this story is valid, then it doesn’t surprise me that Dublin house prices will explode: http://www.telegraph.co.uk/earth/energy/windpower/10291432/Irish-Lilliputs-square-up-to-fight-British-wind-giants.html “We are normal people who have never objected to anything in our lives,” he says. “But we have been compelled to resist something that is being imposed on us as Britain tries to export its environmental problems to us.” So strong has the opposition become in less than a year that proponents and opponents of the scheme increasingly believe it will not go ahead as planned.” I wonder what Declan Ganley has to say about this… It will be odd to do ancestor… Read more »
Bonbon and Bamboo, We have a tendency to analyse global and external factors which have led to this mess in an effort to avoid our personal responsibility. I’m guilty of this as well. We can blame our neighbours, we can blame Stuttgart, we can blame the repeal of laws in other countries. We got ourselves into this mess because we hand over responsibility and allow other people to do our thinking for us. It can be a comfortable position to be in if you’re a shareholder in Berkshire Hathaway and Warren Buffett is the paternalistic uncle looking after your interests.… Read more »
David doesen’t mention that very few houses are actually selling.
Spain Levies Consumption Tax On Sunlight
(so you won’t save money)
http://globaleconomicanalysis.blogspot.ie/2013/07/spain-levies-consumption-tax-on-sunlight.html
Which reminded me of this passage from the classic work of one of my favourite Irishmen:
http://www.goodreads.com/author/quotes/338068.Robert_Tressell
The NYT got it right!
THE NEW YORK TIMES EDITORIALIZED AGAINST LARRY SUMMERS TO BE
THE NEXT HEAD OF THE FED ON SEPT. 5, not only because he “has a
temperament unsuited to lead the Fed,” but because he also “was
instrumental in deregulating derivatives and in repealing the
Glass-Steagall banking law.”
The economic reality of “bubbles” :
In its front page article today on the state of the economy, the Washington Post described the “recovery” in the following terms:
“The grinding pace of recovery has hollowed out the workforce.”
This Jonathan Swift would well affirm :
TALES FROM THE LILLIPUTIAN CRYPT: A Spanish production manager at an industrial plant reported today, in discussing the necessity of a thermonuclear-powered economy, that at the height of the subsidized solar scam in his country, some people in the south of Spain were shining light produced by gas-powered motors on their solar panels at night, in order to generate “solar” electricity!
Just imagine on a calm day all those wind turbines – what would Britain propose the Irish do to “get things moving again” ?
“The Priory Hall residents weren’t given a secret deal by any bank, they couldn’t wash their debts away by moving to the UK for a while. Their function was to accumulate debt and to be prepared to pay whatever the banks demanded.”
Gene Kerrigan contrasts the treatment of Minister John Perry and Priory Hall residents.
http://www.independent.ie/opinion/columnists/gene-kerrigan/who-says-enda-doesnt-give-a-damn-29561480.html
I wish Ireland could produce another Robert Tressel.
Luke Kelly was to folk singing what Bobby Murdoch was to football.
A quiet genius loved and relied on heavily by his friends for his strength.
http://www.youtube.com/watch?v=55OBEs98Pj4
Makes the hair stand on your neck. Just like Bobby. Bobby became the player Duncan Edwards could have been.
Priory Hall = ponziomics