The below webchat took place today on the RTE website,, reproduced from the original location, here.

David: Hello everyone. Thanks for sending in all the emails. Good to see you’ve nothing better to do at lunchtime! Does your boss know?

MR: David – What is going on with the property market? Is it just due to McDowell’s comments or is it something more involved?David: MR, I think the property market is very close to the top, if not at the top. The recent panic is a result of interest rate increases, over-supply, and the fact that the average wage has fallen way behind the average price of a house. This can only be sustained through monumental levels of personal indebtedness, which we are now seeing as Ireland is the most indebted nation on earth. I hope I’m wrong on this because I have no interest, whether personally or professionally in the country having a major recession. But unfortunately the economic history that we’ve seen over the last couple of centuries suggests that we will have a blowout.

Des McDonnell: Surely it is incorrect to say that there is little going on in the country outside of construction. All of the new people coming in require various services which provides employment.
David: Hi Des. What I’m saying is that construction is now the driver of personal consumption, which is driving the economy. Up until 2001 this was not the case. Ireland was being driven then by exports and high productivity. What we have at the moment is the opposite: we are experiencing a balance of payments deficit of 4% of GDP and our productivity is falling. Imagine the economy as an engine: when it is clean and running smoothly, you get more miles per gallon. When it becomes clogged and inefficient it uses up more petrol and then you get less miles per gallon. Think of labour as petrol. We now need much more labour per 1% of GDP than we did in the past, which explains the huge rise in immigration. Basically we are throwing more labour and capital into the economy than we did four years ago for the same net return.

Brian: Should the growing economies of China and India be viewed as a threat or an opportunity for the Irish economy?
David: Hi Brian. I think they are both a threat and an opportunity. It’s very clear that many forms of manufacturing industry will migrate to the East over the course of the next 20 years. But there is an opportunity for high end services here. For example, China has no banking system, no legal system, no property rights – all these we can provide for them. The IDA and Enterprise Ireland should be examining these types of opportunities in the years ahead. However, the long term impact will be exactly like the impact of the United States in the 19th Century, particularly in agriculture. The emergence of the US as the world’s biggest agricultural producer in the 1870s prompted huge recessions in rural European societies such as Ireland, precipitating even more emigration than after the Famine. China will have the same impact on modern industrial Europe – the only problem is we have nowhere to emigrate to.

Tom Power: How many times during the past decade did you forecast the imminent collapse of house prices?
David: Hi Tom. You’re absolutely spot on. I have been wrong on this since 2000 odd. I didn’t expect Germany to stay in a recession so long and therefore didn’t expect our interest rates to stay so low for so long. But if you look at forecasts of the housing market there have been two broad schools: people like me who say it won’t last and the mainstream school, usually employed by banks and estate agents who are making money out of it. They have all said since 2000 that the market would plateau out and achieve single figure growth rates. This has not happened. In fact, in most years double digit increases in prices have been the norm. Nobody forecasted this. So while the crash has not happened, neither too has the plateau-ing out. And every year of double digit price growth increases the risk of a sharp downturn. But you’re right, Tom, to be sceptical. Nobody has the monopoly on the truth, especially not me.

John: Hi David, do you ever foresee a situation where countries in Euroland opt out of the Euro currency, reverting back to their own ‘old’ currencies? Regards, John F
David: Hi John. Yes I can see this. The circumstances might occur when the one-size-fits-all policy begins to become problematic. I address this in the third episode next Monday night, where I explore the chances of Ireland becoming anti-EU in the years ahead.

Sophie McGrath: Saw last nights episode of ‘…The Popes Children’. Very interesting and entertaining. I’m looking at investing in a 1-bed apartment in Dublin for E380000 but of course am suffering from the usual anxiety that has stopped me from investing over the last few years. Are property prices going to fall?
David: Hi Sophie. Your dilemma is very real and I sympathise as somebody who is older and therefore lucky enough to have been in the property market before all this carry on. I think that property prices will fall but the when is like trying to precisely forecast the minute it starts to rain in Ireland. We’ve a fair idea that’s it going to rain sometime in the next week but would be wrong to give that exact moment. So you just have to assess your own situation. Do your own research and make up your own mind. If it was me and I was a first time buyer I wouldn’t buy now.

Wayne Knowles: Do you really believe that Ireland is made up of Dublin alone?
David: Hi Wayne. No, I don’t. But it is less dissimilar than it was 10 years ago. There has been a great blurring between suburban Dublin, Cork, Galway, Limerick and Waterford. The fastest growing counties are Kildare and Meath, while Leitrim, having lost population in every year since the famine is now growing again, largely driven by suburban style housing estates – the type you would’ve expected in North and South Dublin 20 years ago. So while Dublin is not Ireland, it is a fairly accurate indicator of the trends in the country. This suburbanisation of Irish culture will, I think, rightly or wrongly, continue over the next 10 years.

Sean Edwards: David, Super show. In 1973 the Kenny report advocated that local authorities should be empowered to acquire building land for Market value plus 25% premium. If this SINGLE measure was implemented it would have averted much of the insanity. Can we blame Government for always pandering to the rich?
David: Sean, there is little doubt that the property boom has enriched extraordinarily a small bunch of developers that could be referred to as our Oligarchs. However, many hundreds of thousands have also been enriched by it. The problem is that they are mainly the older demographic – people in their 50s and 60s who have owned properties for the last 30 years. These are Ireland’s accidental millionaires. The problem is that these fortunes have been made on the backs of Ireland’s young workers who have been priced out of the market and forced to pay a fortune for a roof over their heads. It’s not that we can blame corruption exactly, but it’s interesting who’s in the tent at the Galway Races with Fianna Fáil’s top brass, they’re usually rich lads in the building trade.

Kieran: Based on the seven stages of the asset bubble which you discussed last night, what stage is Ireland at right now? Was the sale and leaseback of many bank branches recently the insider profit-taking happening right under our noses?
David: Hi Kieran. I think we’re in Stage Five and what better leading indicator do you need than the banks themselves taking profit out of the market and selling up their land?

Sharon McCooey: What name do you give to my generation born in the sixties and seventies?
David: Hi Sharon, as somebody who was born in the late Sixties, I too am wondering! Actually ‘The Pope’s Children’ demographic is a baby boom that began in 1970 and finished in 1980, so they’re all 1970s children, which explains the 620,000 figure. This baby boom peaked in June of 1980 and then throughout the 1980s our birth rate almost collapsed. So when we talk about ‘The Pope’s Children’, we’re talking about the children of the Seventies.

Alan McGregor: How are the economies of Ireland and Northern Ireland linked? Does the property boom filter across the border? How would a potential crash in the Irish housing market affect people North of the border?
David: Hi Alan. As somebody whose kids were born in Belfast and a regular visitor to the North, I am sometimes amazed at how divided both economies are. There is a totally different feeling when you cross the Border. That said, I noted in the Daily Telegraph this weekend that Newry has the fastest growing house prices in the whole of the UK (if you can call Newry part of the UK). This suggests that the North has been disproportionately affected by the effervescence of the Southern market and will be similarly be disproportionately affected if things go pear-shaped here.

David Keane: You made reference last night in your program to examples where boom was followed by a bust eg Japan 1991, Asia 1997, Britain etc. What examples, if any, where a similar boom has happened but the downturn has been managed properly. Also what can we do here if anything to protect ourselves?
David: Hi David. There are very few examples of downturns which have been well managed and the reason is the age-old problem of panic. The main instrument which cushions the blow of a property fall is lower interest rates. Typically what happens in these scenarios is that the Central Bank cut interest rates and print money eg as the Federal Reserve did in the US after the dotcom bust. This usually eases the burden on ordinary people, but because of EMU we can’t do this. So we have no tools at our disposal to manage a downturn, which is the scary prospect.

Andrew: Do you think your frequently negative and pessimistic commentary will help bring about the crash and recession you seem to so desperately crave as some type of vindication for years of doomsday prediction?
David: Hi Andrew. As I said to another emailer I would dearly love to be wrong and would love to see the economic model which says that prices can go up and up indefinitely. But, as of yet, there is no such model so you have to deal with the analytical tools at your disposal. Most people in Ireland would love us to be able to reinvent economics and have an economy that grows and grows with no casualties. But up to now we’ve never seen such an economy. That’s not to say that when prices begin to fall that they’ll fall back to levels that pertained before the boom – they won’t. But the negative equity will impact on our lives. In the US, for example, prices are falling by as much as 10-15% in the past six months.

Olly: I loved your new programme ‘In Search of the Pope’s Children’. My question is ‘what is your opinion of the affordable housing schemes run by local authorities for first time buyers?
David: Hi Olly. I think the State has an obligation to build considerably more affordable houses. They were called council houses when I was a kid and they relieved a huge proportion of this society of the burden of mortgage payments. If, for some reason, the Government believes now that we should have so-called ‘mixed developments’ with council houses and private houses together, I think it’s a good idea. But in every year since 1983 the amount of council houses built relative to the proportion of overall houses has been falling – from 31% in 1983 to well below 10% last year. This is one of the main reasons for the property bubble.

john: I have been driving around Cork city and have seen a number of properties that have suddenly come on the market like old houses on side streets. Is this a side of investors selling or developers willing to buy?
David: Hi John. According to, which is probably the most comprehensive regarding property, particularly rental property, there has been a huge increase in vacancies and new properties coming on the market. So what you are seeing in Cork is happening all over the country. Daft is a good website to watch every month.

Graham: Did you read Brendan O’Connor’s article in The Sunday Tribune about yourself? He referred to how the Irish can be so intrigued by some basic clichéd references to how they live. Do you see yourself as a credible economic expert or a man who gets the nouveau middle class up to speed on current affairs?
David: If Brendan O’Connor said it, it must be right!

Barbara: What does the car you were driving on last nights programme and what does it say about you?
David: It was a Saab, I think, and I was given it. As somebody who drives an eight-year-old car and has no idea about cars in general I’m not too sure what a Saab says about you.

John Dublin: Why do you keep making up stupid names for people? I find it very insulting. I live in Ireland and I am one of the many who can’t afford to buy a house, but I don’t want to be branded with stupid names, and if you don’t like the country why don’t you leave? And go to where the grass is always greener.
David: Hi John. The names are simply a way of conveying a broad-brush description of what is out there. They are not meant to be insulting, nor in any way a complete description of the Ireland we live in, but just a stab. Apologies if they insult you as the intention was simply to find an instrument that is easily recognisable. The whole point about taking time to write a book about Ireland and do a documentary about the country is precisely because I value it. I was one of the generation that had to emigrate and, having come back in 2000, I have no intention of leaving.

Brendan: great show last night David. What will you be covering in the remaining parts of the series?
David: Hi Brendan. Glad you enjoyed the show. In the final part we will be examining the big question of where does Ireland go next. We examine where Ireland fits into the global economy and whether the next big shift in Ireland will be to move against the Euro and the EU in general. Given that all this credit which has fuelled the boom has come from old German savers, what happens when the Germans start spending again? What are we going to do about China? How are we going to deal with immigration? And is it possible that nationalism will again become popular here? I examine the Medieval successful city states like Venice for a blueprint of where Ireland might go in the future.

David: Sorry I didn’t get around to answering all the questions. Thank you very much for all your time. If you want to continue this have a gander at Thanks again and thanks for watching the programme.

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