From top, Houses under the hammer in Ballsbridge, Dublin 4, Tony Groves
We don’t have a deficit of land. We have a deficit of vision and we are walking into another bubble.
Tony Groves writes
Cicero warned, “The only thing we learn from history is that we never learn anything from history”.
Today we have a media surprised and faux-outraged that property prices are growing at Bubble levels. It’s as if this just happened today. It’s as if we need to wait to hear from Daft.ie in order to know that our dysfunctional property market is dysfunctional!
In late 2016, the Central Bank Briefing Report confirmed nearly 20% of Mortgages were not in line with their Rules. Not only were they not compliant, many of these were 100% Loan to Value Mortgages.
In November 2016, Pepper Ireland, announced they were entering the Irish Mortgage Market. The government hailed this as proof that their “strategy” of not having a mortgage strategy was working.
Pepper is a Subprime Lender. It will lend to people who cannot meet the (already 20% broken) Central Bank Rules. Pepper will charge a premium for the additional risk. Then, Pepper will repatriate over-inflated profits to its Vulture Fund Overlord.
In short, this added competition is not going to drive down the highest mortgage rates in the EU. It will actually lift our blended rate nationally. This will trigger the debt bundling that was the main driver of the Mid 2005 Mortgage Switcher Market.
People, under financial pressure, will bundle short term debt with their mortgage and think they are better off. Short term gain for long term pain. This is where we are going. Back to the Future…
In January the 13th Annual Demographia International Housing Affordability Survey: 2017. Rating Middle-Income Housing Affordability, was published.
A riveting title, it’s sure to be a bestseller. Only it should be. It should be compulsory reading for our Politicians, our Planners and anyone who gives a damn about inequality.
What this body of real experts (as opposed to the experts who brought us Irish Water) do is work out how affordable is a house, based on dividing the average price by the average wage.
The good news for Ireland is that we currently have zero Severely Unaffordable housing markets. Great news, right…
The bad news for Ireland is that we are fast on our way to getting there…
Look at the warning above. Dublin has gone from Moderately Unaffordable 3.3, to a Seriously Unaffordable 4.7, in less than 5 years.
As I type we are probably tipping over into the Severely Unaffordable zone of 5.1 or over. Think this is only a Dublin problem, think again. Galway and Cork are rapidly climbing the charts.
Without denigrating Cicero, I refuse to believe that we can’t learn anything from history. History teaches us that a malfunctioning Land market breeds inequality. Inequality means revolution.
Blame becomes the currency and it’s spent on creating division and fear. Elites, deriding the rise of Populism have only themselves to blame.
Ireland has a chance to avoid this “fear of the other” and blame-throwing culture. We had an Unaffordable Score of 6 at the top of the Celtic Tiger insanity. If we don’t act urgently, we will return to that level.
Remember these facts when you hear developers aren’t building because of low profits. How can profits be too low and Unaffordability so high?
Remember these facts when trying to reconcile the Governments Housing Plan has less ambition towards building Social Houses than we had in the darkest days of the Irish Economy.
These are facts; don’t listen to the alternative facts, post-truths or fake news. A lie is a lie is a lie. We don’t have a deficit of Land. We have a deficit of vision.
Dublin has over 60 hectares of vacant land. We don’t need incentives for developers; the only incentive for building we need is the FACT that we are rapidly headed back to Property Bubble Land. And Bubbles Burst.
History repeats itself, first as tragedy, second as farce. If we allow this tragedy to happen again, then the joke will be on all of us.
Tony Groves is a full-time financial consultant and part-time commentator. With over 18 years experience in the financial industry and a keen interest in politics, history and “being ornery”, he has published one book and writes regularly at Trickstersworld