Ireland’s growth is a coming of age
The property market is steaming ahead and looks set to continue to do so this year and next with up to 85,000 houses likely to be built each year.
It looks to have escaped the notice of some people that demand is driving the current property boom.
Builders tend not to build unless they know the demand is out there.
The growth in population and the level of immigration suggests this property boom is not going to falter any time soon.
Certainly the situation will change, and it is equally certain that some people with more money than sense will get burned.
Nevertheless, the past week has seen opinion swing quite sharply among economists and politicians about what’s going on.
Last week at the IMI conference in Wicklow, Taoiseach Bertie Ahern slammed negative commentators who frightened people off buying property.
Those who listened lost out, he said.
“What did people expect him to say,” was Jim Power’s reaction to this.
Mr Ahern did not want to be the cause of a 20% slump in house prices before going into an election.
But Mr Power, who is chief economist with Friends First, addressing estate agents from all over the country in Dublin on Thursday, denounced those who were talking of a house bubble. Is that not what the Taoiseach was doing as well?
Later, Mr Power went on RTÉ to say the biggest threat to the economy was its over-reliance on housing and construction, a theme he has been pursuing for some time.
The Central Bank was trying to have it both ways on Wednesday as well, warning interest rates could cause serious problems.
They had to be pressed hard to say what they thought interest rates would go to and eventually conceded that we should bargain for mortgage rates of 6% in a year or two’s time as European growth picks up somewhat.
That’s over 2% above current rates and could cause problems.
But the bank says the global economy in general is growing and Europe will deliver somewhat better growth in the years ahead.
And it announced it had revised the growth forecasts for this economy upwards for the next two years. So what’s going on?
Having made those warnings the bank still suggested things will be alight.
It’s a bit like the Catholic Church of the old days. We were all damned to hell for eternity, but if we told God we were sorry the threat would be lifted.
It seems most economists are on the Catholic Church take. Our economic souls are in grave danger but if we pull back from the brink we will be all right, except no one wants to repent.
Even Jim Power, who walks a fine line between doom and optimism, has stayed very positive in his economic forecasts.
Perhaps Finance Minister Brian Cowen came closer to the reality of what’s happening for those buying homes in this frenetic market.
He urged prudence. It’s a good old-fashioned word and when asked to explain he basically said people need to ensure they will have enough money to meet their repayments as interest rates tighten in the months and possibly years ahead.
But he was not forecasting doom and gloom either, and speaking at the conference of estate agents he expressed the firm belief that global and domestic conditions were positive looking out over the next year or two.
Realistically that’s about as far as most serious projections should go.
From the point of view of keeping perspective, most have forgotten the awful sense of foreboding that hit the world after 9/11.
The war in Iraq fuelled fears, but the world economy quickly shakes off even the worst disasters.
It also got over the dotcom bubble, even though that was probably the worst economic shock to hit the global economy since the oil spike of 1973.
We never know what’s round the corner, but we have gone round quite a few bends in the past 50 years and the world economy is still going.
From an Irish perspective what we have been experiencing is about coming of age. We had doom and gloom for long enough.
I’m with the optimists.
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