Realising the dangers of a property bubble

And on it goes. The latest house price data from the CSO indicate the two Irelands continuing to diverge. On one hand we have Dublin (and to some extent the rest of the urban areas), growing like gangbusters, while on the other hand the stagnation intensifies in the rest of the state.

While those outside Dublin might bemoan their lot, in reality they should be grateful. Rising house prices are not a good thing. We should know this now. High residential costs are a bar to most economic activity, at least that which does not revolve around rent seeking (rent in an economic sense, not just property rent).

The peak in house prices in Dublin was earlier, by a few months, and higher, by about 10% than the peak nationwide excluding Dublin. This is typical of booms — one area moves ahead and pulls the others along. In the case of the property boom, buyers and investors forced out of the Dublin (and to a lesser extent Galway and Cork) markets, moved out to the suburbs and beyond, bidding up prices and further exacerbating the problem.