‘Unholy alliance’ kept home prices high

ESTATE agents and banks formed “an unholy alliance” to talk up house prices — just as the market began to slump last year, according to economist David McWilliams.

His remarks coincided with research showing the Irish housing market was the worst performer among 21 European countries in 2007, with house prices falling 7.5% in Ireland — equivalent to more than €23,000.

But the presenter of RTÉ’s The Pope’s Children told a Waterford Institute of Technology audience that a housing downturn was a welcome development from an economic point of view.

“Houses are only one part of the economy, and the best thing we could bequeath these kids coming out of college is an affordable place to live,” he said.

Mr McWilliams said banks and estate agents had formed an “unholy alliance” and were talking up the housing market.

“That was an irresponsible thing to do at the top of the cycle,” he said.

Mr McWilliams told a conference of student, academics and business leaders that Ireland’s future lay in the brains of her workers and not in the housing industry.

“If we could put more money into brains and not into bricks we’d be fine,” he said, adding the country needs to “wean ourselves off the construction obsession” and concentrate on coming up with new ideas and on our creativity.

“This idea of using the Irish people abroad — in America, Canada and Britain — is the real thing we have to do [in the same way] the Israelis use the Jews abroad – then this tribe, globally, could be world-beaters,” said Mr McWilliams.

Meanwhile, figures from the Permanent TSB and ESRI house-price index show the average national price of a house in 2007 fell 7.5% from €311,078 to €287,887, a fall of €23,191.

Ireland’s fall was the steepest percentage drop in Europe and exceeded the 6% fall in Germany and the 0.5% slide in Greece, Estonia and Denmark.

All the remaining 16European countries recorded gains last year, according to research by London’s Royal Institution of Chartered Surveyors.

Earlier this month the Permanent TSB and ESRI released figures showing house prices continued to slide in January when values fell 0.7% to an average of €285,880.

“There is mounting evidence sellers are adjusting to more realistic asking prices and buyers are getting better value,” said Niall O’Grady, Permanent TSB’s head of marketing.

During January, Dublin house prices fell by 0.6% to €395,096, while the value of homes outside the capital fell 0.9% to an average of €247,070. The average paid by first-time buyers fell 1.4% to €257,222 in January, while the average price ofsecond-hand homes fell 0.7% to €319,230.