By Proinsias O'Mahony Saturday January 31st, 2009

Auctioneers and developers, have a vision for 2009, one where ever more affordable homes will be snapped up by a willing populace. After all, construction firms cannot cut prices further as they are “down to their bottom line” on prices, according to one builder recently. Indeed, those who are “stupidly waiting” for prices to fall further should cop themselves on and realise that prices are bottoming.

This stupidity has been disappointing developers for some time now. In August, property tycoon Derek Quinlan noted that first-time buyers must be given the confidence to buy as “negative media commentary force them to sit and wait, believing that prices have not yet bottomed out”.

Impartial ‘experts’ have been beating this drum for some time now. Tom Parlon, former minister and now Director General of the Irish Construction Industry Federation, warned last March that “there’s not much more scope for further cuts” and that “now is the time to buy, there is real value out there”. Politicians, too, are puzzled by this ignorant penny-pinching. “If I was to give advice to people, I would say, go out and buy some property now”, said Galway TD Frank Fahy last May. Frank has a pretty extensive property portfolio, as does his Fianna Fáil colleague Donie Cassidy. Donie, perhaps better known for his masterful management of Foster and Allen and other show-band giants than his political accomplishments, said last April that there was “unbelievable” value in the marketplace, something he would remind us all of in 12 or 18 months “when prices have again increased by 25% or 30%”.

That didn’t quite pan out. A mule could have told you that Donie was in la-la land but he wasn’t the only one. “The time to buy is now”, said estate agent Pearse Wyse last April, warning that the “great value” didn’t “mean people can dilly dally.”

Of course, this love affair was encouraged by good old Bertie, our dearly departed Taoiseach. “The boom is getting boomier”, he said in 2006. “We should have an examination into why so many people got it so wrong”, adding that people “should have bought last year.” By April 2007, he was predicting a “soft landing”. By July, he asked why those who sit on the sidelines “cribbing and moaning” don’t “commit suicide”. Two months later, we were told that there “is no place for politically motivated attempts to talk down the economy and the achievements of our people across all sectors.”

What a crock. It’s one thing to have to listen to such garbage from those in the property sector. It’s another thing entirely when the leaders of our country were encouraging one of the greatest housing bubbles in history, a bubble whose bursting has plunged Ireland into a crisis of incalculable proportions. Ahern is famously pally with developers, whose one-dimensional thinking seems to have informed government policy.

It was obvious that a serious property bust was a question of ‘when’, not ‘if’, just as it was obvious to decent economists that a financial crisis would likely be triggered by this bust. Study after study has confirmed as much. 2007 was full of guff about a soft landing even though studies of international housing bubbles show that there has never been such a thing. Bubbles are followed by crashes just as day is followed by night.

It’s not a great time to buy. It’s a great time to wait. Property remains over-priced by any conventional valuation yardstick, some places more than others (West Cork comes to mind). Property crashes play out over a period of many years, partly because sellers become anchored to old prices that are no longer relevant. There’s also a large element of wishful thinking involved – a recent US study found that people expected prices in their locality to fall but believed that their own house would appreciate in value or stay the same.

We’ll still have to put up with the cheerleaders, however, even as the market deflates. Morgan Kelly puts it well. “We can start looking forward to estate agents telling us that the worst is over, a necessary correction to an overheated market has taken place, there has never been a better time to buy, and so on until most of them go out of business.”

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