# Bertie gives investment advice



## bearishbull (7 Apr 2006)

i see bertie suggests that high levels of borrowing for high priced houses isnt a problem and that because people were saying prices would fall last year and in fact they rose a lot that the warnings were wrong and people made bad descisions by not buying last year! by berties logic if he was talking back in early 2000 about dot com prices he would have said people who didnt buy in previous year made bad decisions.where does this buddy of the builders get off? he knows he would pay a heavy price if there was a price crash for the governments inept management of the property market. i dont support FF but i sometimes hope they will get re-elected as if theres a property crash the government of the day will get the blame and i dont wanna see fianna fail get away with this one.
http://www.rte.ie/news/2006/0407/housing.html

do you think its right for our leader to be telling young couples worried about buying last year and having not bought yet that they made bad decisions and basically saying get in now or you'll never get on the ladder!i dont think it is.


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## SLAPPY (7 Apr 2006)

Very distubing.    He should be telling everyone to start saving more of their income for possible hard times ahead.


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## Sherman (7 Apr 2006)

> the governments inept management of the property market. i dont support FF but i sometimes hope they will get re-elected as if theres a property crash the government of the day will get the blame and i dont wanna see fianna fail get away with this one.


 
I'm no fan of FF either but how on earth is the government of a free market economy supposed to 'manage' the property market?

Are current prices not more a function of a) historically low interest rates; b) by Irish standards an unprecedented economic and employment boom; c) increasing population; d) further to point c, particularly the massive growth in population along the eastern seaboard?

Or are these the same people who blamed the government for the money they lost on Eircom?


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## lukegriffen (7 Apr 2006)

At least Bertie's not sitting on the fence like he usually does.  Now he's just leaning on it, spouting baloney.


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## beattie (7 Apr 2006)

Good man Bertie, what a visionary he truly is


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## ubiquitous (7 Apr 2006)

Sherman said:
			
		

> I'm no fan of FF either but how on earth is the government of a free market economy supposed to 'manage' the property market?



Indeed. Another regularly-forgotten point that Ireland's property boom is merely part of a boom that is almost global in its proportions. Bit much for anyone to either expect Bertie to do much about it, or for that matter to either damn or credit him for its consequences.

Another thing - I'm continually amazed as to how many Irish people scoff at GW Bush while voting for Bertie. The only difference between these two guys as that Bush is prone to making simplistic, half-baked inane statements on the world stage and Bertie does the same on the local stage. When either guy is confronted by a situation that requires genuine leadership or decisiveness, they are stumped.


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## bearishbull (7 Apr 2006)

governemnt couldnt have done anything to stop rampant price inflation? i think you'll find they could  have done numerous things to stop rampant inflation and speculation.even the most rampant capitalist countries like america have housing controls in the form of rent controls etc,homes arent like just every other commodity.


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## CCOVICH (7 Apr 2006)

bearishbull said:
			
		

> even the most rampant capitalist countries like america have housing controls in the form of rent controls etc,homes arent like just every other commodity.


 
Are you saying that rent controls have been successful in America?


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## soma (7 Apr 2006)

CCOVICH said:
			
		

> Are you saying that rent controls have been successful in America?


I think they have proven to be a myth alright, the market always finds a way around those kind of enforced price limitations. 

As an example, in parts of the US, if there's a nice sought-after apartment that is rent controlled, you may find something like a "non-refundable key deposit" (i.e. a wad of cash) is asked for - it's the market's way of (legally) increasing rent in a rent-controlled situation.


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## bearishbull (7 Apr 2006)

im just saying market failure exists at times and in theory capitalist/mixed economeis have tried to and continue to try to avoid purely market based approaches to something as important as housing.


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## CCOVICH (7 Apr 2006)

bearishbull said:
			
		

> im just saying market failure exists at times and in theory capitalist/mixed economeis have tried to and continue to try to avoid purely market based approaches to something as important as housing.


 
But why mention rent controls, which to my knowledge have been unsuccessful with regard to controlling price inflation, but have also had some part to play in the creation of ghettos.


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## JohnnyBoy (7 Apr 2006)

Can I say one thing,I'm so sick of people giving out about health service/government etc.I agree they are morons(Bertie especially!),but if people give out then please vote them out!.I'm sick of people ranting on Joe Duffy show & they 're the same people who vote for Bertie


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## bearishbull (7 Apr 2006)

CCOVICH said:
			
		

> But why mention rent controls, which to my knowledge have been unsuccessful with regard to controlling price inflation, but have also had some part to play in the creation of ghettos.


i mention them as they are an example of a highly capitalist governments attempts to prevent purely market driven outcomes ,someone earlier said let market decide everything in this area which many countries dont accept.


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## tyoung (7 Apr 2006)

Interest rates are the key to the property market and the last time I looked they were set by central bankers not by the market. So It is idiotic to talk about "free markets" when the key price- the price of money - is decided by the government. If there was a market set interest rate in Ireland, I think it would be on par with NZ  around 7%


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## RainyDay (8 Apr 2006)

Sherman said:
			
		

> I'm no fan of FF either but how on earth is the government of a free market economy supposed to 'manage' the property market?


Possibly by NOT creating an environment where vast amounts of potential building land around Dublin is not tightly held by a small number of (Galway Races tent visiting) developers. Possibly by implementing the recommendations of the Kenny report from 30 years which proposed that local authorities can buy potential development land at its existing value plus an additional 25 per cent (though I recognise that a constitutional change may be required). Possibly by ensuring a half-decent programme of social and affordable housing.


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## Duplex (8 Apr 2006)

Bertie Ahern is dismissive of warnings from the World Bank the OECD and the ECB, and he is right, for the time being. Property prices look set to rise by in excess of 20% this year, so if you buy now you will pay less than you are likely to pay in the late summer. Irish Banks are quite capable of structuring mortgage lending, by the use of interest only and introductory discount ‘teaser rates’. These types of lending practices, coupled with inter generational equity release are capable of driving the Irish property market upwards even in the face of rising interest rates. So Bertie is spot on, buy now, hopefully he will be as vocal about when its time to sell. 

The report I’ve quoted below comes from the Centre of Economic Policy and Research in the US. The report suggests actions that should be taken by the US government and the Federal Reserve to burst their housing bubble. The CEPR recommend that preemptive action is taken so as to avoid long term damage to the US economy, when the bubble bursts. 




> Given the prospect for a collapse of the housing bubble and its impact on the economy and the financial system, there is a strong case for a preemptive strike. The government cannot prevent the market from collapsing and sustaining the bubble just leads to more overbuilding, which will make the eventual collapse even worse. _The government should have taken steps to prevent the bubble from ever getting this large. Having failed thus far, the best it can do at this point is to burst the bubble before it gets even larger, creating the conditions for an even bigger disaster down the road._
> 
> The economy, and tens of millions of homeowners, will certainly be better off if the fall occurs sooner rather than later. The longer the bubble persists, the more overbuilding takes place, and the more resources will eventually have to be diverted from homebuilding to some other sector of the economy. _Similarly, the amount of bubble-induced debt, and subsequent defaults, will also grow larger as long as the bubble persists. The recession following a housing collapse will likely be more severe the longer the bubble persists._



http://www.cepr.net/columns/baker/2006_03_30.htm


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## askalot (8 Apr 2006)

Sherman said:
			
		

> I'm no fan of FF either but how on earth is the government of a free market economy supposed to 'manage' the property market?



Through allowing the central bank set interest rates at a level suitable for the Irish economy but then the Irish government handed that away to the ECB.

The US Fed have done a pretty good job of cooling the property market stateside.


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## colc1 (27 Apr 2006)

ubiquitous said:
			
		

> Another thing - I'm continually amazed as to how many Irish people scoff at GW Bush while voting for Bertie. The only difference between these two guys as that Bush is prone to making simplistic, half-baked inane statements on the world stage and Bertie does the same on the local stage. When either guy is confronted by a situation that requires genuine leadership or decisiveness, they are stumped.


 
You have a point here alright they're both 'chancers' and talk a lot of nonsense, I think Bertie has a slight advantage in the IO stakes to be fair to him (that wouldnt be hard I know!)


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## colc1 (27 Apr 2006)

bearishbull said:
			
		

> governemnt couldnt have done anything to stop rampant price inflation? i think you'll find they could have done numerous things to stop rampant inflation and speculation.even the most rampant capitalist countries like america have housing controls in the form of rent controls etc,homes arent like just every other commodity.


 
You think Ireland is not more capitalist thank America!    I dont think you could find a more capitalist country than Ireland buying a house is much higher up the list of priorities here than with Americans in my dealings with them


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## colc1 (27 Apr 2006)

Duplex said:
			
		

> Bertie Ahern is dismissive of warnings from the World Bank the OECD and the ECB, and he is right, for the time being. Property prices look set to rise by in excess of 20% this year, so if you buy now you will pay less than you are likely to pay in the late summer. Irish Banks are quite capable of structuring mortgage lending, by the use of interest only and introductory discount ‘teaser rates’. These types of lending practices, coupled  The CEPR recommend that preemptive action is taken so as to avoid long term damage to the US economy, when the bubble bursts.
> 
> 
> 
> http://www.cepr.net/columns/baker/2006_03_30.htm


 
I think most economists would agree with that section on the cepr website from what I've heard from some I know


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## Duplex (27 Apr 2006)

colc1 said:
			
		

> I think most economists would agree with that section on the cepr website from what I've heard from some I know


 

Well the rate of inflation in Irish house prices has now reached it's highest since 2000 according to the latest TSB/ERSI Index released today. So is Bertie right about the fabled soft landing?




http://irish-property-bubble.blogspot.com/


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## colc1 (27 Apr 2006)

Duplex said:
			
		

> Well the rate of inflation in Irish house prices has now reached it's highest since 2000 according to the latest TSB/ERSI Index released today. So is Bertie right about the fabled soft landing?
> 
> 
> 
> ...


 
I doubt it looking at the way things are going.  Who is going to buy all these houses they're building after a while?  Unless everyone has an investment property or multiple investment properties or the economic migrants all settle here for good (which I doubt they'd want to with all the high prices, never mind they have family back home).  When there is a slow down in building surely the many foreign workers working in construction are going to generally go back home and with EU funds the 'new' EU countries will prosper the way Ireland has.  What happens then?  There is talk the ECB might increase rates in May and what if they increase them again.  The attraction of buying investment properties will then lose its appeal especially if the number of potential tenants go 'home' wherever that may be (i.e. the 'new' countries) and we'll have to 'put into' the EU for once in the future too.


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## conor_mc (28 Apr 2006)

askalot said:
			
		

> Through allowing the central bank set interest rates at a level suitable for the Irish economy but then the *Irish government* handed that away to the ECB.


 
Er, didn't we have a referendum on that one.

You can't blame the govt for everything, y'know.


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## redo (5 May 2006)

If (when) the property market goes flat, where nobody is buying new houses, one thing is for definate.  The developers at the FF tent during the Galway races will be using their substantial lobbying power to get the first time buyers' reintroduced.


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## darex (19 May 2006)

I see that Bertie has explained the rationale behind his original comments in reply to Trevor Sargent ...

Want does anyone think of Berties comments in the dail the other day (in reply to Trevor Sargent) that there isn't a danger of a shock in the housing market because loans are only 100 billion whereas the value of property in Ireland is 500 billion.


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## Glenbhoy (19 May 2006)

I'd like to know what he bases the valuation on?   The loan figure is a definite figure, the valuation is (by definition) an estimate.


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## darex (19 May 2006)

Glenbhoy said:
			
		

> I'd like to know what he bases the valuation on?   The loan figure is a definite figure, the valuation is (by definition) an estimate.



Even if the figure is true - and it does sound about right - give or take a couple of hundred billion  - it still makes no sense that because the notional value of property is greater then the actual loan value it will prevent a shock. 

Anyone who remembers the quote from Japan in the late 1980's will know that:
"it was a matter of pride that the land around the Imperial Palace in Tokyo was at one point worth more than California"

I am sure that the land around the imperial palace was far more valuable than the loans on the equivalent property (and ditto for the whole of Japan) - but it didn't prevent a shock


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## Duplex (19 May 2006)

Bertie should consider a visit to Phoenix Arizona.

http://www.azcentral.com/arizonarepublic/news/articles/0519layoffs0519.html

And then he might wish to parlay with this South Korean counterpart, who seems to have a more considered view of the dangers of a property bubble.

http://times.hankooki.com/lpage/200605/kt2006051922343068040.htm


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## Neffa (19 May 2006)

Mervyn King (Governor of the Bank of England) recently commented that "only the debt you have on your home is real". In other words, the value of your house is only true if you sell up. Other than that, the only certainty is the debt owned on it.

I think the interesting figure is the explosive growth in mortgage debt which is accelerating far faster than house prices. So the gap is closing and in the event of a crash, the gap could close dramatically.


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