Raskolnikov said:
I can't believe the opinions of some of the blinkered armchair economists here. Dan McLaughlin is an extremely qualified economist with one of Ireland's leading banks. I imagine that the Bank of Ireland would employ similarily talented financiers, analysts and modellers to draw up the reports that they produce. Unless I see evidence to the contrary, they generally get things right. However, daft.ie's very own Chief Economist; Ronan Lyons (a student who has only just completed his MSc in economics) runs a one man effort using only the asking prices of daft.ie properties; lo and behold, we have the barstoolers here proclaiming the jig is up! Property crash imminent!
Uhem, just so as we're clear, I don't see the game as being up just yet. But I do think that the players are irrational. There is a slight difference, whether you like it or not.
That's one point.
Second point is BOI are not an unbiased party. They are, like most/all of the banks in this country drawing great profits out of mortgage interest. Once the property market begins to slow up, then the year on year growth is likely to slow up as well, even allowing for interest rate rises. As such, while I wouldn't necessarily disbelieve what Dan McLaughlin has to say, I would still consider it within the remit of the following 1) other economists 2) ongoing house price data reports which are interestingly not singing from the same hymnsheets 3) some anecdotal evidence and 4) other related business news which may have a knock on effect.
"Unless I see evidence to the contrary, they generally get things right."
this sounds like an article of faith to be honest with you.
The voices saying that the property market is heading for a, uhem, correction, are starting to get louder. The Independent is even starting to change its tune a little, although that's probably a business move on their part. In other words, the atmosphere and sentiment in the housing market has, pretty much definitely, changed. The economists can quote all the figures they want, but figures do not equal sentiment, and sentiment is what is being discussed here.
What I would like to see these much vaunted banking economists come out with are projected figures on;
1) the impact of a soft landing in housing/construction on the wider economy.
2) the impact of a major correction on the wider economy
3) the impact on the housing market of the exit from the Irish economy of either Dell or Intel.
Banks are in the business of making money. That is why we have so much consumer debt in this country. It is not in the long term interest of the economy however, but it is in the long term interest of the banks provided that the debt can be serviced. As such, I see that the interests of the BOI diverge from the wider interests of the country, and therefore, the views of its highly paid economists must be seen in that context.
As for the guy from DAFT - well he runs a pretty decent business there. As to whether he's right or not - I have some doubts but that's not because I think that the softlanding has arrived. It's because I have some doubts that there will be a soft landing, based purely on the fact that we are unlikely to see salary inflation of a level required to rebalance the house price/salary ratio which is currently not all that sensible, seeing as it varies between 9:1 and 12:1 depending on what set of figures you use. A more rational level would be around 6:1 and preferentially 4:1 but i guess that's too much to ask for at this stage.
. I wonder where he got his PhD from? Maybe it was from "Pacific Western University", the the same place where the previous government chief scientific advisor Barry McSweeney got his from.