where Aengus Fanning asks him…
On television during the week I saw a City of London analyst, apropos the banking problems in Britain, saying at the heart of it all is the price of a house. Would you agree?
and Brian Lenihan replies…
I think that is correct, and what we have seen in the Irish market in recent years is a radical adjustment of prices downwards and that process has to happen. And one of the reasons we have become uncompetitive as a country is because of our high house prices – it put a terrible burden on people who wished to acquire a house for the first time – and that adjustment in house prices has to take place.
I think most of you underestimate this crisis (certainly the speed of the latest collapses has left me gasping for air)
House prices are now an irrelevance and should the least of your worries, they are going to collapse across most of the country.
The old days of cheap credit are gone, we will never see this return in our generation and even if such could happen the losses that people are now taking on everything from equities to property are horrendous, no one will take on debt unless absolutely necessary (credit revulsion).
but rather than continue this line, since it’s a nice day outside, I’ll go and do some gardening.
Indeed. I was just reading ‘American Psycho’. This was written in 1990, but it was shocking to read the names of the firms the characters worked for. Most of them gone or nationalised over the last month.
It could also mean that people will revert back to saving for things like their parents did - and will borrow only what they can afford and not get out of their debt. If there is a reduction of lending - this means that people will still borrow, not as much, costing more, but nevertheless.
In fairness to Lenihan, he’s only been in the Cabinet for little over a year, and only finance minister about 4 or 5 months, so perhaps a bit harsh to blame him too much for the FF policies that inflated the bubble.
However if he really means what he says, there should be no schemes in the budget to “help FTBs”, such as interest free loans from local authorities to make up the difference on what banks are willing to lend and property is selling for. We all know that scheme only “helps” developers get rid of their stock at inflated prices.
We’ll only have to wait 2 weeks to see if he’s willing to walk the walk.