Bubble Radio / TV: Give advance notice here!!!


#11881

Developer Michael O’Flynn made a surprise appearance on RTE Radio The LateDebate on Thursday
Basically saying that house prices would remain high due to input costs controlled by the state: planning, vat, levies, regulations etc


#11882

How well did it work when regulations were outsourced to you chaps the last time eh Michael?


#11883

@yoganmahew
He’s talking about input costs (not that there should be no regulations).

imho, it’s a fair point.


#11884

Leo Varadkar on LateLate tonight Rte1


#11885

It’s a fair point in terms of explaining cost, but the siren call of the right is to reduce those costs by reducing regulation. I’m not entirely sure what the costs of one-off housing levies have to do with large scale development (your link)?


#11886

@yoganmahew
The topic was input costs in housing in general.
Not specifically large scale or one-offs.
The example I posted was addressed to the general point of input costs, and their affect on the prices of houses.

I can not hear this siren call of the right that you are describing. When did you first notice you could hear it?


#11887

Aug 19 2011…


#11888

@yoganmahew
:slight_smile:

Hopefully this won’t sound like another siren call of the right, but…

IMHO, if the private sector can’t build homes at reasonable cost, and the state is intervening to build/fund property development on a large scale, then something is seriously out of kilter, since all public works mean taxes. (Giving with one hand in the short term, taking with the other in the long term.)


#11889

I agree with you entirely. But ZIRP means that housing costs are wildly out of kilter with production costs and production costs. The collapse of the major developers in the crash has resulted in a much smaller number of players (as well as a collapse in building where people actually want to live - the major urban areas where the jobs are), but, and there’s a big but, the failure of government (largely though bustness too) to build social housing has also resulted in a huge deficit in social housing.

Surely you agree that social housing should be the purview of government, whether national or local? Following the English example of selling off existing social housing stock exacerbates this situation. Shelter is a basic right and the governments (national and local) should provide both direct shelter provision and the means for private shelter provision. Cheap and plentiful housing is a good thing.


#11890

True in principle, but as you said they sold off their social housing stock.
(IMO for the sake of social cohesion and financial stability, the state should in the future be required to maintain a minimum fixed % of the total housing stock.)


#11891

ZIRP lowers the price of the future. This should make it more attractive to invest than to consume.

So all else equal this should mean more housing than was being cranked out in Ireland than in 2006 when ECB rates were around 4%.

This is not happeneing so obviously something else in the system is broken.

PS: low interest rates have failed to stimulate housing output all over the US and Europe, maybe only with the exception of Germany.


#11892

Well, in most countries, construction is counted as consumption, buying and selling as investment (at least in the minds of the participants). So ZIRP has encouraged levereaged asset hoarding and rent seeking. Which really shouldn’t surprise economists, but once again they’re caught flat-footed, it appears.


#11893

Construction is counted always and everywhere as investment, not consumption.

It’s the production of something that becomes an asset, not the production of something that gets used up. It’s really simple.


#11894

That’s why I said: (at least in the minds of the participants). Look at it this way. I have x million to spend at ZIRP. I can buy a piece of land that will appreciate at y% with me sitting on me hole. Or I can buy a smaller piece of land and build something on it with all the work that involves and gain y-n%. At this point in time, construction is a cost (as snaps was sort of pointing out) with an uncertain return. Yes, it’ll add to the capital stock, but only after it is complete; it only turns a profit on the investment when it is sold, and it’s not clear there are buyers who can buy at a profitable price point, at least not the price point that outweighs sitting on your hold on an existing appreciating asset.

Simples :frowning:


#11895

I wish you well with your scheme that involves riskless gains on pieces of empty land in Ireland :smiley: :smiley: :smiley:


#11896

:smiley:
Hey, I think it’ll end in disaster too, but that’s how I see the participants behaving. I have even heard that mezzanine debt style development schemes (shareholders in development schemes with senior and junior debt ahead of you) are creeping back. You’d be mad not to apparently… XD


#11897

Mortgage affordability barrier being discussed now on Radio 1 with Cliff Taylor and Karl Deeter…should the CB rules on mortgage limits be changed


#11898

let me guess Karl thinks they should be and Cliff doesn’t?


#11899

Yes though Deeter said the CB is there to protect the financial system and not house prices. He reckoned younger folk will go on to get many wage increases as they age so 4 times your salary now is much lower that ratio in 10 or 20 years time


#11900

so didn’t even pretend it would help supply, just wants to transfer even more future wealth to older generation