Property market in need of tough love - Marc Coleman

He means he can’t do anything about that now. It is a “sunk cost” in economic terms and has no further relevance to forward looking decisions.

But at the time he bought he knew he was paying too much, which takes this out of the category of “sunk cost” and into the category of “wrapping your money round a brick and throwing it into the Forty Foot” (and then saying you have “no regrets, I always expected the brick to sink. Anyway, it was either feck it in the sea or keep it under my mattress.”).

There’s one image that keeps coming to mind when reading his articles:

Mark Coleman is the economics journalistic equivalent of Fr Noel Furlong (Graham Norton) from the Fr Ted caravan episode.

Indeed. I have no answer to that, other than what he says in his article; vis. it was his preference to overpay than rent.

At the risk of appearing like an economic bore, I want to address one of my complaints in this article properly. Marc claimed that because one small developer had success selling his excess supply of apartments after cutting prices by 15-20%, that gives a true indication of the extent of the overvaluation in the market. That is a sinful mistake, or lie(?), for a supposed “economist” to come out with. And here is why.

Look at the chart above. Point A shows where the market was when people thought prices were going to go up exponentially forever and the was, for intentand purpose, limitless and virtually costless finance available (i.e. a certain exectation - E(p) ).

WHat happens when expectations fall out of bed and new reality occurs. The demand schedule shifts to the left and for any given price there is less demand for houses. But prices are sticky and don’t come down immediately, which means the economy finds itself at point “B”. Economist say output is determined on the demand side. So at point B we are with no real reduction in prices yet, but much less aparent demand (i.e. quantity of transactions at the prevailing prices).

This is where we get to MArc’s point. Some developer jumps ahead of the market and drops prices by 15%, say, to a level indicated at “C”. As long as it is below the prices at B, they will get first bite at potential buyers because every other apartment is priced at “B” - THE DEMAND CURVE IS DOWNWARD SLOPING MARC - CAN YOU HEAR ME. So this canny builder, who seems to know more about economics than Marc knows that by being the first mover, he can secure a price which is above the market clearing price (which is in fact at “D”).

Now it MAY be the case that the point “C” is actually equal to “D” or below it even. BUT, it is not necessarily the case and certainly not likely, given the scale of apartments that can’t be sold at the moment (i.e. demand would have to be extremely price elastic - I should have drawn the demand schedules much flatter).

In effect, what this example has elegantly shown is that the market clearing price, which is where prices need to go, is simply an average price in the market. Some people are willing to pay more (to the left and up on the deamnd schedule) and some are not willing to pay it (down to the right) - but there are enough buyers for the number of sellers.

Marc, you are a fraud sir.

Does he honestly expect anybody to listen to his advice when he bought at the top of the cycle :unamused:

And Independent News and Media will be quite happy to have him write these personal justification spiels in their newspapers. Just like they allowed our beloved BoC to make a public jester of himself on the front page of the Sindo for countless months – the masses love a fall guy.

I love the way Marc Coleman goes on about “those with a different, more apocalyptic scenario should not be intimidated or impugned for making it, subject to one condition:** that they base their arguments on fact. If Davy stockbroker’s**…”

Davy stockbrokers! There ya have it folks. Gospel truth. Sorry Marc, you’re a nice chap and all but there are no reliable data or facts in Ireland – you’ve got to grab the anecdotes and make the best of the CSO stats and come to your own conclusions. This is not Sweden or Japan we’re living in – countries that have efficient and well-run government agencies who are world-class experts in statistical compilation and analysis (unlike our crowd of middle-aged, drift wood civil servants sitting in their nice offices with extended lunch hours and state guaranteed pension plans). Isn’t it a sad state of affairs when there’s more to be gleaned from amateur compilations of figures on daftwatch than any official CSO publication. We can’t even get semi-state ESB to come up with some basic facts and figures! Which only begs the question…

Coleman’s behind the herd, not ahead of it. He’s still stuck in denial phase. His book might just hit the headlines yet… just like Robert Ziccaro, CFA. David McW has stolen the limelight in the battle for celebrity economist I’m afraid. No Marc, you won’t be proved right. You should just go away and keep your trap shut because that hole is only getting deeper. You’re only helping the Sindo sell more newspapers.

And from the Q2 2006 Daft report

So, as Mr. Coleman says, there are “selfish property sellers out there with a vested interest in talking the market up”. Presumably, selfish property owners could fall under the same category.

IF we then examine what Mr. Coleman was saying in the Q2 2006 Daft report and cross reference it with what he has stated in todays article, it would appear that Mr. Coleman was engaged in talking up the market at the very time that he had either just bought a property or else was in the process of doing so. No regrets?

Altogether now ; “Non, Je ne regrette rien…”

Coleman’s article has really kicked off us pinners! I wonder what salmon/beef-eating, average Mick is thinking as he reads this today?

So there you have it kids a 350% increase in prices in seven years is fundamentally sound! I have a limited economics education but a good dollop of common sense and can see that statements such as that are utter sh1te. The thing that always bothers me with that dismal science of economics or more correctly with the so called experts we seem to have in this country is that they with the exception of DMcW, rarely see the social implications of what has transpired here over the past decade. Not only has Ireland become a scandalously expensive place to live it’s competitiveness has been seriously damaged and all to the behest of a group of leacherous capitalists that were allowed free reign by an equally leacherous government to push an unashamedly profit before people agenda. And don’t start me about corruption!

Moreover that the largerst demographic shift in Ireland since the 1830’s and indeed the largest per capita migration to any country in recent history was driven to insane levels by the same people that made the most from the gravy train. This is one of the other property related elephants in the room mark because no one really knows what the effect of a resumption of emigration will have because there will inevitably be some as the economy slows and slow further it will. I know from my limited study of economics that inflation generally takes a number of years to feed into employment losses and with it now seemingly permanently around 5% how can this not lead to further trouble for Ireland Inc. I note that large job announcements were very thin on the ground in 07, rather the number of major closures and rumours of large further ones have increased. Also many if not most of the new jobs created in the last number of years would’nt have the salary or security to allow those working in them to purchase a house even at 06 levels.

But hey mark you keep believing that prices only need/will fall to 2006 levels and everything will be hunky dory/business as usual for property.

Well I did say in the past that the population will be back under 4m in the next census ( 2011) and that we will have over 20% of our housing stock empty to boot…maybe as much as 25% .

Emigration and reduced inward migration will be the reason.

At this point after our last mad construction boom in the 1970s ( 1979 census matched with 2006 census) we only had 7% empty , its more like 17% now.

Coleman is not looking at the unlit windows at night as he drives past . Or maybe he looks and sees not.

If I was a well known economist who was foolish enough to buy property at the peak, I would have kept quiet about it. I would not have admitted it (and also try to justify overpaying) in the national press.

I’m actually reading Marc’s book at the moment (I thought I’d get the other side’s view for balance) and it has some very good stuff on Irish history, why were have such low population density and how the planning in this country has been totally messed up. In fact seeing how depressing the first half of it has been someone suggested it should be called “Things can’t get any worse” rather than “the best is yet to come”.

Anyhow, his main point of optimism is that Ireland’s population should be able to grow to 10 million by 2050 just to catch up on the UK’s population density. His thinking seems to be that because Ireland can sustain a much denser population it it will. Unfortunately he doesn’t really seem to consider will people want to come here if we go into recession while other European countries open their boarders to the new EU states in 2009.

Sure if the population continues to grow at the rate it has in the last 4 years then we will eventually burn through all the excess housing stock we have now (But not in the 2 year “correction” model he seems to be predicting here).

So in summary, if we continue to import 100k people a year then in 5 to 10 years we will see a positive demand for houses again and all the empty houses will be filled. That’s a big IF.

But when the boom started in 1994 we had about 12% empty, its now 17% .

We have consistently overvbuilt for years but most particularly since 2002 .

There is a chance that he in denial, that the empties will just stay empty and new people will need new houses. Who knows?

What’s still shocking is how the newspaper of record gave this moron a job as chief economist. I used to get angry reading his crap, but I noticed a change. Now I see him squirming and I feel more disdain. Hopefully people are cottoning on that Marc Coleman is a chancer, of the sort only found in Ireland.

From the article

Firstly, did incomes rise by 5% in 2007?

Secondly, why does he think that this will continue to be the case? It’s not as if we’re still playing catch up with the rest of europe when it comes to salaries. Sure, salaries in London are higher. But I don’t think you could find too many other cities/countries with higher salaries than in Dublin/Ireland. We simply can’t afford to increase salaries ahead of other countries and expect all the jobs to remain in Ireland.

And thirdly, how can he be so certain that the ECB will decrease interest rates. Even by Bundesbank standards, 4% is already quite low. And Eurozone inflation is currently well above the ECB’s target of 2%.

Only in the civil service!

but Coleman ignored that .

No certainty there except for Coleman and Austin .

/fixed for Marc.