The David McWilliams thread


He was saying this just over a year ago:


Dave’s not had a good few years on the prediction front.

The first measure he talks about in halting a bubble is for banks not to extend credit. But the latest august 2014 balance sheets from the central bank show loans for house purchase continues to fall. I.e. a contraction in credit for house purchase while prices in dublin supposedly ‘surge’.

Between this and falling real wages there are no medium term fundamentals to support this bubble.
Given the contracting credit and wages the logical conclusion is that the black economy has expanded something serious in recent years. Something I’ve said before that the revenue should be all over if the government was serious about improving the fiscal position for paye workers.

But maybe the estsblishment prefer the ‘house prices are surging due to buyers with wheelbarrows of cash’ narrative at all costs.


Not paying your mortgage for 6 years surely merits as an expansion of the black economy no?


Wait, if not paying your mortgage merits being part of the black economy, then should these non-payments be included for GDP calculations ?


Well, some people say you can’t spend your way out of debt. So why shouldn’t you be able to increase wealth through mortgage default. It’s a mixed up, muddled up, shook up world. 8DD


Law of unintended consequences - Indo 21/01/2015

This brings me to two Central Bank announcements over the next few days. The first is by the ECB, expected tomorrow, when it unveils a fresh round of QE - money printing. The European economy, including France, has stalled and only by coaxing the banks to lend free money can the ECB hope to get activity going again. As well as making money available to the banks to lend, the ECB is also making sure that interest rates are zero.

The second announcement is expected from Dame Street, when our Central Bank will unveil its 20pc deposit scheme, which will demand that first-time buyers have 20pc of the price of a house set aside in savings before they can bid. The aim here is to stop house price inflation by reducing the amount of credit that can be extended to any house via increasing the accepted loan-to-value ratio.

By cutting rates, the ECB hopes to get banks to lend. Banks make money by charging more on the money they lend out than the rate they offer on deposits. However, in Ireland, due to the €400bn tracker mortgage market, every time the ECB cuts rates, the banks have to cut rates on trackers - which is money lent out. This means the banks have to recoup the losses on trackers by charging more interest - not less - for loans, even if the rate of interest is falling. So tomorrow, we will arrive in the rather paradoxical situation in Ireland where lower ECB rates might mean higher market rates for Irish borrowers.

Undoubtedly, limiting credit to the market will keep house prices down because it is credit, not demand, that drives prices up. So limiting credit will reduce upward pressure on house prices. This has to be good for all first-time buyers because it is higher prices that afflict first-time buyers. In the medium term, all buyers will benefit. However, in the short term, rich kids will benefit most. This is because prices won’t fall so quickly. First-time buyers with rich parents who will give them the deposits will gain enormously. So too will middle-aged cash buyers.


:open_mouth: :open_mouth:

is McWilliams going for dramatic effect or is he unaware that the Refinancing (Refi) is the key rate ECB rate for trackers??


But a 200k deposit will leverage to a million euro property, LTI permitting, and nobody needs to spend million euro on a house.

I’ve read a number of IT and SBP articles which suggest that 700k is a normal amount of money to spend on somewhere to live. It’s completely ridiculous but probably reflects the expectations of their readership demographic.

My 120sqm 4 bed is worth well under 350k and it’s perfectly adequate.


I don’t believe you’re focusing on the most controversial thing he said in that piece, actually.

His solution is public housing for “most of our people”.

Personally I thought it was one of his worst pieces ever. But anyway.


What I hate about discussions on that subject is we look at how much the property is costing and not whether it is a suitable property for needs. Most housing stock in Ireland is poor quality, poorly designed and shockingly lacking in reasonable storage.


Sure, the housing is mostly total crap. But that’s an entirely separate issue from expectations of accessing the top tiny percentage of properties as a first time buyer.



Point of order sir.

813,000 USD give or take!

Euro aint what it used to be, which is good for us overseas types and doesnt exactly encourage the move home.


I’ve yet to see anyone other than CIF argue that we need tax cuts on housing.
As shelter is a basic human need and right then the government should extract the bare minimum of tax on the first 1500 sq ft or maybe the first €105k (3.5 x avg ind wage).


That won’t look good on the meme!

#1936 … er-the-top

He manages not to mention Ireland at all in the article.


First comment to that is great until you get to the end! :smiley:


Always good to have the video evidence to back yourself up.


Well given the fact that in 2003 he was after spending 4 years+ at that point screaming bubble he doesn’t quite have the credibility he claims to have. I can do the same now with US equities for example, continually say the S&P 500 is too high and just keep reiterating. When it then falls give myself a pat on the back and ignore the fact that I’m still offside on my original prediction.


Yes indeed. Different economists say wildly different things about the housing market at different times. Seems relatively random TBH. We only remember the ones who got it approximately right. Doesn’t mean they’ll be right again.