Housing market must obey laws of gravity – and fall
It is foolhardy to suggest there is no need to fear another property bubble.
When house prices rise and fall by as much as they have in recent years, the prospect of another property bubble is real. But while the State's only hope of recovery depends on upside market volatility, the disastrous strategies of the past will bring the system crashing down again, and sooner than we think. Light-touch regulation combined with reckless lending destroyed the global economy and plunged the Irish economy into recession. Those who benefited least from the Celtic Tiger are paying the highest price from the austerity it imposed.
It is foolhardy and just plain stupid to suggest, as the Minister for Finance Michael Noonan has done, that there is no need to fear another property bubble. If the Government's only interaction in the property market is to drive prices higher, the market will eventually crash. Greed, panic and unchecked speculation will inflate the bubble until it bursts.
We are in recovery, but the powers that be don't know what to do. The Housing Agency that advises the Government claims we need 80,000 new homes over the next five years to cope with demand and nearly half are needed in Dublin. Without responding to demand, prices will be driven higher. There were about 9,000 units completed last year. Ten times more were built in 2006 and look what happened prices then. Prices can only go one way and that may be out of control.