Jade Cowen and the Big Housing Bother that needs to be voted off
IT'S not quite Armageddon. It's not quite our property hell either. It's our property limbo. It is, as predicted, torpor, with everyone watching and waiting. Of course the Government will tell us that this is all a good thing because a dip or a slump or whatever you want to call it, is exactly what we needed. You or I didn't know that was what we needed but Big Bruddah Cowen k
IT'S not quite Armageddon. It's not quite our property hell either. It's our property limbo. It is, as predicted, torpor, with everyone watching and waiting. Of course the Government will tell us that this is all a good thing because a dip or a slump or whatever you want to call it, is exactly what we needed. You or I didn't know that was what we needed but Big Bruddah Cowen knows best.
The myth that a slump is a good thing is based on the prevailing gospel in this country - which is that first-time buyers are saints and the rest of us are guilty, dirty sinners and that we should redeem ourselves for the crime of ownership by enduring losses so that the sacred first-time buyers (FTBs) too may become property owners, and of course once they are reborn into property ownership their innocence will evaporate too and they take on the original sin that is owning a house and they in turn will be expected to suffer for the sake of the sacred first-time buyers.
So Brian Cowen, who started this current torpor by having the arrogance to go against the overwhelming wishes of the people on the stamp-duty issue, has told us hthat a bit of torpor is good for everyone, because what's good for the sacred FTBs is good for us all. It's not. In any other country, the outrage of stamp duty and Cowen's refusal to reform it while it becomes an earner for the Government it was never intended to be, would be just that - a scandal, and it would be called 'Cowengate'.
Because the notion that torpor in the market is a good thing is based on a bullshit lefty ideology that everyone has a right to be able to afford a house and that the rest of us should endure losses to give it to them. Communism, I think it used to be called.
The reality is that Government intervention in the property market, in the form of the enormous taxes they take out of it, is good for no one.
And Cowen and the rest of them would do well to remember that last year's sacred first-time buyers are this year's property owners in Dublin's commuter belt. And last week we heard that they are in real danger of negative equity - whereby they will owe more than their house is worth. This means that even if these people were to sell their houses in the morning, they'd end up in debt.
And Cowen and Co would do well to remember that those who will experience negative equity over the next year or so will not be evil old property developers, or even more mature home owners. In fact those who are going to suffer as a result of Cowengate will be a bunch of kids who are even more vulnerable than first-time buyers. These are the 'Justboughts'.
Justboughts these days often have mortgages that exceed the value of their houses anyway, given that they may have borrowed up to, or in excess of, 100 per cent of the value of their property. They will have possibly also borrowed from elsewhere, be it the credit union or their parents, to pay penal one-off stamp-duty rates. They will have taken the advice everyone gives young people getting a mortgage, which is to stretch themselves, so they'll be paying mortgages they can barely afford to start with, and which they now find rising every few months as interest rates go up again.
These are hard-working kids who have put themselves up to the wire to fulfill the dream of owning their own house. And those in the commuter belt are getting a fairly nasty though not cheap version of that dream, which involves commuting two hours to and from work every day and living in a house that's half the size of their parents' house.
And now because of Cowengate, they will have the further cross to bear of waking in the middle of the night worrying that their house isn't even worth what they owe on it, and that after all that work and after making the courageous entrepreneurial leap into property ownership, they are now worse off than those first-time buyers who didn't manage to buy.
The rest of us aren't any better off.
The torpor caused by Cowengate could very easily tip over into a national catastrophe. We all know how delicate and intangible a thing confidence is and how easily it can be knocked. We all know too how relative a thing confidence is. Confidence has nothing to do with reality. Indeed it's not so much that reality influences or creates confidence or lack of it, more that confidence creates reality. If a guy thinks he's successful with the ladies, he probably will be. Why? Confidence, stupid. But if one woman laughs at that guy's dinkle, and if he internalises that one experience, it can shatter his confidence and create a whole new reality for him.
Similarly we create our own reality when it comes to the housing market. And confidence is all. For example, an article appeared in the business section of this paper a few weeks ago proclaiming that everyone should get out of rental property. The guy who wrote it gave the usual story about how there is no such thing as a soft landing etc etc. Just to show you the little ripples these things send out and how fragile confidence is: two days later I got a chain email which was going around among people who would have, shall we say, an interest in the property market. It had the article by the Galway academic (if he's so smart why ain't he rich, do you think?) from our paper and another similar article from the Irish Times from late December.
And there it was, gospel now, doing the rounds, rattling people and becoming a self-fulfilling prophecy.
And someone told me something very interesting about property slumps. He said that once confidence goes, it goes. It doesn't eke away, confidence is a fairly black-and-white thing. It's a tipping-point thing. He'd been through two 'adjustments' in England and he knew what he was talking about.
How it works is this: while we may hear things like that on the macro-level property prices in general are falling by say, 1 per cent a month, the reality of how it happens on the micro level, to you or me, with our one house to sell, is that you end up slashing your price first by 10 per cent, then by 20per cent. There is no such thing as a soft landing for individual properties. When it goes, it goes, as people all over the country are finding out right now.
And this is the anecdotal evidence we're hearing, about buyers realising the balance of power is shifting in their favour and trying gazundering (last-minute price drops after agreements have been made), making only one offer well below the asking price and then walking away, and of people in desperation, because of that elusive confidence, taking offers well below their asking prices, when offers used to be well above the asking price.
And all of it down to Cowengate. Brian Cowen acted like a big arrogant pig in this. He was effectively the Jade Goody of the Housing Big Bother.
Cowen ignored the overwhelming demands for stamp duty reform in favour of his greed for another enormous surplus for this house. He bullied and ridiculed anyone who suggested he was wrong, condescending to anyone who thought they knew better than he did and barging through the situation like a bull in a china shop.
One can only wonder if his reward will be a Jade Goody-style performance at the polls. At least you could say in Jade Goody's defence that she had no idea what was going on in the outside world when she so spectacularly misjudged the public mood. Cowen knew what people wanted and what the temperature was on the ground. But still he chose to press pause on the the housing market. And as every fool knows, if a market or a business or a sector isn't growing, it's going the opposite way. There is no such thing as standing still.
And like Jade Goody, Jade Cowen started a ball rolling that he could really learn to regret. In a country where building is a huge part of the national economic activity and where property has played a huge part in the feelgood boom, Cowen initiated torpor, started a process and now it's blown up in his face by screwing over the most vulnerable group in society with regards to property, the Justboughts in the commuter belts and the property-owning middle classes, neither of whom is rich, all of whom are doing their best, and none of whom can afford the spiral that Cowen appears determined to have thrown us into.
There is only one answer to all this. We must stand firm. Don't sell right now. This is as bad as it gets, and while it's scary, important decisions shouldn't be made in a time of panic. Hang on a year. Don't be pushed around by Cowen and smug buyers who think they're in the driving seat.
Let's hold firm through the torpor of Jade Cowen and Cowengate. If Cowen and this Government aren't willing to stop this spiral, let's do it ourselves. If they can't be trusted to keep the economy on track, it kind of falls to us.