Tuesday 13 November 2018

Don't let bubble distract us from challenges ahead

A new financial crash may not be coming, but we face an unsustainable gap in housing stock

What is happening now is a scarcity of housing driving up its price. Photo: Stock Image
What is happening now is a scarcity of housing driving up its price. Photo: Stock Image

Ronan Lyons

Last week, the ratings agency S&P issued a report on Ireland. That report included a diagnosis of the housing market that was interpreted as predicting a "soft landing".

Of course, many scoffed - remembering similar predictions from the mid-2000s. You could be forgiven for thinking of Michael Gove's infamous line, just before Brexit, that "people in this country have had enough of experts".

But whatever our opinions on ratings agencies and how they performed in the run-up to the crash, the S&P report should not be dismissed as external analysts making the same mistakes all over again. Rather, our reaction to the report might tell us more about ourselves than the rating agencies. In particular, we need to ensure we are not fighting the last war. To explain, what happened, the Irish housing market 1995-2012 was a classic credit-fuelled bubble and crash. It is understandable - it is important - that we should be very careful not to make the same mistake again.

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