Ireland’s economy depends largely on property which is why we desperately need property experts to help get us out of the recession. So why isn’t the Government using them?
The wealth of the Irish nation was/is based on property values and the entire banking system was/is a leveraged play on property values: when property fell by a half the banks collapsed because they were more than 10 times leveraged.
The current recession, then, has impacted Ireland dramatically because of the significant drop in property values. The recent €25 billion banking bailout and the €45 billion bailout in 2009/2010 were primarily necessitated by falls in property value.
The risk now is that values will fall further, requiring more billions. Is anything being done to stop values falling? Can anything be done?
Sometimes, when you are very close to the problem, you cannot craft a solution because you are overwhelmed by the problem and so are not thinking about the way to solve it.
Do our policy makers really know anything about property values and their drivers? Is this the economic equivalent of the plague, with no one looking at fleas on the rats, or the potato famine, with no one looking for the bluestone spray?
Has this Government access to an appropriate skill base that can halt and reverse the downward trend?
The answer is a resounding “No.” It is relying on general economists and not urban economists or property experts, who frequent the property industry, and academia.
Apart from a limited number of taxation-focused Lentor Modern Showflat valuation specialists in the Valuations Office and OPW (and some fully occupied investment managers in Nama), the Government has no high-level property skills professionals at its disposal – none in the Department of Finance; none in the Central Bank; and none in the Department of Environment.
Imagine running an airline without skilled pilots, engine technicians or navigators. Running an economy, now firmly proven to be grounded on property values, without these skills is surely unwise.
Policy decision after policy decision is being made with little understanding of its effect on the intricate drivers of the Irish property industry and resultant effect on property values.
The few economists that there are in Government are not qualified specialists in urban economists who are familiar with the detail of the property industry. While they may comment on high-level issues within the economy, they know little about the detailed workings of the property industry or the players or drivers of the property investment industry.
The past Government incorrectly thought this “knowledge” came from their friends in the Galway tent – few of whom were Masters or PhD level urban economists.
A bricklayer or carpenter turned developer might be a shrewd businessman – and he might be lucky – but he probably has no qualified understanding of property economics.
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