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Irish government warned recession will deepen on back of property woes

Leading economist Bacon urges action to sort housing market

By
CATHAL DERVAN,
IrishCentral.com Staff Writer
Published Sunday, January 8, 2012, 10:16 AM
Updated Sunday, January 8, 2012, 12:02 PM

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Leading economist has warned that Ireland’s economic woes will worsen if the government fails to stabilize the property market.


Expert Peter Bacon has warned that Ireland’s economic woes will worsen if the government fails to stabilize the property market.

Widely regarded as one of the most informed economists in the country, Bacon believes Ireland’s current recession could get even worse.

He told the Sunday Independent newspaper: “Ireland faces a recession more protracted and more severe than the one we are already in if the Government fails to intervene in, and bring stability to, the property market.”

The former government adviser added:  “The market went to dizzying heights and now it’s going to dizzying lows. Property prices are now being driven down by speculative forces in much the same way they had been driven upwards in the boom years.
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“Just as the property market overshot and went on a random walk on the way up, it is doing the same thing now on the way down. Now people will say it will reach a natural level, but there isn’t a natural level.

“What you had were speculative forces driving the market up, and what you have now, in effect, are speculative forces driving the downward path that we are on at the present. It’s within that nexus that an intervention is necessary if the Government desires to bring about stability in the market.”

The economist also said that those who bought at the height of the Celtic Tiger boom face economic ruin with negative equity presenting a huge threat to any hope of Irish recovery.

Bacon added: “Those households who entered the market from the middle 2000s who have seen their wealth eroded or, worse still, are in negative equity, how does all that get worked through?

“Their wealth is eroded and their prospects are completely eroded. They face financial ruin if their balance sheets were to be realised. That’s why a stable property market is crucial to bringing about a recovery in the economy.

“How the hell can you expect households to say, ‘Look, we’re going to spend more,' if the principal assets they are sitting on are being knocked down in value?”

He also believes that any solution involving debt forgiveness would have "to be agreed" by the Government with the EU/ IMF/ ECB troika.

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3 Comments

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luxefaire | Jan 09, 2012, 03:29 PM EST
just as no one could put humpty dumpty back together again, there is no way to un-pop the real estate bubble, so things will just continue to get worse for the rest of our lives, unless we begin a new way of living, and i dont see the tv heads on this planet doing that, they are much too programmed and dunderheaded...the paper money swindle coupled with the world wide real estate boom created money on paper and in ledgers that did not really exist. we all knew there would come a time when that fell, and it did, and the perps are now riding off to their condos in tel aviv with their bags of shekels, and it will be another 50-60 years before they can do it again, but they will, when a new bunch of marks, a new bunch of saps, listens to the lies taught by the zionists in the schools and on television and in the papers, and the cycle continues. nothing new under the sun. the police state is in place, and will remain in place even as our roads and supply points erode to nothing. watch.

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sirpeter | Jan 08, 2012, 05:35 PM EST
ciaradexy.Chances are the Euro will not fall.Keep a close eye on what's happening in Europe and the Euro crisis.If you have access to a balk of cash.The banks have loads of houses and they want cash.If you can prove to them where you got it.You can get a very good deal.I would make a move now!!By march the Euro crisis could be over.Once fiscal union and stability is in place in the Euro Zone.The banks then know things will only get better.Or you could wait and see will the Euro fall or anything else that might happen.Been watching for years so I have.Now is the time to move.But make sure if you do buy you don't leave yourself broke.You would want a job and 20 grand back up,just in case disaster strikes or you might end up losing your frilly knickers.

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ciaradexy | Jan 08, 2012, 12:53 PM EST
I have my eye on a few houses at the mo. They were about €400k 5 years ago and now they cant sell them for €170k! Its great!

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