Taoiseach Bertie Ahern has made light of the relentless rise in property borrowing and said there was no indication of a downturn in the property market, writes Arthur Beesley, Senior Business Correspondent, in Druids Glen.
Only days after the Irish Financial Services Regulatory Authority warned banks to set more money aside for mortgage defaults, Mr Ahern said he believed there was no great problem in the property market.
"Construction is hugely strong at present and looks as if it will be for the medium-term," he said at the Irish Management Institute annual management conference in Wicklow. "I'm always sceptical of the glass half-empty."
He was particularly critical of analysts who predicted a downturn in 2005 and 2006 and said that people who avoided buying property on the basis of such advice now faced higher prices. Bodies such as the Central Bank, the Economic & Social Research Institute, the Organisation for Economic Co-operation and Development, and the International Monetary Fund (IMF) have issued many warnings about the Irish property market.
In late 2004, for example, the IMF said the "possibility of an abrupt unwinding of the housing boom" was a big risk to the economy.
However, Mr Ahern indicated yesterday that he was untroubled by concerns that the rise in borrowing cannot be contained.
He was speaking to reporters after an address in which he said social partnership was capable of meeting the challenges posed by the arrival of migrant labour.
The Taoiseach said he had listened for seven years to warnings and arguments about difficulties in the construction sector. "I think you have to look at the asset. This is the question: if you are borrowing 'x', if you sell the asset, if there's a bit of a downturn, will you get 'x' back in return? That's the issue. At the moment, there doesn't seem to be an indication [of difficulties].
"I mean quite frankly, if you had taken the advice a year ago you would have lost a lot of money. Everybody said we're going to see a huge downturn in 2005 linking into 2006 - they were entirely wrong.
"Really we should have an examination into why so many people got it so wrong. My view is there's not a great problem. Really, the bad advice of last year given by so many has maybe made some people make mistakes, that they should have bought last year."
On the dependence on property in the economy, he said similar issues emerged in the late 1990s.
"Of course there are always problems, but out of all those problems there's advantages, and we should just keep making sure that we have all our sectors as strong as we possibly can so that if one goes down a bit, that the others can carry it."
On the labour market, he said local politicians found it "hard to explain that there were unemployed carpenters and builders in their towns when there were huge building sites going on and that there were no Irish working on them". Mr Ahern said: "We have to work our way through that. There's no good saying it's not there."
He said foreign workers must be treated equally. The census this month was likely to show that the number of foreign workers has risen to 9 per cent - the same rate as Britain - from 2 per cent 10 years ago. The same change happened over 60-70 years in Britain, he said.