Sir, – As regards the Central Bank report claiming house prices have now “over-corrected” by 12-26 per cent, I note that its “models” (quotes necessary given the past success of Central Bank modelling) indicate at most a 20 per cent over-valuation of property at the peak of the property bubble (Central Bank Economic Letter, Vol. 2012, No. 5, Figure 4).
Anyone who believes prices were only 20 per cent over-valued before our property crash is welcome to believe prices are under-valued now, but they’re probably deluding themselves on both counts. – Yours, etc,
Sir, – The Central Bank has just released the findings of a report into property prices on the Irish market (Dan O’Brien and Fiona Gartland, Front page, April 30th).
This is the body that time and again during the boom claimed the fundamentals of the economy were “solid” when it should have known we were utterly insolvent. It now wants us to believe that Irish property is in fact undervalued and not simply falling to reflect the fact that we are a small island with a small economy equipped with few natural resources. I am no economist but its arguments are dubious.
It cites “lack of investor confidence, negative future house price expectations and an uncertain macroeconomic outlook” as responsible for a present negative market verisimilitude which is, apparently, masking the true value (in the region of 25 per cent more than present). This means that property prices circa 2009 would give the “true” value.
The three arguments above, however, cannot be attributed to a confidence deficit based on a chimerical reality. Investors lack confidence and believe the market will not “revise” upwards because they know the macroeconomic outlook is terrible, not because they are deluding themselves.
Just as one cannot talk oneself into a recession, one cannot talk oneself out of one either. – Yours, etc,
Sir, – So, the good people in the Central Bank reckon that house prices have drilled through the floor by up to a whopping 26 per cent, as if there was some sort of aspirational price. The current price of a house is what it is, regardless of what people think it should be, what they would like it to be, what they think is fair, what they hope it will be, or any other emotive guff.
If the banks think the assets are undervalued, then why are people having trouble getting a mortgage? – Yours, etc,