By Ronan Lyons
The spectacular and painful bursting of Ireland’s property market bubble since 2007 has brought to an end what one could term Property Market 2.0 in Ireland. The country’s “Property Market 1.0” was built in the late 19th and early 20th centuries, when successive London administrations made huge amounts of credit available at preferential interest rates so that tenant farmers could buy their plots. Throughout the 20thcentury, the urban poor remained as tenants while only the tiny but growing urban middle class took part in any sort of mortgage market.
“Property Market 2.0” emerged in the 1980s and 1990s, as competition among banks and building societies brought mortgages to the masses. Barely had this transformation time to take hold, though, then Ireland was a member of the Eurozone, with inappropriately low interest rates and a practically infinite supply of credit from global credit markets. Along with lax regulation of the banking and building sectors, the result was perhaps the biggest national property market boom and bust of the modern era.
Learning from the (recent) past
What will “Property Market 3.0” look like? As yet, nobody knows. It is safe to guess that, at least in its early days, it will be haunted by what has just happened. The worry is that initial prudence will eventually decay away, as institutional memory fades. The nightmare scenario is that at some point in the future, the 2020s or the 2060s, the lessons we’ve learnt are thrown away with a simple “Well, that could never happen now/This time it’s different/Insert self-deception here”.
So what can we do? An idea I’ve explored at length elsewhere is the importance of information. Having an official real-time database of transactions prices doesn’t just help people like me churn out research papers. It gives normal people the information with which to make informed decisions about whether to buy or rent and for how much. And in doing that, it actually reduces the chances of a bubble as bad as the one we’re recovering from now happening again. The national house price register looks like it is now government policy, so today, I’d like to focus on a couple of other ideas.
full article at source: http://www.ronanlyons.com/2011/05/31/ideas-for-building-property-market-3-0/
Ronan Lyons has posted a new on the Irish property market
However I do not agree that home ownership in Ireland should have a significant impact of a future Irish economy as I am advocating a totally different approach to home ownership in Ireland.
Firstly I do agree, that there should be no variable interest rates on home mortgages .But I also believe that the Banks should not be involved in giving out such mortgages in the first place .I do not accept that home ownership should be subject to the commercial turbulent system we currently are enslaved to. No we need to have a system administered by the post office and credit unions where by a citizen can take out a fixed term loan at a fixed low interest rate of not more that 2.5%.This then can be passes on to siblings of paid off with a adequate insurance police in place, this insurance should also set up by the government. The point is that home ownership should not be subject to commercial dictates whatsoever .However it will be necessary to have some rules for example the mortgage amount to be taken out will only cover that of an average price home within the state and so if the price of a property is higher then the buyer must have the difference amount themselves Banks will not be able to top up the amount and take in as security the deeds of the property as they will be excluded from doing so. To be clear I am talking about home ownership and not commercial buildings or business .The citizens will only be allowed to get one and only one of these mortgages, Moving up the property ladder will be deemed as a commercial move and thus subject to a commercial bank mortgage. This government backed move will only be for ones first home.
This idea may have some more thought to be invested in it but I think it is well worth a shot.
The bottom line is, home ownership should not be subject to any commercial interests but cater for a social necessity.