Ireland Second Wealthiest in World, Yet are we Mad?

According to Bank of Ireland’s Wealth of the Nation Report (Hat tip Finfacts), we are the second richest in the world after the Japanese. With €196,000 per head of population we are doing well. It certainly is an interesting statistic that shows the growth of the nation is motoring on. However 72% of Irish wealth is from property with residential property worth 671 billion. Take out housing from the data and we are slightly below average financial wealth. Now they explain it with two reasons. 1.) The newness of the wealth and 2.) the returns that property make are simply the best place to invest money anyway and indeed that does make sense with the growth in house prices the last few years and population growth means people can’t take over current housing stock. But a few more things need to be considered when looking at the worth.

Firstly there is the belief that the housing market is overpriced by 15%. Meaning you can throw a billion odd of that figure. Now considering most people are living in their homes and not likely to sell that means that overpricing of the market means are people are paying for something that is worth less then the price they pay. But unless they are going to sell their house it does not matter that much. Especially when the Bull McCabe mentality kicks in.

The Field has to one of the greatest Irish films of all time. The Field was “bare rocks” when his father started to rent the field. The Bull turned it into the lovely field with his own “bare hands”. “digging the rocks” out of it and fertilizing it with seaweed when it was threatened by being put up for sale. To him “It’s MY FIELD”. The Bull’s obsession with the Field cause him to descended into insanity and he lost all because of his obsession for land. Richard Harris was robbed at the Oscar when he didn’t win. But that same obsession for land that drove the Bull is the reason that we have such growth in housing.

Not only does housing make up most of our wealth but also some 12% of the workforce work is in the construction industry and is about 22% of the GNP of Ireland. The price of land has rocketed. Now most petrol stations land is worth more then the business and the only thing that can be built on that land to make back the money it cost to buy it is housing. In the country on average42.5% of the price of a house is the site where 10 years ago it was about 12% .

One of the sentences that grabbed me in the OECD report published last year on Ireland was that

A property tax could be introduced to help fund local infrastructure. This would also redistribute some of the windfall gains that accrue to people living close to new roads and public transport links and shift the cost for local services such as water and sewerage facilities so that businesses and households each pay their fair share. While this makes economic sense, in an Irish context where over 80% of the population own their own homes, it is currently seen as a non-starter.

80% of the Irish population are owner occupiers of their own homes. Now to me that seems a bit low. With the amount of people going on Radio shows and writing about how it is a disgrace that so few people can afford a house anymore and most people would agree. I am sure that many of a leftist precession say this is an indictment of how 20% of the population are being left behind. But read that sentence again. It seems to be saying that 80% is not only high and unusual but kind of crazy. So I decided to a bit of research. I found this one survey about owner occupier housing in Industrialised nations. In Canada the figure is 65.8%; in the US it is 67.9%; in the UK it is 70%; in everyone’s beloved Sweden it is 55%; in Germany the figure is 40.5%. The country in our vicinity is Slovenia at 82%. Now add into the fact that our demography makes us the youngest populations in Europe. When for instance only 21% of young childless couples in France> own a house. The fact that we have 80% is absolutely astounding and I am assuming by population the OECD means over 18. So why do we have such high house ownership.

Tenancy in Ireland has always more then the typical European class struggle yoke. The French revolution was the ruling first and second estate been taken down by the rest. It was about breaking free of the control of the upper class. It was a class struggle. The Irish battle against tenancy wars has always been intertwined with nationalism. The British aristocracy owned most of the land and the Irish were the tenants. The leader of the Land League, the organisation that fought for Irish tenants rights was Michael Davitt a leading Fenian (pre-cursor to the IRB which was pre-cursor to the IRA). The winning of the land war with the Wyndham Land Act 1903. Land reform in Ireland was part of the “Killing Home Rule with Kindness” policy of successive British governments. But it didn’t work in fact the opposite happened it increased nationalism and support for Home Rule. Later it probably also led to the rise of republicanism. As when the normal Irish came to own the land they questioned even more why a foreign power controlled them. Thus perhaps in the Irish psyche, tenancy is a kin to being dominated and while ownership is a kin to freedom. Added to the fact that most people see rent as “Dead Money” as money lost that can not be passed on to their children which of course does have some merit. But perhaps that has something to do with that previous mentality. That lack of the ability to own.

Maybe this is the reason so few people in Ireland let, once they find a partner or start a family. In much of Europe there is a strong rental sector with many people rent for their lives . This is built on a strong foundation of tenancy rights but equally on a strong demand. Tenancy rights have never ever been a major political issue because it does not really effect that many people, there is not a large ground swell of opinion in favour of it. Where as with planning permission we all now how much that is a political issue. Why are we different to the rest of Europe? Yet when someone has enough money for a deposit they go out and get a 40 year mortgage. They will immediately dive into the property market. Houses prices are ridiculously out of the reach of many yet they sacrifice everything to reach. They are willing to spend 4 hours a day in traffic losing out family time. They are willing to sacrifice staying at home to raise their children to own a house. They sacrifice entertainment, fun practically everything to get ownership of an over valued piece of property.

Much of the last election was fought (but not won) on quality of life issues. About people commuting great distances and suffering because of it. Yet the major cause of all these quality of life problems come from the fact that we in Ireland are intent on not renting but owning. A kind of Bull McCabism (I could so be David McDreamy) that drives people to the heights of insanity sacrificing everything in life for a 3-bed semi-d in Carlow. Yet little is ever talked about it. We talk about the need to change the drinking culture, and all manner of other cultures. Yet we never ever talk about this culture. The culture that is causing so many of the problems in modern Ireland. The culture of saying no to rental. And why? Is it because is is even more in our physic then drink?