HOOKE AND MCDONALD: TURTLES ALL THE WAY DOWN

The Irish residential property market has now reached a turning point and already there are encouraging signs of a pick-up in activity, with sales enquiries through Hooke & MacDonald increasing steadily. This momentum will follow through into the autumn selling period, boosted by the resolution of the stamp duty issue and as the interest rate cycle reaches a peak. (Hooke and McDonald, press release, August 2007)

Never let a press release get in the way of a marketing decision.

Over on www.finfacts.ie, it is reported that Hooke and McDonald have withdrawn from sale the apartments within the landmark Alliance building in Dublin’s Ringsend.

The landmark structure forms part of a 7.8-acre site bought by developer Liam Carroll from Bord Gáis in the mid 1990s. Six hundred apartments were built here, along with the office complex now occupied by Google. A further 200 apartments were built in the former gasholder.

The first 50 apartments were launched in June 2006 with prices ranging from €675,000 to just over €1 million. However, it is not clear how many of these were sold. The entire scheme has now been withdrawn from the market, according to the selling agent Hooke & MacDonald.

Only last month, Hooke and McDonald were telling us that the Irish property market is on its way back up, if not today, at least soon.

Hooke & MacDonald believe the European Central Bank could cut interest rates by half a per cent in 2008 and a further half per cent in 2009, resulting in the ECB base rate falling from its current level of 4 per cent to 3 per cent within the next eighteen months. Such a move will offer a major boost to both the economy and property market, with the latter likely to see a significant pick-up in buyer activity. (Press release, 4 October 2007)

Of course, Hooke and McDonald do not tell us how people are going to be able to get access to the type of credit needed to buy their €1,000,000 apartments, given the fact that easy credit has vanished up the American sub-prime arsehole. Nor do they explain how the apartments are worth €1,000,000, given that there’s around 10,000 empty new apartments in Dublin alone.

www.finfacts.ie also has an interesting quote from the head of marketing at Permanent TSB, Mr. Niall O’Grady:

There’s little surprise in the figures for October which confirm that there was little spark in the market during the traditionally strong autumn selling season. Clearly potential purchasers remain cautious and demand is sluggish. Deferral of purchase decisions is now beginning to impact on the rental sector where rents are rising steadily in response to strong demand.”

Rents in Ireland dropped by 0.2% in September, according to the property pin. At the same time, Daftwatch reports a doubling of the supply of rental properties on Daft.ie. The argument that Niall O’Grady seems to be making is that supply is setting the prices. The implication is that there is still a huge demand for property in Ireland, but that people have taken a ‘wait and see’ approach, and as a result they are renting, instead of buying, property.

The fact is that for the last ten years supply has far outstripped demand. The mortgage market in Ireland dried up around June 2006 because mortgages become completely unaffordable. On top of that, the international credit crisis - which is never mentioned by the marketing directors of Irish mortgage suppliers - has meant the end of incentives to supply easy mortgages. Irish property owners are sitting on property, instead of renting it out, it is true. However, even with that, rents, on average, have dropped.

This is a strange time for the Irish property market. The myth of supply setting selling price is beginning to transfer over to the rental market. We are hearing constantly the new myth that rents are going up, even though the facts say otherwise. I’m reminded of Stephen Hawking’s opening anecdote in his book, A Brief History of Time:

A well-known scientist (some say it was the philosopher Bertrand Russell) once gave a public lecture on astronomy. He described how the Earth orbits around the sun and how the sun, in turn, orbits around the centre of a vast collection of stars called our galaxy.

At the end of the lecture, a little old lady at the back of the room got up and said: “What you have told us is rubbish. The world is really a flat plate supported on the back of a giant tortoise.”

The scientist gave a superior smile before replying, “What is the tortoise standing on?”

“You’re very clever, young man, very clever,” said the old lady. “But it’s turtles all the way down!”

In Ireland - when it comes to property - it’s not facts, but turtles, all the way down.