Property is back on the headlines this week due to a report from the Irish Central Bank entitled why are house prices still falling. The report is a pretty standard and non critical look at the Irish housing market pointing out that:
the severe downturn in the Irish residential property market has already become one of the OECDs largest and most protracted Meanwhile estimates of asking prices, from sources such as Daft.ie and MyHome.ie were also indicating substantial falls from peak, of 51.8 per cent and 43.1 per cent respectively at the end of 2011. Despite the evidence from these indices, many wonder whether they are a true reﬂection of where house prices are currently at, pointing to the results of recent property auctions which suggests house prices may be as much as 70 per cent down from peak levels.
The report goes on to consider what the true value of housing should be. It does so by looking at four models which
…are a form of inverted demand function where house prices are expressed as a function of key market fundamentals
Market fundamentals? Where have we heard that before? Back in 2007 one of the key arguments of neo-liberal economists who played a deeply ideological role pre-crash was was ‘the fundamentals are sound‘. The Report Concludes:
The persistent decline in Irish house prices and,
in particular, the acceleration, relative to that in
2010, of the fall in 2011, poses a signiﬁcant ﬁnancial stability concern. This note has, using standard models of house prices, examined where actual prices are, at present, compared to fundamental levels. Most of the models suggest that Irish prices have now overcorrected by up to 12 to 26
And interestingly the report puts some blame on low prices on the lack of mortgage availability:
A growing array of evidence suggests that
the diﬃculty in providing mortgage ﬁnance in the
Irish market is having a contractionary impact on
market activity and price levels.
Now it goes without saying that the report at no point considered any approach to housing outside the market, but to be fair if the brief was to investigate why house prices continued to decline in the market that might be understandable. The report however does not seem to take into account the political economy of the wider crisis, (national or international), the political side to the crisis including government policy and certainly there is no consideration of any extra-market possibilities. The report also seems to be predicated on a recovery that is forever just around the next corner.
Now how does the media deal with the report? With critically minded reporting treatment the wider issues, problems with the report and indeed the source itself? Or how about:
In a front page piece of entitled ‘Houses 50,000 below their true value – bank’ the report is treated by the Irish Independent without any critique and indeed as uncritical as the report itself is of orthodox economics the Independent’s treatment seems to pick an even more optimistic tone. While leaving out much of the report dealing with the crash itself the Indo tells us that:
But the new research suggests that house prices could begin rising again if the banks begin lending, or new lenders come into the market.
Inherent in this is the assumption that house price rises are a good thing which of course no suprise as the Irish media see housing through a market orientated frame, that is that the primary role of housing is as a commodity to be bought, sold and speculated on rather than actually house people. Beyond this of course is the solution that ‘all we need is a few banks to lend and or some new entrants into the lending market.’ Now is it just me or are we not in the grips of the bursting of a massive international credit bubble, and such simple market orientated solutions may not exist. The article continues to tell us that:
…the report warns that the “logical” price of a house will only be realised again when buyers regain their confidence, and banks have the money to be able to lend again.
Again this is the idealistic framing of confidence being the problem, rather than the materialist framing of half a million people being unemployed and those in work having suffered vicious pay cuts alongside the austerity measures taking billions out of the economy. Though at least they seem to acknowledge that the banks may have a slight material problem of being stone cold broke. This is coherent with the market framing as again confidence is most important for housing speculation rather than those who buy or rent a house as somewhere to live. Banks we are told:
…are only giving out about 10pc of the mortgages compared with the height of the boom. They are struggling to find the balance between beginning to give out more mortgages and not being seen as lending recklessly again. They are also coming to terms with a massive lack of funds.
And when considering who might be the expert to call on to discuss this, let’s see we have an excellent group of Geographers in NUIM who have written numerous reports on the housing collapse, some of their work can be seen on the life after NAMA blog. Or on the other hand why don’t we ask a stock broker?
Analyst Brian Devine of NCB Stockbrokers said the report was right to emphasise that Ireland’s rising population and relatively young population would lead to a stabilisation in prices.
So there you have it, the fundamentals are sound.
What neither the original report or the Irish Independent’s treatment consider is the tens of thousands of empty houses nor the tens of thousands of people on the housing lists. Nor indeed that there may be a fundamental problem with leaving housing to an unregulated market, or indeed a market at all. This is because in the market framing of housing it is the market that is key rather than social need. RTE in a similar frame states Irish property prices have overcorrected – Central Bank while the Irish Times in its uncritical treatment of the report declares house prices undervalued by 26% says bank. The media treatment of this report showing little change to media reportage or treatment five years into the property crash.