The domestic property market continues to soar, despite rising interest rates. Although double-digit increases in house prices have been common for years, some of the prices being reported for sales in Dublin at present are jaw-dropping. Those who have been warning that the property market is an over-inflated bubble have gone quiet, for fear of looking even more foolish if this upward momentum is maintained. But now might be a good time for them to shout their warnings, because their chances of being right are rising, notwithstanding the demographic projections of many economists (most of whom work for banks with a vested interest in encouraging people to borrow more).
What's happening now is very like what happened on the stock market in late 1999 and into 2000. Technology stocks soared in value to unsustainable levels but the few who pointed this out were mocked and derided, as the clever made big profits on selling to suckers. Many of the doomsayers simply shut up. Then came the inevitable, but largely unforeseen, crash and big losses were incurred by those who came late to the party.
On 7 April, Bertie Ahern did something extraordinary. He told the Irish Management Institute's annual conference that there should be an "examination" into why there had been so many predictions of economic downturn in 2005. These, he claimed, had led some people to mistakenly hold off from buying property, although the predictions "were entirely wrong".
While all economic projections should be regarded as little more than the opinions of those making them – even from ministers for finance or George Lee – it is hard to recall many who were declaring an actual downturn in 2005 as a certainty. They may have warned, incorrectly so far, that the property market could not continue in its upward projection, and there was a danger of a fall in prices, but such warnings as to what could happen fell well short of saying that it would (with the exception of the Economist magazine).
Those who were cautious as a result of listening to these opinions – the people whom Ahern seems to have sprung to support – have to bear responsibility for their own decisions and actions. And in any case, what good would an examination of those who made the predictions do? Would there be sanctions for getting it wrong?
The suspicion must be that Ahern is fearful of these siren voices being heard and heeded over the next 12 months, prior to the general election. His Government is relying heavily on confident consumer sentiment, the feel-good factor to get itself re-elected. Much of that sentiment based on the support provided by property values. If those buying now see their investments – either here or abroad, especially with loans secured on their first homes – lose value they may be grumpy come election time. It could also impact on consumer spending, notwithstanding the planned SSIA impact of extra cash.
So was our Taoiseach bullying pessimistic economists into shutting up, lest they scare the voters?