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Why The Irish Economy’s Heading For A Fall

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In Ireland, everything hinges on housing

It is in housing, and an over-dependence on it for economic growth, that Ireland is really storing up trouble for itself. The warning signs have been apparent for years :

  • Ireland has the highest rate of housebuilding in the EU, per head of population. Housing starts are by OECD definitions 26% above sustainable levels.
  • Housebuilding accounts for a heady 15% of Irish economic output, and provides 17% of tax revenues.
  • Property accounts for a dizzying 64% of Irish bank lending.
  • House prices have risen by 270% since 1996.
  • Three-quarters of mortgage and consumer debt in Ireland is at floating interest rates, so when rates rise borrowers squeal.
  • 15% of Irish property is actually empty.
  • Rents, which indicate the underlying level of demand for property, have fallen since 2000.

In 2007 so far, house prices have fallen 1%. This is merely likely to be the calm before the storm.

According to Professor Morgan Kelly of University College Dublin, house prices adjustments after property bubbles are quite consistent...

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