Are property bubbles caused by the construction sector?

Slideshowbob

Enda Kenny seems to have said that yesterday:

http://www.independent.ie/irish-news/construction-industry-must-stop-another-bubble-taoiseach-29615751.html

Surely it's up to those moreso that control the flow of money towards property and construction to prevent bubbles? Wouldn't control be better exercised by lenders and regulators?

Or am I wrong in my interpretation?

godtabh

how could the current bubble be created by the construction sector? Nothing has been built for years

ezra_pound

godtabh wrote: »

how could the current bubble be created by the construction sector? Nothing has been built for years

Construction creates supply of property.

More supply needed. Article is pretty clear.

AltAccount

I don't see how construction could cause a bubble - construction increases supply, therefore probably reduces the bubble. It's demand and (percieved) scarcity that drive up prices and create bubbles.

ezra_pound

AltAccount wrote: »

I don't see how construction could cause a bubble - construction increases supply, therefore probably reduces the bubble. It's demand and (percieved) scarcity that drive up prices and create bubbles.

Exactly. Read the article.

ezra_pound

Has anyone who has posted in this thread, other than me, actually read the article?


Face to palm

AltAccount

I did. I think EK is focusing on the wrong people.

Construction reacts to demand, and builds where ti can. IMHO it's planners who dictate where building can occur and should control the construction so it increases in areas that need it, and so that it doesn't in places that don't.

But why would EK point the finger at people he can directly influence? That'd be crazy talk...

ezra_pound

AltAccount wrote: »

I did. I think EK is focusing on the wrong people.

Construction reacts to demand, and builds where ti can. IMHO it's planners who dictate where building can occur and should control the construction so it increases in areas that need it, and so that it doesn't in places that don't.

But why would EK point the finger at people he can directly influence? That'd be crazy talk...

No you didn't.

This post is completely at odds with your last one.

ezra_pound

Look unless a lot of houses are built in Dublin next few years there will be a dub prop bub. Simple

rumour

This is political posturing by Kenny. The construction sector only exists when the banking sector decides to fund it. It costs money to fund bricks and mortar. The politically controlled NAMA is the biggest player in town it is as transparent as lead and all in our national interest.

The motivation is to stablise a base in the property market hence stabalise the balance sheets of our principal banks and avoid Morgan Kellys default scenario. A course in change management in any MBA course will tell you to focus everyone on 'over there' while you tinker with tthings 'over here'. Then when the module on media management comes up you learn how to define your target and communicate your message effectively.

Generally when you join these dots and put forward a theory, the response will include varying use of 'conspiracy' to discredit the theory. Which is quite strange when you think the best courses in the country teach you all about these things.

Why Irish journalists continually refuse explore this blatantly obvious connection is I'm tempted to say beyond me, but its not, they have to much of a vested interest.

bbam

Irrational people cause property bubbles.
Friends of ours moved from Across the country to Dublin just so they could buy a property before prices take off.
There seem to be enough like minded people out there at the moment and the competition is creating the bubble they are trying to beat. A self filling prophecy if you like.

People keep saying property is overvalued but I don't think this is true.
The value of something relates to demand and ye value people place in it. Irish people place a high value in home ownership thus prices will creep up. There is alot of standing on the sidelines waiting to see at the moment, but once people feel the time is right they will buy, create demand and bring prices back up. This is what Dublin is seeing at the moment.
You'd be surprised, the group mentality is still out there. Once some buying starts in an area, others who have been standing by will jump in quickly to "get a deal" or "in before prices go up" or whatever they use to justify doing it.

AltAccount

ezra_pound wrote: »

No you didn't.

This post is completely at odds with your last one.

Demand and scarcity creates bubbles.

Construction creates supply, and can therefore relieve bubbles.

Construction can't just begin, they are limited by the planning process. It's the planners who allow construction to create supply, or restrict construction to limit oversupply.


How are my posts contradictory? Did you even read them?

Face to palm :rolleyes:

rumour

AltAccount wrote: »

they are limited by the planning process. It's the planners who allow construction to create supply, or restrict construction to limit oversupply.

Agree with everything you say but see the planning process as somewhat secondary, its money supply first(banks) then what you can do with the money(planning process). Government has a hand on both, central government is controlling the money supply and local government the planning process. The commonality is parish pump politics.
Generally this is a good model if properly regulated and people are not corrupt, however numerous tribunals and even our current crisis demonstrate how parish pump politics can really F%^k this up. The compromises intrinsic to politics eventually erode the standards. Someone has to say NO and that is never popular and doesn't win votes.

Alan Shore

Two sides of every story. Supply and demand.

In 2005 there was almost 90k housing units constructed but prices continued to rise so I don't think that was a main factor.

On the demand side there was the natural demand that a booming economy required but there was also the very relaxed approach to lending (supposed to be controlled by government) the generous taxes allowances (supported by government) and the government cheer leading for increased property prices.

The more I hear from this government the more I think that they do not actually understand what's going on.

Victor

Blaming or absolving the construction section as such is incorrect.

While construction may create supply, it also creates demand for construction services. Construction services that can't be used elsewhere.

Cost free speculation (low interest rates, liberal lending policies, no property tax), hoarding and building in the middle of nowhere all created problems.

Fiskar

Is there the land to build on in Dublin? People have to temper expectations with location. If you want to be near that school or bus or luas connection then an apartment as opposed to a house may be the only option.
Housing stock will always be constrained in Dublin with prices to match.
Perhaps looking up rather than out may be the way forward?

Idbatterim

heres a solution, build bloody family friendly apartments, decent sized rooms with proper soundproofing etc... Build them in areas that are well serviced by public transport and build high density...

Farmer Pudsey

Idbatterim wrote: »

heres a solution, build bloody family friendly apartments, decent sized rooms with proper soundproofing etc... Build them in areas that are well serviced by public transport and build high density...

There is only one problem in general people do not want them. In reality with a population of 4 million in an area nearly half the size of England and a quarter the size of France or Germany we do not necessary need apartments. Our biggest issue is our failure to plan properly.

robp

Farmer Pudsey wrote: »

There is only one problem in general people do not want them. In reality with a population of 4 million in an area nearly half the size of England and a quarter the size of France or Germany we do not necessary need apartments. Our biggest issue is our failure to plan properly.

Over use of one off housing has created far too many car addicted overweight commuters.
Apartments when made well create a higher quality of life for the average person. I think Irish people are becoming more used to them.

SpaceTime

The constructions sector constructs buildings when it's hired to do so.

The property speculation / investment sector is where the demand for construction services came from and the money to pay for those came form the banking sector who lent to the speculators and the end customers.