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Ireland's New Real-Estate Claptrap

From the 'great crumble' to 'demand bubble'...

ABOUT the only nice thing about our sorry métier is that we never run out of targets, writes Bill Bonner in his Diary of a Rogue Economist.

We aim for claptrap. And wherever we go, we throw a beer can out the window; we are sure to hit it.

Here in Ireland, too. A public demonstration over the weekend proved that the Irish are at least as dumb as New Yorkers.

Last weekend, we (almost) finished putting the roof on our cottage. The place was so derelict and so tiny, most people thought it was not worth saving.

It was abandoned, like the many thousands of abandoned houses in Ireland. On our little farm alone, there are three of these ruins hidden in the woods – just stone walls covered with ivy, laurel, and thorn bushes.

It was called "The Great Crumble".

A half-century ago, the Irish were so burdened by derelict buildings – both grand and humble – that the then Minister for Development joked that people menaced the government "by threatening to leave us their houses."

The little houses crumbled as their owners starved in the famine in the mid-nineteenth century...or left for America, Australia, or Canada. The big houses succumbed to taxes, debt, or IRA bombings.

And then, when prosperity finally came to Ireland, few people wanted to bother with the old wrecks. For the first time ever, Ireland had a middle class that wanted middle-class housing.

Claptrap comes in many guises and disguises. Sometimes, it is based on inconsequential error. Sometimes, it is just bad judgment.

Some people think Hitler is living under the North Pole. Some think that Pi (π) should be rounded off to make it easier to remember.

Many think their government can make their lives better by stimulating the economy, banning drugs, or blocking foreign trade.

Often, claptrap affects only the person who espouses it and draws merely a smirk from the rest of us. But almost all public policy is based on claptrap, too – which invariably makes life less pleasant for us all.

"Oh, it's crazy here in Ireland," a friend explained. "The last bubble was a supply bubble. This is a demand bubble."

Our friend follows real estate trends. He is also a landlord, investing in properties that he rents out.

"I run an ad for an apartment to rent, and I have dozens of people contacting me. And now, they're offering to pay more than I'm asking.

"We have so many people coming to Ireland to work in the high-tech industries – you know, Google, Facebook, and companies like that, many of whom have based their European headquarters here.

"The builders can't keep up with demand. The average house in Dublin is now selling for more than $600,000. And, of course, there are so many restrictions on building, it's not easy to get a permit."

This phenomenon – a boom in demand and a bottleneck in supply – has led to what the papers are calling a "housing crisis." The private sector has its seasons of boom and bust. But if you want a real disaster, you need to bring in the feds.

"Eviction banned for long-term renters," said the headline in the Irish Independent newspaper on Saturday morning. "New laws to prevent landlords from evicting long-term tenants without a clear reason..." begins the article.

Later that day, while we were working on our roof, Dubliners took to the streets; the masses were afoot...and getting up to mischief.

"Housing is a human right," said the signs. Sinn Fein, the nationalist/socialist political party, has proposed that the "right to housing be enshrined in the [Irish] Constitution."

The idea of a "right" to housing reveals the faulty plumbing of a leaky mind. In order for someone to have a right to a house, someone else would have a duty to provide it.

Who is this other person, who must be chained to his hammer and trowel so that the soft hands of a Dublin social activist can enjoy the warmth of a nice abode without paying for it?

Yes, that is the meaning of a "right" – it is something you don't have to bargain for.

There are win-win rights...such as the rights to life, liberty, and property – things we can all enjoy.

And there are fake, win-lose rights, such as the right to a new Tesla. You may get a new car, but someone has to pay for it. Likewise, somebody has to get up on the roof or you're not going to have a house.

Readers may be curious, as we were. How come Ireland has a housing crisis? Have they no plumbers, no electricians, no carpenters? Have they no stone, no cement, no lumber? Have they no builders, eager to put up houses to meet consumer demand and make a buck?

Of course, they have all of those things – thousands of them. Why, then, don't they build enough houses? Where's the bottleneck?

Zoning? Planning? Building codes? Mortgage industry regulations? Why not bring in the likely culprits and ask them a few questions?

Instead, the shyster politicians swing into action with fake rights and win-lose deals.

And there he is...over on page 30. Eoghan Murphy is Minister for Housing, Planning, and Local Government:

This government is not waiting for the market to solve the problem. The market never has. This is not a government restrained by ideology.

We are in the middle of a massive expansion in social housing provision with 50,000 homes being added to the stock between 2016 and 2021.

Well, that ought to do it. Rent control and public housing!

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

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