Property prices predicted to fall 90 per cent

Property prices predicted to fall 90 per cent


Castlebar economic forum told worst is yet to come

A large gathering in The Linenhall in Castlebar were last week told by leading financial analyst Nicole Foss that the historical evidence suggests that the current bounce in the Irish economy is only a temporary reprieve.
Ms Foss, regarded as one of the world’s foremost authorities on financial bubbles, was the keynote speaker at the Community Solutions to the Global Economic Crisis meeting, which was attended by large numbers from all over the country. She is former editor of ‘Oil Drum’ and founder of financial analysis blog ‘The Automatic Earth’.
During her hour-long presentation, Foss argued that financial bubbles are predictable in nature: The initial phase of investment yields high benefits for the first entrants, but the subsequent yield for later investors gradually falls, until eventually any remaining investors are left holding ‘an empty bag’ of worthless assets. By this point all credit has dried up as successive lenders get their fingers burnt. Finally investors attempt to flee the market. There is always only one outcome, says Foss: a rapid deflation of the bubble.
The collapse of the Irish housing bubble has followed this path, but there was disbelief among those present when Foss said that the value of property would fall by an average of 90 percent from its highest point. Her assertion was illustrated by graphs depicting the trajectory of historical financial bubbles – the key message being that the finishing position in terms of worth, was always lower than the original starting point. Or as Foss put more bluntly: ‘The scale of the hangover is always proportional to the size of the party that preceded it’.
Foss also explained the recent ‘green shoots’ phenomenon, which she described as ‘gangrene’. She pointed out that all previous financial crashes had exhibited some element of bounce or rebound, usually quite early on, before the final precipitous descent set in. This bounce phase has been evident in many countries, including Ireland, over the last few months. However, Foss warned there were many signs that the second, more serious deflationary phase was now gathering momentum, both at domestic level and globally.
Having spent the bulk of the presentation describing the nature of the financial bubbles, Foss then moved onto possible remedial actions for local communities. She emphasised the importance of strengthening community, maintaining good health, reducing existing debt and learning useful post-crash skills.
A question and answer session followed the talk. Questions were fielded by Foss, Mark Garavan of Feasta and GMIT Castlebar, sustainability strategist Michael Layden of Arigna and the North West Group, and Andy Wilson, secretary of the Mayo Sustainability Forum, who organised the event.
The Mayo Sustainability Forum plans to hold a follow-up event - ‘Where do we go from here?’ - during the autumn. This event will examine in detail some of the specific steps that local communities (and the individuals within it) can take. It will cover debt reduction, investment strategies, re-skilling, enhancing communication, sharing information, community education, initiating community projects, resilience building and how to best utilise local resources.

For more information Phone Andy Wilson, secretary of the Mayo Sustainability Forum, on 087 6714075 or email forum@sustainability.ie.