The recent (April 16th) RTE program on the prospects of an Irish property crash highlights the economic legacy that is being left by the present government and what the incoming administration will inherit. What is immediately apparent to this reader in travelling around the country are the results of the apparently cosy relationship between Fianna Fail and Irish developers. The relationship which resulted in the reintroduction of tax breaks on developments in 2002.
There are an increasing number of second hand houses on the market for months on end, under bidding is now commonplace. Ghost towns of large empty office and retail buildings are emerging throughout the country, Tralee being one of many examples of unsustainable overdevelopment in many mid-sized towns. The opportunities afforded to developers through the generous tax breaks, no doubt negotiated at the Galway races, has resulted in a culture of greed influencing the planning process at both national and local levels.
We have seen an economy develop since 2002 which has resulted in 25% of working males now in construction, which is at the beginning of a downturn. Where will these workers go as jobs dwindle? Not to manufacturing which has seen a 5% decrease in jobs in the lifetime of this government. They may find employment in the low paid services industry but will that be sufficient to support their 100% mortgages? I doubt it.
Inflation is running at 5.1%, leading to increased wage demands from the public sector unions, stamp duty income is starting to fall off, increasing job losses will also reduce income tax revenue and VAT returns will be hit by decreased consumer spending. This government has built an economic house of cards in which the exchequer has become highly dependent on the stamp duty which is ultimately generated by the private credit of Irish citizens. The snowball of the property boom has driven wage demands and reduced our competitiveness in generating sustainable industry and jobs. They have been helped of course by an opposition which has done nothing to try and halt this indirect exploitation of Irish workers by opportunistic developers.