There are lots of aspects of the performance of the Irish economy that people disagree about. However, I had been under the impression until this week that everyone agreed that Ireland experienced an exceptional increase in real housing prices in the during the period before the recession.
It turns out, however, that I was wrong. Not everyone agrees with this. Earlier this week, there was a discussion on this website of a paper by Carmen and Vince Reinhart, which reported some figures for real house price appreciation between 1997 and 2007.
Among the figures reported by the Reinharts on Table 4 of their paper were the following:
U. Kingdom +150.1pc
These figures have been debated elsewhere on this site but not in a way that would clarify the key fact. That Ireland really did have a larger increase in real house prices than these other countries is not that hard to check.
Here are the facts. The Department of the Environment reports that the average second hand house in the Republic of Ireland cost €102,711 in 1997 and cost €377,850 in 2007, an increase of 268%. The average value of the CPI increased by 42.4 percent between 1997 and 2007. So, from the DoE figures, we can calculate the real house price increase from 368 / 1.424 = 258. In other words, real Irish house prices rose by 158% from 1997 to 2007. And, for what it’s worth, the real increase from 1995 to 2007 was 246%.
So, yes we really did have a huge house price boom. Certainly a boom that was bigger than occurred in Spain, Sweden or France. Morgan Kelly didn’t just make it up.
Cue comments from house price boom deniers, flat earthers and folks who believe Elvis is alive and living with Michael Jackson …