Authorities refused to publish house price warnings in 2004

Anthony Murphy, now at the Dallas Fed, is a renowned Irish econometrician with a strong research interest in housing markets. Back in 2004 he was commissioned by the National Competitiveness Council to study the competitiveness implications of the housing boom.

The first paragraph of his report read: “Ireland’s booming housing market has attracted and continues to attract a considerable amount of attention, both domestically and internationally. Irish house prices are extremely high by historic and international standards, both in absolute terms and relative to incomes. The strength and duration of the house price boom is unique. Many other countries and regions have experienced large house prices booms. However, at least in the 1980’s and early 1990’s, most of these booms have ended in a house price bust.”

The report, which is here, was obviously written in very judicious language but was highly critical of the fiscal contribution to the boom. (His demolition in Section 3.5 of many of the research papers written on the boom is also well worth reading). The NCC declined to publish it. Though I have a good deal of respect for Forfás and the NCC in general, I am forced to ask: how much attention might it have received, and might it have made any difference, if it had been published?

45 replies on “Authorities refused to publish house price warnings in 2004”

Thanks for making this report available and thanks to Anthony for writing it. Any thoughts as to why the NCC refused to publish it? It couldn’t have been for quality reasons. What other “rock the boat” reports are lurking the woodwork?

From the executive summary

Section 23 type reliefs for residential property add to demand and have large deadweight and displacement effects. The current rate of CGT on development land is very low and should be reviewed. Some form of site value taxation would reduce land hoarding. There are good social and economics reasons for wanting to capture a greater share of planning gains for the public.

Not the kind of report that McCreevy/Ahern would have lauded the NCC for producing. Reduction of CGT from 40% to 20% was McCreevy’s brainwave (another oxymoron?)
Eight years later some Section 23 reliefs are still in place.

I think the NCC, as a State funded body, owe an explanation to the Irish public as to why this report was not published or suppressed or whatever.

‘…Though I have a good deal of respect for Forfás and the NCC in general..’


This is a very interesting report. It’s very interesting to see.

I doubt that it would have made any difference if the report had been published at the time. It was hardly a secret at the time that there was a housing bubble in Ireland. For example, the Economist magazine regularly ran articles on the global housing bubble, and frequently referred to Ireland in them. We had lived through the bursting of the tech bubble just a few years earlier, so everyone was familiar with the ideas of bubbles.

I guess that the reason that Forfas and the NCC didn’t publish the report is that it would have been “unhelpful” to the government. Government policy at the time was that the housing bubble was a good thing, and that only cribbers and moaners worried about the extraordinary transfer of wealth from the young to the old, and from the internationally traded parts of the economy to the property industry.

If the Forfas and the NCC had published the report it probably would have undermined their credibility with the government. And it might also have been seen as irresponsible and unpatriotic to be undermining the property market and “talking the economy down”.

No difference and did anyone catch Bacon on 6-1 last night… NAMA / Govt should intervene in property market to stop further price falls… You could not make it up…

This is, to an extent, a smoking gun by virtue of its non-publication.

National Competitiveness Council members should be asked to attend before an Oireachtas Committee to explain why this report was not published.

I know this kind of speculation is an interesting academic parlour game – and is likely to attract a few rants here, but, for goodness sake, what is the point? It reminds me of an observation a friend made some years ago on the infamous tribunals: “What’s the point of spending a fortune tracking down the f*****s who screwed us years ago? What about the f*****s screwing us now and who will be screwing us in the future?”

There is a huge amount of stuff going down, and decisions being made, behind closed doors in the political, policy-making and regulatory arena which will have enormous and irrevocable impacts on the economy and society in the medium and longer term. No light is being shone on this – mainly because those making these decisions (and the representatives of the narrow sectional economic interests influencing these decisions) are damned if any light will be shone until the decisions are promulgated as faits accompli.

Then we’ll have the usual roaring and shouting, but it won’t make a blind bit of difference as the Oireachtas, in so far as it will be required to enact or sanction these decisions, will be rolled over.

And, in a few years when the imbecility of these decisions will be obvious, we’ll probably have posts here speculating about what might have been if someone with a bit of credibility had shouted stop.

The time to shout stop and reconsider is now.

“And the needle returns to the start of the song,
And we all sing along as before.”

I don’t think that publication in isolation would have made any difference but it might have stimulated a debate which could have made a difference.

Coincidently in 2004, I had the following letter published in the Sunday Tribune and Sunday Business Post. It didn’t make any difference!

“It is a pity that outrage over AIB’s overcharging and NIB’s transgressions is not being directed also at the fact that house buyers were obliged to borrow €17 billion last year to acquire overpriced houses. Arguably, if house prices had been, say, 10% lower, these new borrowings might have been reduced by as much as €2 billion and interest payments would have been lower for new and recent borrowers throughout the life of their mortgages.

Having ceded control over interest rates to the European Central Bank, the Government tried, and failed, to contain house prices by tinkering at the edges – mainly by encouraging the building of even greater numbers of overpriced houses. It has ducked real issues such as land prices and hoarding, excessive lending, inflationary tax incentives, profiteering, overcharging and tax gouging. As a consequence, hundreds of thousands of house buyers will be making excessive loan repayments amounting to billions of euro for decades to come.

Given that house prices have escalated to such a degree, containment of price inflation is no longer adequate. It is small consolation to see a slow down in price increase when current prices should never have been reached in the first instance. Instead, what is needed is a substantial reduction in house prices to bring them back to levels that make them sustainable when interest rates rise and economic growth moderates.

To start this process, the Government should immediately establish a Task Force to implement key suggestions in the All Party Committee on the Constitution’s progress report on private property. If the Government fails to unwind the house price problem in an orderly way, then its much-beloved “market forces” will do the job with consequences that will be many orders of magnitude greater than the current financial scandals.”

“Irish house prices are extremely high by historic and international standards, both in absolute terms and relative to incomes. The strength and duration of the house price boom is unique. Many other countries and regions have experienced large house prices booms. However, at least in the 1980’s and early 1990’s, most of these booms have ended in a house price bust.”

It didn’t get published because the author forgot to add the following critical words to the end of that paragraph:

“…but this time it’s different!”


I am on a phone….might someone use one of the internet archive machines/lexis nexus to see who was on board+senior mgmt of NCC back then ?


Comments have been closed on the “Richard Tol Leaves ERSI” thread. Have any posts been removed? This is the second thread to have been closed to comment in so many days. What is going on?

@Paul Hunt
Surely the second half of your post answers your first question? It always seemed to me that the vast majority of commentary after the bust was about who was to blame and what was to be done with them, and precious little about what do to make sure that it won’t happen again. Or at least, very few concrete proposals – lots and lots vague assertions were made, of course.

One of the few good measures was establishing the Fiscal Advisory Council – but only if it does what it’s supposed to do, and if the Government of the day listens to it. Both of which are more likely to happen if there is great wailing and gnashing of teeth at previous failures. Learning from past mistakes is what separates us from the animals and politicians, so we have to apply pressure to the pols in any way we can.

Actually animals probably learn from past mistakes as well. So just the politicians, then.

@Brian Flanagan,

Some of the comments might have been getting a bit too close to the bone, some of m’learned friends might have been instructed to take an interest, some players might been getting splinters in their bums from sitting on the fence…who knows?

But it clear that it has been decided, now that the ripples created by Richard Tol have subsided, to allow the fetid pond to return to its usual calmness and smoothness.

The venerable sage himself, was right on the money:

“The banking system is heavily exposed: the big Irish banks, such as Bank of Ireland and Allied Irish, are in effect mortgage banks, observes Colm McCarthy of DKM Economic Consultants. A property crash would badly hit their balance sheets.”

– – Economist Survey of Ireland 2004

It should however be said that people with wisdom who had far from a university education did not buy the FF fairytale.

The era of boom and bust, GUBU and Donnelly visas was hardly in the remote past.

Paul Hunt has a point about the current time.

Has anything significantly changed in official Ireland?

The NCC reports to the Taoiseach; it has representatives of the public sector, IBEC and the trade unions.

IBEC has a number of constituencies to keep tuned up — some relying on public funds; public staff are not going to rattle any cages and the trade unions vote for the status quo.

Just wonder why the conservative resistance to making the €15bn public procurement system transparent, continues to hold sway?

It’s the public sector and the IFSC that keeps the big law, accounting and consultancy firms in clover.

Why would they compete on price?

Was land hoarding realy a problem? It turns out that once the local authorities started handing out planning permissions there was plenty of land to go around. How else would we have completely over supplied the market?

The problem was the banks alright but it wasn’t the land banks referred to in the report! It is a pity Anthony Murphy didn’t go on to say that the likely consequence of a collapse in the property market was a banking crisis with massive consequences for the state.

[…] The report, which is here , was obviously written in very judicious language but was highly critical of the fiscal contribution to the boom. (His demolition in Section 3.5 of many of the research papers written on the boom is also well worth reading). The NCC declined to publish it. The Irish Economy » Blog Archive » Authorities refused to publish house price warnings in 2004 […]

@ zhou,
That’s what I used to say to my friends in the Cental Bank, but they assured me that everything was stress tested to the hilt.

From the paper:

In Section 2 of the recently published Financial Stability Report 2004, the Central Bank and Financial Services Authority of Ireland (CBFSAI) examined fundamental and non fundamental influences on Irish house prices. Inter alia, they looked at the house price to rents ratio and the discounted house price to rents ratio (CBFSAI, 2004, p. 56 to 59). The former ratio suggests that house prices are overvalued by about 63%. This an excessive figure. In an efficient market, house prices are approximately equal to the discounted present value of net rents See equation (2) above. Since interest rates are much lower now than in the past, the ratio of house prices to rents should be higher now. After the change in interest rates
is taken account of, the discounted house price to rent ratio suggest that house prices are overvalued by about 30%.

At this point, the CBFSAI appear to backtrack from this finding

It’s a fine piece alright. But like others I doubt if its publication would have made much difference. That housing was undertaxed and over incentivised was common knowledge from at least the 1970s when household rates were abolished.
Wrt to his assessment of other scholars in Section 3.5, much of that appeared in a paper he published the following year. (Modelling Irish House Prices: A Review and Some New Results. Anthony Murphy. Nuffield College, Oxford OX1 1NF, UK. December 2005)
His own conclusion about Irish house prices in that mimeo was a bit tame, and no clarion call to action, but no doubt justified by the limitations of econometrics.

‘There is widespread agreement on the reasons for the boom in Irish house prices in the mid to late 1990’s. There is less agreement about the reasons for the continued strength of house prices since 2000 and the outlook for house prices in the next few years. In the absence of good measures of financial liberalization, it is difficult to quantify the deviation of Irish house prices from fundamentals.’

A report is commissioned and completed before the peak of the property boom, which clearly documents how rising house prices had already eroded Irelands competitiveness, and was destroying the economy. It correctly identified the problem, in clear simple language

With hindsight it is a really good report, it shows that there are capable people working in these organizations. Even at the height of the bubble this report would have read well and provided food for thought.

The report author should be promoted as clearly they were competent, and able to perform their duties.

However, the NCC itself should be abolished, with everyone in it made redundant, on statutory terms….. incl directors, employees, contractors etc.

A scaffolding handrail that collapses when brushed against is more dangerous than a scaffolding with no handrail. At least when the scaffold is bare, those working on it know what the story is. When a rail is there people come to rely on it.
Like the dodgy rail, the NCC was not fit for purpose… It provided the illusion of competency, probity, regulation and best practice…

Shut it down

“Many other countries and regions have experienced large house prices booms. However, at least in the 1980’s and early 1990’s, most of these booms have ended in a house price bust.”

But was there any info on what causes the bust?
The point at which the banks ran out of deposits to back their loan books was where it all began to go off the page.

One of the most striking things about the fateful 29 September was that nobody taking the guarantee on knew how much exposure the banks had or what stress testing would show. It was all Arise Knocknagoshel and take your place amongst the prosperous countries of the world sort of magical thinking . FF didn’t do analysis. I imagine if the report had been published in 2004 they would have laughed at it. When Morgan Kelly went on Prime Time in October 2008 he was treated like a freak. Nobody wanted to know.

@Frank Barry

I started Tony Judt’s “Postwar” over the Christmas break. Based on the success of other European countries in reintegrating war-time collaborators back into civil society, and indeed the civil service, I expect that your friends in the Central Bank are not unduly worried about their futures 🙂


Completely agree. We won’t get any change until enough people say to their TDs they won’t vote for them again unless they compel government to present the context, rationale and basis for any policy proposals or proposed executive actions to the Oireachtas well in advance of any legislation or SIs being drafted or ‘decrees’ issued as faits accompli – and for ministers, their officials and advisers to appear before empowered and resourced Oireachtas Cttees to defend their proposals in adversarial disputation with persons with relevant competence and expertise commissioned by these Cttees.

That’s the only way there’ll be any ex ante, effective debate on policy issues – and we might then avoid this post hoc speculation and blame game. But most voters don’t seem to understand they are entitled to this – unlike most voters in other long-established democracies – and don’t demand it. And you can be sure the political classes have no incentive to provide it – and every incentive not to.


An Oireachtas Cttee? As currently consitituted, resourced and empowered? You’re having a laugh, right? These Cttees are about as much use as a eunuch in a harem. And governments prefer the fully emasculated variety. Just see above for something closer to the real thing.


In actual fact the NCC is going to be folded in to this new Competition and Consumers’ Authority. Not sure where Minister Bruton is with the legislation.

I would argue that the NCC should be retained as an independent agency, resourced and empowered to advocate and represent the collective interests of consumers (the one broad-based economic constituency that is never represented behind the scenes when policy decisions are made) and report directly to the Oireachtas. If you’re not at the table when the narrow sectional economic interests press their case to ministers, their officials and advisers, then you’re on the menu. And final consumers, who pay for everything, apart from exports, are being gouged relentlessly.

But will the NCC, folded in to this new body, be able to represent consumers collectively and effectively before the Competition Authority, economic regulators and policy makers? Not a snowball’s chance in hell – and that precisely is the intention.

@ Paul Hunt

The NCC should be abolished with many more of those talking shops.

The OECD provides a wide range of international comparisons.

As for the local carry-on, is there really any need for more repitition of the obvious?

The apparition of the trinity or troika at last prompted attention to dusty reports on the legal professsion.

The National Consumer Agency was established as a response to ‘rip-off Ireland’ but became a symbol of it.

A 14 member board for a 20+staff, a chief earning more than Ben Bernanke and a big PR budget for issuing press releases.

However it could not afford a basic price comparison site.

Through the public procurement process, such a project would have cost a €1m+ but from a startup, a quality product could be delivered for less than €50k with an open source database.

@Michael H,

You must be burning the midnight oil 🙂

The NCA is something on which we may have to agree to disagree. Irrespective of its role wrt the report highlighted by Frank Barry, I view a properly resourced and empowered NCA as an essential institution. Turning the usual principle of common law on its head, I work on the basis that all large companies dealing directly with final consumers are a conspiracy against the public until it is proved they are not. Final consumers are atomised, individualised, isolated and disenfranchised by these companies. Final consumers comprise the one broad-based, but highly diffused, economic interest that is not formally represented in the process of economic or regulatory policy-making.

Final consumers absolutely require effective statutory representation of their collective interests against the predations of all private or public sector consumer-gougers before competition bodies, economic regulators and policy-makers. And any of these bodies that purport to perform a consumer protection role should be stripped of any powers and resources in this area and they should be realigned and assigned to the NCA.

I know I am wasting my breath – and shortening my fingers for no good purpose – particularly when someone like you – who normally sees sense in these matters – appears affected by a blood-lust for a quango cull. But this agency, for me, is the exception that proves the rule.

Questions need to be asked about why this report wasn’t open and in front of Cowen on the night the infamous bank guarantee was granted.

But is it really any surprises that awkwardness was buried? Didn’t Ahern mouth something or other about critics and suicide?

After eight years such a report comes to light. And one wonders why prosecutions for financial chicanery trundle along with the agility of tortoises attending a funeral.

In any event the report is now of historical relevance. Nothing much changes in Ireland. Those in the signal box don’t wish to relinquish control of the levers.

If the NCC is covered by the Freedom of Information Act it should be possible to discover their reasons for not publishing the report. It might make interesting reading.

@Desmond Brennan

The list of council memebrs at the time are on , can’t cut and paste.

The usual suspects, some guy from the Digital Hub, someone from DKM, that guy from State Street, the fellow with the Polish name from DCU etc.

@Paul, @Brian,

I closed the thread because I didn’t have time to carefully read and moderate the posts today, and the comments themselves were drifting inexorably from the subject of the thread in any case. Posts were removed where they were either defamatory, or obvious trolling. Nothing ‘was decided’ in any conspiracy-theory sense to return to the calmness of a fetid pool or whatever. My daughter had a birthday party and I had a report to write.

IBEC did not want businsesses they represent being hit, ICTU did not want the public warned, because it would mean, giving up some valuable cards in their ‘negotiations’. The department of enterprise did not want to know, because the Taoiseach of the day was heavily committed to the Tony Quinn school of only “positive” thinking, as for our ex leader out at UCD I think they were too busy figuring out creative ways to increase their own personal remuneration schemes which to me made them poor guardians of what was morally right or wrong for Joe Public to be informed about. The attitude was that was rife was, no need to unduly or prematurely ‘worry’ people, better we just keep this mum.

At the end of the day, it is just another example of either “capture” or self sensorship driven by the need to protect vested interests and not do what they were supposed to do.

@ Garry
I agree that no hand rail is better than one that does not do what it says on the can. Just as we were told that financial products were “regulated by the financial regulator and the CBI who in reality had gone into a Rip Van Winkle type sleep, safe in the knowledge that they had armises of PR consultants spinning that they were doing fantastic, invaluable work, and were worth every cent of their fabulous salaries.

This post just amplifies what Richard Tol alluded to, we are going to get more and more of this, reports being taken down from top shelves and dusted off. It gives the lie to Bertie’s” If only they had told me”. If only, he had not let it be so vehemently know, that he would seriouly not appreciate anyone contradicting his best guestimates/policies, hence suppression was supported at the highest levels and no one was going to get “into trouble” for suppressing ‘negativity’ the opposite in fact, you were a “team” player and would be sitting on even more quango’s.

I seem to recall being at a public meeting in the RIA about two years ago where Colm McCarthy said, he had difficulty getting his hands on one of his previous reports because it was covered by the official secrets act. They seem to be getting careless leaving evidence lying around.

The whole country was convinced we could walk on water, turn bog water into whiskey, dirt into gold. The Tiger was roaring drowning out the dissenting voices. Bertie was urging the naysayers to go jump in the Liffey. Do you think that a paper by the immigrant Anthony Murphy, then in Texas would have got serious consideration by the public at large. He would have been written off as being out of touch and a begrudger into the bargain. Ireland makes up its own tunes and marches to its own drum beat. We are the product of Millenia of Celtic Mythology, still as active today as the first day a Celt put foot on this island.

@Mickey Hickey

I thought we did turn bog water into whiskey?

Anyway, back to the point… has any journalist picked up on this and asked those there at the time whether they buried it? Not that I’m aware of yet.

@PR Guy
Only Powers.
George Lee was on it, to the point where I thought his days at RTE were numbered.

says it all really….

Pretax profits at Lisney up 30%
The firm’s pretax profit increased by 30 per cent from €427,793 to €560,132.
Operating profits jumped 81 per cent from €466,114 to €846,149 in the 12 months to the end of March last year, according to accounts just filed.

Read this article from May 2010

“Lisney, Savills, DTZ Sherry Fitzgerald, Jones Lang Lasalle and CB Richard Ellis have been appointed to run the national valuation operations for the state agency, as it acquires up to €47bn of toxic property loans from the banks.

Almost all of these firms gave interviews predicting house-price rises and telling house buyers they did not have to worry about a property crash.

They were also responsible — in some cases — for attacking those who warned about a potential property crash.

Labour TD Pat Rabbitte said it was outrageous that estate agents who fed the property bubble had been rehired. “These are the very same estate agencies that puffed up the bubble at its worst between 2004 and 2008 and now they are advising NAMA about property dispositions,” he added.”

I wonder if Pat Rabbitte still feels it is outrageous

@Michael Hickey

“Do you think that a paper by the immigrant Anthony Murphy, then in Texas would have got serious consideration by the public at large.”

Actually the public at large do not invent their own economic theories. They regurgitate what they hear from politicians and economists, which is itself just a regurgitation of the what these people understand of conventional contemporary economic opinion. That is why I am so hard on the generality of economists, they feel noi responsibility for the the creation of the conventional economic wisdom.

During the bubble, I did in fact try to dissuade many people from buying, and I was invariably met with some argument involving the word ‘demographics’. These people did not make up the argument. Many could not spell the word. They got the argument from an obscure NCB report , that was endlessly regurgitated by commentators and politicians. If the generality of economists disagreed with NCB, Joe Public never knew. Like wise, if Murphy’s report had been published, and the generality of economists said, yes, he was right, it would have made a difference.

The problem is the generality of economists would not have done duty by the demnocratic process, they would have allowed Murphy to be hung out to dry, just like Morgan Kelly.

The country is full of sensible, cautious people , careful with their money, if they were as you say “was convinced we could walk on water, turn bog water into whiskey, dirt into gold.” , it was people they respected told them so, against their better instincts.

Note there were at least two economists on the NCC council.

correction: that second paragraph should obviously read

“Actually the public at large do not invent their own economic theories. They regurgitate what they hear from politicians and commentators, which is itself just a regurgitation of the what these people understand of conventional contemporary economic opinion. “

@Tim O’Halloran,

“The problem is the generality of economists would not have done duty by the democratic process, they would have allowed Murphy to be hung out to dry, just like Morgan Kelly.”

This is a view I have expressed here more than once – and it has gotten me in to trouble. But I veer between being harsh – occasionally, perhaps, too harsh – and trying to understand the constraints under which economists, whose pronouncements might carry some weight in the public sphere, actually operate. We have a huge ‘industry’ of advocates, lawyers, researchers, analysts, accountants, PR advocates, ‘tame’ consultants, etc. employed in seeking to influence public policy to protect and advance narrow sectional economic interests. A huge number of economists, and that includes many in academia, are engaged, to some extent, in this ‘industry’ and are, thereby, often conflicted and constrained.

The other key problem, or constraint, if you like, is that there is no formal process for economists with competence and knowledge on public policy issues and who wish to advance efficient public policy in a disinterested manner to do so. Yes, they may be invited to give evidence to Oireachtas Cttees, but that is truly ‘saothar in aisce’. There is no opportunity to compel ministers, their senior officials and advisers to sit down and defend their proposals in the face of critique from such expertise before the relevant Oireachtas Cttee. (And this is true for all other policy specialists.)

This is the key fundamental deficiency and, in the absence of a remedy, we will continue to have propogation of the same economic policy nonsense.

I think Paul it would be interesting to know how much followup consultancy or analysis Mr Murphy has done for the state vs how much business Linsey is getting.

One has called it correctly without fear or favour and done the state some service. Even if the analysis, at the time was unwelcome, events have proved him largely correct.

Linsey in their numerous press releases got it wrong…… whether they genuinely called it wrong or deliberately gave a false opinion doesnt matter.

Results should matter…. Failure should not be rewarded.

“Carlo Spiceyweiner Says:
January 4th, 2012 at 12:48 pm
No difference and did anyone catch Bacon on 6-1 last night… NAMA / Govt should intervene in property market to stop further price falls… You could not make it up…”

This Bacon fella has been screwing with the property market for the last 20 years. He’s a part of the problem, not a part of solution. Every report of his was implemented and resulted in awful distortions. At one stage they screwed the investors (to help buyers) and surprise surprise the rents rocketed. All that time FF buddies have been hoarding land and building limited quantities to keep the supply low. And then supply exploded. Something similar happened with taxi industry. Must the bloody politicians f*** everything up??

The only surprise about this story is that people are expressing surprise.

Silencing critics and muzzling the dogs that should have barked was the hallmark of the Celtic Tiger era.
e.g. in the area of planning
The Heritage Council failed to protect heritage
The National Roads Authority took almost no action against houses being built directly on main arteries
It fell to An Taisce to make any planning appeals and suffer subsequent villification

That was no accident, the boards of all the bodies were crammed with castrated political appointees. It is still going on. Hogan has now ensured that there isn’t even an Architect on the An Bord Pleanala planning appeals board.

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