Madam, - Last week the Economist devoted several pages to the current property price bubble. In particular it says that Irish property prices could fall by up to 40 per cent over the next 5 years. The reaction in Ireland has been disconcerting, to say the least. People refuse to believe that it could happen, insisting Ireland is somehow "different" - immune to the laws of economics.
This belief is a classic symptom of a bubble economy just before the bubble bursts. While there is no guarantee that property prices will crash, the symptoms are unarguably present. Banks have allowed the ratio of loan value to personal income to increase to the point where even a small increase in interest rates will reduce people to penury. Property speculation is rampant and people are acquiring rental properties without fully comprehending the implications of the mortgage rate going up and rents going down. We even have TV adverts extolling the benefits of multi-generational mortgages - similar financial instruments were popular in Japan just before their property crash happened.
In the light of all this the Taoiseach's call for the latest interest rate cut to be passed on in full to the public is irresponsible electioneering. He runs a real risk of going down in history as the man who did to our private finances what Haughey did to our public finances.
Rather than publicly boosting the bubble Bertie should be "advising" the banks to reduce the sizes of the mortgages they are offering and to look for substantial down-payments for rental properties. - Yours, etc.,
DAVID ROLFE, Rathmines, Dublin 6.