[article] Davys report damns the Celtic Tiger economy

mike65

From rte

Irish workers wasted their high incomes during the boom, says a new report from Davy Stockbrokers.

It says that while incomes remain high on an income per capita basis, Ireland itself is not a wealthy country.

Davy's economic report says that Ireland's capital stock - like roads, rail, school, hospitals and telecommunications - is inferior to other small euro area countries.

It says investment here was misallocated from 2000 to 2008 and that infrastructure now should be much better.

The report says that in the eight-year period, 63% of net investment in capital stock was in housing; housing, it says, is an unproductive asset.

Davy says upgrading road infrastructure boosted productivity by reducing journey times.

Underinvestment in the communications network is a concern, the report says.

Economist Rossa White says that Ireland's human capital is its greatest strength - that the country has the second highest number of graduates in the 25-34 age group, and that investment in education must remain a priority.

Feels like stating the bleedin' obvious but no less true for it. I presume Davys will release the full report later

flutered

can one assume that daveys had a different slant on things a few years ago courting publicity me thinks oh yes and dan mc laughlan of bank of ireland plus earnest and young.

AlekSmart

My question would be what,if anything did this very influential company do to try and ensure the wealth WAS distributed to other more sensible uses than building "Luxury" Houses,apartments,and endless shopping malls.

Davy`s and the other big players were in unique situations which,had they been managed by truly visionary people,would have allowed these people to develop a far different Ireland than the crock-of-shytte we are now trying to inhabit.

Doctor Davey...heal thyself first !!!

kmick

That a real Eoghan Harris style u-turn. Davy's are the like the Mirror/Sun of the Irish financial world. Feel free to laugh at their headlines.

ednwireland

didnt need davy's to tell me that

gleep

Hindsight is a plentiful & wonderful thing. Foresight however, which is what they're supposed to be all about, is as common as hens teeth.

Davy, yer a gobsh1te!

SkepticOne

Exactly. Hindsight is cheap.

Next up the Irish association of astrologers will explain why a particular conjunction of planets had to lead to the the economic meltdown thus legitimising themselves.

WalterMitty

This is why we cant afford to keep paying public servants amongst the highest pay/pension packages in the world. We are only an average european country now and not an economic miracle that FF and their friends made people beleive we were.

Riskymove

housing, it says, is an unproductive asset.

lol, they were not going around saying that a few years ago

The_Honeybadger

Riskymove wrote: »

lol, they were not going around saying that a few years ago

To be fair many commentators (dunno about davy's) warned of the dangers of the Celtic Tiger craziness, that people chose not to listen is another matter. Having a Taoiseach who tells these conservative commentators to go off and kill themselves probably didn't help. I remember warnings on various radio programmes as far back as 04-05 that warned house prices would collapse but people were obsessed with property and no amount of warning or common sense would have stopped them buying that "dream home". "Rent is dead money" they were told, "if you don't buy now you may never be able to afford a house". It is amazing to think how foolish we were to believe this nonsense. It became a national obsession and the news constantly carried stories of how much property prices had risen this month. And the crowd that oversaw it all are still in charge, they can never be accused of lacking neck anyway.

Riskymove

mickeyk wrote: »

dunno about davy's) .

davys = BOI = come and get a mortgage!!

Welease

In fairness, I am not sure you are understanding the unproductive asset in the manner they meant..

From my reading, they are saying as an asset to the country, spending 63% does nothing to help Irelands productivity versus other countries.

Roads speed up travel which lessens time, Broadband and Hi Bandwith networks speed up communications and provide richer services etc etc etc.. Renewable energies could lessen the cost of services.

Bigger houses, 2nd homes, over supply of housing etc does nothing productive for Ireland vs other countries, and I don't think anyone ever claimed it did during the boom years.

Riskymove

Welease wrote: »

In fairness, I am not sure you are understanding the unproductive asset in the manner they meant..

No I do get that

but its not like they were encouraging people not to invest in property and do something else with their cash is it?

and why?

cause another wing of the business is based on lending for property purchase!!

alejandro1977

Riskymove wrote: »

davys = BOI = come and get a mortgage!!

Not any more?

The management did a buy out; not sure if BoI retained a stake but it's small at best;

I think when they were issuing the reports on how wealthy "we" were it was different?

Scofflaw

There's a longer Finfacts article on the issue.

cordially,
Scofflaw

ardmacha

The notable thing here is the low level of productive private investment, no doubt including the largely privately owned telecoms infrastructure. The point about housing is that it is not productive, although it could contribute to wealth. If someone ended the boom in a well designed house in a suitable location with a reasonable amount outstanding on their mortgage then this would contribute to the wealth of the country. However the houses were expensive and most of them were not well designed or insulated.

Robster1

http://www.davy.ie/content/pubarticles/economy20100219.pdf

I agree with other posters when they say Davys helped to perpetuate the Irish credit bubble and that most of their publications are self serving, but in fairness to Rossa White (the author of this publication) he published a report in March 29th 2006 which stated:

Investors must be extremely bullish about rental growth in order to justify the sort of record valuations ascribed to residential
property in central Dublin. To us, this looks like boundless optimism. Supply in Dublin is set to remain plentiful for the next
couple of years as we continue to build houses at a rate four times quicker than the European average. Meanwhile, interest
rates will rise by at least one percentage point over the next year, pushing investors’ break-even point lower and lower. The
amount of cash sloshing around due to SSIAs and tax cuts, and the current buoyancy of the housing market, suggest that
valuations will become even more stretched over the next 18 months. But the fundamentals suggest that it will be an
adjustment in prices, rather than rents, that will eventually bring valuations down to more realistic levels.

http://www.davydirect.ie/other/pubarticles/econcr20060329.pdf

Although the Irish housing market had been moving away from fundamentals for at least 3 years at this stage!