In under the space of a week, two international rating agencies produced strikingly conflicting projections on the future of property prices in Ireland.
First it was Fitch when it predicted that house prices here could fall by a further 20% in 2013.
Earlier this week, it was the turn of Standard and Poor’s who predicted the prices could fall by 1%.
Wildly contrasting predictions in what appears to be little more than a cheap PR exercise.
What is perhaps most galling is the seriousness to which these rating agency predictions continue to be treated. Property prices in Ireland are finally beginning to display very modest signs of stability. Lending too is finally beginning to show modest signs of recovery. These are statistical facts. Yet, in one foul swoop, rating agencies can significantly undermine consumer confidence and fledgling recoveries with predictions that are hardly worth the paper they are written on.
Over the course of the last decade, rating agencies have proven their ability to get things wrong on a massive scale. But instead of paying a price for their mistakes, just about everybody else has paid that price for them. The near collapse of the international credit system in 2008 is still being felt. Governments have fallen as have banks and business. Millions of families have lost their homes and tens of millions of citizens have lost their jobs. Whole generations of young people in Europe have never worked and the elderly are facing a squeeze on incomes like never before.
Yet, despite all of this, rating agencies continue doing what they do worst, making predictions. Before the credit crunch, rating agencies were assuring the world that the credit system was in rude health. More recently, they were predicting defaults by Eurozone nations as well as exits from the single currency. This month, it’s the turn of the Irish property market.
It’s high time that rating agencies were held to account for predictions that they get massively wrong. For too long, they have been riding a wave of immunity, the consequences of which have been too great for all of us.