Why most people will learn nothing from the property crash

The Irish property market is recovering again. Finally!

 

The fall in prices by over 50% could well be reversed in a few short years if recent price rises are to be sustained.

So what does this mean?

For a lot of folks, it means an opportunity to make a good purchase…or a great investment. That old rule of ‘buying low’ is in vogue with hoards of cash buyers flocking to property auctions and home viewings.

What is interesting about the current property market recovery is what it reveals, not about the property market but about human nature.

With so many people having lost so much personal wealth during the property crash, it has resulted in a lot of financial plans being left in tatters. Would-be pensions wiped out and some people escaping with barely enough to keep the wolves from the door.

The crash was so effective and so severe at wiping out personal wealth, it has now created those very ingredients that fed the boom in the first place; a need to create personal wealth, again!

When Ireland emerged from the dark days of the 1980’s, it was a country in search of opportunities. Opportunities to raise personal standards of living. Lots of people purchased Eircom shares, many using borrowing only to see those investments wiped out when share prices collapsed. There was so much national media coverage at the time one would have expected a great lesson to have been learned. It wasn’t!

Today, many people are again looking for opportunities to raise their personal standard of living, and why wouldn’t they? This is very natural.

But what is concerning about the broad narrative today as people assess what went wrong during the boom is not centred on the nature of risk, assessment of risk and drivers of risk taking but on the vehicles that facilitated risk-taking in the first place; the bank loans!

It is with a high degree of certainty that with the right conditions, many people would again make the very same mistakes that were made during the stock market and property booms. Perhaps its time for a national lesson on risk, how to assess it and most importantly, how to mitigate it. A module in secondary schools could be a great starting point!

If we don’t, we will just continue to repeat the mistakes of the past!

 

 

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