Tuesday, 30 June 2009

Celtic Tiger Ghosts...

Life for the boom's dead spaces...

The Irish landscape is scarred with the remnants of failed or unfinished building schemes from the Celtic Tiger years. GEMMA TIPTON asks some leading architects to use their imaginations and suggest ways to put them to some use.

EVEN DURING THE boom, it was difficult to see some of the things we were building and imagine them as a success. Enormous luxury golf and spa hotels in the middle of nowhere, shoe-box apartment blocks in small towns, ghost estates where no houses were ever sold, and massive out-of-town retail and industrial parks – all these have blighted the landscape, and now stand in various stages of construction or dereliction, mocking us with the question: what should we do with them?

Some ways out of such waste have already been proposed: turning the hotels into nursing homes is one example. Or we could look to SoHo in New York, where inner-city factories and warehouses became, first, artists’ studios and then ultra-desirable loft apartments. But when Shelley McNamara and Yvonne Farrell, of Grafton Architects, told me about a project they were doing with students in Switzerland, imagining the creation of a school out of an abandoned village (each house becoming a classroom, with civic buildings as canteen and offices, and the streets as a playground), I realised that architects are the holders of solutions too.

Architects are trained in creative thinking about how we live. It is true some members of the profession had a hand in fashioning the chaos we’ve created, but just as many spend time and effort thinking about how we can plan better, build better, live better.

Here, four architects respond to the question of what should be done with our “problem” buildings. The only stipulation was nothing could be knocked down.

Seán O’Laoire is a partner in Murray O’Laoire Architects, and is currently president of the Royal Institute of the Architects of Ireland (RIAI);

Here he imagines a different future for a fictional edge-of-city retail complex, Ballygonaurra Retail Park (from the Irish Baileganáire, “town without shame”):

“Ballygonaurra Retail Park had been booming for 10 years. It could have been anywhere in Ireland, but is situated on a western ‘edge’ suburb on the extremities of the Dublin metropolitan area. It boasted brands such as Leatherheaven, Sofanistatic, Rub-a-Dub Bathrooms, Non-PC and Ceramichic. No more. All went into liquidation in 2009. What now? Retail parks are a primitive form of architectural life, subdivided sheds with a large Tarmac apron and a service entrance. They pepper the edges of most Irish towns and cities.

“Ballygonaurra will now become a centre for knowledge enterprise, in a novel configuration involving the National University of Ireland, an institute of technology and Enterprise Ireland, in partnership with universities in India and China. The developers are partners in the Tearmann Tuiscint (Refuge of Understanding), who are pledged to offer the premises at affordable rates to research and development enterprises, which will embrace biotechnology, alternative energy, medical devices and IT, in return for a percentage of future royalties.

“Non-nationals and nationals will have an option to live in a currently unsold apartment building, owned by the National Asset Management Agency (Nama) and adjoining the park, at controlled rents.

“Tenants will also have the option of building a number of micro-apartments (or pods) within the envelope. The consortium will be free to reconfigure the space, and adapt the section and elevations to specific requirements.

“As part of its biodiversity initiative, the local authority has decreed that the park be extensively landscaped, and that a publicly accessible lecture/ exhibition/restaurant facility be provided. It is also mandated that the complex be 60 per cent self-sufficient in energy within five years.”

Niall McCullough is a partner in McCullough Mulvin Architects. His book, Dublin: An Urban History , was published by Lilliput in 2007;

Here he suggests twin fates for an imaginary “ghost estate” somewhere in Ireland:

Ghost estates in Ireland are such totems of our recent economic traumas that there is a tendency to visit punishment on them. They encapsulate the waste of the last decade – of time, materials and good land – for things that nobody wanted. Beyond their unwantedness, they are poorly planned and bleak environments, places of low expectation, constricted space sustained by the dysfunctional planning systems that are the ‘elephant in the room’ in Irish construction.

“But it’s too easy to demolish them as a waste of resources, because removing them with the idea of moving back to a dream of nature would be a waste as well.

“One is tempted to go backwards or forwards, two alternative fates, either of which would make them into a special ‘zone’ of activity, beyond the grip of the over-regulation that holds Ireland in its spell. Both would put them beyond official Ireland’s abnegation of responsibility to create space for the original, and actually make things better, rather than just talking about it.

“The ‘backwards’ option would simply fence an estate off, leaving it to children and voracious nature – in Ireland a powerful force. The country is full of substantial ruins that have effectively vanished behind walls of leaves. Roofs would gradually fall in, walls would become moist and green. Thus they would become the location of childhood fantasy, the one carried through your life as a Shangri-la memory. It would give the next generation space and time to reinvent a ghost estate as usable space.

“The ‘forwards’ option would declare the zone exempt from normal regulation, and give it to a band of young local entrepreneurs/house-hunters, who would experiment with ways we should, and might, live and work in Ireland, using it as a quarry and a ‘natural’ landscape to inhabit. Houses would be cannibalised, joined together and used in new ways: as creches; as long living rooms at first-floor level, between two houses over a chocolate factory; as an office in two stories of light construction over an existing edifice, reached by an external stairway over two apartments and a hairdressing salon; with gardens used for vegetables, and so on.

“These are the vivid mix of life, with event and colour in interesting rooms, that we all secretly crave in our dull suburbs.”

Anne Cleary and Denis Connolly both studied architecture in Dublin, and are now based in Paris, working as artists. They are the recipients of this years AIB Art Prize, and their most recent publication, Moving Dublin , is published by Gandon;

Here, they write An Irishman’s Diary for this day 100 years on, about a visit to an abandoned apartment block in a country town:

From An Irishman’s Diary, June 30th, 2109: “Honey has become so much a part of our island’s culture that we rarely pay attention to where and how it is produced. The Honey Belt was created after the discovery of the anti-microbial properties of the golden nectar by researchers at City Hospital Belfast back in 2009.

“Visiting the Honey Belt is a difficult project. Helicopter traffic is forbidden and the traditional bitumen highways have not, of course, been maintained since 2084. We found that the best way to travel there was by the inland waterways that serve the industry itself. I arrived by the Barrow River at Ferrymountgarrett on the border of counties Wexford and Kilkenny. The hulking edifice of the honey factory cuts a sharp line on the otherwise low-lying horizon, with its cellular infill units veiled by a dense mantle of ivy. The air is filled with a deep humming noise, behind which the gurgling of the river can still be heard.

“The factory occupies a half-finished construction, originally intended to become a luxury apartment complex, which was abandoned at the start of the First Great Contraction. The area had previously been a part of the commuter belt. The Bio Laws of 2018 allowed the annexation of abandoned cell-form constructions.

“Its geographical setting, in the valley of the Three Sisters rivers, offered generous quantities of pollen and nectar from native flora, sycamore trees and clover – and mild weather.

“The abandoned concrete units proved ideal for hive construction and ivy plantation (flowering in the autumn, ensuring perennial production).

“A local historian relates that income from the factory was a source of dispute between the adjoining counties in 2043. The roving nature of the bee made judgment difficult, and the dispute was settled by referring to ancient Brehon Law, which includes more than 20 pages on bee judgments!”

Dominic Stevens is an architect who lives and works in Co Leitrim. The buildings he has designed with his clients have won many awards and have been published in architecture journals and newspapers around the world.

Here, he suggests that it is architects themselves who need to be re-purposed:

“I believe that re-purposing architects is perhaps a more fruitful way of looking at this problem.

“The defunct buildings that we are discussing are the result of work by teams of people: the Government, the banks, developers and architects. Their purpose was the production of profit and an increase in the holy GNP – it was fuelled by greed.

“Architects must now re-purpose their role and realise that it is the people – all the ordinary people who live in these buildings, work in them, get born, cured and finally die in them – that should be our partners in design. Architects in the future must work directly with communities, with building users.

“As many of these buildings are, in effect, owned by the banks, which at this point are owned by the Government (who represent the people of Ireland), the only way forward is to turn the ownership of these buildings back to the local communities, and assign architects to work as part of these communities to look for creative solutions.

“It is useless, in fact more of the same problem, to assign architects as some type of expert, as creative geniuses, to suggest new ways of using these buildings.

“This time the architect must work in conjunction with communities, in a role more akin to midwifery than obstetrics.

“This is not a pie-in-the-sky abstract idea; it is how the Berlin local government successfully responded to the squatting movement in the early 1990s and indeed how the Venezuelan government currently deals with favelas, or squatter settlements.

“The initiators of such a process are local communities. They initiate it by taking control of any unused buildings for the use of their community.”

Report GEMMA TIPTON - Irish Times

Sunday, 28 June 2009

Collective Stupefaction...

We're gripped by collective stupefaction...

We need more than a changing of the political guard...We need to take the axe to the nation's greedy elite

WHEN the last of the Celtic Tiger cubs are basting in the St Stephen's Green sunshine like Sunday afternoon cooked chickens, it is hard to think revolutionary thoughts.

Sadly, even as we noted that a government which has turned our economy into the Cuba of Europe could be forgiven if it did the same trick with the weather, the antics of our judges and the International Monetary Fund (IMF) swiftly brought us back to more normal dreams about the virtues of Jonathan Swift's wise suggestion that we should hang half a dozen bankers every year.

While the hanging bit is a tad excessive, when it comes to numbers Mr Swift may actually have been too prescriptive -- for any bonfire of our Tiger nonentities should include a right good sprinkling of politicians, clerics, regulators, barristers, mandarins and social partners.

Last week, as the IMF unveiled Ireland's status as a failed political entity, the collective immunity to reason that has gripped our leaders was epitomised by Brian Lenihan's apparently sincere boast that we were on "the right track".

That's akin to the captain of the Titanic saying the plus side to the sinking of the ship was that there would be plenty of fresh ice for any drinks.

Incredibly, this was not the first act of madness by our governing class. This instead had already been provided by a chief justice who, at a minimum, left himself open to the charge of acting like the sort of trade union shop steward who cannot see beyond the vested interests of his members.

The judge's demarche may have been the most egregious example of how all of the nation's "toffs" have failed the people.

What may have far more serious consequences is the apparent belief of our political dullards that, even though the country they created now resembles a pyramid scheme devised by con artists, life should go on as normal.

Of course, there will be cuts (preferably in social welfare because the poor don't vote), but when it comes to the €35bn our bankers squandered or the most expensive public sector in Europe, our role is to simply pay up and be nice about it.

However, although they are incapable of recognising it, the real truth is that the Ireland created by the "Spoilt Princes" and "Marie Antoinettes" of Fianna Fail is now so damaged that the system needs the sort of revolution where things are busted up and put together again in a radically different way.

The most important aspect of any revolution is that it cannot merely consist of a changing of the political guard.

Any transformation in the way this country works needs to start with taking the axe to the top civil service mandarins who have turned this country into an economic tiphead. Such a process will of course raise difficult issues for Brian Cowen.

The great economist Adam Smith once famously noted that when he saw two tradesmen together he suspected a conspiracy against the public. In the latter-day Irish State, the closest Irish equivalent of the tradesmen is the FF Minister and the Departmental Secretary General, who are so closely intertwined that it often looks as though each has a hand in the other's pocket.

As per Mr Swift's advice, we need to select at least six of the top mandarins, line them up against a wall and sack them pour encourager les autres.

This is not just the politics of the scapegoat, for how can those civil servants who created the culture of benchmarking, or the happy idiots in Finance, or Brendan Drumm, be trusted to reform the mess they have made?

The axe need not be confined to our greedy, inept mandarins. It is past time that the salaries of greedy ministers, greedy judges, greedy barristers, greedy university professors and even greedier hospital consultants are halved -- and if you people want to revolt, then try your luck in the private sector.

The Government would save only a moderate sum of money, but the trickle-down effect would soften an awful lot of coughs among those public servants who believe a job for life is a human right.

Any real reform would also have to include the expulsion of dead wood such as "I'm all right Jack" O'Connor and his Colombian pals from the centre of government.

Mr O'Connor and the other participants may have called the construct they invented "social partnership", but their unholy alliance with Bertie Ahern allowed it to evolve into a school for graft where our trade unions and political card sharps filled their boots.

It has also created a public service oligarchy whose venomous self- centred response to our fiscal crisis verges on treason. Happily, when it comes to this oligarchy -- and, for that matter, the banking and other heroes of the private sector -- we have another modest proposal.

It's time to end the "real men don't do accountability" ethos of governance which was so enthusiastically supported by FF and Mary Harney. Instead, we should ensure all top private and public sector "toffs" who are paid by the taxpayers should be employed on annual contracts and be forced to reapply for their jobs in front of specially constituted Dail committees with real Public Accounts Committee-style powers.

Sadly, it is difficult to see how a government that is a mirror image of those Bourbon monarchs whose response to the flames from the Bastille was to continue their game of croquet on the lawns of Versailles, can lead such a process.

We shall leave the hapless Greens out of it, while it must also be noted that Ireland's problem with governance is actually about FF rather than Brian Cowen.

Nothing epitomised the dazed, disengaged incompetent nature of a Cabinet whose capacity to rule is totally compromised by its incestuous relationship with vested interests, more than Dermot Ahern's recent astonishing claim that he was in politics because it puts money on the table.

In one bleak moment, this Jobsworth -- whose great ambition is to be a beach bum -- inadvertently revealed how far we have travelled from the era of Donogh O'Malley. Mr Ahern may not even be the worst of the bunch, but his airy indifference to the death agonies of the Celtic Tiger shows clearly how this Cabinet is no longer fit for purpose.

The modest decadence of the age of Bertie has been replaced by the puritanical rigour of a pay-back time where we no longer have a human right to multi-house ownership or to pay our school teachers so much that they can buy villas in Croatia.

So far, the response of the people and our elite to this transformation has been one of dazed stupefaction. However, unless Mr Cowen gets ahead of the people and starts to do the work required to rescue us, he may learn that no amount of sunshine will save him from a revolt by a nation which has been betrayed almost beyond reason by its elite.

Report John Drennan - Sunday Independent

Friday, 26 June 2009

Negative Equity Boom...

Underwater mortgages: a guide to survival...

Latest estimates suggest that as many as 340,000 home-owners, or one in five homes, are stuck in negative equity...

HINDSIGHT IS a wonderful thing. Looking back at the prices people paid for Irish property during the boom, it’s easy to see how unsustainable they were.

However at the time, despite warnings from everyone from the Central Bank to the Economist magazine that Ireland’s property market was a bubble which had to burst, banks and consumers ignored the advice and ploughed money into property, propping up prices until the inevitable collapse during 2008.

Now, latest estimates suggest that as many as 340,000 home owners, or one in five homes, are stuck in negative equity and prices are still sliding.

If this is the case, then people who purchased property as far back as 2003 with loan-to-values (LTVs) of more than 80 per cent, will discover that they owe more to the bank than what their house is worth.

For example, at the peak of the market two-bed apartments at Wyckham Point in Dundrum, Dublin were selling at €525,000.

Now however, prices have slid back by over a third to €339,000, which means that someone who bought during the boom on a 92 per cent mortgage is stuck in negative equity of about €144,000, or have a loan-to-value (LTV) of 142 per cent. If the property was financed with a loan of 65 per cent of the purchase price, then the owner is just about in the black.

And it looks like negative equity is here for some time. According to the Economic and Social Research Institute (ESRI), those who bought a house in 2003 will have to wait another four years before they move out of negative equity, while those who bought close to the peak in 2007 will have to wait until 2030.

Key to a recovery will be easy access to credit, but given how badly banks have had their fingers burnt in the crisis, it is likely that they will continue to use very strict criteria when it comes to lending for some time yet.

Whereas during the boom, banks were regularly lending six and seven times people’s salaries and offering a multiple on discretionary income such as bonuses and commission, they are now taking a much harder look at what people can afford.

Moreover, people’s income has been slashed due to pay cuts, higher taxes (more of which are on the way) and less discretionary income, while banks are also looking for much higher deposits to keep LTVs at about 80 per cent.

So if negative equity is here to stay, who is it a problem for and is there anything you can do about it?


If you are happy where you are living, at least for the foreseeable future, and can afford your monthly repayments, then being in negative equity should have no material impact on your life. If you consider your house as your home – and not an investment – then being in negative equity won’t be a problem as you will always need a roof over your head.

The last time negative equity made the headlines was in the UK in the early 1990s.

However, the market eventually turned around and people actually made profits on their properties when they sold them. So sit tight, be patient and things may improve again.


If you are in negative equity, with a LTV of more than 100 per cent, it is likely that you will only be able to move once you can clear your mortgage, otherwise the bank is likely to prevent a sale. But there still are some options.

Your first option is to inject a cash sum to pay down your debt and enable you to move house. However, getting the requisite funds to finance a move has become even more difficult as for everyone but first-time buyers, banks are routinely asking for deposits of about 20 per cent – so any move will require a significant cash injection.

For example, if you have a mortgage of €350,000 on your house and you sell it for €300,000, you will need to find an additional €50,000 to pay off your mortgage in full before the bank will release the deeds.

Then, if you purchase another house for €450,000, you will need €22,750 to settle your stamp duty bill, while the bank may require a deposit of €90,000 for your new mortgage to keep the LTV at 80 per cent. In all then, you will need over €160,000 – in cash – to finance trading up.

As most people will be unable to come up with such sums, it means that couples who bought an apartment as a first step on the property ladder and who would now like more space for their expanding family, or friends who bought together but now want to get their own places, or couples who have broken up, will all be unable to move on.

During the last negative equity crisis in the UK in the early 1990s, some banks, such as Halifax, introduced special mortgages with LTVs of 120 per cent which allowed home owners to trade up by enabling them to carry their debt with them.

While there is no sign of any similar product being introduced in Ireland, some banks may be willing to make concessions.

For example, a bank might agree to a “short sale”, whereby it will agree for a property to be sold at a price lower than the outstanding mortgage, and will take a hit on the debt outstanding. Alternatively, the mortgage lender will make you take out a personal loan to cover the shortfall on the sale of the house. Say you sell your home for €300,000 but you actually owe €330,000 on your mortgage. Unable to make up the short-fall, the bank agrees to accept the €300,000 and you take out a personal loan for the remaining €30,000 which you will then owe the bank.

While most Irish banks are unwilling to go down this route, one bank which will consider granting a customer in negative equity a ‘‘small personal loan’’ if they wish to sell up, as long as they meet the bank’s existing lending criteria, is Halifax.

Another option is to rent out your own property, and rent another one which is more suitable to your current circumstances, until such a time as your debt has been paid down or property prices have risen again and you can afford to sell up and move.

If all the above don’t work out, then you will have to learn to be patient and wait until the market improves and the value of your house increases, thereby bringing your LTV down to less than 100 per cent.


This is the most difficult situation facing home-owners in negative equity, as if you can no longer afford to make your monthly repayments due to having lost your job, or if you have to sell the house due to divorce or separation, then the threat of repossession is very real.

It has led to the trend of “jingle mail” in the US, whereby homeowners in negative equity who can’t meet their repayments simply mail their house keys to the mortgage lender and walk away from their loan.

Being in negative equity in such a situation makes everything more difficult. When you have equity built up in the property, you can always look to refinance your mortgage or take out a second loan against it.

However, if there is no equity this isn’t an option, which makes it more likely that the bank will seize your property. Although, given the banks’ current difficulties, many lenders are against crystallising their losses by repossessing property which they will then have difficulty selling. So it might be possible to come to an agreement with the bank.

While the aforementioned short sale might be an option, remember that walking away from your mortgage would seriously damage your credit rating. If the number of repossessions increase, this will further depress home prices.


This is unlikely to happen unfortunately. If you have a variable rate mortgage with a bank which has not passed on all of the ECB’s interest rate cuts over the past year, or are coming off a fixed rate with such a bank, and would like to switch to a more competitive bank, being in negative equity will likely preclude you from doing so. Most banks have significantly reduced the levels at which they are lending – indeed if they are lending at all – which means that you will need a big chunk of cash to move.

Bank of Ireland’s best rate of 2.3 per cent for those trading up is only available for homeowners with LTVs of less than 50 per cent, while those with an LTV of greater than 80 per cent will be offered 2.6 per cent.

Moreover, EBS for example, will only advance 85 per cent of the house value to new customers. At Ulster Bank, for second time buyers, those wishing to refinance and those wishing to trade up, the maximum LTV is 80 per cent. So, if you have a LTV of more than 100 per cent you will need considerable savings to be able to make the switch.


As long as you keep up with repayments on your mortgage, being in negative equity should have no impact on either your credit rating or your ability to borrow more money to finance a car purchase, for example.


Instead of bemoaning your situation, you can take a pro-active approach to getting yourself out of negative equity. While in an ideal world property prices will simply rise again thus lifting people back into the black, this is unlikely to happen for quite some time.

In the meantime therefore, you can improve your situation by increasing the repayments on your mortgage.

At a time of historically low interest rates, you may be able to afford to repay more each month, which will help in bringing down your LTV ratio.

For example, if you are currently in negative equity to the tune of €50,000 and have a LTV ratio of 120 per cent (house valued at €250,000 but outstanding mortgage is €300,000), by increasing your payments from €1,108 a month to €1,608, if you start now you could bring your LTV down to 108 per cent by the end of 2010, and back to 100 per cent by the end of 2012 – provided of course that the situation hasn’t deteriorated further by then and you can continue to afford to overpay during this period.

One way to save the extra cash needed to pay down your debt is by taking in a lodger or two. Under the rent-a-room scheme you can earn €10,000 a year tax-free.

Report by FIONA REDDAN - Irish Times

Thursday, 25 June 2009

More House Price Drops Ahead...

Price of homes 'to fall 23pc in two years'...

HOUSE prices here will fall by 13pc this year and a further 10pc in 2010, international credit ratings agency Standard & Poor's has predicted.

After suffering the sharpest price fall in Europe in the four years to 2010, Standard & Poor's (S&P) expects Irish prices to stabilise in 2011.

However, some Irish estate agents believe that much of these price fall predictions are already priced into current Irish house prices following a spate of house-price cuts by builders since the start of the year.

S&P is using the Permanent TSB (PTSB) house price index as its guide and this has been criticised by many estate agents, including Michael Grehan of Sherry FitzGerald and Keith Lowe of Douglas Newman Good, for being too late with its price trend calculations.

These agents reckon that Irish prices have fallen by between 35pc and 40pc from their 2007 peak but the PTSB index, because of the way it is calculated, has so far recorded a fall of only 20pc from peak.

Furthermore, S&P's 13pc price fall forecast for 2009 suggests that it expects the PTSB index to fall by only 27pc between its 2007 peak and the end of December this year. Consequently, agents now estimate that some of next year's S&P forecast may also be priced into prices currently being quoted by some developers.

In the meantime, S&P also estimates that Irish houses are currently more affordable than any other homes in the five housing markets surveyed, based on an OECD survey.


One of the pluses from a buyer's perspective is that S&P highlights how affordability of Irish homes is the best of the five countries surveyed. On the negative side, it expects oversupply of Irish houses to continue to dampen the Irish market.

S&P refers to a Royal Institute of Chartered Surveyors survey showing an excess of 250,000 homes before the market downturn and how IBEC forecast that 100,000 migrant workers could leave the country this year "creating a severe slump in the buy-to-let market and in turn further depressing the market as a whole".

S&P expects France will be the only one of the five European countries to show a price increase next year while UK house prices will stabilise. Spanish prices are also expected to fall 10pc next year and 5pc in 2011.

Report by Donal Buckley - Irish Independent.

Unprecedented Economic Correction...

IMF warns on extent of 'correction' facing State...

THE INTERNATIONAL Monetary Fund (IMF) painted a bleak picture of the “unprecedented economic correction” facing Ireland, describing the stress on the State as exceeding that being faced by any other developed nation.

However, in a positive diagnosis of the Government’s response, the global financial watchdog has said that on the two fronts that matter most – fixing the banks and the public finances – the Government has “moved in the right direction”.

The IMF said losses faced by Irish banks could top about €35 billion, or 20 per cent of GDP, to the end of 2010, though it added that the Government “did not formally produce any estimate for aggregate bank losses” during the fund’s recent fact-finding trip to Ireland.

The Department of Finance was quick to point out that “the vast majority” of these losses would be absorbed by the banks’ risk capital and ongoing operating profits.

The IMF endorsed the Government’s plans for the repair of the banking system – from the State bank guarantee to recapitalisation and the plan to buy development and related loans of €80 billion to €90 billion through the State’s “bad bank”, the National Asset Management Agency (Nama).

The IMF said Nama was “potentially the right mechanism to separate the good from the bad assets”.

However, it made several significant suggestions. It highlighted the importance of the “adequate design and timely implementation of Nama” and advised that Government consider “risk-sharing structures to help with the problems with pricing distressed assets”.

This would guard against the risk of the taxpayer bearing a disproportionate burden of the costs.

The IMF and the Government were at loggerheads on whether the temporary nationalisation of the banks would make it easier to price the loans moving to Nama.

The Government disagreed with IMF staff that temporary nationalisation would make the pricing of the loans easier.

“Nationalisation could become necessary but should be seen as complementary to Nama,” said the fund.

“The bad assets would still be carved out, but the thorny issue of purchase price would be less important, and the period of price discovery longer, since the transactions are between two Government-owned entities.”

Nationalisation could also be used to bring about “needed mergers in the absence of more far-reaching resolution techniques”.

The US-based fund said Nama should be “given the legal and operational flexibility” to address all classes of distressed bank loans and not be restricted to buying development loans on which the banks are posting large losses.

This will help the State “deal with further deterioration in bank balance sheets”, said the fund.

“The sharp ongoing rise in troubled loans is a warning that this possibility needs to be seriously considered,” said the fund. “A full scoping-out of the likely distress is needed.”

The IMF suggested the need for “a broader tool kit” to prevent banking crises in future.

The Government was “open to exploring the merits of a special bank resolution regime”, the IMF said. This would allow the State, for example, to transfer loans and deposits quickly to another bank or to set up “a bridge bank” – a new limited-life bank to acquire an old bank to enable its future sale.

This would “facilitate a speedy and less disruptive resolution of distressed banks”, said the IMF.

The fund also recommended “intensified bank-by-bank surveillance” beyond the institutions falling under the State guarantee.

IMF report: the main points

- The economy will contract by about 13.5 per cent from 2008 until the end of next year.

- Further wage reductions will be needed to restore competitiveness and growth.

- Unemployment will reach 15.5 per cent in 2010.

- Bank losses could rise to €35 billion by the end of 2010.

- Nama should be designed to incorporate non-property loans as well as property loans.

- Bank nationalisation could become necessary, but not as an alternative to Nama.

- Budgetary adjustments should focus on spending cuts.

- Social welfare spend should better target the vulnerable.

- Further cuts in the public service wage bill are likely to be inevitable. A review of public service employment is needed.

- Broadening the tax base is a key challenge.

Report SIMON CARSWELL - Irish Times

Wednesday, 17 June 2009

Family Fortunes Fall €43,000...

Family fortunes fall €43,000 in two years...

THE average family has lost €43,000 in the value of its pensions, shares, bank deposits and other assets in just two years, shocking new official figures reveal.

At the height of the boom, in 2006, the average household had financial assets worth €95,200, but this has now nearly halved to just €51,500 today.

The huge fall is highlighted in figures from the Central Statistics Office (CSO). It comes as workers have been hit hard by the introduction of savage income levies and pay cuts.

The scale of the destruction of household assets is unprecedented in the history of the State. The losses arise from a sharp fall in the value of pensions, insurance policies, shares and bank deposits, according to the CSO.

Stock market collapses over the past year have meant that almost all those with private pensions are now nursing huge losses.

The only good news has come from a fall in prices – particularly mortgage costs. Collectively, the 1.5 million households in the State have had €36.1bn wiped off the value of their financial assets in the last year alone.

However, the loss of value in pensions, investments and deposits over the last two years has been a much more severe €58.7bn.

Households in this country now hold financial assets worth €81.2bn, down from €117.3bn in 2007.

Despite the sharp fall in the value of assets, the recession has resulted in household debt continuing to rise.

Households now have a debt mountain of €128,000 on average, up from €124,000 in 2007. The debt of households is mainly made up of mortgages, but also includes credit card balances and personal and car loans.

National Irish Bank economist Ronnie O’Toole said falling asset prices and rising debt levels were combining to squeeze the net worth of households.

“The average net financial worth of Irish households was €51,500 in 2008, down from €95,000 from its peak in 2006,” he said.

Dr O’Toole sounded a warning about the CSO figures which, he said, only related to financial assets and ignored some important elements of personal wealth including housing, farmland and businesses.

This meant the CSO figures may actually underestimate the scale of the destruction of wealth.

A recent study carried out by the National Irish Bank economist found that the net wealth of the average Irish household has declined by €153,000 over the last two years, equivalent to a fall of more than 20pc.

This figure is based on the value of household assets, which include pensions, shares and deposits, less outstanding debt, which includes mortgages and personal loans.

However, Dr O’Toole said this year could signal the end for the sharp fall in household wealth seen in the last two years.

House prices are likely to continue to fall, but the value of financial assets is rising, with stock markets having risen for three months in a row now.

“Pension funds, for example, have risen 14pc since the beginning of March, giving a gain for the year to date of over 5pc,” Dr O’Toole said.

Households have responded to the downturn by greatly increasing their savings rate over the past year, reflected in lower borrowing, retail sales and plummeting imports.

Consumers are now building up nest eggs equivalent to around 12pc of their income, up from 3pc in 2007.

Report - Irish Independent

Tuesday, 16 June 2009

What A Load Of Hype...

Vendors still slow to lose belief in the hype...

I WANTED to get away from nasty estate agents, houses containing load bearing dank and breathe the pure, fresh air of New York for a few days. The problem is that fresh air exists here like a Green Party first preference vote and the only other option to going outside and choking to death is sucking in a lungful of legionnaire’s disease in the hotel air conditioning system.

Worse still, the search for a new home is stalking me at every given turn. America is the home of the property bubble and ensuing credit crunch. This is, if you will, the San Andreas Fault of finance, to our San Francisco.

When I mention we’re living 60 miles from work, group therapy ensues, as people mention their own horror stories, of getting up at stupid o’clock and travelling via Neptune to get to work.

House prices pop up in otherwise pleasant chit chat – a topic only slightly cruder than making fart jokes in front of the pope – and someone will describe how house prices haven’t just fallen by a third, as is the case in the Big Apple, but even by a half in places like Las Vegas. It’s just like at home, but over here, the boom has a better name. The Yanks call it “The Hype”.

In south Dublin, where we’re still searching, good old-fashioned delusion continues to hype-up a two-bit shack, so that it finds itself in the same price bracket as the Playboy mansion.

One house we saw bore this theory out quite well. A lovely, spacious house, the best part of this property was that there was no estate agent. Halleluiah! I thought my prayers had been answered.

A colleague at work had told us it had been on the market for ever, with not so much as a nibble from a prospective buyer. The sign outside the house had a number for a mysterious Billy, and so we left a message, calling ourselves Mr and Mrs Deepthroat, saying he should meet us at midnight in the College of Surgeons car-park, alone, and with a brown paper bag for wads of our dirty, dirty cash.

Eventually we got a reply and, sure enough, Billy was not his real name. This was an executor sale pure and simple, and Billy was a very nice chap. The house, unfortunately, was part gorgeous, part Wendy house. Built in the 1940s, it had been added on to considerably during times when Ireland was doing a good impression of Zimbabwe.

People used papier-mâché and asbestos to construct everything in the country and the rear extension was a fine example of such work, including a wavy stone floor at the back. On the plus side, the main bedroom had an incredible view, if you kinked your head a little, of the Irish Sea and elegantly shabby rooftops of Dún Laoghaire and Sandycove.

With each room, though, the asking price, in the late €600,000s, was being devoured by the irresistible reality of needing to renovate the house from top-to-bottom, back-to-front. It was just too much for us, and we’ve no problem getting our hands dirty, doing a spot of upgrading and decorating.

Do I want to do a spot of gutting, though? Eh, no. My nightmare scenario is The Money Pit, where I’m Tom Hanks and my wife is Shelley Long, and a bit of work, which should take “two weeks”, takes us to the brink of bankruptcy and the very edge of a nervous breakdown. Given the big-time hassle we saw for ourselves in this place, the idea of ending up in a psychiatric ward for it wasn’t that appealing.

The more we think about our own house in Carlow, the more its location breaks our heart. It’s lovely, well built and on a quiet cul-de-sac.

We love it and hate the downsides it has, all of which are associated with its location. Work is in Dublin, play is in Dublin. We don’t know our neighbours in Carlow and, despite our efforts, they don’t want to know us. If only we could put the damn thing on wheels and park it on a scrap of land close to work.

Report DON MORGAN - Irish Times