Thursday, 30 September 2010

Tiger In A Tailspin...

Ireland's Problems Have Euro Zone Worried...

The PIIGS are not out of the woods yet. Ireland's ongoing economic woes have financial markets concerned that the country might need an EU bailout. A new round of austerity measures could trigger a downward spiral.

Sean FitzPatrick, 62, couldn't help smirking when he appeared before the judges of the High Court in Dublin last Wednesday. FitzPatrick, who is Ireland's most famous banker, had already declared personal bankruptcy last summer, after accumulating €145 million ($195 million) in debt.

His monthly income is currently €188, FitzPatrick's legal counsel informed the court. But he will only be a poor man if his wife Catriona leaves him. The six houses and the rights to a retirement fund which is worth millions belong in part to her, and cannot simply be seized by creditors.

FitzPatrick owes the largest sum to the Anglo Irish Bank, where he served as chairman until late 2008. "The bank granted him and his relatives and friends some very strange loans," says one banking supervisor, who does not wish to be named. FitzPatrick's friends in the government turned a blind eye to his dealings. Shortly after his resignation, the bank had to be nationalized.

Soaring Premiums

Since the Irish government still doesn't know how many billions of euros it will take to bail out the Anglo Irish Bank, over the past few days the financial markets have been calculating what would happen if Ireland went bankrupt. Insurance premiums for Irish debts have rapidly soared and the European Central Bank has had to purchase Irish government bonds. In the end, though, everyone was relieved when the Irish state saw a €1.5 billion bond issue snapped up last week, albeit at extremely high interest rates.

The International Monetary Fund and the European Union have denied reports that Ireland will have to be bailed out with aid money. But suddenly the fear has returned that, after Greece, yet another country is teetering on the brink of financial ruin, leading to another crisis of confidence in the euro zone.

This anxiety persists despite the fact that the euro-zone countries approved a bailout package for their ailing members earlier this year, and the fact that the unfortunately named PIIGS states (Portugal, Ireland, Italy, Greece and Spain) have approved cost-cutting programs, some of them drastic, to patch up their budgets. Yet the mistrust persists and, over the past week, the risk premiums on government bonds issued by some of these countries have even exceeded the level attained in the spring, when worries about a Greek default were at their height (see graphic).

Ireland is said to be particularly at risk -- and this is primarily due to men like Sean FitzPatrick and their ruinous legacies.

Unfinished Buildings

A huge eight-story concrete skeleton stands like a monument in Dublin's Docklands, not far from the glittering office buildings of the international financial center. This was supposed to be the new headquarters of the Anglo Irish Bank, which FitzPatrick built up from humble beginnings into a major real-estate bank. Nearly two-thirds of its loans were invested in hotels, offices and shopping centers which no one currently needs.

Rainwater drips through the unfinished building. Four bright red cranes appear to stand guard over the skeleton. Apparently no construction company is in need of the cranes -- probably because hardly anything is being built in Ireland anyway. On the adjacent lot, only a large pit has been excavated.

It has been a breathtaking collapse. Until recently, the country's high growth rates had earned it the nickname the "Celtic Tiger." Thanks to Ireland's low tax rates, US companies like eBay, Facebook and Google opened their European headquarters here, creating countless well-paid jobs.

But the boom was financed with borrowed cash. "From 2003 to 2007, the Irish banking system imported funds equivalent to over 50 percent of GDP to fund a runaway property and construction bubble," said the head of the Irish central bank, Patrick Honohan, in a recent speech.

Cheap loans were virtually forced upon the Irish. Bankers advised their customers to take out mortgages amounting to 120 percent of the cost of overpriced apartments, and to use the extra cash to go on holiday or purchase a new car. The financial crisis put an end to these excesses and the boom came to a halt practically overnight. First, the German architects and Polish construction workers were sent home. By now, nearly 14 percent of the Irish population is unemployed -- and many have no idea how they will pay the interest on their mortgages. The banks also have countless loans on their books that are no longer being serviced.

'Ghost Town'

"Everyone is fighting with the banks," says Alan Byrne, who is a plumber by trade. His brown hair is combed back with gel and he is wearing a green "Ireland" T-shirt as he stands in front of his house in a Dublin suburb. He looks at the other side of the street, where a number of homes have never been inhabited. From his bedroom window, Byrne can see the concrete floor slabs and brick walls of half-finished houses that the real-estate companies can no longer sell. "This is a ghost town," says the entrepreneur, who made his money selling tiles and toilets.

Like many other members of the Irish middle class, Byrne hopes that he can somehow continue to make ends meet. But the economy is shrinking, partly because the government is making severe cutbacks. Wages and salaries in the public sector have been reduced by up to 15 percent, leading to savings of over €3 billion.

But what is €3 billion compared to the €20 billion, €30 billion or even €40 billion that a single bank could end up costing the state? This year, Ireland's deficit will rise to well over 20 percent of GDP, a much higher level than Greece's. To make matters worse, this figure only takes into account a small amount of the total cost of the bank bailout. In early October, the government intends to finally disclose how high the final bill for the Anglo Irish Bank will be.

Paying for Bankers' Sins

Up until now, the reforms have been accepted -- but that could change. In December, when it prepares the budget for the coming year, the Irish government will have to take similarly radical measures as those imposed in Greece, if it is to receive additional loans on the international capital markets.

It may very well be that property prices and wages in Ireland will have to fall even further. "We will have to pay for the bankers' stupidities for another 20 years," Byrne says.

It may also be the case that even these measures won't be enough -- and the euro-zone bailout fund will have to save the day.

Article by Christoph Pauly - DER SPIEGEL - Translated from the German by Paul Cohen

Wednesday, 29 September 2010

Ireland Faces Tough Road To Recovery...

Ireland faces a tough road to economic recovery...

LIMERICK , Ireland – Hard times.

You took out a second mortgage to fix up the house. Then in 2008, Ireland's housing bubble burst. A year later, Dell Inc. closed its Limerick laptop factory, putting you and 2,000 others out of work. You're 58 and unemployed, and your home is financially underwater.

Gerry Hinchy is fighting with Dell and his bank for better terms. But he knows the manufacturing work and the property boom are gone.

"It won't come back. They can turn the screw in China for 50 cents an hour," he said.
"What's done is done. The question now is how to get out of it."

To overcome a decade of debt-driven growth, Ireland is gutting its way through one of the world's toughest austerity efforts. Economists here say Americans eventually will face the same belt-tightening to reduce the debts of government, businesses and consumers.

The Irish say they could not wait. As one of 16 countries using the euro currency, Ireland could not devalue and hope for stronger overseas sales. Instead, it did what's called an "internal devaluation," lowering costs and wages to improve competitiveness.

"Ireland didn't have a choice," said John FitzGerald of Dublin's Economic and Social Research Institute. "This was our mess, and we had to work our own way out of it."

The first order of business was to save the banks from collapse, and that's coming at a high price for taxpayers. Then the government put down a plan for bringing its deficit under control. Next, business, labor and government agreed to cut wages, spending and prices so Ireland could regain its global edge.

Twenty years ago, that edge was keen. Ireland attracted hundreds of American companies with its low corporate income tax, low wages and well-educated population. Now its workers, managers and lawyers make more money than Americans.

Before the fall, Ireland's per-capita income was nearly the highest in Europe, trailing only that of tiny Luxembourg.

"There is an understanding, a broad consensus, really, that we paid ourselves too much and we need to get real," said Bill Doherty, head of medical device maker Cook Ireland, the Irish subsidiary of Cook Medical Inc. of Bloomington, Ind.

The austerity program is helping exporters such as Cook and Dell. The Round Rock, Texas-based computer firm still has 2,300 employees in Limerick and Dublin focused on research and services. Ireland's exporters are gaining market share as their costs come down.

"We're about two-thirds of the way back," said Brian Cotter of the American Chamber of Commerce in Ireland.

For ordinary Irish men and women, however, this austerity bites hard. Wages are down roughly 6 percent. Government workers were hit with a 7.5 percent increase in paycheck pension contributions, followed by salary cuts ranging from 8 percent to 20 percent.

Health and welfare spending was cut. Taxes were raised.

Unemployment has climbed from 4.2 percent in 2007 to 13.6 percent. The average price of a home in Ireland is down 43 percent and still falling, with declines of 50 percent already in Dublin.

Myles O'Shaughnessy, 59, worked in quality control for a packaging firm that tied its business to Dell's Limerick factory. Like Hinchy, he borrowed against his home with hope for the future. Now his two sons and daughter are looking to leave the country for work overseas.

"We're going to be looking at 20 years before this country of ours sees anything like a return to what we had," O'Shaughnessy said.

Fewer customers

Ireland is slightly larger than West Virginia, with a population a third less than the Dallas-Fort Worth metro area (4.25 million vs. 6.35 million). The island is beaten and bathed by the North Atlantic. The landscape is famously green, but the sky is often gray.

Limerick, with a population of about 90,000, is known abroad for both whimsical poetry and the grim poverty of Frank McCourt's novel Angela's Ashes.

Up close, Limerick looks like a place with more retailers than customers. Sale signs are ubiquitous. In the past two years, Irish clothing and footwear prices have dropped 27 percent. Department-store revenue is down 12 percent.

Real estate offices, known as "auctioneers and valuers," have moved beyond price slashing and instead advertise "offers invited."

Pat Kearney runs one such office in downtown Limerick. He remembers when customers queued outside his doors for days ahead of the opening of new housing developments.

"Some people were getting a 110 percent mortgage," he said. "They were lined up on the street Monday to Saturday for a chance to buy. It was mass hysteria."

A couple of blocks away, property manager Kersten Mehl added his own memories.

"There was no regulation, and the banks just went mad," he said. "They were throwing money out the door."

Mehl saw a crash coming and changed direction from selling to managing property.

"If I'm a small Mickey Mouse guy, and I can see in 2006 how this is going to end, how come not one member of the government, not one bank, not one bank board member, not one regulator saw it?" he said.

Makeover built on debt

What Ireland saw in the last decade was an economic makeover built on debt. The Celtic Tiger success of the 1990s relied on foreign investors who used Ireland as an export platform. In the past 10 years, that model gave way to a domestic builder's economy.

As in other parts of Europe and the United States, the building boom relied on cheap credit. Unlike with the U.S. housing bubble, Irish banks made risky loans without the benefit of complex securities that seemed to dilute the danger.

One bank in particular – Anglo Irish – plunged ahead with real estate lending heedless of the downside. When international financial markets crashed in late 2008, the Irish government guaranteed deposits in Anglo Irish and several other banks. But Anglo Irish's loan portfolio was so bad that the government was forced to nationalize it.

Faced with mounting losses and alarmed investors, the Irish government announced this month that it would break Anglo Irish into a savings bank for depositors and then wind down the rest of its operations. Earlier cost estimates of $31 billion are being revised upward and could come close to equaling the $43 billion paid in taxes last year.

The central government budget deficit this year amounts to 11.6 percent of gross domestic product, and the Irish government says it will reduce that to 3 percent of GDP within four years. If the cost of bailing out the banks is added to this year's spending, the deficit is more like 30 percent of GDP.

In 1997, average Irish household debt (mortgages, car loans, credit cards and so on) equaled average household income. By 2007, debt was nearly double that amount – 191 percent of household income. (Debt-to-income in the United States hit 130 percent that year).

The Irish debt mountain was nearly all in mortgages and property, rather than credit cards or car loans. About 75 percent of households own rather than rent, compared with an ownership peak in the United States of 69 percent in 2007. The Irish government encouraged homebuyers by, for instance, letting them deduct mortgage interest from their taxable income.

In turn, the government relied heavily on value-added, capital-gains and "stamp" taxes from homebuilding and property sales.

Irish builders went far overboard. There are 621 unfinished housing developments across the country (called "ghost estates"), containing more than 300,000 empty homes. One in four men under the age of 30 worked in construction. Many left school early to take advantage of the salaries offered during the boom.

The 400,000 jobs in construction three years ago have evaporated. By next year, there might be just 10,000 of those jobs left, said Helena Lenihan, assistant dean of the economics department at the University of Limerick.

"During the boom, everybody got caught up in the hype. Nobody wanted to rain on the parade, even though none of it made sense," she said.

More 'like Germans'

Three months after the property crash, Dell announced in January 2009 that it was closing its Limerick laptop plant.

"It's amazing that Dell stayed as long as it did," said Terry Quinn, an economic analyst with the Irish Central Bank. "They were involved in activities that years ago migrated to other lower-cost locations.

"We're not competing with Poland," Quinn said. "We're competing with countries like the Netherlands and Belgium."

Former Dell workers such as Gerry Hinchy don't think the Irish government has done enough to ease their plight. For those who took out a mortgage and then lost their jobs, the hardships are big.

"If you lose your job, you're dead," said Doherty, the Cook Ireland official. "You can't afford the house, and you can't afford to sell it."

That hazard weighs heavily on people who have kept their jobs as well. Polling over the last year done by the Dublin firm Amárach Research has shown that a steady 61 percent of the Irish consider paying off debts their "main financial priority."

Central Bank data shows that between March 2008 and March of this year, mortgage debt declined 12.25 percent.

Amárach Research chairman Gerard O'Neill said Irish consumers haven't quit buying; they're just far more price conscious.

"There's been a seismic shift in consumer behavior," he said. "We've become like Germans in that regard."

O'Neill's retailing clients are adapting.

"Things have changed, yes. But it's 2010, not 1910," he said. "If our clients listened only to the economists, they'd pack up shop and leave Depression Island."

One in an occasional series By JIM LANDERS - The Dallas Morning News.

Thursday, 23 September 2010

Emigration Hits 20 Year Record...

THE number of Irish people being forced to emigrate to find work has hit a 20-year high, with the numbers edging towards the 30,000 level.

The level of overall emigration, including non-Irish nationals, has remained constant at 65,300. But the number of Irish nationals leaving these shores including families was 27,700 in April, up 42pc on last year.

Migration from other countries to Ireland has also slumped. The number of migrants dropped significantly to 30,800 in April from 57,300 last year, according to new figures from the Central Statistics Office (CSO).

The figures also show the highest level of net outward migration to 34,500 in April since 1989.

Economists said yesterday that our youngest and brightest are being forced out of the country to find jobs because of slump in the economy.

"The bulk of this is forced emigration," said Friends First economist Jim Power.

"What we're doing is what we did very well in the 1980s and it is unambiguously negative.

"There are no opportunities for young people and graduates. Young families are also having to leave the country because there are no job prospects."

Youth support groups have called on the Government to commit itself to a dedicated employment strategy in light of the figures.

Youth Work Ireland (YWI) warned the loss of a key productive sector of the population will hamper any future recovery if growth returns.

"We need to see young people as a resource for example in starting new smart-tech companies in new economic areas," said Michael McLoughlin of YWI.

The UK remains the most likely destination for Irish emigrants although others are travelling to Canada, Australian and the US.

"It (the UK) accounted for 14,000 leaving emigrants, while a relatively high 23,000 are going to the 'rest of the world' which includes Australia," said Ronnie O'Toole, economist with National Irish Bank.


"A total of 14,000 eastern European workers returned to the region in the year, partly because of the pull of the Polish economy."

According to the CSO, the overall population remains strong with our high birth rate.

There were 74,100 births in the year ending in April, while deaths stood at 28,200 -- resulting in a natural increase in the population of 45,900.

A breakdown of the figures also shows the number of people aged 65 and over exceeds half a million for the first time. The overall population increase was strongest in the mid-east with the strongest growth of 1.6pc while Dublin experienced the biggest decrease of 0.3pc.

Report by Ailish O'Hora - Irish Independent

Wednesday, 22 September 2010

Irish House Price Drops Continue...

Sales activity continued to increase relative to last April and while this is certainly an encouraging sign, it is not at the same pace as experienced during the first four months of the year.

This survey is the most up to date and comprehensive indication of the state of the market, with sales estimates for each type of property ranging from new one bedroom apartments up to second-hand five bedroom detached houses.

At a national level the survey reveals that 55pc of agents reported an increase in sales activity since April, while 20pc reported a decrease — this compares to the results recorded in last April's survey that showed 71pc of agents recording an increase in sales activity since the beginning of the year versus 11pc recording a decrease.

This trend of a more moderate pace of activity compared to four months earlier is evident across all regions in the country.

Most sales activity is taking place in and around the bigger urban centres and is confined, mainly, to first-time buyers.

The survey finds signs that owner-occupiers are also beginning to move in some areas, in response to sales to first-time buyers. Activity is strongest in the South East, with 67pc of estate agents reporting an increase in sales activity versus 5pc reporting a decrease.

In Dublin, 63pc indicated an increase, while 9pc reported a decrease and in the Mid West 67pc reported an increase versus 23pc a decrease. In contrast, the survey suggested that sales activity had decreased over the last four months in the Border Region, where 28pc indicated an increase versus 40pc a decrease.

House prices nationwide continued to fall over last four months. The average price of a new home fell by a further 9pc and the average price of a second- hand home is down 8pc between April and the end of August.

Since the market peak in 2006, prices have declined 43pc for new homes and 44pc for second hand homes.

Across all of Dublin, prices fell by 5pc on average for new homes and 7pc for second-hand homes since last April bringing the decline from peak to 45pc and 47pc respectively. Prices are more resilient in the Mid West, where new home prices remained unchanged over the four months and second hand prices fell by 4pc, resulting in a drop from peak of 33pc and 32pc respectively.

The biggest adjustments in prices over the last four months occurred in the West where new homes fell by 14pc on average and the Mid East where second- hand prices fell by 13pc.

Figures for some types of property in some locations are higher in the August survey than they were last April. In such cases these latest August levels reflect how prices are stabilising and on this basis it is not unusual to see fluctuations of plus or minus 5pc during the months between surveys.

Readers should be careful against extrapolating that the higher price levels reflect a trend indicating a return to price growth.

Instead such changes are attributable to a re-adjustment of the data due to both increased activity and greater response rates in some areas since the April survey.

Report by Yvonne Hogan - Irish Independent

Tuesday, 7 September 2010

Mortgage Holders In Distress

The banks' forbearance to customers in arrears may be storing up future trouble as household debt spirals...

The banking system is desperately trying to hold back an ever-rising tide of overdue mortgages as high unemployment and increasing mortgage rates play havoc with family finances. Lenders have been ordered by the Financial Regulator to help people stay in their homes, even when they've stopped paying their loans, but how much forbearance can our weak financial system take before buckling?

More than one in 10 borrowers is now in distress, according to the latest quarterly figures on residential mortgage arrears from the Financial Regulator and unofficial estimates by the Irish Banking Federation (IBF).

Around 36,000 households are now more than 90 days in arrears, with two-thirds of that total more than six months behind on their mortgages, according to the regulator.

The IBF is preparing new data on restructured mortgages – loans switched to easier repayment arrangements – showing about 35,000 homeowners in distress but not picked up in the regulator's figures.

Banking sources also estimate another 30,000 or so have missed payments, but haven't yet crossed the 90-day threshold. That puts about 100,000 borrowers out of 790,000 in the troubled category.

The trend is ominous, too. In the last year, 90-day-plus arrears counted in the regulator's surveys have gone from 3.3% to 4.6% of the total. In value terms, mortgages in arrears account for 5.9% of the total outstanding debt compared with 4.5% at the start of the year. Arrears balances stand at €559m, or 8% of those mortgages which are in arrears, according to calculations by Davy.

Yet the banks are doing very little to recoup the money they are losing on souring home loans because the Code for Conduct on Mortgage Arrears prevents them from moving on homeowners who cannot afford to pay. Repossessions have actually fallen in each of the last three quarters.

And the code is set to get tougher if proposals put forward by the regulator over the summer are fully implemented.

"The latest figures from the Financial Regulator confirm that the focus of mainstream lenders remains firmly on forbearance and this is helping homeowners to manage their arrears and to stay in their homes" said Pat Farrell, chief executive of the Irish Banking Federation, in a statement last week.

"IBF mainstream lenders remain committed to doing everything possible to help people with genuine repayment problems."

But the banks' commitment could cost them dearly in terms of bad-debt charges and shrinking margins in the coming years, as arrears are unlikely to peak until after unemployment starts coming down. With the jobless figure holding steady at nearly 14%, according to live register figures published last week, that peak could be a long way off.

"Arrears levels are likely to rise further from here," said Emer Lang, banking analyst with Davy. "[Irish Life & Permanent] reports that early arrears are rising 'more slowly' and is signalling a peak in its arrears at the end of the current year. From a provisioning perspective, the Irish policy of forbearance will elongate the tail of mortgage losses this time around."

While losses for the banks will keep mounting in a 'long tail' scenario, the market is already showing signs that borrowers are building big mountains of debt as a result of forebearance – the balances grow as missed payments pile up and get added to the principal.

"While those in arrears between three and six months grew by 10%, their average level of arrears grew by a massive 44%, from €50m to €72m," said Ronan O'Driscoll, director with Savills Ireland, the real estate services firm.

"This indicates that long-term arrears are a growing problem, with few appearing to recover or escape from the debt once they fall into arrears."

With just 387 repossessions completed in the last year – or slightly more than 1% of distress loans recovered through asset forfeiture – the banks are mopping up very little of the problem, raising concerns that forbearance is only delaying the recovery as the lenders preserve their balance sheets and try to restore their public image.

"How is it that arrears are going up 11% per quarter but we are repossessing fewer houses?" said Karl Deeter, operations manager with Irish Mortgage Brokers. "This isn't a public service. It's political pressure and the realisation by the banks that they don't want to do repossessions for their own good."

A bank does not take a full writedown on a restructured loan or a loan in forbearance, but will take a haircut based on probable loan recovery. With a repossession, however, the bank has to account for the value of the underlying property, which could be worth much less than even a discounted loan.

"This has a number of knock-on effects," he said. "We are not actually dealing with the situation, which kills the property market because we're not finding a clearing price [on houses]. The quicker you reach the bottom, the better it ends."

The regulator's code, however, militates against finding this bottom, as the procedures it puts in place for banks to deal with arrears extends the moratorium on legal action potentially to several years. Each bank now has to have a 'mortgage arrears resolution process' (Marp) for dealing with distressed borrowers. As long as a borrower is engaged in the process, their property cannot be touched. But nobody yet know what to do when forbearance simply doesn't work.

"Forbearance is manageable at the moment," said a senior banking source. "But some people will still be unable to deal with the problem. We still need a process to work that out."

There is a concern that forbearance, then, just stores up more serious problems for borrowers and banks alike, ultimately forcing larger writedowns and defaults in the future.

"Borrowers in arrears will get to a point where they just can't pay what they owe," said one senior bank analyst at a Dublin securities firm. "At some stage you have to make a decision. We're not there yet, but in one or two years you could be looking at 'my Nama' for mortgages."

Report Jon Ihle - Sunday Tribune

Friday, 3 September 2010

€1 Galway House Sparks Avalanche...

€1 Galway house sparks avalanche of interest...

THE TRUCK driver who has put his house on the market and is willing to consider any offers over €1 says he has been inundated with inquiries, some from as far as Australia and Nigeria.

Galway man Michael Dempsey said he had to take the day off work to deal with the avalanche of interest – although more from the media than buyers at this stage.

But several dozen people have declared an interest in making a bid for the property at Gatestown, between Moylough and Mountbellew in north Co Galway.

“It seems to have struck a chord with people but it is too early yet to see if a deal can be struck,” Mr Dempsey said.

He put a four-bedroom bungalow on the market “willing to consider any offers of over €1” after spending two years trying to sell the house, worth €320,000 at the height of the boom.

“It’s a liability to me at this stage. I have to insure it, maintain it, pay €200 each year in property tax to the county council and spend other money on it and may have to consider boarding it up, which would be a shame as it is a lovely house,” said Mr Dempsey (48), a single man who lives nearby.

He built the house partly to provide retirement income, but the downturn destroyed that plan.

His unique sales pitch created a media storm and from early yesterday morning, he was fielding inquiries. He was even the subject of a mobile phone hacker who left a message on his phone saying that the house had been sold, but that problem was rectified yesterday afternoon.

“I promised I would consider all offers and I will look at all genuine offers,” Mr Dempsey said. He can be contacted by writing to him at Gatestown, Moylough, Co Galway.

The inquirers included an Australian woman with Galway links and a Nigerian doctor living in Dublin.

Report by JOHN FALLON - Irish Times

Thursday, 2 September 2010

Knock Knock? Who's There...

Knock knock? Who's there . . . in the market . . .

Ireland’s property market is stuck in a vacuum, with the only stimulus coming from the old reliable triggers: birth, marriage, death and, increasingly, debt

ARE WE THERE YET? The trip to the bottom of the property market is taking an awful long time. It’s three years since the jitters took hold with talk of empty apartments and stalled sales, two years since the global economy took a nosedive courtesy of Lehman Bros.

Savvier individuals would say that they saw the end coming far earlier, as far back as autumn 2006 when auction rooms suddenly emptied. and demand for investment properties waned.

Either way it’s been a long grinding descent to the point we’re at now, with house prices halved and empty homes littered across the landscape. Some estate agents insist that the bottom is now and that people can “smell the value out there”. If only the banks would start lending again, they say.

However, would-be buyers have plenty of reason to be stay on the fence. First off, it’s hard to get a mortgage. With most of Ireland’s financial institutions in dire straits, there are really only two or three providers offering mortgages right now, as against over a dozen at the peak of the property boom four years ago.

Job insecurity is another cloud hanging over young and middle-aged workers who no longer see property ownership as the key to a comfortable retirement. There are other drags on the market: a lack of information on property prices, which are covered by the Data Protection Act, though a register of house prices is promised by the Government later in the year. Looming property tax is another turn-off.

Meanwhile, prices continue to fall gradually, and in most cases are back at 2000 levels. Some sellers however, are still clinging to old valuations and pricing their homes high. A considerable number of these are sticking to unrealistic value to assuage banks seeking to recover outstanding funds.

Nama has taken over the loans of thousands of properties, and now virtually controls large tracts of developments in places like Sandyford and the nothern fringe of the city. It’s now one of the largest property companies in the world, but observers say it’s so big, its employees are struggling to find a way out of the problem.

So far, Nama shows no sign of forcing developers to offload properties at bargain basement prices. For the moment both it, and the banks, are opting to rent out rather than sell distressed properties.

At the upper end of the market, private sales are an increasing trend – where owners want to sell without the hoopla of public viewings. Generally these are top-end homes with an estate agent acting as a broker. Lower down the price scale, sales are being driven by traditional triggers such as birth, marriage, death and, increasingly, debt. No one is buying or selling property on a whim, or to make a quick turn.

The sales process appears to be speeding up, especially in traditional neighbourhoods. In 2008 it was taking an average of 212 days to sell a property, in 2009 it dropped to 174 days. In 2010 it is taking an average of 121 days to sell, according to figures compiled by Sherry FitzGerald.

Unexpectedly, auctioneers are charging slightly higher fees with 1.5 per cent to 1.75 per cent now being sought by most established agencies, up from 1 per cent and less during the boom years. However, a number of new firms formed by ex-employees of the larger agencies will take less in the hope of building market share.

Ireland still has some of the lowest commission rates in Europe where they generally range between two and six per cent.

Both the larger agencies and new names in the business say it’s been a busy summer with more completions in July and August than expected.

Competition seems to be returning for at least one category of home – the well-located three or four-bed that has been fully refurbished. “Renovated houses are selling well,” according to Pat Mullery of DNG, who has many years experience in Dublin 6.

“If it needs lots of work, it is harder to sell.” Cash buyers offer the best prospects for vendors desperate to offload unrenovated property or investment property, which the banks are not interested in funding.

Overseas cash buyers have also swooped on a number of Dublin city centre properties being sold at heavy discounts, including a penthouse off Grafton Street that recently sold to a UK buyer who felt the price of around €1 million was value for a city centre location.

While the very wealthy, and there are still plenty of those, wait for bargains to come out of Nama, the winners in the residential market are likely to be those who have sold at the upper end of the market with the intention of renting until the floor appears. That is, at least, the ones who did not put their savings or windfall into bank shares while waiting to buy a replacement home.

Young couples with steady jobs and a record of saving as well as some family money are now at the top of the pile when it comes to arranging finance and viewings.

For these buyers there is now the possibility of moving to a neighbourhood or a road previously beyond their reach.Location is once more the key decider for buyers, rather than the prospect of capital appreciation.

As for less well-located property, the picture may not be quite as bleak as it seems. A study suggesting that there could be up to 300,000 vacant apartments and houses in Ireland has been highly disputed, with the Department of the Environment conducting its own research into the vacancy rate.

Its findings will be known later this month but one source suggests that the figure is more likely to be between 60,000 and 80,000 with a large number of these units in the greater Dublin area. This may ease some of the concerns over ghost estates.

Still, the problem of empty unsaleable homes remains and it’s clear that some of the worst examples will be demolished.

Report ORNA MULCAHY - Irish Times

Wednesday, 1 September 2010

Property Bubble Floats Again...

The property bubble floats once again on the Fringe of 'Liffeytown'

ONE OF the more esoteric events of the Absolut Fringe Festival will be artist Fergal McCarthy’s Liffeytown . From September 12th to 26th, 11 temporary red and green structures will be floating in the River Liffey, between the Ha’penny Bridge and O’Connell Bridge. If they look familiar to you, that’s because at some time you’ve probably played with tiny versions of the Monopoly houses and hotels they resemble.

McCarthy got the idea from the “craziness of the development and lack of planning at the height of the boom, when apartment blocks were being built all over the city, particularly in the Liberties, where I was living at the time. It was a time of disposable architecture, with no vision or longevity,” he says.

It was also a time during which it seemed as if the planners, if they could have built on water, would have done so.

Now McCarthy is planning to do just that, with his river-based installation. “The Liffey is the central axis of Dublin, yet it seems strangely forgotten about. This is my way of redirecting people’s attention to the river.”

The structures, made of perspex with aluminium frames and buoyed up by polystyrene, will be lit from within with LED lights at intervals once darkness falls. “They’re about the size of garden sheds. I wanted them to look like they’re habitable, that people could almost get into them.”

Not that McCarthy actually wants anyone to get into them – or onto them. If you’re taking a trip on the Spirit of the Docklands boat any time soon – it is the one that plies up and down the Liffey every day – you’ll get to navigate through the floating red and green estate.

He’s not entirely certain yet what’ll happen when the backwash created by the boat hits the structures, but it’s unlikely they’ll sink as spectacularly as the property boom they represent.

Report by Rosita Boland - Irish Times