For about 12 years starting in the mid-90s a bunch of private business concerns decided to buy large tracts of land in Ireland (particularly around Dublin) and “develop” them by building luxury apartments and hotels. Competition was high because every property developer in the country had bought into the same delusion. Somehow they convinced themselves that this was a no-lose proposition. Property values shot up. Greenfield sites in the Dublin commuter belt increased in value by a couple of hundred percent within a few years. And brownfield sites in the city centre rose by even more. It was sheer lunacy.
Which, in itself, wouldn’t have been a problem. No, it became a problem when this small group of developers succeeded in convincing the banks and the government to join their party. And so together, the bankers, speculators and developers — breathlessly urged onwards by politicians tripping over themselves to rezone land and dismantle regulatory frameworks — dragged the nation relentlessly into a deep dark hole. Massive loans were granted based on absurd valuations and overnight a mountain of debt appeared in Dublin’s financial district.
The half-dozen or so sane people left in the country shook their heads ruefully and suggested that there was only one way for this to end… the same way all collective delusions end… with a bone-shaking return to reality and lots of wailing and gnashing of teeth. Of course nobody listened. We were labelled doom-mongers and pessimists. “Shut up and let me enjoy the party”, they’d say, and we’d wince as they shovelled another gramme of future debt up their nose. It’s gonna be one hell of a come-down, we’d mutter as they gave us dark scowls and dismissive gestures. “Come down?! Don’t be such an arsehole”, they’d yell, “I can keep snorting this stuff forever”.
Sadly, there the drug analogy ends. A hangover or comedown may be managed via the skillful application of hair-of-the-dog. Not the case with a property crash. Especially not one that happens just prior to an energy crisis. The Irish people find themselves slumped, sweating and groaning, on the bathroom floor. The economy flushed to get rid of the stench. All that remains of it is a foul stain on our shirt and a few nasty dried flecks stuck to our hair. Ugly reminders of our willingness to trade our future and that of our children for a few years of hedonism.
You see, as was entirely predictable… indeed inevitable… property prices crashed. And how! The Irish Glass Bottle site in Ringsend, which has become something of a symbol of the insanity that gripped the nation, has seen an 88% drop in valuation since the bubble burst. Purchased for €412 million in 2006, it has recently been repossessed by the bank that provided the loan and is for sale for €50 million. There are no interested buyers.
There are now an estimated quarter of a million newly built houses and apartments standing empty in “ghost developments” around Ireland. This, in a country with a population of four million. Safe to say the prospects for a recovery in the Irish residential property market aren’t good. In fact, probably the only remaining positive aspect of the property boom is the new nomenclature that has sprung up to describe the folly. Ghost developments sounds pretty cool, but even better is ‘Zombie hotels’, which is the phrase being used to describe the dozens of brand new hotels that are slowly choking the life out of established businesses. The massive over-capacity is forcing equally massive rate cuts. Good news, you might think, for the consumer but it’s crippling the entire sector and — as is so often the case — the good news of short-termism often doesn’t stay good for very long.
But hang on a second… rewind a bit to the Irish Glass Bottle site in Ringsend. Did I say “repossessed by the bank”? Let me rephrase that… it has been repossessed by the Irish government who have generously agreed to absorb pretty much all of the hundreds of billions of euro worth of debt injected into the Irish economy by a small number of greedy fools. The people responsible for creating our ghost developments and zombie hotels aren’t — it seems — the people responsible for dealing with the consequences. It’s been suggested that every person currently alive in Ireland will have to pay €2,000 per year for the next 70 years in order to clear the total liability that’s been shouldered by our Fianna Fáil / Green coalition government. And given that not all of us have another 70 years to live, we’ll be bequeathing a massive burden to the next couple of generations.
You’re welcome, kids.
As soon as this all sinks in — and for most, it really hasn’t yet — expect to see the next great wave of Irish emigration.