We recently returned from a family holiday in Ireland and it was interesting to spend time in one of the countries deep in the centre of the European Crisis. These were some of my observations – food for thought and a reality check for us all….
The Irish caught onto the idea of owning property much sooner than their British counterparts. The idea of even a working class man buying his home rather than renting was widespread amongst the people going well back to the 1930’s. Of course the centre of the financial crisis was the massive property boom that took place from the early 90’s to 2007. I remember writing a newsletter back in 2006 where I reported on the amount of properties owned by individuals and how they were buying all over Europe, South Africa and even Eastern Europe.
Today Dublin house prices are down as much as 57% and falling by 0.2% every month. In May they had their first month where the prices went up by 0.2% , but even the estate agents said it was a blip. The banks are all but nationalised. They have taken most of the property developers ‘projects’ and put them into a bank called NAMA otherwise known as the Bad Bank. The existing banks are incredibly vulnerable, but the deals in the Bad Bank are spectacular.
One deal that is in the Bad Bank was close to where I grew up in Cork. On the edge of the city limits a developer spent 10 years buying up all the small farms in between the city and the satellite town 8 miles away. He borrowed €100million to do this. The project was one of the first to be put into the Bad Bank, they sold it a few months ago for €7million…. (ouch!). With an oversupply of houses already built and no prospect of rezoning, it has become reasonable dairy farming land again. There are plenty more deals like this. Sadly, many of the property developers will come back and rehabilitate themselves and start to feed off the Bad Bank in the years to come. Although the press is all over every deal, information is relatively hard to come by.
Between the 90’s and 2008, Ireland had for the first time more people coming into Ireland, but now the young well educated people are moving to Canada and Australia in the search of a brighter future.
When you go shopping, sales with discounts of up to 70% are the norm. Grocery shopping is for the most part cheaper in direct comparison to South Africa. (We are definitely getting a bad deal in SA!)
Building, home improvements, electronics (other than Apple) are all on their knees. The price of a pint in a pub is prohibitive – the owners paid far too much for these ‘assets’. The pub culture is in rapid decline with more stringent drink driving laws and a total ban on smoking. Restaurants are competitively priced as they try to encourage people back for a night out.
The Irish have been the first to face up to the reality. They will openly admit that they went a bit crazy and have taken the downturn and austerity on the chin. The civil service made an agreement with government with regards to pay cuts and freezes, no refilling of posts and new employees on tiny salaries. Sadly the writing is on the wall that the hand grip the EU have put them in is about to get stronger and a new round of cut backs is going to come shortly. This is really going to hurt those that would not have benefitted from the Celtic Tiger and now have to bail them all out.
Some things will never change though……. It rained a lot!