Irish property market far from recovery

MOATE, IRELAND Three years ago, Ann Kiernan decided that she had had enough. A third mortgage was more than she could bear. The solution: sell her house in Dublin, and buy one in the countryside. She lost over 100.000 Euros because of the plunging property prices.

By Annica Lindström

Michael Claffey has been kept busy with putting up new for-sell-ads after the property market plunged. Photo: Annica Lindström

During the early spring of 2012 Ireland enjoyed the warmest spell since 1956. 50 year-old Ann Kiernan is enjoying the 20 degree Celsius weather in her back garden.

“Listen… Can you hear how quiet it is? After living in Dublin all my life, I am the first one appreciating the quietness on the countryside,” Mrs. Kiernan says.

Even if Ann Kiernan likes the silence, it is not how it is supposed to be. The housing estate in Moate, that she lives in, was planned to be full of life. More than one third of the houses are unoccupied, which makes it a so-called ghost estate.

The ghost estates can be found all over the country, making the government declare it a national problem. The falling property prices in Ireland have led to an inconvenience being revealed. During the economic boom in Ireland, between 2000 and 2007, the Irishmen built a lot of houses around the country. Since the peak in early 2007, the property prices have plunged by 47 percent on a national level, and even more in Dublin. And the latest figures do not show any sign of recovery.
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When realising that the property bubble had burst, every developer stopped building new houses. But it was too late. Because of the reckless building that had been going on for 7 years, there is a big surplus on houses.

A buyers’ market

While the “For sale” posters keep increasing in the windows along the main road that goes through Moate, the state agent offices are shutting down. Michael Claffey’s office is one of the two that is still operating.

“During the peak there were five state agents in Moate, now there are only two of us left. I am only able to continue because I am also renting out apartments and houses,” Michael Claffey says.

“It is a buyers’ market at this stage. People are getting desperate and they are prepared to take whatever is offered to them. I have a four-bedroom apartment that three years ago was sold for 235.000 euros. I have now taken a booking deposit on it for 125.000 euros. That is the situation that we are in at the moment,” Michael Claffey says.

The deducted prices are common in the state agents windows all along Ireland. Photo: Annica Lindström

Through the window to his office, one can see that the example mentioned is not unique. Out of 25 advertisements most of the houses have figures written in red, revealing that the price has come down. Compared to the years of the Celtic tiger Michael Claffey’s job had changed radically. He has less than half the potential buyers than he was used to.

“Even though it might sound a bit odd, it feels better to be able to sell a house today than it did during the boom. Nowadays people really have to think if they want to buy a house or not, during the boom they just bought anything. People even bought things that did not exist.” Michal Claffey says.

Rock bottom?

Today optimism does not exist. Even if Michael Claffey could easily be characterized as an optimistic person, he finds it hard to see anything positive in the future of the property market. Like so many other times, the banks get the blame.

“The prospect does not look good. The big problem is that the people cannot get their hands on finance. And until the banks start releasing money to people, we are going nowhere. It is really rock bottom at the moment,” he says.

John O’Connor, who works for the department of the Environment, Community and Local Government, shares Michael Claffey’s view.

”Nothing will happen unless people start buying again. At the moment it seems like a lot of people are just waiting around for the right moment to act,” John O’Connor says.

John O’Connor was the chairman of the work group who produced a big report on all the unfinished estates around Ireland. His report has been the most important tool for the government that is trying to find solutions for the empty houses.

The report suggests a number of different opportunities for the unoccupied or unfinished estates.

“It is important to remember that all estates are different, and therefore they need different solutions. Some houses might be finished and the person who will buy it will have to pay for the improvements. Other houses might be knocked down because it is highly unlikely that they are going to be sold. And some estates might be used for social housing,” John O’Connor adds.

Macroeconomics
Helen Dunne also worked in the group, representing Rural Irish Link. Her main task was to give the people of rural Ireland a voice.

“The countryside of Ireland will suffer longer than the areas around the main cities. There are always people who want to move to Dublin. It is important that we understand that the crisis in the property market is a part of the global financial crisis. Until the Irish economy, that is depending on the EU’s and the U.S. economy start working, there is little we can do.” Helen Dunne says.

The areas that are facing the biggest problem are the rural areas in the west of Ireland. Cities like Letrim and Longford are shocking examples on how wrong it all went. Moate, which is located in the middle of Ireland, is a good example of a small town that is trying to deal with the unoccupied houses and unfinished units.

“In that way, I would consider ourselves quite lucky, it could be worse,” Michael Claffey says.

Ann Kiernan is trying to avoid the unfinished estate next to her house. Unfortunately someone destroyed down the fence that her family put up. Photo: Annica Lindström

Ann Kiernans house is just a few hundred meters down the road from Michael Claffey’s office. Her house is one of the forty white houses placed in a circle along the main road that goes through Moate. In the middle there is a small grass field where the flowers have already burst out in different colours. The sound of children who are playing around and jumping on a trampoline completes the picture of an ideal place to raise children.

But out of the forty houses around the flowering daffodils, almost half of them are empty. The perfect picture starts to shatter when having a closer look through the window. In the first house, close to the main road, the only colour one can see is grey. The floor is made of concrete and the building blocks have not been covered by wallpaper. How far the developer has gotten in the house next door is impossible to say. The contracter had decided to put some white plastic in front of the windows. All the houses are alike. Three rooms, a bedroom and a kitchen. Michael Claffey is the one trying to sell or rent all the houses that are empty. At the moment the houses are sold for 85.000 euros or can be rented for 500 euros a month, compared to 750 euros before the crisis.

“There is someone moving into this house next week, they are going to rent it,” Michael Claffey says.

Does not matter if you are not selling

Michal Claffey is not willing to call “Ard Grainne”, as the estate that Ann Kiernan and John MacIntive, a ghost estate. According to him it is not a ghost estate because more than half of the estates are occupied. But on both sides of the estate that is nearly finished, lays an area were more estates where planned. When the planned estates would have been finished, there should have been 104 units.

According to an article published in the Westmeath Independent, a local newspaper, there are seven ghost estates in the Moate area. Ard Grainne is one of them. The planning permission expired in December 2009 and there is still a lot of outstanding work to do, such as including water service pipes, landscaping and traffic calming. Today, there is thick concrete wall that separates the almost finished houses from a rough looking field with metal objects, plastic pipes and concrete, shattered glass, and a lot of building material.

There is still a lot of rubbish left in the field where the developer planned to build even more estates. Photo: Annica Lindström

John MacIntive is rushing in order to get his flowers planted before it starts raining. This month John and his family have been living in Ard Grainne for two years.

“It was what we bought into. I like the area because it is quiet and the houses are good. But what has changed is the value of the house. They dramatically decreased. We got our house two years ago, so we did not lose as much as the people who bought during the boom. But that only matters if you are selling it, and we are not selling,” John says.

John and his wife did what most of the young couples with children do when they want to buy a house. They went to the bank in order to finance their future home. As unemployment is 10 percent higher today than it was in 2007, a lot of people are struggling with paying their mortgages. Most banks in Ireland are also under great pressure.

John MacIntive says he’s not worried about the banks reposessing his home.

“No, we have loads of German money to take care of them. I just live day by day and I do not really care too much. I guess I would care more if it would affect us, but we have a job and we are happy,” John MacIntive says.

The safety of the ghost estates has been an ongoing debate that got a new energy boost when a two-year-old child died after he drowned in a pool of water in an unfinished estate in February this year.

According to John MacIntive, the unfinished estate is one of his main concerns. Even though there is a fence going around the unfinished estate there are many gaps where children could get though. John MacIntive has forbidden his two sons, a 5-year-old and a 3-year-old, to play there because he is afraid that they will hurt themselves.

“It is not a place for a child to play around. It would be nice if they [local council] would cover it up. I am hoping that they would have gotten it done within five years. But at the same time we all know that the country does not have enough money,” he says.

Other parents in the estate agree with him. Edinalva Matias, a Brazilian woman who is renting one of the houses is worried about her son getting hurt.

Edinalva Matias and her husband are optimistic about the estates future even though they are worried about the safety issues in the field next to their house. Photo: Annica Lindström

“I would not let my boy play in there, I cannot even see him because of the thick wall that separates our estate from the field,” says Edinalva Matias.

The National Asset Management Agency, NAMA, who is in charge of 10 percent of all the ghost estates in Ireland, has tried to make the ghost estates safer by paying 3 million Euros for remedial work. NAMA is a body which was founded by the Irish government as a response to the financial crisis and the deflation of the Irish property boom.

NAMA has taken over five Irish banks and through that, they have taken over many houses that people cannot pay the mortgage for anymore. David Clerkin, a former business journalist who now handles the press for NAMA, reminds us that ghost estates is a relatively small part of NAMA. Only ten per cent of its budget has to do with ghost estates.

Screenshot from irelandafternama.wordpress.com showing in which counties the ghost estates are located in.

“NAMA’s plan is to try to get back as much money as possible. We are not going to sell all the houses at the same time, because we believe that they will not ever increase in value nor will we keep all the houses and see what they will be worth 25 years from now,” David Clerkin says.

Back in Moate the people are not too positive about the future housing market. The lastest topic that everyone has an opinion about is the property tax that the government announced. Almost everyone who owns a property is supposed to pay 100 euros, but many Irishmen including the inhabitants of Ard Garinne, are afraid that the amount will increase in the near future.

“Even if it is just one Euro a day, there is no way I can pay it. End of story.  People struggle to pay a mortgage and they are asking them for more money. And next year there will be a property tax, and it will not be 100 euros, it will probably be 500 euros. They cannot put another weight on our shoulders,” Ann Kiernan says.

 

FACTBOX

There are four main categories of unfinished estates in Ireland

  • Category 1: The developer is active and the housing development is being completed and appropriately managed.
  • Category 2: A receiver has been appointed and the development is being appropriately managed.
  • Category 3: The developer is in place but there is no on-site activity and there are significant planning, building control compliance and public safety issues to be addressed.
  • Category 4: The developer or site owner is effectively not contactable and no receiver has been appointed and similar problems to category 3 exist.
  • Categories 3 and 4 are the ones that require a high level of intervention to bring about some resolution and are of most concern to the Advisory Group. Category 4 could be called “developer abandoned developments” and are the developments that require the most attention.

Source: Resolving Ireland’s Unfinished Housing Developments-report

 

About Annica Lindstrom