Nothing captures the despair and destruction left behind by the bursting of Ireland’s property bubble better than photos like this one.
And there are thousands upon thousands of others.
A website has been created,
www.ghostestates.com, which reveals the complete scale of the disaster. It’s a Google-map of Ireland with red pins marking the locations of abandoned building sites. Click on the pin, and you will see a photograph of the estate or site concerned. The map of Ireland is covered with red pins – every province, every county, almost every town is represented.
The website was the work of ordinary citizens, but last week an official State study was published which put exact numbers and locations on the problem. The Department of Environment study confirmed there are more than 2,800 ghost estates in Ireland. Building has started on 120,000 homes in these estates, but only 77,000 are complete and lived in. That means there are 33,000 empty, vacant, unsold or incomplete houses and apartments across the country.
Ten thousand of these houses are in the early stages of construction and have been completely abandoned. In fact, builders are only continuing to work in one-in-six of the ghost estates. The report breaks down the figures, county-by-county. Worst affected are Carlow, Leitrim, Roscommon, Sligo and Longford. Cork has the most unsold homes with 3,427.
Real Victims - Phase 1 buyers of overpriced homes
But it’s not just the empty or abandoned houses that are the problem – the real victims are those who bought houses or apartments in Phase 1 of the developments. In many cases, homeowners who live on estates where building work has ceased have also been abandoned and left without essential services. Sewers have been left open on the sites, water is contaminated and security lax. Thousands of homes are not served by roads, paths and public lighting – many of these essentials would be “finishing touches”, undertaken by developers when the entire estate was completed.
An expert group has now been set up to look at how to deal with the problem. It comprises, among others, local authorities, NAMA (the agency set up to take over non-performing loans from banks and pursue developers – it will end up owning many of these estates), representatives of the Construction Industry and health and safety authorities. The choices they face are stark.
Awful Truth: Bulldozers
Experts say it could cost up to one billion euro to complete all the estates on which work has begun. There is simply no money to do this, nor is there a market for all the houses if completed. A portion of the houses will be taken over by NAMA, and completed and sold for as much as they can get. Others will be allocated to social housing – good news for those on waiting lists, but perhaps not what many of those who bought houses in these estates for inflated prices were expecting when they took out their massive mortgages. There has been talk of converting some ghost estates that are near completion into hospice or nursing home communities.
But the awful truth is that hundreds if not thousands of these properties will be simply bulldozed to the ground – symbols of the foolishness and recklessness that has brought Ireland to its knees.
One NAMA for the rich, and Bananas for everyone else:
The property companies who built these estates, are for the most part, insolvent. They borrowed heavily to finance the developments, and now in a collapsed market, will never to be able to afford to pay them back. But the men who set them up, are often far from insolvent. Intricate corporate structures, and transfers of asset ownership to family members means that even when the company goes kaput, they can walk away comfortably leaving massive debts behind.
The foolish banks who lent them money in the first place without adequate collateral must surely take the hit? No - of course, not. Banks are systemically important. Their books are so filled with these worthless never-to-be-repaid loans, that they need to be bailed out. So the citizens of Ireland, through the government they elected, say "we'll buy these loans off you". Enter NAMA, a "bad" bank who will buy that €100m loan-which-will-never-be-repaid for €40m. (Reports put the average haircut or discount for loans taken over by NAMA at 60%). Of course, even that €40m in most cases will never be repaid - the property company is kaput, remember - so NAMA will take over the assets behind the loans. For that read hundreds of ghost estates.
Now in order for NAMA to work, it must make as much money as it can from selling these houses. Even if that means selling them at fire sale prices. So the market gets flooded with more apartments and houses at a lower price. Guess what that does to the value of the house owned by our Phase 1 buyers? Correct, it drives it down even further.
So now that the fools who borrowed to build, and the chancers that recklessly lent to them are bailed out, the biggest victim of all turns out to be the young couple who just wanted to buy a home to live in. They paid hundreds of thousands of euro to live in an unfinished estate, in a house now worth half of what they paid for it only a few years ago, in an economy wrecked by the very people who overcharged them and are now being bailed out.
Families: as systemic as banks?
Which brings me to the key point. Isn't it time to at least talk about a Nama for "the little people"? Call me bananas, but if the banks are will to sell loans to NAMA for 40% of their original value because the builder has walked away from it, why won't someone give a haircut to those now in negative equity? If we can borrow to buy bad loans off the banks to make sure they don't go bust, can we not do something to make sure families don't go bust? Are families not as systemic to our society as banks? Don't we own most of these banks now anyway?
Personally, I don't own one of these houses, and while I know some people in negative equity, thankfully they are not living in a ghost estate. But many people my age bought houses in areas they didn't really want to live in, and towns that didn't exist ten years ago, just because it was all they could afford. Now, they are trapped.
They have no road or footpath in the estate, youngsters are hanging out in the abandoned building site near their homes, and their new neighbours are likely to be either pensioners from retirement homes or welfare recipients - that's if the bulldozers don't get there first. Their jobs are far from safe, their pay has been cut, their taxes are about to rise, their childcare costs are still high, and they have to work two jobs to pay a mortgage back to a bank that managed to get it's loans taken off its hands.
I'm not an economist. But people live in a society, not an economy. I understand that our budget structural deficit is completely unrelated to the NAMA project and bank bailout (which makes it even scarier). But the tough medicine that is about to be administered, would not taste as bad, if it was tempered with some recognition that there is one group left waiting for their bailout - ordinary citizens.
When the ship is steadied, and the current fire is put out, there are a few "finishing touches" to be made to our approach to the bursting of the property bubble. In the meantime, can we get some paths, roads and lighting to those poor people trapped in our ghost estates, and please tell me we don't have to wait for an "expert group" to report back to tell us that is what they need.
